9911796707
TMI Blog1993 (9) TMI 368X X X X Extracts X X X X X X X X Extracts X X X X ..... ification under proper heading as "Parts of Railways or tram way locomotives or rolling stocks under Chapter 86, sub-heading 8607.00 at the duty rate of 15% Adv. Therefore, the learned Collector, after detailed examination of the entire evidence on record and after duly considering the appellants pleas, confirmed a duty demand under Rule 9(2) of Central Excise Rules, 1944 under TI 68 of erstwhile first schedule of Central Excises and Salt Act, 1944 for the period 1-8-1983 to 24-9-1986 and thereafter, under sub-heading 8607.00 of Central Excise Tariff Act, 1985 for the period 29-5-1986 to 24-9-1986 under the proviso to Section 11A of the Act. He held that the duty of excise already determined and debited, if any, from PLA on the said goods (not being debit payment from RG-23A Part I & II) shall be admissible for adjustment against the amount of duty to be paid in terms of his order under sub-heading 8607.00 of the CET Act, 1985. The learned Collector further ordered for confiscation in terms of Rule 173Q(1) of Central Excise Rules, 1944, as amended 761 nougs of rolled metal tyres valued at ₹ 19,98,690.40 and seized on 25-9-1986. As these seized goods had been released pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not proper and correct, as the correct classification would have been under Chapter 86, sub-heading 8607.00 and accordingly duties shortly levied as calculated as shown in Show Cause Notice from May 1986 to September 1986 were demanded. They were further to state as to why the classification of the said goods should not be revised under sub-heading 8607.00 and the differential amount of duty should not be recovered. (ii) However, this Show Cause Notice was not given effect to, but this was replaced by another Show Cause Notice dt. 20-3-1987 issued by the Collector of Central Excise, Rajkot for still larger period and at para 32 of the Show Cause Notice, it was stated that the period indicated in the Show Cause Notice dt. 6-11-1986 by Supdt. is also included in the present Show Cause Notice. (iii) Show Cause Notice dt. 20-3-1987 issued by Collector of Central Excise, Rajkot runs to about 42 pages accompanied by list of documents listing 24 documents. The copies of all these documents were also given to the appellants. (iv) It is stated in this Show Cause Notice dt. 20-3-1987 that the appellants are manufacturers of various types of Iron & Steel, forged, Semi-machined and machi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 and onwards till the last Classification List No. 159/86-87, dt. 29-5-1986, i.e. Railway Tyres and other forgings which had been classified under TI 68, was in fact required to be classified after the Budget of 1986, under Chapter 8607.00. It is alleged that even prior to Budget of 1986, though the Railway Tyres were classified under TI 68, no clearance was affected by the assessee under TI 68 and no proper duty was paid thereon since June 1982. They had instead cleared 'Rolled Metal Tyre' throughout the above mentioned period under the exemption Notification No. 206/63, dt. 30-11-1963 as amended and thereafter under Notification No. 208/83, dt. 1-8-1983 under Item No. 2 mentioned at the back of the Classification List prior to Budget 1986 under the headings "Various Iron & Steel products, forged, shaped and sections etc. under TI 26AA(ia) as well as TI 25(8)". It is stated that even after Budget 1986, up to 28-5-1986, they partly had taken the clearance under Chapter heading "Pieces roughly shaped by rolling or forging of Iron or Steel, not elsewhere specified" by mentioning new Classification List under Chapter sub-heading No. 7208.00 in lieu of old ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment of CED mis-classified their product namely Rolled Metal Tyres for Railways, as rolling or forging of iron and steel, not elsewhere specified and cleared the said excisable goods, without maintaining statutory records and without following the Central Excise procedure and without payment of CED. 3. The assessee filed their detailed 39 page reply dt. 4-6-1987. Besides denying the charges of suppression and wilful mis-statement, they asserted that the product was not in a fully manufactured stage and the process carried out at the Railway Workshop was not merely a fitment process but they were substantial process of finishing as per Technical Drawing carried out by processes of turning, milling & other operations. They relied the Board's circular in F. No. B-35/21/75-TRU dt. 23-9-1975, wherein it had been classified that mere machining/polishing etc. did not convert the crude forged product or crude casting into an identifiable machine part and that by itself would not bring the goods under Tariff Item 68. They also relied on the Appellate Collector's own decision in order No. V(68)/1520/82/13764, dt. 26-2-1985 given in their case, which was based on the said circular. