Holding

Stainless steel circles are a distinct form not covered by the term “sheet” in Note (n); therefore, for imports prior to 1 January 1981 they are classified under Tariff Heading 73.15(1) and not under 73.15(2).

Summary

The appellants imported stainless steel circles in October 1980 and were assessed customs duty under Tariff Heading 73.15(2), which carried a higher rate. They contended that circles should be classified under the residuary sub‑heading 73.15(1) at a lower rate. The Customs, Excise and Gold (Control) Appellate Tribunal rejected this view, holding that circles are covered by the term “sheet” in Note (n) to Chapter 73 and therefore fall under 73.15(2). The Supreme Court examined the meaning of “sheet”, the scope of Note (n), and the effect of the Customs Tariff Amendment Act, 1982 (retrospective from 1 January 1981). It held that a circle is a distinct form, not a sheet cut to a non‑rectangular shape, and that before 1 January 1981 circles were not included in 73.15(2). Accordingly, the circles must be classified under 73.15(1). The Court also directed that refund applications be dealt with according to the ratio in Mafatlal Industries Ltd. v. Union of India. The appeal (Civil Appeals 1744‑45 of 1988) was allowed, while the later appeals were dismissed.

Issues considered

Whether stainless steel circles fall within the definition of “sheet” under Note (n) to Chapter 73 and thus are classifiable under Customs Tariff Heading 73.15(2).
Whether the Customs Tariff Amendment Act, 1982, with retrospective effect from 1 January 1981, applies to imports made before that date.
What is the correct procedure for refund of customs duty where the classification is contested.

Legislation cited

Customs Tariff Act, 1975

Subjects

customs dutytariff classificationstainless steel circlesinterpretation of statutesbenefit of doubtrefund of dutyCustoms Tariff Amendment ActNote (n) sheet definition

Judgment

CHHEDA INDUSTRIES A
v.
COLLECTOR OF CUSTOMS, MADRAS

MARCH 25, 1997

(S.C. SEN AND SUJATA V. MANOHAR, JJ.] B

Custom Tariff Act, 1975 :

Tanff Heading-73.15(1) or 73.15(2) (prior to 1.1.1981}-"Stainless
steel circles''--Classification of-Held : Classifiable under Tariff Heading C
73.15(1) and' not under Taiiff Heading 73.15(2}-These were not covered by
the tenn "sheet" occuning in Note l(n) to Ch. 73 and Tariff Heading 73.13.

Refund of duty-Claim-Procedure for-Held : To be processed in
accordance with the ratio of Mafatlal Industries' case.
D
Interpretation of Statutes :

Taxing Statutes-Inte1pretation of-Held : Benefit of doubt relating to
interpretation must go to the taxpayer.

Words and Phrases : E
"Sheet"-Meaning of-Jn the context of-Note 1 (n) to Chapter 73 of
the Customs Tariff Act, 1975.

The appellants imported stainless steel circles for which customs
duty was levied under customs Tariff Heading 73.15(2). The appellants F
contended that the said stainless steel circles were classifiable under Tariff ·
Entry 73.15(1). The Customs, Excise and Gold (Control) Appellate
Tribunal rejected the appellant's contention. Hence this appeal.

On behalf of the respondent-Revenue it was contended that a circle G
is nothing but a "sheet" which was cut to a non-rectangular shape within
the meaning of Note l(n) to Chapter 73 of the Customs Tariff Act, 1975;
the same would, therefore, be covered by Heading 73.13. and that in
sub-heading 73.15(2) "sheet" would also cover a circle.

Allowing the appeal, this Court H
343
344 SUPREME COURT REPORTS (1997) 3 S.C.R.

A HELD : 1.1. A sheet is basically a very thin and broad piece of any
substance normally of a regular shape. Hence, Note l(n) to Chapter 73 of
the Customs Tariff Act, 1975 expressly includes a sheet cut into a non-rec·
tangular shape. A stainless steel circle has a distinct shape and form of
its own quite different from a sheet. [347-H)

B Webster's Comprehe11sive Dictio11ary, referred to.

