Full Judgment Text
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PETITIONER:
DUNLOP INDIA LTD.
Vs.
RESPONDENT:
UNION OF INDIA AND ORS
DATE OF JUDGMENT06/10/1975
BENCH:
GOSWAMI, P.K.
BENCH:
GOSWAMI, P.K.
ALAGIRISWAMI, A.
UNTWALIA, N.L.
CITATION:
1977 AIR 597 1976 SCR (2) 98
1976 SCC (2) 241
CITATOR INFO :
D 1985 SC1201 (12)
R 1988 SC2176 (4)
R 1988 SC2223 (15)
R 1990 SC1579 (38)
RF 1991 SC 999 (14,16)
ACT:
Indian Tariff Act 1934-Items 39, 82 - "V. P. Latex"-
Classification of- Interference under Art. 136 of the
Constitution in classification of excisable items-Rule of
Practice-Whether "V.P. Latex" an item of raw rubber"
falling under I.C.T. 89-Whether showing by the agents, while
filling up the various Columns of the Bills of Entry as
"I.C.I. item 87-V.P. Latex", operates as "Estoppel by
conduct" to claim refund.
HEADNOTE:
The appellants, manufacturers of automobile tyres
import "V.P. Latex", an essential ingredient for the
manufacture of tyres. The customs authorities (Appraising)
at Calcutta and Madras classified it as non raw-rubber, an
item covered under item 82(3) (now 87) of the Indian Customs
Tariff and levied duty in addition to the countervailing
duty. On appeals, while the Appellate Collector of Customs,
Madras maintained the appraiser’s stand, the Appellate
Collector of Customs, Calcutta accepted the view that V.P.
Latex is an item of raw rubber and covered by Item 39 of the
Indian Customs Tariff. The Central Government in revision,
however, held that "V.P. Latex being an aqueous dispersion
of synthetic resin is covered by Item 87 I.C.T." and thus
confirmed the Madras view.
On appeal, by special leave the appellants contended,
(i) that V.P. Latex is a synthetic rubber latex and never to
be taken for synthetic resin in as much as.-
(a) V.P. I Latex, being rubber can be vulcanised while
synthetic resin cannot be
(b) V.P. Latex, when coagulated, the coagulum answers
fully the A.S.T.M. standards including elongation tests
prescribed for rubber.
(c) In the international field of rubber manufacture,
all over the world V.P. Latex is fully recognised as a
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synthetic rubber latex and not as a synthetic resin and
(d) Even the entry 150 of the "Red Book", "Import Trade
Control Policy" Vol. I for the various years shows under
"Actual Users for Synthetic rubber" specifically as
including "Vinyl Pyridine lated" (VP-Latex)."
Accepting the appeal, the Court
^
HELD: (1) It is not for the court to determine for
itself under Art. 136 of the Constitution under which item a
particular article falls. It is best left to the authorities
entrusted with the subject. But where the very basis of the
reason for including the article under a residuary head, in
order to charge higher duty is foreign to a proper
determination of this kind, the Court will be loath to say
that it will not interfere. [113 E-F]
V. V. Iyer of Bombay v. Jasjit Singh, Collector of
Customs and Anr., [1973] 1 S.C.C. 148, Collector of Customs,
Madras v. K. Ganga Setty, [1963] 2 S.C.R. 277 distinguished.
Commissioner of Sales Tax, U.P. v. M/s. S. N. Brothers,
Kanpur, [1973] 2 S.C.R. 825 not applicable.
(ii) There is no estoppel in law against a party in a
taxation matter. Giving of a classification by the
appellants agents in order to clear the goods for customs
either under some misapprehension or in accordance with the
wishes of the authorities is of no significance especially
when law allows them the right to ask for refund on a.
proper appraisement and when they actually applied for.
[113H, 114A]
99
(iii) Under Section 12 of the Customs Act of 1962, the
relevant taxing event is the importing into or exporting
from India. Condition of the article at the time of
importing is a material factor for the purpose of
classification as to under what head, duty will be leviable.
The reason given by the authority that V.P Latex when
coagulated as solid rubber cannot be commercially used as an
economic proposition is an extraneous consideration for
classification. The basis of the reason with regard to the
end-use of the article is absolutely irrelevant in the
context of the entry where there is no reference to the use
or adaptation of the article. [110E-G, 114-D-E]
(iv) It is well established that in interpreting the
meaning of words in a taxing statute, the acceptation of a
particular word by the Trade and is popular meaning should
commend itself to the authority. It is clear that meaning
given to articles in a fiscal statute must be as people in
trade and commerce, conversant with the subject, generally
treat and understand them in the usual course. But once an
article is classified and put under a distinct entry, the
basis of the classification is not open to question.
Technical and scientific tests offer guidance only within
limits. Once the articles are in circulation and come to be
described and known in common parlance, there is no
difficulty for statutory classification under a particular
entry. [110H; 113A-C]
King v. Planters Nut and Chocolate Co. Ltd. (1951)
Canada Law Reports 122.. Ramavatar Budhaiprasad etc. v.
Assistant Sales Tax officer [1962] 1 S.C.R. 279.
Commissioner of Sales Tax, Madhya Pradesh, Indore v. M/s.
Jaswant Singh Chanan Singh A.I.R. 1967 S.C. 1454; South
Bihar Sugar Mills Ltd. etc. v. Union of India and ors [1968]
3 S.C.R. 21; Mineral Metals Trading Corporation of India
Ltd. v. Union of India & ors. [1973] 1 S.C.R. 148; referred
to.
