Bombay High Court
India Steel Industries And Anr vs Union Of India And Ors on 13 October, 2017
Bench: A.S. Oka
201-WP-1187-1993.DOC
Jsn
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO. 1187 OF 1993
1. India Steel Industries
A partnership firm registered under the
provisions of the Indian Partnership Act,
and having its registered office at Railway
Gate No.4, Antop Hill, Wadala, Bombay -
400 037.
2. Shri H.B. Gupta of Bombay
Indian Inhabitant and a partner in M/s.
India Steel Industries Railway Gate No.4, ...Petitioners
Antop Hill, Wadala, Bombay - 400 037.
Versus
1. Union of India
2. The Asstt. Collector of Customs
Drawback Department,
3rd Floor, Annexe Building, New Customs
House, Ballard Estate, Bombay - 400 038.
3. The Collector of Customs (Judicial),
New Customs Hosue, Ballard Estate,
...Respondents
Bombay - 400 038.
Mr. Anand with Mr. A.K. Gopalan, i/b Haresh Mehta & Co., for
the Petitioners.
Mr. Pradeep S. Jetly, for the Respondents.
CORAM: A.S. OKA &
RIYAZ I. CHAGLA, JJ.
JUDGMENT RESERVED ON 31ST AUGUST 2017
JUDGMENT PRONOUNCED ON 13TH OCTOBER 2017
201-WP-1187-1993.DOC
O R A L J U D G M E N T :- (Per Riyaz I. Chagla J.)
1. The Petitioners have filed this Writ Petition under Article
226 of the Constitution of India challenging order dated 23rd
December 1992 passed by the first Respondent in a review
application filed by the third Respondent under Section 129
DD of the Customs Act, 1962.
2. The short point which arises for determination in the
present Writ Petition is whether the "Stainless Steel Bright
Bars of Austenitic Variety" is classifiable as "Bright Steel Bars"
for the purpose of drawback schedule under the Customs
and Central Excise Duties Drawback Rules, 1972 (for short
"the Rules") i.e. whether the same will go under sub serial
No.3606 or 3803 of schedule 'F' of the Rules.
A brief background of facts in the present Petition is
necessary.
3. The Petitioners are manufacturers of "Stainless Steel
201-WP-1187-1993.DOC
Articles" which conforms to the standards prescribed for
grade AISI 304 of "Austenitic Variety". The Petitioners have
exported between July to October 1988 various quantities of
stainless steel bright bars of grade AISI 304. The Petitioners
had filed drawback claim in respect of four shipping bills
pertaining to the export effected between 6th June 1988 and
21st June 1988 for amount of Rs.2,76,122/-. A public notice
had been issued on 31st May 1988 by the Ministry of
Finance, Government of India, Department of Revenue,
wherein inter alia SS No. 3606 and 3803 were included under
item Nos. 36 & 38 respectively in the duty drawback schedule
of the Rules. The Respondents initially admitted the
drawback claim of the Petitioners but by a letter dated 29th
July 1988 paid a sum of Rs.12,254/- by classifying the
exported goods under sub-serial No. 3606 rather than sub-
serial No. 3803 to the said drawback schedule. The
Petitioners filed supplementary claim on 6th September 1988
for balance amount to Rs.2,63,868/- and filed detailed written
submissions in support of the supplementary claims. The
supplementary claims of the Petitioners initially came to be
allowed on 1st March 1989 and the Petitioners received a
201-WP-1187-1993.DOC
balance claim of Rs.2,63,868/-. However, the new Assistant
Collector (Drawback) issued a short levy notice dated 4th
May 1989 and demanded Rs.2,63,868/- which had been paid
to the Petitioners on the ground of erroneous payment. The
Petitioners replied to the said notice and disputed the claim of
the department that the goods exported would come under
sub-serial No. 3606 rather than sub-serial No. 3803 to the
drawback schedule. On 28th November 1989, the second
Respondent directed the Petitioners to repay the amount of
Rs.2,63,868/- by holding the goods to be classifiable under
sub Serial No. 3606. A second claim of the Petitioners
pertaining to export of goods under 11 shipping bills and for
which the Petitioners were entitled to receive the drawback
payment under sub-serial No. 3803 came to be rejected vide
order dated 26th September 1988 on the ground that the
goods are classifiable under serial No. 3606 and the claim is
less than 2% of the FOB value of the goods. The claim was
hit by the provisions under Rule 7A of the Rules. The third
claim of the Petitioners regarding the export of gods under 9
shipping bills was rejected on 11th April 1990 on the same
ground that the claim assessed under sub-serial No. 3606
201-WP-1187-1993.DOC
was less than 2% of FOB value and therefore, hit by Rule 7A
of the Rules. The Petitioners had filed Appeals against all
three orders before the Collector (Appeals) and submitted
that the goods are classifiable under sub-serial No. 3803 and
not sub-serial No. 3606 of the schedule to the Rules and
public Notice dated 31st May 1988 as the goods are
"Stainless Steel Bright Bars of Austenitic Variety". The
Collector (Appeals) vide order dated 25th September 1990
allowed the Appeal of the Petitioners by holding that the
"Stainless Steel Bright Bars of Austenitic Variety" are
classifiable under sub-serial No. 3803 and drawback should
be allowed accordingly.
