Gujarat High Court
Union Of India And Ors. vs Cmc India Ahmedabad on 1 January, 1800
Equivalent citations: 1979(4)ELT298(GUJ)
JUDGMENT
1. This judgment will govern the disposal of First Appeal No. 128 of1972, Special Application No. 97 of 1972 and First Appeal No. 970 of1973, as the main question involved in each of these cases is - whetherUltimarine Blue is chargeable with duty under Item 14 (1) (5) of theFirst Schedule to the Central Excise and Salt Act, 1944, hereinafterreferred to as `the Act'.)
2. We have already pointed out that the main question to the decided inthose three tters is whether ultermarine blue is chargeable with dutyunder Item No. 14 (1) (5) of the First Schedule to the Act. According tothe plaintiffs in both the suits, their products is known as ultramarineblue in the commercial world and also by those who use it. They have alsoalleged that ultramarine blue is mainly used for the purpose ofheihtening the whiteness of textiles and ofhter matters. It is never usedfor the purpose of painting, colouring or dyeing. the petitioners inSpecial Civil Application No. 97 of 1972 have also come out with the samecase. As observed above, the plaintiffs in Civil Suit No. 75 of 1972 werepaying duty on the above product and they raised the dispute on the pointonly after the decision the City Civil Court in Civil Suit No. 271 of1968. It is not disputed that so far as the plaintiffs in Civil Suit No.271 of 1968 are concerned, the excise authorites called upon it to paythe duty on the above product only on the basis of thr report of thechemical analyser in respect of its product. It appears from the writtenstatement filed by the defendants in Civil Suit No. 75 of 1972 that thedecision to levy duty on ultamarine blue manufactured by the plaintiffs,hereinafter referred to as M/s. Sindhu Chemical Products was made on thebasis of the report of analysis of the product made by the Deputy ChiefChemist, Bombay, who came to the conclusion that the product in questionwas inorganic pigment in the form of powder. In view of what is statedabove, it becomes evident that in both the aforsaid cases, the decisionof the defendats to charge duty on the product in question rests only onthe result of the chemical analysis. The respondents in their affidavitin reply in Special Civil Application No. 97 of 1972 assert thatultramarine blue being a pigment is chargeable with duty. They have notindicated in the above reply thatthey have taken the above view on thebasis of the report of the chemical analyser. It is not clear as to onwhat basis they took the above view. The petitioners have alleged theirproduct Nilsin Ultramarine Blue-Jal Jyoti is indentical to the productultramarine blue-manufactured by M/s. C.M.C. India, the plaintiff inCivil Suit No. 271 of 1958. It is submitted by Mr. Vakharia, the learnedAdovcate for the petitioners that the above allegations of thepetitioners have remined uncontroverted in view of the defective type ofthe affidavit in reply filed by the respondents. In this connection, hehas pointed out that the affidavit has not been properly varified andhence, itis difficult to say as to on what basis, the person making theabove affidavit denies the truth of the statements made by thepetitionerts in their petition.
3. According to him, the affidavit in reply cannot be treated as anaffidavit in the real sense of the term. In support of his abovearguments, he has relef on the dicision of the Supreme Court in the caseA.K.K. Nambiar v. Union of India and another,A.I.R. 1970, S.C. 652.
4. The affidavit of the respondents in the present case has not beenvarified and hence, in view of the above decision, itis difficult ot saythat the respondetns have in any way controverted the allegations ot thepetitioners in their petition. Under these circumstances, it would bejust and fair to hold that the product of the petitioners in identical tothe product manufactured by M/s. C.M.C. India. The learnedc AssistantGovernment pleader who appears for the respondents had not been able toshow as to how, in view of theabove, defective affidav it in reply filedon belhaf of the respondents, it is possible to take any other view inthe matter.
5. We have already pointed out that the main question to be decided inthese cases are whether the civil court or the High Court hasjurisdiction to decide the question as to levying duty under the Act and whether ultramarine blue us chargeable with duty under item No.14(1) (5) of the First Schedule to the Act. As the decision of thequestion of juridiction of the court depents, to a considerable extent,on the decision on the second question, we would first deal with thelatter.
6. It is submitted by Mr. Nanavati, learned Assistant Govt. Pleader whoappears for the Union of India and Central Excise in two of the abovematters that ultramarine blue is a pigment within the meaning of thewords of Item No.14(1) (5) of the first Schedule to the Act.
