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2015 (11) TMI 446 - CESTAT AHMEDABAD

2015 (11) TMI 446 - CESTAT AHMEDABAD - 2016 (335) E.L.T. 69 (Tri. - Ahmd.) - Availment of DEPB benefit under Sr.No.68B of the DEPB Scheme - Classification of Alloy Steel Forgings (Machined) / goods for use Gear Blanks - Classification under Tariff Item 732616 of the Drawback Schedule or under Tariff Item 848221 and 8708099 of Drawback Schedule - Held that:- There is no dispute that the list appended to the Circular clarified that the Sr.No.68B of DEPB Scheme is corresponding to Tariff Item 72261 .....

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l Excise officers and officers of Special Economic Zone. Hence, the said case law is not applicable herein. - The goods exported by the Appellant declaring Alloy Steel Forging (Machined) for use of rings of Bearing and Gear Blank in their shipping bills, require further operation and such goods when not fit for being ready to use, would appropriately classifiable under tariff item No.732615 of Drawback Schedule. Therefore, the demand of differential amount of drawback alongwith interest and .....

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- Hon ble Mr. P.K. Das, Member ( Judicial ) And Hon ble Mr. P.M. Saleem, Member ( Technical ) For the Appellant : Shri P. M. Dave, Shri P. V. Sheth - Advocates For the Respondent : Dr. J. Nagori, Authorised Representative ORDER Per P. K. Das The relevant facts of the case, in brief, are that the Central Government w.e.f. 01.10.2011 abolished export incentive under Duty Entitlement Pass Book (DEPB) Scheme. Notification No.68/2011-Cus(NT), dt.22.09.2011, was issued and determined rates of Drawback .....

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awback Schedule and DEPB Scheme. It is mentioned in the list of the said circular that the corresponding sub-heading for the goods covered under Sr.No.68B of the DEPB scheme is tariff item 732616 of the Drawback schedule. From 01.10.2011, the Appellants manufactured and exported Alloy Steel Forgings (Machined) for use rings for Bearings/Gear Blanks and claimed Drawback benefit under tariff item No.732616 of the Drawback schedule. The competent authority sanctioned and paid drawback as per the cl .....

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s Tariff Act, 1975 (CTA) and under tariff item No.848221 of Drawback schedule. Further, the impugned goods for use Gear Blanks manufactured and exported by them should be classified under sub-heading No.87084000 of CTA and under tariff Item No.8708099 of Drawback schedule. It has also proposed to recover excess amount of Drawback availed by the Appellant during the period from November 2011 to September 2012 under Rule 16 of the Customs, Central Excise duties, and Service Tax Drawback Rules, 199 .....

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1 of Drawback schedule. The impugned goods used for Gear Blanks manufactured and exported by the Appellant should be classified under sub-heading 87084000 of CTA, wherever the impugned goods machined used for Gear Blanks are shown under sub-heading No.73261990 and the said Gear Blank should be classified under tariff item No.8708099 of the Drawback schedule. It has confirmed the demand of excess Drawback amount availed by the Appellant under proviso to Rule 16 of Rules, 1995 alongwith interest a .....

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of DEPB schedule and thereafter under tariff item No.732616 of the Drawback schedule as per Board clarification. As per Serial No.70 of the list appended to the circular, DEPB product code 68B under the description of Alloy Steel Forging (Machined) would cover tariff item No.732616 of the Drawback Schedule. He submits that prior to 01.10.2011, the Department investigated on various occasions in the year 2000, 2005, 2009 etc to classify the impugned items under Code No.428 as Bearing Races of the .....

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C). He also submits that the strict interpretation at par with Customs tariff is not required while deciding the export incentive scheme as held by the Tribunal in the following cases:- i) Imperial Thread Co. Vs CC (EP), Mumbai 2002 (139) ELT 221 (Tri-Mumbai) ii) Amiya Commerce & Construction Co. P. Ltd Vs CC (Prev.), West Bengal, Kolkata 2007 (217) ELT 154 (Tri-Kolkata) 4. The learned Advocate further submits that the goods were exported in observance of the procedure as prescribed in Rules .....

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k claim as declared in the shipping bills for the reason, the goods were unfinished form and not ready to use as finished goods. He further submits that the demand is barred by limitation as there is no suppression of facts with intent to evade payment of duty. He further submits that even if there is no limitation prescribed in Rule 16, the limitation prescribed under Section 28 of the Customs Act, 1965 would be applicable. The learned Advocate also filed Written Submissions with compilation of .....

