TMI Blog1994 (1) TMI 176X X X X Extracts X X X X X X X X Extracts X X X X ..... ch as T.C. Caps, Top-mast, Socket tongue, and Bearing Shells under Tariff Item 25 along with other goods as iron castings without payment of duty. The Castings of T.C. Caps, Top-mast, Socket tongue, and Bearing Shells were sent to other factories namely, (i) M/s. Mac Engineering, (ii) Abhay Engineering Industries, (iii) Arcost Industries, and (iv) Santani Auto Ancilliaries for the purpose of drilling of holes and machining on job-work basis through M/s. Shah Metal Industries to whom other items of castings were also sent by the appellants for fettling and shot blasting to job-work basis. The goods sent by the appellants on job workers against their private gate passes were received back in their factory and were finally cleared therefrom without payment of duty. The Central Excise (Preventive) officers, after visiting the appellants factory on 17-10-1983 arrived at the conclusion that identifiable parts bearing specific names namely, T.C. Caps, Top-mast, Socket Tongue and Bearing Shells were classifiable under Tariff Item 68 since crude castings of such articles after being subjected to machining and drilling operations were converted into different identifiable articles having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firmed the demand of duty amounting to Rs. 1,18,229-09 in terms of the proviso to Section 11A of the Act. He also imposed a penalty of Rs. 18,000/- on the appellants. The goods seized from the premises of different job-workers were also ordered to be confiscated but option was given in each case for the redemption of the goods on payment of specified amount as fine. 3. Appearing on behalf of the appellants Shri Willingdon Christian, Ld. Advocate submitted that during the relevant period in the appellants factory certain dies and moulds had developed defects giving rise to holes and other defects in castings. He added that such castings were therefore, being sent by the appellants to job-workers for rectification of defects. He contended that the goods recieved back from the job-workers after removal of defects by blasting and drilling of holes were not new finished machine parts but continued to be crude-castings classifiable under Tariff Item 26A(ii). He argued that the castings in question being covered by the specific Tariff Item 25, they could not be classified under the residuary Item 68 of the Central Excise Tariff. In support of his contention he cited the following case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the goods were being removed from their factory for further processing by job-workers. He contended that the extended period for confirmation of the demand was not invokable since the appellants had cleared the goods on the basis of an approved classification list and as contended by their written reply to the show cause notice, they were under the bona fide belief that drilling of holes in unfinished castings did not amount to manufacture of a new excisable product. In support of his contention he cited the following case law :- (i) 1989 (43) E.L.T. 195 (S.C.) = 1989 (25) ECR 289 (S.C.) - Padmini Products v. Collector of Central Excise, (ii) 1992 (57) E.L.T. 293 - Punjab Recorders Ltd. v. Collector of Central Excise, (iii) 1991 (52) E.L.T. 145 (Tri.) = 1990 (30) ECR 77 - New Polymer Industries v. Collector of Central Excise. 4. On behalf of the respondents Shri K.K. Jha, Ld. SDR stated that the appellants contention that in case drilling of holes in castings was held as amounting to manufacture then the job-workers who had processed the castings by machining and drilling the holes would have to be deemed as manufacturers and duty, if held to be leviable, would be reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Mac Engineering or M/s. Arcoshi Industries. The appellants have contended that rough castings of the items known as T.C. Caps, Top-mast, Socket Tongue and Bearing Shells received back in their factory after being subjected to finishing operations such a shot blasting/fettling, machining and drilling of holes, continued to be Castings classifiable under Tariff Item 25(16) goods falling under residuary Item 68 of the Tariff. 7. The respondents case is that the disputed products namely, T.C. Caps, Top-mast, Socket Tongue and Bearing Shells produced by subjecting rough castings to various finishing operations such as shot blasting, machining and drilling of holes were finished machined parts which being distinct in character, name, usage from the original castings from which they were made were correctly classifiable under Tariff Item 68. In this regard reliance has been placed on the following findings of the Collector in the impugned order :- In this regard, in his recorded statement dated 9-12-1983 and 10-12-1983, Shri Kanaiyalal Gulabdas Shah, Secretary and Factory Manager in the Unit, has clearly stated that they were getting process of drilling and machining done on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted