Union of India & Ors. v. Tata Iron & Steel Co. Ltd.

by-GoswAMI, J. This appeal is by special leave from the judgment of the 1Jelhi High Court m a writ app11cauon there under amc!e 226 of the (.;onstitut1on. The respondent manufactures various · other items hot rolled finished steel products in rectangular cross-section of thickness varying between 1.7 mm and 6.55 mm and width varying between 16.2 mm and 311.2 mm and rolled in coils which it supplies to the Indian Tube Company Limited at Jamshed-pur for making tubes and also to others. Tim article is subjected to Central Excise Duty under the Central Excises and Salt Act, 1944 (hereinafter called the Act). The dispute between the respondent anld the appellants is that while the former describes the said manufactureld pi:oduct as strip the appellants .classify it as skelp. This difference in classifying the product differently results in fiscal misfortune to the respondent since skelp is subjected to a higher Central Excise Duty than strip.

It may be stated that 'during the period from April 24, 1962 to February 28, 1964, the respondent described its product as skelp and it was subjected then to a lower rate of duty. From February 19, 1964, the respondent chimed that the aforesaid product be classified as strip since there hat! been a levy of higher duty /for skelp. The Assistant Collector, Central Excise, Jamshedpur, whb is the primary taxing authority, the Collector of Central Excise, Patna, in appeal, and the Central Government in revision rejected the contention of the respondent by successive orders, each authority upon its own test E· of the definition of the product as skelp. That led to the successful

writ application of the respondent in the High Court resulting in this appeal.

In the forefront of his argument the learn<o'd Additional Solicitor General for the appellants relying upon two decisions of this Court, aamely, The Collector of Customs, Madras v. K. Ganga Setty (1) and V. V. Iyer of Bombay v. lasjlt Singh, Collector of Customs and Another, (2) submitted that "it is primarily for the taxing authorities to determine the heads or entry under which any particular commodity fell; but that if in doing so, these authorities adopted a construction which no reasonable person could adopt i.e., if the construction was preverse then it was a case in which the Court was competent to inter-fere. Jn other wort:ls, if there were two constructions which an entry could reasonably bear, and one of them which was in favour of Reve-nue was adopted, the Court has no jurisdiction to interfere merely because the other interpretation favourable to the subject aoneals to the Court as the better one to adont". On the other hand with equal emohasis Mr. Palkhivitla for the respondent submitted that an assess-ment without the anolicatirm of an idf\ntifiable test is nothine but perverse and arhitrarv. He: submits that in the nresent ca•P-the.re was no identifiable test before the taxing authorities by which the

(1) [1963] 2 s. c. R. 277 .. (2) [197311s.c.c.148. product of the respondent coul\i b~ held to be ske~p and not stri~ subjecting the respondent to a heavier duty. Accordmg t? the lear-ned counsel there is no difference between sklep and stnp, the two items being interchangeable.

It may be noted for our purpose that und~r section 3 of t.he Act Central Excise Duties are leviable on all excisable goods which are produced or manufactured in l n\:lia at the rates set out in the First Schedule. Item No. 26AA in that Schedule relates to iron and steel products and mentions in sub-item (iii) therein fiats, skelp and strips showing the rate of duty in the third column. Und~r rule 8 of the Central Exci~.e Rules,, 1944, made under section 37 of the Act, the Central Government may from time to time by notification in the offi-cial gazette exempt, subject to such conditions as may be specified in the notification, any excisable goods from whole or any part of the duty leviable on such goods. In exercise of the power under this rule the Central Government has made such exemptions in the rates of duty as have· made it higher on skelp than on strip.

Before we proceed further we may notice how the various Excise authorities dealt with the matter at dtfferent stages. The first order is that of the Assistant Collector of Central Excise, Jamshedpur, which was on June 17, 1964. According to him "skelp is the name used in reference to a plate of wrought iron or steel use'rl for making pipe or tubing by rolling the skelp into shape and lap welding or revetting edges together and strip is a term used, to describe a fiat rolled product of smaller cross-section than sheet or bar." He accordingly adopted the definition given in Marymen's Dictionary of Metalurgy. The order of the Collector of Central Excise in appeal made on October 24/29, 1964, shows that the authority note(! the definition of strip as follows:- ·

"Hot or cold rolled finished steel product in ·rectangular cross-section of thickness below 5 mm and of width below 800 mm and supplied in straight length''.

