Delhi High Court
Hyderabad Asbestos Cement Products ... vs Union Of India And Others on 1 January, 1800
Equivalent citations: 1990ECR377(DELHI), 1980(6)ELT735(DEL)
JUDGMENT Sachar, J.
1. Is the imposition of excise duty on asbestos fibre introduced by the Finance Act of 1976 w.e.f. 1-4- 1976 constitutionally valid and are the petitioners liable to pay additional duty of customs equal to the excise duty for the time being leviable on asbestos fibre in terms of Sections 3 of the Customs Tariff Act 1975, are the questions which call for determination in this batch of writ petitions ?
2. All these petitions were heard together and the main arguments was addressed in C.W. 48/78. The counsel for the parties agreed that the decision in this writ petition will govern the decision in all other cases, namely :-
C.W. 652/78, C.W. 627/78, C.W. 1378/78, C.W. 863/78, C.W. 808/78 and C.W. 956/78.
3. The petitioner No. 1 company has factories at Hyderabad and Ballabhgarh and manufacturers asbestos cement products like- cement sheets and pipes. The main constituent for the production of asbestos sheets and pipes is asbestos fibre. Before 1962 the supply to asbestos was dependent completely on imports, thereafter the petitioner took on lease certain mines in the State of Bihar under the Mines and Minerals (Regulation and Development) Act, 1957 (hereinafter to be called the 957 Act). Section 9 of the 1957 Act provides for payment of royalties in respect of mining lease at the rate specified in Second Schedule to the Excise Act. Second Schedule specifies the mineral and entry 30 relates to asbestos and reads as follows :-
"ASBESTOS * * * *
(a) Chrysotile of superior Two hundred and quality i.e. AS, A.B. fifty rupees per and C. tonne.
(b) Chrysotile of inferior Fifty rupees per quality i.e. other than tonne. A, As, B & C.
(c) Amphibole Twelve rupees per tonne".
But this meets a very minimal demand of the trade which s 60,000 tonnes per annum. Out of this India imports about 57,000 tonnes of chrysotile asbestos from Canada and U.S.S.R. The indigenous production is less than 3,000 tonnes.
4. Entry 84 in List I. Schedule, VII of the Constitution of India reads as duties of excise on tobacco and other goods manufactured or produced in India. Section 3 of the Central Excises and Salt Act, 1944 (hereinafter to be called the Excise Act) lays down that there shall be levied and collected in such manner, as may be prescribed, duties of exercise on all excisable goods other than salt which are produced or manufactured in India....... as and at rates set forth in the First Schedule. By Section 35 of the Finance Act, 1976, the Excise Act was amended in the manner specified in the 4th Schedule. Amongst others an item 22(f) was incorporated in the First Schedule to the Excise Act which reads as follows :
"22F. Mineral Fibre and yarn and manufacture Fifteen per cent facture there from in or in relation to the ad volorem. manufacture of which any process is ordinarily carried on with the aid of power.
EXPLANATION : Mineral Fibre and yarn manufacture there from shall be deemed to include :
(i) Glass fibre and yarn including glass tissues and glass wool;
(ii) Asbestos fibre and yarn :
(iii) any other mineral fibre and yarn whether continuous or otherwise such a slag-wool and rock-wool; and
(iv) Manufactures containing mineral fibre and yarn other than asbestos cement products.
Since the date i.e. April 1, 1976, the respondents demanded from the petitioners the payment of excise duty at the rate specified in the First Schedule.
5. Section 3 of the Customs tariff Act, 1975, provides that any article which is imported into India shall in addition be liable to duty (referred as Additional Duty) equal to the excise duty for the time being leviable on like articles if produced or manufactured in India.................
6. Now the petitioners in all these writ petitions are importing asbestos fibre also for their requirement. As a matter of fact some of the petitioners only depend upon the import of the asbestos fibre for their requirement. The result was that there was a demand made on the petitioners to pay not only the duty of excise on asbestos fibre which was obtained by the petitioners from their mines but also on that quantity of fibre which was imported by them. The petitioners represented that they were not liable to any the excise duty and also ipso facto no additional duty of Customs under the Customs Tariff Act. This however, was not accepted and the Collector, Central Excise, Hyderabad issued a trade notice on August 3, 1977 in which he took the view that asbestos fibre as processed and graded has a distinct character differing from asbestos rock and that the said item was covered within tariff item 22 (f) of the Excise Act and was liable to pay duty of excise. The petitioners were also informed by the letter form the Government of India, Ministry, of Finance dated August 9, 1977 that the process by which asbestos fibre is obtained is a process of manufacture and that the said item correctly falls within tariff Item No. 22(f) of the First Schedule to the Excise Act. It is thereafter that the petitioners filed these writ petitions. Their main grievance being that in the asbestos mined by them and the asbestos fibre that they ultimately use there is no process of manufacture and therefore no duty is payable under the Excise Act. The further consequential argument urged is that if there is no duty under the Excise Act on asbestos fibre automatically no additional duty of Customs can be levied under the Customs Tariff Act because the same is only to be charged if there is being levied excise duty on a like article which is produced of manufactured in India. Consequential relief for refund is also sought. According to the averments the amounts of duty paid in different writ petitions is as under :-
(1) C.W. 48/78-Excise duty paid till 31-3-1977 Rs. 4,20,095.52
Addl. Customs duty paid till 31-3-1978 Rs. 3,75,84,713
(2) C.W. 652/78-Additional Customs duty paid
till 31-3-1978 Rs. 87,64,824.25
(3) C.W. 627/78-Additional Customs duty paid
till 31-3-1978 Rs.2,44,75,165.77
(4) C.W. 13778/78-Additional Customs duty
paid till 31-10-1978 Rs.1,41,42,912.52
(5) C.W. 863/78-Additional Customs duty
paid till 20-7-1977 Rs. 5,14,695.56
(6) C.W. 808/78-Amount of Excise duty paid -
(7) C.W. 956/78-Amount of Excise duty paid -
7. Three questions may arise for consideration in these writ petitions namely-(1) Whether the process of obtaining asbestos fibre is a part of mining operation and a mining process as urged by the petitions;
(2) does the process of obtaining asbestos fibre amount to manufacture within Section 2(f) of the Excise Act;
(3) even if duty of excise could not be charged on that quantity of asbestos fibre obtained from the mines will the levy of additional duty of customs under the Customs Tariff Act, 1975 be not sustainable irrespective of the finding whether excise duty is held to have been validly imposed by the parliament.
