1988 (2) TMI 382 - AT - Customs

Summary

Issues Involved:
1. Classification of imported forgings as parts or steel forgings.
2. Application of Rule 2(a) of the Rules for the Interpretation of the First Schedule of the Customs Tariff of 1975.
3. Timeliness of the review show cause notice under Section 131 of the Customs Act, 1962.
4. Specific classification of "Measuring Head and Retraction Unit."

Detailed Analysis:

1. Classification of Imported Forgings:
The primary dispute is whether the forgings imported by M/s. Motor Industries should be assessed as parts under their respective heads as claimed by the department or as steel forgings under the forgings head. The Appellate Collector of Customs, Madras, ruled that the steel forgings were mere pieces of forged iron/steel and had no similarity with the finished product except their outward shapes. He concluded that the rough forgings did not have the essential characteristics of the finished items and should be assessed under Heading 73.33/40 with Notification No. 254/76-Cus. and countervailing duty under Item 26AA of the Central Excise Tariff.

2. Application of Rule 2(a):
The dispute revolves around the application of Rule 2(a) of the Rules for the Interpretation of the First Schedule of the Customs Tariff of 1975. The rule states that an incomplete or unfinished article should be assessed as the complete or finished article if it has the essential character of the finished product. The department argued that the unfinished forgings have the essential character of the finished parts, such as adjusting pins, camplates, and control levers, and should be assessed as parts. The Tribunal, however, noted that the imported goods are not parts until considerable work and expense have been bestowed on them. Despite this, the Rules of Interpretation, particularly Rule 2(a), are against M/s. Motor Industries as the unfinished forgings have the essential character of the finished parts.

3. Timeliness of the Review Show Cause Notice:
An objection was raised regarding the timeliness of the review show cause notice issued by the Government under Section 131 of the Customs Act, 1962. It was argued that the notices were barred by time as they pertained to matters of short levy. However, the Supreme Court decision in the case of Geep Flash Light Industries clarified that such instances should not be regarded as short levy. Since the refund had not been actually paid to the party, the notices were deemed to be in time, and the objection was without merit.

4. Specific Classification of "Measuring Head and Retraction Unit":
The department sought to classify the "Measuring Head and Retraction Unit" under Heading 90.28(4) read with Heading 90.16(1), while the respondents wanted it assessed under Heading 84.45/48 as part of machine tools. The Tribunal agreed with the department, noting that the function of the imported article is to serve as a "Measuring Device" designed for fitment in the grinding machine, and thus should be classified under Heading 90.28(4) read with Heading 90.16(1) of the Customs Tariff Act.

Conclusion:
The Tribunal concluded that the imported forgings should be assessed under the headings covering the finished parts, not as forgings, based on Rule 2(a) of the Rules for the Interpretation of the First Schedule of the Customs Tariff of 1975. The review show cause notices were deemed timely, and the classification of the "Measuring Head and Retraction Unit" under Heading 90.28(4) read with Heading 90.16(1) was upheld. All appeals were allowed, concurring with the judgment of the learned Member (Technical).