# KHANDELWAL METAL & ENGINEERING WORKS AND ANOTHER ETC v. UNION OF INDIA AND OTHERS - **Citation:** [1985] Supp. 1 S.C.R. 750 - **Court:** Supreme Court of India - **Decided:** 1985-06-11 - **Case number:** Civil Appeals Nos. 338-349 of 1983 - **Bench:** Y.V. Chandrachud, R.S. Pathak, Sabyasachi Mukharji - **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/khandelwal-metal-engineering-works-and-another-etc-v-union-of-india-and-others-9124 - **Pages:** 28 ## Headnote Customs Act 1962. Section 12 & Customs Tariff Act 1975, Se~tlon 3(1}- "Additiona/ duty'- Whether in the nature of a counter-vai/ing duty-Import of bras1 scrap-Test of taxabilit.r-lmported brass scrap-" like Arlicle if produced or ma11JJ/actured in lndia'-Meaning of-Taxable event ls whether import and not manufactured in India-Whether nature and quality of goods imported relevantWhether imported brass scrap need be capable of being produced or manufactured in India.....:...Manufacturing process-ivhat is-Being a bye-product of manufacturing process-Whether liable to duty-Sections 2. 25, Isl Schedule, (Import Tari.ff') Chapter 14, Heading 74.01/02, RU/es/or interpretation of the Isl Schedule. Rules I lo 4, Notes 2 Section XV of t!te Isl Schedule', Notes 3 and 4-'Copper waste and scrap'-Whether brass scrap is comprehended wilhin the expression and wJ,,ther i.s •master alloy•- whether imported brass scrap entitled to exemption under Notification No. 97 dated June 25 1977. Customs Tariff Act 1975-1 st Schedule (Import Tariff). Chapter 74, Head· Ing 74.01/02-Classiftcatlon of goods under import tariff-Contemporary notifict;- tlon-Whether can be relied upon-Rules of Interpretation-Whether should have precedence over other aids of interpretation-Rules for interpretation of the /st Schedule-Rule.s 1 to 4-Appllcation of. Central Excises and Salt Act 1944, Section 3(1) Schedule I, Ent,y 26A Clause (lb}-Whether ultra vires Section 3(1)-Whether within the legislat/1e comptence of Parliament. / Words and phrases-'Brass Scrap'-•Copper waste and scrap'rMmter al/oy'-Meaning of. Section 2(1.5) of the Customs Act, 1962 defines •"duty'' to mean a duty of customs leviable under the Act. Chapter V of the Act contains provisions for the levy of, and exemption from, customs duties. Bys. 12(1) of the Act. "Except otherwise provided in the Act or in any other Jaw for the time being In rori;e'', t)uties or customs shall be levied at such rates as may be specified KHANDELWAL METAL WORKS V. l'NION 751 under the Customs Tariff Act, 1975 or under :iny other law for the time being in force, on goods imported into or exported from India. Section 25 of the Customs Act, empowers the Central Governn1ent to grant ex.en1ption from the payment of Customs duty. The rates at which duties of customs shall be levied under the Customs Act, 1962 are specified in the First and Second Schedules of Tariff Act. Section 3 of the Tariff Act deals with the levy of ''additional duty equal to excise duty". Sub-s.(l) thereof provides that any article which is imported into India shall in addition be leviable to a duty equa 1 to the excise duty for the time being leviable on a like article if produced or manufactured in India and if such excise duty on a like article is leviable at any percentage of its value, the additional duty to which the lmported article shall be so liable shall be calculated at that percentage of the value of the imported article. The expression "the excise duty for the time being leviable on a like article if produced or manufactured in India", according to the Explanation in the section, means, the excise duty for the time being in force which would be leviable on a like article if produced or manufactured in India or if a like article is not so produced or manufactured which would be leviable, on the class or description of article to which the imported article belongs, and where such duty is leviable at different rates, the highest duty. A B c D On June 25, 1977 the Central Goverment issued ".'Jotification No. 97 under s. 25 of the Customs Act 1962, eKempting article;; other than copper waste and scrap and unwrought copper (refined or not) falling under Headini: E No. 74.01/02 of the First Schedule to the Customs Tariff Act, 1975) (51of1975) when imported into India, from so much of duty of customs leviabJe thereon which is specified in the First Schedule as is in excess j of 40 per cent ad valorem. Another Notification No. 156 was issued by the Central G ## Text _Characters 0–39,834 of 69,859. This is a partial read: ask again with offset=39834 for what follows._ A B c D E F G H 750 KHANDELWAL METAL & ENGINEERING WORKS AND ANOTHER ETC. v. UNION OF INDIA AND OTHERS June 11, 1985 [Y.V. CHANDRACHUD, C.J., R.S. PATHAK AND SABYASACHI MUKHARJI, JJ.) Customs Act 1962. Section 12 & Customs Tariff Act 1975, Se~tlon 3(1}- "Additiona/ duty'- Whether in the nature of a counter-vai/ing duty-Import of bras1 scrap-Test of taxabilit.r-lmported brass scrap-" like Arlicle if produced or ma11JJ/actured in lndia'-Meaning of-Taxable event ls whether import and not manufactured in India-Whether nature and quality of goods imported relevantWhether imported brass scrap need be capable of being produced or manufactured in India.....:...Manufacturing process-ivhat is-Being a bye-product of manufacturing process-Whether liable to duty-Sections 2. 