1987 (8) TMI 96 - HC - Central Excise

Summary

Issues Involved:

1. Classification of steel flanges for excise duty.
2. Applicability of Tariff Item 26AA(ia) vs. Tariff Item 68.
3. Definition and scope of "manufacture" u/s 2(f) of Central Excises and Salt Act, 1944.
4. Commercial parlance test for classification.
5. Application of principles of ejusdem generis.
6. Allegation of hostile discrimination.

Summary:

1. Classification of Steel Flanges for Excise Duty:
The primary issue was whether the steel flanges manufactured by the appellants are classifiable for payment of excise duty under Tariff Item No. 26AA(ia) or under Item No. 68 of the First Schedule to the Central Excises and Salt Act, 1944, or both.

2. Applicability of Tariff Item 26AA(ia) vs. Tariff Item 68:
The appellants contended that the flanges should only be classified under Tariff Item 26AA(ia) as "forged shapes and sections." However, the authorities and the learned single Judge held that once the flanges undergo further processes such as machining, polishing, and drilling, they transform into identifiable parts of machinery, thus attracting duty under Tariff Item 68 in addition to Tariff Item 26AA(ia).

3. Definition and Scope of "Manufacture" u/s 2(f):
The Court referred to the definition of 'manufacture' u/s 2(f), which includes any process incidental or ancillary to the completion of a manufactured product. The Court emphasized that 'manufacture' implies a transformation resulting in a new and different article with a distinctive name, character, or use.

4. Commercial Parlance Test for Classification:
The Court applied the commercial parlance test, stating that the goods in question are regarded in the market as machinery parts and not merely as forged shapes and sections. The transformation through machining, polishing, and drilling changes their identity, making them identifiable as machine parts.

5. Application of Principles of Ejusdem Generis:
The Court applied the principles of ejusdem generis, stating that unspecified goods in Tariff Item 26AA(ia) must belong to the same class as the specified ones. The Court concluded that flanges, after the additional processes, do not remain in the same category as 'shapes and sections' but become machine parts.

6. Allegation of Hostile Discrimination:
The plea of hostile discrimination was dismissed due to lack of specific averments and evidence. The Court found no basis for this claim as the classification depends on the facts of each case.

Conclusion:
The appeal was dismissed, and it was held that the flanges, after undergoing further processes, are liable to pay duty under Tariff Item 68 in addition to the duty at the forging stage under Tariff Item 26AA(ia). The Court upheld the decisions of the Central Excise authorities and the learned single Judge, stating that the classification was not perverse.