8. Major producers of asbestos are Canada and U.S.S.R. Asbestos is defined as a general name for the useful fibrous varieties of a number of rock forming minerals, The value of asbestos ensues from the incombustible nature of the products fabricated from the various grades of mineral fibres. [Vide Mc. Graw Hill Encyclopedia of Science and Technology, Vol. I (1977) page 618.] Most asbestos fibres occur in small cracks in massive rocks and are difficult to recover e.g. a large cubic open pit mine handles approximately 16 tons of ore 8 tons of waste ore and 23 tons of over-burden to produce a single ton of asbestos. To mine chrysotile, the ore is first blasted loose. The larger asbestos seams i.e., those that are at least 9.5 mm wide are picked from the ore after blasting and adhering rock is removed with a pick, The resulting chunks of ore called crudes, which may contain as much as 30% water, are then dried in preparation for the next stage- separation into fibres. Fibre separation is accomplished mainly by a series of shaking screens, special separators called cyclones, and additional crushers or fiberizers. At each shaking screen the liberated fibres are sucked off by an air stream and collected for grading and packaging. The larger pieces of ore, which are retained by the screen are recycled for further crushing. Smaller pieces, which pass through the screen and are called throughs, are sent to the next crushing or fiberizing sequence. The extremely small pieces that fall through the screens following the final fiberizer are discarded, [vide Encyclopedia Americana, Vol. II (1970) pages 427, 428.]
9. Similarly, the Encyclopedia of Natural Chemical Analysis, Vol. II gives the processing of asbestos fibre as follows :-
"Asbestos fibre is recovered by open pit or underground mining operations. In the open pit operation, the ore is taken from the top of the deposit and in underground method, the ore is removed from the bottom of the deposit. One important method used in underground mining is known as block carving. In this method, a large block of ore is loosened in such a away that is breaks down from its own weight. The ore is extracted through a network of tunnels and carried to primary crushers which break up the large rock chunks into gragments. The crushed ore falls into bins and then undergoes further crushing and drying prior to processing at the mill. The milling operation are complicated but consists of separating the fibres from the rock. In the mill the rock is crushed more finally and passes ores through vibrating screens which roughs separate the loose fibres from the rock. Powerful hoods, which operate much like vacuum cleaners, lift the loose fibre leaving the heavier rock. This operation is repeated until the separation is completed and only waste rock remains. The separated fibres are then cleared and carefully graded according to length. Grading is done according to rigid industrial specifications.
BRUSSLES' NOMENCLATURE defines asbestos as follows :-
`25.23-ASBESTOS : Asbestos is a natural mineral substance produced by the decomposition of certain rocks. It has a very characteristic fibres texture : It is sometimes, silkly in appearance and the colour varies greatly, being usually white, but sometimes grey, greenish, blue or dark brown. Its main property is its resistance to fire and acids.
The heading applies to crude asbestos in the form, to raw, beaten or washed fibres whether graded to length or not to, asbestos in flakes or powder and also to asbestos waste. The heading excludes fibres which has been further process (carded, dyed etc.) and finished articles of asbestos (heading 68.13").
The process by which the asbestos fibre is obtained is more or less as follows :-
"The petitioners extract asbestos rock form the mine which is in the shape of large boulders. This asbestos rock is put interview crushers and is made into small size of about 20-40 mm. These further rocks of 20-40 mm size are still subject to further reduction in a hammer mill, the purpose of which is to reduce the rock to a stage so that the fibre could be taken away from rock in which it is embedded. The asbestos fibre is found on the rock which contain thin layer of the fibre of about an inch in length of a piece of rock about the size of a cricket ball. The petitioners have obtained permission from the Collector of Central Excise, Patna as communicated by Assistant Collector dated December 14, 1977 to remove in bond semi-finished goods under section 56(b) from the mining place at Roro to the factory at Hyderabad for further processing after the pieces of rock are brought to Hyderabad they are crushed to smaller size small with the aid of power and thee resultant is subject to series of spinning surfaces so that the asbestos fibre which is very much lighter is removed and separated from the dust and the grit. The fibre however, still contains rock articles and speckles. The fibre is then pressed through a Hurricane Mill where rapidly rotating rotors pulverise the stones and speckles without damaging the fibre. It is in this process that ultimately the asbestos fibre free of all dust and stone particles is produced.
10. The petitioners were argued by their learned counsel Mr. Ray who was also followed by Mr. A. K. Sen, Mr. Soli J. Sorabjee and Dr. Chitley and on behalf of Union of India by Mr. S. N. Chopra and Mr. N. K. Jaggi. The first contention raised by the counsel for the petitioners was that the whole process from the mining of the asbestos rock to the obtaining of the asbestos fibre was really a mining process and that mining process is distinct from a manufacture no excise duty could be levied on the asbestos fibre. Mr. Ray drew our attention to the typical mining lease deed of the petitioner and emphasised that it is a lease to mine all beds, veins seams of asbestos, that the right extended to search for mine, bore for win, work dress process, convert carry away and dispose of the said minerals. Emphasis was placed on clause 8 on beneficiation as giving a right to beneficiate any ore produced from the said land and carry away such beneficiated ore. The suggestion being that the lease was in such wide terms that it allowed the lessee/petitioner to win any mineral, to beneficiate any ore and therefore this covered the extraction of the asbestos fibre from asbestos rock and therefore would no the a manufacturing operation.
