Holding

Battery‑grade manganese dioxide purified by electrolysis is not covered by heading 25.01/32(3) and must be classified under heading 28.01/58 of the Customs Tariff Act, 1975.

Summary

Toshiba Anand Batteries Ltd imported electrolytic manganese dioxide (91% purity) for dry‑battery manufacture and argued that it should be classified under heading 25.01/32(3) of the Customs Tariff Act, 1975, which covers battery‑grade manganese dioxide in its crude or mechanically purified form and would not attract counter‑vailing duty. The Revenue contended that the product, being chemically pure and obtained by electrolysis, falls under heading 28.01/58, a chemical product, and is liable to counter‑vailing duty. The Court examined Note 1 to Chapter 25, which limits the chapter to goods in crude state or purified only by mechanical/physical processes, and held that electrolysis is a chemical process, thus excluding the product from heading 25.01/32. Consequently, the product must be classified under heading 28.01/58. The appeals were dismissed.

Issues considered

Whether battery‑grade manganese dioxide imported in electrolytic form falls under heading 25.01/32(3) of the Customs Tariff Act, 1975.
Whether the purification process (electrolysis) brings the product within the scope of Note 1 to Chapter 25, thereby affecting its classification.

Legislation cited

Customs Tariff Act, 1975s. First Schedule, Chapter 25, Item (3) under heading 25.01/32, s. First Schedule, Chapter 28, Heading 28.01/58, s. Note 1 to Chapter 25

Subjects

customs classificationtariff interpretationbattery grade manganese dioxideelectrolysiscounter‑vailing dutyNote 1 Chapter 25mineral productschemical products

Judgment

A TOSHIBA ANAND BATTERIES LTD. ANAND HOUSE,
COCHIN
v.
·-
COLLECTOR OF CUSTOMS, COCHIN

DECEMBER 20, 1990
B
[S. RANGANATHAN, N.M. KASLIWAL AND
S.C. AGRAWAL, JJ.]

Customs Tariff Act, 1975: Item Nos. 25.01/32 and 28.01/58--
Battery grade Manganese dioxide-Classification for custom duty-Not
the ore contents in its crude form but ore contents in the form purified or
c upgraded by electrolysis.

The appellant-assessee in the appeals is a manufacturer of dry
batteries. For this it imports electrolytic manganese dioxide from
abroad having a manganese dioxide content of 91 %. Its claim is that
D customs duty is payable on this item under heading 25.01/32(3) of the
Customs Tariff Act, 1975 whereas the revenue authority says that the
item imported falls under heading 28.01/58. The rate of duty under
both the headings is the same, but if the item is classified under 28.01/58
the assessee would be liable to pay counter-vailing duty as well.

E The Assistant Collector's findings that Note 1 for the interpreta-
lion of items under Chapter 25, clearly exclude the goods imported by
the appellant, were revised by the Collector (Appeals), but confirmed
by the Tribunal, holding that various grades of manganese dioxide exist
and only few are suitable for use as battery grade, that the item
imported by the appellant is Electrolytic Manganese Dioxide of very
F high purity and this chemically pure Manganese Dioxide would qualify
for assessment correctly under heading 28.01/58(1), of the Tariff with
Countervailing duty under Item 68 of the Central Exeise Tariff.

On the question, under which of the two headings in the first
schedule to the Customs Tariff Act, 1975 the goods in question fall for
G the purposes of levy of duty:

Dismissing the appeals, the Court,

HELD: 1. In view of Note 1 to Chapter 25, Item (3) under heading
25.01/32 has to be understood, unless the context requires otherwise to
H refer to the goods described therein either in their crude state or in a

614
··-...
TOSHIBA BATTERIES v. COLLECTOR OF CUSTOMS 615

purified state provided the processes of purification employed are only A
mechanical or physical processes, particularly those mentioned in the
said note. [619G)

In the instant case, this raises two questions: (1) whether battery
grade manganese dioxide is available in the crude form, and (ii) if the
goods in question represent manganese dioxide in a purified form, B
whether the processes applied for the purification or refinement are the
processes permissible under note I. The evidence on record compels an
answer to each of the questions against the appellant. [619H]

