Commnr. Of Customs, New Delhi vs M/S. Caryaire Equipment India Pvt. Ltd

The Commissioner of Customs, New Delhi ... Appellant

Versus

M/s. Caryaire Equipment India Pvt. Ltd. .... Respondent

O R D E R

1. The core issue that falls for our consideration and

decision in this appeal is: whether "aluminium grills"

can be termed as "Extruded aluminium products"? If

the answer is in positive, the assessee would be

covered by Item Serial No.7 of the Product Code 61 of

the Duty Entitlement Passbook Scheme (for short "the

DEPB Scheme"). The assessee has succeeded before

the Customs, Excise and Gold (Control) Appellate

Tribunal (for short 'the Tribunal'). The Revenue in this

appeal calls in question the correctness or otherwise of

the judgment and order of the Tribunal. By the

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impugned judgment and order, the Tribunal has set

aside the order of confiscation of goods and the penalty

imposed by the Commissioner of Customs.

2. The facts in nutshell are: the assessee is the

manufacturer of aluminium grills made out of extruded

aluminium sections. In its regular business activity, the

assessee had filed a shipping bill dated 18.06.2002,

inter alia, claiming the benefit of the DEPB Scheme

for export of the said products as falling under Item

Serial No. 7 of Product Group: Engineering-Product

Code: 61 at 7% ad valorem. The Customs Officer, on

verification of the shipping bill, has found that the

goods in question are fabricated aluminium products

and therefore, denied the export of goods as being

prima facie liable for confiscation under the Customs

Act, 1962 (for short "the Act")

3. Thereafter, the assessee, by his letter dated 24.6.2002

had made a request to the Commissioner of Customs

for a personal hearing in lieu of the show cause notice.

2 At the time of the personal hearing, the assessee had

contended that the aluminium grills were fabricated

items, but the end-product is made out of the extruded

aluminium. The Commissioner, while rejecting the

contention of the assessee, has passed an order dated

28.6.2002 for confiscation of goods and imposition of

penalty in exercise of his powers under Section 113

and 114 of the Act read with Rules 11 and 14 of the

Foreign Trade (Regulation) Rules, 1993. However, he

had permitted the assessee to redeem the goods on

payment of certain amount of fine.

4. Aggrieved by the aforesaid order of the Commissioner

of Customs, the assessee had carried the matter in

appeal before the Tribunal. The Tribunal, after

appreciating the contention of the assessee, had set

aside the order of the Commissioner vide its order

dated 16.10.2002. In its order, the Tribunal holds that

aluminium grills are nothing but the extruded

aluminium products. Therefore, the Tribunal is of the

opinion that the Commissioner of Customs was not

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justified in passing the order in exercise of his powers

under Section 113 and 114 of the Act.

5. The Revenue, being aggrieved by the judgment and

order passed by the Tribunal, has filed this appeal

under Section 130-E of the Act.

6. Shri Harish Chandra, learned senior counsel appearing

for the Revenue, contends that aluminium grill is

altogether a separate product and the same cannot be

equated with extruded aluminium product which is

mentioned under Entry 7 of the Product Group

Engineering (Code 61). He submits that the benefit of

the DEPB Scheme encompasses within its ambit only

to the extruded aluminium products which are obtained

from the process of aluminium extrusion. Shri

Abhinav Mukerji, learned counsel for the Revenue,

who is assisting Shri Harish Chandra, would elaborate

the process of aluminium extrusion and contends that it

is a product, which is strictly obtained from the process

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of extrusion, without any alterations or modifications,

is eligible for the benefit provided under the DEPB

Scheme. He, therefore, submits that the product

obtained by fabricating the extruded aluminium is not

eligible for the benefit of the Scheme. In support of

their contention, they have produced a xerox copy of

the book titled as "The Complete Technology Book on

Aluminium and Aluminium Products". A reference is

also made to certain observations made by this Court

while explaining the meaning of the expression "the

product".

7. Per contra, Shri Aditya Kumar, learned counsel

appearing for the assessee submits that the expression

"extruded aluminium products" used in Entry 7 of

Code 61 is sufficiently wide to include products which

are made out of the extruded aluminium by fabricating

it. He contends that even the finished end-product

which is in the fabricated form of the extruded

aluminium, the same would fall under Entry 7, as

extruded aluminium product.

5 8. In order to resolve the controversy posed in this appeal

by the parties to the lis, a reference to Duty

Exemption/Remission Scheme requires to be noticed.

