1990 (7) TMI 245 - Commissioner - Central Excise

Issues Involved:
1. Classification of "patta patti" prior to 1-8-1983 and after 1-8-1983.
2. Definition and interpretation of "strip" under the Central Excise Tariff.
3. Validity of the Assistant Collector's decision on classification.
4. Applicability of existing exemptions and licensing controls.

Issue-wise Detailed Analysis:

1. Classification of "patta patti" prior to 1-8-1983 and after 1-8-1983:
The primary issue revolves around the classification of "patta patti," a product manufactured by rerollers of stainless steel. The manufacturers contended that their product should be classified under Item 26AA(ia) of the earlier Central Excise Tariff prior to 1-8-1983 and under Tariff Item 25(8) thereafter. Conversely, the department classified these products under Tariff Item 26AA(iii) before 1-8-1983 and as strip under Tariff Item 25(12)(i) from 1-8-1983. The department argued that the products met the criteria for being classified as "strip."

2. Definition and interpretation of "strip" under the Central Excise Tariff:
The definition of "strip" from 1-8-1983 is provided in Serial No. (xiv) of the explanation to Tariff Item 25. According to this definition, a strip must be a hot or cold rolled product, rolled approximately in rectangular cross-section of thickness usually 10 millimeters and below, with mill rolled, trimmed, or sheared edges, and supplied in coil or flattened coil (straight length) form. The manufacturers argued that their product did not meet all these criteria, particularly because it was not supplied in coil or flattened coil form and did not have rectangular cross-section or sheared edges. The department, however, maintained that the product met the essential characteristics of a strip.

3. Validity of the Assistant Collector's decision on classification:
The Assistant Collector initially classified the product as a strip and, alternatively, as a sheet. The manufacturers contended that the classification should be based strictly on the definitions provided in the tariff and not on the end use of the product. They argued that the Assistant Collector could not decide the product was a sheet without issuing a show cause notice for such classification. The Tribunal's decision in the Calcutta Steel Industries case was cited, which ruled out classification as a loop because the product was not from a mill producing loops or strips.

4. Applicability of existing exemptions and licensing controls:
The goods in question were exempted under Notification No. 450/86, and the rolling mills availed of this exemption without any licensing control. The manufacturers argued that economically, it would not make sense to classify "patta patti" as strip, as the duty on strips manufactured by a strip mill with significant investment would not be exempted if the intent was to charge duty on "patta patti."

Judgment Analysis:
The judgment concluded that the product "patta patti" could not be classified as a strip under the definitions provided. The essential criteria for being classified as a strip, such as being supplied in coil or flattened coil form and having milled, trimmed, or sheared edges, were not met by the product in question. The Tribunal's previous decisions and the Supreme Court's ruling in the Calcutta Steel Industries case were upheld, reinforcing that the product must be from a strip mill to be classified as a strip. The Assistant Collector's decision to classify the product as both strip and sheet was found to be incorrect, and the product was deemed to be classifiable under Item 26AA(ia) prior to 1-8-1983 and under Item 25(8) thereafter. The order of the Assistant Collector, North Gujarat, was upheld, and the order of the Assistant Collector, Central Excise, Division-II, was set aside.

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