http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 9

PETITIONER:

M/S. BOMBAY OIL INDUSTRIES PVT. LTD.

Vs.

RESPONDENT:

UNION OF INDIA & ORS

DATE OF JUDGMENT06/12/1994

BENCH:

MAJMUDAR S.B. (J)

BENCH:

MAJMUDAR S.B. (J)

SAHAI, R.M. (J)

CITATION:

1995 SCC Supl. (1) 295 JT 1995 (3) 64

1994 SCALE (5)97

ACT:

HEADNOTE:

JUDGMENT:

MAJMUDAR, J.:

1. These appeals arise out of a common judgment rendered

by the Customs, Excise & Gold (Control) Appellate Tribunal

New Delhi, by which it disposed of ten appeals in all.

Civil Appeal Nos. 401313A of 1985 challenge that part of

that order of the Tribunal by which the appeals of the

common appellant, namely, M/s

67

Bombay Oil Industries Pvt. Ltd. were dismissed by the

Tribunal; while the remaining four appellants seek to

challenge the other part of the Tribunal's order by which

four appeals moved by the Collector of Customs, Bombay,

against the concerned present appellants came to be allowed

by the Tribunal.

2.The facts leading to these appeals may be noted at the

outset to appreciate the grievance of the appellants. All

these appellants had imported tallow being bleachable fancy

tallow from foreign countries between 2.8.1976 and 2.9.1978

by different consignments. So far as common appellant H/s

Bombay Oil Industries Pvt. Ltd. in C.A. Nos.4013-13A of

1985 is concerned, it imported bleachable mutton tallow

while the rest of the appellants imported bleachable fancy

tallow which according to them was not mutton tallow. These

imports were subject to customs duty under the provisions of

the Customs Act, 1962. As per the applicable customs tariff

as laid down in the First Schedule to the Customs Tariff

Act, 1975, the imported tallow was liable to customs duty

under sub-heading of Heading No. 15-01/06 at the rate of 35

per cent ad valorem. A partial exemption was given by the

Central Government from the payment of customs duty so far

as imported tallow was concerned by an exemption

Notification dated 2nd August, 1976 being Notification No.

141 -CUS/76 issued in exercise of powers conferred on the

Central Government by sub-section (1) of Section 25 of the

Customs Act, 1962. The said Notification provided that the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 9

Central Government being satisfied that it is necessary in

the public interest so to do, exempts tallow having the

specifications mentioned hereunder and falling under sub-

heading No.2 of Heading No. 15-01/06 of the First Schedule

to the Customs Tariff Act, 1975(51 of 1975), when imported

into India, from payment of so much of that portion of duty

of customs-leviable thereon which is specified in the said

First Schedule as is in excess of 15 per cent ad valorem.

The Notification further laid down the specifications of the

exempted tallow. It was provided that the imported tallow

meeting the indicated specifications was entitled to partial

exemption of customs duty to the extent of 30 per cent ad

valorem. These specifications read as under:

"SPECIFICATIONS

i. Moisture and Insoluble impurities

percent by weight, max. 1.0

ii. Colour in a lin cell on the Lovibond

scale expressed as Y=5 R not deeper than 20

iii. Saponification Value 192 to 202

iv. lodine Value (wijs) 32 to 50

v. Acid Value, Max 10

vi. Unsapponifiable matter, percent by

weight, Max 0.5

vii. Titre of fatty acids oC 40 to 49"

The said Notification was amended later on by a Notification

dated 2.9.1978 whereby specification No. 2 was deleted from

the earlier Notification dated 2.8.1976 being Notification

No. 141-CUS-76. The said latter Notification dated 2nd

September, 1978 being Notification No. 168/F No.

370/24/78/Cus 1 provided that in exercise of the powers

conferred by sub-section (1) of Section 25 of the Customs

Act, 1962 (52 of 1962), the Central Government be-

68

ing satisfied that it is necessary in the public interest so

to do hereby makes the following amendment in the

Notification of the Government of India in the Department of

Revenue, and Banking No. 141Customs dated the 2nd August,

1976, namely, "In the Specifications mentioned under the

said Notification, item (ii) and the entries relating

thereto shall be omitted. "