Chapter 4 of Exim Policy and Handbook of Procedures

provides for Duty Exemption/Remission Scheme.

Paragraph 4.37 of the said chapter provides for the

DEPB Scheme. The said paragraph reads as under:

"The Policy relating to Duty Entitlement Passbook Scheme (DEPB)

Scheme is given in Chapter 4 of the Policy. The duty credit under the

scheme shall be calculated by taking into account the deemed import

content of the said export product as per SION and the basic custom

duty payable on such deemed imports. The value addition achieved

by export of such product shall also be taken into account while

determining the rate of duty credit under the scheme."

Entry 7 of the Product Code 61 in the DEPB schedule reads as under:

"Extruded Aluminium products including pipes and tubes".

9. The facts are not in dispute. The assessee is a

manufacturer of aluminium grills made out of the

extruded aluminium. Admittedly, the export of the

aforesaid item was made and shipping bill dated

18.6.2002 was presented before the Customs Officer,

inter alia, claiming the benefit under the aforesaid

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entry. While denying the said benefit, the

Commissioner of Customs has passed an order of

confiscation of the goods and has also levied a penalty,

in exercise of his powers under Section 113 and 114 of

the Act read with Rules 11 and 14 of the Foreign Trade

(Regulation) Rules, 1993. However, he had permitted

the assessee to exercise its right of redemption, if it so

desires. We do not know whether the assessee had

exercised that right. We are not concerned much on

that.

10. Admittedly, the assessee had carried the matter in

appeal before the Tribunal. The Tribunal has given

relief to the assessee by holding that the aluminium

grills are nothing but extruded aluminium products

and, therefore, the assessee is entitled to take benefit of

Item Serial No. 7 of the Product Group: Engineering-

Product Code: 61.

11. As we have already noticed, the only issue which

requires to be considered and decided in this Civil

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Appeal is, whether the aluminium grills can be termed

as Extruded aluminium products, and if it is so,

whether the assessee can take the benefit of the Item 7

of Code 61?

12. To appreciate what is extruded aluminium, a reference

can be made to the literature that is produced by

learned counsel appearing for the parties.

13. The process of "extrusion", as explained in the

Textbook McGraw-Hill Encyclopedia of Science &

Technology, reads as under :

"Extrusion: The forcing of solid metal through a suitably shaped

orifice under compressive forces. Extrusion is somewhat analogous

to squeezing toothpaste through a tube, although some cold extrusion

processes more nearly resemble forging, which also deforms metals

by application of compressive forces. Most metals can be extruded,

although the process may not be economically feasible for high-

strength alloys."

The process of the cold extrusion of aluminium can also be noticed

from the aforesaid book. The same is as under:

"Cold extrusion: The extrusion of cold metal is variously termed cold

pressing, cold forging, cold extrusion forging, extrusion pressing, and

impact extrusion. The term cold extrusion has become popular in the

steel fabrication industry, while impact extrusion is more widely used

in the nonferrous field.

The original process (identified as impact extrusion) consists of a

punch (generally moving at high velocity) striking a blank (or slug) of

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the metal to be extruded, which has been placed in the cavity of a

die. Clearance is left between the punch and die walls; as the punch

comes in contact with the blank, the metal has nowhere to go except

through the annular opening between punch and die. The punch

moves a distance that is controlled by a press setting. This distance

determines the base thickness of the finished part. The process is

particularly adaptable to the production of thin-walled, tubular-shaped

parts having thick bottoms, such as toothpaste tubes.

A process requiring less pressure than backward extrusion is the

forward-extrusion process, originally called the Hooker process. A

formed blank (usually a thick-walled cup) is placed in a die cavity and

struck by a punch having a shoulder or enlarged section a short

distance from the end. Upon contact with the blank, the nose or end

of the punch starts to push the center of the blank through the die

cavity, in a manner similar to the action occurring in deep drawing of

sheet metal. After the punch has advanced a short distance, the

shoulder comes in contact with the top of the thick wall of the blank.

The punch shoulder then extrudes the metal through the annular space

between the die and the end of the punch. Thus, in forward extrusion,

the metal moves in the same direction as the punch, whereas in

backward extrusion the metal moves in the opposite direction."

