9911796707
TMI Blog1984 (12) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... Ferrous Industrial Directorate of the Directorate General of Technical Development, Ministry of Industries Development, Government of India and manufactures a number of Steel forged products namely : (a) Steel forgings for Auto Tractors like Forged Connecting Rods, Forged Pinions, Forged Gears, Forged Shaftings. (b) Miscellaneous Steel Forgings e.g., Rings, Step Forgings and Bars. (c) Forged Steel Flanges Other fittings for high pressure pipe lines of Petrochemical and other projects for export fully machined and drilled. The aforementioned forged products, as listed in para (a), (b) and (c) here-in-before are manufactured by the petitioner company mostly out of steel semis - e.g. billets, blooms, slabs or bars, on which proper Central Excise duty including product duty has been charged and paid at the source. The petitioner company also uses to some extent heavy steel cut ingots on which ingot duty is paid at source and the product duty is to be paid by the petitioner company. 3. The process of manufacture of these forged products consists of cutting of steel, pre-heatings of material, heating and beating of steel material till the final shaping, nearest to the sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h not exceeding six hundred millimetres with rolled (square, slightly round or levelled) edge.' 5. With effect from 1st March, 1975, Item 68 came to be added to the Schedule to the Act which reads as follows :- "All other goods not elsewhere specified manufactured in a factory, but excluding alcohols, opium ..........." 6. The question arose whether the forged products manufactured by the petitioner-company were "Iron Steel Products" described in sub-item (ia) of Item 26AA of the Schedule or any of one of the said items, manufactured by the petitioner, company by the further process of machining or cutting holes etc. attracted the newly introduced Tariff Item 68. The petitioner company received a letter No.. GL6/Misc/75/423 dated June 24, 1975 from the Superintendent, Central Excises (MOR IV) wherein it was stated that "Forged Products which are machined and are ultimately parts of machinery should be classified under Tariff Item .68." The said letter of the Superintendent, Central Excise was replied by the petitioner company vide their letter No. MF/OPB/SC/75-76/3167, dated July 2, 1975. Subsequently, the petitioner company received another letter, being letter dated July ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect of those forged shapes and sections which may be subsequently used as components for machinery the classification has necessarily to be under sub-item (ia) of Item 26AA. If such products are processed further to make them suitable and identifiable as parts of machinery these products would attract duty again under Item 68 which was inserted in the C.E.T. w.e.f. 1-3-1975. The result would be that at the forged stage even products which are intended to be used as component parts of machinery others than those which fall under any of the items from 1 to 67 C.E.T. have necessarily to pay duty under sub-item (ia) of Item 26AA. Thereafter, if, other processes which make them indentifiable parts of machinery are undertaken duty liability will further arise under Item 68'." 9. The petitioner seeks the quashing of all these orders and a declaration that the forged products of iron and steel manufactured by the petitioner-company are liable to duty of Central Excise under Item 26AA (ia) only and not under Item 68. 10. In the counteraffidavit filed in the affidavit of Shri R.D. Vasudeva, Assistant Collector, Central Excise, the facts and circumstances mentioned by the petitioner in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said examination, the petitioner company was advised and was satisfied that the goods manufactured by the petitioner company are in fact covered under Schedule Item 26AA (ia). The petitioner sought leave of the Court to withdraw the writ petition. The same was dismissed as withdrawn under the orders of the Court on August 5, 1975. It is urged by the respondents that the petitioner is estopped by pleading now that his manufacture falls under Tariff Item No. 26AA (ia) when he expressly sought its classification as machinery parts under Item No. 68. The submission now made by the respondents is that the petitioner company itself admitted that forged machinery parts after undergoing further process of machining, drilling etc. do make them indentifiable machine parts and that the petitioner has been manufacturing machinery parts besides forged iron and steel products which are liable to Central Excise duty under Tariff Item No. 68. 11. Tariff Item No. 26AA (ia) is comprehensive enough to include all the forged products manufactured by the petitioner company. Item 26AA (ia) is of very wide amplitude as the words "all other rolled, forged or extruded shapes and sections, not otherwise s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Government that forging would not cease to be forging by processes like removal of superfluous extra skin of cast iron. The stand of the Central Excise authorities, is that the forged products of iron and steel which are subjected to further processes like machining, drilling holes etc. which convert the forged products into an identifiable machine part would render the final products leviable to additional duty under Schedule Tariff Item 68. On the other hand, the case of the petitioner is that a product does not cease to be a forged or rolled product set merely because it may have been machined or tooled or polished to remove forging defects or to make marketable. 13. Neither the petitioner nor the respondents contend that the process of forging is an intermediary process in the manufacture of machinery parts and components which are being subjected under the impugned orders to additional excise duty under Item 68. In law there can be manufacture even at the intermediate stage if a distinct and different product known to the commercial world comes into existence. An intermediate product which is by itself an excisable article is liable to excise duly even though it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... articles or materials by physical labour or by skill or by mechanical power vendable and useful as such. Manufacture implies a change but every change is not manufacture exigible to duty. To be manufacture exigible to duty there has to be such transformation that a new and different article which can ordinarily come to the market to be bought and sold and known to the market having a distinctive name, character and usage must emerge. In other words, it should be a different commercial commodity. The Supreme Court has also emphasised the importance of an article being known as such in the commercial community for consideration whether an article in question becomes an article as mentioned in the Schedule to the Act. The concept of being known to the market is important not from the point of view whether the goods are manufactured. By the process of forging as detailed above, a forged product of iron and steel comes into existence. It acquires distinguishable identity as forged product. Now once an article comes into existence with the detinue identity, the process of manufacture is complete and it is exigible to duty. Merely because a manufactured goods is used subsequently for manu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e within the meaning of the Act. In my view the manufacture of the goods is not complete until all the processes incidental or ancillary to have been completed. In case of forged products the removal of extra unwanted material by either trimming or by gas cutting or by skin cutting for the removal of superfluous extra skin of cast iron is a process incidental to the forging. But when the forged products are machined/drilled/polished, they assume an altogether different character from what it was when forged. In that case before Patna High Court it was asserted that the goods supplied by the petitioners, there to its customers could not be used in that condition as it required further machining for using it as machine parts. In the case before me they are identifiable and usable as machine parts without any further process. 18. The Counsel is right when he says that the taxing event is the manufacture and the excise duty is leviable when the goods leave the factory gate. The condition of the article at the time when it leaves the factory gate is the determining factory for the purposes of levy of excise duty. End use of the goods cannot determine their classification in general ex ..... X X X X Extracts X X X X X X X X Extracts X X X X
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