11. Reference was made to the definition of mine in Section 2(j) of the Mines Act, 1952 which means any excavation where any operation for the purpose of searching for or obtaining minerals has been or is being carried on. I do not see how this definition is of any help. This definition is meant for the Mines Act and includes even workshop situated in the precincts of a mine and even power station supplying electricity for working of mine. Similarly, a reference was also made to the `mining lease' in `Section 3(c) of the 1957 Act which means the lease granted for the purposes of undertaking mining operations and clause 3(d) which defines `mining operation' to mean any operations undertaken for the purpose of winning any mineral. Again the emphasis is that as it was a mining lease for asbestos and granted the right to dig, drill or win, work mineral, it would mean not only winning the asbestos rock but also further getting fibre from the said rock. I cannot agree. Reference was made to the Federal Commissioner of Taxation and Henderson (68 Commonwealth Law Reports 29) by Dr. Chitley. In that case 'Slum Dumps' which soiled which had been raised from the beds of gold mines and from which visible gold had been removed so that such gold as was left could be extracted only by special processes lay on the surface of the ground Question arose under thee Income Tax Act-'whether the company inn treating the dumps was a mining company carrying on the operation for treating gold so as to entitle deduction in respect of the calls made by him in contributing to the shores of the company. At page 44 Latham, C.J.conceded that moil or minerals severed from the freehold are chattels and that the primary meaning of the word 'mine' is a subterranean excavation for the purpose of getting minerals but the Judge relied on the definition of 'mine' in the Mines Act,1928 which included a place wherein any operation for or in connexion with mining export that mining includes not only excavation of material by digging mechanical methods, or hydraulic methods but also treatment by a battery or otherwise and by a Chemical process when carried out at the place where the gold bearing material was obtained, though it was never the less accepted that a treatment at a place other than from where the dump was removed would not be described as a mining apportion. It will be clear that the case was decided on thee peculiar definition of the Mines Act. It is also significant to note that even in the extended meaning of the mining it was recognised that if concentrates are removed from the place where it was produced and treated at some other place the treatment at the latter place would not be described as mining operation though the same process at the place of origin would be described as part of the mining operation. In the present case admittedly asbestos rock was removed from Roro to Hyderabad for obtaining asbestos fibre.
12. Reference may also be made to Commissioner of Taxation of the Commonwealth of Australia and Broken Hills Proprietary Company Ltd.(120 Commonwealth Law Reports 240 at 273). In that case it was held that though mining operation may include work done on a mineral baring property in preparation for or as ancillary to the actual winning of the mineral but the court had reservation that it extends to any work done on the property subsequently too the winning of the mineral (e.g. transporting, crushing. sluicing and screening) for a purpose of completing the recovery of the desired end product of the whole activity. This case clearly shows that the crushing, sluicing are not covered by the word `mining' nor does the winning of mineral includes such a process. It is the further held, `Once the iron ore is obtained in manageable lumps then its there treatment, either to reduce or increase its size so that it can be conveniently sported from the mine and better utilized inn industry, forms no part of the mining operation . It all depends in the context of leases or Acts wherein the expression 'win' is used. Thus in Lewis v. Forthergill (5 Chancery Appeals 103) expression 'winning' in the lease in that case was meant to put the mine in a state in which continuous working can go forward in the ordinary way.
Similar was the meaning given in Lord Rokeby v. Elliot (9 Chancery Division 685 at 689).
13. In a popular sense winning mineral means getting or extracting it from the mines vide ( Bihar Mines Ltd. v. The Union of India and others. Here what is extracted the mine is certainly not asbestos fibre but asbestos rock. The mining lease is for asbestos. The suggestion that the mining lease was for asbestos fibres not in terms supported by the mining lease. Of course the argument of counsel for thee petitioner was that as the end product which is to be obtained is asbestos fibre it should be treated to be a mining operation. I cannot agree, Mining in normal and ordinarily under stood parlance would mean a bodily removal of the rock from the bottom to the pit. ` Mine' is defined in Chambers's Twentieth Century Dictionary as a place from which mineral are dug, to excavate.' Mining is defined in Stroud's Judicial Dictionary as 'a commercial work done on a mineral bearing property and preparation subsequently. the expression defined is understood to what is really the chief objective. A man employed at the pithold of colliery was held not engaged in the process of mining in the sense in which that word was used in relation to industrial disease [Stroud's Page 1677 (4), 4th Edition].
14. In American Jurisprudence, Vol. 54, II edition,page 190, "Mining", as it is effected by governmental controls includes surface evacuation of are and minerals and of sand and gravel by the "Open pit" and "trip' mining" methods. But then it is also described in Article5(at page 189 of 54 Am.Jur.2nd) as an operation consisting of sinking shifts to the productive level, digging or blasting put the minerals, and elevating then top the surface for processing. This insistence to give a meaning in a particular Act by reference to the meaning ascribed to it inn some other Acts has been commented adversely by various courts. As the House of Lords said in Macbeth v. Chislett (1910 AC 220 at page 224),"It would be a new terror in the construction of Acts of Parliament if we are required to limit a word to an unnatural sense because in some Act which is not incorporated or referred too such an interpretation is given to it for the purposes of the Act alone." This view was referred to with approval by the Supreme Court in The Commissioner of Sales Tax, Madhya Pradesh, Indore v. M/s. Jaswant Singh Charan Singh. In (J. K. Steel Ltd. v. Union of India & others (in para 19)) the items in Tariff Act were held not to throw any light on the interpretation of entries in the Excise Ct. Thee courts have also held that the expression `Mining machinery in the Indian Customs Act, and reference to the definition of `mine' in the Mines Act was not relevant, In the Law of Central Excise(by Taraporewals and Parikh at page 188) a case decided by Bombay High Court is mentioned, where it was held that entries in the Brussels Tariff Nomenclature could not be of help in determining the commercial trade meaning in India of the goods described as tariff items. Thus the effort of Mr. Ray to broaden the meaning of mining and mining operation for the purpose of persuading us to hold that though what is taken as mining operation may normally mean enervation from mines, yet it has extended meaning by drawing inspiration by reference to the Mines Act and the Mines and Minerals Act is asking us to do against which a note of caution was sounded in P.C. Cheriyan v. Mst. Barfi Devi; wherein thee court observed that definition of "Manufacturer" given in other enactments such as Factories ACt or Excise ACt should not be blindly applied while interpreting the expression "manufacturing purposes" in section 106 of the Transfer of Property Act. On a parity of reasoning to find whether asbestos fibre is manufactured or produced by the petitioner within the meaning of Excises Act, thee aid of other Acts has only a limited relevancy. I must, therefore repel the first contention that obtaining of the asbestos fibre by the petitioners can be covered in thee expression of "mining operation" and is therefore not thus covered by Excise Act as such.