2. Although the product imported by the appellant is battery
grade manganese dioxide, it does not fall under heading 25.01/32
because it is not the ore in its crude form but is the ore in a form
c
purified or upgraded by electrolysis. Once the applicability of chapter
25 is out for this reason, the only item that can cover the goods in
question is heading 28.01/58, since there is no dispute that the item in
question is a chemical product or chemical compound. [621C-D]
D
3. The manganese dioxide imported by the appellant is electro-
lytic manganese dioxide which is manufactured from the ore by a pro-
cess of electrolysis. [620C)

4. Purification or upgradation of the manganese dioxide content
of crude ore by the process of electrolysis, which is a chemical and not a E
mechanical or physical process takes it outside the purview of item
25.01/32. [620D)

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos.
3868-3932 of 1988.
F
From the Order dated 29. 1.1987 of the Customs Excise and Gold
(Control) AppeJlate Tribunal, New Delhi in Appeal Nos. C-1639/85-
C, C-1225 to 1245/86-C, C-1256 to 1272/86-C, C-2486 to 2506/86-C,
C-2042/86-C, and C-2016/86-C.

A.T.M. Sampath and P.N. Ramalingam for the AppeJlant. G

Ashok H. Desai, Solicitor General, P. Parmeshwaran and G. V.
Rao for the Respondent.

..... The Judgment of the Court was delivered by
H
616 SUPREME COURT REPORTS [1990] Supp. 3 S.C.R.

RANGANATIIAN, J. The appellant is the same in these sixty eight
A
appeals, which raise a common point. All the appeals are, therefore,
disposed of by a common order.

The common issue raised in this batch of appeals is a simple one:
vis. whether the goods in question fall under one or the other of the
B two headings in the first schedule to the Customs Tariff Act, 1975
(hereinafter referred to as the 'customs tariff') referred to later.

The appellant-assessee, as its name indicates, is a manufacture of
dry batteries, For this manufacture, it imports electrolytic manganese
dioxide from abroad having a manganese dioxide content of 91%. Its
claim is that customs duty is payable on this item under heading 25.01/
c 32(3) of the customs tariff. The Revenue, on the other hand, says that
the item imported falls under heading 28.01/50 of the customs tariff. It
may be mentioned that the rate of duty under both the headings is the
same. The only difference is that if the item is classified under the
latter heading, as claimed by the Department, the assessee will be
D liable to pay counter-vailing duty as well whereas, if it is classified
under the former, as suggested by the appellant, no countervailing
duty wiU be payable. We shall proceed to refer to the nomenclatures of
the relevant entries in the first schedule to the Customs Tariff Act,
1975.

E Section V of the above schedule deals with mineral products. It
has three chapters, nos. 25, 26 and 27. Chapter 25 deals with "salt,
sulphurs, earths and stone, plastering materials, lime and cement". In
this chapter, there occurred, at the relevant period, the following item:

F Heading Sub-heading No. and descrip- Rate of Duty Pre-
No. tion of article standard ferential
area

25.01/32 mineral substances, not elsewhere
specified including clay, earths, earth
G · colours, natural abrasives, salt, sulp-
hur, slate and stone; cement, all sorts
not elsewhere specified (including
portland cement and clinker); lime;
plasters with a basis of calcium sulp-
hate whether or not coloured, but not
H including plaster specially, prepared
_, TOSHIBABATIERIES v. COLLECTOR OF CUSTOMS [RANGANATHAN,J.] 617
'
for use in dentistry:
A
(1) Not elsewhere specified 100%
(2) Asbestos raw including fibre 60%
(3) Battery grade mangenese dioxide 100% 90%
(4) Cements, all sorts, not elsewhere 100% 50% B
specified (including portland cement
and clinker)
(5) Cryolite natural 60%
(6) Flour-spar 100%
(7) Graphite, natural 100% 90% c
(8) Mineral phosphates, natural, impor- Free
ted in a form indicative of their use as
fertilisers
(9) Rutile in granular or powder form 100%
for use otherwise than for extraction D
of metal.
( 10) Insoluble sulphur 100%
(11) Sulphur of all kinds, other than 10%
insoluble sulphur, sublimed sulphur
precipitated sulphur and colloidal E
sulphur

Chapter 28, to which reference is made by the Department,
comes under section VI of the schedule intituled "Products of the
chemical or allied industries" covering chapter 28 to 38. Chai;ter 28
deals with "Inorganic chemicals; organic and inorganic compounds of F
precious metals, of rare earth metals, of radio-active elements and of
Isotopes." In this chapter, there is a very detailed entry particularising
various kinds of chemicals, components etc. and no useful purpose will
be served by setting out the entry in full. The Department relies only
on the following portion of the entry:
G

Heading Sub-heading No. and description of Standard rate of
article duty

28.01/58 Chemical elements, inorganic chemical
compounds and other products as specified H
618 SUPREME COURT REPORTS [1990] Supp. 3 S.C.R.

