1991 (9) TMI 80 - HC - Customs

Dismissal of Petitions on Customs Duty for Zinc Ash Bank Guarantees

The court dismissed the petitions challenging the levy of additional customs duty on zinc ash, ruling that the respondents can encash the bank guarantees ... Zinc ash imported Issues Involved1. Levy of additional customs duty on zinc ash under Section 3(1) of the Customs Tariff Act, 1975.2. Interpretation and applicability of Tariff Item No. 26B of the Central Excise Tariff.3. Exemption of zinc ash from additional customs duty under specific circumstances.4. Classification of zinc ash arising from galvanising operations.Detailed Analysis1. Levy of Additional Customs Duty on Zinc Ash:The petitioners challenged the levy of additional customs duty on zinc ash imported after March 1981 under Section 3(1) of the Customs Tariff Act, 1975. Section 3(1) stipulates that any imported article shall be liable to an additional duty equal to the excise duty levied on a like article if produced or manufactured in India. The court examined whether zinc ash falls under this provision.2. Interpretation and Applicability of Tariff Item No. 26B:The court analyzed Tariff Item No. 26B of the Central Excise Tariff, which, from 1st March 1981, includes zinc ash under waste and scrap, subject to an excise duty of Rs. 2,625/- per metric tonne. Explanation II to Item No. 26B clarifies that waste and scrap include dross and ash, fit only for the recovery of metals or for use in the manufacture of chemicals. The court determined that zinc ash imported by the petitioners, used for metal recovery or chemical manufacture, falls under this tariff item, making it liable for additional customs duty.3. Exemption of Zinc Ash from Additional Customs Duty:The petitioners argued that Tariff Item No. 26B should be interpreted in light of its legislative history, suggesting that only zinc ash produced during smelting operations should be taxed. The court rejected this argument, stating that the language of the tariff item is clear and unambiguous, covering all kinds of zinc ash. The court emphasized that clear statutory language cannot be overridden by legislative history or external aids like the Statement of Objects and Reasons or parliamentary speeches.The court also referenced an excise notification (No. 104/73-C.E., dated 21st April 1973), which exempts zinc dross and zinc ash arising from smelting operations from excise duty. This exemption was maintained in the amended notification (No. 32/81-C.E., dated 1st March 1981). The court concluded that if the petitioners could prove that the imported zinc ash was produced during smelting operations, they would be entitled to this exemption from additional customs duty.4. Classification of Zinc Ash Arising from Galvanising Operations:Some petitioners contended that zinc ash from galvanising operations should be exempt from excise duty, arguing that galvanising is not a manufacturing process. They cited the Supreme Court decision in *Gujarat Steel Tubes Ltd. v. State of Kerala*, where galvanising was deemed a processing operation, not manufacturing. The court found this argument irrelevant, as the case concerned zinc ash, a distinct product expressly subjected to excise duty under Tariff Item No. 26B(1a). The court also noted the lack of evidence supporting the claim that no excise duty is levied on zinc ash from galvanising operations in India.Conclusion:The court dismissed the petitions challenging the levy of additional customs duty on zinc ash. It ruled that the respondents are entitled to encash the bank guarantees furnished by the petitioners under interim orders, provided the petitioners do not establish that the imported zinc ash arises from smelting operations. The petitioners were given three months to claim exemption by providing evidence to the Customs Authorities. The court stayed the operation of this order for eight weeks and expedited the certified copy.Separate Judgments:No separate judgments were delivered by the judges; the judgment was delivered per Sujata Manohar, J.