2019 (11) TMI 954 - AT - Central Excise

Classification of goods - manufacture of various forged and cast items which are subsequent used by the buyers for manufacture of machinery parts - whether the items manufactured by the appellant falling under chapter heading 7326 or under chapter 84? - CBEC Circular No. 139/7/88-CX.4, dated 28-07-1989. HELD THAT - The appellants are also doing a drilling operation. The appellants have explained that the drilling is done to create a hole on the item for the purpose of providing a hold for other operations and for the purpose of carrying these items from one place to another. Apparently, such drilling operations has no impact on the essential character of the item manufactured by the appellant and thus, the classification cannot change solely on the ground of drilling operation. There are no merit in the arguments of Revenue that the classification needs to be changed from Chapter 73 to chapter 84 - appeal allowed - decided in favor of appellant.

Summary

Issues:
Classification of goods under Central Excise Tariff Act, 1985 - Whether items manufactured fall under chapter heading 7326 or under chapter 84.

Analysis:
The appeal was filed against the demand of Central Excise duty and penalty by M/s Techno Forge Ltd. The primary issue revolved around the classification of goods manufactured by the appellant under the Central Excise Tariff Act, 1985. The dispute centered on whether the items fell under chapter heading 7326 or chapter 84. The appellant argued that the goods were wrongly classified under chapter 84, as they were primarily engaged in the manufacturing of forged and cast items used for machinery parts.

The counsel for the appellant highlighted a Show Cause Notice that sought to demand duty on the goods manufactured, claiming they were machine parts of chapter 84 due to certain processes conducted by the appellant. The issue of classification of forged items was a matter of dispute between Revenue and various assessees. A clarification issued by the Board clarified that certain processes, including drilling, did not alter the essential character of the items, thus maintaining their classification under Chapter 73. The appellant contended that the drilling process was essential for handling the items and did not change their essential character.

The Authorized Representative argued that as per Rule 3(a), the items should be classified under Chapter 84 after obtaining the essential character of finished machinery parts, emphasizing that the drilling process was not specified in the Circular. However, the Tribunal found that the drilling operation conducted by the appellant did not impact the essential character of the items, and thus, the classification should not change solely based on the drilling operation. Therefore, the appeal was allowed, and the classification under Chapter 73 was upheld.

In conclusion, the Tribunal ruled in favor of the appellant, emphasizing that the drilling operation did not alter the essential character of the goods, and hence, the classification under Chapter 73 was deemed appropriate. The decision highlighted the significance of specific processes in determining the classification of goods under the Central Excise Tariff Act, 1985.