A in Notes 1 and 2 to this chapter:
!Not elsewhere specified 100%

On behalf of the assessee, it is submitted that the item imported
by it, though described as electrolytic manganese dioxide, is commer-
B cially known as "battery grade manganese dioxide" and falls squarely
under serial no. (3) set out under heading 25.01/32. It is emphasised
that this is a specific entry covering the goods in question while head-
ing 28.01 is a general heading pertaining to various kinds of chemicals,
It is pointed out that note 2 to chapter 28 enumerates a number of
products which are to be classified in this chapter but manganese dio-
xide is not one of the items so specified. Also, note 3 to the chapter
C clarifies that the chapter does not cover, inter alia, "(a) sodium
chloride and magnesium dioxide, whether or not chemically pure, and
other products falling within section V." Since battery grade manga-
nese dioxide finds a place in chapter 25 as indicated above, it is argued,
it is clearly excluded from the purview of chapter 28.
D
In the light of the above arguments, it becomes necessary to
determine the scope of item (3) under chapter 25, heading 25.. 03.
prima facie, it may appear that the appellant's contention that the
goods should be classified under an item which directly seems to cover
its description has to be accepted. However, on behalf of the depart-
E ment, it is pointed out that Section Vin which chapter 25 occurs deals
with mineral products and our attention is drawn to note I for the
interpretation of the items under chapter 25, which reads thus:

"Except where the context otherwise requires, this chapter
is to be taken to apply only to goods which are in the crude
F state or which have been washed (even with chemical sub-
stances eliminating the impurities without changing the
structure of the product), crushed, ground, powdered,
levigated, sifted, screaned, concentrated by floatation,
magnetic separation or other mechanical or physical pro-
cess (not including crystallisation) but not calcined or sub-
G jected to any further process other than a process specially
mentioned in respect of the goods described in note 3."

This note, it is pointed out, clearly excludes the goods imported
by the appellant as pointed out by the Assistant Collector, whose
findings, revised by the Collector (Appeals) but confirmed by the
H Tribunal, are to the following effect: · ·-
TOSHIBA BATTERIES v. COLLECTOR OF CUSTOMS [RANGANATHAN,J.] 619

"No evidence has been produced to show · that the
A
mangenese dioxide under reference is crude mined ore.
The write ups produced state "Battery Grade Manganese
Dioxide" could be obtained by electrolysis of Mn04 during
the process of electrolysis, Mn02 gets deposited on the
anode. The deposit is hammered out and ground to a finer
mesh and treated with patented processes for neutralising B
the acid that may be encapsulated in the deposited Mn02.
From the photostat of literature produced it is seen that the
electrolysis, process consists of grinding, dissolution, leach-
ing, electrolysis, hammering, washing, crushing, neutrali-
sation, pulverising etc, These methods do not confine to
the methods mentioned in Note (1) to Chapter 25 C.T.A.
c
The description of the goods in the import document is
"Electrolytic Manganese Dioxide for dry Battery-Mn02-
91 %. The Laboratory test report confirms these as
Manganese Dioxide of declared purity. The chapter (note)
no. 1 of chapter 25 states that "except where the context D
otherwise requires", the goods should satisfy the definition
given therein. It is a fact that various grades of manganese
dioxide exist and only few are suitable for use as battery
grade. The sub-heading has to be read along with main
heading and cannot be read in isolation. Therefore, the
main heading covers only crude manganese dioxide in E
crude from purified only by methods mentioned in Chapter
Note 1. The item imported is Electrolyic Manganese
Dioxide of very high purity and this chemically pure
Manganese Dioxide would therefore qualify for assessment
correctly under chapter heading 28.01/58(1), C.T.A. with
C. V. duty under Item 68 C.E. T." F

We are of the opinion that the Department's contention is well-
founded. In view of note 1 to chapter 25, item (3) under heading
25.01/32 has to be understood, unless the context requires otherwise,
to refer to the goods described therein either in their crude state or in a
purified state provided the processes of purification empolyed are G
only mechanical or physical processes, particularly those mentioned ii)
the said note. This raises two questions: (i) whether battery grade
mangenese dioxide is available in the crude form and (ii) if the goods
in question represent mangenese dioxide in a purified form, whether
the processes applied for the purification or refinement are the proces-
ses permissible under note 1. The evidence on recored compels an H
620 SUPREME COURT REPORTS [1990] Supp. 3 S.C.R.

