Bombay High Court
Navyug Steel Industries And Ors. vs Bombay Municipal Corporation And Anr. on 5 October, 1990
Equivalent citations: 1991(1)BOMCR640, 1991(1)MHLJ556
JUDGMENT S.M. Daud, J.
1. The short question arising in this petition under Article 226 of the Constitution is whether respondent No. 1 erred in law in refusing petitioners exemption claimed under Rule 7 being part of the rules framed under section 195-1A(iv) of the Bombay Municipal Corporation Act, being Bombay Act No. III of 1888, hereinafter referred to as the 'Rule' and 'Act' respectively.
2. The 1st respondent being the Bombay Municipal Corporation, hereinafter referred as the "BMC" has as its disposal various devices for raising revenue to meet the expenses which it has to incur under the Act. Octroi is the most lucrative source of revenue and the imposition thereof is provided under section 192-1 of the Act. Basically, goods, entering into the Greater Bombay for consumption, use or sale thereof are dutiable i.e. subject to the levy of octroi. Section 194 of the Act provides for different forms of exemption and refund etc. in the matter of octroi payable or refundable. Section 195-A empowers the Municipal Commissioner with the approval of the Standing Committee to exempt by general or special order and subject to the Rules, any article imported into Greater Bombay. Sub-section (iv) of section 195-1A deals with articles "which are imported in such other circumstances and subject to such conditions and restrictions as the Corporation may specify". Rules have been framed under this section and Rule 7 consists of six sub-rules and the ones relevant are reproduced below :---
"(a) Article liable to octroi which are temporarily imported into or.....Greater Bombay for the purposes of inspection, demonstration, exhibition, repairs, processing or for such other similar purposes as may be exempted from octroi provided that-
(1) The importer......as the case may be or his duly constituted attorney applies for the same in writing in form 'R' provided for the purpose.
(4) No change of form, condition or appearance is involved except to the extent inherent in the processing or repairs allowed.
(6)(b) For the purposes of this rule, processing shall include-
(1) Dyeing, bleaching, paining, printing, finishing, stentering, embroidering, doubling twisting, metallising and electroplating.
(2) Building and mounting of bodies over chassis of vehicles of all kings, and shall also include such other process as may be approved by Commissioner from time to time. The decision of the Municipal Commissioner in this respect shall be final.
The 1st petitioner is a partnership firm of which the 2nd petitioner is a partner. It is located at Bombay and claims to be a Small Scale Unit engaged in rolling on work of copper bars and non-ferrous metals. One of its customers is the 3rd petitioner which is a firm carrying on business at Mirzapur, in the State of Uttar Pradesh. The Bombay firm, which expression shall herein after be referred to denote petitioners Nos. 1 and 2, says that it has several customers outside Greater Bombay who forward their copper bars and copper wire bars for being rolled into copper slab, rods, flats, strips and wire rods. The required rolling is a processing activity of the nature of labour job work and nothing more. The raw material received by it retains the same character except that it changes appearance and this change is inherent in the process of rolling. The slabs etc. retain the chemical composition, virginity, originality and conductivity of the original material. Therefore, the in-coming copper bars and copper wires were entitled to the exemption stipulated by Rule 7. The Bombay firm received copper rods and copper ingots vide the particulars set out in Exhs. E, F. and one more consignment. The said firm submitted an application for exemption in the prescribed form known as 'Form R'. The Octroi Officials declined to grant the Bombay firm the facility sought. Upon this a detailed representation was submitted on 26th October 1983. It was pointed out as to why the Bombay firm was entitled to the exemption solicited. Respondent No. 1 refused to change its view and gave the reply at Exh. D dated 28th December 1983. This reply was to the effect that the petitioners were not entitled to the exemption claimed as the same was not warranted by the provisions of the Act. The requisite octroi duty totalling Rs. 19,800/- was collected from the petitioners and hence this petition for refund of the amount collected and a direction to the BMC to retain from realising octroi duty on similar consignments imported into Bombay by the Bombay firm.
