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TMI Blog1995 (6) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, forged, extruded, formed, finished. The Department, on the other hand, considered the goods to be fully finished articles of iron or steel falling under Item 68 CET as goods not elsewhere specified in the tariff. The Referring Bench considered the two decisions already existed in the case of Paxma Axle Springs P. Ltd. v. Collector of Central Excise reported in 1990 (47) E.L.T. 639 (Tribunal) which was followed in V.K. Industries v. Collector of Central Excise reported in 1990 (50 ) E.L.T. 520. In both these decisions, the Tribunal had held that elastic rail clips has its own identity and is meant for a specific use as railway track material and the process of producing it involved a series of operations. There is no simple process of forging alone and hence, the Tribunal ruled out classification under 25(11) CET of these goods and held that they are correctly classifiable under Item 68 CET. The Referring Bench, however, noted that these two decisions of the Tribunal had not noticed the judgment of the Supreme Court rendered in the case of TISCO v. Collector of Central Excise - 1988 (35) E.L.T. 605 which had also considered the ruling of the Delhi High Court in the case of Met ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s instructions in F. No. 139/79/87-CX. 4, dated 18-9-1989 in which it has been stated that forgings which had been subject to process upto and including the stage of proof- machining were to be regarded as pieces roughly shaped under Tariff Item 25 and also Heading 7208 w.e.f. 28-2-1986. The ld. Counsel, further, referred to the proviso to the Notification 223/88 which gives the exemption to the products forging and forged articles of steel provided the said goods have not been subjected to any machining or surface treatments, other than annealing, tempering, case-hardening, and similar heat treatments to improve the properties of the metal. The ld. Counsel, further, referred to the book called `Manufacture of Heavy Press Forgings'. It has a Section on heat treatment of forgings. It is stated therein that few heavy forgings are shipped without some form of heat treatment. It also gives water or oil quenching followed by tempering as a form of treatment of forgings. The ld. Counsel, further, referred to the book `Manufacturing of Forgings' by Thomas G. Byrer. This gives the flow chart of typical operations in the production of heat forgings. The last operation on the forged parts, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T. 3.The ld. Counsel, further, referred to the textual authority given at page 105 of the Paper Book in the Section 4 dealing with `manufacture of forgings' that the primary objective of precision forgings is to produce a finished or nearly finished part ready for use at a lower cost than a conventionally forged or completely machined part. This shows that finished product can emerge as a result of forging. The ld. Counsel, further, referred to the definition of the term `forgings', the various textual authorities as IS 1956 - Glossary of Terms relating to Iron and Steel as an article produced by hot working, the metal under a hammer or press. It may also refer to the process followed in producing the article. It is the working of metal into a useful shape by hammering or pressing. The ld. Counsel, further, cited the Delhi High Court decision in the case of Metal Forgings Pvt. Ltd. (supra). The High Court held that in the 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 cutting is a process incidental to forging. But when the forged products are machined or drilled or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and were fully exempted. It is, thereafter, that the officers visited the appellants' factory on 21-1-1987 and the proceedings were initiated for the issue of the present show cause notice. The ld. Counsel pointed out that the Department's own understanding, as revealed in their letter was that the product would fall under item 26AA(ia) even during the period, Item 68 CET existed in the tariff. Since there is no charge of suppression of fact stated in the show cause notice, the longer period cannot be invoked. The ld. Counsel, therefore, urged that there was no ground for imposing penalty on them. He relied upon the Supreme Court decision in the case of Tamil Nadu Housing Board (supra) already cited by the ld. Counsel, Shri Sridharan. 4.Shri B.K. Singh, ld. S.D.R. submitted that the question here is of classification of railway clips. Relying on the Tribunal decision in the case of Reckitt Colman of India v. Collector of Central Excise, Bangalore reported in 1994 (71) E.L.T. 44 (Tribunal), the ld. S.D.R. argued that applying the test of distinct nomenclature, character and function of the goods, they can be clearly brought under Item 68 CET as they have specifically been made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich it has been stated under the heading heat treatment that it is an operation which is undertaken after completition of final forging. The ld. S.D.R. urged that goods will not also be classifiable under Item 25(8) CET as pieces roughly shaped. These do not have the characteristic of such goods. He referred to the HSN Explanatory Notes under Heading 73.07. These goods should be semi-finished, with large dimensional tolerances and should require considerable further shaping. Therefore, these goods cannot fall under Item 25(8) CET. They are also not classified under Item 25(11) as already argued based on the case law cited in the case of Reckitt Colman of India (supra). The ld. S.D.R., further, submitted that the case law cited by the appellants is also factually distinguishable. Referring to the process of manufacture of the clips, the ld. S.D.R. urged that there are two bending processes involved and bending is not forging. They are two different operations. The ld. S.D.R. referred to the Encyclopaedic Dictionary of Industrial Technology by TVER BOLZ and also manufacturing processes by Arthur D. Roberts Samuel Lapidge. The ld. S.D.R. argued that the bending process does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by United States