TMI Blog2019 (2) TMI 310X X X X Extracts X X X X X X X X Extracts X X X X ..... otification No.223/88 was granted. Tribunal glossed over the aspect that the entire supply was to the Railways of fully machined Railway components/parts and other Railway components/parts from the stage of melting and casting. It was the later components/parts which were found subjected to drilling and welding. The department duly established the twin test of manufacture and marketability . The department having discharged the burden, the onus shifted on the respondent to have contradict that the impugned cast articles which were marketed (to Railways) were not subjected to process of manufacturing. The fact situation in the present case as is evident from cogent material evidence since establishes the fact as to cast articles being subjected to manufacturing process as per drawing and design given by the Railways, the respondent is not benefited by the decision in Vasantham Foundry [1995 (8) TMI 190 - SUPREME COURT OF INDIA], where it was held that `rough unmachined cast iron castings will continue to be treated as declared goods under sub-item (i) of Item (iv) of the Second Schedule to the Tamil Nadu General Sales Tax Act, 1959. The Tribunal having misread the enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tings and cast articles of iron or steel Rs.500 per tonne 04 Any heading or sub-heading of Chapters 84 85 86 or 87 Forgings and forged articles of steel. Rs.750 per tonne Provided that the said goods have not been subjected to any machining, or surface treatments, other than - (a) annealing, tempering, case-hardening, nitriding and similar heat treatments to improve the properties of the metal; (b) descaling, pickling, scraping and other processes to remove oxide scale and crust formed during the heating of metal, (c) rough coating intended solely to protect products from rust or other oxidation, to prevent slipping during transport and to facilitate handling for example, paints containing an active anti-rust pigment such as red lead, zinc powder, zinc oxide, zinc chromate, iron oxide (iron minium, jewellers rouge), and non-pigmented coatings with a basis of oil, grease, wax, paraffin wax, graphite, tar or bitumen; (d) removal of small portions of the metal for testing purposes; and (e) removal of surface defects, or of excess material by grinding, chipping, filin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... May' 1994 should not be recovered from them under Proviso to Section 11A of the Central Excises Salt Act, 1944. (ii) Penalty should not be imposed under Rule 173Q of the Central Excise Rules, 1944. (iii) Penalty should not be imposed under Section 11AC of the Act. (iv) Interest should not be recovered under Section 11AB of the Act. Similar, Show-Cause Notice bearing C.No.V(86)30-109/94/Demand/10351 dt. 25.11.1994 was issued demanding ₹ 2,09,332/- for the period from June 1994 to August 1994. Further, show-cause notice in respect of the period from September 1994 to November 1994 was issued vide C.No.V(86) 30- 77/95/Demand/2231 dt. 10.03.1995 for ₹ 1,52,677/-. Respective reply were filed. Besides denying the liability, the noticee raised preliminary objection against the show-cause notice. It was urged that in the wake of the provisional assessment, the Show-Cause Notice was premature and that the demand was hit by the limitation. The Adjudicatory Authority after affording an opportunity to examine and cross-examine adjudicated the matter and passed the order on 30.11.2003. The authority concerned framed following issues: (i) The assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /noticee. As regard to entitlement of benefit of concessional rate of duty under Notification dated 23.06.1988, the Adjudicatory Authority found that the respondent was not entitled for the benefit as the castings and cast articles of steel (other than stainless steel) was subjected to process other than those specified in the proviso to the notification; consequently, held that they were liable for duty amounting to ₹ 1,12,31,487/- under Section 11A of the 1944 Act and penalty of ₹ 10 lacs under Section 173Q of the Rules of 1944 under notice dated 28.09.1994. That under notice dated 25.11.94 the respondent/noticee was found liable for a duty of ₹ 2,09,332/- and penalty of ₹ 25,000/-; and under notice dated 10.03.1995 the noticee were found liable for duty amounting to ₹ 1,52,677/- and penalty ₹ 10,000/- under Rule 173Q of the Rules of 1944. Following factors weighed with the Adjudicatory Authority: (i) Statement of Shri B.S. Bhadoria, Superintendent, Machine Shop. (ii) Non-production of goods for verification before their removal. (The unit being under self removal procedure (SRP) it was not mandatory for the department to have p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re testimony of the witness being read as a whole, we do not find any supporting material to the allegations made by the department against the appellants. The findings arrived at by the Commissioner on the basis of said reply in the testimony of the witness clearly amounts to misconstruction and misunderstanding of the statement of the witness. The statement cannot be construed as an admission on the part of the appellants even assuming that the deponent was the representative of the appellants, because the admission has to be clear and simple. Being so, there was absolutely no material before the adjudicating authority to arrive at a clear finding that during the relevant period, the appellants had, in fact, subjected all the cast articles to the machining and that therefore, could not have availed the benefit under the said notification. 17. The contention that failure on the part of the manufacturer to produce the product for the inspection of the departmental authorities inspite of observation made in the classification list dt. 6.3.92 and that the same would justify adverse inference against the appellant is also without any substance. It is pertinent to note that the no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [AIR 1962 SC 1314] , it is held that: 6. ........The proper test for determining whether a question of law raised in the case is substantial would, in our opinion, be whether it is of general public importance or whether it directly and substantially affects the rights of the parties and if so whether it is either an open question in the sense that it is not finally settled by this Court or by the Privy Council or by the Federal Court or is not free from difficulty or calls for discussion of alternative views. If the question is settled by the highest Court or the general principles to be applied in determining the question are well settled and there is