14. In the book "The Complete Technology on Aluminium

and Aluminium Products", a reference is made to the

manufactured forms of the aluminium. A useful

reference can be made to the literature on aluminium

and its manufactured form, from the aforesaid book. It

shows aluminium and its alloys may be cast or formed

by virtually all known processes. Manufactured forms

of aluminium and aluminium alloys can be broken

down into two groups. Standardized products and

Engineered Products. The Standardized products

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include sheet, plate, foil, rod, bar, wire, tube, pipe, and

structural forms. In the same book, it is said that

Engineered products are those designed for specific

applications and include extruded shapes, forgings,

impacts, castings, stampings, power metallurgy (P/M)

parts, machined parts, and metal-matrix composites

(MMCs). The standardized products are again

described to include only the extruded aluminium

product simplicitor. If anything that is done to those

extruded aluminium products, that would become the

engineered products.

15. In the instant case, it is the assessee's stand before the

Commissioner of Customs and also before the

Tribunal, that it fabricates extruded aluminium into

aluminium grills. It is not the case of the assessee

either before the Commissioner of Customs or before

the Tribunal, that aluminium grills are the same as

extruded aluminium products. It is an admitted

position that assessee carries out the fabrication to

derive a product known as aluminium grills made out

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of extruded aluminium products. If that fact situation

is accepted, then the Tribunal was wholly incorrect in

holding that the aluminium grills are nothing but

extruded aluminium products and therefore, they

would fall under Entry 7 of Code 61. The issue before

us can be looked into from another angle also. The

Legislature, while enumerating the goods that would

fall under Item 7 of the Product Code 61 of the DEPB

Schedule, immediately after the expression "extruded

aluminium products" has specifically used the

expression "included" to include pipes and tubes. The

legislature recognizes pipes and tubes which are

engineered out of the extruded aluminium products, as

included under the Item 7. The expression "including

pipes and tubes" following the words "extruded

aluminium products" in Item 7 is restrictive in nature

and will give `extruded aluminium products' a

restrictive meaning in order to include the standardized

products such as pipes and tubes within the meaning of

the term extruded aluminium products.

11 16. In South Gujarat Roofing Tiles Manufacturers Assn. &

Anr. v. State of Gujarat & Anr., (1976) 4 SCC 601,

this Court has held thus:

"Though "include" is generally used in interpretation clauses as a

word of enlargement, in some cases the context might suggest a

different intention. Pottery is an expression of very wide import,

embracing all objects made of clay and hardened by heat. If it had

been the legislature's intention to bring within the entry all possible

articles of pottery, it was quite unnecessary to add an explanation. We

have found that the explanation could not possibly have been

introduced to extend the meaning of potteries industry or the articles

listed therein added ex abundanti cautela. It seems to us therefore that

the legislature did not intend everything that the potteries industry

turns out to be covered by the entry. What then could be the purpose

of the explanation. The explanation says that, for the purpose of Entry

22, potteries industry "includes" manufacture of the nine articles of

pottery named therein. It seems to us that the word "includes" has

been used here in the sense of `means'; this is the only construction

that the word can bear in the context. In that sense it is not a word of

extension, but limitation; it is exhaustive of the meaning which must

be given to potteries industry for the purpose of Entry 22. The use of

the word "includes" in the restrictive sense is not unknown. The

observation of Lord Watson in Dilworth v. Commissioner of Stamps

which is usually referred to on the use of "include" as a word of

extension, is followed by these lines:

"But the word `include' is susceptible of another construction, which

may become imperative, if the context of the Act is sufficient to show

that it was not merely employed for the purpose of adding to the

natural significance of the words or expressions defined. It may be

equivalent to `mean and include', and in that case it may afford an

exhaustive explanation of the meaning which, for the purposes of the

Act, must invariably be attached to these words or expressions."

It must therefore be held that the manufacture of Mangalore pattern

roofing tiles is outside the purview of Entry 22."

17. In Reserve Bank of India & Ors. v. Peerless General

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Finance & Investment Co. Ltd. & Ors., (1987) 1 SCC

424, this Court while analysing the different

connotations of the `inclusive definitions' has held:

"32. We do not think it necessary to launch into a discussion of either

Dilworth case2 or any of the other cases cited. All that is necessary

for us to say is this: Legislatures resort to inclusive definitions (1) to

enlarge the meaning of words or phrases so as to take in the ordinary,

popular and natural sense of the words and also the sense which the

statute wishes to attribute to it, (2) to include meanings about which

there might be some dispute, or, (3) to bring under one nomenclature

all transactions possessing certain similar features but going under

different names. Depending on the context, in the process of

enlarging, the definition may even become exhaustive."

