TMI Blog1994 (5) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... e specifications given in Note 6 to Chapter 84 of the CETA, 1985 and, therefore, all these steel balls fall under Tariff Heading 84.82 as parts of ball bearings. Consequently, benefit of Notification No. 62/86, dated 10-2-1986 or 162/86, dated 1-3-1986 given to parts and accessories of cycles and cycle rickshaws will not be available to the steel balls manufactured by the assessees. It is the case of the assessees that prior to 1-3-1986 i.e. the date from which the new Tariff was introduced, the said steel balls manufactured by the various assessees were being assessed under Tariff Item 68 of the erstwhile Central Excise Tariff read with exemption Notification No. 104/82, dated 28-2-1982 and later on under Notification No. 234/82 as parts of cycle and cycle rickshaws. It is also pointed out by the assessees learned counsels that the steel balls under consideration are sold in packed condition with markings on packets as cycle grade steel balls . They have always been sold to dealers of cycles and cycle parts. Use of the steel balls in cycle is not denied by the department. Not a single piece of evidence has been brought on record by the department where the steel balls under cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed steel balls under sub-heading No. 8482.00 of the Central Excise Tariff Act, 1985 in view of the Chapter Note 6 of Chapter 84 and Note 2(a) of Section XVI as these balls satisfied the dimensional variations provided under Chapter Note 6. An appeal against the above order was filed by the assessee before the Collector (Appeals), New Delhi, contending that these steel balls are classifiable under Chapter 87; and are further entitled to exemption under Notification No. 162/86, dated 1-3-1986; as parts and accessories of cycles. The said appeal was rejected by the Collector (Appeals), New Delhi vide his order-in-original No. 261/CE/JPR/87, dated 29-9-1987 upholding the order-in-original passed by the Assistant Collector, Central Excise, Jaipur. An appeal against the order-in-appeal mentioned above, was filed by the assesses before the CEGAT. On pleas of the assessee, vide its Order No. 331/88-B, dated 27-7-1988 CEGAT remanded back the case for de nova proceed -ings by the Assistant Collector on the grounds that the matter may be reconsidered in the light of experts opinion. During the course of de novo proceedings the samples of the said products were drawn and got tested t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... * * * 5. Crux of the grounds taken by the Revenue is set out in Para (4) of their grounds of appeal in the case of National Engineering India Ltd. (respondent). For the sake of proper appreciation we reproduce it below : (4) The submissions of the assessee that these steel balls can be used as cycle parts only cannot be taken into consideration as no such condition regarding end use of these balls has been quoted/mentioned in Chapter Note 6. Thus the end use of the product will not make any effect while classifying the same under sub-heading 8482.00. On the same line the opinions of the experts regarding availability of different type of machinery with assessee for manufacture of steel balls for use in ball bearings, will not make any effect on the issue of finalisation of classification because the condition imposed vide Chapter Note 6 to classify the steel balls under sub-heading 8482 is that - (1) they should be polished; and (2) the maximum and minimum diameters of which do not differ from the nominal diameter by more than 1% or by more than 0.5 mm,whichever is less. and nothing has been mentioned in the said Chapter Note with regard to hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the maximum and minimum diameter of which do not differ from the nominal diameter by more than 1% or by more than 0.05 mm whichever is less, balls not conforming to this definition are classifiable in Heading 73.26 (See Chapter Note 6) . Learned SDR has, therefore, emphasised that irrespective of the use of the steel balls so long as such steel balls conform to the specifications given above, these steel balls would be classifiable under Tariff Heading 84.82. 5.3 He also draws attention to the fact that expression parts and accessories occurring in Tariff Heading 87.14 under which the assessees seek classification would not be applicable to the articles of Tariff Heading 84.82 as given in Section Note 2(e) of Section XVII of the CETA, 1985. He further submits that Tariff Heading 73.26 in view of the aforesaid Chapter Note will be applicable only if Tariff Heading 84.82 is ruled out, as given in the aforesaid Explanatory Note. 5.4 As against the above contention of the Revenue learned counsels for the assessees led by Shri N.R. Khaitan for National Engineering submit that the Explanatory Notes relied upon by the Revenue covers only those steel balls which are inter alia part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eading 87.12. Since they are admittedly parts of cycles these steel balls would also be entitled to the benefit of Notification 62/86. 