3. It, therefore, became clear that the importers of

tallow after coming into operation of the latter

Notification dated 2nd September, 1978 had not to satisfy

the customs authorities that their imported tallow met the

requirement of erstwhile item No.2 in the earlier

Notification of 2.8.1976. We have seen that the second

condition of the Notification dated 2.8.1976 referred to the

colour of imported tallow. The imported tallow under the

earlier Notification was required to stand the test of

having colour not deeper than 20 in one inch cell on the

lovibond scale as Y+5R. It is this requirement which the

latter Notification gave up. It is not in dispute between

the parties that import oftallow after the Notification

dated 2.9.1978 having given partial exemption upto 30% ad

valorem, customs duty on imported tallow covered even that

imported tallow which did not meet any colour requirement

but so far as present proceedings are concerned as the

appellants had imported tallow during the time the earlier

Notification dated 2.8.1976 held the field, they had to meet

the colour specification No.2. The appellants contended

before the Customs Authorities that they were entitled to

get refund of customs duty paid by them in excess of 15 per

cent as their imported tallow satisfied Notification of

Customs dated 2.8.1976. The samples of imported tallow were

examined by Custom House and were found not meeting the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 9

colour test specification as laid down by the Notification

dated 2.8.1976, Consequently, their request was rejected by

the Assistant Collector of Customs. They went in appeal to

the Collector of Customs. The Collector of Customs, Bombay,

took the view that so far as common appellant in Civil

Appeal Nos.4013-13A of 1985, namely, M/s Bombay Oil

Industries Pvt. Ltd. was concerned, it had imported tallow

on 4.4.1978 when the earlier Notification 14 1 -Cus/76 was

operative. The Custom House had tested the samples by ap-

plying the correct method of I.S. 548 and as it was found

that the tallow imported by M/s Bombay Oil Industries Pvt.

Ltd. did not satisfy the colour specification as per

condition No. 2 of Notification of 1976, the appellants

cannot be said to have earned any exemption under the said

Notification on the imported tallow and accordingly the

appeals of the appellant, M/s. s Bombay Oil Industries Pvt.

Ltd., were dismissed. However, so far as appeals by the

remaining four appellants in the present case are concerned,

the Appellate Collector took the view that these appellants

had imported tallow which were not mutton tallow but

bleachable fancy tallow which was a mixture of beef and

other animal tallow and so far as these imports were

concerned, proper tests were not carried out by the Custom

House. The Appellate Collector noticed that the

specifications given by Customs were word for word and

figure for figure in IS 887 for Type No. 1 and that referred

to mutton tallow and that the method prescribed for mutton

tallow as per IS 548 could not have been applied for testing

colour of imported tallow of these remaining four appellants

and that the correct method for testing samples should have

been the method recom-

69

mended by American Oils Chemists' So ciety wherein samples

should have been first bleached and then got tested. In vie

of the Appellate Collector as the goods imported by these

four appellants were not Indian tallow for which the IS 887

and IS 548 were designed but foreign tallow and most

probably beef tallow, it was reasonable to say that the

standard of the tallow should be gauged in accordance with

the grades or standards prescribed by the American Fats and

Oil Association and if that was done the colour

specification as found in condition No. 2 of the Notifica-

tion was likely to be satisfied and for that purpose the

samples were required to be re-tested by following the

method recommended by American Oils Chemists' Society and

accordingly the remaining four respondents' appeals were

allowed and the proceedings were remanded to the Assistant

Collector directing that the test should be done only after

refining aiid bleaching the samples as prescribed in the

said American Oils Chemists' Society Official' method Cc Sd-

55. It was further observed that if it passes the colour

test on such refining and bleaching, the benefit of No-

tification 141 -Cus/76 shall be extended otherwise not.

4.The common appellant, M/s Bombay Oils Industries Pvt.

Ltd., being aggrieved by the order of the Appellate

Collector dismissing its appeal preferred further appeals to

the Customs, Excise & Gold (Control) Appellate Tribunal. So

far as remaining four appellants arc concerned, the Central

Government issued notices under Section 131(3) of the

Customs Act, 1962, whereby all these appellants were called

upon to show cause why the orders passed by the Appellate

Collector should not be recalled and annuled. After the

cstiblishment of the Tribunal these proceedings were trans-

ferred to the Tribunal, They were registered as appeals as

taken out by the Collcctor of Customs, Bombay. As noted

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 9

earlier the two appeals of M/s Bombay Oil Industries Pvt.

Ltd. and the four appeals of the Collector of Customs

against the remaining four present appellants were heard

together by the Tribunal along with other four appeals, In

all ten appeals were disposed of by the common judgment.