HELD FURTHER
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(v) In the instant case, it is clear that the authority
would have found no difficulty in coming to the conclusion
that V.P. Latex in view of chemical composition and physical
property is rubber raw, if the same were commercially used
as rubber. The authority, therefore, was principally
influenced to come to its decision on the sole basis of the
ultimate use of the imported article in the trade. There is
no reason, when as a matter of fact, in the Red Book (Import
Trade Control Policy of the Ministry of Commerce), V.P.I.
Latex is specifically included under the sub head "synthetic
rubber", the same policy could not have been followed in the
I.C.T. book being complementary to each other. When an
article has, by all standards, a reasonable claim to be
classified under an enumerated item in the Tariff Schedule
it will be against the very principle of classification to
deny it the parentage and consign it to an orphanage of the
residuary clause. When a particular product like V.P. Latex
known to trade and commerce in this country and abroad is
imported; it would have been better, if the article is, "eo
nomine" put under a particular classification to avoid
controversy over the residuary clause.. [110E, 113D-E, 113-
C]
(vi) V.P. Latex is raw rubber and comes under an item
under ICT 39 of the Indian Tariff Act 1934. [1l4-D] G
OBITER: It is a good fiscal policy not to put people in
doubt and quandary about their liability to duty. When
evidence is well balanced, the best cause in a fiscal
measure is to decide and fix the entry under which the
article comes otherwise it will give rise to adoption of
varying standards where uniformity should be the rule. (113C
JUDGMENT:
[The court, expressed no opinion with regard to the
question relating to countervailing duty under 16 AA of the
First Schedule to the Central Excise and Salt Act, 1944]
100
&
CIVIL APPEPLLLATE JURlSDICTION: Civil Appeal Nos. 1446
and 2746 of 1972.
Appeals by Special Leave from the Judgment and order
dated the 14th January 1972/17th August, 1972 of the Central
Govt. in Rvs. under Sec. 131(3) of the Customs Act, 1962
being No. 25/53/59 ous (Tu), 1972 and of the Collector of
Customs, Custmos House, Madras in Appeal No. C/3/1848 of
1970 respectively.
S. Choudhry, S. J. Sorabji, D. N. Gupta for the
Appellant (In CA No. 1446/72) .
S. J. Sorabji, V. J. Taraporawala and K. R. Nambiar for
the Appellants (in CA No. 2746/72).
G. L. Sanghi and Girish Chandra for the Respondents (in
both the appeals) .
G. Mukhoty and H. K. Dutt for Intervener No. I (Incheck
Tyres Ltd.)
S. J. Sorabji, Ravinder Narain, K. K, Master of M/s. J.
B. Dadachanji & Co. for Intervener No. 2. (Firestone Tyres
Ltd.).
S. J. Sorabji Ravinder Narain, K. J. John and R. D.
Divan of M/s. J. B. Dadachanji & Co. for Intervener No. 4
(Burkib Fibres Tyres Ltd.).
I. N. Shroff for Intervener No. 3 and S (Ceat Tyres Ltd
and Premier Tyres Ltd).
The Judgment of the Court was delivered by
GOSWAMI, J. - In these appeals by special leave the
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only question that is raised is whether the substance known
as pyratex- Vinyl Pyridine Latex (for short, V. P. Latex) is
not rubber raw classifiable under item No. 39 of the Indian
Tariff Act 1934 (hereinafter referred to as I.C.T.) .
The appellants are manufacturers of automotive tyres.
V. P. Latex is required in the process of manufacturing of
tyres. V. P. Latex is not manufactured in India and has to
be imported from outside the country. The tyre industry uses
V. P. Latex as one of the essential ingredients in the
course of manufacture of automotive tyres.
The appellant in Civil Appeal No. 1446 of 1972 imported
some time in April, 1969, 3 consignments of V. P. Latex. In
appeal from the proceedings before the Assistant Collector
of Customs for appraisement of the said consignments for the
purpose of imposition of customs duty and/or countervailing
duty, the Appellate Collector of Customs, Calcutta, upheld
the appellant’s contention and classified V. P. Latex under
item 39 of the I.C.T. as raw rubber. The classification made
by the Appellate. Collector was revised by the Central
Government in a proceeding initiated, suo motu, under
section 131 (2) of the Customs Act, 1962. ’the Central
Government held, by the impugned order, That the said V. P.
Latex was "an aqueous dispersion of synthetic resin," and
hence classifiable under item 87 of I.C.T. prior to 1st
March 1970, and thereafter under the new item No. 82(3)
I.C.T.
101
The Central Government by the same order further held that
the said goods were liable to countervailing duty under item
No. 15 C.E.T. both before and after 1st March, 1970. It is
apparent that if V. P. Latex were to be classified under
item No. 87, higher duty will be leviable and that is the
reason for the controversy in these appeals.
In Civil Appeal No. 2746 of 1972, the appeal is
directed against the order of August 17, 1972, of the
Appellate Collector of Customs, Madras, dismissing a batch
of 18 appeals of the Company. The Appellate Collector
confirmed the order of the Assistant Collector of Customs
Appraising, Madras, rejecting the appellant’s claim for
refund of duty on the basis that V. P. Latex should be
classified under item 39 I.C.T. and not under item 82(3) of
the I.C.T. The appellant did not go in revision before the
Central Government as already similar claims had been
rejected by the Central Government.