A answer to each of the questions against the appellant. We do not wish
to refer in detail to the literature placed before the authorities as there
is really no controversy about the material facts. It is common ground
indeed before us that battery-grade manganese dioxide is avilable in
crude ore form in several places such as tropical African regions. In
fact, the order of the Tribunal refers to a case in which natural battery
B grade are, obtained by highly selective mining, was imported. Natural
and electrolytic manganese dioxide are different items, separately clas-
sified. For example, under the import policy while item 140 refers to
"electrolytic manganese dioxide", item 220 talks of "manganese dio-
xide, chemical/synthetic/monda grade-natural" Battery grade manga-
nese dioxide, in its crude or raw form has also been found to be a
C commodity dealt with in international trade, though said to be slowly
depleting. The manganese dioxide imported by the appellant is
electrolytic manganese dioxide which is manufactured from the ore by
a process of electrolysis. It is stated in the literature produced by the
appellant-and this is not in dispute-that the same is obtained by a
process of not only grinding, dissolving, washing, crushing, neutralis-
D ing and pulverising but also of electrolysis. The product thus obtained,
it is said, has also uses other than in dry batteries. Purification or
upgradation of the manganese dioxide content of crude ore by the
process of electrolysis, which is a chemical, and not a mechanical or
physical, process takes it outside the purivew of item 25.01/32.

E Shri Sampath submits that not all the items specified in item
25.01/32 are items of minterals in crude form. Cement, it is pointed
out, is one of the items included there. It is also said that where the
intention was to include only the natural mineral product it has been
stated so as, for example, against items (5), (7) ans (8). It is, therefore,
submitted that this limitation does not apply to item (3). We do not
F find substance in this argument. So far as cement is concerned, it is an
item which, by its very nature, excludes the applicability of note 1. In
regard to the second point, the description of items (5), (7) and (8)
places a further restriction that these minerals, only in their natural
forms, will fall under the heading in question. It is true that the item
set out under item 25.01/32 read in the light of notes 2,3 and 4 read in
G the chapter bring under its purview not only minerals in their natural
form but also various items derived therefrom in several ways includ-
ing, in some cases, chemical processes. But Note 1 requires every
entry under th.e sub-item to be considered independently in the light of
what it states-viz. that only the crude, raw or physically changed forms
are to be taken into accont-unless there is something in the nature of
H the entry which precludes the applicability of note 1. Thus, for exam-
TOSHIBA BATTERIES v. COLLECTOR OF CUSTOMS [RANGANATHAN,J.I 621

pie, if battery grade lllOlnganese dioxide were not available for import, A
except in the upgraded form, the assessees' claim would be well
founded and it will be covered by item 25.01/32 (3) even though
manufactured under an electrolytic process. But since it has been
found as a fact that battery grade manganese dioxide is available in the
crude unrefined form only that type or it is covered by item 25.01/32
B
(3). In view of the interpretation placed by us on item 25.01/32, it is
unnecessary to discuss the decisions cited by Sri Sampath setting out
certain general principles regarding interpretation of tariff items in
cases of difficulty.·

The result of the discussion is that, although the prpduct
imported by the appellant is battery grade manganese dioxide, it does c
not fall under heading 25.01/32 because it is not the ore in its crude
form but is the ore in a form purified or upgraded by electrolysis. Once
the applicability of chapter 25 is out for this reason, the only item that
can cover the goods is question is heading 28.01/58, since there is no
dispute that the item in question is a chemical product or chemical
D
compound.

In our view, therefore, the assessing authority and the Tribunal
took the correct view. These appeals, therefore, fail and are dismissed.
But we make no order as costs.

N.V.K. Appeals dismissed.