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TMI Blog1982 (9) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... tition was pending the petitioner, according to it, by way of abundant precaution filed an appeal against Annexure '1' and prayed for stay of the same till the disposal of the writ petition. However, the appellate authority refused the prayer and disposed of the appeal by rejecting it. The petitioners filed amendment of the writ petition praying for quashing the appellate order and the same was allowed. In this writ petition, therefore, prayer has been made also for quashing the appellate order dated 24-2-1981 passed by Respondent No. 5 confirming the order of Respondent No. 1, Annexure-1/A to the writ petition. 2. The petitioners carry on business, inter alia, of manufacture and sale of diverse iron and steel castings popularly known as Cast Rolls at its Adityapur factory. All the Cast Rolls manufactured by the petitioners are tailor made items for individual customers as per the customers' specifications, designs and drawings and against their specific orders. The process of manufacturing Cast Rolls have been described in paragraph-4 of the writ petition. We will refer the details at appropriate stage. The duty payable on the Cast Rolls, manufactured by the petitioners, was un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hining and/or polishing it fell under Item 68. Against the order of Respondent No. 1, the appeal filed by the petitioners was dismissed by Respondent No. 5 by Annexure-1/A. 3. Three questions were formulated by the parties in this case, namely, (i) Whether the Steel Castings manufactured by the petitioners are excisable at two stages; under Item 26AA(V) when taken out of the mould and under Item 68 after the same are machined and polished for delivery according to the designs and specifications of its customers or whether the same are excisable only after machining and polishing under Item 26AA(V). If the answer to question No. (i) goes in favour of the respondents (ii) Whether the demand for a part of the period 1-3-1975 to 31st of March, 1979, was barred by limitation, and (iii) Whether in the circumstances of the case any penalty could have been imposed on the petitioners. Before discussing the questions, so raised, it is necessary to notice some of the provisions of the Act to which the counsel appearing on behalf of the parties repeatedly referred and the interpretation given to them by the Supreme Court and different High Courts. Under the Act excise duty is on the manufact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tomers' specifications, designs and drawings and against their specific orders. The process of manufacturing Cast Rolls as stated in paragraph 4 of the writ petition is as follows :- "That the petitioner further says that the normal process of manufacturing Cast Rolls is as under :- (a) The main raw materials, which are steel melting scrap and/or used and scrapped rolls purchased from the market and ferro-alloys are melted in the furnaces. (b) The molten metal is poured into moulds of different types depending upon customers' ultimate requirement as per their drawings. (c) After solidifying and cooling of the metal in the moulds, the casting is taken out, foreign materials like sand, dust, etc. sticking to the casting are removed and certain appendages of metal like runners, etc. are also removed by cutting off. (d) The casting is then taken to machine shop and put on the machine for removal of other appendages like risers and rough machining is carried out; after this, heat treatment process is carried wherever required. (e) Then the final machining on various machines is done to finish the castings as per the customers drawings. (f) On the finished product, rust pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lied by the petitioners to its customers cannot be used in that condition as it requires further machining for using it as machine parts. This fact is supported by Annexures 5 series. From these evidences it must be held that the steel castings when taken out from the moulds and put to further processing for bringing it according to the designs and specifications of customers, do not cease to be steel castings as known in the market. Steel Castings Hand Book (Supplement 1) of Steel Founders' Society of America was referred on behalf of the petitioners and Principles of Metal Castings by Richard W. Heine, Carl R. Loper, Jr. and Philip C. Rossenthal was referred by the respondents. According to the Hand Book, rules governing the design of steel castings are based upon (1) fluidity and solidification of steel, (2) the mechanical principles involved in the production of cores and moulds, (3) cleaning, (4) machining requirements and (5) functionality and weight consideration. In Principles of Metal Castings it has been stated that practically all the detailed operations that enter into the making of steel castings may be categorised as belonging to one of the five fundamental steps of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el casting and even if at the end of the processing by the petitioners it remains steel casting, the respondents cannot take recourse to Item 68 for the purpose of duty on the finished steel casting. This submission was made by Mr. Joshi with reference to Annexure-'l'. From Annexure '1' it appears that Respondent No. 1 is of the view that semi-finished steel castings are excisable under Item 26AA (V) and these semi-finished castings after cleaning, machining/polishing becomes excisable under Item 68. There is no warrant for this reasoning. Item 26AA(V) does not speak about semi finished and finished castings. In considering a fiscal statute, the language used in the statute cannot be allowed to be strained in order to hold a subject liable to tax (The State of Punjab v. M/s. Jullendur Vegetable Syndicate, A.I.R. 1966 S.C. 1295). 8. According to the definition of "manufacture" in the Act, as interpreted in Hindustan General Electrical Corporation Ltd. (supra), the manufacture of goods is not complete until all the processes incidental or ancillary to have been completed. According to the petitioners it manufacture goods according to the specifications and designs of individual cus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 5) read with Rule 173Q(i)(C). This notice is Annexure-'3'to the writ petition. The petitioners filed its show cause which is Annexure-'4'. The petitioners contended in the show cause that the steel casting rolls supplied by the petitioners to its customers were excisable at one point only and under Item 26AA(V) and at no stage it became excisable under Item 68. It asserted that it had not contravened any of the rules and no question of imposing penalty arose. By Annexure-'1', Respondent No. 1 demanded a duty of Rs. 3,98,860.80 (Rupees Three Lakhs ninety-eight thousand eight hundred sixty and paise eighty only) said to be payable under Item 68 for the period 1-3-1975 to 31st of March, 1979, and also imposed penalty of Rs. 1,000/- (Rupees one thousand). The notice to show cause (Annexure-3) was issued on 1-5-1979. 12. Mr. Joshi contended that in view of Rule 10, the period prior to 1-12-1978, was barred and the amount is not recoverable. Mr. Prasad replied that since it was a case of evasion of payment of duty period of limitation is five years. Under Rule 10(1) the period of limitation for recovery of duty, where it has not been levied or paid or has been short levied or errone ..... X X X X Extracts X X X X X X X X Extracts X X X X
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