There are several interveners in the appeals and the
entire tyre industry is interested in the matter
Prior to the 1st March, 1970, the First Schedule to the
Indian Tariff Act, 1934, contained, inter alia, the
following dutiable items:-
Item No. 39 Rubber, raw.
Item No. 87 All other articles not otherwise
specified.
In addition to the above, the following item was introduced
in the Tariff Act by the Finance Act, 1 970 :-
"Item No. 82(3) (a)-Artificial or synthetic resins and
plastic materials in any form, whether solid, liquid or
pasty, or as powder, granules or flakes. Or in the form
of moulding powders".
Under section 2A of the Tariff Act any article which is
imported into India shall be liable to customs duty equal to
the excise duty for the time being leviable on a like
article if produced or manufactured in India. Such customs
duty in addition to the duty under the Tariff Act is known
as countervailing duty.
Item 15A of the First Schedule to the Central Excises
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and Salt Act 1944 (briefly C.E.T.) reads as follows:-
"15A : Artificial or Synthetic resins and Plastic
Materials and Articles thereof-
(1) Artificial or synthetic resins and plastic
materials in any form, whether solid, liquid or
pasty, or as powder, granules or flakes, or in the
form of moulding powders, the following, namely.."
An additional item being item No. 16AA was introduced
in the C.E.T. for the first time by the Finance Act 1970,
which reads as follows:-
"Item No. 16AA : Synthetic rubber, including butadiene
acrylonitrile rubber styrene butadiene rubber and butyl
rubber; synthetic rubber latex, including prevulcanised
synthetic rubber latex".
102
The quantity of V. P. Latex consumed by the tyre
industry in India as a whole is said to be about 1000 tonnes
per year and the value thereof is Rs. 40,33,000/-
approximately. The appellant, Dunlop India Limited, consumes
about 300 tonnes per year. The controversy between the
parties centers round the real meaning of V.P. Latex While
the appellants submit that V. P. Latex is synthetic rubber
in the latex form, according to the respondents it is not
so, but on the other hand, it is what may be described as
’resin’.
In order that the Court is able to appreciate the rival
contentions, both sides addressed us referring to several
standard authorities and treatises.
Before we proceed further it may be appropriate to see
how rubber is described in the Encyclopaedia Britannica,
volume 19, 1965 edition:
"RUBBER is the substance caoutchouc (q.v.), a milk
like fluid that is obtained from certain tropical
shrubs or tyres and then subjected to various processes
of manufacture; or it may be a product of chemical
synthesis".
X X X
"The uniqueness of rubber lies in its physical
properties of extensibility and toughness. In its
natural state, it is greatly affected by temperature,
becoming harder when cooled at 0-10C it is opaque and
softer when heated (above 50 C. it becomes tackier and
less elastic, decomposing into liquid form at 190 -200
C). When vulcanized (i.e. heated with sulphur at 120-
160 C.) it loses its thermoplasticity and becomes
stronger and more elastic."
"Chemically, rubber is a polymer of isoprene
X X X X
"The term synthetic rubber is used to describe an ever
growing number of elastic materials, some of which
closely resemble natural rubber while others have
completely different physical properties. Since World
War II, precise terminology has not kept pace with the
rapid developments in the synthetic and plastics
industries."
X X X X
"The copolymerization of the butadiene and the styrene
takes place in an emulsion in the presence of an active
initiator, such as cumene hydroperoxide and p-menthane
hydroperoxide, which allows the conversion to occur at
a low temperature (5o C.). SBR is usually prepared with
75% butadiene and 25% styrene; the proportion will,
however, vary according to the desired degree of
elasticity.. "
Let us consider the appellants’ case to treat the V. P.
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Latex as rubber raw. In this attempt the appellants rely
upon several authorities from the rubber world pronouncing
upon the chemical properties well as various uses and
potentialities. Their contention is that V. P. Latex is a
synthetic rubber latex and can never be taken for synthetic
103
resin The principal point to distinguish V. P. Latex from
synthetic resin is, while synthetic resin cannot be
vulcanised, V. P. Latex, being rubber, can be vulcanised.
According to the American Standard for Testing Material,
(A.S.T.M.) raw rubber is defined as crude or uncompounded
rubber, either natural or synthetic. Indian Standards
Institution (I.S.I.) defines rubber as follows:-
"Rubber in its modified state free of all
diluents, retracts within one minute to less than 1.5
times its original length after being stretched at
normal room temperature to twice its length and held
for one minute before release."
It also defines raw rubber as vulcanised rubber’. According
to H. J. Stern in his book "Rubber-Natural and Synthetic",
V. P. Latex is composed of butadiene styrene and vinyl
pyridine in the ratio of 70: 15: 15 respectively. A
synthetic latex is produced as the first stage in the
manufacture of most synthetic rubbers. V. P. Latex is one
such synthetic rubber latex. An affidavit sworn by Mr.
Mayer, Manager Technical Services, Chemical Division,
Goodyear International Corporation, states that V. P. Latex
is a terpolyer rubber as defined in A.S.T.M. Specification
DI-566-60T and that there is measurable resin content in
this product. It is claimed by the appellants that pyratex
which is the commercial name for V. P. Latex imported by
them, is exactly similar to the V. P. Latex referred to in
Mr. Mayer’s affidavit, since it also contains butadiene
styrene and vinyl pyridine in the same proportion of 70: 15:
15 with no measure able resin content. It is claimed that V.