3. The BMC in its return takes a preliminary objection to the maintainability of the petition pointing out that petitioners had the remedy of an appeal under section 217 of the Act which has not been availed of before moving this Court. That apart, the petition gave rise to several disputed questions of fact which cannot be resolved within the confines of a writ petition under Article 226 of the Constitution. On merits, it is contended that there is no similarly between the material imported and that exported after the process for which it is sent to Bombay is carried out. In fact the two sets of articles are classified separately under the Central Excise Tariff formulated under the Central Excise and Salt Act, 1944 (CESTA). Having regard to this fundamental feature, the rule upon which the relief is claimed is not applicable. The product received under goes a change in form, condition, size, shape and identity once it is processed by the Bombay firm. The process employed by the Bombay firm is not one which has the approval of the Commissioner as required by the rules. Though the material, rather, the metal remains the same, it does not mean that there is no manufacturing at the Bombay end. The product that goes out from Bombay after the processing employed by the Bombay firm are merchantable goods knowns as such in the market and distinct and different from the original raw material imported into this city.
For the transformation of a product it is not necessary that there must be a change in the chemical composition. There has been a suppression of material facts inasmuch as full particulars of the exported material have not been furnished by the Bombay firm. The petition be dismissed with costs.
4. Having regard to the contentions of the parties summarised above, the points arising for determination would be-
(i) Whether the petition is liable to be rejected in limine because of the non-exhausting of statutory remedy as also the figuring of disputed questions of facts?
(ii) Whether the petitioners establish that they were entitled to the exemption claimed?
(iii) What relief?
5. The preliminary objection is to the effect that the Act vide section 217 provides for the remedy of an appeal to the Chief Judge of the Small Causes Court at Bombay. Petitioners have not availed of this remedy and have come straightway to a writ Court. There is no excuse for the failure to avail of the statutory remedy. In fact having regard to the disputed questions of facts which arise it may be necessary to record evidence and that can be done only within the confines of the statutory remedy of an appeal. This petition was filed way back in the year 1984 and that will be a factor to be taken into consideration to appraise the contentions raised by the respondents. Now it is true that the mere fact of the petition having been admitted for hearing does not preclude the respondents from taking the objection that the petitioners have rushed to this Court without availing of an equally speedy and efficacious remedy provided under section 217 of the Act. But the passage of time and that too of 6 to 7 long years, would make a different. Of course if the petition gives rise to such disputed facts which could not be resolved in a proceeding under Article 226 of the constitution, this Court would have no option, but to direct the petitioners to exercise the remedy provided under the statute. If that remedy had been lost because of the lapse of time, a suitable order to ignore the bar of limitation could conceivably be passed in appropriate cases. Alternatively, the writ Court would leave the petitioner to suffer where there are no good reason for his rushing to this Court instead of going by the statutory provisions. It would all depend on the circumstances, and the position here is that the so-called dispute in relation to a question of facts is more or less of a cosmetic nature. The factual position is virtually indisputable and the quality and extent of dispute which survives is easily soluble. What arises is in substance a question of interpretation i.e. a question of law. For that as also the fact that petitioners would be put to undue expenditure and pressure if they had to prefer repeated appeals every time a consignment was refused exemption, I hold that the preliminary objection raised by the BMC must be negatived.
6. Coming to the factual position, what the Bombay firm receives is a commodity described as copper bars and copper wire bars. The articles are sent to it for the purpose of rolling job work. The bars have to be rolled into what are described as slabs, rods, flat, strips, sheets and wires. The process has been explained in para 4 of the petition as to put the copper wire bars and copper bars through heating and rolling which result in a change in the dimension and appearance of the bars into shapes such as strips, slabs, flats, wire etc. It is pleaded that the appearance of the above change is inherent in the process of rolling and does not affect the chemical composition, virginity, originality and conductivity of the material. In support of the submission that there is no transformation of one known product to another, Counsel for the petitioners has relied upon a number of reported decisions which I shall refer to in due course. The question which has to be attended to before that is the scope of rule 7.