25, Isl Schedule, (Import Tari.ff') Chapter 14, Heading 74.01/02, RU/es/or interpretation of the Isl Schedule. Rules I lo 4, Notes 2 Section XV of t!te Isl Schedule', Notes 3 and 4-'Copper waste and scrap'-Whether brass scrap is comprehended wilhin the expression and wJ,,ther i.s •master alloy•- whether imported brass scrap entitled to exemption under Notification No. 97 dated June 25 1977. Customs Tariff Act 1975-1 st Schedule (Import Tariff). Chapter 74, Head· Ing 74.01/02-Classiftcatlon of goods under import tariff-Contemporary notifict;- tlon-Whether can be relied upon-Rules of Interpretation-Whether should have precedence over other aids of interpretation-Rules for interpretation of the /st Schedule-Rule.s 1 to 4-Appllcation of. Central Excises and Salt Act 1944, Section 3(1) Schedule I, Ent,y 26A Clause (lb}-Whether ultra vires Section 3(1)-Whether within the legislat/1e comptence of Parliament. / Words and phrases-'Brass Scrap'-•Copper waste and scrap'rMmter al/oy'-Meaning of. Section 2(1.5) of the Customs Act, 1962 defines •"duty'' to mean a duty of customs leviable under the Act. Chapter V of the Act contains provisions for the levy of, and exemption from, customs duties. Bys. 12(1) of the Act. "Except otherwise provided in the Act or in any other Jaw for the time being In rori;e'', t)uties or customs shall be levied at such rates as may be specified KHANDELWAL METAL WORKS V. l'NION 751 under the Customs Tariff Act, 1975 or under :iny other law for the time being in force, on goods imported into or exported from India. Section 25 of the Customs Act, empowers the Central Governn1ent to grant ex.en1ption from the payment of Customs duty. The rates at which duties of customs shall be levied under the Customs Act, 1962 are specified in the First and Second Schedules of Tariff Act. Section 3 of the Tariff Act deals with the levy of ''additional duty equal to excise duty". Sub-s.(l) thereof provides that any article which is imported into India shall in addition be leviable to a duty equa 1 to the excise duty for the time being leviable on a like article if produced or manufactured in India and if such excise duty on a like article is leviable at any percentage of its value, the additional duty to which the lmported article shall be so liable shall be calculated at that percentage of the value of the imported article. The expression "the excise duty for the time being leviable on a like article if produced or manufactured in India", according to the Explanation in the section, means, the excise duty for the time being in force which would be leviable on a like article if produced or manufactured in India or if a like article is not so produced or manufactured which would be leviable, on the class or description of article to which the imported article belongs, and where such duty is leviable at different rates, the highest duty. A B c D On June 25, 1977 the Central Goverment issued ".'Jotification No. 97 under s. 25 of the Customs Act 1962, eKempting article;; other than copper waste and scrap and unwrought copper (refined or not) falling under Headini: E No. 74.01/02 of the First Schedule to the Customs Tariff Act, 1975) (51of1975) when imported into India, from so much of duty of customs leviabJe thereon which is specified in the First Schedule as is in excess j of 40 per cent ad valorem. Another Notification No. 156 was issued by the Central Government F on July 16, 1977 by which copper waste and scrap falling under the same heading were exempted from so much of the duty of customs leviable thereon which is specified in the First Schedule, "as is in excess of 80 per cent ad valorem". The appellants carry on the business, of in1porting brass scrap from other countries. According to them they are liable to pay customs duty at the rate of 40 per cent only by reason of the ex~mption granted by the first notification while as per the respondent.Union Government tl1ey are liable to pay duty at the rate of 80 per cent since the secor,d notification is attracted. The appellants filed Writ Petitions under Art, 226 of the Constitution and the same were dismissed by the f!igh Court. G H A B c D E F 752 SUPREME COURT REPORTS (1985] SUPPL. s.c.R. Jn the appeals to this Court it was contended on behalf of the appel· Iants : (l) that the 'additional duty' of customs, which is in the nature of countcrvai1ing duty, cannot be levied on brass scrap because, such scrap which consists of damaged brass articles like taps and pipes, is not "manufactured" in India (or elsewhere), as indeed it cannot be and (2) that they arc liable to pay duty of customs on the brass scrap at the rate of 40 per cent only and not at the rate of 80 per cent because, brass scrap is a 'master alloy.