The Tribunal came to the conclusion that the colour

specification as laid down by the Notification dated

2.8.1976 being No. 141 Cus/76 was not fulfilled by the

concerned imports of the tallow of appellants herein and

that, therefore, these imports failed to earn the partial

exemption to the extent of 30 per cent as claimed by them on

these imports under the said Notification. It was. further

found by the Tribunal that a common colour specification was

laid down as condition No.2 under the said Notification and

it referred to all types of tallow whether mutton tallow,

beef tallow or other animal tallow and a common test had to

be resorted to for testing the samples of these imported

tallow and all these imported tallow did not satisfy the

colour specification of condition No. 2 of the exemption

Notification. The Tribunal further observed that it was not

open to the Assistant Collector to lay down a separate

condition for the said Notification that the sample should

be tested by American method and that the Indian Standard

method as adopted by the Custom House for testing these

samples cannot be found fault with, consequently, the

appeals filed by M/s. ' Bombay Oil Industries Pvt. Ltd.,

were dismissed and appeals filed by the Collector of Customs

against the remaining four appellants were allowed. Being

aggrieved by the aforesaid common order

70

of the Tribunal in the respective appeals, the appellants

have preferred appeals under Section 131(3) of the Customs

Act, 1962.

5.These appeals were set down for final hearing before us.

We have heard learned counsel for the contesting parties in

support of their respective cases.

6.Learned counsel for the appellant, M/s Bombay Oil

Industries Pvt. Ltd., submitted that the Tribunal had

committed a patent error in taking the view that the

imported mutton tallow of the appellant did not meet the

colour specification of the exemption Notification that the

Custom House had wrongly followed the IS 549 for testing the

appellant's samples and it should have followed the official

method Cc 8d- 55. In any case the matters were required to

be remanded as the appellant had been denied the principle

of natural justice and fair play. Learned counsel appearing

for the remaining appellants submitted that the tallow which

they imported was bleachable fancy tallow and was not mutton

tallow and, therefore, as rightly held by the Appellate

Collector the IS 548 meant for mutton tallow testing could

not have been adopted by the Custom House for testing their

samples of imported tallow and that the correct method which

should have been adopted was method prescribed by the

American oil Chemists' Society and if that was done in all

probabilities their samples would have satisfied the colour

test of being not deeper than 20. It was next contended

that exemption Notification of 1976 nowhere lays down any

particular method for testing colour of samples of imported

tallow and especially when imported tallow came from foreign

countries specially America and Australia, the American

method of testing, colour specification should have been

adopted as Appellate Collector had done. It was further

submitted that even if Indian testing method was adopted by

following IS 548, the testing method should have been done

on one inch cell and not on half inch cell as was done by

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 9

Custom House so far as their samples were concerned. In

these circumstances the Tribunal was not justified in

allowing the appeals. These appeals should have been

dismissed.

7.Having given our anxious consideration to the rival

contentions, we have reached the conclusion that there is no

substance in any of the appeals.

8.It has to be kept in view that as per Section 12 of the

Customs Act. duties of customs shall be levied as specified

in the Customs Tariff Act for goods imported in or exported

out 'of India. It is not in dispute between the parties

that the imported tallow attracted the customs duty as per

the Customs Tariff Act, 1975 at the rate of 45 per cent ad

valorem but the applicants staked their claim on the basis

of the Notification issued by the Central Government under

Section 25 of the Act granting partial exemption from duty

on such imported tallow. It is obvious that whatever ex-

emption is granted under Notification may be either absolute

or subject to such conditions which have got to be fulfilled

by the importers before earning such exemption, The

Notification 141-cum/76 which we have earlier referred does

not grant such 30 per cent exemption in absolute terms but

such exemption is based on fulfilment of conditions

mentioned therein about the specification of imported tallow

and if the imported tallow does not meet the specification

required it cannot earn the exemp-

71

tion. It is trite to say that in order to earn the

exemption the person claiming the exemption must satisfy

that his imported item has fulfilled all the conditions of

the exemption Notification as such exemptions are granted in

public interest. In connection with such exemption

Notification issued under Section 25 of the Customs Act a

Bench of this Court in case Union of India & Ors. vs. M/s

Jalyan Udyog & Anr. (A.I.R. 1994 SC 88), speaking through

B.P. Jeevan Reddy, J., has made the following observations

"An exemption granted may be an absolute and

or subject to such conditions, as may be

specified in the notification and further that

the conditions specified may relate to a stage

before the clearance of goods or to a stage

subsequent to the clearance of goods. S.25(1)

is a part of the enactment and must be

construed harmoniously Kith the other

provisions of the Act. The power of exemption

is variously described as conditional

legislation and also as a species of delegated

legislation. Whether it is one or the other,

it is a power given to the Central Governmen

t

to be exercised in public interest. Such a

provision has become a standard feature in

several enactments and in particular, taxing

enactments. It is equally well settled by now

that the power of taxation can be used not

merely for raising revenue but also to

regulate the economy, to encourage or

discourage as the situation may call for the

import and export of certain goods as also for

serving the social objectives of the State.

