Bombay High Court
Star Chemicals (Bombay) Ltd. vs Union Of India And Others on 1 January, 1800
Equivalent citations: 1980(6)ELT133(BOM)
ORDER
1. By this petition, the petitioner seeks an appropriate writ for setting aside the order dated 10th February, 1972 passed by the Assistant Collector of customs, the appellate order dated 21st March, 1973 passed by the Appellate Collector of Customs and the revisional order dated 12th September, 1975 passed by the Joint Secretary to the Government of India.
2. The petitioner is a public limited Company which carries on business of manufacturing chemicals in its factory at Belapur Road, Thana in the State Of Maharashtra. The petitioner manufactures phosphorus acid and certain phosphates, the principal raw material whereof is rock phosphate, which the petitioner has been importing in powder or pebble form. The rock phosphate so imported by the petitioner was allowed to be cleared by the Customs authorities under Entry 35 of the Customs Tariff under which no duty was payable. A countervailing duty was however payable.
3. In March 1970, the petitioner purchased on the high seas from the State Trading Corporation of India, a Government of India undertaking (viz. the 4th respondent, against whom no relief is claimed in this petition), 13,125/87 metric tonnes of rock phosphate in pebble form for a sum of Rs. 20,68,697/-. On arrival of the goods the Customs authorities proposed to asses them to duty under the residuary Entry 87. thereupon the Minerals and Metals Trading Corporation of India Ltd., which is also a Government of India undertaking, submitted a representation dated 25th March, 1970 to the Customs pointing out in detail that the rock phosphate in pebble form was not assessable under the residuary Entry 87 but under Entry 35.
4. Sometime between March and June 1970, an order was passed by the Assistant Collector assessing the petitioner's goods at 60% ad valorem duty under Entry 87. This duty amounting to Rs. 12,41,218/- the petitioner paid under protest, though the difference between such duty under Entry 87 and the countervailing duty under Entry 35 was Rs. 10,39,520/-. On 6th June, 1070, the petitioner applied to the Assistant Collector of Customs for the requisite refund. On 10th February, 1972, an order was passed by the Assistant Collector rejecting the petitioner's refund application on the ground that the rock phosphate imported by the petitioner attracted duty under the residuary Entry 87 as it was in pebble form and not in powder form in which case the appropriate entry would have been Entry 35. The petitioner's appeal was dismissed by the appellate authority by its order dated 21st March, 1973. Thereupon the petitioner preferred the requisite revision petition and also filed an affidavit of an expert on Dr. Govind Pandurang Kane, Retired Deputy Director General in the Directorate of Technical Development. The petitioner's revision petition was rejected by the revisional authority by its order dated 12th September, 1975. Hence the present petition.
5. It is not in dispute that the goods imported by the petitioner in pebble form was rock phosphate, which is essentially a mineral phosphate. It cannot be rationally disputed that rock phosphate is a chemical fertilizer and hence is manure. It is also not in dispute (as is clear from the Assistant Collector's order dated 10th February, 1972) that rock phosphate in powder form will fall within Entry 35. hence the narrow question that arises for determination in this petition is whether the appropriate entry applicable to the petitioner's goods, viz. rock phosphate in pebble form, would be Entry 35 as urged by the petitioner, or the residuary Entry 87 as contended by respondents 1 to 3, viz. the Union of India, the Assistant Collector of Customs and the Appellate Collector of Customs respectively.
6. At this stage a reference to these entries is pertinent. The relevant excerpts of Entry 35 read as under :-
"Manures, all sorts, including ..... the following chemical manures, namely, ...........mineral phosphate, imported in a form indicative of their use for manurial purposes........"
Entry 87 under the heading "Articles not otherwise specified", reads as under :-
"All other articles not otherwise specified."
7. The question that arises is whether this rock phosphate imported by the petitioner in pebble form is "in a form indicative" of its use for manurial purposes", as contemplated by Entry 35. The petitioner invites me to answer this in the affirmative. On the other hand, the gravamen of the respondents' case is that as the rock phosphate imported by the petitioner was in pebble form, it could not directly be used of manurial purposes, and hence fell outside the ambit of Entry 35 and within the purview of the residuary Entry 87. Here in may at once be stated that it is not in dispute before me that this rock phosphate imported in its pebble form could not be directly used for manurial purposes since it has first to be pulverised. Thus the answer to the controversy between the parties turns on the interpretation of the works :-
"...........in a form indicative of their use for manural purposes", in Entry 35. Do these words suggest that the form of the rock phosphate had to be such as was capable of being used directly for manurial purpose n order to attract assessability under entry 35. If so, the petitioner must fail and the contention of the department must be upheld.
8. The relevant excerpts from the impugned revisional order are as follows :-
"...........Since the goods have been imported in pebble form and it does not represent the form in which they are marketed as fertilizer or used as a fertilizer obviously they will not qualify to be within the purview under Item 35 ICT........."