1.2. Since forms, which are not specifically set out in Tariff Heading
73.15(2), will have to be classified under 73.15(1), circles of stainless steel
will have to be classified under Heading 73.15(1). Note l(n) does not
C provide much assistance in this connection. In respect of Heading 73.13,
which deals with sheets and plates, the Note says that sheets or plates,
which have been cut to non-rectangular shapes, will also be classified as
sheets, or plates. But when stainless steel is in the form of a circle, it
assumes a specific form and it cannot be treated if merely as a stainless
steel sheet, which has been cut to a non-rectangular shape. It has a specific
D form of its own. [348-E-F)

1.3. The Customs Tariff Amendment Act of 1982 whereby angle,
shapes, sections and circles of stainless steel are added to Tariff Heading
73.15(2) is given retrospective•effect from 1.1.1981. Therefore, prior to
E 1.1.1981 angles, shapes, sections and circles of stainless steel were not
covered under Sub-heading (2) of Hi;_ading 73.15. It is a well-established
principle of interpretation of taxing statutes that the benefit of any doubt
relating to interpretation must go to the taxpayer. [349-A-B]

Ve11kateshwara Stai11less Steel & Wire l11dust1ies v. Union of I11dia,
F (1991) 53 ELT 312 (Mad.), approved.

Super Traders & A11r. v. U11ion of India, (1983) ELT 258 (Del.),
overruled.

2. Refund applications by the assessees have to be processed in
G accordance with the ratio of Mafatlal Industries case. [349-G)

Mafatlal Industries Ltd. v. Union of India, (1996) 9 SCALE 457,
referred to. l
j
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 1,744-45
H of 1988 Etc.
CHHEDA INDS. v. COLLECTOR OF CUSTOMS [MRS. S. V. MANOHAR, J.] 345

From the Judgment and Order dated 23.12.86 of the Customs Excise A
and Gold. (Control) Appellate Tribunal, New Delhi in A. No. 896 and 1100
of 1981-B2 (Order No. 1344-45 of 1986-B2)

N.D. Garg for the Appellant.

, N.K. Bajaj, S.A. Matto, V.K. Verma and P. Parmeswaran for the B
Respondents.

The Judgment of the Court was delivered by

MRS. SUJATA V. MANOHAR, J. The appellants in Civil Appeal C
Nos. 1744-45 of 1988 are importers of stainless steel circles. The appellants
have filed the present appeals against an order of the Customs, Excise, and
Gold (Control) Appellate Tribunal holding that stainless steel circles im-
ported by the appellants are classifiable under Customs Tariff Entry
73.15(2) instead under Tariff Entry 73.15(1) as contended by the importers.
The appellants in Civil Appeal No. 10334-36 of 1995 are Union of India. D
They have challenged a decision of the Madras High Court holding that
the stainless steel circles imported by the respondents therein are classifi-
able under Customs Tariff Entry 73.15(1) and not under Customs Tariff
Entry 73.15(2) as contended by the appellants therein. The Madras High
Court has followed an earlier decision of the Division Bench of that court E
in Venkateshwara Stainless Steel & Wire Industries v. Union of India, (1991)
53 E.L.T. 312 (Mad.) in so holding.

All these appeals raise a common question regarding the classifica-
tion of stainless steel circles imported by the assessees. For the sake of
convenience, we are referring to the facts in Civil Appeal Nos. 1744-45 of F
1988.

In or about October 1980 the appellants imported stainless steel
circles. The Customs authorities levied and collected duty on stainless steel
circles so imported under Customs Tariff Heading 73.15(2). The standard
duty of customs under that Heading was 300% which was reduced by G
notification dated 15.7.1977 and the effective duty was 220% which was
levied and collected. The importers contended that the correct classifica-
tion of the goods so imported was under Customs Tariff Heading 73.15(1)
and the rate of duty was 60% which, by reason of the notification dated
18.6.1978, was reduced to 35%. The appellant has lost in the departmental H
346 SUPREME COURT REPORTS [1997] 3 S.C.R.

A proceedings and hence the present appeals.