15. The next question is whether the process of obtaining asbestos fibre amounts to manufacture. This in fact was the most strongly, hotly contested point. The argument of the counsel for the petitioners is that unless it can be held that the process of obtaining asbestos fiber amounts to manufacture, the parliament would have no legislative competency to include the it 22(f)in the Excise ACt and therefore. Section 35 of the Finance Act,1976 to that extent must be held to be invalid and unconstitutional.
'The court ought not to interpret statutory provisions unless compelled by their language in such a manner as would involve its constitutionality because the Legislature is presumed to enact a law which does not contravene or violate the constitutional provisions.' [See M. K. Balakrishnan Menon v. Asstt. Collector of Estate Duty-cum- Income Tax Officer,(1971) & SSC 909].If certain provisions of law construed in one way would make them consistent with the Constitution, and another interpretation would render them unconstitutional, the Court would lean in favor of the former construction. Vide (1962) supp. SCR 769) Kedarnath Singh v. State of Bihar.
16. Now the equation whether a particular levy is a levy in respect of manufacture or production of goods has to bee decided on the fact of each case, It is also well settled that a duty of excise is a tax on goods produced or manufactured in the taxing country and issued in contradistinction to customs duty on articles imported into the country from elsewhere. Vide A. B. Abdul Kadir & Ors. v. State of kerala &another . In the matter of the Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938.
17. The excise duty is thus principally a duty on the production or manufacture of goods produced or manufactured within the country. It is an indirect duty which the manufacturer or producer passes onto the ultimate consumer i.e. its ultimate incidence will always be on the consumer. Vide R.C.Jall Parsi and others v. Union of India and another.
18. It being thus settled that the excise duty is leviable on the manufacture or production of goods question arises as to what exactly is meant by "manufacture." In that connection we were referred to some decision of the Supreme Court of America as to what is a meant by the word "manufacture" namely (30 Lawyers Edition 1012, 75 Lawyers edition page 801) We were also referred to ("Words and Phrases permanent edition Vol. 26) to the various meanings of the word " manufacture" to emphasise that manufacture is transformation - fashioning of raw materials into a change of form for use.
19. In opinion it is unnecessary to burden the Judgment with various definitions from other courts because our Supreme Court has broadly defined - What a manufacture is in Union of India and another vs. Delhi Cloth and General Mills Co. Ltd. The Supreme Court had accepted the meaning of manufacture given in Permanent edition of "Words and Phrases" Vol.26, from an Amercian Judgment which is as follows:-
Manufacture implies a change but every change is not manufacture, and yet every change in an article is a result of treatment, labour and manipulation.
But something more is necessary. There must be transformation: a new and different article must emerge having a distinctive name, character or use."
The Supreme Court also held that manufacture is liable to excise duty must be the bringing into existence of a new substance known to the he market, and that to become `goods' an article must be something which can ordinarily come to thee market to be brought and sold, and further that mere process is not manufacture. This was reiterated in [AIR 1963 SC 922 = 1978 E.L.T.(J 336)] South Bihar Sugar Mills Ltd. and another etc. v. Union of India and others etc. It is now, therefore,not open to challenge that before excise duty can be leviable on the goods there must be brought into existence goods, which can bee bought and sold and are known to the market i,e. to say that if by process of treatment, labour certain raw material is converted to an article which is salable in the market as gods it would amount to manufacture of gods on which excise duty would bee leviable.
20. Applying that test to the present case is not open to doubt that asbestos fibre is a marketable commodity and is known to the market and is saleable as such. It is also not disputed that asbestos rock which is mined by the petitioner is as such not saleable in the market. Great and intensive process is required before the asbestos rock which is minded by the petitioner can be converted, transformed and put into market a asbestos fibre. The argument of consulate for the petitioner that all this process of breaking. the boulders into smaller pieces of 20.40 mm and and further putting them into crushers, air cleaners, hurricane mills, separating fibre fro the rock is only a process and even though by an application of human labour a commodity known to thee market is obtained it is still not manufacture is unacceptable. I am unable to accept that the process which is involved in the present case is such a simple and routine and minimal one and that it does not lead to a change and a transformation of the raw material to new article. As admitted even by the petitioner what it obtains from the mine is a asbestos rock which is not marketable as such. It is only when this complicated and detailed process of separation of rock, screening and deduct, degritting operations with the aid of power and that to outside the precincts of mine when it is again subjected to series of processes and crushed through hurricane mills, stones and dust are removed that asbestos fibre is obtained. I find it impossible to accept that all this process can be equated to be anything else but manufacture because more especially when only now a marketable commodity has come into existence, which is totally and significantly different form the asbestos rock which was mind in the first instance. In this connection it is important and very significant to not that the Parliament has specifically included Tariff item 22f clearly recites that mineral fibre and manufactures there from shall be deemed to include Asbestos fibre. Parliament has thus indicted that asbestos fibre is obtained by the process of manufactures it must be deemed to be aware that it cab only legislate with regard to excise duty if there is manufacture or production of goods. In this connection reference may apply be made to Union of India v. Hindu Undivided Family Business known as Ramlal Mansukhria, Rewari and another, In that case thee owner of a manufacturing unit of utensils procured copper, tin, zine. He first prepared alloys from these metals. These alloys were then converted into billets. The billets, alloys were then sets to mills for rolling them into uncut circles. The uncut circles are trimmed and then converted into utensils and sold as such in the market. Item 26(2) under which excise was levied reads as under :-
(2) "manufactures the following, namely - plates, sheets,circles, strips & foils in any form or size......".