4. The Petitioners thereafter received show cause notice
under Section 129 DD of the Customs Act, proposing to
review the order of the Collector (Appeals) dated 25th
September 1990 and to set aside the said Order-in-Appeal
and restore the Order-in-Revisional dated 28th November
1990 from the Joint Secretary to the Government of India.
5. The Petitioner filed reply to the show cause notice
201-WP-1187-1993.DOC
issued by the Central Government and opposed the review
proposal. The Joint Secretary of the Central Government
vide order 23th December 1992 (the impugned order) set
aside the order of the Collector (Appeals). The Assistant
Collector Drawback Department issued letter dated 10th
March 1993 demanded Rs.2,63,868/- from the Petitioner. The
Petitioners have challenged the impugned order dated 23rd
December 1992 and the order dated 10th March 1993 issued
by Assistant Collector Drawback Department by the present
Writ Petition. The Writ Petition came to be admitted by order
dated 28th June 1993 passed by Division bench of this Court
and interim relief was granted in terms of prayer clause (c) of
the Writ Petition.
6. Mr. Anand the learned counsel for the Petitioners had
first sought to raise a contention that the impugned order was
without jurisdiction as it reviewed the order of the Collector
(Appeals) which the Central Government was not authorised
under Section 129DD of the Customs Act, 1962. An
application for review can be made only by "any person
aggrieved" and that the Collector of Customs (Judicial)
201-WP-1187-1993.DOC
Bombay upon whose application the show cause notice to
review the order was issued is not a person aggrieved. He
has also relied upon Section 3 of the Customs of Act in
contending that the Collector of Customs is declared as a
officer of the Customs and not a person. He had, therefore,
contended that show cause notice was defective and had no
force of law. Mr. Anand thereafter restricted his arguments to
the classification of the goods viz. "Stainless Steel Bright
Bars of Austenitic Variety" exported by the Petitioners as
classifiable under sub-serial No. 3803 to the drawback
schedule of the Rules and not under sub-serial No. 3606
which included all types of bright steel bars and shafting. He
has stated that stainless steel bright bars involved ingredients
in its manufacturing which are Nickel and Chromium.
7. Mr. Anand has submitted that from a plain reading of
these entries the stainless steel bright bars are specifically
placed under sub-serial No. 3803 and come within the
heading "manufacture of metals not elsewhere specific". This
is distinguished from sub-serial No. 3606, which comes under
201-WP-1187-1993.DOC
the heading "Iron and steel except ingots and other primary
forms (including blanks for tubes and pipes) of iron and
steel". He has contended that in sub-serial No. 3606 steel
bars of all types would mean Round, Hexagon, Octagon, flat
steel bars but this cannot mean bright steel bars made of all
grades of steel including bright bars of stainless steel. He has
stated that under Rules, neither the term steel nor stainless
steel have been defined in under the Rules. It is settled law
that where the definition of a particular expression is not
given, it must be understood in its popular or common
parlance i.e. in the sense how that expression is used every
day by those who use or deal with those goods. In common
and commercial parlance steel and stainless steel are
understood and traded differently. He has submitted that from
the heading itself it is clear that stainless articles are metals
not elsewhere specified in counter distinction to bright steel
bars and shafting which clearly come within the heading of
iron and steel. He has contended that it is a well settled
principle of classification that the heading which provides
mere specific description shall be preferred to the heading
providing mere general description. The "Austenitic Variety"
201-WP-1187-1993.DOC
of the product i.e. stainless steel is specifically covered under
sub serial 3803 cannot be classified elsewhere. He has then
sought to explain the manufacturing process of "Stainless
Steel Bright Bars of Austenitic Variety" which is a specialised
process and has a distinct identity on is own and can be used
directly with minimal machining work as a part of Automobile
Machinery, Agricultural machinery, Textile Machineries etc.
