1987 (8) TMI 197 - AT - Central Excise

Issues Involved:
1. Classification of air brake hose assemblies and hydraulic brake hose assemblies under the Central Excises and Salt Act, 1944.
2. Applicability of exemption notification under Rule 8(1) of the Central Excise Rules, 1944.
3. Interpretation of "manufacture" under Section 2(f) of the Act.
4. Authority of the Assistant Collector to revise previous classification decisions.
5. Applicability of estoppel against revenue.
6. Entitlement to refund of duties paid under protest.

Detailed Analysis:

1. Classification of Air Brake Hose Assemblies and Hydraulic Brake Hose Assemblies:
The central issue in the appeals was the classification of air brake hose assemblies manufactured by Sundaram Clayton Ltd. and hydraulic brake hose assemblies manufactured by Brakes India Ltd. under the First Schedule to the Central Excises and Salt Act, 1944. The dispute pertained to the period after changes brought by the Finance Bill, 1979, effective from 1-3-1979, narrowing the scope of Item No. 34A, CET. The assessees argued that the hose assemblies should fall under Item No. 16A(3), CET, which covers "Piping and tubing of unhardened vulcanized rubber," and claimed exemption from duty under Notification No. 197/67. The Revenue contended that the hose assemblies fell under Item No. 68, CET, which covers "All other goods, not elsewhere specified," and were liable to duty.

2. Applicability of Exemption Notification:
The assessees procured rubber hoses exempted from duty under Notification No. 197/67 and argued that the fitment of nozzles did not amount to manufacture, thus retaining their classification under Item No. 16A(3), CET. The Assistant Collector initially agreed but later revised the classification to Item No. 68, CET, asserting that hose assemblies were new products with distinct trade names, designed for specific use in motor vehicles, and thus did not qualify for the exemption.

3. Interpretation of "Manufacture":
The Tribunal noted that the processes applied to the hose pipes, including cutting to size and fitting with nozzles, resulted in a new product known as hose assemblies, which were distinct from the original hose pipes. The hose assemblies were recognized as motor vehicle parts and could not be classified under Item No. 16A(3), CET, as they had undergone "manufacture" resulting in a new product with a distinct name, character, and use.

4. Authority of the Assistant Collector to Revise Previous Classification Decisions:
The Tribunal considered whether the Assistant Collector had the jurisdiction to revise the classification indicated in the Superintendent's letter dated 10-12-1979. It was determined that the letter was a quasi-judicial order and that the Assistant Collector could not retrospectively apply the revised classification without new facts or changes in the tariff entry. The revised classification could only be enforced from the date of the show cause notice.

5. Applicability of Estoppel Against Revenue:
The Tribunal addressed the principle of estoppel, noting that it applies only to judicial proceedings and not to quasi-judicial authorities under the Central Excises and Salt Act, 1944. The Tribunal upheld the Assistant Collector's authority to correct a mistaken view but emphasized that such corrections could not be applied retrospectively without new facts or changes in the law.

6. Entitlement to Refund of Duties Paid Under Protest:
The assessees claimed refunds for duties paid under protest, arguing that the hose assemblies should be classified under Item No. 16A(3), CET. The Tribunal held that since the proper classification of the goods was under Item No. 68, CET, the assessees were not entitled to refunds of duties paid under Item No. 68, CET.

Conclusion:
(a) The re-classification of hydraulic and air brake hose assemblies under Item No. 68, CET, was correct and upheld.
(b) Assessments under Item No. 68, CET, for purposes of raising demand, could only be sustained for periods commencing from the dates of the respective show cause notices. Demands for duty for periods prior to the dates of the show cause notices were set aside.
(c) The show cause notices issued by the Central Government under Section 36(2) of the Act were not sustainable and were discharged. The Collector's appeals were dismissed.
(d) The assessees were not entitled to refunds of duties paid under Item No. 68, CET.

The appeals were disposed of accordingly.

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