P. Latex is an emulsion of synthetic rubber and it is borne
out by its chemical composition and k. by its physical
properties. In the case of V. P. Latex when coagulated the
coagulum answers fully the A.S.T.M. standards and tests
prescribed t‘or rubber. Its use in liquid state is
commercially more expedient than its use in dry state. V. P.
Latex has been designed as a special synthetic rubber latex
to be suitable for its use at the fabric cross-linking stage
with rubber compound. It is claimed that in its application
it is in no way different from any other natural rubber or
synthetic rubber latices. The advantage gained in the case
of V. P. Latex is that it is more stable and is not
whimsical with reference to manufacturing conditions.
According to G. S. Whitby, the additions of vinyl pyridine
in such terpolymers of butadiene, styrene and vinyl pyridine
have been found to improve the characteristics and
properties with the increase of vinyl pyridine content and
it is known to reach optimum at about 15 parts i.e. at a
charge of 75: 10: 15. It is further said that vinyl pyridine
copolymers suffer from the drawback of extremely high rate
of cure, scorching and incompatibility with other rubbers
and hence do not final use in the dry state in spite of
their certain superior properties. According to the
appellants’ V. P. Latex when coagulated just like any other
rubber latex satisfies the elongation tests prescribed for
rubber. It is also claimed that in the international field
of rubber manufacture. all over the world, V. P. Latex is
fully recognised as a synthetic rubber latex and not as a
synthetic resin
8-L1276 SCI/75
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104
The Condensed Chemical Dictionary, 8th edition, 1971,
defines latex as a white free-flowing liquid obtained from
some species of shrubs or trees in which microscopically
small particles or globules of natural rubber are suspended
in a watery serum. Natural rubber latex, obtained from the
tree Heve a Braziliensis, contains about 60% water, 35%
rubber hydrocarbon, and 5% proteins and other substances.
Coagulation is prevented by protective colloids, but can be
induced U by addition or acetic or formic acid. Synthetic
latices include polystyrene, SBR rubber, neoprene, polyvinyl
chloride etc. Both natural and synthetic latices are
available in vulcanised form. It describes their uses for
thin rubber products (surgeons’ gloves, drug sundries);
girdles, pillows, etc; emulsion paints; adhesives; tire cord
coating; rubber, natural.
In the same Dictionary, rubber synthetic is described
as follows:-
"Any of a group of manmade elastomers which
approximate one or more of the properties of natural
rubber. Some of these are : sodium polysulfide
(’Thikol’); polychloroprene (neoprene); butadiene-
styrene copolymers (SBR); acrylonitrile-butadiene
copolymers (nitrile rubber); ethylene propylene-diene
(EPDM) rubbers; synthetic polyisoprene (Coral’,
’Natsyn’); butyl rubber (copolymer of isobutylene and
is prene); polyacrylonitrile (’Hycar’); silicone
(polysiloxane): epichlorophydrin; polyurethane
(’Vulkollan’) ". "
Styrene-butadiene rubber (SBR, s. type elastomer)-is
the most common type of synthetic rubber. Manufacture
involves copolymerization of about 3 parts butadiene with 1
part styrene. Its uses are for tiers, footwear, mechanical
goods coatings; adhesives; etc.
The appellants have also produced the Import Trade
Control Policy, Volume I, for the year 1975-76 described
during the arguments as the ’Red Book’ of the Commerce
Ministry of the Government of India. It may be useful to
quote the entire entry 150 at page 58:
SECTION II: Policy for individual items and the detailed
policy for Actual Users:
Part & Description IMPORT POLICY
Sl. No. Established Actual
Users
of I.T.C. Importers
Schedule
1 2 3 4
150 Rubber, raw and gutta Nil (1) A. U. for
percha,raw Import of Gutta
percha, raw.
(2)Requirement
s of actual users for the following items will be met
by imports , I through public sector agency
105
1 2 3 4
(i)Synthetic rubber namely, Butyl rubber, r
Acrylonitrile Butadiene Copolymer, Poly Ch loroprene,
Thikol, Chloroprene, Polybutadiene, Hyplaon-Viton
Polyacrylic; EPDM, Chlonobutyl and Bromobutyl,
Siliconerubber and silicone rubber master batches and
Synthetic latex including Vinyl pyriding latex and
copolymer of styrene butadiene latex, Nitrile latex and
polychloroprene latex
(ii)Hot type special grades of SBR for manufacture of
high impact polystyrene only.
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Please see Section III to this Red Book
(3)Import of SBR and/or Alkyl substituted Styrene
Butadiene Elastometric Copolymers will not be allowed.
(4)Import of natural rubber and reclaimed rubber will
not be allowed. (emphasis added).
The earlier Volume of the Import Trade Control Policy,
for the year 1969-70, this item 150-Rubber, raw-shows under
the fourth column "Actual Users for Synthetic rubber," the
following:-
(i) Import of natural rubber will normally be
arranged through STC for meeting the
requirements of actual users.
(ii) A.U. for synthetic Rubber namely, Butyl
rubber, Acrylonitrile Butadiene Copolymer,
Polychloroprene, Thikol, Poly isoprene and
Polybutadiene and Synthetic latex.