He has then given a chart of comparison of entries where
drawback is provided for different articles made from the
same or similar raw material which establish that drawback is
to be granted on the basis of the raw material and not the
general description of the article. In the chart he has also
referred to safety razor blades made from stainless steel
strips which are classified under sub-serial No. 3816 having
drawback at 25% of FOB value and therefore the article of
stainless steel cannot be classified under sub-serial No. 3606
wherein the drawback is only Rs.395 per M.T. and the correct
entry would be sub-serial No. 3803 where the drawback
allowed is of Rs.8.90 per kg. He has submitted that with effect
from 1st June 1989, the "Stainless Steel Bright Bars" was
listed in sub-serial No. 3606 and entry No. 3803 was left
201-WP-1187-1993.DOC
vacant clearly establishing that the "Stainless Steel Bright
Bars of Austenitic Variety" fell within sub-serial No. 3803 prior
to the amendment. After the amendment, the duty drawback
was Rs.1090 MT for Stainless Steel Bright Bars and this is
more in line with the duty drawback of 8.90 per kg in sub-
serial No. 3803 prior to amendment. Whereas, the duty
drawback in respect of the "Bright Steel Bars and shafting"
under sub-serial No. 3606 was Rs.3.95 per MT prior to
amendment. After the amendment for other bright bars and
shafting have a duty drawback of Rs.540/- per M.T. lower
than that for stainless steel at Rs.1090/- Per MT. This goes to
show that the articles of stainless steel of austentic variety
has been treated on a different footing from other bright bars
and shafting under sub-serial No. 3606 prior to amendment
and could only have been classified under sub-serial No.
3803. Mr. Anand also contended that import of stainless steel
had a much higher duty liability as they comprised of nickel
and chromium in comparison to pure steel and the Petitioners
could not be denied the benefit of higher drawback for
manufacturing and exporting stainless steel. Mr. Anand has
also relied in the submission on judgments of the Supreme
201-WP-1187-1993.DOC
Court as well as this Court on interpretation of taxing statutes
and on the principle that where two views are possible in
classification of goods, the one favourable to the assessee in
the matter of taxation has to be preferred.
8. Mr. Jetly, learned counsel appearing for the
Respondent has supported the impugned order passed by
the first Respondent. He has contended that the Petitioners
themselves had considered their goods viz. "Stainless Steel
Bright Bars of Austenitic Variety" to fall under sub-serial No.
3606 and had sought duty drawback at the rate prescribed
under that entry. It was only thereafter that the Petitioners
made supplementary claims on the ground that the goods
ought to have been classified under sub-serial 3803. He has
submitted that "Stainless Steel Bright Bars of Austenitic
Variety" falls within the definition of "steel" and that stainless
steel would be covered under "bright steel bars" under SS
No. 3606 at the relevant time. He has also mentioned that
subsequent to the change effected form 1st June 1989
stainless steel has been brought under bright steel bars and
201-WP-1187-1993.DOC
shafting, which could only mean that stainless steel has at all
times been considered as a type of bright steel bars and
hence the impugned order of first Respondent in classifying
stainless steel under a type of bright steel bar is an
appropriate classification under sub serial No. 3606 and
cannot be found faulted with.
9. After careful considering arguments on both sides, we
are of the view that "Stainless Steel Bright Bars of Austenitic
Variety" had been treated in a manner differently from that of
bright steel bars and shafting at the relevant time. Stainless
steel comprises of ingredients which are Nickel and
Chromium, both imported items used in manufacturing of
stainless steel. The duty drawback has also been treated
differently for stainless steel articles from that of all types of
bright steel bars and shafting. The duty drawback of stainless
steel articles of "Austenitic Variety" was Rs.8.90 per kg. as
against Rs.395/- PMT for bright steel bars and shaftings. This
distinction has also been carried forward in the change
effected in the schedule of duty drawback of the Rules from
1st June 1989. The duty drawback of stainless steel with
201-WP-1187-1993.DOC
effect from 1st June 1989 was Rs.1090 PMT as against
Rs.540 PMT for other varieties of bright bars and shafting.
