DUNLOP INDIA LTD. versus UNION OF INDIA AND ORS

DUNLOP INDIA LTD.

UNION OF INDIA AND ORS October 6, 1975

[A. ALAGIRISWAMI, P. K. GOSWAMI AND N. L. UNTWALIA, JJ.]

Indian Tariff Act 19,34-ltems 39, 82-"V. P. Latex"-Classification of-lnterference 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 l.C.T. 89-Whether showing by the agents, while filling up the various columns of the Bills of Entry as "!.C.l. item 87-V.P. Latex·•, operates as ''Estoppel by conduct" to claim refund.

The appellants, ma·nufacturers of automobile tyre» import "V.P. Latex'', an essential ingredient for the manufacture of tyres. The customs authorities (Appraising) at Calcu.tta 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 counterva.iling 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 J.C.T." and thus confirmed the Madras view.

On appeal, by special leave the appellants contended, (i) that V.P. Latex is synthetic rubber latex and never to be taken for synthetic rc»in in as much as'.-

(a) V.P. Latex, being rubber can be vulcanised while synthetic resin cannot

(b) .V.P. Latex, when coagu.lated, 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 i'> fully recognised as synthetic rubber latex and not as 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

HBLD : (1) It is not for the court to determine for itself under Art. 136 of the Constitution under which item particular article falls. It is best left to the authorities entrusted with the subject. But where the very basis of tlle reason for including the article under residuary head, in order to charge higher duty is foreign to proper determination of this kind, the Court wiil 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., [1973] 1 S.C.C. 148, Collector of Customs, Madras v. K. Ganga Setty, fl 963] 2 S.C.R. 277 distinguished.

Commissioner of Sales Tax, U.P. v. Mis. S. N. Brothers, Kanpur, [1973] 2 S.C.R. 825 not applicable.

(ii) There is no estoppel in law against party in taxation matter. Giving of 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 au.thorities is of no significance especially when Jaw allows them the right to ask for refund on proper appraisement and when they actually applied for.

(iii) Under Section 12 of the Customs Act of 1962, the relevant taxing event is the importing into or exporting from India. Condition of th~ art~cle at the time of importing is material factor for the purpose of class1ficat1~m 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 classiikation. 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. [l lOE-G, 114-D-E]

(iv) It is well established tha1 in interpreting the meaning of words in taxing st>1tute, the acceptation of particular word by the Trade and is popular meaning shou.ld commend itself to the authority. It is clear that meanings given to artides fa 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 distinct entry, the basis of the classification is riot open to question. Technical and scientific tests offer guidan~e only within limits. Once the articles are in circulation and come to be described and known in common parlance, there is no difficulty for statu-tory classification under particular entry. [110H; 1!3A-C]

King v. Planters Nut and Chocolate Co. Ltd. (1951) Canada Law Reports 122; Ramavatar Budhaiprasad etc. v. Assistant Sales Tax Officer [1962] 1 S.C.R. 279'; Commissioner of Sales Tax, Madhya Pradesh, Indore v. M/s. laswant Singh Chanan Singh A.LR. 1967 S.C. 1454; South Bihar Sugar Mills Ltd. etc. v. Union of l'!.dia and Ors., [1968] 3 S.C.R. 21; Mineral Metals Trading Cor· poration of [11dia Ltd. v. Union of lndia & Ors. [1973] 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, wa-s 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 matter of fact, in the Red Book (Import Trade Control Policy of the Ministry of Commerce), V.P. Latex is specifically included under tbe su.b 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 ali standards, 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 orphan-age of the residuary clause. When 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 particular classification to avoid controversy over the residuary clause. [llODE, 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. [114-DJ

OBITER : It is 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 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 & G]

[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]

C1v1L APPELLATE JURISDICTION : 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, Custmm House, Madras in Appeal No. C/3/1848 of 1970 respectively.

S. Choudhry, S. !. Sorabji, D. N. Gupta for the Appellant (In CA No. 1446/72).

S. ]. Sorubji, V. !. Taraporawala and K. R. Nambiar for the Appel-lants (in CA No. 2746/72).

G. L. Sanghi and Girish Chandra for the Respondents( ir, both the appeals).

G. M11/d10ty and H. K. Dutt for Intervener No. l (Inchcck Tyres Ltd.)

S . .!. Sorabji, Ravinder Narain, K. K, Master of M/s. 1. B. Dada-chanji & Co. for Intervener No. 2. (Firestone Tyres Ltd.).

