1995 (9) TMI 180 - AT - Central Excise

Issues Involved:
1. Classification of forgings and forged products.
2. Application of Interpretative Rule 2(a).
3. Determination of essential character.
4. Eligibility for concessional rate of duty under Notification No. 223/88.
5. Relevance of precedents and alignment with Harmonized System of Nomenclature (HSN).

Detailed Analysis:

1. Classification of Forgings and Forged Products:
The appellants, engaged in manufacturing forgings and forged articles, claimed classification under Chapter sub-heading 7224.00 and later under 7326.90 of the Central Excise Tariff Act, 1985. The department contended that these products had acquired the essential character of motor vehicle parts and should be classified under Chapter sub-heading 8708.00, invoking Interpretative Rule 2(a).

2. Application of Interpretative Rule 2(a):
The department argued that the forgings, although not fully finished, had attained the essential character of motor vehicle parts and should be classified as such under Chapter Heading 8708.00. The appellants countered that their products were still un-machined forgings and required further processing before becoming identifiable as motor vehicle parts. The Tribunal examined the wording of Rule 2(a) and concluded that it does not permit reclassification of an article that squarely falls under a particular tariff heading by invoking the concept of essential character.

3. Determination of Essential Character:
The Tribunal referred to several precedents, including the case of Shivaji Works Ltd., where it was held that an incomplete or unfinished part of a machine or motor vehicle would fall under Chapters 84, 85, or 87 only if it had acquired the essential character of the finished product. The Tribunal also noted that the products supplied by the appellants underwent significant further processing by the buyers before becoming motor vehicle parts, indicating that they had not acquired the essential character of such parts at the stage of clearance.

4. Eligibility for Concessional Rate of Duty under Notification No. 223/88:
The appellants argued that their products were eligible for concessional duty under Notification No. 223/88, which applies to forgings and forged articles of steel falling under any heading or sub-heading of Chapters 72, 73, 84, 85, 86, or 87. The Tribunal observed that the products were described as un-machined forgings in the purchase orders and invoices, and the buyers were paying duty on the finished products after further processing. This supported the appellants' claim that the products were still in the forging stage and eligible for the concessional rate.

5. Relevance of Precedents and Alignment with HSN:
The Tribunal examined the implications of aligning the Central Excise Tariff with the HSN. It noted that the classification should be determined according to the terms of the headings and any relative Section or Chapter Notes, as per the Supreme Court ruling in the case of Fenner (India) Ltd. The Tribunal found that the products manufactured by the appellants were correctly classified under sub-heading 8708.00, as they were ready for final machining and thus had acquired the essential character of motor vehicle parts.

Separate Judgments:
- Majority Judgment: The majority of the Tribunal members (Member (J) and Member (T)) concluded that the products were still in the forging stage and had not acquired the essential character of motor vehicle parts. Therefore, they should be classified under Chapter sub-heading 7326.90, and the appeal was allowed.
- Minority Judgment: One member (Member (T)) dissented, holding that the products had acquired the essential character of motor vehicle parts and should be classified under Chapter sub-heading 8708.00. This member upheld the impugned order and rejected the appeal.

Final Order:
In view of the majority judgment, the impugned order was set aside, and the appeal was allowed.

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