1988 (5) TMI 222 - AT - Central Excise

Summary

Issues: Assessment of shots and grits under Central Excise Tariff Item 26AA, applicability of Indian Standard Specification IS:4606-1968, interpretation of steel shots as castings, relevance of McGraw Hill Encyclopaedia definition, classification under SAE - J 827, experimental stage of spray casting, comparison with CCCN, assessment under Item 68 CET, legality of departmental changes in assessment, recovery of duty under rule 9(2) of Central Excise Rules.

In this judgment by the Appellate Tribunal CEGAT, New Delhi, the primary issue revolves around the assessment of shots and grits under Central Excise Tariff Item 26AA. The appellants, M/s. Wheelabrator Alloy Castings, argued that these products are made through a unique casting process involving atomization of molten steel, leading to the formation of shots and subsequent grits. They supported their stance with various materials, including the Indian Standard Specification IS:4606-1968, which describes steel shot as a product obtained by atomizing molten steel into random sizes. However, the tribunal noted that neither this specification nor the British Steel Castings Research Association Sheffield Specification No. 1 referred to the shots as castings, highlighting the absence of finishing processes typically associated with castings. The judgment emphasized the distinction between traditional castings and the atomization process used by the appellants, indicating that the shots may not qualify as castings based on industry standards.

Regarding the definition of steel shots as castings, the tribunal analyzed references from the McGraw Hill Encyclopaedia of Science and Technology provided by the appellants. The encyclopedia discussed levitation melting as a method for shaping metals without molds, particularly in experimental contexts like space casting. While acknowledging the theoretical possibilities of levitation techniques, the tribunal expressed skepticism about equating these methods with conventional casting processes on Earth. The judgment highlighted the experimental nature of spray casting and the uncertainties surrounding its practical application in industrial assessments, underscoring the need for concrete evidence to support such claims in excise classifications.

The judgment also addressed the classification of steel shots under SAE - J 827, which refers to them as cast steel shots. However, the tribunal noted that the appellants presented only partial information from this source, emphasizing the importance of reviewing the complete publication to understand the descriptive nomenclature used. Additionally, the tribunal examined the appellants' argument based on the CCCN classification of goods as iron and steel products, highlighting the discrepancies between CCCN structure and the relevant tariff heading 26AA. The judgment pointed out the incomplete nature of Heading 26AA and its lack of clear definitions, making direct comparisons with CCCN challenging.

Furthermore, the tribunal evaluated the department's decision to assess the shots and grits under Item 68 CET instead of Item 26AA. While approving the assessment under Item 68 CET, the tribunal criticized the sudden change in classification by the department in 1980 without substantial reasons or legal basis. The judgment questioned the department's authority to alter longstanding assessment practices arbitrarily and highlighted procedural irregularities in demanding duty payment under rule 9(2) of the Central Excise Rules. The tribunal emphasized that rule 9(2) applies to contraventions of sub-rule (1) regarding excisable goods' removal, indicating that the department's retrospective reclassification did not constitute a violation warranting duty recovery. Consequently, the tribunal set aside the duty demand and prohibited its recovery, emphasizing the importance of adherence to legal procedures and consistency in excise assessments.