Since the parliament cannot constantly monitor

the needs of and the emerging trends in the

economy and is in no position to engage itself

in day-to-day regulation and adjustment of

import-export trade accordingly, power is

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 9

conferred upon the Central Government to

provide for exemption from duty of goods0.

either wholly or partly,

and with or without conditions, as may be

called for in public interest. Reading any

limitation into this power is not warranted.

If the public interest demands s that the

exemption should be absolute, the Central

Government can do so. Similarly, if the

public interest demands that exemption should

be granted only subject to certain conditions

it can provide such conditions. Then again if

the public interest demands that conditions

specified should relate to a stage subsequent

to the date of clearance it can do so. The

guiding factor is the public interest."

9.Once the appellants admittedly imported tallow into this

country, on account of the charge by the Customs Act under

Section 12, their imported tallow attracted customs duty.

It is for them to show how instead of paying full duty they

get exemption to the tune of 30 per cent pursuant to the

Notification 141-cus/76. For that purpose they have to show

that the imported tallow have met colour specification as it

was a notification granting exemption on conditions and did

not grant exemption in absolute terms. It is not in dispute

that out of seven specifications mentioned in the

Notification, six were met by them but only on colour

specification No. 2 they met their waterloo. He Custom

House which tested the samples on imported tallow, submitted

by the appellants, found that the colour specification laid

down in condition No. 2 was not satisfied by these imported

tallow and, therefore, on these imported tallow exemption

could not be granted as claimed. If the appellants felt

that the findings of the Custom House were not correct it

was open to them to get the samples cross tested through

their experts and to Jay evidence in that connection before

the authorities as burden was entirely on them to show that

they had satisfied all the conditions of Notification with a

view

72

to earnings, the exemption to the extent of 30 per cent of'

import duty on their imported tallow. They did nothing of

the kind. The Custom House followed the method of Indian

Standards Institution for testing these samples. Our

attention was invited to booklet "Indian Standard, Methods

of Sampling and Test for Oils and Fats" as well as booklet

of "Indian Standard, Specification for Animal Tallow" is

sued by the Indian Standards Institution So far as animal

tallow is concerned, the booklet dealing with test IS 887-

1977 in paragraph 8.1 lays down that the test shall be

carried out according to IS 548 part-1 1964. IS 548 Part 1

1964 deals with method of sampling and test for oils and

fats. Thus, there appears to be a common test prescribed by

the Indian Standards Institution being IS 548 Part 1 for all

types of animal tallows. That was the test adopted by

Custom House and it was found that none of the samples of

imported tallow as submitted by the appellants fulfilled the

requirement of condition No. 2 of the exemption

Notification. 'In other words, their colour in one inch

cell on lovibond scale, expressed as Y + 5R was deeper than

20. Consequently, the imported tallow whether mutton tallow

or beef tallow or any other tallow as covered by these

consignments of the appellants did not satisfy condition No.

2 of colour as laid down by Notification 14 1 -Cus/76 dated

2.8.1976. On these findings reached by the Custom House and

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 9

when no effort to rebut the same was made by the appellants,

the conclusion was inevitable that these imported

consignments of tallow during the time exemption

Notification dated 2.8.1976 was holding the field did not

earn the exemption under the said Notification from the

customs duty to the extent of 30 per cent and they were

liable to pay full customs of duty. This finding is rightly

reached by the Tribunal on facts and calls for no in-

terference. So far as submission of learned counsel for

appellant M/s Bombay Oil Industries Pvt. Ltd., is concerned

to the effect that only because the appellant imported

mutton tallow, IS 548 could not have been resorted to cannot

be accepted in view of the Indian Standards Institution's

method for testing animal tallow which has to follows IS 548

as seen earlier. It may also be noted that the Tribunal has

observed in paragraph 25 of its judgment that M/s Bombay Oil

Industries Pvt. Ltd. did not question the test result.