* * * * "...........Therefore, the most used methods for making it available is treatment which mineral acids like sulphuric, nitric etc. before using the rock phosphate as a manure..........
* * * * "The Government, thus, observes that the basic question, as to whether the `florida' pebble rock phosphate in the form in which it has been imported can at all be considered as suitable for manurial purposes without any chemical treatment with acids etc. in making the nutrient phosphate available to the plant, does not tilt the scale in the petitioners' favour........"
* * * * "........There is nothing on record by which the Government can come to the conclusion that the rock phosphate imported by the petitioner is required or used for fertilizing the land without any further chemical treatment......."
Agreeing with the opinion of the petitioner's expert Dr. Kane, namely, that all rock phosphate whether in pebble form or in powder form has to be pulverised to a very fine powder of not less than 100 mash for further chemical treatment to obtain the P 205 in a water soluable form so that it becomes available for plant growth, the revisional authority has observed that the same proves :-
"......that the goods have not been imported in a form for a direct use as a manure. The goods imported as claimed by the petitioners contains 31.66% P 205 which represents rock phosphate of very high quality and the purity in no way indicates its unsuitabilities for industrial use of the same."
On this reasoning, the revisional authority had that the rock phosphate imported by the petitioner in pebble form would not qualify for assessment under Entry 35.
9. The pharaseology "in a form indicative of their use for manurial purposes." is a tortuous one and cannot be reconciled with the department's case of direct user as canvassed by Mr. Dalal, the learned Counsel appearing on behalf of respondents 1 to 3, who urged that in order to attract the provisions of Entry 35, the rock phosphate imported by the petitioner should have been in a form in which it could directly or immediately be sued as a fertiliser which admittedly could not be done as it was not in powder form but in pebble form. This contention is not correct. If such had been the legislative instead of resorting to the tortuous phraseology advisedly use in this entry, viz. "in a form indicative of their use for manurial purposes." It is presumed that legislature intends to use and uses phraseology in order to best carry out its intent. If the material had to be in a form directly or immediately fit for use as a fertiliser and if such had been that intent of the legislature the entry would not have read in the manner in which it has been framed but such intention of the legislature would have been made manifest by simpler, direct and more appropriate words, for instance, "imported in a form suitable for use" or "imported in a form adapted for use" or the like. the words "in a form indicative" in Entry 35 bring to the forefront in no uncertain terms that the form of the rock phosphate must indicate that it can be or is capable of being used for material purposes, say pulverising, and not that it must be directly or immediately used for manurial purposes in the form it was imported, viz. in pebble form. The word "indicative" is important and must be given its due meaning.
10. What also cannot be lost sight of is that it is not even the department's case, and rightly so, that rock phosphate, which is a chemical fertiliser and hence manure (as observed by the Division Bench of this Court in Special Civil Application No. 581 of 1970, decided on 15th/16th june, 1977), changes its character or characteristics as a chemical fertiliser or becomes a new substance or assumes new chemical properties if pulverised into powder form. Thus be it in powder form or pebble form, rock phosphate remains a chemical fertiliser and hence is capable of being used for manurial purposes. So particular form is prescribed in that Entry for the import of rock phosphate. Thus rock phosphate imported by the petitioner in pebble form did not case to be rock phosphate which in the words of the Division Bench in special C.A.No. 581 of 1970 (supra), "is known throughout the world as a chemical fertiliser". had it been the legislature's intent that rock phosphate could only be imported in powder form and not in pebble form in order to attract assessability under Entry 35, there was nothing to prevent the legislature from making any such intention manifest in the entry itself, which in its wisdom it has not chosen to do. It is therefore manifest that irrespective whether the rock phosphate was in powder form or in pebble form Entry 35 would be attracted, if it was indicative that it could be used for manurial purposes.
11. What is also important is that even in its powder form rock phosphate cannot always be used directly for manurial purposes, is is evident from the opinion expressed by the petitioner's expert Dr. Kane as under :-
"........all rock phosphate whether in pebble form or powder form (normally 40-60 mash) has to be pulverised to a very fine powder of not less than 100 mash, for further chemical treatment to obtain P 205 in a water soluble form so that it becomes available for plant growth."
12. This opinion of Dr. Kane has been accepted by the revisional authority which has stated that "Government agrees with this view". thus rock phosphate even is powder form, cannot in all cases be directly or immediately used for manurial purposes but has to go through a pulverisation process like rock phosphate in pebble form, be it to a lesser extent. It would therefore be anomalous that while on the department's own showing, Entry 35 would apply to rock phosphate in powder form it should not apply to rock phosphate in pebble form. To my mind, the difference is none. And yet, the department applied Entry 35 to rock phosphate imported in powder form and do not choose to apply the same yardstick in respect of rock phosphate imported in pebble form.
