WP/2213/1996 of M/s. Goldston Technologies Ltd., Vs Union of India , on 31 December 2004

1. The Union of India, rep. by its Secretary, Ministry of Finance, Govt. of India,Central Secretariat Building, New Delhi.2. The Commissioner of Customs, Customs House, Fort,Bombay-400 038.

3. The Asst. Commissioner of Customs, Customs House, Fort,Bombay- 400 038.

.....RESPONDENTS

Petition under Article 226 of the Constitution of India praying that in thecircumstances stated in the Affidavit filed herein the High Court will be pleased to issue any appropriate Writ, Order or Direction, preferably a Writ in the nature ofMandamus, declaring the action of the respondents in treating the raw-materialimported by the petitioner company viz, Outer Layer of Heat Shrinkable Sleeve andInner Layer of Heat Shrinkable Sleeve, as the one falling under Chapter 39 of theCustoms Tariff Act, as illegal , arbitrary and contrary to law and consequently directthe respondents to treat the raw-material viz outer Layer of Heat Shrinkable Sleeveand Inner Layer of Heat Shrinkable Sleeve, imported by the petitioner company, asthe one falling under Chapter 85.47 of the customs Tariff Act, and by permitting thepetitioner company to pay the customs duty as well as countervailing duty asassessable under 85.47 of the customs Tariff Act, and pass such other order ororders as this Hon'ble Court may deem fit and proper in the circumstances of thecase.

Counsel for the Petitioner: Mr. B.CHANDRASEN REDDY

Counsel for the Respondents: Mr. ARAJASHEKAR REDDY

SC FOR CG

WRIT PETITION NO : 4313 of 1996

Between:

M/s Gold Stone Technologies Limited, 9-1-83 & 84, Amarchand Sharma Complex,S.D. Road, Secunderabad - 3, (a Companyincorporated under the provisions of the Companies Act), Rep. by its Director Y.V.Prasad, S/o. Y.U. Rao, 38 yearsR/o. Hyderabad.

(The Cause title of the petitioner is amended as per court order dt. 16/5/2000 inWPMP 11239/2000.)

..... PETITIONER

AND

1. The Union of India, Rep. by its Secretary, Ministry of Commerce,Govt. of India, Central Secretariat Building,New Delhi.2. The Commissioner of Customs, Customs House,Fort, Bombay - 400 038.3. The Assistant Commissioner of Customs, Customs House,Fort, Bombay - 400 038.4. The Assistant Commissioner of Customs, International Air CargoComplex, Sahar, Bombay.

.....RESPONDENTS

circumstances stated in the Affidavit filed herein the High Court will be pleased toissue any appropriate Writ, Order or direction, preferably a Writ in the nature ofMandamus, declaring the action of the respondents in treating the raw-materialimported by the petitioner company, viz. Outer Layer of Heat Shrinkable Sleeve andInner Layer of Heat Shrinkable Sleeve, as the one falling under Chapter 39 of theCustoms Tariff Act, as illegal, contrary to law, and arbitrary, and consequently directthe respondents to treat the raw-material viz. Outer Layer of Heat Shrinkable Sleeveand Inner Layer of Heat Shrinkable Sleeve, imported by the petitioner company, asone falling under Chapter 85.47 of the Customs Tariff Act and by permitting thepetitioner company to pay the customs duty as well as countervailing duty aassessable under Chapter 85.47 of the Customs Tariff Act, without reference to theinternal Standing Order, and to pass such further or other orders as this Hon'bleCourt may deem fit and proper in the circumstances of the case.

Counsel for the Petitioner: Mr. S.RAVI

Counsel for the Respondents: Mr. A.RAJASHEKAR REDDY

SC FOR CG

The Court made the following :

ORDER:(per Hon’ble Sri Justice M.H.S.Ansari)

The short question arising for consideration in these writ petitions is whetherthe raw material that has been imported by the petitioner company falls underChapter 85.47 of the Customs Tariff Act.

It is the case of the petitioner that it has imported the raw material i.e., (i) outerlayer for heat shrinkable sheet (22 Ton in granule form) and (ii) inner layer forshrinkable sleeves of various dimensions and sizes. It is the further case of thepetitioner that the raw material that has been imported is exclusively used by thepetitioner company for manufacture of insulating components, namely, heatshrinkable sleeves to be supplied only to the Department of Telecommunicationsand Mahanagar Telephone Nigam Ltd. Therefore, the raw material that has beenimported by the petitioner, it was contended, falls under Chapter 85.47 and notunder Chapter 39 of Customs Tariff Act, 1975. The stand of the respondent Customsauthorities appears to be that the outer layer is in the form of polythelene granules.The imported goods are merely sheets of polythelene and as such the goods aremore appropriately classifiable as polythelene sheets under CTH 3920 rather than Chapter 85.47. According to the respondents, the assessment of the goods is to bemade in accordance with the status of imported goods rather than its end use.

