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

2. The appellants are manufacturers of automotive tyres. V.P. Latex is required in the process of manufacturing of 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 tyres3. The appellant in Civil Appeal No. 1446 of 1972 imported sometime 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 counter-vailing duty, the Appellate Collector of Customs, Calcutta upheld the appellants 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 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 the I.C.T. prior to 1st March, 1970, and thereafter under the new item No. 82(3) I.C.T. The Central Government by the same order further held that the said goods were liable to countervailing duty under item No. 15A, 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 appeals4. 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 appellants 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 Government5. There are several interveners in the appeals and the entire tyre industry is interested in the matter.

Reasoning:
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.