13. Here it may be mentioned that on 18th August, 1969, a Trade Notice was issued stating that natural rock phosphate, a mineral fertiliser covered by Item 14HH of the Central Excise Tariff would be liable to countervailing duty on import into India. A Trade Notice, such as this, is binding on Government. If any authority is necessary for this proposition, the same is to be found in the decision of the Division Bench of the Gujarat High Court in Nav Gujarat Paper Industries v. Superintendent of Central Excise, 1977 E.L.T. J67, where it was held that even if a Trade Notice amounts to not more than executive instructions, it would be binding on the department and the department would be estopped from contending that what way mentioned in the Trade Notice should not be adhered to.
14. Mr. Dalal urged that under Entry 35, it is not the articles but its form which should indicate it use for manurial purposes and rock phosphate when imported in pebble form does not indicate that it will be used for manurial purposes. Mr. Dalal further urgent that the end- use of the rock phosphate is the criterion to attract the provision of Entry 35. Mr. Dalal elaborated that Entry 35 would be attracted only if the petitioner established that the end-use of the rock phosphate was for manurial purposes only. They is no merit in these contentions. The plain reading of Entry 35 reveals that the criterion is that rock phosphate can be used for manural purposes and not that it shall be so used. The end-use is irrelevant. Apart from the fact that even in the impugned revisional order this is not the ground taken for denying the petitioner the benefit of Entry 35, this contention of Mr. Dalal has in terms been negatived by the Division Bench of this Court is Special C. A. No. 581 of 1970 (supra). In that case the question was whether for the purpose of levy of octroi rock phosphate as a chemical manure fell within Entry No. 85 in Schedule 1 to the Maharashtra municipalities (Octroi) Rules, 1968 or whether it was liable to be taxed under the residuary Entry No. 86 of that Schedule. Refuting the contentions of the respondents in that case that rock phosphate could not be classified as a chemical manure because its main use was in the manufacture of superphosphate, the Division Bench had that rock phosphate is known throughout the world as a chemical fertiliser and that despite the fact that one of its uses may be in the manufacture of superphosphate, the same would not cause a change in the description of the article, namely, that it is essentially a chemical manner.
15. Mr. Dalal further urged that the form of the rock phosphate must be such that if sold to a purchaser the latter would be in a position to know that it can be used for manurial purposes. Mr. Dalal further urged that rock phosphate in all forms are not indicative of its use for manurial purposes. this is yet another contention which is without substance, Rock phosphate is no doubt a chemical manure. In whatever form it exists, namely, either in powder form or in pebble form, it is a chemical fertiliser and hence manure and is known throughout the world as a chemical fertiliser as observed by the Division Bench of this Court in Special C. A. No. 581 of 1970 (supra).
16. What also cannot be lost sight of is that the "form" stated in Entry 35 need not be merely the physical form but also must take into account the chemical composition of the rock phosphate. It is therefore the chemical composition together with the physical form, and not the latter alone, which is the criterion to determine whether the rock phosphate is indicative of its use for manurial purposes. Even the State Trading Corporation in its revision application dated 16th June, 1973 has emphasised this aspect by reference to various authorities and authorities commentaries, that it is not merely the physical form regardless of the chemical composition which determines the suitability of material for manurial purposes and that both the chemical composition and the physical form collectively form the criterion for determining whether rock in phosphate indicative of its use for manurial purposes. The petitioner's expert Dr. Kane has also stated in his affidavit as under :-
"Rock phosphate is mined and graded before shipment and is sold on the basis of its chemical composition in which P 205 (phosphorus pentoxide) is the major and only constituent for determining its utility for use for manurial purposes.......
* * * * "I am asked to state what the criterion is for determining the suitability of rock phosphate for use as manure and also whether the physical characteristics of such rock phosphate determines their suitability for such use. The only answer to this question is that the chemical composition of the rock phosphate and in particular its P 205 content is the sole criterion. The physical appearance or characteristic of the rock phosphate in its natural form does not in any way determine its suitability for use for manurial purpose."
These aspects have not been challenged by the revisional authority or by Mr. Dalal either, what his habitual fairness.
17. Thus to summarise, no particular form is envisaged under Entry 35. Attention must be paid not only to the physical form but also to its chemical composition. The words `in a form indicative' mean that the article can be or is capable of being used for manurial purposes and not that it must be used for manurial purposes directly in the form in which it is imported. The entry applicable to the petitioner's goods is Entry 35 and not the residuary entry 87.
18. In the result, the petition is allowed in terms of prayers (a) and (b0 with the exclusion of the words "plus interest at 12% per annum approximately" in prayer (b). The amount of Rs. 10,39,520/- mentioned in prayer (b) shall be refunded to the petitioner within four months from today. There will be no order as to the costs of the petition. Rule is made absolute accordingly.