Item No. 3803 subsequent to the change has been kept
vacant. This only goes to show that at the relevant time there
was a clear distinction made between stainless steel articles
of "Austenitic Variety" as against bright steel bars both in
terms of the classification and the duty drawback rate. The
headings under which sub-serial No. 3606 and sub-serial No.
3803 comes, along with the entries at the relevant time. The
two sub-serial Nos.3603 and 3803 at the relevant time (with
effect from 1st June 1988) read thus:-
"36. Iron and steel except ingots and other
Primary forms (including blanks for tubes and
pipes) of iron and steel.
Sr.No. Item Rates Remark
3606 All types of Rs.395/- All
Bright Steel (Rupees three Customs
Bars and hundred and
Shafting ninety five only)
per M.T.
"38. Manufacture of Metals not elsewhere specified.
Sr. No. Item Rates Remark
3803 Articles made Rs.8.90 All
of stainless (Rupees eight Customs
steel casting, and paise
201-WP-1187-1993.DOC
not otherwise ninety only per
specified, made Kg.)
of Austenitic
variety of
stainless steel"
10. A plain reading of the headings would make it apparent
that stainless steel articles made of stainless steel Austenitic
Variety are part of metals which are manufactured and not
elsewhere specified as in the manufacturing of stainless
steel, Nickel and Chromium are used. Hence, stainless steel
articles were treated differently from articles of steel and
came under a separate classification since other metals go
into its manufacturing. We are of the view that the Collector
(Appeals) in the order which was reviewed had appreciated
this distinction and had also appreciated the distinction
between the different duty drawback rates which were
dependent on the duty inputs which in the case of stainless
steel comprised of Nickel and Chromium, both of which are
imported items. Hence, in the duty drawback rate prescribed,
there was a substantial difference between stainless steel of
austentic variety and bright steel bars. We are of the view that
the words "all types of bright steel bars" would necessarily to
201-WP-1187-1993.DOC
apply to the dimensions of steel bars such as round,
hexagon, octagon, flat but would not mean include all
grades / variety of steel. This would therefore, not include
stainless steel at the relevant time. It would also appear from
the revised drawback schedule effected from 1st June 1989
that SS No. 3606 was divided into two different categories
and Sub-serial No. 3803 was kept vacant and read thus:-
3606 All types of bright
bars and shaftings :
(i) of stainless steel : Rs.1,090/- PMT
(ii) All others : Rs.540/- PMT
11. This could only mean that prior thereto "Stainless Steel
Bright Bars of Austenitic Variety" were classified under a
specific entry viz. sub-serial No. 3803 and after the change,
sub-serial No. 3803 has been kept vacant. There are also
rates prescribed, one for stainless steel (higher rate) and
another for all other bright bars (lower rate) after the change.
Thus, bright stainless steel bars of austentic variety has at all
times been treated differently.
12. We are, therefore, inclined to concur with view taken
by the Collector (Appeals) that "Stainless Steel Bright Bars of
201-WP-1187-1993.DOC
Austenitic Variety" could classify only for inclusion in sub-
serial No. 3803 at the relevant time. It is a settled law that
where there are two views possible, the one favourable to the
assessee in the matter of taxation has to be preferred. We
are of the view that the impugned order of the first
Respondent has incorrectly arrived at a finding that the
scheme of drawback schedule at the relevant time was such
that the words "Steel" mentioned in sub-serial No. 3606
would include stainless steel also. We are of the view that the
first Respondent has erroneously held in the impugned order
that the goods exported are bright stainless steel bars and
are appropriately classifiable under sub-serial No. 3606. We
are not going into issue as to whether the first Respondent
has validly exercised power under Section 129DD of the
Customs Act 1962 in reviewing an order of the Commissioner
(Appeals) pursuant to an application made by the Collector
Customs (Judicial) as we find on merits itself that the
impugned order is unsustainable and is required to be
quashed and set aside.
13. We accordingly pass the following order:-
201-WP-1187-1993.DOC
(a) The impugned order dated 23rd December 1992
passed by the first Respondent and the letter
dated 10th March 1993 issued by second
Respondent are quashed and set aside.
(b) We order and direct that the Respondent to pay
the Petitioners the differential duty drawback at
the rate determined by the Collector of Customs
(Appeals) vide Order dated 25th September 1990
within a period of three months.
(c) There shall be no order as to costs.
(d) The Petition is made absolute on the above
terms.
( RIYAZ I. CHAGLA J. ) ( A.S. OKA, J. )
