Judgment:
1. This is a revision application filed before the Government of India which on transfer to the Tribunal is being treated as an appeal.
2. The appellants manufacture among other products steel wire of various types. The steel wires manufactured by the appellants was classified under Item 26AA (ia) of the First Schedule of the Central Excises and Salt Act, 1944. The appellants filed a classification list under Rule 173B and it was approved by the proper officer on 25-3-1974 classifying among others steel wires galvanised and ungalvanised and stranded steel wire for ACSR Core under 26AA (ia). The classification was approved after enquiry and after verifying the materials. No appeal or revision was filed by the Department on the approval of the classification list. While so on 28-10-1978 the Superintendent, Central Excise, requested the appellants to show cause why galvanised stranded wire should not be classified under Item 68 instead of 26 A A (ia). The appellants replied that the demand of duty was illegal. However, the appellants were compelled to pay duty on galvanised stranded wires under protest. Since the classification was already approved the demand for duty under Item 68 is not justified. There was no further enquiry either. The appellants, therefore, filed a wirt petition before the Hon'ble Kerala High Court for quashing the same. The Hon'ble Kerala High Court directed the Collector of Central Excise to hold an equiry as expeditiously as possible and after giving an opportunity to the appellants to substantiate their case. On 20-3-1980 the Collector of Customs and Central Excise, Cochin confirmed the earlier decision and held that galvanised and ungalvanised steel wires were classifiable under Tariff Item 68 of the Central Excise Tariff. Aggrieved by the said order the appellants moved the Central Board of Excise and Customs, New Delhi. It was contended, inter alia, that the demands were time-barred. The Central Board of Excise and Customs, New Delhi, dismissed the appeal and hence the present revision which is being treated as an appeal.
3. Shri J.B. Koshy, learned counsel for the appellants, argued that the order of the Collector determining the classification even if valid could only be prospective and could not be retrospective. He placed reliance on 1986 (25) ELT 94, Collector of Central Excise, Chandigarh v. Gurmukh Singh and Sons, Ludhiana. In that decision the Tribunal has held there was no authority under Rule 173B (5) to undo the effect of any decision already taken and that the re-opening of the question of classification must necessarily relate to prospective periods. Shri Koshy then urged that the Department has approved the classification under Item 26AA (ia) and if the products are classifiable under any of the Items 1-67 the classification under Item 68 was not warranted. He placed reliance on 1983 (13) ELT 1566, Dunlop India Ltd. and Madras Rubber Factory Ltd. v. Union of India and Ors. The Hon'ble Supreme Court has held that when an Article is by all standards classifiable under a specific item in the Tariff Schedule it would be against the very principle of classification to deny it the parentage and consign its residuary item. 1984 (16) ELT 528, Jayant Paper Mills, Bombay v.Collector of Central Excise, Bombay, and 1980 (6) ELT 390, Darshan Hosiery Works v. Union of India, were also cited for the same purpose.
Shri Koshy then urged that the show cause notice issued by the Superintendent was illegal inasmuch as the classification had been determined by the Assistant Collector. He relied on 1984 (16) ELT 389, Entremonde Polycoaters Pvt. Ltd., Nasik v. Collector of Central Excise, Pune.
4. According to Shri Koshy stranding of galvanised wires would not amount to manufacture. In 1982 (10) ELT 145, Piramal Spg. and Wvg.
Mills Ltd. v. Union of India and Ors., the Hon'ble Bombay High Court has held that the blending of cotton yarn and nylon yarn, done with a desire to give a twinkling effect to the fabric, would not amount to manufacture. In 1977 (1) ELT 199, Union of India and Ors. v. Delhi Cloth and General Mills Co. Ltd. and Ors., the Hon'ble Supreme Court has held that the order to imply a manufacture there must be transformation and a new and different Article must emerge having 'distinctive name, character or use'. 1978 (2) ELT 336, South Bihar Sugar Mills Ltd. and Anr. etc. v. Union of India and Anr. etc., also reiterates the same position. Shri Koshy submitted that if there is a doubt regarding the classification the benefit of the same should be given to the assessee. He urged that the Department has not discharged the burden cast on it in order to classify the item under Item 68 of the Central Excise Tariff. In 1986 (24) ELT 388, Collector of Central Excise, Cochin v. Fertilizers and Chemicals, Travancore Ltd., the Tribunal has observed that the burden of proof is on the Department and a specific tariff item has to be preferred to the general. The learned counsel drew our attention to the entry and argued that the item referred to 'all other rolled, forged or extruded shapes and sections not otherwise specified' and stated that it was wide enough to include the products manufactured by the appellants.
