1. These appeals involve the issue of classification of grids, connectors, straps & terminals manufactured by the appellants for use in electric storage batteries - the assessee's contention is that they fall under T.I. 68 while the Department has classified them under T.I.27A(5) of the erstwhile Central Excise Tariff. As all the 3 appeals involve this issue, they are being heard together and disposed of by a common order.
2. E/2989/87B1 - This is an appeal against the order-in-original dated 8-6-1987 passed by the Collector of Central Excise, Calcutta levying duty amounting to Rs. 86,23,173.90 and imposing a penalty of Rs. 2 lakhs on the appellant under Rule 173Q of the Central Excise Rules, 1944. The appellant is a company engaged, inter alia in the manufacture of electrical storage batteries falling under Tariff Item 31 of the First Schedule to the Act. In the manufacture of the said electric storage batteries, the appellant requires certain essential items such as, grids, connectors, straps, terminals etc., which are manufactured in the appellant's factory by adopting the process of "alloy blending and casting". For the above purpose, the appellants purchase on payment of duty, from the market, virgin and different lead based alloys where lead predominates as, for example, tandem, arsenic master alloy, antimonial lead etc., which are used as raw material. In the above process, the virgin lead is blended with the alloys in 5/10 ton pot and casting pigs of around 25 kg in weight are produced. These casting pigs are lead based alloys commonly known as antimonial lead alloys. In other words, the input to allow blending is virgin lead/lead based alloy and the output is also a lead based alloy. The blended cast pigs are then transferred to a casting machine where one pig in certain intervals is put in for replenishment. In the casting machine, molten alloy is poured into the mould for casting and thereafter grids and other lead parts like connectors, straps, terminals come out of the mould as cast product. As the grid comes out of the mould, the grid passes through wooden rollers and the metal head portion of the grid is trimmed. They are then stacked in stackers for inspection and thereafter re-released or subsequent operations like pasting with lead oxide-paste, drying etc. By a show cause notice dated 21st January, 1986, the appellant was asked to show cause as to why the classification list dated 17-3-1985 submitted by the appellant declaring straps, connectors, terminals, cable-ends etc., claiming classification under T.I. 68, should not be rejected and the said goods be not classified, under T.I. 27A(5) of the Central Excise Tariff, brought into force with effect from 1-8-1984. By his order dated 29-4-1986, the Assistant Collector held that the products are classifiable as wrought lead in the form of shapes under T.I. 27A(5), attracting duty at the rate of Rs. 1,000/- per MT in addition to special excise duty. By his order dated 22-12-1986, the learned Collector of Central Excise (Appeals), Calcutta allowed the appeal holding that a product does not become wrought merely by casting but it has to be worked upon subsequently to accord it specific shape or form for specific purpose. Against this, the Department has preferred E/A/3357/87B1. In the meantime, by another show cause notice dated 5-11-1986 the appellant was asked to show cause as to why the classification list dated 5-10-1985 submitted by the appellant in respect of "grids" classifying the same under T.I. 68 be not rejected and the said grids be held classifiable under T.I. 27A(5). By his order-in-original dated 6-1-1987, the Assistant Collector confirmed the demand. By his order dated 4-5-1987, the Collector (Appeals) allowed the appeal and grids were directed to be classified under T.I. 68. - E/A/2424/87B has been filed by the Department against this order. On 29-4-1986, the Assistant Collector issued a fresh show cause notice on the appellant asking the appellant to show cause as to why a penalty should not be imposed on the appellant and as to why Central Excise duty amounting to Rs. 86,23,173.90 leviable on 7839.249 MT of wrought lead in the shape of grids, straps, connectors etc. should not be required to be paid. The adjudicating authority confirmed the demand.
3. We have heard Shri V. Sridharan, learned Counsel & Shri M.S. Arora, learned DR.4. The contention of the manufacturers is that the items are cast articles, not of wrought lead and not in the form of angles, shapes & sections so as to attract T.I. 27A(5) which covers wrought lead in the form of brass rods, angles, sections, shapes,_The items are not machined - apart from casting, nothing further is done in respect of terminals, connectors & straps. Grids, on coming out of the casting mould, are guillotined & pass through wooden rollers through which they are strengthened & conveyed and the metal head portion of grid is trimmed. They contend also that the demand is time-barred in the absence of suppression - classification lists have been filed under T.I. 68 regularly from 1975 (except in 1981, when classification lists were filed for other items as the rate of duty changed) and the show cause notice suffers from lack of jurisdiction as it has been issued by the Superintendent who ceased to be the proper officer for the purpose of invoking the extended period of limitation under the proviso to Section 11A subsequent to 27-11-1985. In any event, the demand, if found justified, would amount only to Rs. 5 lakhs at the effective rate of duty of Rs. 70 per metric tonne after taking the benefit of set-off under Rule 56A.5. In reply, the learned DR submits that the process of strengthening in conveyor amounts to further working of the grids & renders them machined products emerging from cast machine; the items are of wrought lead, according to the Encyclopaedia of Metallurgy & Materials by C.R.Tottle (which says that at page 372 that "wrought" does not necessarily mean further working on the metal); resort should not be had to T.I. 68 which is a residuary entry when the specific comprehensive entry for lead is T.I. 27(A).
