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PETITIONER: UNION OF INDIA & ORS.

       Vs.

RESPONDENT: TATA IRON & STEEL CO.  LTD.

DATE OF JUDGMENT31/01/1975

BENCH: GOSWAMI, P.K. BENCH: GOSWAMI, P.K. RAY, A.N. (CJ) KHANNA, HANS RAJ

CITATION:  1975 AIR  769            1975 SCR  (3) 418  1975 SCC  (1) 789

ACT: Constitution  of India, 1950 Art. 226, 227--Powers  of  High Court   under   article  226  &  227   to   interfere   with classification of a product by taxing authorities. Central  Excise  Act, 1944--Skelp and  strip  necessity  for identifiable test in fiscal statutes.

HEADNOTE: The  respondent  manufactures  hot  rolled  finished   steel products in rectangular cross-section, of thickness  varying between  16.2  mm  and 311.2 mm  in   coils  (hereinafter  a referred  to as the Product)  product as Strip  whereas  the appellant   classifies it as a skelp. to higher excise  duty than Strip.  The Assistant Collector  the product as  Skelp. On  appeal  to the Collector of  and rolled  The  respondent describes   the  Sklip  is subject  Central  Excise  treated Central Excise, he confirmed it and in revision the  Central Government also approved. The respondent filed a Writ Petition in the High Court.  The High  Court accepted the contention of the  respondent.   On appeal by Special Leave the appellant contended before  this Court : (i) That it is primarily for the Taxing  Authorities to  determine the head or nature under which any  particular commodity  fell.  (ii)  The Court  can  interfere  with  the decision  only  if  it  is  perverse.  if  there  were   two constructions  possible and if the Taxing Authority  accepts one of them the Court cannot interfere. The   respondent   submitted’.   (i)   Assessment    without application   of  an  identifiable  test  is  perverse   and arbitrary.  (ii)  In the present case. there  was  no  iden- tifiable  test before the Taxing Authorities.  There  is  no difference between Skelp and Strip. Dismissing the appeal, Held  : There are 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 there is no statutory definition for Skelp and  Strip, different  tests  have  been resorted to  by  the  different authorities.  The question arises whether the High Court was right in interfering with the orders under Art. 226 of  the:

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Constitution.   It  is  not for this Court to  come  to  the conclusion  on  facts.   The  absence  of  any  identifiable standard  naturally  gives rise to the scope  for  arbitrary assessment at the hands of different authorities.  It is not possible  to  hold that: the High Court has  gone  wrong  in granting the reliefs prayed for. [422D-F; 423C]

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1527 of 1974. Appeal by Special Leave from the Judgment & Order dated  the 14th  December, 1973 of the Delhi High Court in  Civil  Writ No. 1678 of 1967. F.   S. Nariman, Addl.  Sol.  Gen. of India, D. N. Mukherjee and R.    N. Sahthey, for the Appellants. N.   A. Palkhiala, Ravinder Narain, J. B. Dadachanji, O.  C. Mathur, K. J. John and K. R. Jhaveri, for the Respondent. 419 The Judgment of the, Court was delivered by- Goswami,  J.  This  appeal  is by  special  leave  from  the judgment    of   the   Delhi   High   Court   in   a    writ application--there  under article, 226 of the  Constitution. 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 Jamshedpur  for  making  tubes and  also  to  others.   This article  is  subjected  to Central  Excise  Duty  under  the Central  Excises and Salt Act, 1944 (hereinafter called  the Act).  The dispute between the respondent and the appellants is  that  while the former describes the  said  manufactured product 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  claimed  that  the aforesaid  product be classified as strip since  there.  had been  a  levy  of  higher duty  for  skelp.   The  Assistant Collector,  Central Excise, Jamshedpur, who 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 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  learned  Additional Solicitor  General  for  the  appellants  relying  upon  two decisions  of this Court, namely, The Collector of  Customs, Madras  v.  K. Ganga Setty(1) and V. V. Iyer  of  Bombay  v. Jasjit 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  interfere.   In other worlds, if there were two constructions which an entry could reasonably bear, and, one of them which was in  favour of  Revenue  was adopted, the Court has no  jurisdiction  to interfere   merely   because   the   other    interpretation