7. According to Mr. Naravati, Ultramarine, Blue falls withinsub-item (5) ofItem no. 14 (1) and the learned Judge of the City Civil Court was notjustified in taking a contary view on the point Mr. Sorabji, learnedCounsel for the respondent M/s. C.M.C. India vehmently argues that thetest adopted by the excise authorities for the purpose of deciding thequestion whether Ultramarine Blue is chargeable with duty under Item No.14(1) (5) is not acording to law and that it is fot the authoritiesconcerned to prove that the product in question is chargeable with dutyunder the above item. At this stage, we may m,ake it clear that Mr. H.B.Shah, learned advocate for M/s. Sindhu Chemical Products has adpoted thearguments of Mr. sorabji on the above as well as other points. On theqauestion of burden of proof in the matter like the present one, Mr.Sorabji has relied on the decision of the Supreme Court in the cases ofIncom-tex and Sales tax, Quilon v. Travancore Rubber and Tea Co.20, SalesTax Cases, 520 and South Bihar Sugar Mills Ltd. and another etc. v.Unionof India and another etc. and Tata Chemicals Ltd., Bombay v. R.M. Deal,Inspector. Central Excise, Mithapur and others, A.I.R. 1968 S.C. 922=1978E.L.T. (J 336). In the case of Travancore Rubber and Tea Co. (Supra)Lordships of the Supreme court have observed -
" In all cases of taxation the burden of providing the necessaryingredients laid down by law to justify taxation is upon the taxingauthority and in the instant case they have failed to prove the essentialingredient. viz. the intention of the petitioner to carry on a businessof selling or supplying agricultural produce."
8. According to him, manufacture of Ultramarine Blue was started forthe first time in India in or about the year 1957-58 and prior to that ,it was imported from abroad under specific tariff item Ultramarine Blueshown under the general clause of paint colours and painter's materialin the customs tariff. He admits that all the terms used in Item No. 14are technical terms by which he means-the terms used by technologists.this supports the plaintiffs case that Ultramarine Blue is not known as apigmant in commonparlande and that is is known only as Ultramarine blue.He is fair enough to admit in his cross-examination that "the substanceknown as Ultramarine Blue has acquired identity of its own in the worldof business and science", and that it is known as Ultramarine Blue, allover the world. this shows that only those persons who are conversantwith properties of Ultramarine Blue may call it as a pigment inscientific term, but so far as busines community is concered, it is knownonly as Ultramarine Blue. he admits that Tinopal is an optical whiteningagent. But according to him, it cannot be classified as a pigment. Now,it is found from his evidence and other evidence on record thatUltramarine Blue is used mainly for the purpose of heighting thewhiteness or thinks to which is is applied. Under these circumstances,even though according to the chemical test, it can be said to be apigment, it is not known as such and in the business community or bypersons who are dealing with it. On the basis of heis evidence, itcannot be said that Ultramarine Blue is a coloure in the strict sence ofthe term. He futher admits that in the market, the sbstance in questionis known as ultramarine blue. When the evidence discussed above isconsidered together, it becomes evicent that the product in question isknown only as Ultramarine Blue in the Market and that even the exciseauthorities started treating it as a pigment oly after it was analysed atthe Customs Laboratory in the yesr 1963. the defendant have not adducedany evidence to show that ultramarine blue which, it is not disputed, ismanufactured in other part id the country also, in charged with dutyunder Item 14(1) (5) of the first Schedule. Under these circumstances, itcan be resonably inferred that the customs authorities throught oflevying duty on Ultramarine Blue for the first time on the basis of thereport of the chemical examiner.
