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Issues Involved:
1. Classification of goods 2. Time barring issue Issue-wise Detailed Analysis: 1. Classification of Goods: The appellants, engaged in the manufacture of forge, iron, and steel products (such as crank-shafts, rings, discs, connecting rods, pinions, shafts, gears, etc.), disputed the classification of these products. They claimed classification under Item 26AA, sub Item(i-a) of the first schedule to the Central Excises and Salt Act, 1944. The Department, however, classified them under Item 68 effective from 1-3-1975. The Assistant Collector's order dated 25/26-7-1985 classified the goods under Tariff Item 68, which was subsequently upheld by the Collector of Central Excise (Appeals) on 9-8-1990. The appellants argued that the goods remained forged products classifiable under T.I. 26AA (i-a) or later under T.I. 25 and did not transform into machine parts eligible for classification under T.I. 68. They relied on Supreme Court decisions in TISCO v. Union of India and Bharat Forge and Press Industries Pvt. Ltd. The Collector (Appeals) dismissed these contentions, noting that each case must be decided on its facts and circumstances. The Delhi High Court, in the appellants' case, had detailed the manufacturing process, nature, and commercial identity of the products, concluding that processes like machining and drilling transformed the forged products into identifiable machine parts classifiable under T.I. 68. 2. Time Barring Issue: The appellants contended that no show cause notice was issued, and letters from the Department before finalizing the classification were neither notices nor show cause notices. They argued that the Assistant Collector's order dated 25/26-7-1985 could not be considered a show cause notice, questioning the legality of the demand for the entire 10-year period. The demand for Rs. 1.97 crores was raised as per the letter dated 2-8-1985 by the Assistant Collector. The appellants challenged this letter, and the Collector (Appeals) modified the demand for different periods, excluding 26-11-1975 to 30-11-1980. The Assistant Collector's order dated 22-1-1976 classified the goods under T.I. 68, which was final, not provisional. The High Court's stay order from 19-2-1981 to 12-12-1984 did not prevent issuing a show cause notice. The Supreme Court's decision in Gokak Patel Volkart Ltd. v. Collector of Central Excise, Belgaum, clarified that a stay on duty collection does not equate to a stay on issuing show cause notices. The Karnataka High Court in Davanagere Cotton Mills Ltd. v. Chairman, C.B.E. & C. held that demands without a show cause notice are illegal. The Tribunal concluded that the Assistant Collector's order dated 26-7-1985 could be treated as an order-cum-show cause notice, allowing the Department to recover duty from six months prior to this notice and for the remaining period in 1984-85. Final Judgment: The majority opinion held that the goods shown against Srl. No. 2(b), (c) & (d) and 4(b), (c) & (d) of the Classification List filed in 1975 by the appellants were classifiable under Item 68 Central Excise Tariff. It also held that the demand for the period 1-3-1975 to 25-11-1975 and from 2-8-1980 to 26-7-1985 was valid and not time-barred.
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