6. We have carefully considered the aforesaid pleas of both sides. Section Note 1(k) of Section XVI clearly spells out that Section XVI under which Chapter 84 falls would not cover articles of Section XVII under which Chapter 87 falls. On the basis of evidence on record adduced by the assessees that the steel balls under consideration are parts of cycle and not parts of ball bearings and there being no evidence to the contrary adduced by the Revenue, we hold prima facie at this stage that the steel balls in question would fall under Tariff Heading 87.14 as parts and accessories of vehicles falling under 87.12. We have now to examine whether Section Note 2(e) to Section XVII would take away the classification of steel balls under Tariff Heading 87.14. This can only be possible if the steel balls are articles inter alia of Tariff Heading 84.82. Steel balls could be articles of Tariff Heading 84.82 if only they are parts of ball bearings. As stated above, there is no evidence on record that the steel balls under consideration are used or even capable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is question. Revenue contends that the steel balls under consideration satisfy the specifications of the said Chapter Note 6 whereas the assessees contend that they do not. Controversy is on two grounds :- (i) whether the steel balls are polished; (ii) what is the scope of the expression the maximum and minimum diameter of which do not differ from the nominal diameter by more than 1% or by more than 0.05 mm . Since the controversy has arisen, we would like to give our finding thereon although, as stated earlier, it is not very much material for the disposal of these appeals in view of our finding that the steel balls under consideration fall under Tariff Heading 87.14. 7.1 On the question whether the steel balls are polished or not, learned SDR has contended that the said Chapter Note merely speaks of the steel balls being polished. The degree of polishing and the process by which the polishing is to be carried out is not spelt out in the said Chapter Note. It has been submitted that the process of barelling and tumbling undertaken by the first assessee namely National Engineering and other processes of polishing undertaken by the other assessees makes the steel balls poli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rk. Characteristics and Applications: Polishing operations have the purpose of surface-finish improvement rather than dimensional refinement. However, parts and surfaces of irregular contour which require some refinement of shape with minimum stock removal are suitable for polishing operations. If dimensional-accuracy requirements are high or the amount of metal to be removed is large, it is better to use conventional grinding or machining operations. By far the most important function of polishing operations is the improvement of appearance. This involves the removal of surface imperfections like scratch marks, gates, stretch marks, cutting tool marks, pits, parting, lines, etc. It also includes surface smoothing prior to plating, anodizing, painting, or other surface finishes. There are, however, other reasons for polishing workpieces." 7.2 On the other hand, the assessees contend that Chapter Note 6 to Chapter 84 speaks of polished steel balls for bearings. It is submitted by the learned advocate Shri N.R. Khaitan that polishing of steel balls for bearing purposes essentially requires polishing by lapping machines and it is not undertaken in respect of cycle grade steel ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort and Export Policy) to give relief to polished steel ball manufacturers. Even then a machine system for polishing and lapping operations of steel balls will have a landed cost of approximately Rs. 3.00 crores. Precision toolings will also involve considerable expense. The technology used in polishing steel balls is high technology, for which most manufacturers in the country have foreign collaborations. The cost of polishing steel balls will therefore be prohibitive. On the other hand the balls used for other commercial use do not require the precision inbuilt as a result of polishing operation. Therefore no polishing is done on commercial balls generally used in furnitures, turntables and bicycles. Such steel balls although made out of similar or cheaper steels cannot be categorised as polished steel balls. Simple barelling operation is enough to give these balls a finish commercially accepted. Therefore I certify that commercial grade balls used in bicycles and furniture etc. cannot be classified as polished steel balls since they have not undergone the expensive polishing and lapping operations which create the desired accuracies, polish and other characteristics as a r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of