The relevant Tariff Entry, at the material time, was as follows :

Head- Sub-heading No. & Rate of duty Other Duration
ing No. description of articles. standard UK prefer when rate
B
ential of duty are
areas. protected.
73.15. Alloy steel and high
carbon steel in the
forms mentioned in
c heading Nas. 73.06/07
to 73.14
(1) Not elsewhere
specified. 60% ...... ······ ······
D (2) Coils for re-rolling,
bars (including bright
bars), rods, wire rods,
strips, sheets and
plates of stainless 300% ...... ...... ......
steel.
E
Entry 73.15 sets out that it will cover, inter alia, stainless steel in the
forms mentioned in Heading Nos. 73.06/07 to 73.14. These earlier Headings
73.06/07 to 73.14 deal with iron and steel products. The forms of iron and
steel items which are mentioned in these entries, inter alia, are puddled
F bars, pilings, ingots, block, lumps, coils for re-rolling, bars and rods, angles,
shapes and sections, hoops and strips, sheets and plates and so on. Heading
73.13 deals with sheets and plates of iron or steel, hot-rolled or cold-rolled.
It is divided into two parts : (1) Not elsewhere specified and (2) Tinned
sheets and plates. Circles are not expressly mentioned in any of these
entries. Entry 73.15 which deals, inter alia, with stainless steel, is also
G divided two parts : (1) Not elsewhere specified and (2) Coils for re-rolling,
bars, rods, wire rods, strips, sheets and plates of stainless steel. Sub-head-
ing (2) clearly refers to certain specific forms of stainless steel which are
mentioned therein, namely, coils, bars, rods, wire rods, strips, sheets and
plates. Forms which are not expressly dealt with in the second Sub-heading
H will fall under the first Sub-heading which is in the nature of a residuary
CHHEDAINDS. v. COLLECTOR OF CUSTOMS !MRS. SUJATA V. MANOHAR, J.) 347

Sub-heading covering all types and forms of stainless steel material which A
does not fall under Sub-heading (2).

It is the contention of the department that sheets which are expressly
covered by Sub-heading (2) of Heading 73.15 would cover circles. There-
fore, circles will not fall in the residuary Sub-heading (1) of Heading 73.15.
The department relies upon Note l(n) of the Chapter Note of Chapter 73 B
dealing with iron and steel and articles thereof. Entry 73.15 forms a part
of this chapter. Note l(n) which relates to sheets and plates in an earlier
Heading 73.13, is as follows :

"(n) : 'sheets and plates' (Heading No. 73.13) : c
rolled producl~ (other than coils for re-rolling as defined in
paragraph (k) above) of any thickness and, if in rectangles, of a
width exceeding 500 milimetres.

Heading No. 73.13 is to be taken to apply, inter alia, to sheets D
or plates which have been cut to non-rectangular shape, per-
forated, corrugated, channelled, ribbed, polished or coated,
provided that they do not thereby as.~ume the character of articles
or of products falling within other Headings;"

The second part of Note l(n) states that Heading 73.13 will apply, E
inter alia, to sheets or plates which have been cut to non-rectangular
shapes. The department, therefore, contends that a circle is nothing but a
sheet which is cut to a non-rectangular shape. It will, therefore, be covered
by the term "sheet". Hence in Heading 73.15 also "sheet" in Sub-heading
73.15(2) will cover a circles. F

Webster's Comprehensive Dictionary defines a "sheet" as : (1) a very
thin and broad piece of any substances; that which is or can be spread, as
upon a surface, or can be laid in broad folds; anything having a consider-
able expanse with very little thickness, (2) A large rectangular piece of
linen or cotton cloth, used in making up a bad. (3) A piece of paper, G
especially one of a regular size; hence, a newspaper, or a leaf of a book.
(4) A piece of metal or other substance hammered, rolled, fused or cut
very thin : a sheet of glass. (5) A broad flat surface; superficial expanse :
a sheet of water, a sheet of flame etc. A sheet, therefore, is basically a very
thin and broad piece of any substance normally of a regular shape. Hence H
348 SUPREME COURT REPORTS [1997] 3 S.C.R.

