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CASE NO.: Appeal (civil)  7188 of 1997

PETITIONER: Associated Cement Co. Ltd.

RESPONDENT: State of M.P. & Ors.

DATE OF JUDGMENT: 05/05/2004

BENCH: CJI& G.P. Mathur.

JUDGMENT: JUDGMENT

(with CA No\005..\005 of 2004 @SLP ) No.1186 of 2000)

G.P. MATHUR,J.

1.      Leave granted in  SLP (c) No. 1186 of 2000 (Municipal Corporation  Katni v. M/s. Associated Cement Co. Ltd.).   

2.      Civil appeal no. 7188 of 1997 has been preferred against the judgment  and order dated 21.4.1997 of a Division Bench of Madhya Pradesh High  Court deciding the issue relating to levy of export tax on certain products  manufactured by M/s.   Associated Cement Co. Ltd.  

3.      By a resolution published in M.P. Gazette dated 25.10.1991, the  Municipal Corporation, Katni levied tax on export of goods from within the   area of Municipal Corporation.  Entry Nos. 1 and 2 in the Schedule  appended to the Notification read as under:- SCHEDULE

S. No.                  Name of Article                 Tax Proposed (1)                          (2)                                            (3)

1.              All types of Cement                     =% of the cost of the                                                                 consignment 2.              Materials made of cement                1% of the cost of article

4.      The appellants Associated Cement Co. Ltd. filed  writ petition  challenging the levy of export tax on refractory cement and Acco Proof  basically on the ground that they were not covered by the Schedule as they  were not cement.  The writ petition was dismissed by a learned Single Judge  but the Letters Patent Appeal was party allowed by a Division Bench and it  was held that refractory cement is a cement so as to attract liability of export  tax  but Acco Proof being a water proofing compound  was not cement and  was therefore not exigible to export tax.   

5.     The main question which requires consideration  is whether refractory  cement  is  cement so as to attract liability of export tax.  Shri T.R.  Andhyarujina, learned senior counsel appearing for the appellant  has  submitted that the Associated Cement Co. (hereinafter referred to as ’the  appellant’) has several factories in different parts of the country including a  manufacturing unit by the name of  Katni Refractory Works at Katni.  This  Unit manufactures (i) Firebricks; (ii) Ramming masses; (iii) Fireclay  mortors; (iv) High Alumina Refractory Binder; (v) Refractory Castables; (vi)  Whytheat Castables.  The aforesaid products in the commercial parlance are  known as "Refractory material" and they are entirely different from  "cement" or material made "out of cement".  Most of the Refractory

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products are sold directly to the end users and only a small quantity is sold  by way of  retail sale whereas cement is sold through warehouses and  cement stockists network.  It has been submitted that the products  manufactured by the appellant can by no stretch of imagination be equated  with or used for the purposes for which cement is used.  The refractory  materials are used in furnaces and kilns to withstand high temperature,  corrosion and abrasion and they are not usable as a substitute of cement or  for construction activities.  Learned counsel has further submitted that  cement cannot be used for the purpose for which refractory material is used  and the process of manufacturing cement and refractories are entirely  different and the plant manufacturing refractories can neither be used nor  can be converted for manufacturing  any type of cement.  The raw materials  required for manufacturing refractory are also entirely different from those  required for manufacturing cement.  The main raw material required for   manufacture of  cement is limestone, silicous clay and gypsum whereas for  manufacture of refractory products, the main raw material is bauxite, kyanite  and fire clays.  Bauxite and fire clay are not used for manufacture of cement  and chemical composition and properties of the two products are entirely  different.  It has also been urged that so far as construction activity is  concerned the most important criteria applicable in the case of cement is its  strength in ordinary temperature but for refractory it is its refractoriness at  high temperature.  Lastly learned counsel has submitted that in common  parlance and in trade, refractory can never be understood as cement.  It has  thus been urged that the levy of export tax on refractory is wholly illegal as  the said product is not covered by the relevant entries in the schedule.

6.      Shri Anoop G. Choudhary, learned senior counsel appearing for the  Municipal Corporation, Katni, has submitted that Entry I in the Schedule  mentions "all types of cement" and so long as the material is cement  whatever be its chemical composition, nature or characteristic it will be  covered by the said Entry.  Learned counsel has laid emphasis on the words  "all types of" and has submitted that it is a very comprehensive Entry  and  consequently irrespective of the purpose for which the article is used on  account of  its special qualities and components etc. as long as it is  cement it  will be covered by the Entry.  According to Shri Choudhary the fact that  refractories are used in furnaces and are capable of  withstanding  very high  temperature, corrosion and abrasion will make no difference as it is still a  cement and therefore it is covered by the Entry.  Learned counsel has also  submitted that being a taxing statute it has to be strictly construed and one  has to look merely at what is clearly said and since the entry is  all  embracing which covers "all types of cement" it will take within its compass  refractory as well as  cement.  