S . .T. Sorabji Ravinder Narain, K . .T . .Toh11 and R .. D. Divan of M/s . .T. B. Dadachanji & Co. for Intervener No. 4 (Burkib Fibres Tyres Ltd.) .

/. N. Shroff for Intervener No. 3 and 5 (Ceat Tyres Ltd and Pre-mier Tyres Ltd).

The Judgment of the Court was delivered by

GoswAMJ, 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. L'atex) 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 automotive 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 out-side the country. The tyre industry uses V. P. Latex as one of the essential ingredients in the course of manufacture of automotive tyres.

The appeliant in Civil Appeal No. 1446 of 1972 imported some time in April, 1969, 3 consignments of V. P. Latex. ln appeal from the proceedings before the Assistant Collector of Customs for appraise-G mcnt of the said consignments for the purpose of imposition of customs duty and/or countervailing duty, the Appellate Collector of Custom~, 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 mollt, 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.

The Central Government by the same order further held that the &aid _goods werl;! liable to countervailing duty under item No. ISA 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 batch of 18 appeals of the Company. The Appe-llate Collector confirmed the order of the Assistant Collector of Cus-toms Appraising, Madras, rejecting the appellant's claim for refund of duty on the basis th•at V. P. Latex should be cla?sified under item 39 1.C.T. and not under item 82(3) of the LC.T. The appellant did not go in revision before the Central Government. as already similar claims had been rejected by the Central Government.

There arc 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 fodian Tariff Act, 1934, contained, inter alia, the following dutiable items

Item No. 39 Rubber, raw. Item No. 87 All other articles not otherwise specified.

In addition to the above, the following item was introduced in the Tariff Act by the Finance Act, 1970 :-

"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 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:-

" l SA : Artificial or Synthetic resins and Plastic Materials and Articles thereof-·

( l) Artificial or synthetic resins and plastic materials in any form, whether solid, liquid or pasty, or as pow-G der, granules or flakes, or in the form of mouldi[1]ag 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 syn-thetic rubber latex".

The quantity of V. P. Latex consumed by the tyre industry in India as whole is said to be about 1000 tonnes per year 'a'ild the value thereof is Rs. 40,33,00.0/- approximately. The appellant, Dunlop India Limited, consumes •about 300 tonnes per year. The contro-versy between the parties centres 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 'resin'.

ln order that the Court is able to appreciate the rival contentions, both sides addressed us referripg 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.), milk-like fluid that is obtained from certain tropical shrubs or tyres and then subjected to various processes of manufacture; or it may be product of chemical synthesis".

"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 O~lOC 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 &ulphur at 120 -160 C.) it loses its thermoplasticity and becomes stronger and more elastic."

"Chemically, rubber is polymer of isoprene ......... .

"The term synthetic rubber is used to describe an ever grow-ing number of elastic materials, some of which closely resem-ble natural rubber while others have completely different physical properties. Since World War II, precise termino-logy has not kept pace with the rapid developments in the synthetic and plastics industries."

"The copolymerization of the butadiene and the swrene takes place in an emulsion· in the presence of an active t;litiator, such as cumene hydroperoxide and p-menthane hydropero-xide, which allows the conversion to occur at low tempera-ture (5? C.). SBR is usually prepared with 75% butadiene and 25% styrene; the proportion will, however, vary accord-ing 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 autho-rities from the rubber world pronouncing upon the chenlical properties as well as various uses and potentialities. Their contention is that V. P. Latex is synthetic rubber latex and can never be taken for synthetic

resin. The principal point to distinguish V. ~· Latex from s;nthc_tic resin is, while synthetic resin cannot. be vulcamsed, ".'· P. L~tex, _be'.n~ rubber can be vulcanised. Accordmg to the American St"ndard tor Testing Material, (A.S.T.M.) raw rubber is d~fincd ~~ crud:? or :111-compoundcd rubber, either natural or synthetic. lnlttan Standa1ds Institution (LS.I.) defines rubber as follows :-

