Dunlop India Ltd. Vs. Union of India
& Ors  INSC 243 (6 October 1975)
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)
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.
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 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.,  1 S.C.C. 148, Collector of Customs, Madras v. K. Ganga Setty,
 2 S.C.R. 277 distinguished.
Commissioner of Sales Tax, U.P. v. M/s. S. N.
Brothers, Kanpur,  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
[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  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  3 S.C.R. 21; Mineral
Metals Trading Corporation of India Ltd. v. Union of India & ors.  1
S.C.R. 148; referred to.
HELD FURTHER (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
[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
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 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
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 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
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
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 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
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. 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/75 104 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
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,
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 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 cannot 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
(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
(8) V.P. Latex has been designed as 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 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
(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 109 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 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".
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
Mr. Sanghi for the respondents has made a
strenuous 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
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.
111 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. 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 everyday
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)  Canada Law Reports
172. (2)  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
"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
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
Latex exhibits outstanding adhesive
properties. His main 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)  3 S. C. R. 21. (2)  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, so 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
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
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, 114 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)  1 S. C. R. 148.
(2)  2 S. C. R. 277.
(3)  2 S. C. R. 852.