1984 (12) TMI 68 - HC - Central Excise

Summary

Issues Involved:

1. Classification of forged products of iron and steel for Central Excise duty.
2. Applicability of Tariff Item 26AA (ia) vs. Tariff Item 68.
3. Estoppel in tax matters.
4. Determination of manufacturing process and its completion.

Summary:

1. Classification of Forged Products:
The petitioner sought a declaration that forged products of iron and steel manufactured by them are liable to duty only u/s 26AA (ia) of the First Schedule to the Central Excises and Salt Act, 1944, and not u/s 68. The petitioner argued that their products, which include steel forgings for auto and tractors, miscellaneous steel forgings, and forged steel flanges, should be classified under Item 26AA (ia) as "all other rolled forged or extruded shapes and sections not otherwise specified."

2. Applicability of Tariff Item 26AA (ia) vs. Tariff Item 68:
The Central Excise authorities initially classified the products under Item 26AA (ia) but later, with the introduction of Item 68 on March 1, 1975, reclassified machined forged products as falling under Item 68. The Assistant Collector's order stated that goods identifiable as parts of machinery after machining would be covered under Item 68, in addition to the duty under Item 26AA at the initial forging stage. The appellate and revision orders upheld this classification, reasoning that further processed forged products identifiable as machinery parts attract duty under Item 68.

3. Estoppel in Tax Matters:
The respondents argued that the petitioner is estopped from claiming classification under Item 26AA (ia) due to their previous stance in another writ petition. However, the court held that there is no estoppel in a taxing statute, and incorrect classification by an assessee does not prevent them from claiming a correct classification later. The principles of estoppel or res judicata do not apply to tax matters.

4. Determination of Manufacturing Process and Its Completion:
The court emphasized that the duty is on the manufacture or production of goods, and the process of manufacture is complete when a distinct and different product known to the commercial world comes into existence. Forged products that are machined, drilled, or polished to become identifiable machine parts assume a different character and are thus liable to additional duty under Item 68. The court granted the Central Excise authorities the liberty to determine which forged products are transformed into machinery parts and thus liable to duty under Item 68, in addition to the duty at the forging stage.

Conclusion:
The writ petition was dismissed, and the Central Excise authorities were allowed to determine the classification of forged products as parts of machinery liable to duty under Item 68. No order as to costs was made.