Case: Dunlop India Ltd. &amp; Madras Rubber Factory Ltd Vs. Union of India and Others

to show that V.P. Latex is resin which is an omnibus term for a variety of hard brittle, solid or semisolid 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 goods 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 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. 36. 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 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, we then see no difficulty for statutory classification under a particular entry. 37. 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. 38. 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. 39. 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 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. 40. 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.C.T. 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, 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. 41. Mr. Sanghi drew our attention to two decisions of this Court in V. V. Iyer of Bombay v. Jasjit Singh, Collector of Customs, (1973) 1 SCC 148 and the Collector of Customs, Madras v. K. Ganga Setty, (1963) 2 SCR 277 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 on an irrelevant factor. Even in the Commissioner of Sales Tax, U.P. v. M/s. S.N. Brothers, Kanpur, (1973) 2 SCR 852 , 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. 42. 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.

Court's decision (1 = petition accepted / positive for appellant, 0 = rejected / negative): 1

Reasoning from the judgment:
1[ds]19. 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 formulate and properties. The impugned order itself takes note of all the contentions raised before the Government and also pressed before us20. 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.24. 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 other25. 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 I.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 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 properties26. 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.28. To revert to the order of the authority, it is clear that the authority would be 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.30. 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 authorities31. 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.36. 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 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, we then see no difficulty for statutory classification under a particular entry37. 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 footing38. 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.39. 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 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.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.These decisions are clearly distinguishable, as, in the view we have taken, the order is ex facie on an irrelevant factor.Even in the Commissioner of Sales Tax, U.P. v. M/s. S.N. Brothers, Kanpur, (1973) 2 SCR 852  , 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.42. 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.