• Dismissing the Appeals and the Special Leave Petitions, HELD: 1. Notification No. 156 of July 16, 1977 exempts copper waste and scrap from so much of the duty of customs as is in excess of 80 per cent ad valorem. Since brass scrap is includible in the expression 'copper waste and scrap' and since, brass scrap is not a 'Master a11oy', the appellants' case would fall under this notificatioa. Accordingly, they would be entitled to exemption from customs duty to the extent of 20 per cent only. [774 C-DJ 2. The charging section is s 12 of the Customs Act, 1962 and nots. 3(1) of the Customs Tariff Act, 1975. Section 12 of the Customs Act incorporates the different ingredients embodied in the concept of a fiscal imposition. It levies a charge, it indicates the taxable event (the import or export of goods) and it indicates the rate of the levy. The rates are such "as may be specified under the Customs Tariff Act 1975". Section 2 of the Tariff Act lays down that "the rates at which the duties of customs shall be levied under the Customs Act are Gpecified in the first or Second Schedules." The scheme incorporated in s.12 of the Customs Act read with s.2 of the Tariff Act is analogous to the scheme embodied in s.4, Income Tax Act read with the relevant provisions of the Finance Act. The levy specified in s.3(1) of the Tariff Act is a supplementary levy, in enhancement of the levy charged by s.12 of the Customs Act and with a different base constituting the measure of the import. The •additional duty' which is mentioned in s.3(1) of the Tari:tf Act is not in the nature of countervailing duty. [758 G·H; 759 A·q Ashok Service Centre v. State of Ori"•· [1983] 2 SCR 363, relied upon. 3. Under s.12 of the Customs Act duty is leviable on the taxable event of export of goods from India or the import of the goods into India, which is relatable to Entry No. 83 is List I of the Seventh Schedule to the Constitution. The taxable event is not the manufacture of the goods. Under s.3(1) of Tartiff G Act, "the excise duty for the time being leviable on a like article if produced or manufactured in India" is only the measure of the duty leviable on tho imported article. Section 3(1) does not require that the imported article should be such as to be capable of being produced or manufactured in India. [761 F-HJ ff 4. Th~ provisions contained in Explanation to s.3(1) of the Tariff Act make it clear that the duty referred to in s.3(1) of the Tariff Act does not bear any nexus with the nature and qualit~ of the ~oods imported in to India. [762 A-Cj .. .' ,. ti KHANDELWAL METAL WORKS 1. UNION 753 5. Section 3(5) of the Tariff Act which provides, that the duty "chargeable under this section'' shall be in addition to any other duty imposed under A the Act, docs not help s.3(1) becoming a charging provision. The word 'chargeable' occuring in sub·s. (5) has to be read alongwith the expression "imposed under this Act". Section 2 of the Tariff Act does not charge a duty but only prescribes the rates of duty leviable under s.12 of the Customs Act. Besides, s.3(5) of the Tariff Act refers not merely to any other duty imposed und'°r the Tariff Act but also •'under any other law for the time being in force", B which would include s.12 of the Customs Act. Therefore, in the instant case, it cannot be said that s.3(1) of the Tariff Act is not attracccd because the damaged articles, which are in the nature of brass scrap, are outside the scope of that Act since, such articles are not and cannot be produced or manufactured. [762 C·F] 6. (i) Even if the duty "chargeable" under s.3(1 J of the Tariff Act is a countervailing or counterbalancing duty, the brass scrap imported by the appellants will attract the charge on that basis also. The damaged goods of brass, which are compendiously called 'brass scrap!, can come into existence during the process of manufacturing brass articles and such brass scrap has an established market in l ndia. The scrap is re-cycled for extracting metal and since excise duty is payable on such scrap, the imported brass scrap is subjectted to the additional duty in order that indigenous brass scrap may not suffer in competition with the imported brass scrap. The true test is as to what is the description of the articles imported. [762 G-H; 763 A-C} (ii) The limited inquiry which has to be made is whether brass scrap can come into being during the process of manufacture. If the answer is in the affirmative, the imported brass scrap will be chargeable to additional duty in accordance with• 3(1) of the Tariff Act. [763 C-E] 7. Jn the instant case, the appellants claim that the goods imported by them fall in the class of 'master alloy' is against the tenor of their own documents. The appellants imported the articles under Open General Licence in pursuance of Entry 44 of Appendix 10 of the 'Import Policy'. Jhey could not have been granted permission to import ·master alloy' under the Open General Licence because under the OGL the import of brass scrap was permissible at the relevant time but not of any •master alloy'. [765 E-GJ 8. An 1a1Ioy' is a substance possessing metallic properties and composed of two or more elements of which at least one must be a metal. A ·master alJoy' js generally called a foundry alioy for the simple reason that it is an alloy used for adding elements in the foundry. Brass scrap does not square with that description and use. It is not an alJoy of mixture of elements used for introducing desired elements into melten metals in the foundry. Brass is but ~~ ~Uoy of copper ~n4 JOin, an4 is complete and finished