1986 (8) TMI 76 - HC - Central Excise

Writ jurisdiction - Copper scrap - Taxability requiring unerring certainty - Fiscal legislation

Issues Involved:
1. Whether "copper scrap" is copper in crude form falling within Tariff entry 26A.
2. Violation of principles of natural justice in the procedure adopted by the authorities.
3. Effectiveness of alternate remedy under Article 226.

Detailed Analysis:

Issue 1: Whether "copper scrap" is copper in crude form falling within Tariff entry 26A

The main question was whether "copper scrap" could be classified as "copper in crude form" under Tariff entry 26A. The petitioner, a public limited company manufacturing copper fungicides and other industrial chemicals, imported "copper scrap" from various countries. The department did not collect any additional customs duty on "copper scrap" from 1956 till 1979. However, in March 1979, the Assistant Collector of Customs began demanding a duty of 8% under entry 68 of the Central Excise Tariff Act. The petitioner objected, arguing that "copper scrap" did not fall within Tariff entry 68 or entry 26A and was not liable to any excise or additional customs duty.

The court noted that the Ministry of Law had taken a decision that "copper scrap" is copper in crude form falling within entry 26A, and the department had consistently taken the same view thereafter. However, the court found that "copper scrap" is not copper in crude form and was not liable to excise duty or additional customs duty prior to 1-4-1981. The court emphasized that taxability requires certainty and that fiscal legislation must describe dutiable goods in clear terms. The court observed that the description "copper in crude form" was vague and led to sharp differences of opinion within the department. The court concluded that the benefit of doubt should be in favor of the assessee and that "copper scrap" was not dutiable under entry 26A(1) until the specific item "waste and scrap" was inserted in 1981.

Issue 2: Violation of principles of natural justice in the procedure adopted by the authorities

The petitioner contended that the procedure adopted by the authorities violated the principles of natural justice. The respondent issued a notice under Section 28 of the Customs Act, 1962, demanding countervailing duty under entry 68 of the Central Excise Tariff at 8% ad valorem. The petitioner filed objections and requested a personal hearing, but an order was passed without any enquiry with notice to the petitioner. The court noted that the pre-assessment notice referred to the residuary entry, item 68, while the assessment order was made under entry 26A(1). The court found that the department was not sure about the taxable item and that the assessment was made under entry 26A(1) but the demand was restricted to the amount under entry 68. The court concluded that the procedure adopted violated the principles of natural justice.

Issue 3: Effectiveness of alternate remedy under Article 226

The petitioner argued that the alternate remedy available was ineffective and that the jurisdiction under Article 226 had to be invoked. The court noted that the Ministry of Law had taken a decision that "copper scrap" is copper in crude form and that the department had consistently taken the same view thereafter. The court found that directing the parties to agitate the question before the authorities under the Act would be a futile exercise. The court decided to determine whether "copper scrap" is copper in crude form in these proceedings to provide finality to the issue.

Conclusion

The court held that "copper scrap" is not copper in crude form and was not liable to excise duty or additional customs duty prior to 1-4-1981. The court quashed the orders demanding additional customs duty under entry 26A(1) and directed the respondent to consider the petitioners' liability under item 68 of the Act, providing a personal hearing to the petitioners if required. The Original Petitions were disposed of accordingly, with no costs.

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