1995 (7) TMI 368 - SC - Customs

Additional duty under Sec. 3(1) of the Customs Tariff Act - dispute is in regard to the levy on the imported asbestos fibre - article which is imported has not been produced or manufactured - Held that - assumption underlying the Explanation to Section 3(1) would appear to be that an imported article which is the result of production or manufacture can be produced or manufactured in India; the emphasis in the assumption is on the words in India - additional duty on an imported article is provided for to counterbalance the excise duty leviable on the like article made indigenously - decision in the case of Khandelwal Metal & Engineering Works requires the consideration of a larger Bench - proceedings shall be placed before the Hon ble Chief Justice for appropriate administrative directions

Issues Involved:
1. Levy of additional duty on imported asbestos fibre under Section 3(1) of the Customs Tariff Act, 1975.
2. Exigibility of excise duty on asbestos fibre mined in India under Tariff Item 22F.
3. Whether the process of separating asbestos fibre from rock constitutes manufacturing.

Detailed Analysis:

1. Levy of Additional Duty on Imported Asbestos Fibre:
The primary issue was whether the imported asbestos fibre was liable to additional duty under Section 3(1) of the Customs Tariff Act, 1975. The appellants contended that the imported asbestos fibre should not be subject to additional duty as it was not a manufactured product. The court referenced the case of *Khandelwal Metal & Engineering Works and Another v. Union of India*, which held that additional duty could be levied regardless of whether the imported article was manufactured, as the duty was to counterbalance excise duty on like articles produced in India. The court noted that the charging section was Section 12 of the Customs Act, and Section 3(1) of the Tariff Act was supplementary, extending the Customs duty to include an additional duty measured by the excise duty on a like article if produced in India.

2. Exigibility of Excise Duty on Asbestos Fibre Mined in India:
The appellants also disputed the excise duty levied on asbestos fibre mined in India under Tariff Item 22F. The court analyzed the process of extracting asbestos fibre and concluded that the process did not constitute manufacturing. The court cited the case of *Minerals and Metals Trading Corporation of India Ltd. v. Union of India*, which held that separating minerals from the rock did not amount to manufacturing. The court found that the asbestos fibre, once separated from the rock, retained its original properties and was not a new or distinct commodity.

3. Process of Separating Asbestos Fibre from Rock:
The court examined whether the process of separating asbestos fibre from rock amounted to manufacturing. It was determined that the process involved manual and mechanical means to separate the fibre from the rock without altering its chemical structure. The court referenced *Moti Laminates Pvt. Ltd. v. Collector of Central Excise*, which emphasized that for goods to be subject to excise duty, they must be produced or manufactured and capable of being marketed. The court concluded that the asbestos fibre, as separated, did not result from a manufacturing process and was not a new, commercially identifiable article.

Conclusion:
The court concluded that the asbestos fibre, whether imported or mined in India, was not subject to additional duty or excise duty as it was not the result of a manufacturing process. The decision in *Khandelwal Metal & Engineering Works* was found to require reconsideration by a larger bench, particularly regarding the interpretation of Section 3(1) of the Tariff Act and its applicability to non-manufactured goods. The papers and proceedings were directed to be placed before the Hon'ble Chief Justice for appropriate administrative directions.

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