This definition is substantially in conformity with the one given by the Indian Standards Institution (ISI). The appellate authority held that "since the products have not satisfieli the above specifications, they have been correctly classified as 'skelp' by the Assistant Collec-tor .... ". Jhen comes the order in revision of the Central Govern-ment of August 18, 1967 .. Inter alia it was held that "the pr<*:luct does have bevel edges peculiar to skelp and not found in strips. Under the ~ircumstances, there is no doubt what~_ver that the product in qm:stion 1s· correctly classified as skelp".

From a!l the above three orders it is clear that the authorities were ~ot at ~e~tain abou! a uniform .definition of 'skelp' distinirnishing 1t from stnp . Extensive arguments were advanced at the bar with regard to the definitions of these two words. We may, therefore, look

UNION v.'IRON & STEEL co. (Goswami,].) 421 at the various definitions to which our attention has been drawn. Since the appellants largely upon the definitions given by the Indian Stan-dards Institution, "an expert body", we will first note these definitions. The ISI's definitions of strip and skelp as given in IS 19 5 6-1962 (amen,tled upto July 1968) are as follows:- Upto 1965 the ISI gave no description of 'Strip. It had defined skelp in 1962 as follows :- "Skelp Hot rolled narrow strip with rolled (square, slightly round or bevelled) edg''.

Strip A hot or cold rolled flat product, rolled in rectangular cross section of thickness 10 mm and below and supplied with mill, trimmed or sheared edge.

(a) Narrow strip-strip (other than hoop) of width belaw 600 mm and supplied. in straight len-gth or in coil form.

(b) Wide Strip-Strip of width 600 mm above and sup-lied in coil form only."

Upto 1965 the ISi gave no description of strip.

It had defined skelp in 1962 as follows :-

"Hot rolled strip with square or slightly bevelled edges, used for making welded tubes" • In 1968 the ISI's definition of skelp stands as follows :-

"Hot. rolled narrow strip with rolled (square, slightly round or bevelled)

edge."

Strip was defined by the ISi for the first time in 1965 as follows:- "Coiled Strip-A hot or cold rolled flat product, rolled in rectangular cross section and supplied in coil form.

Strip A hot or cold rolled flat product, rolled in rectangular cross- ,. section thickness below 5 mm and of width below 600mm an4 supplied in straight lengths''.

The ISI's definition of strip given in 1968 is as follows :--

"A hot or cold rolled flat product, rolled in rectangular cross-section of thickness 10 mm and below and supplied with mill, trimmed or sheared edges.

(a) Narrow strip-Strip (other than hoop) of width

below 600 mm and supplied in straight length or in coil form.

(b) Wide strip-Strip of width 600 mm and above and

supplieli in coil form only".

Anne1ure 'J' submitted by the respondent along with its rejoinder affidavit in the High Court at page 101 of the record, gives various definitions of ship take'n from various dictionaries and treatises such as Hornor J. G. Dictionary of Terms, page 323, year 1952; Brandt D.J.C.-Manufacture of Iron & Steel, pages 318 and 319, year 1953; Henderson J.C.-MetaUurgical DictiQnary, page 192, year 19'53; -Backert A.0.L. A.B.C. of Iron & Steel, page 1912, year 1925-5th edition; Chamber's Technical Dictionary, year 1967. Similarly defini-tion of strip is also given from these Dictionaries and books. It is also pointed out that there is no category of skelp mentioned in Brns-sels Nomenclature. British Stantlards 2094!, Part 4; 1954, defines skelp as follows :-

"Hot rolled strip with square or slightly bevelled edges used for making welded tubes".

Chamber's Tedm.ical Dictionary Revised Edition (Re-printed 19541) defines skelp as follows :-

"SkelP'--(P. 77:5) Mild steel strip from which tubes are

mo.Ide by drawing through a bell at welding tempera-ture; to produce 111p welded or butt welded tubes". We may not add to the list but are satisfied that there are a large number of definitions out of which one can be picked up to satisfy the definition of skelp according to some authority and another definition to fit in with the concept of strip according to another authority. Since the duties on strip and skelp are not the same, it is absolutely neces-sary to define the worti skelp so that there can be no doubt or con-fusion in the mlnd of either of the taxing authority or of the tax payer with regard to the tax liability aua skelp as opposed to strip. Since, however. there is no statutorv definition of this controversial :Item different tests have naturally been resorted to by the different autho-rities anrl the same variation is discernible . even in the affidavits of the appellants submitted before the High Court.

