1987 (3) TMI 261 - AT - Central Excise

Summary

Issues: Classification of cement coated pipes under Central Excise Tariff - Whether cement coated pipes are a distinct product from steel pipes.

In this case, the Government issued a notice under Section 36(2) of the Central Excises and Salt Act, 1944, seeking to review the order of the Appellate Collector of Madras regarding the classification of cement coated pipes. The Government argued that the coating of steel pipes with cement internally and with weld mesh and cement externally results in the emergence of a new product, cement coated pipes, classified under the residuary Item 68 of the Central Excise Tariff. However, the counsel for the appellant contended that cement coated pipes are not a distinct product but merely steel pipes coated with cement. The Tribunal noted that the nature, characteristics, and use of the steel pipes do not change by coating them with cement. The coating serves to protect the steel body from corrosion, making it a longer-lasting and rust-resistant steel pipe. The Tribunal emphasized that despite the coating, the product remains a steel pipe used for fluid conduction, and the coating process does not create a new product separate from the original steel pipe. Therefore, the Tribunal held that no duty can be charged under Item 68 of the Central Excise Tariff as the cement coating does not result in the emergence of a different product.

Additionally, the Tribunal highlighted a fundamental rule of assessment that a product should be classified under the heading that most appropriately covers it or with goods to which it is most akin. In this case, even though the pipes were coated with cement, they were fundamentally steel pipes. The Tribunal reasoned that since the product was essentially a steel pipe coated with cement, it should be classified under the heading for steel pipes rather than under goods not elsewhere specified. Therefore, the Tribunal set aside the government's notice seeking to classify cement coated pipes under a different tariff heading and upheld that the product should be classified as steel pipes rather than as a distinct product under a different category.