1. The respondents M/s. S.S. Miranda Ltd. claimed before the Assistant Collector that the products (tool bits) manufactured by them were to be classified under TI 68 CET. Under his order dated 31-8-1981 the Assistant Collector of Central Excise Bombay held that the proper classification was under TI 51 A(iii) CET. On appeal the said order was set aside by the Appellate Collector of Central Excise Bombay under his order dated 7-10-1981. The Appellate Collector referred to an earlier order passed by him on 22-7-1981 in an appeal filed by ,M/s. Indian Tools Manufacturing Ltd. which order, according to him, dealt with similar goods. Following the decision in the earlier appeal he classified the goods manufactured by the respondents also under TI 68 CET. The Central Government was of the view that the said order of the Appellate Collector was not proper, legal and correct. Notice under Section 36(2) of the Central Excises and Salt Act was accordingly issued directing the respondents to show cause why the order of the Appellate Collector should not be set aside and suitable appropriate orders passed thereafter. The respondents replied supporting the order of the Appellate Collector. It is the proceedings as initiated that, on transfer, are now before us as this deemed appeal.
2. We have heard Shri Vineet Kumar for the department and Mr. Atul Setalvad, Advocate for the respondents.
3. From the letter of the respondents dated 11-8-1981 (with reference to which the Assistant Collector had passed his order dated 31-8-1981) it appears that after the introduction of TI 68 in the tariff the respondents were paying duty under TI 68 with reference to the tool bits manufactured by them and that when TI 51-A was amended in 1977 the department reclassified the goods under TI 51-A but that this was objected to by the respondents and that correspondence was thereafter going on, duty being paid by the respondents under protest. It was after the respondents became aware of the order of the Appellate Collector (in the appeal of a competitor M/s. Indian Tools Manufacturers Ltd.) that the respondents wrote the letter dated 11-8-1981 relying on the said order and pressing for final classification under TI 68 CET. It had always been the case of the respondents, and has been stressed in the letter dated 11-8-1981 also, that the subject matter of the controversy were the tool blanks manufactured and cleared by them since, according to the respondents, such blanks cannot be directly used as tools unless further processing such as grinding, edge sharpening, grooving, etc. is carried out on such blanks before they could be properly used as tool bits. In this letter the respondents pointed out that the product manufactured by them was identical to the product of M/s. Indian Tools Manufacturers Ltd. They had subsequently given to the Assistant Collector a copy of the said order of the Appellate Collector as also certain declarations from firms which were purchasing the subject goods from them, such declarations making it clear that after such purchase the goods were being subjected to further processes (of the nature mentioned earlier) before they could be put to actual use. This is seen from the letter of the respondents dated 31-8-1981. It also appears that the respondents had enclosed samples of the subject goods as well as goods manufactured by M/s. Indian Tools Manufacturers Ltd., in order to establish the similarity of the goods. The Assistant Collector had refused to accept the claim of the respondents and ordered final classification under TI 51-A(iii) CET.4. In his order dated 7-8-1981 the Appellate Collector has extracted the operative portion of his earlier order dated 22-7-1981 (containing the discussion on the issue). It appears from the said order that the Appellate Collector had ordered classification under TI 68 CET only with reference to tool bits which are in the nature of blanks and hence not ready for use as tools. This is to say, the Appellate Collector confined the classification under TI 68 CET only to the tool blanks which were not ready for use except after further processing.
5. As earlier mentioned, the case of the respondents is that their product is exactly similar to the product of M/s. Indian Tools Manufacturers Co. so far as the subject matter of the present controversy is concerned. Shri Setalvad states that the respondents are also paying duty under TI 51-A (iii) CET so far as the ready to use tool bits are concerned. It may be seen from the order of the Assistant Collector dated 31-8-1981 that the Assistant Collector also does not dispute the position that so far as the goods now under issue are concerned they are not ready to use but would require some further processing in the nature of sharpening, edging, etc. before use. The Assistant Collector rejects the averment of the respondents on the ground that such further processes will be in the nature of minor processes only and hence even without such processing the goods would be covered under TI 51-A(iii) CET.6. With reference to the order of the Appellate Collector dated 22-7-1981 the Assistant Collector has noted "the exact circumstances, propriety and chances of the decision holding the field are not comprehensible at this stage. It is, therefore, necessary to decide the matter on its own merits". As we have already seen, a copy of the Appellate Collector's order had been sent by the respondents to the Assistant Collector along with their letter dated 31-8-1981. It is not clear to us whether this letter was received by the Assistant Collector after he had issued his order or whether this letter dated 31-8-1981 had been given during any hearing and before the said order was issued.
In any event, it was not proper for the Assistant Collector to ignore the order of the Appellate Collector for the reason mentioned by him.
7. As regards the other reason suggested by him, that the processes which the blanks had to undergo are minor processes, we are unable to understand the reasons which prompted the Assistant Collector to make the said observation. Presumably he had inspected the goods. The case for the respondents had always been that their goods were exactly the same as the goods of M/s. Indian Tools Manufacturers Ltd. If that is so, the observation of the Assistant Collector about the processes being minor and hence the earlier order of the Appellate Collector not being relevant, would not be proper.
8. Shri Vineet Kumar contends that the fact that such minor processes would be required to be carried out before the blanks 'could be put into use as tool bits would not render classification under TI 51-A(iii) CET improper since, according to him, the position would be similar to tool bits losing the efficiency due to wear and tear during use and being subsequently subjected to such processes to render them usable. He contends that just as tool bits which had lost their efficiency due to wear and tear would not cease to be tool bits, though they are to undergo the processes of sharpening, edging etc. before they could be again put to use, the blanks also would be tool bits though they may require such processes before they are put to use. It does not appear to us that the analogy is appropriate. Once the goods have assumed a particular shape and character, and, because of the same, are to be classified under a particular head the fact that after use for a particular period they may have to be repaired would not take them outside the classification. But in the present case the blanks had not attained the shape or character of the bits and therefore t would not be proper to infer that even before they attain the said shape and character (by being subjected to the relevant processes) they would still be tool bits. It is no doubt true that in the review notice the Government had mentioned that in their price list the respondents have referred to their goods as high speed tool bits. The Government therefore, infer that the goods were tool bits and not mere blanks.
But, as earlier seen, the case for the respondents has from the commencement been that the goods under issue were blanks and not bits.
It has also been seen that the Assistant Collector also accepts this position when he states that the goods do require processing before they could be put to use as tool bits. It may also be noted that the evidence produced by the respondents before the Assistant Collector (in the form of declaration by actual users who purchase these blanks from them) makes it out that the purchasers have to perform on these blanks certain processes before they could be put to use as tool bits. Hence the fact that the goods were not ready to use as tool bits appears to be beyond dispute.
9. As earlier mentioned, such goods had been classified by the Appellate Collector in the case of M/s. Indian Tools Manufacturers Ltd. as failing under TI 68 CET. We may note that, evidently with reference to certain earlier disputes, the issue of classiliability of carbide blanks manufactured by Indian Tools Manufacturers Ltd. came up for consideration before this Tribunal and that the Tribunal had held in its decision reported in 1983 ELT 1170 that such blanks were classifiable under TI 68 CET. The Tribunal had held that blanks which are not ready for use till after further processing is done would fall under TI 68 CET and not under the heading under which they would fall after such processing is done. Similarly in the present case also the subject goods would fall under TI 68 CET since they can fall under TI 51-A(iii) only after the further processes are carried out thereon by the purchasers.
10. Accordingly we are satisfied that the order of the Appellate Collector requires no interference.: The appeal is accordingly dismissed and the notice dated 26-6-1982 is discharged.