Apparently the excise was levied on the basis that at the stage when billets were rolled into circles the process of manufacturing circles was complete and these circles become liable to excise duty under item 26A(2) The High Court had accepted the owner's pleas that he was not liable to pay excise duty as circles were prepared without undergoing an such change could be held to amount to manufacture, so that circles at that stage were not liable to excise duty under this item. Reliance was placed before the Supreme Court on the earlier two cases and (Supra) to urge that billets when rolled into circles no process of manufacturing was carried and consequently no excise duty was payable. Rejecting the owner's contention the court held that rolling of billet into circles is certainly a process in the course of completion of manufactured products i.e. circles. They laid special emphasis on the fact that the legislature has laid down that excise duty shall be leviable on billet at a lower rate and on manufactures of circles at higher rate, and observed - "this provision itself makes it clear that the legislature was aware that billets are converted into circles, and it was decided that excise duty should be leviable at both stages. When the legislature used the word `manufacture' in connection with circles, after having taken account of the fact that billets are already subjected to excise duty, it is obvious that the process, by amount to manufacture." It will be seen from this case that to produce billets an alloy of copper and tin and zine was prepared and then they were converted into billets. There was a separate excise duty on billets. When these billets were converted in uncut circles a further excise duty on billets. When these billets were converted into uncut circles a further excise duty was imposed. The Supreme Court held that the end result of the process of manufacture is the production of circles which is envisaged as the goods to be subjected to excise duty The main emphasis was that as the Parliament itself had provided for imposition of excise duty it was futile to urge that the process to obtain the end product was not manufacture. In the present case also it is important to emphasise that in tariff item 22f, the Explanation has clearly stated that mineral fibre yarns and manufacture there from shall be deemed to include asbestos fibre and yarn. Here is manufacture. It is not disputed that Parliament has full power to legislate with regard to excise on the goods which are manufactured. or produced.
21. Thee controversy in all the case which have been referred to by thee counsel for the petitioners has been whether any particular goods falls within any particular item included in the Schedule to Excise Act or not. The contentions have always been that the Excise authorities are tending to include goods under a particular item when the process of obtaining that goods does not amount to manufacture, inasmuch as no such change has been made to bring into existence a new article. There has never been a case in which a challenge has been made and succeeded that though the Parliament has specifically included a particular goods like in the present case i.e. asbestos fibre under a particular item,(i.e.22F) in Schedule to the Excise Act yet it should be held to be invalid on the ground that notwithstanding the understanding of Parliament that asbestos fibre is a manufactured produced it should be held that obtaining asbestos fibre does not involve any process amounting to manufacture. The only case in which the said challenge was made was (supra.) but the same was rejected. This will be clear if a reference is made to the various authorities cited. In (supra) the petitioner who was a manufacturer of vanaspati, which was an excisable item were paying excise duty under vegetable product under item were paying excise duty under vegetable product under item 23. The excise authorities demanded excise on the ground that petitioners who purchased groundout oil from the market manufactured at an intermediate stage `refined oil' within clause 12 of entry in Schedule. The court accepted the plea if the substance known as refined oil came into existence then it would have to bear excise duty. It then went on to examine whether at any intermediate stage before vanaspati comes into existence the petitioner-produced refined oil as is known to the market. The court found that what was known to the market refined oil could not come into existence without deodorisation. The court found as a fact that deodorisation was necessary before the product could be called be refined oil and further that this process of deodorisation was applied in the petitioner's factory after hydrogenation is complete and not at the stage that refined oil came into existence at an intermediate stage. There was no evidence given by the Union of India that refined oil was being brought to market without deodorisation. It was therefore held that raw oil purchased by the party for the purpose of manufacturing vanaspati did not at any stage become a "refined oil" as is known to the consumer. It will thus be seen that in that cases the department failed because it was not able to show that "refined oil" came into existence as is commercially known. Here excise duty is on asbestos fibre which is known to commercial community as a goods. Similarly in the next case (supra) the company manufactured sugar by carbonisation process. It was argued by the excise department that company were subject to excise duty under item 14H in thee Schedule reading as compressed, Liquified gases- (carbon dioxide). The court found that by burning limestone in kiln the manufacturer only produced kiln gas of which one of the constituents undoubtedly is carbon dioxide and which he utilises while producing his ultimate excisable goods. The court however, held that untruth the manufacturer was using kiln gas produced by him in his lime kiln and even assuming if it was compressed, what was compressed, was the kiln gas containing, no doubts certain percentage of carbon dioxide buy the said gas was not carbon dioxide as is known to the trade. On facts therefore it was found that kiln gas in question is other carbon dioxide nor compressed carbon dioxide known to the market and therefore cannot attract item 14H of the first Schedule. Again it will be upon that emphasis was that the gas produced was not covered by a particular them given in the first Schedule, and not that though the article was specifically covered by an item in first Schedule, still it was not a manufactured product. Reference was made to The Commissioner of Sales Tax, Lucknow v. M/s. D. S. Bist and Sons, Nainital . That case arose under the Sales Tax Act which had exempted the agricultural produce from the subject matter of sales tax. The question arose whether the assessed who had tea garden and sold tea leaves was dealing in agricultural produce and was not therefore covered under the Sales Tax Act. The court found that the tea leaves were crushed and then roasted for 15 minutes and then passed through process of screening with sieves of various sizes and thereafter packed in packets and taken to the market for sale. The court held that the process was so minimal that it did not substantially change the character of tea leaves because they still remained the tea leaves. The court also found that the process was necessary for the purpose of preparing and making them fit for transporting and marketing them. It may be mentioned that the emphasis was on the minimal process. Now admittedly the tea leaves were agricultural produce and obviously did not become a different article by the minimal process that was applied to tea leaves. This was emphasised by Untwalia,J. when he noticed a case of Bombay High Court which had held that Gur prepared out of sugar cane still remained agriculture produce and commented that if the agriculturist who produces wheat has a flour mill and crushed the wheat produced by him in the at mill and ten if the flour so produced is sold by him the same will not be considered to be an agriculture produce because the manufacturing process had gone beyond the limit of making the agriculture produce fit for marketing as such and turns it into a different commodity altogether. Mr. Chopra had referred to G. R. Kulkarni v. The State . In that case Hidayatullah, C.J.(as he then was) held that the essence of manufacture is the changing of one object into another for the purposes of making it marketable. It was held if the stones which are won in the process of quarrying are sold without fashioning them into something else, it is not manufacture but if they are broken into metal or gitti there is some process manual though it may be for the purpose of shaping the stones into another marketable commodity .Surely the process involved in obtaining asbestos fibre is too involved, complicated, and resulting in bringing forth a new product can not be held to be held to be but a process of manufacture.