7.       Learned counsel for the appellant has referred to some dictionaries  and technical books  to get an idea what "refractory" is and it will be useful  to take note of the same.   The Cambridge Encyclopedia             Materials which are neither deformed nor chemically changed by exposure to high temperatures.  This makes  them suitable for containers, structural materials, and components,  particularly in metallurgical  operations, such as furnace linings.   Naturally occurring  refrectories  include silica, fireclay, and alumina.  Synthetic refractories include the  high-melting carbides and nitrides  used in nuclear power plant.  

The New Encyclopaedia Britannica        material not deformed or damaged by  high temperatures, used to make  crucibles, incinerators, insulation and  furnaces, particularly metallurgical  furnaces.  Refractories are produced  in several forms; molded bricks of

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various shapes(see firebrick); bulk  granular materials; plastic mixtures  consisting or moistened aggregate that  are rammed into place: castables  composed of dry aggregates and a  binder that can be mixed with water  and poured like concrete: and mortars  and cements for laying brickwork.

The Oxford Dictionary and             (of a substance) hard to fuse or work,   Thesaurus                                            substance  especially   resistant to he at,                                                                                                                                    corrosion etc.

New Webster’s Dictionary              suitable for lining furnaces because of  and Thesaurus                                    resistance   to    fusion    at   very   hi gh                                                            temperature

The Oxford Universal Dictionary      Resisting   the action   of  heat; difficult Illustrated on Historical Principles     to fuse  (or to work in any way)

Chambers Twentieth                    esp. difficult of fusion: fire-resisting \026  Chambers Dictionary                         n. a substance that is able to resist high                                                                                                                             temperatures etc., used in linin g  furnaces etc.  

Mc Graw-Hill Encyclopedia of    One of a number of ceramic materials  Science & Technology                      for   use  in high temperatures structures                                                                             or equipment.  The term high                                         temperatures is somewhat indefinite but  usually means above about 1800\025 F  (1000\025 C), or temperatures at which,  because of melting or oxidation, the  common metals cannot be used.  In  some special high temperature  applications, the so-called refractory  metals such as tungsten, molybdenum,  and tantalum are used.

       The greatest use of refractories is in the  steel industry, where they are used for  construction of linings of equipment  such as blast furnaces, hot stoves  and  open-hearth furnaces.  Other important  uses of refractories are for cement  kilns, glass tanks, noneferrous  metallurgical furnaces, ceramic kilns,  steam boilers, and paper plants.  Special  types of refractories are used in rockets,  jets and nuclear power plants.  Many  refractory materials, such as aluminium  oxide and silicon carbide, are also very  hard and are used as abrasives; some  applications, for example, aircraft brake  lining, use both characteristics  

       Refractory materials are commonly  grouped into (1) those containing  mainly aluminosilicates; (2) those made  predominately of silica; (3) those made  of magnesite, dolomite, or chrome ore,

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termed basic refractories (because of  their chemical behavior); and (4) a  miscellaneous category usually referred  to as special refractories.              

8.      The appellant has also placed on record certain technical data  regarding the refractories manufactured by it which are used in Iron and  Steel Industry and in Fertilizer Industry.  This technical data shows that  different varieties  of refrectories are manufactured for use in different kind  of industries.  Learned counsel has also laid  emphasis upon the fact that for  the purpose of levy of excise duty the Central Government has treated  refractory as distinct from cement.  Tariff Item 23 C.B.E.&C. Tariff Advice  No.75/80, dated 24.11.1980  reads as under:         "It is considered and clarified for the information of the  trade and all others concerned that Fire clay/Refractory Mortars  and Ramming Masses are classifiable under Item 68 and not  under Item 23 of Central Excise Tariff."

The relevant tariff entries are as under: Item No.23- Cement Item No.                Tariff Description                              Rate of Duty

23.             Cement, all varieties -                         Rupees two                 (1) Grey portland cement (including             hundred per                  ordinary portland cement, pozzolana             metric tonne                 cement and blast furnace slag cement),                 masonry cement, rapid hardening cement,                 low heat cement and waterproof                 (hydrophobic) cement

               (2)     All others                                      Forty per cent                                                                 ad valorem

Item No.68-All other Goods, N.E.S.

