A sophisticated tariff based on Brussels Trade Nomenclature has created its own problems. Previous tariffs were more rough and ready. Entries were like resins all sorts, chemicals all sorts, etc. But with a highly sophisticated tariff with so many scientific headings and sub-headings, the problem of residuary entry has been created.
Even a seasoned chemist or an experienced engineer cannot say straight away what type of chemical or machine has been imported unless he goes through a lot of literature relating to the goods or undertakes chemical tests. So he resorts to the residuary entry of ‘others’. That creates a problem for the assessee if the rates of duty are different for the main heading from that of the residuary entries. This is the problem we are discussing here.
In a very recent judgement in the case of Mauri Yeast India Pvt. Ltd Vs State of UP[1] the Supreme Court has reiterated once again the principle of interpretation that if there is a conflict between two entries, one leading to an opinion that it comes within the purview of the tariff entries and another within the purview of residuary entry, the former should be preferred. T
hat is to say, the residuary entry is not the first choice. This judgement was given in the context of a very well-contested case under the UP Trade Tax Act, 1948 relating to yeast. The issue was whether yeast should be classified within the main entry of chemicals or in the residuary entry. The Supreme Court chose the main entry.
The need for residuary entry also arises due to technological advance. Even if we take the examples of common household items such as paper or biscuits, there is always a possibility that there will be some new types of paper or biscuits in future for which provision has to be made. And it can be done only by residuary entry.
However, with so many residuary entries for each sub-heading, there is always a temptation on the part of the assessing officer to classify under residuary entry for the purpose of quick disposal.
Let us see the previous judicial decisions on the issue. The High Court of Bombay in the case of Garware Nylon Ltd vs UOI, reported in 1980(6)ELT249(Bom.) used the expression the “orphanage of Item 68” as opposed to “parent entry”. The High Court of-course decided in the case that if there is any other entry more fitting than the residuary entry, then attempts should be done to put it in the parent entry rather than in the orphanage.
Thereafter the same principle has been upheld by the Supreme Court in several judgements such as CCE v. Jayant Oil Mills – 1989(40)ELT287(SC) and Indian Metal & Ferra Alloys Ltd. Vs CCE – 1991(51)ELT165(SC). In the case of Western India Plywoods Ltd Vs Collector of Customs, 2005(188)ELT365(SC), the Supreme Court has laid down the same principle that the application of a residuary tariff entry must always be made with a good deal of caution as it is attracted only when no other tariff item applies to the goods in question.
The solution to the problem of frequent litigation on the issue of residuary entry can be solved if the rate of duty of parent entry and the residuary entry are made the same. This is an achievable proposition now since the dispersion of rates of duty has come down considerably in the last few years.
In Customs there is a convergence towards 10 per cent, 7.5 per cent and 5 per cent and in Excise towards 14 per cent. The trend towards convergence should be intensified in the next Budgets.