5. Shri Koshy also urged that the demand was issued on 2-11-1981 for the period 1-3-1975 to 31-3-1980 and was manifestly time-barred. He stated that the process of stranding would not bring into existence a totally new product known as stranded steel wire in the market and that the impugned order has to be set aside. Shri H.L. Verma, learned S.D.R, urged that twisting of galvanised and ungalvanised wires would bring into existence a new product known in the market as stranded wires and would attract duty. He referred as to the Glossary of a few selected terms relating to Iron Steel from the Indian Standard : 1956-1962 (Second Reprint May, 1975) where Wire has been defined as under : "6114 Wire - It shall be round, half-round, square, hexagonal, flat or any other Section including grooved Section, and is characterised by the fact that it has been subjected to a sizing operation by the process of drawing through a die or by other mechanical means." Since the stranded wire is totally different from a single strand of wire duty would be attracted. He stated that it was always open to the Revenue to re-open the classification and a show cause has been issued.
He urged that the demand is totally different from classification and the demand in this case would be valid. On the question of time-bar he stated that in any case the demand would be valid at least for the 6 months prior to 28-10-1967 the date of show cause notice.
6. The classification list filed by the appellants refers to earth wire, stranded steel wire, ACSR core wire etc. The appellants claim them as non-excisable but the Department would say that these products are excisable under Item 26AA (ia). It must be mentioned that the appellants were paying duty for these products as approved under 'Item 26AA (ia). Their classification list effective from 1-4-1978 was also approved on 26-6-1978. While so on 28-10-1978 a show cause notice was issued that manufacturing of stranded wires of different sizes were known by the trade names as stray wire, earth wire, P.C. wire, A.C.S.R core wire and as stranded wires are identifiable as distinct articles having names, character, and use different from the solid single wires, the same should be classified under Tariff Item 68 with effect from 1-3-1975. The Superintendent, Central Excise, has issued this show cause notice. Even at the outset it was argued that the classification list having been approved, the issue of a show cause notice by the Superintendent for classifying the products under Tariff Item 68 with effect from 1-3-1975 could not be justified. The classification list has been approved by the Assistant Collector. Shri Koshy stated that once the list is approved, the excise authorities can only take recourse to the appropriate provisions of the Act. In this connection he referred to the decision in 1986 (23) ELT 318, Ajanta Iron and Steel Company Pvt. Ltd. v. Union of India and Ors., where the Hon'ble Delhi High Court had occasion to consider the effect of approval of the classification list by the Assistant Collector. In that case one Assistant Collector had approved the classification list for an earlier period. On appeal, the Appellate Collector had accepted the assessee's new point. A show cause notice was issued by another Assistant Collector to re-open the question with respect to the same period. The High Court held that the show cause notice was not valid. It is unnecessary to give a finding if the classification list once approved.
A show cause notice could not be issued in view of our findings on merits of the case.
7. The Department want to classify the item under Item 68. It is well-settled that the levy of duty under Item 68 could be made only if the products do not fall under any of the other items. For the purpose of a clear understanding of the dispute we extract below the tariff item at the relevant time : (ia) Bars, rods, coils, wires, joists, girders, angles, other than slotted angles, channels, other than slotted channels, tees, beams, zeds, trough, piling and all other rolled, forged or extruded shapes and sections, not otherwise specified.