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under tariff item No.732616 of the Drawback schedule. Since, the Appellant had classified their product under heading 84829900 and 87084000, it is clear that the goods are classifiable under respective tariff heading of the Drawback schedule and it cannot come under tariff item 732616 of the said schedule. It is also submitted that the corresponding correct classification of Bearing/Gear Blank under DEPB schedule should have been under Sr.No.428 and not 68B of DEPB Schedule as classified by the .....

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schedule and the items in questions would be classified under Chapter 84 and 87 of the said Drawback schedule. It is stated that Rule 16 of Rules 1995 is not subject to the provisions of Section 28 of the Customs Act, 1962 as held by the Tribunal in the case of Sun Exports Vs CC(Exp.), Nhava Sheva - 2008 (228) ELT 545 (Tri-Mumbai). He also submitted written submissions with case laws. He also relied upon the following decisions of Hon'ble High Court:- i) Pratibha Syntex Ltd Vs UoI 2013 (287) .....

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appreciation of the case, we reproduce below the relevant portion of the DEPB, Drawback schedule and CETA/CTA as under:- (A) DEPB Schedule (Prior to 01.10.2011) S.No. DEPB Sr.No. Description of goods Corresponding Drawback Tariff item 1. 68B Alloy Steel Forgings (Machined) 732616 2. 428 Bearing races 848221 (B) Drawback Schedule (from 01.10.2011) Tariff Item Description of goods Unit A Drawback when Cenvat facility has not been availed B Drawback when Cenvat facility has been availed Chapter 73: .....

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6 Other articles of iron and steel - Forged or stamped, but not further worked: 7326 11 00 - Grinding balls and similar articles for mills 7326 19 - Other: 7326 19 90 - other 8482 Ball or roller bearings - Parts: 8482 99 00 - Others. 8708 Parts and accessories of the motor vehicles of headings 8701 to 8705 8708 40 00 - Gear boxes and parts thereof 7. The description of Chapter 73, 84 and 87 of CTA is similar to Drawback Schedule. Chapter 73 of the schedule to the Customs Tariff Act covers the Ar .....

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under Chapter 84 and 87 of CTA. It is observed that as evident from the documents and statements of various persons of the Appellant, the impugned export goods are not just forged articles but further worked. It has been observed that the processes carried out at customer s end, a new product does not emerge. These processes are carried out simply for the purpose that they fit into the specific need and requirements of the customers. These processes are not the processes alien to the manufactur .....

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Excise invoices. 8. The learned Advocate submitted that the Appellants were manufacturing and exporting the parts of machinery in finished form classifying under Chapter 84. They claimed drawback benefit under the respective headings of the drawback schedule. In the case of manufacture and export of the unfinished articles of iron and steel, where the customers had further worked, the Appellants declared the goods under Chapter 73 of the Drawback Schedule. The Adjudicating authority also observ .....

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e Customs authorities enquired the matter in detail. The Appellants submitted certificate dt.25.07.2000 of the Chartered Engineer. The relevant portion of the said certificate is reproduced below:- On the basis of our inspection and verification of manufacturing facilities available at the factory of M/s Rolex Industries, process flow chart being followed by the unit and other relevant information furnished by the unit, it is certified that:- 1. M/s Rolex Industries, Rajkot is capable to manufac .....

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ers end to make machined rings suitable for bearing assembly. 4. Forged and machined rings manufactured and, being exported by the unit cannot be assembled or used for producing bearings. All rings require further process like heat treatment, grinding, lapping, assembly etc to make complete bearing. 5. Information furnished herewith is true and correct to the best of our knowledge and belief. 10. It is noticed that the Superintendent of Central Excise, Rajkot also issued a certificate dt.26.07.2 .....

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g bearing races from alloy steel materials. On going through the records and information supplied by M/s Rolex Industries, Rajkot certified that export forged and machined condition rings required further process of heat treatment to impart required hardness to bearing races, further process of finishing by grinding and lapping on special machineries, so that bearing races can be assembled as to prepare the bearing complete. Forged and machined rings being exported by the unit, for producing bea .....

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Z, dt.26.03.2009 of the Superintendent of Customs Authorised Officer, Mahindra City, SEZ, which is reproduced below:- File No.8/20/2006/MAHINDRASEZ Dated 26/03/2009 Sir, Sub: Timken India Ltd Certain clarification DEPB - Reg. Timken India Ltd had sought for clarification on the excisable raw materials namely alloy steel forged rings (cups & cones), proof machined and carburized, received from, vendors namely, M/s Mascot Forge Pvt.Ltd., Rajkot, Rolex, Rajkot, & Dual Rings, Hyderabad, used .....