22. Reference was made to 30 Lawyers Edition page 1012. In that case the collector has levied a duty upon the shells on the ground that they were manufacturing shells. What was found was that the outer layer of the shells was was cleaned by acid and then grinding off the second layer by an emery wheel, so as to expose the brilliant inner layer. The court on that held that the shells were still shells and thus they had not been manufactured into a new and different article having a distinctive name, character or use from that of a shell and the application of labour to an article does not necessarily make it into a distinct article. It will be seen that what was originally a shell, still remained shell though cleaned for ornamental purpose. This case is like that in (supra). It is significant to note that in this very case a duty of 30% and valorem was imposed on "coral, cut or manufactured" was made exempt from duty. The court observed that this provision clearly implies that but for the special provision imposing a duty on cut coral, it would not be regarded as a manufactured article, although labour was employed in cutting it. What is important is that the court accepted that if the legislature has treated an article to be a manufacture the argument is not open that the process is not manufacture. It is of significance to be note that in American case it was observed that "cleaning and ginning cotton does not make the resulting cotton a manufacture of cotton" runs contrary to (supra) where it was held that "ginning process is a manufacturing process." Similarly, it has been held that rice and paddy are two different things and when paddy is dehusked and rice produced, there has been a change in the identity of goods . Similarly the next case of 75 Lawyers edition page 801 is of no assistance to the petitioners. In that case the orange had been impregnated with borax, through immersion in a solution and it was held that this did not amount to a manufacture. evidently as was said by the court there was no change in the name, appearance, or general character of the fruit. It remained a fresh orange fit only for the same beneficial uses as therefore. Obviously by applying even borax the orange remained a fresh orange.
23. The next case of 100 Lawyers edition 917 is equally of no avail to the petitioners. Inn that case the agricultural commodities (not including Motor carriers act. Douglas, J. who wrote the majority judgment held that a chicken that has been killed and dressed is still a chicken and removal of feathers has only made it ready for a market and that it could not be concluded that this process which really makes it marketable turns it into a manufactured commodity. with respect I would agree. It is however, interesting to not that four other learned Judges did not agree with their colleague douglas J. They were of the view that the decision of the commissioner should be accorded proper weight and that the order of the Commissioner cannot be set aside eventhough, if upon a consideration of the evidence the court might reach a different conclusion because it is not authorised to substitute, its own for the administrative judgment.
24. It is also significant that the petitioners themselves treated the mined article as a semi-finished goods which had to be gone through the process of manufacture before being put for sale inn the market. It has been stated in the counter affidavit and the same is not deposited that the petitioners had obtained permission from the collector Central Excise as communicated to them by the Assistant Collector, Central Excise, Patna by has endorsement dated 14-12-1977.
another person for completion of certain manufacturing process or to permit the manufacturer without payment of duty such goods to the premises of the assessed for completion of certain other manufacturing process. It is thus clear that rule 56B applies only if a person is manufacturer and the goods removed are subject to certain manufacturing process. The petitioner no doubt seeks to make out that this permission was taken because the Collector would not allow them to remove the goods otherwise but this is at least a recognition that they accepted that process to be gone into for obtaining asbestos fibre from asbestos rock was manufacture.
25. It s been held by the Supreme Court that it is primarily for the import control authority to determine the head or the entry in tariff Schedule under which any particular commodity fall, and that if there are two constructions which an entry could reasonably bear and one of them which was in favor of Revenue was adopted, the court has no jurisdiction to interfere merely because the other interpretation favorable to the subject appeals to the court as the better one to adopt : see Collector of Customs, Madras v. K,. Ganga Setty and V. V. Iyer of Bombay v. Jasjit Singh, Collector of Customs and another . If therefore the opinion of the government is to be accepted unless it is said that no reasonable person could adopt it, surely a declaration by the Parliament declaring that mineral fibre and manufacture there from shall be deemed to include asbestos fibre, is entitled at least to the same presumption. After all it is on the facts of each case that one has to find whether the manufacturing processed is involved to bring a different article in existence. Legislature having determined that asbestos fibre is obtained by the process of manufacture it would, I feel, be usually extremely hazardous and normally impermissible fore the court to say that this is not a manufacture.
26. Surely in a case where not administrative decision buy in legislative decision and a declaration has been made that asbestos fibre is a manufacture, is it allowable for the court to say t hat notwithstanding the legislative recognition asbestos fibres not obtained by a process of manufacture. It is relevant to note that in the case cited a dressed chicken was held to be the same because even in the earlier stage it was still saleable in the market as chicken. In the other case the goods saleable in the market was orange notwithstanding impregnation by borax. In the present case however, it is nobody's case that the asbestos rocks are saleable in the market as such. This means that when asbestos fibre is a obtained, it is an article different from asbestos rock. Naturally low that a different article has come into existence, the legislature could and did validly impose a duty of excise on the manufacture of this product. The plea that this duty of excise has been invalidly imposed or that insertion of Item 22F in Schedule to the Excise Act is ultra vires has not merit and must be rejected.