prod9\:t by c D E F G H A B c D E F G 754 SUPRllMB COURT REPORTS (1985] SUPPL. S.C.R itself. Brass or brass scrap is not used as a raw ffiaterial in the manufacture of other alloys, therefore, it is not a master alloy. The appellants cannot claim the benefit of Notification No. 97 dated lune 25, 1977 on the basis that brass scrap is a master alloy. (767 G-H; 770 C-D 768 C-D; 770 F-GJ "A Dicllontry of Metallurgy by A.D. Merriman". "Materials Handbook" by George S. Brady,• World Trade and the law of Gatt' by John H. Jackson, Ed. 1969. Henderson's •Mettal/urgical Dictionary,' Osborne's 'Encyclopaedia of the Iron and Sttel Industry', Encyclpoaedia Britannica, referred to. 9. The question of classification of goods under the 'Import Tariff' cannot be decided by implications, when there are Rules of Interpretation which are specifically framed to aid and assist the classification of goods under appropriate Heading. Those rules must have precedence over other aids of interpretation. [774 B·C] Desh Bandhu Gupta v, Delhi Srock Exchange Association, [1979] 3 SCR 373, K.P. Verghese v. I.T.0, [1982] 1 SCR 629 referred to. 10. R•1le 1 of the Rules for the Interpretation of the First Schedule (Import Tariff) to the Tariff Act, 1975 provides that classification has to be determined according to the provisions of the Rules unless, a particular Heading or Note excludes the application of the Rules other than Rule I. In the instant case, the terms of the Heading No. 74.01/02 by themselves, yield an answer to the question whether copper waste and scrap includes brass scrap and the Heading does not require or provide that the other rules should be excluded while detern1ining the classi~ fication of articles under the Heading. That is how Rules 2 to 4 become relevant for deciding the question whether 'copper waste and scrap' includes brass scrap. By reason of the concluding part of Rule 2(b) classification of goods consisting of more than one material or substance shall be according to the principles contained in Rule 3. Applying the principle contained in Rule 3(b) brass is a mixture of copper and zinc, usually in the proportion of 60:40 but. in which the component of copper may be anywhere between 67 per cent and 70 per cent. Since copper gives its •essential character• to brass, brass scrap has to be classified as 'copper waste and scrap• within the meaning of Heading No. 74.01/02. Even if it is assumed that brass scrap does not fall within any Heading of the First Schedule, Rule 4 would yield the same result because Rule 4 provides that goods not falling within any Heading of the First Schedule shall be classified under the Heading appropriate to the aoods to which they are most akin. Brass, unquestionably, is most akin to copper ind, therefore, brass scrap bas to be classified as 'Copper Waste and Scrap'. (772 A-H; 773 A-CJ ff 11. Clause (a) of Note 3 of Section XV of the First Schedule (Import Tariff) provides that an alloy of base metals is to be classified as an alloy of the metal which predominates by weight over each of the other metals. Since bra~~ i~ a:n allor of copper and ~inc in which copper pred,om~n~~~~ b)' weight, - KHANDELWAL METAL WORKS v. UNION 755 brass has to be classified as an alloy of copper. According to Note 4, unless the context otherwise requires any reference in the First Schedule to a base metal is to be taken to include a referenc to alloy which by virtue of Note 3, is to be classified as alloys of that metal. Heading No. 74.01102 of the First Schedule refers to waste copper and scrap. Copper is a base metal. Reference to coppr in that heading would include reference to brass since, by virtue of Note 3, brass· has to be classified as an alloy of copper. Therefore, •copper waste and scrap' includes brass scrap. [773 C-F) 12. Considerations based on documents issued by the Merchants' Association and upon extracts from 'Indian Standard Coding and Classification for non-ferrous scrap metals' showing that brass scrap and copper scrap are regarded as distinct and separate items for commercial purposes cannot furnish a true answer to the· question, because the distinguish in& feature is brass and copper are not mentioned as separate items in the Import Tariff. (773 F-H I 13. (i) Imposition of excise duty on 'waste and scrap', referred to in CJ. l(b) of Entry 26A of the First Schedule to the Central Excises and Salt Act, 1944 is not ultra vires s. 3 of that Act. Section 3 provides for levy of excise dut) on all exciseable goods produced or manufactured in India. The production of waste and scrap is a necessary incident of the manufactruing process. Waste and scrap are the bye-products of the manu~ facturing process. Sub-standard goods which are produced during the process of manufacturing may have to be disposed of as 'rejects' or as scraps. But they are still the products of the manufacturing process. (774 D-H] (ii) 'Intention• is not the gist of the manufacturing process. {774 HJ 14. Section 2~d) of the Act of 1944 defines 'excisable goods' to n1ean good s which are specified in the First Schadule as being subject to a duty of excise under s. 3 of the Act .The goods mentioned in the First Schedule will attract excise duty under s. 3 only if