7. Mr. Taleyarkhan submits that the placement of word "include" in any statutory provisions is in order to enlarge the meaning of the words or phrases occurring therein. In support of this submission, Counsel relies upon Dilworth v. Commissioner of Stamps, 1899 A.C. 99 and Commissioner of Income-tax, A.P. v. Taj Mahal Hotel Secunderabad, . It is not necessary to make a detained reference to the authorities except to reproduce the ratio of the principle relied upon by the learned Counsel from Dilworth (supra). It was there said that :---
"the word 'include' is used in order to enlarge the meaning of words or phrases occurring in the body of the statute; and when it is so used these words or phrases must be construed as comprehending not only such things as they signify according to their natural import, but also those things which the interpretation clause declares that they shall include".
In another case viz Robinson v. Barton-Eccles Local Board, 1883(8) A.C. 798, it was said :---
"the word in respect of which 'includes used bears both its extended statutory meaning and its ordinary, popular, and natural sense whenever that would be properly applicable."
Counsel submits that sub-rule (4) speaks of the processing to which an importer is granted exemption and that the enumeration of different processes in sub-rule (b) of Rule 6 is only a specification of various processes, which but for the enumeration, would not be includible in the natural meaning of the word 'processing'. As against this submission of Mr. Taleyarkhan, Mr. Dalal for the BMC pleads for the giving of a restricted meaning and in support thereof refers to the heading and certain other features of sub-rule 6(b). The heading according to the learned Counsel indicates that exemption is granted to articles imported for a short period and different purposes. But for the exemption, the imported goods would be liable to payable of octroi. The purpose of exemption, is to exclude from the import, articles brought in for short periods and incidental purposes. The purpose for which the exemption is granted apart from processing are "inspection, demonstration, exhibition and repairs". This being the position, processing unless it falls within the specifications of sub-rule 6(b) exemption is not available. Another indication according to the learned Counsel is provided by the word 'shall' occurring in sub-rule 6(b). Mr. Dalal submits that this is the way of legislature indicating the restriction to be placed upon the succeeding word 'include'. To put it differently, the intent is to limit the word 'include' to the items specified as excluding others that are not specified therein. The third circumstance pressed into service by Mr. Dalal is the occurrence of the words"and shall also include such other process" occurring in sub-rule (6)(b)(2). Mr. Dalal submits that the processing entitled to exemption is restricted to the specifications provided in sub-rule (6)(b)(1) & (2) i.e. dyeing, bleaching, printing, painting, finishing, stentering, embroidering, doubling, twisting, metalising, electroplating, and building and mounting of bodies over chassis of vehicles of all kinds, and shall also include such other processes as may be approved by the Commissioner from time to time. Unless the activity of processing falls within these categories, the import will not be entitled to exemption under Rule 7. Counsel argues that there is no warrant for holding that use of the word 'include' is always used in the sense suggested by Mr. Taleyarkhan. In support of this submission, Mr. Dalal relies upon Leukoplast (India) Ltd. v. State of Goa, 1988(36) E.L.T. 369A (Bom). In that case the word 'include' construed, was that occurring in section 3(b) of the Drugs and Cosmetics Act, 1940. This section spoken of "all substances and all medicines". It was in this background that the Division Bench negatived a submission advanced by Counsel representating the State of Goa. The words used by the Bench were-
"He submitted that the use of word 'include' indicates that the definition is merely inclusive and therefore, the word 'includes' occurring therein does not connote the idea of meaning. But here too, we again fail to agree with the learned Advocate General. As Mr. Hidayatullah submitted, placing reliance on the decision of the Supreme Court in the South Gujarat Roofing Tiles Manufacturing Association and another v. The State of Gujarat and another, , the word 'includes' should not always be read as meaning an extension and there may be cases where the word connotes the idea of meaning. In the context of section 3(b) of the Drugs and Cosmetics Act, we are inclined to think that the word 'includes' occurring in the said section should not be read as a word of extension with reference to its context, but on the contrary, it is equal to 'means' ".