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the profile including the machining of the flanges are not done and at that stage the rolled metal tyre can only be referred to as a piece roughly shaped or a forged shaped and section of iron & steel. They have also referred to the drawings of the tyre in its rolled stage and the drawings of the tyre in its finished stage together with a summary of the dimensions of the tyre in the rolled stage and in the finished stage and of the permitted tolerances in respect of Meter gauge Wagon tyre, Broad Gauge Wagon Tyres. Thus Meter Gauge Wagon Tyres indicate the following further processes are done by the Railways : (a) Reduction of outside diameter by 5 mm to 11 mm (note no machining of outside diameter is done by the company). (b) Increase of inside diameter by 8 mm to 14 mm (Note: This has to be done by a great degree of precision to fit the wheel and the degree of precision can only be achieved by the railway workshops as they have the requisite precision machinery). (c) Internal Step height machining to the extent of nil to 3 mm. (d) Reduction in the height and thickness and profile of the flanges. (e) Creation of two grooves of different lengths; depths and widths. (f) Cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apter 86 is irrelevant as the note only specifies that Metal tyres are parts of railway or tramway, locomotives or rolling stock. They state that it is an undisputed position that metal tyres are such parts but not rolled forgings for metal tyres and that the goods are not metal tyres capable of being used as parts of railway locomotive or rolling stock, as they require significant processing before they are capable of such use and hence would not fall under sub-heading 8607.00, as the goods are not "metal tyres" but rolled products capable of being converted but "metal tyres". They have strongly placed reliance on the opinion of a Consulting Engineer Shri Kasy Aiyer, who had served in the Railways as Chief Rolling Stock Engineer and held other posts. In his opinion, he had confirmed that (a) Machining carried out by the company is limited to the completion of forging. (b) The machining is in the nature of proof machining only. (c) No operation subsequent to forging is carried out by the company. (d) The rolled metal tyres only have the rough shape of a tyre, but do not have the essential features of a tyre. (e) Several machining operations have to be carri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as also examined the contention regarding applicability of note 2(a) and has rejected the same in Para 6.22. The said para is noted herein below: * * * The ld. Collector has held that larger period is attracted and has justified the same by giving his own reasoning. 5. We have heard Shri Gautam Doshi, ld. Chartered Accountant for the appellant on several dates of hearing and ld. SDR, Shri B.K. Singh. In the meantime, several appeals on similar issue were also heard and order was pronounced in the case of Aravali Forgings Ltd. and Ors. v. Collector of Central Excise in Order No. E. 232 to 242/93-B1, dt. 23-8-1993, reported in 1994 (70) E.L.T. 693 (Tri.) The ld. Chartered Accountant pleaded that the ruling would apply in all fours in this case also and that there is no reason to differ from the same. He also forcibly argued that even on independent appreciation of the evidence alongwith technical literature produced and referred by him in his argument it would be conclusively established that the impugned goods were only forged ones and not in fully finished stage, to enable its classification under sub-heading 8607. He also pleaded that the department having consciously approved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... note 2(a) would apply and the ruling rendered in the case of TELCO v. Collector of Customs as reported in 1990 (50) E.L.T. 571 would apply on this point. He also relied on the ruling rendered in the case of Central Railway Bombay v. Collector of Customs, Bombay as reported in 1984 (16) E.L.T. 510. He reiterated the Collector's finding on the point of limitation. 7. Shri Doshi reiterating his earlier arguments countered by arguing that the goods were referred as 'rolled stage' ones and not as finished goods. The drawings would clearly indicate that the goods were in rolled stage only. He referred to the evidence pointed out by ld. SDR and argued that even as per this statement it was clear that several machining and finishing activities besides fitment processing were done at Railway Workshop as per the drawings and therefore, there was not incriminating in the statement of these experts. The experts had also clearly admitted that in the Railway Workshop dimensional change upto 5 mm was done on both sides of the product that would come to about 10 mm and hence the product continued to remain as a forged one. He also pointed out that the evidence of Shri Aiyer had not c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. SDR has pointed out that the evidence in this appeal would lead to a different conclusion, inasmuch as that there is a clear trade understanding of the goods in this case, to show that the impugned goods is not a forging. He has also pointed out to the evidence of the experts and the Shop Superintendent of Railway Workshop and thus has pleaded that note 2(a) of Chapter 86 would clearly apply to this case. We have already extracted the letter of Railways at para 3(iii) above. The gist of the opinion of Shri S. Kasy Aiyar is also noted above. Both these two evidences are not controverted but the ld. Collector has preferred to accept the evidence of Shri Sasi Kant Vithal Parkhe, Asstt. Supdt. Machine Shop, who had stated that they do not conduct any manufacturing operations regarding railway tyres for loco wheel received in their unit at Pratapnagar Workshop. The letter dt. 24-11-1986 of Addl. Chief Mechanical Engineer Workshop, Hubli is also relied, wherein it is stated that the process carried out is for fitting up of rolled metal tyres to meter gauge railway. The statement of Tiradia dt. 1-10-1986 Workshop Supdt. Western Railway recorded before Asstt. Collector is relied, where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Machining, it was found as under : (a) Metal removed to increase internal diameter of tyre is approximately 7.5 mm. Difference in internal diameter of forged tyre and machined tyre was found as 15 mm. Dia of Forged Tyre 588MM Dia of Machined Tyre 603 MM (b) Metal removed from side face of forged tyre during machining process was 4 mm (minimum) to 6 mm (maximum). 