they are manufactured in India and not otherwise. Entry 26A (lb) of the First Schedule of the Act of 1944 cannot be held to be beyond the legislative competence of the Parlian:,ent because the precondition of the excisability of the articles mentioned therein, namely, waste and scrap is in the manufacturability of those articles. Since the production of waste and scrap is an integral part and an inevitable incident of the manufacturing process, Parliament has the legislative competence to make •waste and scrap' excisable under Entry 84 of List 1 of the Seventh Schedule to the Constitution. Parliament would even otherwise have the legislative competence to pass the law by "irtue of Article 248 read with the residuary Entry 97 of List I, because the subject matter of Legislation does not fall within List JI, the State List. [775 A-El Second Gift Tax Officer, Managalore v. D.H. Nazareth [1971] l S.C.R 195 ~n\l Union of India v. H.S. Dhillon [1972) 2 SCR 33 fol!owe4. A 8 c D E G H A B c D E F G H SUPREME COURT REPORTS (1985) SUPPL. s.c.a. The Hinglr·Rampur Coal Co. Ltd. v. The State of Orlssa (1961] 2 SCR 537, Kalyoni Stores v. The State ofOrissa [1966] SCR 865, I A.B. Abdul Kadlr v. State of Kera/a (1976} 2 SCR 690 and Mc. Dowell & Company Ltd. v. Com· merceial Tax Officer, VII Circle, Hyderabad [1977] SCR 914 referred to. CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 338-349 of 1983 etc etc. From the Judgment and Order dated 19th October, 1982 of the Delhi High Court in Civil Writ Petitions Nos. 2684, 2685, 2686, 1687, 2688, 2724, 2725, 2507, 2508, 2509 and 1432 of 1981. R.N. Bajoria, Soli J. Sorabji, Anil B. Dewan, Gobind Dass, A.K Sen. I.R. Gupta, M.M. Abdul Khadar, S.K. Bagaria, Kamal Persul'am Puria, A.M. Shah, V.N. D~shpande, E.C. Agarwala, R. Sathish, Vijaya Pandlta, Prakash Mittal, Madan Sharma, Ra~inder Narain, O.C. Mathur, J.B. Dadachanji, Talat Ansari, D.N. Mishra, Barish Salve, Miss Rainuwa/ia, Ashok Gupta, P.H. Parekh, D.K. Chhaya, Miss Nisha Srivastava, JP. Devadhar, Aruneshwar Gupta, Brij Bhushan, S.P. Mang/a, Rajesh Gupta, J.N. Aggarwal, P.D. Sharma, P.K. Mukherjee, A.S. Pundir, N.D. Garg, P.K. Aggarwal. V.K. Varma, S. Srinivasan, Sushi/ Kumar Jain, M.K D. Namboodiry. R.C. Pathak. Mrs. Rani Chhabra, Mrs. Shobha Dixit. A. T.M. Sampath, K.J. John, Shri Narain, J.N. Aggarwal, B.P. Maheshwari. Miss Halida Khatun, R.S. Suri, S.K. Dholakia, Altaf Ahmad, G.D. Rawal, Shyam Moorjani Kai/ash Vosdev, C.S. Vaidyanalhan. D.D. Sharma, B. Parthasarthi, S.S. Shroff, Mrs. Pa//avi Shiraf. D.P. Mohanty, S.A. Shroff, Subhash Parekh, A.K. Sanghi. S.N. Parekh, Vijay Pandita, Madan Sharma, R.D. Upodhya, Mrs. Hemantika Wahi, Janendra Lal, B.R. Agarwala, Mias v. Menon, A.K. Goel, K. Dileep and M.A. Feroz, for the Appellants/Petitioners. K. Parosaran, Solictor General, M.K Banerjee, Additional Solictor General, A.K. Ganguli, K. Swamy, R.N. Poddar, C. V. Subbarao, Suraj Udai Singh and Miss Halida Khatun for the Respondents. Anil B. Dewan, Abhay M. Shah, V.N. Deshpande, E.C. Aggarwala and V,K. Panditq for the Interveners (lndravanqan Golrnldas Mehta), iiteANDELWAL METAL WORKS'· UNION (Chandrachud, C.J.) 757 The Judgment of the Court was delivered by CHANDRACHUD, CJ : This is a group of Civil Appeals and Special Leave Petitions arising out of a judgment dated October 19, 1982 delivered by a Division Bench of the High Court of Delhi in a batch of Writ petitions filed under Article 226 of the Constitution. Those Writ Petitions having been dhmissed by the High Court, the Writ-petitioners have filed these Appeals and Special Leave Petitions. The facts of the various Writ Petitions naturally vary from case to case but, such variation has no bearing on the points which arise for our decision. We will mention the facts of Civil Appeal Nos. 27-33 of 1983 as a respresentative batch of cases. The two appellants therein are respectively Messers Eastern Engineers, a partnership firm carrying on business at Goregaon, Bombay, and a partner of that firm. For the sake of convenience, we will proceed on the basis that the real appellant is the firm. The appellant carries on the business, inter a/ia, of importing brass scrap from other countries. Its contention is that the 'additional duty' of customs, which is in the nature of countervailing duty, cannot be levied on brass icrap because, such scrap which consists of damaged brass articles like taps and pipes, is not "manufactured" in India (or elsewhere), as indeed it cannot be. The second contention of the appellant is that it is liable to pay duty of customs on the brass scrap at the rate of 40 per cent only and not at the rate of 80 per cent because, brass scrap is a 'master alloy'. The rate of customs duty payable depends upon which of the two Notifications, granting exemption from payment of customs duty, is applicable. These contentions are based on the following provisions of law. Section 2 (15) of the Customs Act, 1962 defines "duty" to mean a duty of customs Ieviable under the Act. Chapter V of the Act contains provisions for the levy of, and exemption from, customs duties. By section 12 (I) of the Act, "Except as otherwise prcvided in the Act or in any other law for the time being in force", duties of