X X X X
In the Import Trade Control Policy in Volume No. I for the
year 197071 against serial No. 150, rubber, raw, under
column 4 "Actual Users for Synthetic rubber", actual users
are shown as (ii) "A.U. (Actual User) for Synthetic Rubber
namely, Butyl Rubber, Acrylon-trile Butadiene Copolymer,
Poly Chloroprene, Thikol, Poly Isoprene and Polybutadiene
Hypalon, Silicone rubber and Synthetic Latex including
106
Vinyl Pyridine latex and copolymer of styrene butadiene
latex" (emphasis added). Again the. Condensed Chemical
Dictionary at page 741 describes "Pyratex" the trade name
under which V. P. Latex has bean imported as follows:-
"Pyratex. 248 Trade mark for a vinylpyridine Latex.
Properties: Total solids 40-42%, PH 10.5-1 1, 5; sp.
gr. 0.96.
Uses: To promote adhesion between rayon or nylon fibers
and rubber, as in tire cord, belting, hose, etc."
The British Standard specification is as follows:-
The British Standards Institution gives the
specification of PSBR41 latex as "(Vinyl) pyridine-styrene-
butadiene rubber latex with a nominal total solids content
within the range 40.0% to 49.9% and a nominal bound styrene
content of less than 20.0% of the total polymer‘’. In the
Elastomers Manual, under Table XI, the International
Institute of Synthetic Rubber Producers, Inc. enumerates
"GENTAC" and "PYRATEX" as Emulsion Styrene-Butadiene and
Butadiene Rubber Latices of S 41 P Class. The classification
"S 41 P" properly decoded means as belonging to the Chemical
Family of Styrene-Butadiene Rubber (SBR) having total solid
contents of 40 to 49% and Styrene Comonomer content of less
than 20% wherein Vinyl Pyridine is present in the Polymer.
Although the controversy between the parties was placed
before us in an exhaustively enlarged form going into the
Chemistry of V. P. Latex, it is not necessary to go into all
the complexities of chemical formulae and properties. The
impugned order itself takes note of all the. contentions
raised before the Government and also pressed before us
This approach is also’ convenient and unobjectionable,
since it is urged on behalf of the respondents that we
should not entertain fresh materials which were not
available before the authority. We may, therefore, briefly
note the claim of the appellants to V. P. Latex being
classified as raw rubber under item 39 I.C.T. On the grounds
advanced before the Government which the authority took note
of: ‘
(1) V.P. Latex is a synthetic rubber latex which
satisfies wholly each and every test
prescribed by the authority in India as well
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as abroad for classification of rubber
(2) According to the A.S.T.M. definition. rubber
means "an elastomer that can be or already is
vulcanised. Collectively the rubber
constitutes the definite raw material of the
rubber industry. They may be of vegetable
origin or synthetic". Synthetic resin can not
be vulcanised whereas V.P. Latex, being
rubber, can be vulcanised.
107
(3) A.S.T.M. further defines raw rubber as crude
or uncompounded rubber, either natural or
synthetic. A
(4) According to I.S.I. definition, rubber is
defined as follows:-
"Rubber in its modified state free of all
diluents, retracts within one minute to less than 1.5
times its original length after being stretched at
normal room temperature to twice its length and held
for one minute before release".
I.S.I. also defines raw rubber as unvulcanised
rubber.
(5) V. P. Latex is composed of butadiene styrene
and vinyl pyridine in the ratio of 70: 15: 15
respectively. According to H. J. Stern
(author of ’Rubber-Natural and Synthetic’), a
synthetic latex is produced at the first
stage in the manufacture of most synthetic
rubbers (page 358). V. P. Latex is one such
synthetic rubber latex.
(6) V.P. Latex is very much similar to other
synthetic rubber latices. V.P. Latex cannot
be regarded as an aqueous dispersion of
synthetic resin since it has no measurable
resin at all. On the contrary the proper
description of V.P. Latex would be to call it
an emulsion of synthetic rubber and this is
borne out by its chemical composition and by
its physical properties.
(7) The question of classifying a substance rests
primarily on its chemical properties as
borne out by technical tests. In the case of
V.P. Latex, when coagulated the coagulum
answers fully the A.S.T.M. Standards and
tests prescribed for rubber. Its use in
liquid state is commercially more expedient
than its use in dry state but this should not
be a factor in classifying a product
according to its technical and chemical
composition.
(8) V.P. Latex has been designed as a special
synthetic rubber latex to be suitable for its
use at the fabric cross-linking stage with
rubber compound. In its application it is in
no way different from any other natural
rubber or synthetic rubber latices. V. P
Latex should, therefore, properly be regarded
as a synthetic rubber latex.
(9) It is not correct to say that all rubber
latices when coagulated should have an
absolute commercial dry rubber usage in order
to be classified under raw rubber. Quoting
from G. S. Whitby "the addition of vinyl
pyridine in such terpolymers of butadiene,
styrene and vinyl pyridine has been found to
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improve the characteristics and properties
with the increase of vinyl pyridine content
and it is known to
108
reach optimum at about 15 parts, i.e. at a
charge of 75:10:15 (Synthetic rubber by
Whitby, page 725 ) . It was admitted that
vinyl pyridine copolymers do not find use in
the dry state as they suffer from the
drawback of extremely high rate of cure,
scorching and incompatibility with other
rubbers
(10) V.P. Latex has to be assessed in the form in
which it is imported. In this view, V.P.
Latex is nothing but a synthetic rubber
latex.