9. The evidence adduced by the parties in special civil suit No. 75 of1972 also leads to the above conclusion. the evidence adduced by theplaintiffs in the above case, to show that theit product is known only asUltramarine Blue has remined unchallenged and hence, it is not necessaryto discuss that part of the evidence in details. We have already pointedout that the above position has been admitted by the defendants' witnessSubramaniam. It is futher found from the evidence on record that inGujarat, Ultramarine Blue is known as `Gali', whereas, in Northern Indiait is known as `Neel'. D.W.1-Lalchand who is the chemical analser hadanalysed the product of the plaintiffs. According to him, the contents ofthe product were inorganic pigment in powder form. It is used in paintindustry and leather and palstc industry. He stated in hiscross-examination and that it does not mix up with water and the water ismade blue temporarily and " in technical language there is dispersion butn ot solution". It appears from his evidence also that Ultramarine Blueonly heightens the whiteness of the substance and that is tis not acollouring agent. the evidence ofv D.W. 2-Parbhu Madhu also shows thatUltramarine Blue is used only for the purpose of heightening thewhiteness and that it is not used for colouring. The evidenee of D.W. 3Indravadan is also to the above effect. He also admits in hiscross-examinaiton that the product is called Ultramarine Blue and not asa pigment. thwe evidence in the above case further shows that thedefendats relied onlu on the result of the chenical analusis of theproduct Ultramarine blue for the purpose of charging is with duty underItem No. 14 (1) (5) of the First Schedule. the learned Advocates for theUnion of India and Cantral Excise authorities have not controverted thefact that, the product of each of the three companies is known only asUltramarine Blue by those who trade in or use it. It further appears fromther evidence on record that even maufacturers themselves call thatproduct as Ultramarine Blue.
10. Mr. R.A. Methta, learned Adocate for the Union of India and centralExcise authorities in F.A. 970/73 argues that according to the bookletpublished by the Indian Standards Institution which contains"specification for Ultramarine Blue for paints", Ultramarine Bluedescribed as apigment. The above bokelet has been produced at Ex- 43 byD.W. 1-Lalchand who, as observed above, is a chemical analyser. He alsosays that the product is known as Ultramarine Blue. Apart from sayingthat ex. 48 is publishedby the Indian Standards Instituttion, he has notstated anything about the binding nature of the contents of the booklet.The defendants have not examined any one from the said Institution inorder to explain the purpose for which the above booklet is published andas to what extent, the manufactuers are expected to follow variousdirections given in the booklet. It should further be remembered thateven according tothe booklet, the material is "commercially known asUltramarine Blue", Attention of none of the witnesses for the plaintiffswas drawn to the above booklet, This shows that the plaintiffs had noopportuniy to explain any of the points in connection with the booklet.Considering all these circumstances, it would not be proper to holdmerely on the basis of the booklet ex. 48 that to the knowledge of themanufacturers, Ultramarine Blue was pigment or "ultramartine pigment " asstated in the booklet. According to Mr. Mehts the letters `I.S.I.' on thepacket of the product are the abbreviations of the term `Indian StandersInstitution', but no such suggestion has been made to any of the witnessfor the plaintiffs and none of the witnesses for the defendants has alsostated so. Under these circumstances, the above submission of Mr. Methacannot be accepted. In this connection, we may iucidentally point outthat no such submission has been made by the learned advocates for thedefendants in the other suit. Thus, in view of the evidence discussedabove, it is established thatproduct manufactuered byt eh manufacturersin each of the three cases is known only as Ultramarine Blue by consumersans commercial community and as observed above, the defendants have notbeen able to controvert the above position.
11. The next question that arises for our decision is whether theproduct in question even through it is known as Ultramarine Blue to themanufacturers as well as tthe trades aand consumers can be legallycharged with duty of excise under Item No. 14 (1) (5) of the FirstSchedule to the Act. In this connection, Mr. Sorabji has made thefollowing submissions :-
1. The Central Excise and Salt Act is not an Act aplied to a particularscience or art, but it is general statute the object of which is to raiserevenue and for this purpose to classify various substances according tothe general usage and known denominations of trade.
2. The correct principal to be applied in interpreting the words in ataxing statute and in any event in the Central Excise and Salt Act, is toconstrue the words in their popular sense, that is, in the sense whichpeople conversant with the subject matter with which the atatute isdealing, would attribute to it.
12. In support of his above submissions, he has relied on certainauthorities. The purpose would be served by referring to only some ofthese authorities.
13. Cases of Dunlop India Limited v. Union of India and others (Civil AppealNo. 1446 of 1972) and Madras Rubber Factory Limited v. Union of Indiaand others (Civil Appeal No. 2746 of 1972), decied by the Supreme courton 6th October, 1975 are also relevant on the point. It has been pointedout in the judgment in the above cases that-
"It is well established that in interpreting the meaning of words in ataxing statute, the acceptation of a particular word by the trade and itspopular meaning should commend itself to the authority".
