1986 (8) TMI 303 - AT - Central Excise

Classification list not to be re-opened if already approved when no change in pattern of manufacture

Issues Involved
1. Classification of steel wires under the Central Excise Tariff.
2. Validity of retrospective application of classification.
3. Legality of the show cause notice issued by the Superintendent.
4. Determination of whether stranding of galvanised wires amounts to manufacture.
5. Time-barred nature of the demand for duty.

Issue-wise Detailed Analysis

1. Classification of Steel Wires under the Central Excise Tariff
The appellants manufacture steel wires, which were initially classified under Item 26AA (ia) of the Central Excises and Salt Act, 1944. The classification was approved by the proper officer on 25-3-1974. However, the Superintendent of Central Excise issued a show cause notice on 28-10-1978, proposing to reclassify galvanised stranded wire under Item 68 instead. The Tribunal concluded that the appellants' products, including stranded wires, continued to be wires under Item 26AA (ia) and did not warrant reclassification under Item 68. The Tribunal noted that Item 26AA (ia) covers a wide range of products, including wires, and is comprehensive enough to include the subject goods without recourse to the residuary Item 68.

2. Validity of Retrospective Application of Classification
The appellants argued that any reclassification determined by the Collector could only be prospective and not retrospective. The Tribunal agreed, referencing prior decisions such as the Collector of Central Excise, Chandigarh v. Gurmukh Singh and Sons, Ludhiana, which held that reopening the question of classification must necessarily relate to prospective periods. Therefore, the demand for duty under Item 68 from 1-3-1975 was deemed unjustified.

3. Legality of the Show Cause Notice Issued by the Superintendent
The appellants contended that the show cause notice issued by the Superintendent was illegal since the classification had been determined by the Assistant Collector. The Tribunal referenced the decision in Entremonde Polycoaters Pvt. Ltd., Nasik v. Collector of Central Excise, Pune, which supported the appellants' position. The Tribunal found that once the classification list is approved, the excise authorities can only take recourse to the appropriate provisions of the Act, and a show cause notice to reclassify the products was not valid.

4. Determination of Whether Stranding of Galvanised Wires Amounts to Manufacture
The appellants argued that the stranding of galvanised wires does not amount to manufacture. The Tribunal cited multiple cases, including Union of India v. Delhi Cloth and General Mills Co. Ltd., which established that for an activity to constitute manufacture, there must be a transformation resulting in a new and different article with a distinctive name, character, or use. The Tribunal concluded that the process of stranding did not result in a new product and that the stranded wires continued to be classified as wires under Item 26AA (ia).

5. Time-barred Nature of the Demand for Duty
The appellants claimed that the demand issued on 2-11-1981 for the period 1-3-1975 to 31-3-1980 was time-barred. The Tribunal agreed, noting that there was no allegation of clandestine removal and that the classification list under Item 26AA (ia) had been approved by the proper officer. The Tribunal rejected the argument that the demand would be valid for the six months prior to the show cause notice dated 28-10-1978, thereby supporting the appellants' position that the demand was time-barred.

Conclusion
The Tribunal set aside the impugned order, concluding that the classification of the appellants' products under Item 26AA (ia) was justified and that the demand for duty under Item 68 was not valid. The appeal was allowed, and the Tribunal emphasized that any reclassification must be prospective and that the show cause notice issued by the Superintendent was not legally valid.

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