(11) In the international field of rubber
manufacture all over the world V.P. Latex is
fully recognised as a synthetic rubber latex
and not as a synthetic resin. While V.P Latex
can be coagulated and vulcanised, a synthetic
rubber cannot be vulcanised.
The appellants submitted before the revisional
authority-letter dated 26th November, 1970, written by
Dunlop Products Chemical Division on V.P. Latex; extracts
from Elastomers Manual published by the International
Institute of Synthetic Rubber Producers; Articles written by
W.F. Brucksch, Jr. Of Metal Halides in Vinylpyridine Rubber
(PBR) published Rubber Chemistry and Technology; A.S.T.M.
Glossary of Terms relating to Rubber and Rubber like
Materials; and the books by G.S. Whitby and H. J Stern. It
was pointed out before the authority by the appellants that
rubber was always obtained first in a latex form and latex
was nothing but an aqueous state of rubber, that V.P. Latex
is a liquid rubber designed for use in tyre manufacture as a
bonding agent by cross linking with fabrics. It-was also
pointed out with reference to the classification of
synthetic rubber latices that the Central Board itself had
ruled in several cases that these were to be regarded as
coming under I.C.T. 39.
The conclusion of the revision of authority after
considering the above submissions, may be quoted in its own
words:
"V.P. Latex is a synthetic latex designed to be
used in the manufacture of tyres as a bonding agent by
cross linking with fabric. It has been admitted by the
importers that the product is not used in the dry
state....V.P. Latex is a liquid latex used as such and
the question boils down to consider whether synthetic
rubber latex could be classified as ’raw rubber’
assessable under item 39 T.C.T. irrespective of its
usage known commercially or in the industry."
Then after noting the definition of latex in the
Chemical Dictionary and in the "Materials Hand Book" by
Brady, the authority observed as follows:-
"These definitions imply that latex is a material
from which rubber is obtained and not rubber itself’’.
Latex, according to the authority is, milk juice of the
rubber tree which is source of rubber and is in common
parlance referred to as
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rubber. The authority then refers to Chapter 40 of the
Brussels Tariff Nomenclature (B.T.N.) dealing with natural
rubber latex (40.01) d synthetic rubber latex (40.02):
40.01 "Natural rubber latex, whether or not with
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added synthetic rubber latex; pre-vulcanised natural
rubber latex; natural rubber; balata, gutta-percha and
similar B natural gums".
40.02. "Synthetic rubber latex; pre-vulcanised
synthetic rubber latex; synthetic rubber; factice
derived from oils".
The authority then observed as follows:-
"Chapter 40 of the B.T.N. covers raw rubber.
Heading No 40.01 refers to ’natural’ Rubber Latex
whether or not with added synthetic rubber latex, pre-
vulcanised natural rubber latex, natural rubber...but
natural rubber latex has been defined under 40.01 as
containing in suspension 30% to 40% of rubber. Ruber
latex therefore appears to fall under 40.01 by specific
inclusion only. So also synthetic rubber latex is
specifically mentioned in heading 40.02. Had they not
been so specified, latex may have been excluded from
the scope of the heading ’rubber’."
To say the least, it is difficult to appreciate the strained
meaning given by the authority in the above extract. At any
rate the authority concludes "hence it appears that rubber
latex is not rubber as such but merely a source of rubber..
In this view, latex and rubber will have to be distinguished
from each other".
It appears from the order itself that the Government of
India was not treating rubber latex as raw rubber assessable
under item 39 I.C.T. till 1935, and a decision was taken in
that year to accord the same tariff treatment to rubber
latex as to rubber raw, because it was found that latex had
to be imported for various specific uses which required a
liquid form. According to the authority, the use of rubber
latex was as rubber and therefore on the same principle,
synthetic rubber latex was also treated as synthetic rubber
for assessment purposes. Then comes the crucial conclusion
of the authority, "If V.P. Latex was designed for or
intended to be used as rubber, there would have been no
difficulty in classifying it under item 39 T.C.T. In fact
synthetic rubber itself has been classified as raw rubber
only because synthetic rubber serves exactly the same
purpose as crude rubber in all its industrial uses and has
no practical difference from the latter Pyratex V.P. Latex
is designed for use as an adhesive in the manufacture of
tyres. It is seldom put to any of the other uses to which
rubber, natural or synthetic is ordinarily put. In
composition it is similar to rubber latex and it may also
well answer the tests for rubber such as . elongation etc.
when reduced to dry state, but its use is not the same as
that of rubber. It could theoretically be converted into a
substance which is akin to rubber but it has been admitted
that due to high rate
110
of cure, scorching and incompatibility with other rubbers,
it does not find use in a dry state. In fact it does not
replace rubber in use though it has similar properties".
(emphasis added).
The last point considered by the authority was with
regard to the resin content in V.P. Latex. The appellants
claimed that V.P. Latex had no resin content. The authority
repelled the contention in the following words:-
"It appears that there is no accepted definition
of the term ’resin’ in trade usage or technical
literature and resins are identified by their use as
resins and in this view V.P Latex may well be
considered as a resin latex".
Mr. Sanghi for the respondents has made a strenuous
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plea that V.P. Latex is not rubber raw and is synthetic
resin. If it is correct that V.P. Latex is synthetic resin,
it would come under item 87 I.C.T. the residuary entry
covering "all other articles not otherwise specified".