a mere question of applying those principles or that the plea raised is palpably absurd the question would not be a substantial question of law. The question, therefore, is whether the findings arrived at by the Tribunal are perverse. In paragraph 15, the Tribunal observes that except the return and statement of Shri B.S. Bhadoria the department has not produced any other material that all the cast articles were subjected to machining during the relevant period. Careful reading of the show-cause notice and the findin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le, the Authority found, was not subjected to the Show-Cause Notice. Thus, the Show-Cause Notice and the adjudication thereon has been erroneously construed by the Tribunal that all the cast-articles were subjected to notice. The findings in paragraph 15 of the decision by the Tribunal is, thus, not sustainable. Furthermore, the Tribunal in paragraph 16 of its order discarded the evidence of Shri B.S. Bhadoria by observing that he made a general statement as regard to drilling operation on cast article. True it is that the testimony of a witness has to be read in its entirety. In the show-cause notice, the manufacturing process of cast articles in brief has been adverted to in the following terms:- First sand moulds are prepared as per the drawings and designs of the cast articles to be manufactured. Steep Scrap, purchased from out side, is melted in the electric are furnace. Then molten steel is poured in to the sand moulds and allowed to cool down in the sand moulds. Molten Steel solidifies in the natural course and becomes cast articles. Then sand is removed with the help of vibrating machine, casting so obtained, are subjected to gas cutting to remove runners an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ully machined components/parts. In all other cases these cast articles are subjected to gauging and finishing work. Q.4 Please explain gauging and finishing and different involved in it stage wise. Ans. Cast articles are subjected to grinding with the help of swing frame grinder and then cutting of excess material is being done. Then they are subjected to grinding with the help of pneumatic grinder. If the dimension of the cast articles is less then welding is done to bring it to the required size. For this purpose welding is necessary and without this it is not possible to completely manufacture the said product. After welding, the said articles are subjected to grinding. In case of small holes in the castings pencil grinder is used to make the bore of required dimension or size. Q.5. What is the purpose of gauging finishing? Ans. Gauging is done to make the item as per drawing size design. Gauging is done with the help of gauges. Q.5A . What do you mean by boring? Ans. To make the bore in size we grind it by hand grinder or pencil grinder. This process is called as boring or bore grinding. Gauging includes process of bore making and bore grinding. All t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of Shri B.S. Bhadoria is to be understood in general manner as to the process. It glossed over the aspect that the entire supply was to the Railways of fully machined Railway components/parts and other Railway components/parts from the stage of melting and casting. It was the later components/parts which were found subjected to drilling and welding. The Adjudicatory Authority on the basis of the material evidence on record returned the following findings: (H) The noticee had manufactured two types of railway parts. Fully machined parts and cast articles. It is on record (as per Show Cause Notice and statement of Shri B.S. Bhadoria dated 01.02.1994) that the latter category of products viz. Cast articles also undergo following processes: (i) Cast articles are subjected to grinding with the help of swing frame grinder and then cutting of excess material is being done. These are then subjected to grinding with the help of pneumatic grinder. (ii) If the dimension of the cast articles is less than the required size, then welding is done to bring it to the required size. For this purpose welding is necessary and without this it is not possible to completely manufacture the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty having been paid on earth , no duty was leviable on spent earth as it remained the same product. It had been held that to levy duty on spent earth would amount to levying duty twice. It is on this ground that it has been held that spent earth was not excisable. Even now it has not been shown that there is manufacture. The only submission is that spent earth is a residue resulting from the treatment of fatty substances. The submission is that now that there is a specific entry which makes residue resulting from the treatment of fatty substances excisable, duty has to be paid on spent earth . In other words, what is submitted is that merely because a goods falls within one of the Tariff items it becomes excisable. 4. In support of their submission, reliance is placed on the case of Lal Woollen Silk Mills (P) Ltd. vs. CCE, (1999) 4 SCC 466. In this case the question was whether excise duty was to be paid on dyed worsted woolen yarn made from duty-paid worsted woolen grey yarn. It was argued that there was no manufacture. The Court, however, held as follows: (SCC p.467, para 1) Admittedly both 'dyed yarn' and 'grey yarn' are covered by two separa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n facts of present case. In Vasantham Foundary (supra) , their Lordships were dwelling on the issue as to whether the 'cast iron' in the list of declared goods in the Tamil Nadu General Sales Tax Act would include cast iron castings . In the context thereof, it was held: 15. In our judgment, this contention must be upheld. When Section 14 declared certain goods as of special importance in inter-State trade or commerce, it could not have the molten metal in contemplation. It is nobody's case that the molten metal is bought and sold in the market. What is bought and sold is cast iron, which is obtained by pouring molten metal in the moulds. The moulds may be of various shapes or sizes, but the type or nature or the size of the mould will not decide the question whether the end product will be `cast iron' or not. Cast iron has to be in some shape, whether as a bar, as a billet or in some other form. The molten metal has to be poured into some mould to obtain `cast iron' so that it can be traded, transported and used in obtaining finished goods out of it. It is not the shape of this rough mould that is determinative of the issue. What is determinative is wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X
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