MILAK BROTHERS versus UNION OF INDIA AND ORS.

Citation: [1990] SUPP. 2 S.C.R. 141 · Decided: 09-10-1990 · Supreme Court of India · Bench: S. RANGANATHAN · Disposal: Dismissed

Judgment (excerpt)

MILAK BROTHERS 
v. 
UNION OF INDIA AND ORS. 
OCTOBER 9, 1990 
[S. RANGANATHAN AND-A.M. AHMADI, JJ.] 
B 
Customs Tariff Act, 1975/Indian Tariff Act 1934 Item 13 of the 
Second Schedule to the Indian Tariff Act 1934/item 20 of the Second 
Schedule to the Customs Tariff Act, 1975: Blanched, roasted and s_alted 
peanuts packed in vacuum containers-Liability to export dwy. 
The appellants purchased groundnuts without shell in raw fonn, 
and after subjecting tbem to various processes and treatment, packed 
them in packets and tins which were then exported. 
The goods were charged to duty under item 13 of the Second 
Schedule to the Indian Tariff Act 1934 and, later, under item 20 of the 
Second ··Schedule to the Customs Tariff Act, 1975 as •groundnut 
kernel". The appellant however contended that the product exported by 
it was "processed peanuts", and since the product exported by the 
assessee, though basically groundnuts, had been so processed and 
treated that it lost its quality of gennination, it could no longer be 
described as 'groundnut kernel'. Another argument of the appellant 
was that groundnut kernel could be said to be of two varieties-one an 
edible variety, and the other a variety used for oil extraction purposes, 
and that the tariff entry should be confined only to groundnut kernel of 
the oil-yielding variety and not the variety exported by the assessee, 
which could be more appropriately described as "processed food" 
rather than as "groundnut kernel". 
The appellant's contentions were rejected by the _Collector of 
Customs, on appeal by the Central Board of Excise and Customs lihd, on 
further revision, by the Government of India. Subsequently, the con-
tentions were rejected by a Full Bench of the Customs, Excise & Goid 
Control Appellate Tribunal. 
Before this Court, the appellants while reiterating the submis-
sions made before the authorities below, contended that the entry in the 
export tariff should be given a restrictive interpretation and if there was 
any ambiguity-or doubt it should be resolved in favour of the assessee. It 
was fUrther submitted that, in matters of export and import, the func-
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SUPREME COURT REPORTS 
I 1990] Supp. 2 S.C.R. 
tional test was slowly replacing other tests. 
On !he other hand, it was contended on behalf of the Revenue that: 
(i) the expressions 'groundnut kernel' and 'groundnut shell' used in the 
export entry were of widest connotation; (ii) ther was no justification 
whatsoever for restricting the meaning of the word 'kernel' on the basis 
of the capacity to germinate or lo yield oil; (iii) the functional test may 
be attracted where t~ere was a bifurcation or classification as in the 
tariff entries, but there was no justification to import any such test 
where the expression, as in this instance, was broad and unrestricted; 
and (iv) groundnut kernel remains groundnut kernel even after roast-
ing and frying and the processing and treatment did not create a diffe. 
rent product. 
Dismissing the appeals, this Court, 
HELD: (1) There is no difficulty or ambiguity in the interpretil' 
ti on of the tariff entry. Groundnut is a well known commodity which is 
D available both in shell and as kernel. In this context, 'kernel' clearly 
means the grain, seed or the soft matter inside the shell, whatever the 
use or purpose to which it is put, eating or crushing for oil or sowing. 
The tariff entry covers all groundnut and there is no justification for 
confining it to the germinating or the oil seed variety alone. [151C-D] 
E 
M/s Healthways Dairy Products Co. v. Union of lndia & Ors., 
I 1976 I 2 sec 887, referred to. 
(2) Assuming that two different commercial commodities fall 
nuder the same entry, there is no reason why the entry should be 
restricted to only one of them. It can and should cover both unless one 
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can say that the commodity marketed by the appellant is not 'gronnd· 
nut kernel'. [151E] 
Diwan Chand Chaman Lat's Case [1977) 39 STC 75, referred to. 
(3) Though the raw groundnut kernel has undergone a drying, 
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roasting and frying process, its identity as groundnut is not lost. Even in 
the market to which it is exported and where it is marketed, it is 
purchased as groundnuts. [151.G] 
(4) The legislature must be presumed to know that, for import 
purposes, for instance, groundnuts are classified nuder different head-
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ings with differential rates of duty. Those entries appear not elsewhere 
MILAK BROS. v. U

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