To revert to the order of the authority, it is clear
that the authority would have found no difficulty in coming
to the conclusion that V.P. Latex in view of chemical
composition and physical properties is rubber raw, if the
same were commercially used as rubber. The authority,
therefore, was principally influenced to come to its
decision on the sole basis of the ultimate use of the
imported article in the trade.
Section 12 of the Customs Act, 1962, is the charging
section. That section reads-
(1) "Except as otherwise provided in this Act, or
any other law for the time being in force,
duties of customs shall be levied at such
rates as may be specified under the India
Tariff Act, 1934, or any other law for the
time being in force, on goods imported into,
or exported from, India".
The relevant taxing event is the importing into or
exporting from India. Condition of the article at the time
of importing is a material factor for the purpose of
classification as to under what head, duty will be leviable.
The reason given by the authority that V.P. Latex when
coagulated as solid rubber cannot be commercially used as an
economic proposition, as even admitted by the appellants, is
an extraneous consideration in dealing with the matter. We
are, therefore, not required to consider the history and
chemistry of synthetic rubber and V.P. Latex as a component
of SBR with regard to which extensive arguments were
addressed by both sides by quoting from different texts and
authorities
It is well established that in interpreting the meaning
of words in a taxing statute, the acceptation of a
particular word by the Trade and its popular meaning should
commend itself to the authority.
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Dealing with the meaning of the term "vegetables" in
the Excise Tax Act in King v. Planters Nut and Chocolate
Company Limited the Exchequer Court observed as follows:-
"Now the statute affects nearly everyone, the
producer or manufacturer, the importer, wholesaler and
retailer, and finally, the consumer who, in the last
analysis, pays the tax. Parliament would not suppose in
an Act of this character that manufacturers, producers,
importers, consumers, and others who would be affected
by the Act, would be botanists. The object of the
Excise Tax Act is to raise revenue, and for this
purpose to class substances according to the general
usage and known denominations of trade. In my view,
therefore, it is not the botanist’s conception as to
what constitutes a ’fruit’ or ’vegetable’ which must
govern the interpretation to be placed on the words,
but rather what would ordinarily in matters of commerce
in Canada be included therein. Botanically, oranges and
lemons are berries but otherwise no one would consider
them as such".
The Exchequer Court also referred to a pithy sentence from
"20 chests of Tea", per Story, J. (1824) 9 Wheaton (U.S.)
435] that "the Legislature does not suppose our merchants to
be naturalists, or geologists, or botanists".
The above Planters Nut case (supra) was referred to
with approval by this Court in Ramavatar Budhaiprasad etc.
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v. Assistant Sales Tax Officer(2). In Ramavatar’s case, this
Court was concerned with the meaning of the word
’vegetables’ occurring in C.P. and Berar Sales lax Act,
1947. This Court held as follows:-
But this word must be construed not in any
technical sense nor from the botanical point of view
but as understood in common parlance. It has not been
defined in the Act and being a word of every day use it
must be construed in its popular sense meaning ’that
sense which people conversant with the subject matter
with which the statute is dealing would attribute to
it’. It is to be construed as understood in common
language".
Again in the Commissioner of Sales Tax, Madhya Pradesh,
Indore v. M/s. Jaswant Singh Charan Singh(3), this Court had
to deal with the word ’charcoal’ used in Madhya Pradesh
General Sales Tax Act. It was contended in that case that
’charcoal’ would be covered under Entry I of Part III of
Schedule II to that Act. This Court while holding that
charcoal would be included in coal, observed as follows:-
"Now, there can be no dispute that while coal is
technically understood as a mineral product, charcoal
is manufactured by human agency from products like wood
and other things But it is now well-settled that while
interpreting items in statutes like the Sales Tax Acts,
resort should be had not
(1) [1951] Canada Law Reports 172. (2) [1962] 1 S. C.
R. 279. (3) A.I.R. 1967 S. C. 1454.
112
to the scientific or the technical meaning of such
terms but to their popular meaning or the meaning
attached to them by those dealing in them, that is to
say, to their commercial sense".
This Court again referred with approval to the decision in
Planters Nut case (supra) and followed the principle laid
down in Ramavatar’s case (supra). In South Bihar Sugar Mills
Ltd., etc. v. Union of India & Ors.,(1) the question that
was raised related to item 14-H in the Schedule I to the
Central Excise & Salt Act, 1944, which contained compressed,
liquified or solidified gases, inter alia, Carbon acid
(carbon dioxide). This Court observed as follows:-
"It is also not correct to say that because the
sugar manufacturer wants carbon dioxide for carbonation
purpose and sets up a kiln for it that he produces
carbon dioxide and not kiln gas. In fact what he
produces is a mixture known both to trade and science
as kiln gas, one of the constituents of which is, no
doubt, carbon dioxide"
This Court finally observed:
"The kiln gas in question therefore is neither
carbon dioxide no compressed carbon dioxide known as
such to the commercial community and therefore cannot
attract Item 14 in the First Schedule".
Similarly in Minerals & Metal Trading Corporation of India
Ltd. v. Union of India & others(2), this Court dealing with
the meaning of the word ’Wolfram ore’ again approvingly
referred "not to the scientific or technical meaning but to
the meaning attached to them by those dealing in them in
their commercial sense".
Mr. Sanghi draws our attention to several authorities
to impress upon us that butadiene styrene latices are
compatible with many resins and modifiers. He also submits
that the term vinyl pyridine has been used to include a
variety of resins, plastics, elastomers, etc. and that V.P.