by the Unit for completion of a manufactured product and are thus rightly covered by the inclusive definition of manufacture given in Section 2(f) as above. In this regard, in the case of Brakes India Ltd. v. Superintendent of C. Excise - 1986 (26) E.L.T. 211 (Mad.), Madras High Court has observed as under :- The process of drilling and trimming or chamferring is a process which has to be essentially applied in order to render the break lining blanks fit to be straightway used in vehicles. Consequently, the process of drilling and trimming or chamferring of break lining blanks is a process essential, incidental or ancilliary to the completion of the brake linings as manufactured product as without drilling or trimming or chamferring, the product could not be used in vehicles. I, therefore, hold that the process of drilling, Trimming or chamferring which is applied to the break lining blanks purchased by the Petitioners to their specification from M/s. Rana Brake Lining Ltd. and other manufacturers of brake linings is incidental or ancillary to manufacture and that therefore the Petitioners must be deemed to be manufacturing break linings. 8. On a plain reading of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the manufacture of finished goods at the appellants premises. It is seen that in the case of Malleable Iron and Steel Castings (P) Ltd. v. Collector of Central Excise, Bombay reported in 1987 (30) E.L.T. 1019 in which the case law cited before us was also relied upon by the concerned appellant, the Tribunal held that the liability under Tariff Item 68 would arise if castings were converted into identifiable machine parts different from the castings. Para 16 of the said order of the Tribunal being relevant is reproduced below :- * * * * It is seen that on the basis of the appellants statement as regards the end use of the products in question and having regard to the various processes namely, shot blasting, machining and drilling of holes, to which malleable castings of the item were subjected to at the premises of different job workers, the Collector has recorded that the disputed T.C. Caps were being supplied to the manufacturers of insulators for use as metallic parts of insulators supplied by them to the Electricity Boards of various States. Similarly, as observed by the Collector, Top-masts were casting products and were being supplied to Railway contractors for being fitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m to the customers against Central Excise gate passes. In cases where the customers wanted the goods in galvanised condition they were also subjected them to galvanisation before being despatched. It is evident that the appellants were availing the facility in terms of Rule 56B reproduced below for sending semi-finished goods to other parties for carrying out further manufacturing process even when they had not obtained the required permission from the Collector :- RULE 56B. Special procedure for removal of finished excisable goods or semi-finished goods for certain purposes. - The Collector may, by special order and subject to such conditions as may be specified by the Collector, permit a manufacturer to remove - (i) excisable goods which are in the nature of semi-finished goods, for carrying out certain manufacturing processes, or (b) excisable goods for carrying out tests, to some other premises of his or to the premises of another person and to bring back such goods to his factory, without payment of duty, or to some other licensed premises of his or to the premises of another assessee and allow these goods to be removed on payment of duty or without payment of duty for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice. As such the Unit s argument that the department has only reproduced the proviso to Section 11A is baseless and is not correct. Further, with regard to their argument on the point of limitation, it may be stated that wilful and deliberate intent on their part to evade payment of duty is clearly established from the fact that they did not disclose full description and information with regard to four products in question before the Central Excise Officers and also suppressed the fact regarding certain processes to be carried out on the four products in question namely, T.C. Caps, Top-mast, Socket Tongue and Bearing Shells and other products as well. In view of this, the duty as demanded in the impugned show cause notice dt. 16-4-1984, would be rightly governed by the longer period of 5 years under proviso to sub-section (1) of Section 11A of the Central Excises Salt Act, 1944, and not by the period of six months as contended by the unit. In view of above, the reliance placed by them on Board s circular No. 24/83 dt. 24-11-1983 and Circular No. 34/84 dt. 28-9-1984 is of no avail to them." As observed by the Collector the appellants had not disclosed in the relevant classifi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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