TMI Blog1984 (8) TMI 329X X X X Extracts X X X X X X X X Extracts X X X X ..... ed or partially machined) for- (1) * * * (2) * * * (3) Cylinder liners proof machined to Part No. CC-F-3 (Rev.1). (4) Cylinder liners proof machined to Part No. 10123116 which is not identifiable part in that it is partially machined only and not ready for use. under the aforesaid notification No. 74/62 and it was duly approved by the Asstt. Collector in November, 1981; (Exhibit F in the Paper Book). (c) however, in consequence of an audit objection dated 3-7-1981 (to which the Appellant submitted a reply dated 6th August, 1981), a notice dated 17-8-1981 (Exhibit D in the Paper Book) was issued to the Appellant under Section 11A of the Act, alleging inter alia that- (i) cylinder liners manufactured by the Appellant were cleared as cast iron castings under Item 25 of the First Schedule to the Act without payment of duty under the aforesaid notification, (ii) however, on physical verification, they were found to be identifiable as machine parts having undergone machining and polishing before clearance/removal ; (iii) the cylinder liners in question would hence fall under Item 68 of the First ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1944. 2. It was contended by Shri R.K. Habbu. Advocate for the Appellant before us, inter alia, that - (a) once the classification list was approved, the Asstt. Collector had no jurisdiction to go back on such approval since there is no such power that inheres and becomes vested, as it should, either expressly or by necessary implication, in the Asstt. Collector (reliance upon 1983 E.L.T. 34 - Indian Organic Chemicals Ltd. v. Union of India); (b) in any view, the first show cause notice dated 17-8-1981 must be deemed to have been dropped in the facts and circumstances of the case; (c) the castings manufactured by the Appellant cannot in any view be considered to be machine parts and assessed to duty under Item 68 of the First Schedule, because, after the supply of castings, further processing by way of machining and polishing has yet to be done and was, indeed, done by the purchasers from the Appellant on their own. Such processing by way of machining or polishing done by the Appellant before clearance was merely to remove the defects noticed on the surface of the castings rather than to render them completely serviceable as cylinder liners without any more machining or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cified, the Appellant could always enquire and ascertain the actual duty before giving a reply to the show cause notice. Mere failure to comply meticulously with the requirements of Sec. 11A does not render the show cause notice void (reliance on 1981 E.L.T. 642 - Hindustan Aluminium Corporation Ltd. v. Superintendent, Central Excise, Mirzapur and others. It was Rule 10 as it existed at the relevant time that was construed in the said decision. Rule 10 is now replaced by Sec. 11A and is ad idem.) 4. On 29-12-1983, when the matter was reopened and reheard - (a) Shri Habbu, the learned counsel for the Appellant invited our attention to certain additional evidence in the form of two letters dated 23-5-1983 and 29-9-1983, the first from the Senior Stores Officer (for Controller of Stores, Diesel Locomotive Works, Varanasi, and the second signed for Controller of Stores, Southern Railway, Madras respectively, as well as certain certified photographs of the castings and submitted, inter alia, that the castings cannot be regarded as machine parts since they have to undergo further processing at the customers end. He also relied upon the decisions of the Tribunal in- (i) 1983 E.L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er under item No. 68 at the appropriate rate of duty for the reasons annexed to the notice; (d) it is, hence, proposed to classify the said cylinder liners under item 68 pursuant to the powers conferred by sub rule (5) of Rule 173B of the Central Excise Rules, 1944 and to levy duty under it and also to demand the differential duty payable with effect from 1-3-1981 on the said items under the provisions of Sec. 11A of the Act, and invited the Appellant to show cause against the proposed action; (ii) the earlier show cause notice dated 17-8-1981 did not propose any such reclassification. It merely alleged removal of excisable goods with an intent to evade payment of duty and, accordingly, such duty as has been evaded was recoverable from the Appellant under proviso to Sec. 11A. The Appellant was required to show cause why he should not be required to pay an amount of ₹ 3,07,028/- over the period September, 1980 to March, 1981; (iii) personal hearing in the earlier show cause notice would appear to have been concludes before the Asstt. Collector on or about 23-10-81. It would appear that the Appellant had contended that cylinder liners manufactured by him were assessa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvolved right through. Is it, in the circumstances, unreasonable to conclude that the enquiry pursuant to the earlier notice dated 17-8-1981 was dropped with the approval accorded to the classification list on 20-11-1981 but resuscitated for obvious reasons on the issue of the subsequent show cause notice dated 16-1-1982? In any view of the matter, when there were no findings whatsoever on the issues that arise under the first show cause notice dated 17-8-1981, the composite adjudication order is of no effect in so far as the said notice is concerned; (ix) this is how, the Appellate Collector had also apparently understood, for he proceeds to deal with the matter as if the adjudication order concerned itself with the notice dated 16-1-1982 only and the earlier notice finds no mention or discussion at all in his order. When he, therefore, modifies the adjudication order and quashes the demand for duty beyond a period of six months from the date of the show cause notice (para 3 and the last para), he can be understood to refer to the second show cause notice only and not to the first at all. Otherwise, there was no modification effected by him. as stated by him, if he is to be und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is enough indication of the arbitrary or capricious exercise of the power of review in this case, if at all it were assumed to inhere in the adjudication officer to a limited extent. One can hardly describe the action otherwise in the light of the sequence of events-the show cause notice for payment of differential duty on 17-8-1981, the conclusion of the adjudication on 23-10-1981, the approval of a classification list entirely negating the adjudication, and the issue of a second notice to show cause on 16-1-1982 in despite of it. (C) (i) The foregoing, by itself, is sufficient to dispose of this