14. In the above case, a reference has been made tto the followingobservations of the Supreme court in the case of South Bihar Sugar Mills(Supra) -
" It is also not correct to say that because the sugar manufacturer wantscabon dioxide for carbonationjpurpose and sets up a kiln for it that heproduces carbon dioxide and not kiln gas. In fact what he produces is amixture known both to trade and science as kiln gas, one fo theconstituents of which is, no doubt, carbon diozide."
15. This Court finally observed -
"The kiln gas in question therefore is niether carbon dioxide norcompressed carbon dioxide known as such to the commercial community andtherefore, cannot attract Item 14H in the First Schedule."
16. It is, however, submitted by Mr. Metha, learned Advocate for thedefendats in civil suit No. 75 of 1972 (first appeal No.970 of 1973) thatthe goods referred to in Item No. 14 of Schedule I to the Act areordinarily used or dealt with by the person who know the technicalterminology of those goods and hence, while construing Item No14, thetechnical terms in which various items have been described should betaken into consideration. The defendants have, however, not adduced anyevidence to show that various articles referred to in Item No. 14 areused only by the persons of the above category. Even as regardsUltrtamarine Blue, as observed above, the defendants have not been ableto controvert the contention of tghe plaintiffs that, that particularproduct is known only as Ultramarine Blue not only to the manufacturersand traders, but even to the common people. Under these circumstances andespecially in view of the authorities cited above, the above submissionof Mr. Metha cannot be accepted. In the absence of any evidence on thepoint, it would be hazardous to interpret the term `pigments' used inItem No.14(1) (5) of the Schedule I to the Ac, in the manner suggested byMr. Mehts. We have already referred to the principle laid down by thesupreme Court and on other already to the principle laid down by theSpreme Court and other Courts for the purpose of interpretation of wordsin a taxing statute. Now, according to sec 3 of the Act, duties of exciseare to be levied on "all exisable goods other than salt which areproduced or manufactactured in India" At the rates set for in the FirstSchedule. As pointed out by the Supreme Court of India in the case ofSouth Bihar Sugar Mills Ltd(Supra).
" As the Act does not define goods the legislature must be taken to haveused that word in its ordinery dictionary meaning. The dictionary meaningis that to become goods it must be sonething which can ordinarily come tothe market to the be bought sold and is known to the market."
17. We have already out that the goods on which duty is sought to be leviedare known to the market or the trade as "Ultramarine Blue" and not aspigments ans in that case, it is difficult to say that Ultramarine Bluefalls within Item No. 14 (1) (5) of the First Schdule. This shows thatthe products in question in these cases cannot ne said to be exisablegoods as contemplated by section 3 of the Acft and they cannot be chargedwith duty under Item No. 14 (1) (5) of the First Schedule.
18. It is , however, vehemantly argued by the learned Advocates for theUnion of Indis and Central Excise authorities that in view of theprovisions of secs. 35 and 36 of the Act which, according to them,providea complete Code for the purpose of adjudication of disputes under theAct, the Civil Court or the High Court has no juridiction to interferewith the decision taken by the Central Excise authorities in the matter.IN this connection, it may be pointed out that so far as the productmanufacrtured by M/s C.M.C. India is concedrned, the DeputySuperintendent of Central Excise, by his letter dated 15 the November1963 vide ex. 51 informed the manufacturers that they were liable to payduty on Ultramarine Rule. After some correspondenc between the DeputySuperintendent and M/s. C.M.C. India, the Matter was referred to theAssistant Collector of Central Excise, Ahmedabad. He also informed theplintiffs in reply to their letter that in view of the analysis of theproduct, it was chargeable with duty. M/s. Sindhu Chemical Products whoare the plaintiffs in civil suit No. 75 of 1972 approached the CentralExcise authorities only after the dicision in civil suit No. 271 of 1968.As the Deputy Suprintendent of Central Excise Rajkot insisted that theywere liable to pay duty for their product, they filed the above suit. Thepetitioners M/s. Nisin Industries by their letter, dated 11the October,1971 requested respondentsd Nos. 2 and 3, the Assistance Collector andSuperintendent, Central Excise, Ahmedabad respectively that they shoulddesist from collecting and excise duty in respect of their productUltramrine Blue. As their request was turned down, they filed the abovepetition.