Steel (USS), it has been said under "Heat Treatment of Forgings" that few heavy forgings are shipped without some form of heat treatment and annealing and water or oil quenching followed by tempering have been mentioned as typical heat treating operations. In the book "Forging Handbook" edited by Thomas G. Byrer published by Forging Industry Association Americal Society for Metals, under Section 4 on Manufacture of Forgings a flow chart of typical operations in the production of hot forgings is given which shows the flow as - Forging stock - heating for forging - forging equipment - forging 1. Edging 2. fullering 3. blocking 4. finishing 5. (cut off) - Trimming - forged parts - cleaning, heat treating, finishing, inspection, counting, packing, shipping. In the same book, there is another relevant passage on heat treating which is as follows : "Many impression die forgings produced by hot forging methods are given some type of heat treatment after completion of final forging operations and before machining or end-use. Proper heat treatment can produce a forging with optimum grain size, microstructure, and mechanical properties." Hence, there is reasonable gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8-9-1989 as follows : "The matter has been examined. The Board felt that in view of the order of the Hon'ble Supreme Court in the case of TISCO v. Union of India - 1988 (35) E.L.T. 605 on two stage levy for castings and forgings under the erstwhile CET and of the High Court of Gujarat, Ahmedabad's order dated 5-2-1988 in the case of M/s. Echjay Industries v. Union of India, which is against the recourse to explanatory notes so long as the tariff entries were not aligned with HSN, the broad ratio of Board's decision on castings should be applicable mutatis mutandis to the classification of forgings as well. The Board noted that Chapters 72, 73 of the CET Act 1985, prior to 1-3-1983, were not fully aligned with HSW. The entries in the Chapters 72, 73 of the CET Act 1985, prior to 1-3-1988 to be interpreted in accordance with the established practice and trade understanding. Accordingly, forgings which had been subjected to processes upto and including the stage of proof machining (whereby they were only smoothened and made ready for final machining to shape into machine parts) were to be regarded as `Pieces roughly shaped' under the old Tariff Item 25 and also under Heading 7208 wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial, heating and heating of steel material till final shaping is achieved. The steel forging process involves open forging process where the quantity is small and drop/close die forging and/or upset forging process under which the product is made with the help of dies. Thereafter, the extra unwanted material is removed by either trimming or by gas cutting or by skin cutting to achieve the shape and section nearest to the forged steel product required and also the forging clearances specified in the standards by ISI/or International. The forging would not cease to be forging by processes like removal of superfluous extra skin of cast iron. On this plea, the Hon'ble Court held in para 13 of the report that "The forged products of iron steel manufactured by the petitioner are excisable goods having come into existence as a result of manufacturing process. The removal of the extra/unwanted material by either trimming or by gas cutting of forged products, by either trimming or by gas cutting or by skin cutting for the removal of superfluous extra skin of cast iron to achieve the prescribed dimensions and tolerances is not a further process of manufacture. This process is incidental ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said goods could be said to be forged iron and steel products as contemplated in the said item; whether they could be regarded as such as soon as they are forged or after machining and polishing which is done in the excess skin before being supplied to the Indian Railways. The stand of the appellant is that this machining and polishing which is done in its workshop, is not significant character and extensive precision machining and polishing has to be done by the railways at their workshop before the wheels, tyres and axles supplied by the appellant can be attached to the rolling stock. The machining and polishing done in the workshop of the appellant was only in the nature of shaping by removing the superficial material to bring the forged item upto with the Railways' specifications. A perusal of Item 26AA would show the excise duty on forged goods covered under the said entry, is according to the weight of the goods. It was contended by the appellant that the weight should be measured only after the polishing and machining at the appellant's workshop was completed. It is obvious that as a result of such machining and polishing there would be some loss weight on account of exce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard must be accepted". The Tribunal applied these rulings in the case of Steel Industrial Forging Ltd. (ibid) for the new Tariff. These rulings squarely apply to the facts of each case before us. There is no reason to differ from these rulings by us." 7.It may be seen that in one of the cases dealt with in the Aravali Forgings case, the processes involved were trimming, normalisation, annealing, tempering, hardening, inspection, and shot blasting. The Deptt. had held that after these processes, the goods are given specific names as crank shafts, pinion, etc. and they are made as per specifications and drawings and hence should be classified under Heading 7308 as other articles of iron and steel and not as forgings roughly shaped under Heading 7208. This has been overruled by the Tribunal in the above decision on an elaborate consideration of precedent decisions and technical aspects and the coverage of the relevant tariff headings. The Tribunal, however, did not have occasion to make such an in - depth examination in its decision classifying rail clips under Item 68 CET in the Paxma Axles and Springs case (supra) and in the Vee Kay Industries decision which followed the fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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