Case Note & Summary
The case arose from writ petitions filed by Hyderabad Industries Ltd. and another, who imported asbestos fibre and also mined asbestos domestically. They paid customs duty under entry 25.01.32 on imported asbestos fibre but challenged the additional duty levied under Section 3(1) of the Customs Tariff Act, 1975, which is equivalent to the excise duty leviable on like goods produced in India. In respect of domestically mined asbestos, excise duty was levied under Tariff Item 22F. The Delhi High Court dismissed the writ petitions by a common judgment, upholding the levies. The constitutionality of the excise duty was not disputed; the core question was whether the process of obtaining asbestos fibre from rock amounted to manufacture. The Court described in detail the mining and processing of asbestos, including open pit and underground mining, crushing, screening, and air suction to separate fibre from rock. It noted that asbestos fibre occurs in small cracks in massive rocks and is recovered by mechanical and manual means. Relying on the decision in Minerals and Metals Trading Corporation of India Ltd. v. Union of India, which held that separating wolfram ore from rock is not manufacture because the chemical structure remains the same, the Court found that the same principle applied to asbestos. It also referred to Moti Laminates Pvt. Ltd. v. Collector of Central Excise, which explained that excise duty is leviable only on goods produced or manufactured. The Court was satisfied that the appellants only separated asbestos fibre from the parent rock by manual and mechanical means; the fibre was in every respect the same substance that was embedded in the rock, and no process of manufacture was employed nor any new or distinct commodity realised. Consequently, no excise duty could be levied under Tariff Item 22F. As a result, the additional duty of customs under Section 3(1) of the Customs Tariff Act, 1975 could not be imposed on imported asbestos fibre because there was no excise duty on like domestic goods. The Court found the High Court's dismissal of the writ petitions erroneous and held in favour of the appellants.
Headnote
A) Excise Law - Manufacture - Mineral Separation - Not mentioned (Tariff Item 22F) - The dispute concerned whether extracting asbestos fibre from asbestos rock through crushing, screening, and air suction constituted 'manufacture' or production of a new commodity. Relying on Minerals and Metals Trading Corporation of India Ltd. v. Union of India, the Court observed that separating ore from rock is selective mining and not manufacture, as the chemical structure remains unchanged. Held that no excise duty was leviable under Tariff Item 22F because the appellants merely separated the fibre from rock without creating a new or distinct commodity (Paras Not mentioned). B) Customs Law - Additional Duty of Customs - Section 3(1) of Customs Tariff Act, 1975 - Additional duty under Section 3(1) is equal to excise duty on like goods produced or manufactured in India. Since domestically produced asbestos fibre was not excisable as no manufacture occurred, the additional duty on imported asbestos fibre could not be sustained. Held that the levy of additional duty was impermissible and the High Court's dismissal of the writ petitions was erroneous (Paras Not mentioned).
Issue of Consideration
Whether separating asbestos fibre from rock by manual and mechanical processes amounts to 'manufacture' or 'production' under excise law; whether additional customs duty under Section 3(1) of the Customs Tariff Act, 1975 can be levied on imported asbestos fibre when domestically produced asbestos fibre is not excisable as manufactured goods
Final Decision
The Supreme Court held that separating asbestos fibre from rock does not amount to manufacture; no new or distinct commodity is realized. Therefore, the levy of additional customs duty under Section 3(1) of the Customs Tariff Act, 1975 on imported asbestos fibre and excise duty under Tariff Item 22F on domestically mined asbestos fibre was impermissible. The High Court judgment dismissing the writ petitions was liable to be set aside.
Law Points
- Mere separation of naturally occurring mineral fibre from parent rock by manual and mechanical means does not amount to manufacture or production of a new commodity
- excise duty is leviable only on goods produced or manufactured
- additional customs duty under Section 3(1) of the Customs Tariff Act
- 1975 cannot be levied when like domestic goods are not excisable
- process of selective mining and crushing does not change chemical structure
- no new or distinct commodity emerges