27. The arguments of the counsel for the petitioner to emphasise that it was asbestos fibre which were mined and not asbestos rock proceeded apparent matter of excise, because it can never amount to manufacture within the meaning of Excise Act. There is no support in law for such a broad proposition. Mr. Chopra, learned counsel for the respondent, Union of India had in order to meet the argument of the petitioner referred to Aluminium Corporation of India Ltd.v. Coal Board where the validity of the Coal Mines (Conservation and Safety) Act, 1952 so far as it purported to impose duty of excise on all coals dispatched from the colliery. The court in interpreting entry 84 List I Schedule 7 seems to have held that though no question of manufacture of coal arise yet it would be covered by the entry of `producing goods.' Apparently there are some observations which seems to suggest that the court was making a distinction between the word "manufacture" in the sense that raw material should be used to turn out something different and "produce" appearing in the same entry to mean an expenditure of some human skill and labour in bringing the goods concerned into the condition as would attract the duty. It was strongly contended by the counsel for the petitioner that these observations which make the distinction between the word "manufacture" and "produce" was not supportable in law and that the reasoning that the excise will be applicable merely by the application of some expenditure of human skill and labour is not supportable in view of the latter decisions of the Supreme Court. It was in that connection that Mr. Sorabjee,, one of the counsels or the petitioners referred us to 36 Federal Suppl. 792 to emphasise that the term `manufacture' means creation or production of a product from raw material or by combining two or more products to form a new and different one Apart from the distinguishing fact that the meaning was given in the context of stature there, reference to 55 Corpus Jurisdiction Secundum 671(4) will show that it has been also held to be interchangeable or synonymous with 'fabricate' make and process. That is why the entry in general at page 667 in C.J.S. reads that while it has been said that the word `manufacture' has a well ascertained and defined meaning it is not an easy term to define and is not susceptible of an accurate definition that is all embracing or all exclusive, but is susceptible of many applications and many meanings.
28. The counsel for the petitioners were even bold enough to assert that no excise duty can be levied on coal because though it undoubtedly involves mining process, it can never amount to manufacture. The obvious conclusion suggested being that similarly as asbestos rock is mined and thereafter asbestos fibre is obtained no manufacturing process is involved. In any view it is not necessary to consider whether the Calcutta High Court was corrected in holding that excise levy was valid not because the coal was not manufactured by because it was at least products. I say this because the levy of excise duty on coal had been held by the Supreme Court to be a valid legislation,(see R. C. Jall v. Union Of India ). In that case the validity of the excise duty levied on coal and coke dispatched from colliery in British India under Ordinance No.39 of 1944 was challenged on the ground that excise duty cannot legally be levied on coal and coke dispatched from colliery in British India under Ordinance No. 39 of 1944 was challenged on the ground that excise duty cannot legally be levied n the consignee who had nothing to do with manufacture or production of coal. The Supreme Court examined the point and after referring to : and held that the duty imposed in essence was an excise duty and that there was rational connection between the duty and the person on whom was imposed. It was also held that subject to the legislative competence of the taxing authority, the tax can be levied at a convenient stage so that the duty on the manufacture or production is not lost and that the method of collection does not affect the essence of the duty but is only related to the machinery of collection for administrative convenience. In that view it was held that the machinery evolved under the rules for collection of the duty satisfies the said condition and therefore the exigibility of the tax at the destination point in the hands of the consignee cannot legitimately be questioned. This case is therefore a clear authority that imposition of excise duty on coal is valid. In my view the Division Bench of Calcutta High Court was unnecessary hesitant in not holding that the coal was a manufactured product and hence excisable article. As a matter of fact coal was specifically manufactured product and hence excisable article. As a matter of fact coal was specifically mentioned in item 11D in Schedule I to the Excise Act as being subjected to excise levy. This again is legislative recognition an i declaration that even though coal is obtained from the mines it is still manufactured within the meaning of the Excise Act. Similar consideration must apply to asbestos fibre, found at item 22F in Schedule I.
29. Counsel for the petitioner has placed great reliance on Minerals and Meals Trading Corporation of India Ltd.. v. Union of India and others. That case is of no assistance to the petitioner. In that case the petitioner imported wolfram concentrate. One of the component was WO 3 the minimum percentage being 65% The petitioner was charged the duty., by the Customs Authorities under item No. 87 namely 'All other articles not otherwise specified. Item No.26 provided that metallic ores all sort except others and other pigments ores and antimony ore will not be liable to pay any duty. The Assistant Collector however imposed duty of customs on the ground that the term ore mentioned in item 26 is confined to articles which are in the form or condition in which they are mined and that ores in powder form cannot qualify for assessment under item 26,. The question that called fore consideration was whether Wolfram Ore WO 3 was a metallic ore or not. The opinion of the experts and the relevant books showed that, In order to produce a usable are concentration operations are necessary which involve crushing, washing and similar process separating the useless gangue to bring it to a minimum 65% WO 3 content without which it is not regarded as an acceptable Wolfram are wolfram concentrate and useless too consuming industries.' It was found that Wolfram Ore is always selectively mind in the technical terminology, and without such selective meaning tungsten Ore cannot be exported or sold in the country of its origin. Selective mining means that Wolfram is detached from rock crushed, washed and freed from gangue. Brussels Nomenclature Tariff described that term `concentrates' form was still metallic ore under item 26 and therefore no duty was leviable on them. It was emphasised that rock could not be imported as it could not be sold and separating of Wolfram from the rock to make it usable are by process of selective mining was essential to make it merchantable. All that it therefore held was that what was imported was still and ore and it must be charged under the specific item of metallic are mentioned in item 26 and not under the residuary item because it did not case to be metallic are. It do not know how this case helps the petitioners. This was a case dealing with import tariff. The only point was that Wolfram does not cease to be ore by the process of selective mining It was in that context that it was said that selective mining was not manufacture, meaning that no new product was obtained.
