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1987 (3) TMI 125

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..... uthorities. Rule having been issued, we cannot refuse to adjudicate the matter on the ground of availability of alternative remedy. We have, therefore, heard this matter and now proceed to judgment. 3. The petitioner manufactures wheels, tyres and axles of railways. The buyers of these products are the Indian Railways. Apart from selling wheels, tyres and axles for Railway wagons, the petitioner also sells and supplies wheels and axles as a composit unit. These are forged products. Before supplying these items to the Railways, these forged items are machined and polished by the petitioner. That brings about the rub falling for consideration before us. The stand of the petitioner is that forged steel products fall within the ambit of Tariff Item 26AA(ia) of the Central Excise Rules (sic). The stand of the revenue is that these products after the stage of forging obviously fall within Tariff Item 26AA(ia) and dutiable as such. The further stand of the revenue is that after machining and polishing these items, a new product comes into being, and therefore, the new machined and polished tyres, axles, etc., fall within the ambit of Tariff Item 68 and separately dutiable as such. Thus .....

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..... goods, not elsewhere specified, but excluding - (a) alcohol, all sorts, including alcoholic liquors for human consumption; (b) opium, Indian hemp and other narcotic drugs and narcotics; and (c) dutiable goods as defined in Section 2(c) of the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 (16 of 1955). Explanation :- For the purposes of this item, goods which are referred to in any preceding item in this Schedule for the purpose of excluding such goods from the description of goods in that item (whether such exclusion is by means of an Explanation to such item or by words of exclusion in the description itself or in any other manner) shall be deemed to be goods not specified in that item." From the above, it will be seen that forged steel products are liable to duty in terms of Tariff Item 26AA. The petitioner admits that after the wheels, tyres, etc., have been forged, they are put through a process of machining and polishing before they are supplied to the Railways. The stand of the petitioner is that this machining and polishing in the workshop of the petitioner is of insignificant character and that extensive machining and polishing is done by the Rail .....

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..... res is not complete until it has been machined and polished in accordance with the requirements of the Railways. According to the petitioner, the wheels and tyres passed through rough machining process to remove excess metal/surface defects. According to the petitioner, only some of the articles passed through inspection and get despatched. According to the revenue, the tyres and wheels have to undergo considerable machining and polishing and, therefore, the machined and polished articles assume a character different from that of forged articles. 8. The petitioner has placed reliance upon a certificate issued by Additional Director, Railway Stocks (P), Railway Board in which it has been mentioned that wheels, tyres, axles and blanks manufactured by Tata Iron and Steel Company and supplied to Indian Railways against orders placed by Railways to Tisco are manufactured according to the specifications, drawings agreed to between the Railways and Tisco. Axles according to him, are supplied to the Railway in rough machined condition and wheels, tyres are supplied in as rolled/as forged condition. The Additional Director has also mentioned in his certificate (Annexure-8) that the wheels .....

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..... goods now come under the scope of this levy. 2. The Technical Study Group on Central Excise Tariff, which was set up by Government in 1984 to conduct a comprehensive inquiry into the structure of the Central Excise Tariff has suggested the adoption of a detailed Central Excise Tariff based broadly on the system of classification derived from the International Convention on the Harmonised Commodity Description and Coding System (Harmonised System) with such contractions or modifications thereto as are necessary to fall within the scope of the levy of Central Excise duty. The Group has also suggested that the new Tariff should be provided for by a separate Act to be called the Central Excise Tariff Act. 3. The Tariff suggested by the Study Group is based on an internationally accepted nomenclature, in the formulation of which all considerations, technical and legal, have been taken into account. It should, therefore, reduce disputes on account of Tariff classification. Besides, since the Tariff would be on the lines of the Harmonised System, it would bring about considerable alignment between the Customs and Central Excise Tariffs and thus facilitate charging of additional custo .....

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..... n the international canvas, machined and polished steel goods have for long been considered to be items different from forged items. It thus clearly shows that forged items are different from rolling stock. Wheels become wheels only when they are machined and polished. In my view, therefore, the machined and polished wheels, axles, tyres, etc., are separate identifiable goods and are liable to payment of excise duty under Tariff Item 68 besides being exigible under Tariff Item 26AA. 11. Learned Counsel for the petitioner then submitted that the realisation of excise duty from 1975 was barred in terms of Section 11A of the Central Excises and Salt Act, 1944. Section 11A lays down that when any duty of excise has not been paid a Central Excise Officer may, within six months from the relevant date, serve notice on the person chargeable with the duty which had not been levied or paid. In terms of this provision, the notice to show cause why he should not pay the duty must be issued and served within six months. In this case the period for which demand has been made is from March, 1975 to July, 1981. The notice was thus obviously beyond six months. Steps for realisation, therefore, wi .....

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..... n be of that view now, how can the petitioner be hauled up for suppression or mis-statement of facts or fraud being of the same view. In that view of the matter, I am clearly of the view that there was no fraud, collusion, suppression or wilful mis-statement of facts. These not having been established, the proviso cannot come into play. Secondly, from the facts brought on record there is nothing to show that there was any intent to avoid payment of duty. It is obvious that the petitioner bona fide believed that the wheels, tyres, axles, etc. were merely forged items exigible under Item 26AA. I have no reason to doubt its bona fide in this behalf. In the Cement Marketing Co. of India Ltd. v. The Assistant Commissioner of Sales Tax, Indore, and Others (1980 E.L.T. 295)= [1980] 45 STC 197 it was held that merely filing [a] wrong return is not necessarily [a] false return. That was case under the Madhya Pradesh General Sales Tax Act where the assessee had not included the freight in the return of sales tax, as it was generally under the impression that inclusion of freight was not necessary in showing the gross turnover. In that background, Bhagwati, J. (as he then was) observed as fol .....

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