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1988 (5) TMI 39 - SC - Central ExciseWhether for the purpose of Item 26AA(ia) of the Central Excise Tariff set out in the First Schedule to the Central Excises and Salt Act, 1944 the weight of the steel should be calculated as at the time when the forging was complete or after machining and polishing to remove the excess skin of steel? Whether, as a result of the polishing and machining done by the appellant on the said goods before supplying them to the railways the same were transformed into new commercial commodities, namely, finished axles, wheels, tyres and so on or whether these finished or manufactured goods which could be regarded as distinct commercial products came into existence only after precision machining done at workshops of the Indian Railways to enable the Railway to put these goods to use to meet the actual requirements of the Railways? Held that:- In respect of the said goods the weight for the purpose of levy of excise duty under Item 26AA(ia) should be taken after the machining and polishing is done to remove the excess surface skin and the contention of the appellant in this regard must be accepted. In these state of affairs, it is quite clear that the finished goods, namely, finished wheels, tyres, axles and blanks could be said to have come into existence only after the precision machining and other processing at the Railways' workshops was completed and the appellant is not liable to pay any duty on these goods as under Item No. 68 of the said Central Excise Tariff. The period of limitation would clearly be only six months prior to the service of the show cause notice. The demand for excise duty against the appellant on the said composite units under Item No. 68 of the Excise Tariff, to the extent that it exceeds the period of six months prior to the service of the show cause notice must, therefore, be struck down. In the result, the appeal is allowed. The appellant is liable to pay duty on the goods referred to in the petition other than the composite units only under Item No. 68 of the First Schedule to the Central Excises Act and the duty will be based on the weight after the machining carried out in the factory of the appellant to remove the excess skin or excess surface steel. Secondly, in respect of the composite sets, the appellant is liable to pay duty both under Items Nos. 26AA(ia) and 68, but only for a period of six months prior to the service of the show cause notice.
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