The conclusion decisive is that normally the use of the word 'includes' is meant for giving an extended meaning though of course the context in which the word occurs may warrant the apportionment of a restricted meaning to the word. So far as Mr. Dalal's attempt to use the heading of Rule 7 is concerned, I must say that he is right to the extent that the exemption dealt with by the rules is meant for the purpose of articles temporarily imported and for a temporary purpose. But here also the processing carried out, as I shall show later, does not bring about a transformation of the nature suggested on behalf of the BMC. The processing is what may be described, a touching up activity. Counsel's attempt to limit the meaning of the word 'processing' by recourse to the use of the word 'shall' is not acceptable. The use of the word 'shall' occurring in sub-rule (6)(b) is quite consistent with the suggestion of Mr. Taleyarkhan that it indicates no more than the giving of an artificial meaning to the verb 'processing'. But for the use of this word one cannot conceive of the specifications in sub-rule (6)(b)(1) to be includible in the expression 'processing'. The specifications in sub-rule is demonstrably an indication of the rule maker intending to give an usual meaning to the expression 'processing'. The words occurring in sub-rule (2) which empowers the Commissioner to approve such other processes as he may deem fit for inclusion in the expression 'processing' also cannot be looked upon as factor limiting the meaning of the word 'processing'. These words mean no more than that the Commissioner is conferred with a legislative power which he can exercise within the parameters of Rule 7. Counsel then submits that the rule has to be read in a common sense manner and if the exemption claimed by the petitioners be admissible, it will be impossible to enforce the provisions in regard to recovery of octroi duty. Silver and gold ingots will be imported for manufacture of ornaments and sent out without the payment of octroi duty on the plea that there has been no change in the commodity imported. The matter is not so bad as that. Sub-rule (4) permits a change in form, condition and appearance which has a nexus and is limited to or inheres in the processing employed. Conversion of one article into another is far different from changes limited to those inherent in the process employed. For this purpose it becomes necessary to look into the cases relied upon by the either side.
8. In Deputy Commissioner, Sales Tax, Ernakulam v. M/s. Pio Food Packers, , the following from Anheuser Busch Brewing Association v. United States, 1907(52) L.Ed. 336, was quoted with approval:---
"Manufacture implies a change, but every change is not manufacture, and yet every change in an article is the 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...." At some point processing and manufacturing will merge. But where the commodity retains a continuing substantial identity through the processing stage we cannot say that it has been 'manufactured'."
The case before their Lordship of the Supreme Court arose out of processing of pineapple fruit into slices for selling in sealed cans. If there was a transformation of the commodity, the same was liable to tax-otherwise not. After quoting with approval the aforementioned passage, Pathak J., speaking for the Bench said:---
"The comment applies fully in the case before us. Although a degree of processing is involved in preparing pineapple slices from the original fruit, the commodity continues to possess its original identity, notwithstanding the removal of inediable portions the slicing and thereafter canning it on adding sugar to preserve it. It is contended for the Revenue that pineapple fruit and that implies that the slices constitute a different commercial commodity. The higher price, it seems to us, is occasioned only because of the labour put into making the fruit more readily consumable and because of the can employed to contain it. It is not as if the higher price is claimed because it is commercially a different commodity. It is said that pineapple slices appeal to a different sector of the trade and that when a consumer asks for a can of pineapple slices he has in mind something very different from fresh pineapple fruit. Here again, the distinction in the mind of the consumer arises not from any difference in the essential identify of the two, but is derived from the mere form in which the fruit is desired."
