1984 (8) TMI 329 - AT - Central Excise

Issues Involved:
1. Classification of cast iron castings and cylinder liners under the Central Excises and Salt Act, 1944.
2. Jurisdiction and power of the Assistant Collector to review an approved classification list.
3. Applicability of excise duty on machined parts under Item 68 of the First Schedule.
4. Time bar for issuing show cause notices and demand for duty.
5. Validity of the show cause notices issued.

Detailed Analysis:

1. Classification of Cast Iron Castings and Cylinder Liners:

The main issue was whether the cylinder liners manufactured by the appellant should be classified under Item 25 or Item 68 of the First Schedule to the Act. The appellant argued that the castings were classified under Item 25 as "iron in any crude form," and were exempt from duty under Notification No. 74/62-C.E. However, the department contended that the cylinder liners, after undergoing machining and polishing, became identifiable machine parts and should be classified under Item 68.

The Tribunal, considering the evidence, including letters and photographs, concluded that the cylinder liners were fully machined and identifiable as machine parts. Thus, they ceased to be castings and were liable for duty under Item 68.

2. Jurisdiction and Power of the Assistant Collector to Review an Approved Classification List:

The appellant argued that once the classification list was approved, the Assistant Collector had no jurisdiction to review or go back on such approval. The Tribunal referred to various judgments, including the Delhi High Court in J.K. Synthetics case, which stated that an authority could change its decision for cogent reasons such as fresh facts coming to light or previous decisions not being arrived at after due enquiry.

The Tribunal found that the Assistant Collector had the right to review the classification list when material facts not stated in the classification list came to her knowledge on physical verification of the goods and their processes of manufacture.

3. Applicability of Excise Duty on Machined Parts under Item 68:

The Tribunal examined whether the cylinder liners, after undergoing machining, could be considered as machined parts and assessed to duty under Item 68. The Tribunal referred to the larger Bench decision in M/s. Tata Engg. & Locomotive Co. Ltd., which held that castings fall under Item 25 until they lose their identity as castings and assume a new name, character, and use.

Applying this test, the Tribunal concluded that the fully machined cylinder liners had become identifiable machined parts and were liable for duty under Item 68.

4. Time Bar for Issuing Show Cause Notices and Demand for Duty:

The appellant argued that the demand for duty was time-barred as it was issued beyond the period of six months. The Tribunal noted that the Appellate Collector had already given the benefit of time bar of six months under Rule 10 to the appellants. The Tribunal upheld this benefit, stating that the period of six months for which the demand for duty could be enforced would be the period of six months preceding each of the two show cause notices.

5. Validity of the Show Cause Notices Issued:

The appellant contended that the show cause notices did not specify the amount to be paid towards duty and were thus nullities in law. The Tribunal, however, found that the purpose of the show cause notice was to indicate the amount of duty payable. Even if the amount was not specified, the appellant could always enquire and ascertain the actual duty before giving a reply to the show cause notice.

Conclusion:

The Tribunal allowed the appeal partially. It held that proof machined castings of cylinder liners were classifiable under Item 25, while fully machined cylinder liners were liable to a two-stage levy-first under Item 25 and later under Item 68. The demand for duty should be revised accordingly, covering only a period of six months prior to the issue of the respective show cause notices. The Assistant Collector was found competent to review the classification list based on fresh facts coming to her knowledge.

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