Consequently, it is too late for it to make a grievance

about it in these proceedings. So far as the remaining four

appellants are concerned, the Tribunal rightly held that it

was not open to the Appellate Collector to presume that for

imported tallow which was not mutton tallow and which would

be a mixture of beef and other tallows, the American method

of testing should have been adopted by the Custom House. It

is true that the Notification did not specify as to which

method should be followed. But it has to be appreciated

that the imported tallow was to be utilised in India by

Indian manufacturers and had ultimately to join the main-

stream of consumer goods either as such or after being

utilised in production of consumer goods. When they are to

be imported in India and when they claim exemption for the

condition of Notification issued by the Central Government

under Section 25 of the Customs Act, the test for checking

their colour as laid down by the exemption Notification has

necessarily to be as per the Indian standard method and test

laid down by the Indian Standards Institution. In this con-

nection, we may refer to the decision in the case Union of

India v. Delhi cloth &

73

General Mills, (1963 Suppl.) (1) SCR 586) which has taken

the view that if method of testing any item of central

excise tariff is not mentioned, then Indian Standards

Institution's method should be applied. Learned counsel for

the appellants submitted that strictly speaking this

judgment may not apply to the facts of the present case as

we are not concerned with any central excise tariff. Be

that as it may, the fact remains that the imported goods on

which the appellants claim exemption from customs duty have

to be ultimately disposed of in India and when the Indian

Government grants exemption on condition, the method to test

whether the exemption is earned or not by these imported

goods would obviously be the Indian method. Learned counsel

for the respondents submitted that if a converse case is

taken into consideration and if Indian goods are exported to

foreign countries and if they have to earn any exemption

from duty imposed by foreign countries on such imports in

their countries and if colour specification of such imported

material is to be found out, the country of import, namely,

the foreign country would insist that the method to be

adopted for testing the imported goods should be the method

of testing adopted by the country and it would be no ground

to say that the Indian goods imported in foreign countries

meet the requirement of the Indian specification though they

may not meet the requirement of specification laid down by

the importing counties, for the simple reason that they have

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 9

to meet the requirements of the importing country and not of

India which is the exporting country. In the present case

also, therefore, when the importers are Indian they have to

meet the requirement of exemption Notification issued by the

Central Government. These imports must satisfy the test as

laid down by the exemption Notification issued in India and

when the Notification is silent about the method for testing

the colour of imported items then the testing method adopted

by the Indian Standards Institution would of necessity be

applicable. It was then contended by the learned counsel

for the appellants in these remaining four appeals that IS

548 Part 1 was to be applied for testing the colour of

tallows. The colour specification by the Notification was

required to be tested on one inch cell on the lovibond scale

expressed as Y + 5R. While in the present case the samples

were tested on one half inch cell and, therefore, the Custom

House results should not be relied upon. It is not possible

to agree with this contention. As we have discussed earlier

as the appellants wanted refund of duty on their imported

goods, they should have made efforts to rebut the result of

Custom House. That they did not do but even that apart as

noted in paragraph 38 of the impugned judgment the Tribunal

found that even when lovibond one inch cell was adopted, if

the imported tallow was tested in unbleached form in which

it was imported then its colour deepening would be 34 to 36

which would be more than 20 as required by the second

condition of the colour specification. The main argument of

the appellants was that American method should have been

followed as observed by the Appellate Collector when the

exemption Notification is silent about the said method. We,

therefore, concur with the view of the Tribunal that there,

was no occasion to test the appellant's samples of tallow

after bleaching as that was not the method of IS 548 Part 1

which was holding the' field and as such prebleaching and

refining could not be done pursuant to the American method

which

74

was not applicable to the facts of the present case and even

by taking one inch cell testing on lovibond IS 548 method

would have resulted in the samples showing colour deepening

to the extent of 34 to 36 on the basis of Y + 5R which would

not satisfy condition No. 2. The appellants cannot have any

real grievance in this connection.

10. Before parting we may note one submission of the

learned counsel. They submitted that laying down of

condition No. 2 in Notification dated 2.8.1976 was a clear

error on the part of the Central Government which was

corrected by them by the latter Notification dated 2.9.1978

and, therefore, the latter Notification be treated as

clarificatory Notification read with above Notification of

2.8.1976. It is not possible to agree as the disputed

imports with which we ate concerned are prior to 2.9.1978.

They are, therefore, covered by the earlier Notification of

1976. It is true that the Tribunal by noting these

submissions has observed in paragraph 3 5 of the judgment

that the colour specification was an error and that the

error be removed but for that reason it could not ignore the

colour specification when it was the part of the law. We

entirely agree with the view of the Tribunal that even if

the Central Government corrected its error about condition

No. 2 from 2.9.1978 by issuing a fresh Notification, the

earlier colour specification requirement remained operative

for imports made by the concerned importers prior to

2.9.1978 when the earlier Notification dated 2.8.1976 was

holding the field. The latter Notification cannot be said

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 9

to be merely clarificatory Notification nor can it have any

retrospective, effect. It is a fresh Notification lying

down fresh condition deleting the earlier condition No. 2

about the colour specification. Hence this submission is of

no avail to the learned counsel for the appellants.

11. For all these reasons, there is no substance in these

appeals and they are accordingly dismissed. In the facts

and circumstances of the case, there will be no order as to

costs.

77