The short question, therefore, that arises for consideration is whe-ther in the above background the High Court was right in interfrring with the orders under ai;ticle 226 of the Constitution. It is not for · the High Court nor for this Court to come to a conclusion on facts as to whether the 'product can truly come under the description of skelp. That undoubtedly would require some evidence be taken at the Ie~el of the taxing authority provided, however, there is an identifiable, uruform and determinate test by wjich skelp can be properly distin-guished from strip. In. the mass of documents filed before us and the extensive arguments addressed at the bar with regard to the definitions are culled from various Uictionaries, hand-books and authorities, we not at all surprised that the three authorities came to the same conclu-sion bv deoending uoon their own chosen tests. A oarticular type of strio mav accordine: to certain definitions be skein 11nd accorrllr11? to others not skelt>. This. however. c~nnot be oermittP<t in a fi•r:i11eitls-1atio" which bv all stand~rcls shoulcl arloot a clear cif'finition of 11~1 ex-cisable item which is incapable of giving rise to a confounding contro-versy as in this case unless the matter is beyond doubt in view of the popular meaning or meaning ascribed to the term in commercial par-lance. ln absence of any clear criterion to detennine what is skelp and not strip, no useful purpose would be served by even remanding the matter to the Excise authorities for a decision after taking neces-sary evitlence. It is only when a taxing law provides for a clear and unequivocal test for determination as to whether a particular product would fall under strip of skelp it may be possible for the authorities to address itself to the evidence submitted by the parties in order to come to a decision on the basis of the test. This is, however, not pos-sible in this case in view of the fact that there is no identifiable stan-dard. The best way is to define ·the product for the purpose of excise duty in approximate terms demarcating clearly the distinction between the two terms.

The absence of any identifiable standard would, therefore, natural-ly give rise to the scope for arbitrary assessment at the hands of different authorities. Whether this has happeneti in this case, as complained bv the respondent citing the instance of the Hindustan Steel Company, Rourkela, it is not necessary for us to pursue in this appeal. We are, therefore, unable to hold that the High Court has gone wrong in granting the reliefs prayed for.

The appellants strenuously emphasised upon the test relied upon in the Revisional order as to skelp having bevelled edges which, accor-ding to them, is peculiar to skelp and not to strip. But this does not bear scrutiny as on the counter-affidavit of the Union of India in the High Court at page 57 of this record it shows that "as regards tested Hot rolled strips, the edges are never looked into, they can be bevelled, square or have Mill edge" (emphasis added). This is an admission of the appellants that strips may also have bevelled edges. ·

The two decisions relied unon hv the annellants do not come to-their aid in this case since there is no identifiable standard or test to determine clearly which product can be skelp and not strip. In Gartga Setty's case (supra) the controversy arose with regard to whether "feed oats" fell within item 42 (fodder) or within item 32 (grain) of parti-cular circular. Dealing with the matter this Court observed as fol-lows:-

" .... any particular species of grain cannot be excluded merely because it is capable of being used as cattle or horse feed".

The decision of the Customs authorities, therefore, this Court held, could not be characterised as perverse or mala fide calling for int01.- ference. Similarly following Ganf!a Setty's case (supra) in Jas;it Sin~i{s • case (suora) the conclusion and findin!!s of the Customs authorities were accented as reasonable. Jn both the abovt-cases therP-were definite tests bv which the· particular article could be held to fall un~er one item and not under the other and the construction of the authorities 4l4 SUPREME cou&r· ll.EPmtTS [1975] 3 s.c.R. with TC~ to the scope of the })l\rt.icwar::entries was, therefore, held to be reaSonable and ·not calf'mg for interference by the court The question that arises in the instant case is of a contple;ely different nature as pointed, out above there being no j(lehtifiable test reasonably capable of distingaiflhing skelp from strip.

In the result the appeal fails and is disfllissed with costs.

. P.H.P. AppeaL dismissed .

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1527 of 1~~

Appeal by Special Leave from the Judgment & Odrer dated the 14th December, 1973 of the Delhi High Court in Civil Writ No. 1678 of 1967. ·

F. S. Nariman, Addi. Sol. Gen. of India, D. N. Mukherji~e and R. N. Sahthey, for tllle Appellants.

· N. A. Palkhiala, Ravinder Narain, I. B. Dadachanji, 0. C. Mathur, K. J. John and K. R. lhaveri, for the Respondent. · ·