A case from this Court apposite to the subject is Sandoz (India) Ltd. v. Union of India, E.L.T. 696 Bombay. It was there held that a mere change in the form or substance or a commodity would not by itself lead to the conclusion that a new article had been manufactured. Also relied on by the petitioners are the two judgment of the Supreme Court delivered by the late Chief Justice Sabyasachi Mukharji. In , Collector of Central Excise Bombay II v. M/s. Kiran Spinning Mills, Thane, the original material was polyester fibre tow, later cut into pieces. The Revenue contended that the short pieces constituted an article distinct and different from the polyster fibre tow. The CEGAT negatived the Revenue's contention and that gave rise to the appeal before the Supreme Court. It was held that:---
"The material which the respondents had purchased was already man-made fibre but in running length. All that the respondents did in relation to it, was to cut it into staple length after some manual sorting and straightening...... It indubitably brought a change in the substance but did not bring into existence a new substance. The character and use of the substance (man-made fibre) remained the same. It is true by the change in the length of the fibre, it acquired a new name. But since in this case the tariff entry recognised the single description 'man-made fibre' with no further sub-division based on length of the fibre and even without any distinct enumeration of the various forms of fibre by cutting long fibres into short ones, the respondents did not bring into existence any new product so as to attract any levy under the same traiff entry. Even by cutting, the respondents obtained man-made fibre. Such cutting, therefore, involved no manufacture and, hence no duty liability can be imposed upon them." (underlinings mine).
The underlined portion indicates that even a change in the size and substance does not necessarily result in the coming into existence of a new product. In the same volume at page 164, the Court dealt with the meaning to be given to the word 'manufacture' vis-a-vis the conversion of timber logs into sawn timber. Negativing the Revenue's contention that the conversion of timber logs into sawn timber resulted in the manufacture of a different product, it was held :--
"It may be worthwhile to note that 'manufacture' implies a change, but every change is not manufacture and yet every change of an article is the result of treatment, labour and manipulation. But something more was necessary and there must be transformation; a new and different article must emerge having a distinct name, character or use."
To get over the effect of these decisions Mr. Dalal relies upon the entries made in the Central Excise Tariff of India for the year 1988-89. Entry Nos. 74.07 to 74.09 deals with different items as follows:--
74.07 ... Copper bars, rods and profiles.
74.08 ... Copper wire.
74.09 ... Copper plates, sheets (including circles) and strips of a thickness exceeding 0.15 mm.
Mr. Taleyarkhan counters this argument by pointing out that the scheme of CESTA is far different from that of rules. In CESTA, excisable goods means goods specified in the schedule as being subject to duty of excise. Even the definition of the word 'manufacture' is such as to include any process which is specified in relation to any goods as amounting to manufacture. Therefore, the specifications in the Central Excise Tariff cannot be a proper guide for the construction of the rules. This submission has to be accepted for the concepts of one statute cannot be imported into another merely because of the fact that both relate to statutory imposts. Mr. Dalal then argues that the market looks upon copper bars and copper wire bars as distinct and different from slabs, rods, flats, strips, and wires. This is not correct for the latter is a derivative of the former and a derivation flowing from processing and is limited to the extent inherent in the processing activity. For that reason it cannot be held that the market looks upon the two categories as distinct and different. The result of the foregoing discussion is that the BMC was not right in insisting upon refusing the exemption claimed by the Bombay firm. The recovery made by it was violative of the law and the petitioners will therefore, be entitled to the sought for refund. They will also the entitled to a direction to the respondents BMC to retain from refusing exemption in like imports of the petitioners. Hence the order:--
ORDER Respondent No. 1 do refund to the petitioners the sum of Rs. 19,800/- within 12 weeks from today. Respondent No. 1 do refrain from refusing exemption under Rule 7 to the petitioners seeking to import goods for the purpose of like processing figuring in this petition. Bank guarantee furnished by the petitioners shall stand discharged after the expiry of the aforementioned period. Having regard to the peculiar circumstances, there shall be no order for costs.