cold heading, slug sorting, flashing and soft grinding. The balls thus obtained are heat treated. They are then hardened, washed and tempered. All the steel balls meant for bearings are stated to be inspected for their hardness. The hard steel balls undergo the process of rough grinding. Steel balls meant for cycles undergo the process of barelling/tumbling which smoothens the surface and gives a shine to the surface of cycle balls. They are thereafter washed, dried, oiled and packed. However, in case of manufacture of balls for bearings; the operations abrasive lapping; grading on electronic machine, first polishing and lapping, second polishing lapping are done in the case of manufacture of cycle balls. All the steel balls for bearing undergo rigid inspection for diameter variation, roundness, surface finish etc. On passing the tests, such balls are oiled packed as steel balls for bearings. The main operation which is stated to make the difference between cycle balls and steel balls for bearings is lapping operation. Lapping is low-speed, low-pressure abraiding operation. In lapping machine, there are two cast iron lapping plates having precision lappe grooves in wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d into the surface. Tumbling : A surface finishing operation for small articles in which irregularities are removed or surfaces are polished by tumbling them together in a barell alongwith wooden pegs, sawdust, and polishing compounds. From the above, it may be seen that although tumbling and lapping are different operations, the function of both the operation is to polish the surface. That is why both cycle balls ball bearings have a shiny look on the surface. They cannot be distinguished from each other on visual examination. Thus acquire a look of polished surface in a restricted sense, although degree of polish may vary considerably. However, when examined under very high magnification on Tolyround-73, cycle balls showed valleys peaks which are practically negligible in other steel ball meant for bearings. The maximum and minimum diameters of each of the cycle balls examined differed from nominal diameter by more than 1% or by more than 0.06 mm, whichever is less. Hence the cycle balls do not satisfy Note 6 to Chapter 84 CET. Test report is issued separately, copy of the same enclosed . Learned advocate also draws attention to the fact that it is clear from the to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ween the maximum diameter and nominal diameter and difference between nominal diameter and maximum diameter should be properly checked and compared with the specifications given therein. If it is so done, the specifications of the steel balls under consideration satisfy the criteria given in the said Chapter Note. 7.5 As against the above reading of the said Chapter Note 6 of the Department of Revenue, the assessees learned advocate wants us to read the Chapter Note as follows :- (i) Heading 84.82 applies, inter alia, to polished steel balls, the maximum and minimum diameter of which do not differ; (ii) from the nominal diameter; (iii) by more than 1% or by more than 0.05 mm. In other words, the case of the assessee is that the difference between the maximum and minimum diameters should be arrived and this should be compared with the nominal diameter of the steel ball to check whether this is within the specifications of 1% or 0.05 mm whichever is less. 7.6 So read, the learned advocate contends that the steel balls under consideration do not satisfy the criterion of difference of maximum and minimum diameters from the nominal diameter laid down in Chapter Note 6. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of law, the benefit thereof should be given to the subject. Keeping in view the aforesaid principle the assessees are entitled to the benefit. Therefore, it has to be held that the steel balls under consideration do not satisfy the two criterion (i) of being polished and (ii) of measurements of maximum and minimum diameters. For this reason as well as the steel balls cycle grade would not fall under Tariff Heading 84.82 and they would be classifiable under Heading 73.26 (w.e.f. 1-3-1988) and under Tariff Heading 73.08 (prior to 1-3-1988). Consequently, the steel balls would be entitled to the benefit of Notification 62/86 or 162/86. 9. In some of the cases demands of duty have been made and penalties have been imposed on the basis of classification of the steel balls under Tariff Heading 84.82. In view of our finding on the question of classification and applicability of Notification 162/86 or 62/86 demands of duty and penalties on some of the assessees herein would not be sustainable. 10. In short, appeals of the Revenue are dismissed and appeals of the assessees are allowed with consequential relief to the assessees. 11. Before parting, we may say that both the sides h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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