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ial/components, alloy steel forged cups & cones, are procured indigenously and roller and cages are procured under import from USA, & Japan.. The indigenously procured raw material alloy steel rods procured by the vendor, Mascot Forging, Rajkot, undergoes forging and machining operations, and cleared to the job workers premises for carburizing, and are received by, Timken directly from the job workers premises on behalf of the suppliers, under ARE-1 in terms of Central Excise Rules 1944 .....

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gs which is exported, under SEZ procedures. The process of manufacture is studied and the same is detailed under:- The machined, carburized alloy steel forging, namely cups & cones, i.e. green rings received from the vendors are quality checked for visual damage etc, are sent for heat treatment in furnace at a relatively high temperature, then sent to quench press for sizing and washed. The heat treated, washed materials are sent for tempering operation in tempering furnace for about couple .....

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red parameters of sizes of Timken USA standards. During the course of each operation the materials are sent for quality test and inspected with high precession lab as well as physical, visual tests. Then the QC approved materials are sent for laser marking in the Laser marking machine, sent for de-magnetization, and the resultant product manufactured is known as Bearing Race, for final assembly with the rollers and caging (imported) for the final assembly of taper roller bearing assembly, and ex .....

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d has a rough shape of a race, however in the absence of the operations, refer supra, it cannot be directly fitted into the bearings as bearing race, thus the operations carried out at Timken only makes the alloy forging as an identifiable part of for fitment into roller bearings. It is therefore felt the goods supplied by Mascot, merits classifiable under CT 73269990, rather under CT 84829900. The view is strengthened in light of the Apex Court s decision in the case of Jaypee Forgings Vs CCEX .....

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the forgings which don t require further machining and are ready to be used merits classification under 84/85/86/87, & all castings coming out of casting moulds upto stage of proof machining and requiring further machining before being used as machine parts, are correctly classifiable under 7325. Further, as per the explanatory notes of HSN DVI-8482-1, normally bearings consists of two concentric rings, enclosing the ball or the roller and a cage which keeps them in a place, and ensure thei .....

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product code 61/68B appears more appropriate rather than under product code 61/428 or 61/530A, WHICH IS MORE SPECIFIC inasmuch as the alloy steel forging machined are neither rough or attained the character bearing race or machine part fit for ready use. Regarding the classification of the components received, namely alloy steel rings machined and carburized, the appropriate classification appears under CT 7325. 12. The Appellant also submitted the certificates of the customers in the present ap .....

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required to be performed on Forgings (Machined) Rings supplied by ROLEX RINGS PRIVATE LIMITED, RAJKOT INDIA. (1) Heat Treatment (2) Grinding (3) Finishing (4) Assembly Further to state that these rings procured from ROLEX RINGS PRIVATE LIMITED, RAJKOT INDIA cannot be used directly in as supplied condition for assembly of bearings or cannot be considered as Bearing Races and fitted as Bearing Races. 13. The certificate dt.03.05.2013 of M/s NTN-SNR Roulements, France is reproduced below:- This is .....

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NGS PRIVATE LIMITED, RAJKOT INDIA (1) Heat Treatment (2) Grinding (3) Super Finishing process like honing and Lapping (4) Assembly Further to state that these items/Rings imported/procured from ROLEX RINGS PRIVATE LIMITED, RAJKOT INDIA cannot be used directly in as supplied condition for assembly of bearings or cannot be considered as Bearing Races and fitted as Bearing Races. 14. On perusal of the certificates of the customers and the customs authorities and SEZ, as mentioned above, we are unab .....

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out these processes, the Bearing rings/blanks cannot be produced. The findings of the Adjudicating authority that the product is finished nature are without any substance. 15. The learned Authorised Representative strongly relied upon The Rules for the Interpretation of the First Schedule in the Customs Tariff Act. He submitted that the impugned product had attained essential character of the finished product under Chapter 84 or 87 of the tariff. On perusal of the certificates of various authori .....

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The drawback schedule this year incorporates items which were hitherto under the DEPB scheme. Thus, the total number of items in the drawback schedule now number approximately 4000. While incorporating these DEPB items in the Drawback schedule, care has been taken to classify them at the appropriate four digit level. However, there may be some doubts about the classification of these DEPB items in the drawback schedule notified. Be that so as it may, it may please be noted that the rates of dra .....

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f the Customs Act, 1962, Section 37 of the Central Excise Act, 1944, Section 93A, Section 94 of Finance Act, 1994, the Central Government framed the Customs, Central Excise duty and Service Tax Drawback Rules, 1995 (in short Drawback Rules, 1995)as amended by Notification No.69/2011-Cus(NT), dt.22.09.2011. Notification No.68/ 2011-Cus(NT), dt.22.09.2011 issued in exercise of the powers conferred under Section 75(2) of the Customs Act, 1962, Section 37(2) of the Central Excise Act, 1944, and Sect .....

