1989 (5) TMI 219 - AT - Central Excise

Summary

Issues:
Correct classification of spirally welded steel pipes subjected to lining and coating with cement mortar.

Analysis:
The issue in this case revolves around the correct classification of spirally welded steel pipes that have undergone lining and coating with cement mortar. The appellants claim the benefit of a specific notification, arguing that the process does not change the basic character of the steel pipes received from customers. On the other hand, the lower authorities contend that the lining and coating transform the steel pipes into a new product, denying the exemption claimed. The central question is whether the process of lining and coating with cement mortar alters the essential character of the steel pipes.

The appellants argue that the steel pipes, despite the cement mortar layer, retain their essential character as steel pipes and should be classified accordingly under the Central Excise Tariff sub-heading. They emphasize that the process is intended to prevent rust and corrosion, making the pipes suitable for underground laying. They also rely on circular instructions stating that similar processes do not amount to manufacture.

On the contrary, the Department asserts that the mortar coating is what gives the product its essential character, rendering the steel pipes suitable for underground water conveyance. They highlight an agreement indicating the intention to produce a new product and argue that the functional character of the product should determine its classification, citing relevant case law.

The Tribunal, after considering the arguments, holds that the essential character of the product is determined by the steel base-pipe, not the mortar coating. They find that the product remains mortar-coated steel pipes and that no substantial process of manufacture has occurred to create a new product. While acknowledging the importance of the mortar coating for specific use, the Tribunal concludes that the essential nature of the product as steel pipes remains unchanged. Therefore, the appeal is allowed, aligning with the decision in a previous case on a similar issue.

In conclusion, the Tribunal's decision emphasizes that the essential character of the product is not altered by the process of lining and coating with cement mortar, leading to the classification of the product as mortar-coated steel pipes. The judgment underscores the significance of the base material in determining classification and highlights that functional enhancements do not necessarily change the essential nature of the product.