19. We shall now refer to the point raised by Mr. Sorabji on thequestion of jurisdictaion of the Civil Court or the High Court tointerfere with such matters. His submissions are as follows :-
1. The decision is without jurisdictaion if the authority is guilty ofan error which goes to the very root of of the determination, in that, ithas appaoached the case on a entirely wrtong footing.
2. Determination must be real and not a purported one. The decison whichtaks into account irrelevent factors or matters which law enjoins :should not be taken into account or ignores or disrgard the relevantconsiderations is no decison at all and it is nullity.
3. No. question of exhausting remedies provided by the Act arises whenthe order is without jurisdiction. This question of exhausting internalremedies applies only towrit petitions and not ot the suits.
20. We shall now deal with the cases cited by Mr. Sorabji in support of hisabove submission.
21. One of the leading cases on the pointed is the decision of theSupreme court in the case of Dhulabhai etc. v. State of Madhya Pradesh,A.I.R. 1969 S.C. 78. The above case has been folowed and the ration ofthat case has been pointed out in the case of Sree Raja KandregulaSrinivasa Jugannadharao Panthuly Bahaddur Guru v. The State of AndhraPradesh and othedrs. A.I.R. 1971, S.C. 71, relied on by Mr. Sorabji. Wewould, therefore, refer only to the latter case in which it has beenobserved -
" The general principle on the which the juridiction of civil courts cansuccessfully be excluded in respecxt of decisions by special tribunals iswell settled. The Difficulty usually arises in its application to givencases. As observed by the Privy Council in Secy. of state v. Mask and Co.67 ind app 222 (AIr 1940 Pc 105), the exclusion of the jurisdiction of the civil courts must either be explicitly expressed or clearly implied. Further even if the jurisdiction is so excluded the civil courts havejurisdiction to even if the juridiction is so excluded the civil courtshave jurisdiction to examine into the cases where the provision of theAct have not been complied with ir the statutory tribunal has not actedin conformity woth the fundamental principles of judicial procedure. Itis unnecessary to refer to other cases dealing with this question. Weneed only refer to the recent decision of this court in Dhulabhai v.State of Madhya Pradesh (1968) 3 SCR 662=(air 1969 sc 78),in which afteran exhaustive discussion of the case law, the legal position wassummarised by the court speaking through Hidayatullah C.J. as follows :-
(1) Where the statute gives a finalitiy to the orders of the specialtribunal the civil courts' jurisdiction must be held to be excluded ifthere is adequate remedy to do what the civil courts would normally do ina suit. Such provision, however, does not exclude these cases where theprovisions of the particular Act have not been complied with or thestatutory tribunal has not acted in conformity with th e fundamentalprinciples of judicial procedure.
(2) Where there is an express bar of the juridication of the court, anexamination of the Scheme of the particular Act to find the adequacy orthe sufficiency of the remedies provided may be relevent but is notdecisive to sustain the jurisdic of the Civil court.
Where there is no express exclusion, the examination of the remedies andthe scheme of the particular Act to find out the intendment becomesnecessary and the result of the inquiry may be decisive in the lattercase. It is necessary to see if the statute creates a special right or aliability and provides for the determination of the right or liabilityand further lays down that all question about the said right andliability shall be determined by the tribunals so constituted, andwhether remedies normally associated with actions in civil courts areprescribed by the said statute or not.
(3) Challenge to the provisions of the particular Act as ultra virescannot be brought before tribunals constituted under the Act. Even theHigh Court cannot go into that question on a revisio or reference fromthe decision of the Tribunals.
(4) When a provision is already declared unconstitutional or theconstitutionality of any provision is to be challenged, a suit is open.Awrit of certiorari may include a direction for refund if the calim isclearly with i the time prescribed by the Limitation Act but it is not acompulsory remedy to replace a suit."
(5) Where the particular Act contains no machinery for refund of taxcollected in excess of constitutiional limits or illegally collected asuit lies.
(6) Questions of the correctness of the assessment apart from itsconstitutionality are for the decision of the authorities and a civilsuit does not lie if the orders of the authorities are declared to befinal or there os an express phohibitiaion int he particular Act. Ineither case the scheme of the particular Act must be examined because itis relevant enquiry.