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favourable to the subject appeals to the Court as the better one  to adopt’.  On the other hand with equal  emphasis  Mr. Palkhivala  for the respondent submitted that an  assessment without  the application of an identifiable test is  nothing but perverse and arbitrary.  He submits that in the  present case  there  was  no identifiable  test  before  the  taxing authorities by which the (1) [1963] 2 S. C. R. 277. (2)  [1973] 1 S.C.C. 148. 420 product of the, respondent could be held to be skelp and not strip   subjecting  the  respondent  to  a   heavier   duty. According  to  the learned counsel there is  no  difference. between    sklep   and   strip,   the   two   items    being interchangeable. It may be, noted for our purpose that under section 3 of the Act  Central  excise Duties are leviable  on  all  excisable goods  which  are produced or manufactured in India  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 flats, skelp and strips showing  the rate  of  duty  in the third column.  Under rule  8  of  the Central  Excise  Rules, 1944, made under section 37  of  the Act,  the  Central  Government  may from  time  to  time  by notification in the official 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 different.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  used  for making  pipe or tubing by rolling the skelp into  shape  and lap  welding  or brevetting ,edges together and strip  is  a term  used  to  describe a flat rolled  product  of  smaller cross-section than sheet or bar." He accordingly adopted the definition given in Marymen’s Dictionary of Metallurgy.  The order  of the Collector of Central Excise in appeal made  on October  24/29,  1964, shows that the  authority  noted  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 satisfied   the   above  specifications,  they   have   been correctly,  classified as ’skelp’ by. the Assistant  Collec- tor.    Then  comes  the order in  revision  of  the  Central Government of August 18, 1967.  Inter alia it was held  that "the product does have bevel edge,-.; peculiar to skelp  and not  found in strips.  Under the circumstances, there is  no doubt  whatever  that the product in question  is  correctly classified as skelp". From the above three orders it is clear that the authorities were  not  at  all certain about  a  uniform  definition  of ’skelp’ distinguishing it from ’strip.  Extensive  arguments were  advanced at the bar with regard to the definitions  of there two words.  We may, therefore, look 421

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at  the various definitions to which our attention has  been drawn.   Since the appellants largely upon  the  definitions given by the Indian Standards Institution, "an expert body", we will first note these definitions.  The ISI’s definitions of  strip and skelp as given in IS 1956-1962  (amended  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 beveled) edge. 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 below  600 mm and supplied in straight length or in coil form. (b)  Wide Strip-Strip of width 600 mm above and supplied  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  beveled  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 beveled 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 and 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 supplied in coil form only". Annexure  ’J’  submitted by the respondent-along  ’with  its rejoinder  affidavit  in the High Court at page 101  of  the record, gives various 422 definitions  of skelp taken. 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.-Metallurgical Dictionary,  page 192, year 1953; Backert A.O.L.  A.B.C.  of Iron  & Steel, page 1912, year 1925-5th  edition;  Chamber’s Technical  Dictionary,- year 1967.  Similarly definition  of strip  is also given from these Dictionaries and books.   It is  also  pointed  out that there is no  category  of  skelp mentioned in Brussels Nomenclature.  British Standards 2094, Part 4; 1954, defines skelp as follows :                "Hot  rolled  strip with square  or  slightly               bevelled edges used for making welded tubes".               Chamber’s Technical Dictionary Revised Edition               (Reprinted 1954) defines skelp as follows               "Skelp-(P.  775) Mild steel strip  from  which               tubes  are made by drawing through a  bell  at               welding temperature, to produce lap welded  or               butt welded tubes". We may not add to the list but are satisfied that there  are

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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 necessary to  define the word skelp so that there can be no  doubt  or confusion  in the mind of either of the taxing authority  or of the tax payer with regard to the tax liability qua  skelp as opposed to strip.  Since, however. there is no  statutory definition  of this controversial item different tests  have naturally been resorted to by the different authorities  and 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 whether in the above background the High Court was  right in  interfering  with the orders under article  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 level of the taxing authority provided, however, there is an identifiable,  uniform and determinate test by  which  skelp can  be properly distinguished from strip.  In the  mass  of documents  filed  before  us  and  the  extensive  arguments addressed at the bar with regard to the definitions  ’culled from  various  dictionaries, handbooks and  authorities,  we are not at all surprised that the three authorities came  to the  same  conclusion  by depending upon  their  own  chosen tests.  A particular type, of strip may according to certain definitions.  be  skelp and according to others  not  Skelp. This.  however, cannot be permitted in a fiscal  legislation which by all standards should adopt a clear definition of an excisable  item  which  is incapable of  giving  rise  to  a confounding contro- 423 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 parlance.  In absence of any clear  criterion to determine 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 necessary  evidence. 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 possible in this’ case in view of the fact that there is  no identifiable  standard.   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, naturally  give rise, to the scope for arbitrary  assessment at  the  hands of different authorities.  Whether  this  has happened  in  this case, as.’ complained by  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 emphasized upon the test  relied upon  in  the Revisional order as to skelp  having  bevelled edges which, according 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

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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 upon by the appellants 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 Ganga 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 follows:--               "..any  particular species of grain cannot  be               excluded merely because it is capable of being               used as cattle or horse feeds. The  decision  of the Customs authorities,  therefore,  this Court  held could not be characterized as Perverse  or  mala fide  calling for interference.  Similarly  following  Ganga Setty’s  case  (supra) in Jasjit Singh’s  case  (supra)  the conclusion  and  findings of the  Customs  authorities  were accepted  a reasonable.  In both the above cases there  were definite  tests  by which the particular article  could  be- held to fall under one item and not under the other and  the construction of the authorities 424 with  regard  to the scope of the  particular  entries  was, therefore,  held  to  be  reasonable  and  not  calling  for interference by the court.  The ,question that arises in the instant case is of a completely different nature as  pointed out  above  there  being  no  identifiable  test  reasonably capable ,of distinguishing skelp from strip. In the result the appeal fails and is dismissed with costs. P.H.P.                    Appeal dismissed. 425