customs shall be levied at such rates as may be specified under the Customs Tariff Act, 1975 or under any other law for the time being in force, on goods imported into or exported from India. Section 25 of the Customs Act, which deals with the power of the Central Government to grant exemption from the payment of A B c D E F G H A B c D E F G H 758 SUPIU!Mll COURT REPORTS [198S] SUPPL. s.c.il. cutsoms duty, provides by sub-section (I) that, if the Central Govern· ment is satisfied that it is necessary in the public interest so to do, it may, by a notification in the Official Gazette, exempt generally, either absolutely or subject to such conditions as may be specified, goods of any specified description from the whole or any part of the duty of customs leviable thereon. Section 2 of the Customs Tariff Act, 1975 says that the rates at which duties of customs shall be levied under the Customs Act, 1962 are specified in the First and Second Schedules of the Tariff Act. Section 3 of the Tariff Act deals with the levy of "additional duty equal to excise duty". Sub-section (I) of section 3 and the Explanation to that section, which are relevant for our purpose, read thus : "Levy of additional duty equal to excise duty. (!) Any article which is imported into India shall, in addition be liable to a duty (hereafter in this section referred to as the additional duty) equal to the excise duty for the time being leviable on a like article if produced or manufacred in India and if such excise duty on a like article is leviable at any percentage of its value, the additional duty to which the imported article shall be so liable shall be calculated at that percentage of the value of the imported article. ExplanationIn thjs section the expression "the excise duty for the time being leviable on a like article if produced or manufactured in India" means the excise duty for the time being in force which would be leviable on a like article if produced or manufactured in India or, if a like article is not so produced or manufactured which would be leviable on the class or description of article to which the imported article belongs, and where such duty is leviable at different rates, the highest duty." The question which we must first examine is as to what is the tr 1e nature of the duty mentioned in section 3 (1) of the Tariff Act. It has to be appreciated at the threshold that the charging section is section 12 of the Customs Act and not section 3 (!)of the Tariff Act. Section 12, Customs Act, incorporates the different ingredients embodied in the concept of a fiscal imposition. It levies a charge, KHANDELWAL METAL WORllS v. UNION (Chandrachud, C.J.) 759 it indicates the taxable event (the import or export of goods ) and it indicates the rate of the levy. The rates are such "as my be specified A under the Custom Tariff Act, 1975". The last ingredient takes us to section 2, Tariff Act, which lays down that "the rates at which the duties of customs shall be levied under the Customs Act are specified in the First or Second Schedules". Nothing more would be ordi· narily required to complete the scope of section 12, Customs Act. The B scheme incorporated in that section read with section 2 of the Tariff Act is analogous to the scheme embodied in section 4, Income Tax Act read with the relevant provisions of the Finance Act. The levy specified in section 3 (J) of the Tariff Act is a supplementary levy in enhancement of the levy charged by section 12 of the Customs Act and with a different base constituting the measure of the impost. C In other words, the scheme embodied in section 12 is amplified by what is provided in sction 3 (1). The customs duty charged under section 12 is extended by an additional duty confined to imported articles in the measure set forth in section 3 (I). Thus, the additional duty which is mentioned in section 3 (I) of the Tariff Act is not in D the nature of countervailing duty. In Ashok Service Centre v. State of Orissa,(1) which considered the nature of levy of additional sales· tax under an Orissa Act, this Court observed : "This construction receives support from the use of the word 'additional' in section 3 (I) which involves E the idea of joining or uniting one thing to another so as thereby to form one aggregate. (See Black's Law Dictionary ). The gross turnover referred to therein should therefore be understood as that part of the gross turnover which is taxable under the principal Act." F (page 380). Counsel for the appellants rely strongly on the 'Objects and Reasons' of section 3 of the Tariff Act in support of their contention that the said section is a charging section and imposes a countervail· ing duty. The Statament of Objects and Reasons says : G "Clause 3 provides for the levy of additional duty on an imported article to counterbalance the excise duty leviable on the like article made indigenously, or on the H indigenous raw materials, components or ingredients (I) [1983] 2 S.C.R. 363. A B c D E F G H '160 stJPP.Ei.!