4. Proof machining is generally done for just levelling the surface and finishing it. On forged tyres, there is no possibility of proof machining looking to the large differences in dimensions of forged tyre and machined tyre. The tyres are definitely machined. 5. Looking to photographs 6 and 7 supplied by Central Excise, we are of the firm opinion that these photographs are of machined tyre". These experts were cross-examined. Prof. Kachhala and Prof. Vyas have admitted several facts and also they have not been able to reply-to several material questions. Like for instance to a question: "Does the process of manufacturing of railway tyres require machining operation in addition to safety operation? A (Prof. Vyas) cannot be replied firmly" He was shown the two drawings and asked as to whether h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat are the finishing process of rolling? A. Grinding, laping, clod rolling and then finishing, i.e. Super finishing (grinding/finishing could result, in a component of this size, removal of maximum a mm. surface metal by process of turning or grinding, i.e. the extent of removal permissible would depend depending upon of the size of the component). Q. Referring to the drawings at the rolled stage and the norm size will indicate difference in sizes and tolerances for the internal diameter at the norm stage. The tolerances are nominal and diameter is larger. Would you consider machining operations carried out to achieve the rolled stage, part of the operation of forging or rolling as a part of the sub-sequent processes required to achieve norm stage ? A. It has got no relevance with the opinion given earlier. Q. In the opinion you have found that the lathe used by the company is not capable of giving accuracy to the extent of 0.5 mm. I am showing you a certificate given by the Lathe Manufacturers at page 158 of parties reply to the show cause notice, which indicates that the actual error in turning is .01 to .02 mm. Would it, therefore, indicate that the lathe can give accuracy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have the essential feature of Railway tyre? A. Can't be said. For further amplification it may be clarified that we were asked to opine on the seized product which was rolled and machined confirmed to diagram W/TY-772/R which was different from the product received from rolling mill in the factory. Accordingly, we gave our opinion based on these two products and cannot state the use to which they may be put or whether they are ready for such use. Q. Would you consider the process of comparing tyres from two different sets, one out of the seized tyres and one out of those which were rolled but not machined as being a satisfactory method of locating the extent of machining carried out on the machine tyres ? A. Yes. Q. Can the products examined by them be considered to be railway tyres ready for use on railways and described as parts of railway or tramway locomotives and for this purpose heading 86.07 to explanatory notes to HMS volume No. 4 shown to them? A. Cannot be said. Can't comment. [Questions asked by me (Collector of Customs & C. Excise, Rajkot)]. Q. Whether the product manufactured and cleared by M/s. Echjay Steel Industries as shown to them can be considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant and his evidence is not at all helpful to the revenue. 13. Even Shri Tiradia Workshop Supdt. Western Railway has admitted that they receive rolled tyres and that they carry out several processes vis. "groove for glut ring and groove for lip (purpose of glut ring and lip is to fasten the tyre over the wheel rim), chamfering on the corners, a little machining on the surface and V-groove for identification of wear limit." He has also stated that these processes are essential features for fitment to the wheel. He has also stated that "some operations mainly profile machining which is very essential for safe running of the trains and which is being achieved after the tyre is fitted on wheel rim". He has clarified his earlier statement given to Asstt. Collector to mean that the railways do not make tyres to the rolled size. He has emphatically answered that the tyre would be complete only after the machining operations. He has also stated that "there is no improvement in quality or change in profile of the goods, excepting that the shape is altered by machining inner side of the tyre to suit fitment for the wheel rims and according to drawing W/TR-772 no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itional Director for Railway Store. This amendment has not been prior to show cause notice or after the visit of the officers of the department. Therefore, the evidence on record supports the assessee's stand. The ratio of rulings referred by the ld. S.D.R. in the case of PEFCO (supra) TELCO v. Collector of Customs - 1990 (50) E.L.T. 571 and that of the case of Central Railways (supra) do not apply to the facts of this case. 14. The ld. Collector has given a clear finding that there was no misclassification prior to 31-7-1983 and he has dropped the demands. But, he had done his best to somehow hold the assessee having wilfully misdeclared and suppressed facts for later period. We are not at all convinced with his reasonings. The classification list have all been approved from time to time. The description of the goods have clearly given in the classification list. Merely because the assessee quotes a different chapter heading, as that would be the correct one according to the, assessee; that by, itself is not at all a ground to hold that they had misdeclared the chapter headings and, therefore, larger period is attracted. It is well settled that the burden of classification is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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