'"Rubber in its modified state free of all diluents, retracts within one minute to less than l .5 times its original length after being stretched at normal room temperature to twice its length aad 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. synthetic latex is produced as the first stage in the manufacture of most synthetic rubbers. V. P. Latex is one such sy\1thetic rubber latex. An affidavit sworn by Mr. Mayer, Manager Technical Services; Chemical Division, Goodyear Interna-tional Corporation, states that V. P. Latex is terpolyer rubb~r as defined in A.S.T.M. Specification Dic566-60T and that there is no 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. butadicne styrene and vinyl pyridine in the same proportion of 70 : 15 : 15 with no measur-able resin content. It is claimed that V. P. Latex is an emulsion of synthetic rubber and it is borne out by its chemirnl composition and by its physical properties. In the ease 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. 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. It is claimed that in its appli-cation 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 man~facturi1~g. c01~ditions. According to G. S. Whitby, the additions of ~JJ:yl pynd111c 111 such terpolymers of butadiene, styrene and viRyl pyndme have been found to improve the characteristics and properties with the increase of vinyl pyridine content and it is kno~~i1 to reach optimum at about 15 parts i.e. at 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 find use in the dry state in spite of their certain superior properties. Accordi11g to the appellants' V. P. Latex, ~hen coagulated just like any other rubber latex satisfies the el.onga-t1on tests prescribed for rubber. . It is also claimed that in the inter-national field of rubber manufacture, an over ·the world, V. P. Latex is fully recognised as synthetic· rubber latex and not as synthetic resm.

8-Ll276 SCf/75

The Condensed Chemical Dictionary, 8th edition, 1971, defines latex as 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 watery serum. Natural rubber latex, obtained from the tree Heve Braziliensis, contains about 60% water, 35% rubber hydrocarbon, and 5% proteins and other substances. Coagulation is prevented by protective colloids, but can be . induced by addition of acetic or formic acid. Synthetic latices include polysty-rene, 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); gir-dles, pillows, etc; emulsioR paints; adhesives; tire cord coating; rubber, natural.

In the same Dictionary, rubber synthetic is described as follows :-

"Any of group of manmade e1'astomers which approxi-mate one or more of tbc properties of natural rubber. Some of these are sodium polysulfide ('Thikol'); polychloro-prene (neoprene); butadiene-styrene copolymers (SBR); acrylonitrile-butadiene copolymers (nitrile rubber); ethylene-propylene-diene (EPDM) rubbers; synthetic polyisoprene ('Coral', 'N atsyn') ; butyl rubber (copolymer of isobutylene and is prene); polyacrylonitrile ('Hycar'); silicone (polysi-loxane); cpichlorophydrin; polyurethane ('Vulkollan') ". ·

Styrene-butadiene rubber (SBR, s. type elastomer)-is the most common type of synthetic rubber., Manufacture involves copolyrneri-zation of about 3 parts butadiene with 1 part styrene. Its uses are for tiers, footwear, mechanical goods coati,ngs; adhesives; etc.

The appellants have also produced the Import Trade Control Policy, Volume I, {or the yeali 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:

In the Import Trade Control Policy in Volume No. I for the year 1970-71 against serial No. 150, rubber, raw, under column 4 "Actual Users for Synthetic rubber", actual users are shown as (ii) "AU. (Actual User) for Synthetic Rubber namely, Butyl Rubber, Acrylon-trile Buta-diene Copolymer, Poly Chloroprene, Thikol, Poly Isoprene and Poly-butadiene Hypalon, SilicO'.ne rubber and Synthetic Latex including:

Vinyl Py1'i<line' latex and copolymer of styrene butadienc latex" (em-phasis added). Again the Condensed Chemical Dictionary at page 741 describes "Pyratcx" the trade name under which V. P. Latex has been imported as follows :-

"Pyratex. 248 Trade mark for vinylpyridine Latex.

.B Properties : Total solids 40-42%, PH 10.5-11, 5; sp. gr. 0.96.

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 lat.ox as "(Vinyl) pyridine-styrene-butadiene rubber latex with nomi-nal total solids content within the range 40.0% to 49.9% and nomi-nal bound styrene content of less than 20.0% of the total polymer"'. In the Elastomcrs Manual, under Table XI, the International Institute of Synthetic Rubber Producers, Inc. enumi<rates "GENT AC" and "PYRATEX" as Emulsion Styrene-Butadienc 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 Rub-ber (SBR) having total solid contents of 40 to 49% and Styrene Co-monomer 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 synthetic rubber latex which satisfies wholly each and every test prescribed by the autho-G ritv 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. Col!cctively the rubber constitutes the definite raw material of the rubber industry. They may be of vegetable origin or synthetic". Synthetic resin can-not be vulcanised whereas V.P. Latex, being rubber, can be vulcanised.

(3) A.S.T.M. further defines raw rubber as crude or un-compounded rubber, either natural or synthetic.

(4) According to I.SJ. definition, rubber is defined as follows :-

"Rubber in its modified state free of all di!uents, 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".

LS.I. also defines raw rubber as unvulcanised rubber.

