TMI Blog1991 (12) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... rported to be in terms of Rule 173Q of the Central Excise Rules, 1944. 2. Bereft of all unnecessary details, the facts of the matter shortly put are :- The petitioner, a company incorporated under the Companies Act, 1956, is engaged in the manufacture of graded gray iron, malleable and S.G. Iron castings which are supplied to many public undertakings of national importance, such as Vehicles Factory, Jabalpur, Heavy Vehicles Factory, Avadi, Small Arms Factory, Kanpur, Railways, Bharat Heavy Electricals Limited, Bhopal and Jagdianpur, National Thermal Power Corporation, Insulators and other Electricity Boards. The petitioner manufactures two types of iron castings : (i) machined and (ii) unmachined. The dispute which led to the adjudication and passing of the impugned order is in relation to the unmachined iron castings. The petitioner has contended that no excise duty was payable for unmachined iron castings. 3. In terms of the provisions of the said Act and the Rules framed thereunder, classification lists used to be submitted by the petitioner before the appropriate authority. According to the petitioner, unmachined iron castings were falling under Tariff Item No. 25 till ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it application). 9. By an order dated 31st January, 1990, Respondent No. 3 rejected the petitioner's objection and classified the said goods as under the heading or sub-heading of Chapters 84, 85, 86, 87 of the Tariff Act. Being aggrieved by the said approval of the classification list by Respondent No. 3, the petitioner again filed an application under Articles 226 and 227 of the Constitution of India before this Court being C.W.J.C. No. 291 of 1990 (R) and this Court by order dated 20th February, 1990 (Annexure-13) while permitting the petitioner to withdraw the said application in order to enable it to prefer an appeal directed the respondents to allow the petitioner a period of ten days from that day to clear the goods on the basis of the earlier approved classification list and the petitioner was directed to keep accounts of goods. An appeal was preferred by the petitioner against the said order dated 31st January, 1990 and by order dated 2nd March 1990 (Annexure-14), the Collector of Central Excise (Appeals) allowed the said appeal, set aside the order passed by Respondent No. 3, and specifically approved the classification list filed by the petitioner classifying the unm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. In this connection, the learned counsel has relied upon Collector of Central Excise v. Chemphar Drugs and Liniments reported in AIR 1989 SC 832; in Tata Yodogawa Ltd. v. Assistant Collector of Central Excise reported in 1983 (12) E.L.T. 17; and in Padmini Products v. Collector of Central Excise and Others reported in AIR 1989 SC 2278 = 1989 (40) E.L.T. 276 (SC). 14. Learned counsel further submitted that it is not a case where the authorities were not aware of the contentions raised by the petitioner relating to the classification of unmachined goods and as such the question of fraud having been played by the petitioner in relation thereto does not arise. According to the learned counsel even in the notice or in the impugned order (Annexure-18) the Respondent No. 2 has not given the particulars of fraud. 15. It was next contended that in any event, in view of the circulars issued by the Board from time to time which are binding upon the authorities, as would be evident from pages 112, 114 of the brief, that even on merits, the petitioners have a good case and the Respondent No. 2, although bound by the aforementioned circular, has passed the impugned order illegally. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst the said appellate order, neither any appeal nor any revision has been preferred by the Department. Thus the classification lists contained in Annexure 2, 3 and 8 to the writ application have not been set aside by any competent authority. 20. In Ajanta Iron Steel Co. Pvt. Ltd. v. Union of India and Others reported in 1986 (23) E.L.T. 318 (Del.), a Division Bench of the Delhi High Court held that once list has been approved by one of the Assistant Collectors, it becomes an approved list and, accordingly, the excise authorities may take recourse to some other provisions of the Act, but no proceeding under Section 11A thereof can be initiated. It had been pointed out that an approval of the classification list is given in terms of Rule 173B of the Central Excise Rules. Thus, once a classification list is approved the same becomes binding upon the Assistant Collectors unless the Excise authorities take recourse to some other provisions of the Act, that is, the procedure for appeal or revision. 21. In Union of India v. Kamlakshi Finance Corporation Ltd. reported in 1991 (55) E.L.T. 433, the Supreme Court has clearly held that once an appellate order has been passed, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act. 26. Re. Question No. B C :- Section 11A reads as follows :- "11A. Recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded :- (1) When any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, a Central Excise Officer may, within six months from the relevant date, serve notice on the person chargeable with the duty which has not been levied or paid or which has been short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice : Provided that where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of fraud, collusion or any wilful mis-statement or suppression of fact, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, by such person or his agent, the provisions of this sub-section shall have effect, as if for the words 'six months', the words 'five years' were substituted. Explanation. - Where the service of the notice is stayed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntion of any of the provisions of the Act or of the rules made there under with intent to evade payment of duty. 28. It has, of course, been stated in the counter-affidavit that the petitioner had suppressed certain facts. But from a perusal of the impugned notice, as contained in Annexure-15 to the writ application, it does not appear that any such contention was raised thereunder and, in fact, the petitioners were directed to show cause, inter alia, on the ground that the petitioner has failed to pay duty at the prescribed rate under notifications dated 23-6-1988 and 1-3-1989 on all such castings and cast articles of iron which are to be ultimately used as goods falling under Chapters 84, 85, 86 and 87 of Central Excise Tariff and failed to submit revised classification list in view of the clear requirements of the aforementioned notifications and suppressed the facts with intentions to evade payment of duty because the castings supplied by them were clearly for use as parts of Machinery as per orders received from different customers. 