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2016 (1) TMI 386 - CESTAT MUMBAI

2016 (1) TMI 386 - CESTAT MUMBAI - 2016 (332) E.L.T. 341 (Tri. - Mumbai) - Classification of forged round bars - Extended period of limitation - Whether the articles manufactured by appellant get covered under Heading 7214 or 7326 during the relevant period - Held that:- Appellant's records were audited by audit party in EA-2000, Comprehensive audit, which has been formulated by the Govt. of India, includes all the aspects of business of the unit which is being audited. This would mean that EA-2 .....

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n produced before us indicate that this issue was not raked by the audit team would mean that it was accepted by the audit team that the classification of products is under Notification 72.14.

On limitation the appeal succeeds and the demand for the period 01.03.2004 to 31.10.2004 is blatantly hit by limitation and the show-cause notice invoking the period of limitation under the provisions of Section 11A(1) is not correct. The impugned order is liable to be set aside on limitation o .....

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n order. 3. The relevant facts that arise for consideration after filtering out the unnecessary details are appellant M/s. Sunil Forging & Steel Industries (main appellant) have engaged in the manufacture of "forged round bars" etc. They manufactured forged round bars without any definite shape as per the order from the customers and classified the forged products under Chapter Heading 72.14 of Central Excise Tariff Act, 1985 (CETA) and also manufactured forged articles which calle .....

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er on merits as well as on limitation. The adjudicating authority did not agree with the contentions and confirmed the demands along with interest and also imposed penalties. On an appeal field before the first appellate authority the views expressed by the adjudicating authority were upheld by the first appellate authority. 3. Learned Counsel appearing on behalf of the appellant would take us through the show-cause notice and also the impugned order and the adjudication order. He would submit t .....

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turing process as mentioned there is being followed by them hence all products manufactured by them would merit classification under Chapter Heading 7214. He would then elaborate the said process of manufacturing by explaining the types of forging process and submit that the product manufactured by them are undergoing the same process as mentioned in Explanatory Note in HSN. He would also draw our attention to "cold", "warm" or "hot" forging as given in Explanatory .....

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premises. It is his submission that the products merit classification under Chapter Heading 7214 and not 7326 as claimed by Revenue. He would submit that the product 7326 are other articles of iron and steel forged or stamped but not further worked while the products manufactured by them are in the form of grinding, punching etc. It is his further submission that on limitation, they have got very good case inasmuch as before starting the manufacturing of the products they had informed the depart .....

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the audit party was aware and recorded in the report that appellant is engaged in the manufacture of "forged" products falling under Chapter No. 7214. He would submit that on limitation when the audit party has examined the records for the period in question, the classification dispute was not raised. The show-cause notice issued on 30.04.2009 by invoking extended period of limitation for demanding the differential duty for the clearances made during 01.03.2004 to 31.10.2004 is blatan .....

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led in favour of the Revenue as to the classification of forged articles by the Tribunal as well as the Apex Court. He would submit that the items manufactured by the appellant are nothing but articles which would merit classification under 7326 and not under 7214. He would submit that in order to get classified the items under Chapter Heading 7214, the articles should be bars and rods of iron or non-alloy steel while the product manufactured by the appellant is forged articles and not bars and .....

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been taken by the Apex Court in the case of CCE vs. Jaypee Forges - 2003 (158) ELT 560 (S.C.). He would draw our attention to the judgement of the Tribunal in the case of TISCO Ltd. - 2001 (131) ELT 253 (Tri. Kolkata wherein forged/rolled rings were classified under 73.26 and this order has been upheld by the Apex Court as reported at 2003 (156) ELT A210. He would submit that identical issue came in before this Tribunal in the case of Sharda Forging & Stampings (P) Ltd. - 2004 (166) ELT 357 .....

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ng forged articles and have also mis-declared on the invoices that the product would fall under the category of iron bars and rods forged. It is also his submission that the year 2002 it is not necessarily covered the classification issued when auditing is being undertaken. 5. We have considered the submissions made at length by both sides and perused the records. 6. The issue involved in this case is whether the articles manufactured by appellant get covered under Heading 7214 or 7326 during th .....

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lling 7214.10 Forged 16% 7214.20 Of free-cutting steel 16% 7214.90 Other 16% 73.26 Other articles of iron or steel Forged or stamped, but not further worked: 7326.11 Grinding balls and similar articles for mills 16% 7326.19 Other, Articles of iron or steel wire: 16% 7326.21 Tyre bead wire rings intended For use in the manufacture of tyres for cycles and cycle-rickshaws 7326.29 Other 16% 7326.90 Other 16% It can be seen from the above reproduced Chapter Heading, to our mind, that in order to get .....

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der 73.26 as other articles of iron and steel forged or stamped, but not further worked. Our this view is also fortified from the Explanatory Note to HSN in respect of Chapter Heading 72.14 wherein HSN clearly states as under:- "The heading, however excludes (a) Products consisting of two or more rolled bars twisted together (heading 73.08) (b) Pieces cut from bars and rods with a length not exceeding the greatest cross-sectional dimension (heading 73.26)" 6.3 The Explanatory note to C .....