Latex exhibits outstanding adhesive properties. His main
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object is to show that V.P. Latex is resin which is "an
omnibus term for a variety of hard brittle, solid or semi-
solid organic substances". It is, however seen from an
extract from the Dictionary of Rubber Technology, 1969
edition, by Alexander S. Craig, produced by Mr. Sanghi that
"vinyl pyridine is one component of terpolymer of butadiene,
styrene and vinyl pyridine used in latex form to promote
good adhesion between rubber and textiles, particularly
rayon and nylon". We find the same description reiterated in
a book "Latex Natural and Synthetic" by Cook (a Reinhold
Pilot Book) where at page 145 it is stated that "there is
one type of speciality rubber latex that deserves special
notice. This is terpolymer of butadiene, styrene, and 2-
vinyl pyridine. Under the trade names of "Gentac" and
"Pyratex" it is extensively
(1) [1968] 3 S. C. R. 21. (2) [1973] I S. C. R. 997.
113
used in nylon tire cord saturation because it gives better
adhesion between the cord and the rubber in which the cord
is imbedded than do other latices’. Mr. Sanghi, however,
emphasises that V.P. Latex is merely an adhesive and so is
akin to resin and not to rubber.
We are, however, unable to accept the submission. It is
clear that meanings given to articles in a fiscal statute
must be as people in trade and commerce, conversant with the
subject, generally treat and under Br stand them in the
usual course. But once an article is classified and put
under a distinct entry, the basis of the classification is
not open to question. Technical and scientific tests offer
guidance only within limits. Once the articles are in
circulation and come to be described and known in common
parlance, we then see no difficulty for statutory .
classification under a particular entry.
It is good fiscal policy not to put people in doubt and
quandary about their liability to duty. When a particular
product like V.P. Latex known to trade and commerce in this
country and abroad is imported, it would have been better if
the article is, eo nomine put under a proper classification
to avoid controversy over the residuary clause. As a matter
of fact in: the Red Book (Import Trade Control Policy of the
Ministry of Commerce) under item 150, in section II, which
relates to "rubber, raw and gutta percha, raw", synthetic
latex including vinyl pyridine latex and copolymer of
styrene butadiene latex are specifically included under the
sub-head "Synthetic Rubber". We do not see any reason why
the same policy could not have been followed in the I.C.T.
book being complementary to each other. When an article has,
by all standards, a reasonable claim to be classified under
an enumerated item in the Tariff Schedule, it will be
against the very principle of classification to deny it the
parentage and consign it to an orphanage of the residuary
clause. The question of competition between two rival
classifications will, however, stand on a different footing.
It is not for the Court to determine for itself under
article 136 of the Constitution under which item a
particular article falls. It is best left to the authorities
entrusted with the subject. But where the very basis of the
reason for including the article under a residuary head in
order to charge higher duty is foreign to a proper
determination of this kind, this Court will be loath to say
that it will not interfere.
In this case there is rather voluminous evidence from
the standard authorities in favour of V.P. Latex being a
component of SBR which is admittedly classified under rubber
raw. But assuming, and only assuming, that evidence is
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balanced, the best course in a fiscal measure is to decide
and fix the entry under which the article comes otherwise it
will give rise to adoption of varying standards where
uniformity should be the rule.
At one stage Mr. Sanghi pointed out that in certain
Bills of Entry of Dunlop India Limited, their Agents, Messrs
Mackinnon. Mackenzie & Co., Private Ltd., gave the I.T.C.
item No. 87 with regard to the imported V.P. Latex. This
according to Mr. Sanghi clearly shows how the appellants
themselves have understood the matter. There is,
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however, no estoppel in law against a party in a taxation
matter. In order to clear the goods for the customs, the
appellants’ Agents may have given the classification in
accordance with the wishes of the authorities or they may
even be under some misapprehension. But when law allows them
the right to ask for refund on a proper appraisement and
which they actually applied for, we do not attach any
significance to this aspect of the matter pointed out by
counsel. The question is of General importance and must be
decided on its merits.
Mr. Sanghi drew our attention to two decisions of this
Court in V. V. Iyer. Of Bombay v. Jasjit Singh, Collector of
Customs and Another (1) and the Collector of Customs,
Madras, v. K. Sanga Setty(2) and submitted that this Court
should not interfere with the decision of the authority
under article 136 of the Constitution. These decisions are
clearly distinguishable, as, in the view we have taken, the
order is ex-facie based on an irrelevant factor. Even in the
Commissioner of Sales Tax U.P. v. M/s. S. N. Brothers,
Kanpur(3) this Court refused to interfere only because it
could not be persuaded to hold that the view taken by the
High Court was so grossly erroneous as to call for
interference under article 136 of the Constitution. The
present is not such a case.
We are clearly of opinion that in the state of the
evidence before the revisional authority no reasonable
person could come to the conclusion that V.P. Latex would
not come under rubber raw. The basis of the reason with
regard to the end-use of the article is absolutely
irrelevant in the context of the entry where there is no
reference to the use or adaptation of the article. The
orders of the authority are, therefore, set aside. In the
result the appeals are allowed with costs.
We should observe that we express no opinion with
regard to the question relating to countervailing duty under
16AA of the First Schedule to the Central Excises and Salt
Act, 1944,. in these appeals.
S. R. Appeals allowed.
(1) [1973] 1 S. C. R. 148.
(2) [1963] 2 S. C. R. 277.
(3) [1973] 2 S. C. R. 852.
115