Item No.                        Tariff Descripton                       Rate of duty

68.                     All other goods, not elsewhere          Eight per cent                         specified, but excluding                        ad valorem (a)     alcohol, all sorts including          alcoholic liquors for human          consumption.                    On the basis of above tariff entries it is submitted on behalf of the  appellant that  refractory is not cement.

9.       The technical material referred to above shows that refractories are  basically  materials which are used in  high  temperature structures or  equipment.  They can withstand temperatures above one thousand degree  centigrade when other metals will melt or oxide and they are generally used  for  lining of  furnaces etc.

10.     The principle to be applied for interpretation of taxing statutes which  is relevant for the decision of the present case  has been settled by a catena  of decisions of this Court. In Commissioner of Sales Tax v. M/s. Jaswant  Singh AIR 1967 SC 1454 it was held that while interpreting items in statutes  like Sales Tax Acts resort should be had not 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.   The same view was taken in Minerals and Metals Trading Corporation of  India v. Union of India & Ors.  (1972) 2 SCC 620;  Royal Hatcheries Pvt.  Ltd. v. State of A.P. & Ors. 1994  Supp. (1) SCC 429; Dunlop India Ltd. v.  Union of India 1976 (2) SCC 241.  In Indian Cable Company Ltd. v.  Collector of Central Excise (1994) 6 SCC 610 this principle was stated as  under:-

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"\005\005\005..But we would like to point out that in construing the  relevant item or entry, in fiscal statutes if it is one of every day  use, the authority concerned must normally, construe it, as to  how it is understood in common parlance or in the  commercial  world or trade circles.  It must be given its popular meaning.   The meaning  given in the dictionary must not prevail.  Nor  should the entry be understood in any technical or botanical or  scientific sense.  In the case  of technical  words, it may call for  a different approach.  The approach to be made in such cases  has been stated by Lord Esher in Unwin v. Hanson (1891) 2 QB  115 thus:                                                                                                                                                                                                                                   

       "If the Act is directed to dealing with matters affecting  everybody generally, the words used have the meaning attached  to them in the common and ordinary use of language.  If the  Act is one passed with reference to a particular trade, business,  or transaction and words are  used which everybody conversant  with that trade, business or transaction knows and understands  to have a  particular meaning in it then the words are to be  construed as having that particular meaning, though it may  differ from the common or ordinary meaning of the words."

       We would only add that there should be material to enter  appropriate finding in the case.  The material may be either oral  or documentary evidence."

The word ’cement’ has not been defined in the relevant notification.   Therefore it has to be understood in the same way as is understood in  common parlance.  Cement is exclusively used as a building material and is  a commodity  of everyday use.  Therefore, we have to go only by the  popular or  commercial meaning of the term.  The main property of the  refractory is that it can withstand  very high temperature, corrosion and  abrasion. Cement is used for building roads, bridges and dams etc. and also  by common people for building residential or commercial buildings.   Anyone buying cement for building purpose would under no circumstance  buy refractory. Similarly a mason or a supervisor would under no  circumstance use refractory material in  making a normal construction. The  refractory is used for entirely different purpose namely for furnaces, linings  and for insulation. A dealer would not supply refractory to anyone wanting  to buy cement.  In Cemento Corporation Ltd. Vs. Collector of  Central  Excise 2002 (8) SCC 139 it has been  held that it is axiomatic that if the  product is not cement but can be used for some purposes like cement, such  product is not cement.  We are, therefore, of the opinion that refractory   material produced by the appellant does not fall within the Entry "all types  of cement" and consequently it is not exigible to levy of export tax.

11.       The challenge in the appeal preferred by the Municipal Corporation,  Katni is to the order of the High Court in the matter relating to withdrawal of  the amount deposited by the Associated Cement Co. Ltd.  In view of our  finding that refractory material is not exigible to export tax, the appeal is  liable to be dismissed.

12.     In the result CA No.7188 of 1997 is allowed and the judgment and  order of the High Court in so far as it holds that refractory manufactured by  the appellant are cement and are exigible to export tax is set aside.  CA  No\005\005\005.. of 2004 @ SLP) NO. 1186 of 2000 preferred by Municipal  Corporation, Katni is dismissed.