30. The question whether it is `manufacture' for the purpose of Excise Act did not arise. The only point was that specific item covered metallic are and Wolfram was still ore under item 26 and could not be placed under residue item. Here asbestos fibre is covered by item 22F First Schedule. The suggestion of the petitioners that right from the beginning asbestos fibre is mind, and only rock is separated, and other processes of crushing, digitting and screening is done not amounting to manufacture even if presumed, will not still help the petitioners because in that case one must hold that the petitioners mined asbestos fibre. There is no inherent contradiction that if an article is mined it cannot be excisable. That legislature has treated coal which is mined as a fit item for duty of excise is apparently from the fact that by Finance Act, 1970 Entry 11D namely coal (excluding lignite) and coke not elsewhere specified was incorporated in Schedule I of Excise Act. Thus coal was specifically treated as an excisable Item. (Of course for reasons of price consideration this item was deleted in about May, 1979). The point to note is that as asbestos fibre is included at item 22F of First Schedule, the petitioners will be liable to pay the duty even if their argument that they mine asbestos fibre was to be accepted on the short ground that the goods is specifically covered by schedule I. If there was no specific item of asbestos fibre in the First Schedule then naturally in order to make the petitioners liable it will have to be found whether the process by which asbestos fibre was obtained from the asbestos rock was manufacture or not. I have already held above that this process amounts to manufacture. Even on the alternative argument of mining asbestos fibre the petitioners must fail, because this very goods is included at item 22F in First Schedule. The challenge to the validity of levy of Excise duty on asbestos fibre therefore fails on either of the contentions urged by the petitioners.
31. If as I have held above that the excise duty on the asbestos fibre was validity imposed, it was not even disputed by the petitioners that they would be liable to pay the additional duty of customs as imposed by Section 3 of the Customs Tariff Act, 1975. I may however mention that assuming if it had been held that levy of excise duty was invalid I am not sure that the levy of additional duty of customs imposed under the Customs Tariff Act would automatically have become inoperable. The reason is that the levy of additional duty under the Customs Tariff Act, 1975 is an independent provision. There was no challenge to the validity of this additional duty under the Customs Tariff Act as such. I do not propose to decide this question because it does not arise in view of my finding given on the question of validity of the excise duty leviable on the asbestos fibre.
32. In the petition there was also a claim for the refund of duty which had been paid. In view of my finding on the validity of imposition of the excise duty that question does not arise. Even if I had found otherwise a question may well have arisen whether an order of refund could be passed in favor of the petitioners. The reason is that excise duty and additional duty which has been imposed and as has been recognised by the Supreme Court is ultimately passed on to the consumers. It is not the petitioners' case that the duty of excise or additional duty of customs had not been include in their cost structure and passed on to the consumers in the prices charged. The duty of excise and additional duty was not imposed retrospectively and therefore in the normal course these duties must have already been realised from the consumers. The benefit if any of the refund, illegally levied excise duty and additional duty should in all fairness normally belong to the consumers. In such a situation a question may well be raised that the petitioners cannot be allowed to unjustly enrich themselves by obtaining refund of the excise duty and additional duty which amount they have already recovered from the consumers when asbestos fibre was disposed of. This is on the equitable plea that if there is illegal levy and some refund is due the same should be disbursed to the buyers from whom the excise duty and additional duty was realised and not appropriated by the petitioners who in equity are not entitled to it. Had the levies been held invalid all these questions may have had to be considered and the appropriate directions issued in the light of a decision dated 10-7- 1975 given by V. R. Krishna Iyer, J. of the Supreme Court in Special Leave Petition (No. 1330 of 1975) M/s. L. H. Sugar Factories and Oil Mills, v. Union of India where it was observed that the benefit of illegally levied price really belongs to actual consumer and not to the manufacturer. But again in view of my finding that the levies have been validly imposed above question does not arise here and need not be pursued any further.
33. The result is that the writ petitions are without any merit and the same are therefore dismissed with costs. At the time of admission of the petitions this court had stayed the recovery of excise duty and customs duty on terms. As I am now dismissing the writ petitions the stay order no longer survives and is hereby vacated.
34. Mr. Ray appearing for all the petitioners prays that the petitioners may be granted certificate for leave to appeal to the Supreme Court. We have only applied the well known principles under the Excise law to the facts of the present case. We, therefore, do not feel that this case raises any substantial question of law of general importance which needs to the decided by the Supreme Court. Leave to appeal is therefore, refused.
35. Mr. Roy next contends that the petitioners intend moving the Supreme Court for special leave and because of the vacations in the Supreme Court prays for special leave and because of the vacations in the Supreme Court prays that the interim order given by this court may be continued. This court had stayed the recovery of excise duty and additional duty subject to the petitioners furnishing bank guarantee. Mr. Ray informs us that the bank guarantee has been kept alive and is continuing. He also prays that we should restrain the respondents from the recovery of excise duty and additional duty payable in future subject to the petitioners furnishing bank guarantee. We are of the view that having held that the excise duty and additional duty were validly imposed we should not be justified in permitting the petitioners to remove their goods without payment of excise duty and additional duty as required by the provision of Excise Act and Customs Tariff Act. This prayer is, therefore, refused.
36. As we are dismissing the petitions it would be open to the respondents in the normal course to encash the bank guarantees furnished by the petitioners. But as Mr. Ray has petitioners intend filing an appeal we would direct that the respondents may not encash the bank guarantee furnished by the petitioners till 31-7-1980 so as to enable the petitioners to obtain any appropriate order from the Supreme Court subject to any order passed by the Supreme Court it would be open to the respondents to encash the bank guarantee after 31-7-1980.