TMI Blog2015 (11) TMI 446X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 penalties cannot be sustained. Extended period of limitation - Held that:- Appellant has a very strong case in their favour on limitation, as is evident from the analysis of facts herein earlier. When the Department had repeatedly examined the issue earlier and assessments were final, demand can be raised only for normal period. Demand of differential duty set aside - Decided in favor of assessee. - Appeal No. C/10572,10573/2014-DB - Order No. A/11578-11579/2015 - Dated:- 29-10-2015 - 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rector of the Appellant Company under Section 114(ii) of the Act, 1962. By the impugned order, the Adjudicating authority held that the impugned goods machined rings used for Bearing manufactured and exported by the Appellant should be classified under sub-heading No.84829900 of CTA and under tariff item No.848221 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 and imposed penalty of equal amount of excess Drawback on the Appellant Company and also imposed penalty on Shri Manesh Madeka, Managing Director of the Appellant Company. Hence, the Appellant Company and the Director filed the appeals before the Tribunal. 3. The learned Advocate on behalf of the Appellant submits that prior to 01.10.2011, they have manufactured and exported Alloy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmits 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 case laws. 5. The learned Authorised Representative on behalf of the Revenue reiterated the findings of the Adjudicating authority. He submits that the Appellants were classifying the impugned goods under heading No.84829900 (machined rings) and heading No.87084000 (gear blank) in Central Excise invoice and ARE-1 and the same products were classified in the shipping bill under sub-heading No.73261990 describing Alloy Steel Forgings (Machined) for the purpose of claiming higher rate of Drawback 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 DEP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Articles of Iron or Steel 7326 Other Articles of iron and steel 732616 Alloy Steel Forging (Machined) Kg. 5% 9% 5% 9% Chapter 84: Nuclear Reactors, Boilers, Machinery and Machined Applications; parts thereof 8482 Ball or roller bearings Parts 848221 Bearing Races 2% 2% Chapter 87: Vehicles other than Railway or Traction Rolling Stock, and parts and accessories thereof. 8708 Parts and accessories of the motor vehicles of Headings 8701 to 8705 8708099 Others 1% 1% (C) Customs Tariff Act, 1975 7326 Other articles of iron and steel - Forged or stamped, but not further worked: 7326 11 00 -- Grinding balls and similar articles for mills ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 observed that the Appellant exported two types of alloy steel. According to the Revenue, the impugned product would also cover under Chapter 84 and 87 instead of Chapter 73 as claimed by the Appellant. 9. On perusal of the records, we find that from the very beginning, the Appellants took a stand before the Customs authorities that the impugned goods were exported in unfinished form and not ready to use by the customers and availed benefit under DEPB Scheme. It is noticed that in earlier occasions, the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tified that 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. 11. The matter was also enquired by the Mahindra SEZ (Special Economic Zone) as revealed from the File Note No.8/20/2006/Mahindra SEZ, 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 in the manufacture of Taper Roller Ball Bearing, and its applicable rates under deep scheme, viz-viz, the classification of the raw material supplied. The undersigned is directed to examine the issue for compliance. 1) Timken India, (TIMKEN) has put a plant in Mahindra World City, Special ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cal, 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 exported. It appears a basic doubt may arise as to whether the steel alloy products, namely cups and cones, machined and carburized supplied to Timken, could be said to have attained the essential character of a part of taper roller bearing, as machined forging would only be used for the manufacture of the said item. In the present case, though articles supplied are subjected to further grinding finishing on all sides of the bearing races, despite the fact the raw material, forged articles received 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 732 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India Ltd, Chinchwad, Pune, procure Alloy Steel Forgings (Machined) rings from ROLEX RINGS PRIVATE LIMITED, RAJKOT INDIA. These Alloy Steel Forgings (Machined) Rings supplied by ROLEX are further processed to produce a Bearing Race. Following processes are 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 to inform that, We, NTN-SNR Roulements, B.P. 2017, ANNECY CEDEX, FRANCE, import/procure Alloy Steel Forgings (Machined) Rings from ROLEX RINGS PRIVATE LIMITED, RAJKOT INDIA. These Alloy Steel Forgings (Machined) Rings supplied by ROLEX are further used to produce Bearing Races. Alloy steel forged rings supplied by ROLEX RINGS PRIVATE LIMITED, RAJKOT INDIA are further processed to produce a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 drawback as specified for these items in the drawback schedule is not to be denied in all such cases. For easy reference, a list of all the DEPB items falling under a particular product code and serial number with the corresponding drawback tariff item has also been separately hosted on the CBEC website. All field formations are requested to inform the Board about specific item/s (if any) on which there are doubts regarding the classification. 17. In exercise of the powers conferred by Section 75 of 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, S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of DEPB Scheme. 19. The Adjudicating authority, for the purpose of denying the benefit of the above Board circular, had observed that the Appellants had classified 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 heading of Bearing/Races is Sr.No.428 of DEPB schedule. It has also relied upon the statement of the Appellants and the Buyer. We are unable to accept the findings of the Adjudicating authority. There is no proposal in the show cause notice for re-opening of classification under DEPB scheme. Further, there is no proceeding initiated to deny DEPB benefit prior to 01.10.2011. Furthermore, it is seen from the records that enquiry was conducted to classify the said product other than Sr.No.68B of the DEPB scheme in the year 2000 and 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icers of the DGCEI stopped the payment of drawback in respect of shipping bill No.1668505 dt.12.10.2012 onwards. The appellant approached to the Hon'ble Gujarat High Court by way of filing Special Civil Application. The Hon ble High Court by order dt.19.06.2013, directed the authority concerned to sanction at least part of the duty drawback as claimed by the Appellant and also directed investigating agency to complete the investigation by the end of July 2013 and complete the adjudication proceeding within further period of two months. Apparently, the Customs 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 said decision is reproeduced below:- 7.2. From the above two circulars, two things are absolutely clear. The first two digits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unctional 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 disputed on the basis of any technical opinion or test. We find that none of the case laws as relied upon by the learned Authorised Representative would be applicable in the facts and circumstances of the case. In the present case, the Revenue has not produced any evidence to the extent that the goods are identifiable ready to use as parts or components. The Appellants contested the nature of the impugned goods by showing the certificate of the customers. The classification of product is depending 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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