~ coui>.T REPORTS (1985) SUPPL s.c.R. which go into the making of the like indigenous article. This provision corresponds to section 2-A of the existing Act, and is necessary to safeguard the interests of the manufacturers in India." This Statement lends prima facie support to the contenion of the appellants but, in the absence of any ambiguity in the wording of section 3 (I), we cannot treat the additional duty referred to therein as countervailing duiy, Nor, indeed, can we regard that provision as a charging section merely because the Statement says that section 3 "provides for the levy". The Statement of Objects and Reasons errs in being common to sub-sections (I) and (3) of section 3. It is more apposite to sub- section (3) though, even there, it may not be correct to say that it is a charging provision. Sub-section (3) confers power on the.Central Government, in public interest, to levy on any imported article "such additional duty as would counterbalance the excise duty leviable on any raw materials, components and Ingredients of the same nature as, or similar to those used in the production or manufacture of such article", whether on such article, duty is leviab:e under sub-section (1) or not. Since we are not concerned directly with sub-section (3), we will not pronounce upon its meaning and implications. In this view of the matter, it is unnecessary to consider the various decisions cited at the Bar on the nature and connotation of 'countervailing duty'. We are unable to acecpt the argument of the appellants that section 3 (1) of the Tariff Act is an independent, charging section or that, the 'additional duty' which it speaks of is not a duty of customs but is a countervailing duty. That leads to the inquiry as to the reason or purpose behind the argument that section 3 (1) of the Tariff Act is an independent, charging section. It shall have been noticed that section 3 (!)provides that any article which is imported into India shall, in addition, (that is, in addition to the duty of customs for which rates are specified in section 2 ) be liable to an additional duty "equal to the excise duty for the time being leviable on a like article produced or manufactured in India". The contention of Mr. Sorabjee, who appears on behalf of the appellants, is that the brass scrap imported by them is not produced or manufactured in India because the damaged articles of brass which constitute brass scrap, are not only incapable of being manufactured but are in fact not manufactured. Learned ' kiiANDELWAL MEfAL WORKS v. uNioN (Cirandrachud, C.J.) 76i counsel contends that if the change in the condition of an article is the result of an accidental event, that is to say, an event not intended or if the change is the result of ordinary wear and tear, the change thus produced cannot be termed as manufacture. It is urged that the articles imported by the appellants are what they are because, they had suffered damage or had been subjected to ordinary wear and tear in the natural course. If such goods cannot be produced or manufactured in India for the reason that they cannot be and are, in fact, not produced or manufactured in India, or for the matter of that anywhere, no additional duty can be levied upon them under section 3 (!). According to the learned counsel, the basic postulate underlying the levy of duty under section 3 (I) of the Tariff Act Is that indigenous goods belonging to the class of goods which are chargeable to excise duty. The illustrations given are the import of live animals, live trees burnt up cables, broken glass or fused bulbs. The argument is that there is and can be no levy of additional duty on these goods if imported because they cannot be and are not manufactured for the simple reason that they are not the result of treatment, labour and manipulation, nor are they the result of one or more processes through which the original commodity is made to pass. Putting it in one sentence, the argument is that if indigenous goods, similar to those which are imported, do not suffer excise duty for the reason that they are not manufactured, the charge leviable under section 3 (I) of the Tariff Act is not attracted. There is no substance in this argument. In the first place, as we have indicated earlier, sections 2 and 3 (I) of the Tariff Act are not charging sections. The charging section is section 12 of the Customs Act under which, duty is leviable on the taxable event of export of goods from India or the import of goods into India, which is relatable to Entry No. 83 in List I of the Seventh Schedule to the Constitution : "Duties of Customs including export duties". The taxable event is not the manufacture of the goods. Under section 3 (I) of the Tariff Act, "the excise duty for the time being leviable on a like article if produced or manufactured in India" is only the measure of the duty leviable on the timported article. Section 3 (I) does not require that the imported article should be such as to be c~pable of being produced or manufactured in India. The assumpt10n has to be .that an article imported into India can be produced or ma?ufactured in India and upon that basis, the duty has to be determmed under section 3 (I). A B c D E F G H A 8 c D F G H 762 SUPREME COURT REPORTS (198S) SUPPL. S.C.R. Any doubt on thls point is resolved by the Explanation to section 3 (I) of the Tariff Act. The Explanation furnishes a dictionary for the interpretation