{5) V. P. Latex is composed of butadiene styrene .and vinyl pyridine in the ratio of 70 : 15 : 15 respectively. .According to H. J. Ster,n (author of 'Rubber-Na-tural and Synthetic'), synthetic latex is produced at the first stage in the manufacture of most synthetic rubbers (page 358). V. P. Latex is one such syn-thetic 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 emul-· sion of synthetic rubber and this is borne out by its chemical composition and by its physical properties. (7) The question of classifying substance rests primarily .E on its chemical prop·erties as borne out by technical tests. In the case of V.P. Latex, when coagulated, the coagulum answers fully the A.S.T.M. Stand_ards 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 factor in classifying product according to its technical and chemical com-F position.

( 8) V.P. Latex has been designed as special synthetic rubber latex to be suitabll) 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 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 rub-ber. Quoting from G. S. Whitby "the addition of vinyl pyridine in ·such terpolymers of butadiene styrene and vinyl pyridine has been found td !mprovc the characteristics and properties with the mcrcase of vinyl pyridine content and it is known to

reach optimum at about 15 parts, i.e. at charge of 75: 10: 15 (Synthetic rubber by Whitby, page 725). It was admitted that vinyl pyridine copoly-mers 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 synthetic rubber latex.

(11) In the international field of rubber manufacture all over the world V.P. Latex is fully recognised as synthetic rubber latex and not as synthetic resin. While V.P. Latex can be coagulated and vulcanised, 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. Glos-sary 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 latex form and latex was nothing but an aqueous state of rubber, that V.P. Latex is liquid rubber designed for use in tyre manufacture · as 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 synthetic latex designed to be used in the manufacture of tyres as 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 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 J.C.T. irrespective of its usage known commercially or in the industry." Then after noting the definition of latex in the Chemical Dic-tionary and in the "Materials Hand Book" by Brady, the authority observed as follows :-

"These definitions imply that latex is 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

rubber. The authority then refers to Chapter 40 of the Brussels Tarifi Nomenclature (B.T.N.) dealing with natural rubber latex (40.01) and synthetic rubber latex ( 40.02) :

40.01. "Natural rubber latex, whether or not with added synthetic rubber latex; pre-vulcanised natural r~b)x:r latex; natural rubber; balata, gutta-percha and s1m1lar 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 meanin~ 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 source of rubber ..... In this view, latex and rubber will have to be distinguisned 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 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 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 ex~.ctly the same purpose as crude rubber in all its in-dustrial uses and has no practical difierence 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 conwosition it is similar to rubber latex and it may also well answer the tests for rubber such as e/.ongafion etc. when reduced to dry state, but its use is not the same as that of rubber. It could theoretically be converted into substance which is akin to rubber but it has been admitted that due to high rate

of cure, scorching and iucompati_bility with other rubbers, it do.es not find use in dry state. In fact it does not replace rubber 111 use though it has similar properties". (emphasis added). 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 resin latex".

Mr. Sanghi for the respondents has made 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 specified".

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 ~ection. J:hat section reads-

( l) "Except as otherwise provided in this Act, or ai1y 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 lndia. Condition of the article at the time of importing is 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 extra-neous 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 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 taxing statute, the acceptatfon of particular word by the Trade and its popular meaning should commend itself to the authority.

Dealing with the meaning· of the term "vegetables'' in the. Exc~se Tax. Act in King v. Planters Nw and Chocolate Company L:11111ed l ·), the Exchequer Court observed as follows :-

"'Now the statute affects nearly everyone, the producer or manufacturer, the importer, whole-saler ~nd retailer, and finally, the consumer who, in the last analysis, pays the tax. Parliament WOl!ld 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 t9 class substances according to the general usage and known denominations of trade. In my view, there-fore, it is not the botanist's conception as to what constitutes 'fruit' or 'vegetable' which must govern the interpretation to be placed on the words, but rather what wou!d ordinarily in matters of commerce in Canada be included therein. 13otanic:::ily, oranges and lemons are berries, but otherwise no one would consider .them as such".

The Exchequer Court also referred to pithy sentence from "20 chests of Tea", per Story, J. [(1824) 9 Wheaton (U.S.) 435] that "the Legislature docs not suppose our merchants to be naturalists, or geo-logists, or botanists''.