29. It has not been disputed by the respondents that the petitioner has been manufacturing items involving process of iron castings both machi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31 = [AIR 1989 SC 832) at P. 832 at p. 835] of the report, this Court observed that in order to sustain an order of the Tribunal beyond a period of six months and up to a period of 5 years in view of the proviso to sub-sec. (1) of S. 11A of the Act, it had to be established that the duty of excise had not been levied or paid or short-levied or short-paid, or erroneously refunded by reasons of either fraud or collusion or wilful mis-statement or suppression of facts or contravention of any provision of the Act or Rules made thereunder, with intent to evade payment of duty. It was observed by this Court that something positive other than mere inaction or failure on the part of the manufacturer or producer or conscious or deliberate withholding of information when the manufacturer knew otherwise is required before it is saddled with any liability beyond the period of six months had to be established. Whether in a particular set of facts and circumstances there was any fraud or collusion or wilful mis-statement or suppression or contravention of any provision of any Act is a question of fact depending upon the facts and circumstances of a particular case." In this case, therefore, ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t correct. From the submission and the records, it is clear that the castings had not been machined, but like all castings the parts which they are going to form can clearly discerned; otherwise, it would not be a casting. There is no point in making a casting that is so radically different from the other component it is ultimately going to be. In other words, all castings are given the shape as near as possible to the one they are going to have when they are finished. Thus wheel castings can be seen as wheel in embryo although it is still too rough to work as a wheel and still requires drilling, balancing, trimming, machining etc. before it can be fitted as a wheel; but one can see the wheel form clearly in the cast product. If the Collector meant this, he was right to say that the products were clearly identifiable as part of motor vehicles, but that will not mean that they were parts of motor vehicles." 34. The order of the Collector of Central Excise (Appeals) is contained in Annexure-14 to the writ application, whereby the order of classification granted by the Assistant Collector dated 31st January, 1990 (Annexure-20) was reversed. It is, therefore, not a case where the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tionary makes an order based on certain grounds, its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reasons in the shape of affidavit or otherwise. Otherwise an order bad in the beginning may, by the time it comes to court on account of a challenge, get validated by additional ground later brought." 40. Further it appears that in relation to iron and steel castings departmental clarifications have been issued from time to time, the relevant portion whereof reads as follows :- "Iron and steel castings. - Certain doubts have been raised as to whether iron and steel castings (which have not undergone machining) would be classifiable as castings of iron and steel not elsewhere specified, under Chapter 72/73 (heading 73.07) or as parts of machinery under Chapter 84/85 of the Schedule to the Central Excise Tariff Act, 1985. 2. It may be recalled that prior to 23-2-1986, instructions were issued under Board's F. No. 136/2/81-CX-4 dated 27-6-1981 to the effect that the product was subjected to only the process of making casting, it would be classifiable as casting. However, if machining or any processes other than casting were employed on such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tings, would not be enough to merit the classification of such castings as machinery parts under Chapter 84 or 85 as the case may be. (a) Removal of runners and risers. (b) Surface cleaning and removal of surface defects. (c) Chipping, filing or grinding to remove excess material. (d) Annealing and stress relieving. (e) Proof machining (f) Surface coating." 41. The office of the Collector of Central Excise, Patna, upon receipt of the aforementioned circular issued by the Central Excise Board issued a trade notice bearing No. 30/1-Chap. 73/87 dated 10-3-1987 wherein also it was stated as follows :- "It is viewed that operations, such as those listed below which do not alter the essential character of the castings, would not be enough to merit the classification of such castings as machinery parts under Chapters 84 or 85 as the case may be. (a) Removal of runners and risers. (b) Surface cleaning and removal of surface defects. (c) Chipping, filing or grinding to remove excess material. (d) Annealing and stress relieving. (e) Proof machining (f) Surface coating. Such castings would more appropriately be classified under Heading 73.07 of the Central Excise ..... X X X X Extracts X X X X X X X X Extracts X X X X
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