Judgment:
1. The dispute in these cases is about the hot rolled products less than 3 mm in thickness and less than 75 mm in width assessed by the Assistant Collector of Central Excise, Patiala as hoops under tariff item No. 26AA(ii); the manufacturers had asked for their classification as bars under Tariff Item No. 26AA(ia).
2. The Collector (Appeals) wrote an excellent order in which all the points of dispute have been discussed thoroughly; it is hardly necessary to go anywhere else to understand the dispute. By his order No. 126 to H4-CE/CHG/85, dated 23-2-1985 he approved the assessment made by the Assistant Collector and ruled that the products were assessable as hoops. He was fair enough however, to record that at the relevant time there was no definition in the tariff for different iron and steel products and, therefore, the issue in question would have to be decided by taking into account the meaning of these terms as they were understood in the trade, although he said that it was clear from the description that the goods were covered by the definition hoops all sorts. The Collector (Appeals) relied on the IS 1956-62 (2nd Reprint May 1975) which defines hoop as follows :- HOOP (baling, Hoop Iron) - A hot rolled flat product, rolled in rectangular section of thickness less than 3 mm and width less than 75 mm.
Apparently the specification of the product in question squarely falls within the above definition, according to the Collector (Appeals). He then went to the definition of the hoop and strips in heading No. 73.12 of the BTN which defines them as : rolled products with sheared or unsheared edges, of rectangular section, of a thickness not exceeding 6 millimetres, of width not exceeding 500 millimetres and of such dimensions that the thickness does not exceed one-tenth of the width in straight strips, coils or flattened coils.
3. In his discussion the learned Collector took the question of the criterion of the nature of the mill. The manufacturers claim that their mill is only a merchant/bar mill and is not able to produce goods like hoops and strips. The learned counsel for the manufacturers Mr. Bedi stressed this point very strongly saying that this it is a technical fact that these goods are classed by the type of mill in which they are produced. He pointed out that the Board had given instructions to this effect in tariff advice No. 4/67 to the effect that flats and bars are products of section mill, whereas plates and sheets are products of flat/strips mill. The learned counsel also pointed out that the Collector of Central Excise, New Delhi also in his order No.V/26AA(2)/41l/CE/67, dated 15-2-1967 re: Jai Bharat Iron and Steel Rolling Mill held that the nature of the mill was a criterion to decide the nature of the product manufactured. The Deputy Collector of Central Excise, Amritsar came to the same conclusion in his order No. 2-CE/84, dated 14-2-1984 holding that classification of a product as strip depended on the nature of the mill through which it is rolled. And in a very detailed order, the Assistant Collector of Central Excise, Aurangabad in order No. V/26AA(17)-49/78/8390, dated 11-11-1980 wrote to the same effect and said that there is more than a grain of truth in the arguments that the mill should receive sufficient attention when such products are to be classified. In order No. 1115 to 1123 of 1978 the government of India ruled that products referred to as pattis in commercial parlance made in a place other than a strip mill, by hot -cold - rolling process from scrap cuttings of duty paid unused, rerolled rods/billets would not be classifiable as "strip" under Item 26AA(iii) but under Item 26AA(ia) CET. The Collector (Appeals) of Central Excise, New Delhi in his order C.No. 289-CE/APPL/KNP, dated 17-9-1983 ordered that products with thickness not exceeding 3 mm and width between 20 and 25 mm should be assessed as bars. In tariff advice 31/78, dated 15-6-1978 the Board decided that the stainless steel products referred to as pattis and manufactured at a place other than a strip mill by hot or cold rolling process from scrap cutting of duty paid, unused re-rollable rods/billets would not be classifiable under Item 26AA(iii) as strips but may merit assessment under Item 26AA(ia).
4. We read in the U.S. Steel Publication "THE MAKING SHAPING AND TREATING OF STEEL" edited by Herald E. McGannon 9th Edition is an authority on steel. At page 808, we have the following information under Narrow Flat - rolled Products : Hoop - There are four general classifications of this type of products : Hoop is made either by slitting coiled strip rolled in multiple width, into narrow coiled strip of the desired width; or, from narrow coiled strip with a hot-rolled or mill edge. The type and width of hoop being produced influences the choice of the method used.
5. The method of production of the products in question is not one of the methods listed in this authoritative work for hoops. These so called hoops were not produced by slitting coiled strip nor rolled from narrow coiled strip, with hot rolled or mill edge.
6. A little later down, the article says "Hoop is produced as 'curled hoop' or 'a straight length'. Curled hoop is made by a pinch-roll and curved guide-shoe arrangement that permits the hoop to take a circular form. A straight length hoop is produced merely by removing the curved guide shoe".