It is manifest from the perusal of item that Item 26AA refers to iron and steel products. Sub-item (ia) refers to wires. It also refers to all other rolled, forged or extruded shapes and not otherwise specified. The later part of the sub-item clearly indicates that iron and steel products rolled or forged or extruded shapes with sections if they are not provided would come under the Section if they have not been specified in any other item. Sub-entry (ia) covers a wide range of products and is comprehensive enough to include the subject goods without recourse to the residuary Item 68. The show cause notice merely indicates that stranded wires are known by a distinctive name in the trade. But it must be mentioned that the Central Board of Excise had issued tariff advice dated 13-9-1978 which shows that twisted steel used in re-forces would be classified as rods under Item 26AA (ia) of the Central Excise Tariff. It is specific that if they are made out of duty paid they would not be subjected to Excise duty again under Item 26AA (ia). Thus it is manifest that even according to the trade the twisted steel rods to be used as re-inforced concrete as in this case cannot be charged to duty under Item 68.
8. By a letter dated 30-5-1979 the Appellants have been informed that the Collector has classified that all stranded steel wires galvanised or ungalvanised would be classifiable under Tariff Item 68 and since the proviso has been there even at the date of commencement this would have effect from that date i.e. 1.3.1975. It is manifest that the show cause notice has been issued mainly on the basis of clarification issued by the Collector. The basis for the classification has not been indicated nor do we have materials to uphold it. On the other hand the Board has taken a different view on that aspect. It is significant to note that no action was taken on the show cause notice and the appellants had been paying the duty under protest. Later on 9-8-1979 the appellants were permitted provisional assessment for ungalvanised wire under Tariff Item 26AA. The facility for provisional assessment was withdrawn on 13-8-1979; hence the appellants went before the Hon'ble Kerala High Court. The Hon'ble High Court directed the Collector to consider the representations of the appellants.
Significantly the Collector did not issue any fresh show cause notice.
He has held that the products manufactured out of steel products could not be considered as wires and stranded process was a manufacturing process. But the orders of the Collector indicate that at all times the product continued to be wire. He would call it the 'stranded wire'.
There is no separate item for stranded wires. It is not known how after stranding the product which continued to be wire, would hop into Item 68, especially, when sub-item (ia) covers all rolled items not otherwise specified. On the facts of the present case it is manifest that the stranded wires continued to be wires under Item 26AA(ia).
Since there is no change in the pattern of manufacture the classification list approved cannot be ignored and a fresh classification under Item 68 introduced. Assuming there is some doubt in the matter as rightly contended by Mr. Koshy and in view of the decision cited by him the benefit of the same should be accorded to the assessee. Applying the test in the D.C.M.'s case there is no transformation of the product and there is no evidence to prove that it has acquired a distinctive name, character and use. The Board has observed that process of stranding has resulted in a new product known as stranded wire. At this stage, we must mention that the tariff item does not speak of any stranded wire. In the harmonised Code there is a reference to iron and steel whether or not coated but insulated.
Electric resistence wire has been classified separately. There is no item as "stranded wires". In contrast in the Customs Tariff Chapter 73 refers to articles of iron and steel; 73.12 refers to stranded wires.
It is reasonable to conclude that the steel wires continue to be wires despite the process of stranding and are not covered by Item 68.
9.There is also considerable force in the contention of the learned counsel for the appellants that the claim is time-barred. The show cause notice was issued on 28-10-1978 demanding duty from 1-3-1975.
There is no allegation of any clandestine . removal. Far from it the classification list under Item 26AA (ia) has been approved by the proper officer. The Collector in his order has merely classified the item under Item 68 and there is no demand for duty. While so the demand issued on 1-11-1981 sent on 2-11-1981 for the period 1-3-1975 to 31-3-1978 cannot be supported. We do not accept the contention of the learned S.D.R. that the demand would be valid for the calculated period of 6 months prior to 28-10-1978.
10. We may incidentally mention that the recourse to ISI by the S.D.R.would not have any material bearing, in view of the other circumstances stated in this case. Further it has been held by the Hon'ble Supreme Court in 1985 (21) ELT 3, Indian Aluminium Cables Ltd. v. Union of India and Ors., that the specifications issued in ISI are for ensuring quality control and have nothing to dp with: the class with which the goods belong in a Tariff Schedule.
11. In view of the above discussion the impugned order is not justified and is set aside. The appeal is allowed.