18. In Godfrey Phillips India Ltd. & Anr. v. State of U.P.

& Ors., (2005) 2 SCC 515, this Court has observed

thus:

"73. Having rejected the second premise contended for by Mr Salve,

the next question is whether the language of Entry 62 List II would

resolve the issue. The juxtaposition of the different taxes within Entry

62 itself is in our view of particular significance. The entry speaks of

"taxes on luxuries including taxes on entertainments, amusements,

betting and gambling". The word "including" must be given some

meaning. In ordinary parlance it indicates that what follows the word

"including" comprises or is contained in or is a part of the whole of

the word preceding. The nature of the included items would not only

partake of the character of the whole, but may be construed as

clarificatory of the whole.

74. It has also been held that the word "includes" may in certain

contexts be a word of limitation (South Gujarat Roofing Tiles

Manufacturers Assn. v. State of Gujarat28). ..."

19. In Karnataka Power Transmission Corporation & Anr.

13 v. Ashok Iron Works Private Limited, (2009) 3 SCC

240, this Court while considering the meaning and

connotations of the word `inclusive' has held thus:

"14. The learned counsel also submitted that the word "includes"

must be read as "means". In this regard, the learned counsel placed

reliance upon two decisions of this Court, namely; (1) South Gujarat

Roofing Tiles Manufacturers Assn. v. State of Gujarat1 and (2) RBI v.

Peerless General Finance and Investment Co. Ltd.2

15. Lord Watson in Dilworth v. Stamps Commr.3 made the following

classic statement: (AC pp. 105-06)

"... The word `include' is very generally used in interpretation

clauses in order to enlarge the meaning of words or phrases occurring

in the body of the statute; and when it is so used these words or

phrases must be construed as comprehending, not only such things as

they signify according to their natural import, but also those things

which the interpretation clause declares that they shall include. But

the word `include' is susceptible of another construction, which may

become imperative, if the context of the Act is sufficient to show that

it was not merely employed for the purpose of adding to the natural

significance of the words or expressions defined. It may be equivalent

to `mean and include', and in that case it may afford an exhaustive

explanation of the meaning which, for the purposes of the Act, must

invariably be attached to these words or expressions."

16. Dilworth3 and few other decisions came up for consideration in

Peerless General Finance and Investment Co. Ltd.2 and this Court

summarised the legal position that (Peerless case2, SCC pp. 449-50,

para 32) inclusive definition by the legislature is used:

"32. ... (1) to enlarge the meaning of words or phrases so as to take in

the ordinary, popular and natural sense of the words and also the

sense which the statute wishes to attribute to it; (2) to include

meanings about which there might be some dispute; or (3) to bring

under one nomenclature all transactions possessing certain similar

features but going under different names."

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17. It goes without saying that interpretation of a word or expression

must depend on the text and the context. The resort to the word

"includes" by the legislature often shows the intention of the

legislature that it wanted to give extensive and enlarged meaning to

such expression. Sometimes, however, the context may suggest that

word "includes" may have been designed to mean "means". The

setting, context and object of an enactment may provide sufficient

guidance for interpretation of the word "includes" for the purposes of

such enactment."

20. Principles of Statutory Interpretation (12th Edition,

2010) by Justice G.P. Singh, at pg. 181, has discussed

in detail the different connotations of the word

`include' while laying stress on the restrictive as well

as exhaustive explanation of the word `inclusive' thus:

"The word `include' is very generally used in interpretation clauses

in order to enlarge the meaning of words or phrases occurring in the

body of the statute; and when it is so used those words or phrases

must be construed as comprehending, not only such things, as they

signify according to their natural import, but also those things which

the interpretation clause declares that they shall include. But the

word `include' is susceptible of another construction, which may

become imperative, if the context of the Act is sufficient to show that

it was not merely employed for the purpose of adding to the natural

significance of the words or expressions used. It may be equivalent to

`mean and include' and in the case it may afford an exhaustive

explanation of the meaning which for the purposes of the Act must

invariably attached to those words or expressions. Thus the word

include may in certain contexts be a word of limitation."

21. In view of the aforesaid reasons, in our opinion, the

goods in question namely, the aluminium grills cannot

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fit into Item 7 of the Product Code 61 of the DEPB

Schedule in order to claim benefit of the DEPB

Scheme and therefore, we cannot sustain the order

passed by the Tribunal.

22. In the result, while allowing the appeal filed by the

Revenue, we set aside the impugned judgment and

order passed by the Tribunal and restore the order

passed by the Commissioner of Customs. No costs.

Ordered accordingly.

.....................................J.

(H.L. DATTU)

.....................................J.

(ANIL R. DAVE)

NEW DELHI,

FEBRUARY 14, 2012

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