7. The goods are not curled hoop nor a straight length. It is necessary to understand clearly that the "straight length" used in this book is not the straight length understood by the department, which seems to think that any short straight length is the straight length signified by the term for these products. It is nothing of the kind as can be seen from the above passages quoted from the authority. A straight length is not a short length - it is long. The means of producing the goods is completely different from what this authority writes about the method of production of hoop. On this alone it would not be possible to agree with the department that the manner of production of the goods cannot be taken into account. These goods have been rolled in a bar mill and they have not been subjected to the processes mentioned by the book for producing hoops. Furthermore these goods are not meant for baling or packaging which a hoop is meant for.
8. The SDR's arguments as well as the Collector's argument are that we should go by the market parlance; the SDR in fact said that use should not be overlooked in this kind of question. If we take the question of use, it is clear that these are not hoops because they are not used in packing/baling, nor is there any evidence that they are known as hoops in the trade. The IS quoted and relied upon by the Collector (reproduced at page 3) lists Hoop as baling, hoop iron. Since these are not baling hoops, the IS has been incorrectly used.
9. We have seen that the Board has said, at one time, that the mill in which the goods are produced must be taken into account and when we do so, these goods are disqualified from being classed as hoops. The learned Collector says that the nature or type of mill cannot by itself be the determining factor of the issue in dispute. The phraseology and scope of the tariff entry itself and trade practices terminology well-reccgnised standard national and international literature should be taken into account. But we can find nothing in support of the department's case except a letter of the Board F.No. 139/43/77-CX.IV, dated 13-4-1982 on which the learned Collector relies heavily, which lays down the measurement of less than 3 mm and less than 75 mm for hoops. However, the same letter also contains instructions that a bar would cover all rectangular product of thickness below 3 mm without any reference to the width crigterion; this was of course modified later.
The learned Collector rejects the claim of the appellants that their mills were not capable of producing a product with rectangular cross-section as he says that it was not sustainable on facts. But we do not see that this is such an important point of dispute after what we have said.
10. The learned counsel for the manufacturers urged that they were not licensed to manufacture hoops by the Iron and Steel Controller. We think the learned counsel for the department and the Collector were correct in saying that this would make no difference if the product they made were hoops; we entirely agree with this argument and we are not able to accept the assessees' contention.
11. The learned SDR strongly recommended that the Tribunal should agree with the findings of the Collector in paragraph 7.1 and with the instructions issued by the Board starting with the one dated 13-4-1982 and ending with the one dated 7-10-1982 to support the assessment of these goods as hoops. But we have seen that the instructions of April 1982 was contradictory; that it recommended assessment of the goods below 3 mm in thickness as bars without distinction as to the width.
But it is unnecessary to go into the correctness of the instructions nor into the complaint by the counsel for the manufacturers that the department kept changing its assessment definitions. We agree that classification should be done with more consistency and more coherence than it has been. However that may be, all that have gone before were departmental instructions and directions, the bases for which are unclear; perhaps this is the reason for the "frequent changes, since the definitions had no fixed or recognized bases.
12. The definition dimensions of these products are "arbitrary" in the sense that they are man-made and were laid down for the conduct of trade and commerce and for the purpose of standard and similar functions. Technologically there is nothing to prevent a product 3 mm thick from being a bar. In the item 25 which came into effect in 1983, a flat is given a thickness of 3 mm or over and width of 400 mm and below, a strip is a thickness of 10 mm and below. Therefore a product with a thickness of 5 mm and a width of 75 mm can by measurement alone be either a strip or a flat. The C.C.N., meanwhile, gives hoops/strips a thickness not exceeding 6 mm. So a 9 mm thick product can be a strip for the central excise, but is too thick for that head under the C.C.N.But the central excise tariff allows hoops a thickness of less than 3 mm. This illustrates that all these dimensional definitions are only devices for testing goods and products of steel and are liable to revision and change. They have created and even after the statutory dimensions will continue to create conflicts. In such uncertainty, we can profitably fall back upon the mill. When we know a product is produced in a flat/bar mill and another produced in a strip mill, the question is resolved. It might at times be tempting to ignore the mill in which the products are made but that can only be at the expense of proper appreciation, and true and correct understanding.
13. Above is part of a figure diagram taken from page 2 of the book we have quoted : THE MAKING, SHAPING AND TREATING OF STEEL. This diagram traces the products to their origins and in doing so, places their manufacture in different kinds of mills. Note that plates are produced in plate mills, bars in bar mills, and strips/sheets coil in hot-strips mill; while skelp are produced in skeip mills and so on. This is the pattern of modern steel production.
14. These products are not the hoops i.e. baling hoops, which the Collector (Appeals) by his reference to IS 1956 - 62, showed he considered them to be. They were produced in a mill that cannot produce hoops or strips. Their lengths are not such as to place them in the same class as hoops : too many reasons for saying they are not hoops, and hardly any for saying they are. Assessment under 26AA(ia) is more appropriate than assessment under 26AA(ii).