(7) An exclusion of the jurisdiction of the civil court is not readilyto be inferred unless the conditions above set down apply."
22. According to us, the first proposition laid down by the SupremeCourt specking through Hidyatullah in the case of Dhulabhai (Supra)covers these cases. We have already pointed out as to how the procedureadopted by the Central Excise authorities to determine the questionwhether the product Ultramarine Blue were liable to tbe charged with dutywas almost arbitrary and not in conformity with the fundamentalprinciples which would be taken into consideration while interpreting ataxing statute.
23. Mr. Sorabji has also relied on the decison of a dividion bench ofthis court in the case of M/s Jyoti Limited, 1978 E.L.T. (J 238) firstappeal No. 713/68 to which my learned brother J. M. Sheth, J was Party) insupport of his above submisions. As the submissions of Mr. Sorabjialready stand supported by the decisions of the Supreme Cort and otherCourt referred to earlier, we do not think it necessary to refer to anyspecific obsevations in the case of M/s Jyoti Limited,, in which also theabove authorites have been folloed. It supports the view that we havetaken on the point.
24. As observed above, the decision of the Central Excise authoritiesto levy duty on the products in question are void and hence, in view ofthe decisions of the Spreme Court and other courts referred to above, itwas not at all necessary for the manufacturers to tske recource todepartment appeals or aplication in revision, as the case my be and thecivil court has jurisdiction to the suits and this court to hear the writpetition.
25. In the result, appeal No.970 of 1973 is allowed. The decree of thetrial court in civil suit No. 75 of 1972 is set aside. The suit isdecreed and it is declared that the plaintiffs product Ultramarine Blueis not chargeable with duty under item No. 14 I (5) of the First Scheduleto the Act. the defendants are restained from recovering any duty fromthe plaintiffs in respect of the above restrained from recovering anyduty from the plaintiffs in respect of the above product o the footingthat it is chargeable with duty under item No. 14 I (5) of the FirstSchedule. Defendant No. 1, Union of India is directed to refund theamount of Rs. 28,615.26 to the plaintiffs within three months from thedate of this judgment. In case, defendant No. 1 fails to refund the aboveamount to the plantiff within the above time , the plaintiffs would beentitled to redover the same from defedant No. 1 with interest at therate of 6% per annum from the date on which the period of three monthsexpires till realisation. Defendant No. 1 to pay the costs of theplaintiffs throughout. The defendants to bear their own costs.
26. First appeal No. 128 of 1972 is dismissed with costs.
27. In Special Civil Application No. 97 of 1972, the petitioners have,amongst other relefs, claimed that respondent No. 1 Union of India may bedirected to refund the entire levied on their product Ultramarine Blue onthe footing that it is chargeable with duty under item No. 14 (1) (5) ofthe First Schedule to the Act. As we have held that they were not liableto pay any duty on the above product under item No. 14 (1) (5) of theFirst Schedule, respondent No. 1 is bound to refund the amount of theduty recovered from them during the period of three years prioe to thedate of the petition as well as from the date of the petition tillto-day. The petitioners' request for refund of the duty paid by themperior to the period of three years before the date of the petitioncannot be granted. The learned adovocate for the Pettiioners requestedtaht the petitioners may be awarded interest at the ratge of 6% per annumon the amount which is sirected to tbe refunded by respondent No. 1.Looking to the peculiar circumstances ofthe case, the above requestcannot be accepted. Subjexct to the above observations, the petition isallowed and the orders demanding duty from tghe petitionser for theirproduct on the footing that it is chargeable with duty under item No. 14(1) (5) of the Schedule I to the Act are quashed. Respondent No. 1 andthe authorites concerned are directed to refund the amount of dutyrecovered by them as stated above, to the petitioners within three monthsfrom the date of this judgment. Respondent No. 1 should pay the costs ofth epetition to the petitioners ans the respondents should bear their owncosts.
28. At this stage, the learned advocates for the Union of India and theCentral Excise authorities request that looking to the points involved inthese mattters, cerificates of fitness for appeal to the Supreme Courtmay be granted under Article 133(1) of the Constitution of India.Looking to the peculiar circumstance, of the case, we also feel that all these cases involve substaial questions of law of general importance andthat these question need to be decied by the Supreme Court. thecertificates as prayed for are, therefore, granted.