A Note l(n) expressly includes a sheet cut into a non-rectangular shape. A
stainless steel circle has a distinct shape and form of its own quite different
from a sheet. In the case of Ve11kateshwara Stainless Steel & Wire Industries
case (supra), after referring to the Indian Standard Specifications for
stainless steel sheets, coils and circles for utensils and hospital ware, the
Madras High Court has pointed out that in commercial parlance stainless
B
steel circles are a commodity distinct from stainless steel sheets. Their
pricing is also on a different basis (diameter length). The High Court has
also referred to atleast two notifications under the Central Excise Tariff
where a distinction is made between sheets and circles. The first notifica-
tion is in respect of partial exemption to plates., sheets, circles, strips and
C foils produced from old or duty paid scrap. While the second notification
is in respect of aluminium. It grants exemption to aluminium manufactures
containing more than 97% of aluminium. The notification refers to plates,
sheets, circles, strips and foils. Of course these are notifications under a
completely different tariff. We are referring to them only for the purpose
D of showing that sheets and circles have been considered as two different
forms in which a metal can be manufactured of sold.

Since forms which are not specifically set out in Tariff Heading
73.15(2) will have to be classified under 73.15(1), circles of stainless steel
will have to be classified under Heading 73.15(1). Not l(n) does not
E provide much assistance in this connection. In respect of Heading 73.13
which deals with sheets and plates, the note says that sheets or plates which
have been out to non-rectangular shapes \vill also be classified as sheets or
plates. But when stainless steel is in the form of a circle, it assumes a .
specific form and it cannot be treated merely as a stainless steel sheet
F which has been cut to a non-rectangular shape. It has a specific form or
its own.

Tariff Heading 73.15 has been subsequently amended by the Customs
Tariff Amendment Act of 1982 by which Tariff Entry 73.15(2) has been
amended to include circles, angles, sheets and sections in addition to sheets
G and plates of stainless steel. The Statement of objects and Reasons sets
out, "Stainless steel articles not elsewhere specified other than those falling
under Sub-heading (2) fall Sub-heading (1) of Heading 73.15........... The
difference in duty the two Sub-headings is so large that attempts have been
made by some importers to manipulate the description or form of the
H articles in such a ways as to claim a lower rate of duty as has recently
CHHEDA INDS. v. COLLECTOR OF CUSTOMS [MRS. SUJATA V. MANOHAR, J.] 349

happened in the case of stainless steel sheets imported in the guise of A
folded angles and circles ......" The amendment whereby angles, shapes,
section and circles of stainless steel are added to Tariff heading 73.15(2)
is given retrospective effect from 1st of January, 1981. Therefore, prior to
1st of January, 1981 angles, sections and circles of stainless steel were not
covered under Sub-heading (2) of Heading 73.15. They have been so B
included with effect from 1.1.1981. It is a well-established principle of
interpretation of taxing statutes that the benefit of any doubt relating to
interpretation must go to the tax-payer.

The contention of the department that prior to the amendment, sheet
included angles, shapes, sections or circles is difficult to accept for reasons C
we have set out. We are, therefore, inclined to agree with the view taken
by the Madras High Court in Venkateshwara· Stainless Steel & Wire
Industries's case (supra). The Delhi High Court has, however, in the case
of Super Traders and Anr. v. Union of India and Ors., (1983) E.L.T. 258
(Del.) taken a contrary view holding that stainless steel circles are nothing
but stainless steel sheets and are clao;sifiable under Heading 73.15(2). It has D
relied upon Chapter Note l(n) and has held that stainless steel circles are
stainless steel cut to non-rectangular shape. In our view, this is not a correct
reading of Note l(n). A circle is a very specific form in which stainless steel
is marketed. It cannot be treated as a sheet cut to a non-rectangular shape.
Its pricing is also different from that of a sheet. It has a separate form and E
a commercial identity of its own. It would, therefore, not be covered by the
term 'sheet' in Tariff heading 73.15(2) prior to 1.1.1981.

All these appeals deal with Tariff Entry 73.15 as it stood prior to its
amendment with effect from 1.1.1981. Therefore, stainless steel circles
imported by the importers in all these appeals are classifiable under Tariff F
Heading 73.15(1) and not under Tariff Heading 73.15(2).

Civil Appeal Nos. 1744-45 of 1988 ar, therefore, allowed while Civil
Appeal Nos. 10334-10336 of 1995 are dismissed. Refund applications by
the assessees will have to be processed in accordance with the ratio of the G
judgment of this Court is Mafatlal Industries Ltd. v. Union of India, (1996)
9 SCALE 457. There will, however, be no order as to costs.

v.s.s. Appeal allowed.

H