Appeal and it is unnecessary to go into the other issues. Since, however, the issue as to whether the goods in question can be considered to be machined parts and assessed to duty all over again under Item 68 of the First Schedule, had been argued at some length, initially as well as after reopening the case, it is being dealt with. (ii) The question of construction and applicability of Item 25 of the First Schedule, relevant in this context, was previously referred to a larger Bench by B Bench itself in the case of M/s. Tata Engg. Locomotive Co. Ltd. [Appeal No. CD(SB)(T) 45/7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 till they lose their identity as castings and assumed a new name, character and use; (d) discrimination and subjective selection is inevitable; (e) various citations (not, however, referred to) show that if the goods were manufactured in India, they were liable to duty under Item 25; (f) in an addendum, one of the learned Members relied upon the ratio of the Supreme Court in 1980 E.L.T. 343 (SC) (Dy. Commissioner, Sales Tax, Ernakulam v. P.I.I. Food Packers) and observed that, even though the casting had undergone a degree of processing, it must still be regarded as retaining its original identity and accordingly it is assessable under Item 25; (iv) in terms of the ratio of the larger Bench of this Tribunal, therefore, it is not the extent of crudeness or roughness in the casting that is the true test determinative of the assessability to duty of a Iron cast in any other shape or size in terms of Item 25 of the First Schedule. The real test is whether, by dint of the processing, the casting had become another identifiable article. If one may say so with respect, Iron cast in any other shape or size cannot be an unidentifiable article. It has, necessarily, to be to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidering the way entry 25 of the Tariff is worded, viz., 25. Iron in any crude form - including pig iron, scrap iron, molten iron or iron cast in any other shape or size the word crude ought to be taken as qualifying the entire entry. This was also the unanimous view of the appellants as well as the Department in M/s. TELCO s appeals before the Larger Bench [Appeals No. CD(SB) (T) A. No. 45 and 50-55/75-B]. However, the Larger Bench has ruled otherwise saying that the word or occurring after the words molten iron in the entry is disjunctive and that the word crude does not qualify the words iron cast in any other shape or size . Therefore, whatever may be my personal views in the matter, I consider that as a part of the three-Member Bench I am bound by the Larger Bench ruling on the point. At the same time, I find that it is not necessary to prolong this controversy as this point is not very material for deciding the issues in the present appeal of M/s. Pefco Foundry Chemicals Ltd. As I see from the records, two types of cylinder liners were supplied by the present appellants to two customers in the Indian Railways - one proof machined and the other fully machin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , were almost finished machinery components, even if not fully finished. The important thing is that at this stage they had ceased to conform to the description iron cast in any other shape or size in entry 25. I, therefore, hold that fully machined cylinder liners were liable to assessment at two stages-under Item 25 at the stage of casting and under Item 68 at the time of their clearance after detailed machining etc. Patna High Court judgment in the case of M/s Tata Yodogawa (1983 E.L.T. 17) cited by the appellants is not applicable here because that judgment related to a case of classification of steel castings under entry 26AA (v) and the two entries-25 and 26AA(v) are worded differently. 9. As regards the appellants argument that the Assistant Collector could not revise her own decision on the classification list, I rely on the Division Bench judgment of the Delhi High Court in J.K. Synthetics case (1981 E.L.T. 328). In this judgment, the Hon ble High Court considered a host of authorities of the Supreme Court and the other High Courts and thereafter held that the same authority or the one subordinate to it should not change the classification arbitrarily but such a chan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arlier year. This rule is based both on the principle that there should be a finality to litigation even in Income-tax matters as well on principles of natural justice. Applying the above rule to the present appellants case, I find that the goods were declared by them in the classification list effective from 1-3-81 as under :- (4) Cylinder liners proof machined to Part No. 10123116 which is not identifiable part in that it is partially machined only and not ready for use. However, on physical verification of the goods and their manufacturing processes, the Asstt. Collector found, and so have I after seeing the photographs and the contract documents, that they were fully machined cylinder liners . In other words, the description of the goods in classification list was misleading or, at best, only partially true. As far as the records before me show, both the classification lists, the one effective prior to 1-3-1981 and the other effective from 1-3-1981, were initially approved on the basis of the description of the goods given therein by the appellants. But when physical verification of the goods and their processes of manufacture revealed a different position, or in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice given in respect of an earlier classification list, in force prior to March, 1981 stood dropped. The Asstt. Collector did not pass any order withdrawing the first show cause notice but actually adjudicated upon it, together with the later show cause notice, in her combined Order-in-Original. 11. To sum up, I order that - (1) proof machined castings of cylinder liners were classifiable under I tern 25 of the Tariff, (2) fully machined cylinder liners were liable to a two-stage levy - first under Item 25 and later under Item 68, and (3) the demand for duty should be revised accordingly and, in so far as the past period (prior to the issue of the show cause notices) is concerned, it should cover only a period of six months prior to the issue of the respective show cause notices. 11 . [Per : B.B. Gujral, Vice-President] : Broadly, I agree with the judgment of Shri K.L. Rekhi, Member (Technical). The ratio of the larger Bench judgment vide Order No. 449-455/84-B, dated 31-5-1984 in the matter of M/s. Tata Engineering and Locomotive Co. Private Ltd., Bombay v. Collector of Customs, Bombay, is binding on us and any views expressed to the contrary are not relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