of seciion 3 {I) and provides a clue to its understanding. The Explanation provides in so many words that the expression "excise duty for the time being leviab!e on a like article if produced or manufactured in India" means "the excise duty for the time being in force which would be le viable on a like article if produced or manufactured in India" (emphasis supplied). The Explanation even goes further and provides that if a like article is not so produced or manufactured, then, the duty leviable means the duty which would be leviab!e on the class or description of articles to which the imported article belongs. These provisions leave no doubt that the duty referred to in section 3 (I) of the Tariff Act does not bear any nexus which the nature and quality of the goods imported into India. Section 3 (5) of the Tariff Act which provides, inter alia, that the duty "chargeable under this section" shall be in addition to any other duty imposed under the Act, cannot be pressed into service in support of the contention that section 3 (!)is in the nature of a charging provision. The word 'chargeable' which occurs in sub-section ( 5) has to be read along with the exprossion "imposed under this Act". Section 2 of the Teriff Act does not charge a duty but only prescribes the rates of duty Ieviable under section 12 of the Customs Act. Besides, section 3 (5) of the Tariff Act refers not merely to any other duty imposed under the Tariff Act but also "under any other law for the time being in force," which could include section 12 of the Customs Act. For these reasons, we must reject the argument of Mr. Sorabjee and of the other learned Counsel for the appellants that section 3 (1) of the Tariff Act is not attracted because, the damaged articles, which are in the nature of brass scrap, are outside the scope of that Act since, such articles are not and cannot be produced or manufactured. Looking at the matter from a different point of view, the brass scrap of the kind imported by the appellants is a by-product of the manufacturing process. Such goods can and do come into existence as waste articles or rejected articles during the process of manufacturing that class of articles. Indeed, brass scrap is known in commercial parlance by that name and is excisable as such. Assum· ing for the sake of argument that the appellants, contention is correct that the duty "chargeable" under section 3 ( 1) of the Tariff KHANDELWAL METAL WORKS v. UNION (Chandrachud, C.J.) 763 Act is a countervailing or a counterbalancing duty, the brass scrap imported by the appellants will attract the charge on that l:>asis also. As stated above, damaged goods of brass, which are compendiously called 'brass scarp', can come into existence during the process of manufacturing brass articles and such brass scrap has an established market in India. The scrap is re-cycled for extracting metal. Since excise duty is payable on such scrap, the imported brass scrap is subjected to the additional duty in order that indigenous brass scrap may not suffer in competition with the imported brass scrap. The argument that the articles imported by the appellants have been reduced to scrap by reason of damage, wear and tear, is qute irrelevant. The true test is as to what is the description of the articles imported. If the articles are brass scrap, the limited inquiry which has to be made is whether brass scrap can come into being during the process of manufacture If the answer is in the affirmative, the imported brass scrap will be chargeable to additional duty in accordance with section 3 (I) of the Tariff Act. Having disposed of the contention as to whether the duty mentioned in Section 3 (l) of the Tariff Act, whether one calls it additional duty or countervailing duty, is leviable on the brass scrap imported by the appellants, the next question for consideration is as to whether the appellants are liable to pay excise duty on the brass scrap at the rate of 40 per cent or at the rate of 60 per cent. The answer to this question depends upon which of the two notifications, notification No. 97 dated June 25, 1977 and notification No. 156 dated July 16, 1977, is applicable. It is undisputed that excise duty is payable on the brass scrap imported by the appellants, the only controversy being as to the rate of duty payable. Section 25 of the Customs Act, as stated earlier, empowers the Central Government, in public interest to exempt goods of any specified description from the whole or any part of the Customs duty leviable thereon. The First Schedule called "Import Tariff" to the Tariff Act, which is referrable to section 2 of that Act consists of one-hundred chapters divided into XXII sections. Each chapter bears a broad heading of the articles comprised therein. Chapter 7 4 which bears the heading ',Copper and articles thereof," contains six headings, the first of which reads thus: A B c D E F G A. B c D E F G H 764 \ SUPREME COURT RErORTS [i9s5j SUPPL. s.c.Ji. Heading No. Sub·headiitg 7 4.01/02 Copper matte; Unwrought copper (refined or not); copper waste and scrap; master alloys. · Standard Rate of Duty (a) 100% Central Excise Tari.ff Item 26A On June 25, 1977, the Central Government issued Notification No.