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ned) under Sr.No.68B of DEPB Scheme would be covered under tariff item 732616 of Drawback schedule. After 01.10.2011, the Appellants claimed the Drawback benefit of the impugned goods under tariff item No.732616 of Drawback schedule. 18. There is no dispute that the list appended to the Circular clarified that the Sr.No.68B of DEPB Scheme is corresponding to Tariff Item 722616 of Schedule. The Hon ble Supreme Court in the case of Ranadey Micronutrients Ltd (supra) held that the circular issued b .....

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ect for circulars such as these issued by the Board, which also operates under the aegis of the Ministry of Finance, for it is the Board which is by statute, entrusted with the task of classifying excisable goods uniformly. The whole objective of such circulars is to adopt a uniform practice and to inform the trade as to how a particular product will be treated for the purposes of Excise duty. It does not lie in the mouth of the Revenue to repudiate a circular issued by the Board on the basis th .....

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d their product under CTH 84829900 of schedule to CETA/Customs Tariff in the Central Excise invoice and ARE-1. It was clear that their product to be part of ball bearing. It is also observed that the corresponding correct classification of Bearing Races under DEPB schedule should have been S.No.428 and not 68B as classified by the Appellant. It is further observed that the Appellant, while exporting the Bearing Races before 01.10.2011, had wrongly claimed DEPB under S.No.68B, as the correct head .....

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PB scheme in the year 2000 and 2008. The customs authorities and Mahindra SEZ, after detailed examination of the issue, had ruled in favour of the Appellant. The learned Authorised Representative at the time of hearing submitted that the investigation was going on this issue. It is settled that the statement would not prevail over the evidence. In any event, the Appellants contested the authenticity of the statement. It is stated that the statement of Shri Bhavin Shah, working as Deputy General .....

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Heat Treatment, Face Grinding, Outer Diameter Grinding and Raceway Grinding. It is also stated that the Rings being supplied by the Appellant are not capable of direct use. We do not find any substance in the submission of the learned Authorised Representative, as the impugned order confirmed the classification under the Drawback Schedule and not under DEPB Scheme. 20. The learned Authorised Representative strongly relied upon the classification of the goods as declared by the Appellant under C .....

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s to the Assistant Commissioner of Customs with the various documents. The customs authorities, after satisfaction, allowed export and finally assessed shipping bill No.6308848 dt.05.12.2011 on which specific query was raised and also sanctioned duty drawback as claimed by the Appellant. The goods were exported under the supervision of the customs officers and an enquiry was made. But, no dispute was raised. Thereafter, the officers of the DGCEI stopped the payment of drawback in respect of ship .....

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officers at the time of exportation, had examined the documents and the goods and therefore, the impugned goods would be more appropriately classifiable under tariff item 732616 of the Drawback Schedule. In any event, the classification of a product is to be decided on the basis of description, nature, use etc of the product. 21. The learned Authorised Representative for the Revenue relied upon the decision of the Tribunal in the case of Bharat Forge Ltd (supra). The relevant portion of the sai .....

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chapter under which the serial no. is indicated and secondly, they should conform to the description given against the serial no. In the instant case, as is clearly admitted by the appellant s officials and as revealed from the manufacturing processes undertaken, the item steering knuckle falls under Chapter 87 of the Customs Tariff and hence the all industry rate of drawback for the said item can not be claimed against goods for which rate has been prescribed under Chapter 73. In respect other .....

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f CTA 87.08 of the Customs Tariff, it is abundantly clear that there are motor vehicle parts suitable for use as such and had been subjected to various processes after forging. In the case of M/s Bharat Forge Ltd (supra), the Tribunal strongly relied upon the purchase orders for the product from the foreign buyer, given the description of the goods such as Spindle-Wheel, I Beam, Spindle Assembly, Steering Krunches and so on. Therefore, the Tribunal rejected the claim of Drawback of the Appellant .....

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ted regarding functional utilities of items viz. cake save, food saver, finger soup, stainers, collander showing that used for handling food or drink so as to fall under Heading 8215 of drawback schedule and the Appellants are not eligible for drawback claim. In the case of CPS Textiles (supra) the Hon'ble High Court observed that the description of the goods as per the document submitted alongwith shipping bills will be a relevant criteria for the purpose of classification, if not otherwise .....

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ing on description, nature and use of the goods and not merely on mentioning of Sub-heading No. of the Tariff in the documents. 23. It is noted that the Government had introduced various incentives/subsidies to the exporter for export of the goods. The exports are essential for earning foreign exchange for the country. The purpose of various incentives/subsidies allowed to the exporter that they may be able to compete in the international market and all taxes and duties are neutralized for the p .....

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