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vered by Note I to Section XV or included in 82 or 83 or more specifically covered elsewhere in the Nomenclature." From the photographs which were reproduced herein above of the articles manufactured by the appellant, it would be seen that these products are correctly classifiable as per the HSN Explanatory Note under 73.26. 6.4 We find that the reliance placed by learned D.R. on the judgement of the Tribunal in the case of TISCO Ltd. (supra) as upheld by the Apex Court is directly on the p .....

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E.L.T. 49 held that forgings and forged articles of alloy steel after chipping of excess material are classifiable as forging. The revenue filed appeal and the Hon'ble Supreme Court rejected the appeal reported as CCE v. Jaypee Forges reported in 2003 (158) E.L.T. 560. The Hon'ble Supreme Court has held as under :- "In this appeal the only issue relates to the correct classification of the products in question which are described as forgings and forged articles of alloy steel by the .....

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. It was observed thus : In the present stage, they have just emerged from forging, without acquiring any essential characteristic of a part of a motor vehicle. The Revenue has not placed any evidence that the article has acquired such a shape and there has been further working of such a nature, that it is no longer an article of forging. The photographs of the product have been shown and the same are in the file. The impugned goods are straight from forging without any processes undertaken on i .....

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hat a similar view was taken by the Tribunal in Sikka Heat Treatment Industry v . Collector of Central Excise, New Delhi reported in1996 (81) E.L.T. 628 and that order of the Tribunal has been confirmed by this Court vide 1997 (94) E.L.T. 5 ( Veekay Industries v. Collector of Central Excise, New Delhi ). The learned Senior Counsel appearing for the appellant has tried to overcome the above precedent by contending that Rule 2(a) of the Interpretation Rules was not considered by the Tribunal in th .....

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hape and removes the excess/over shaping of the items which is resultant due to hammering from all sides and then used to clear the same. Identical manufacturing process has been recorded in the case of BCL Forging Ltd. (supra) and the view taken by the Bench was such articles would fall under Heading 73.26. 7.6 In similar case of Sharda Forgings and Stampings (P) Ltd. (supra) this Bench was considering similar articles and held as under:- "7. Heard both the sides. In this case, the appella .....

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the shape and section nearest to the forged steel products required. The forging would not cease to be forging for the removal of superfluous extra skin cast iron. Similar view was taken by the Tribunal in the case of Shivaji Works Limited . After the decision of the Tribunal in the in the case of Shivaji Works Limited , the Central Board of Excise and Customs also issued the instructions to this effect. The contention of the appellants is that they are only removing extra unwanted material from .....

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nts. In the circumstances, we find no merit in the contention of the appellants that the forged articles of iron and steel cleared from their factory were used as such as parts of agricultural implements, hence, we find no infirmity in the impugned order where the Commissioner of Central Excise held that the goods are classifiable under Heading 73.26 of the Central Excise Tariff as forged articles of iron and steel." This order of the Tribunal was contested by the appellant therein and the .....

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.04.2009 by invoking extended period stating that the appellant had suppressed that they are manufacturing forged articles and mis-stating the facts. At the outset we record that the findings of the first appellate authority as well as the adjudicating authority on the limitation are incorrect for more than one reason. 7.9 Firstly, it is undisputed that appellant had been classifying the very same products from 1994 onwards under Ch. Heading 72.14 and also when they started manufacturing of prod .....

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esser duty. 7.10 Secondly, we find that the appellant's records were audited by audit party in EA-2000, Comprehensive audit, which has been formulated by the Govt. of India, includes all the aspects of business of the unit which is being audited. This would mean that EA-2000 audit were also looking at the discharge of duty liability of the appellant in accordance with law. Appellant as reproduced herein above had clearly indicated in the monthly returns that the products manufactured by them .....

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the department cannot say that EA 2000 audit was not for the classification of the product and was for other procedural aspects. We find strong force in the contentions raised by the learned Counsel that this Bench in the case of Trans Engineers India Pvt. Ltd. (supra) was considering the aspect of limitation when the audit had taken place. We reproduced the relevant paragraph:- "9. We find that the show cause notice has invoked the extended period for the demand of service tax liability. I .....

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was short payment of duty with intention to evade Service Tax. The show cause notice in the case hand was issued based upon the 2 nd audit report. 10. In our view the entire demand is to be set aside on the ground on limitation only. Revenue authority cannot invoke the extended period of limitation, when the records of the assessee were audited by the officers once but did not find any short payment from records. The 2nd audit party, doing the audit of same period or over lapping period, cannot .....

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er 1993 have recorded the visit of the audit party and have also replied to the audit objections raised by the said audit party in respect of scrap generated and have informed the authorities that they were debiting ₹ 80,000/at the rate of ₹ 1,000/per Metric Tonne and that they were also debiting differential duty totaling to ₹ 63,318/in respect of Mill Rollers which was debited under PLA dated 3rd September 1993. Therefore, the Petitioners vide their letter dated 5th July 1995 .....

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