1985 (6) TMI 191 - AT - Central Excise

Summary

Issues Involved:
1. Classification of the products (wheels, axles, and wheel-sets) under the Central Excise Tariff.
2. Applicability of the extended period of limitation for issuing show cause notices.
3. Determination of whether the products are finished goods or forged products.
4. Assessment of duty liability under different tariff items.
5. Consideration of marketability and manufacturing processes.

Issue-wise Detailed Analysis:

1. Classification of the Products:
The appellants contended that their products, wheels, axles, and wheel-sets, should be classified under Tariff Item (TI) 26AA(ia) as forged products. They argued that these items had been consistently classified as such since 1962, and even after the introduction of TI 68 in 1975, the classification remained unchanged. The Department, however, issued show cause notices arguing that these products should be classified under TI 68 as finished products, thus subjecting them to additional duty.

2. Applicability of the Extended Period of Limitation:
The appellants argued that the show cause notices issued by the Department were barred by time, as there was no suppression or misstatement of facts. They relied on the consistent approval of their classification lists and the regular filing of RT-12 returns, which included detailed descriptions of the goods. The Department, however, claimed that there was suppression and misstatement, justifying the invocation of the extended period of five years under Rule 9(2) and Section 11A of the Central Excises and Salt Act, 1944.

3. Determination of Whether the Products are Finished Goods or Forged Products:
The Collector of Central Excise held that the wheels, axles, and wheel-sets underwent substantial processes after the forging stage, giving them a separate commercial identity. Consequently, they should be classified as finished products under TI 68. The appellants argued that the machining and other processes were incidental to the forging process and did not change the classification of the products.

4. Assessment of Duty Liability Under Different Tariff Items:
The Tribunal agreed with the Collector's view that the products, after undergoing substantial machining and other processes, assumed a distinct character and should be classified as finished goods under TI 68. This classification required the products to discharge duty liability at the second stage, in addition to the duty paid under TI 26AA(ia) as forged products.

5. Consideration of Marketability and Manufacturing Processes:
The Department argued that marketability was not a relevant concept once the goods had been made excisable by a tariff entry. They cited judgments to support this view, emphasizing that the machining processes carried out on the products were substantial and transformed them into distinct, identifiable commodities. The Tribunal found that the machining and other processes went beyond rough or proof machining and transformed the goods into identifiable parts of railway wagons, thus justifying their classification as finished products.

Conclusion:
The Tribunal upheld the Collector's decision that the products should be classified as finished goods under TI 68, requiring additional duty payment. However, the Tribunal found no justification for applying the extended period of limitation and held that the demand for additional duty was enforceable only from the date of the first show cause notice, i.e., 28-4-1980. The appeal was dismissed on merits but partly allowed on the point of limitation.