The above Planters Nut case (supra) was referred to with appro-val by this Court in Ramavatar B11dlwiprasad etc. v. Assistant Sales Tax Officer("). In Ramavatar's case, this Court was concerned with the meaning of the word 'vegetables' occurring in C.P. and Berar Sales Tax 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 word of every day 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 com-mon 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 hold-ing that charcoal would be included in coal, observed as follows :-

"Now, there can be no dispute that while coal is techni-cally understood: as mineral product, charcoal is manufac-tured 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

(I) [1951] Canada Law Reports 122.

(2) [1962] 1 S. C.R. 279,

(3) A. l. R. 1967 S. C. 1454.

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 co1muercial 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.,(') the question that was raised related to item 1'4-H in the Schedule I to the Central Excise & Salt Act, 1944, which contained compressed, liquified or solidified gases, inter alia,. Carbon acid (car-bon dioxide). This Court observed as follows :-

"It is also not correct to say that because the sugar manu-facturer wants carbon dioxide for carbonation purpose and sets up kiln for it that he produces carbon dioxide and not kiln gas. In fact what he produces is mixture known both to trade and science as kiln gas, one of the constituents of which is, no doubt, carbon dioxide".

This Court finally observed :

"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-H in the First Schedule".

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 scienti-fic 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 variety of resins, plastics, elastomers, etc. and that V.P. Latex exhibits outstanding adhesive properties. His main object is to show that V.P. Latex is resin which is "an omnibus term for variety of hard brittle, solid or semi-solid organic substances". It is, however, seen from an extract from the Dictionary of Rubber Tech-G nology, 1969 edition, by Alexander S. Craig, produced by Mr. Sanghi that "vinyl pyridine is one component of terpolymer of butadienc, 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 book "Latex Natural and Synthe-tic" 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

(!) [1968] 3 S. C.R. 21, (2) [1973] 1 S. C.R. 997,

used in nylon tire cord saturation because it gives better adhesion bet-ween the cord and the rubber. in which the cord is imbeded than do other latices'. Mr. Sanghi, however, emphasises that V.P. Latex is merely a.n adhesive and so is akin to resin and not to rubber.

We are however unable to accept the submission. It is clear that meanings g\ven to a(ticles in fucal statute must be as people in trade and commerce conversant with the subject, generally treat and under-stand them in' the usual course. But once an article is classified and put under distlnct entry, the basis of the classification is not open to question. Technical and scientific tests offer guidance only wi!-hin limits. Once the articles are in circulation and come to be descnbed and known in common parlance, we then see· no difficulty for statutory classification under 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 bc-~n better if the article is, eo nomiile put under proper classification to avoid controversy over the residuary . clause. As 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 fol-lowed in the I.C.T. book being complementary to each other. When· an article has, by all standards, 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 competi· tion between two rival classifications will, however, stand on different footing. ·

It is not for the Court to determine for itself under article 136·· of the Constitution under which item 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 residuary head in. or~er to ~hargc hig~er duty is foreign to proper determination of this kind, this Court will be loath to say that it will not interfere. In this case there is rather voluminous evidence from the standard ~uthori~ies in favoi:r of V.P. Latex being component of SBR which is adf!11ttedly clas.sified i:nder rubber raw. But assuming, and only assumrng, that evidence 1s balanced, the best course in fiscal mea-sure is to decide and fhc the entry under which the article comes otherwise it will give rise to adoption . of varying sta)idards wher~ uniformity should be the rule. · ·

At one sta~e ~-. Sanghi pointed out that in certain Bills of Entry of. Dunlop India Lmuted. thelf Agents, Messrs Mackinnon. Mackenzie f" Co., Private Ltd., gave the I.T.C. item No. 87 with regard to the imported V.P. Latex. This according to Mr. Sanohi ckarlv shows how the appellants themselves have understood the matter. There is,

however, no estoppel in law against party in taxation m;ittcr. In order to clear the goods for the customs, the appellants' Agents may have given the classification in accordance with the wishes of the autho-rities or they may evert be under some misapprehension. But when law allows them the right to ask for refund on 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 Custums and Another([1]) and the Collector of Customs, Madras, v. K. Sanga Setty(") and submitted that this Court should not interfere with the decision of the authority under article 136 of the Constitution. These decisions arc clearly distinguishable, as, in the view we have taken, the order is . ex-fade 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 su::h case. .

· We arc clearly of opinion that in the state of the evidence before the revisional authority no reasonable person could come to the con-clusion 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 irn:kvant 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 thes~ appeals.

Appeals allowed.

(I) [1973] 1 S. C.R. 148.

(2) [1963] 2 S. C. R. 277.

(3J [1973] 2 S. C. R_. 852.