Mr. S. Ravi, learned counsel for the petitioner submitted that the matter is covered bythe judgment of the Bombay High Court. In its judgment in XL Telecom Pvt. Ltd. v.Union of India, Bombay High Court had occasion to consider the question as towhether the articles in that case being “components for cable jointing kits” meritclassification under Chapter 85.47 or Chapter 39 heading 26 of Customs Tariff Act. Itwas noticed that the cables have to be jointed so that they can go into runninglengths as if they are original. The joints have to be insulated in a sophisticatedmanner so that they are completely dust, air and water proof ensuring continuoussupply of power. The cables are of different sizes and actually insulation is to beachieved by automatic shrinking of the insulating sleeves to a pre-determineddiameter by a single operation of heating. It was further noticed that the subjectarticles in that case being components for cables joining kits, plastic is used as oneof the raw materials. It was further noticed by their Lordships that Chapter 39 ofCustoms Tariff Act covers “plastics and articles thereof”. Heading 39.26 is anomnibus and generic entry. Chapter 85 covers, inter alia, insulating fittings. Heading85.47 contains a specific description of insulating fitting. Their Lordships applied theprinciple of generalia specialibus non-derogant. It was observed that the thread ofthis principle runs all-through even in the general rules of interpretation of entriesunder the CTA. Their Lordships further noticed the Customs Tariff Advice given bythe Board by their letter dated 17[th] November 1989 wherein it is stated that heatshrinkable material falls under Chapter 85 of CTA. Their Lordships considered thecontention raised with respect to the bills of entry wherein the subject articles in thatcase were described as components for cable jointing kits and in one or two bills thearticles were described as raw materials for manufacturing of components for cablejointing kits – insulating materials – un-expanded sleeves. Their Lordshipsnegatived the contention of the respondent authorities that at least those items meritclassification under Chapter 39 in the following terms:

“……..Even raw-material for manufacture of components of cable jointing kits cannotbe classified as general plastic articles under omnibus Heading 39.26. They arealso insulating material capable of automatic shrinking to pre-determined diametersby a single operation of heating. Heading 85.47 is more akin to these articles thanHeading 39.26.”

We are in respectful agreement with the view of their Lordships in the case citedsupra. Also, we note that the above decision has been accepted by the respondents,in that, no appeal against the same was filed.

In the light of the above, the contention of the respondent authorities that rawmaterials for manufacture of components of cable jointing kits in the case on hand, isto be classified as general plastic articles under Chapter 39, has to be rejected. It isnot disputed that heat shrinkable sleeves are formed when the two sleeves arefused together to form a heat sheet which at that stage acquire a characteristic of rawmaterial for manufacture of heat shrinkable materials. The same are thus the rawmaterials in the manufacture of insulating components. As noticed, in the judgmentcited supra, the raw material for manufacture of components of cable jointing kits, itwas held, are also insulating material capable of automatic shrinking, cannot beclassified as general plastic articles under omnibus heading 39.26. The objection ofthe respondents in the case on hand appears to be only with respect to the form inwhich the raw materials are imported and not that the same is a raw material formanufacture of insulating components. This stand of the respondents for the reasonsafore-stated cannot, therefore, be sustained nor can it be said that the importedgoods can be classified as falling under the omnibus entry.

The objection as to the alternative remedy in the instant writ petition being availableto the petitioner was also raised in the context of the maintainability of the two writpetitions. This objection, in our view, does not merit consideration keeping in viewthat the writ petitions were admitted in the year 1996 and it would be unjust andinequitable at this distance of time to relegate the petitioner to avail of the alternativeremedy, which, now is time barred. Furthermore, the matter can be decided on thesettled position in law, on the authority of the judgment of the Bombay High Courtcited supra.

In the facts and circumstances of this case, we direct the respondents to treatthe imported raw materials namely, outer layer of heat shrinkable sleeves (in granuleform) and inner layer of heat shrinkable sleeves as one falling under Chapter 85.47of the Customs Tariff Act. The petitioner shall accordingly be liable to pay thecustoms duty as well as countervailing duty as assessable under Chapter 85.47 of the Customs Tariff Act.

The writ petitions are accordingly allowed in the terms as above. However, inthe facts and circumstances, there shall be no order as to costs.

(M.H.S.ANSARI, J.)

December 2004.

_________________________

(T.Ch.SURYA RAO, J.)

__________________________

ARS

That Rule Nisi has been made absolute as above.

Witness the Hon’ble Sri Devinder Gupta, the Chief Justice on this the Friday theThirty First day of December, Two Thousand and Four.

ASST. REGISTRAR.

To

1. The Secretary to Government of India, Ministry of Commerce,Central Secretariat Building,New Delhi.

2. The Secretary to Government of India, Ministry of Finance, Central Secretariat Building, New Delhi.

3. The Commissioner of Customs, Customs House,Fort, Bombay - 400 038.

4. The Assistant Commissioner of Customs, Customs House,Fort, Bombay - 400 038.

5. The Assistant Commissioner of Customs, International Air CargoComplex, Sahar, Bombay.Complex, Sahar, Bombay.

6. Two CD copies.