1996 (9) TMI 394 - AT - Central Excise

Summary

Issues: Classification of forgings under Tariff, eligibility for concessional rate of duty, whether forgings are parts of machinery, interpretation of processes involved in manufacturing forgings.

In the judgment delivered by the Appellate Tribunal CEGAT, New Delhi, the case involved two appeals filed by M/s. Ajay Forgings Pvt. Ltd. concerning the classification of forgings they manufactured for motor vehicle parts manufacturers. The appellants claimed their products were classifiable under Chapter 72 of the Tariff and eligible for a concessional rate of duty under Notification No. 174/88-C.E. The Revenue, however, classified the products as parts of machinery under various chapters. The main contention was whether the forgings constituted parts of machinery or not.

The advocate for the appellants argued that the goods produced were not machinery parts and required several processes before becoming identifiable machinery parts. He cited previous Tribunal decisions supporting the view that un-machined forgings were not classifiable as machinery parts. On the other hand, the SDR for the Revenue referred to the Order-in-Appeal and reiterated the observations made by the Appellate Authority.

The Collector of Central Excise (Appeals) had visited the appellants' unit and observed that the forgings, manufactured through die forgings, had acquired the shape and essential character of machinery parts. However, the forgings were only ready for machining and had not been actually machined. The judgment referenced a previous case involving Tata Iron & Steel Co. Ltd., where the Supreme Court held that precision machining was necessary to consider a product as a part of machinery.

The advocate for the appellants presented communications from customers stating that the goods received required further processing like machining, threading, and boring before being used as component parts. The judgment highlighted the distinction between un-machined forgings and forged products that had not acquired the essential character of motor vehicle parts. It was emphasized that processes like machining, polishing, and hole drilling transformed forged products into machine parts.

Referring to a previous Tribunal decision in Jaypee Forgers v. CCE, Bombay, the judgment concluded that forged products needed to undergo specific processes to assume the definite shape of a machine part. Considering all relevant factors, the Order-in-Appeal was set aside, and both appeals were allowed in favor of the appellants.