6. Angles, shapes & sections have a special connotation in metallurgy, & this is illustrated in the Explanatory Notes to the Brussels Trade Nomenclature with which non-ferrous metals under the Customs Tariff Act were aligned from 1-8-1984. Tariff Item 27 was rationalised by the Finance Bill of 1984 & while explaining the rationale for these changes in the Tariff structure, the Department had issued Trade Notices stating that "The proposed classification for non-ferrous metals, namely, copper, zinc, aluminium and lead broadly follows the Customs classification in respect of these items under Chapters 74, 79, 76 and 78 respectively of the First Schedule to the Customs Tariff Act, 1975.
It was further stated that it may also be mentioned that under the proposed Tariff Items, certain products such as 'angles, shapes and sections', 'powders and flakes', 'shells and blanks for pipes and tubes' would get covered. Presently, these items are covered under Item 68." 7. From the above, it is apparent that the intention was to align the Tariff description of non-ferrous metals under T.I. 27 with that of the Customs Tariff Act after 1984, which broadly followed the Customs Co-operative Council's Nomenclature. We have gone through the BTN Explanatory Notes to Chapters 74 (copper), Chapter 78 (lead), Chapter 76 (aluminium) and Chapter 73 (angles, shapes & sections of iron & steel). Relevant extracts are reproduced below :- "Heading 74.61 - The present heading further covers cast and sintered slabs, sticks, bars and rods, provided that they have not been subsequently worked after production otherwise than by simple trimming or de-scaling.
Heading 74.03 - WROUGHT BARS, RODS, ANGLES, SHAPES AND SECTIONS, OF COPPER; COPPER WIRE - The products of this heading are usually obtained by rolling, extrusion or drawing, but may also be obtained by forging (whether with the press or hammer). They may subsequently by cold-finished (if necessary after annealing) by cold-drawing, straightening, or other processes which give the products a finish of higher precision. They may also be worked (e.g., drilled, punched, twisted or crimped), provided that they do not thereby assume the character of articles or of products falling within other headings.
Bars and rods obtained by casting (including the so-called "jets" and continuously cast bars) or by sintering fall within heading 74.01 provided that they have not been subsequently worked after production otherwise than by simple trimming or de-scaling.
Chapter 78 - Note 1(b) - Wrought bars, rods, angles, shapes and sections (heading No. 78.02) : Rolled, extruded, drawn or forged products of solid section, of which the maximum cross-sectional dimension exceeds 6 mm and which, if they are flat, have a thickness exceeding one-tenth of the width.
Also cast or sintered products, of the same forms and dimensions, which have been subsequently machined (otherwise than by simple trimming or de-scaling). Heading 78.06 - OTHER ARTICLES OF LEAD. This heading covers all lead articles not included in the preceding headings of the present Chapter, or in Chapter 82 or 83, or more specifically covered by other Chapters of the Nomenclature (see Note 1 to Section XV), whether these articles are cast, pressed, stamped etc.
Collapsible tubes for packing colours and other products; vals, reservoirs, drums and other containers (for acids, radio-active products and other chemicals), not fitted with mechanical or thermal equipment; lead weights for fishing nets; weights for clothing, curtains etc.; weights for clocks, and general purpose counter-weights; skeins, hanks and ropes of lead fibres or strands used for packing or for caulking pipe joints; parts of building structures; yacht keels, divers' breast plates; electro-plating anodes (see Explanatory Note to heading 75.05).
Heading 73.11- ANGLES, SHAPES AND SECTIONS, OF IRON AND STEEL, HOT-ROLLED, FORGED, EXTRUDED, COLD + FORMED OR COLD-FINISHED; SHEET PILING OF IRON OR STEEL, WHETHER OR NOT DRILLED, PUNCHED OR MADE FROM ASSEMBLED ELEMENTS (+ ).
The sections most commonly falling under this heading are H, I, T, capital omega, Z and U (including channels), obtuse, acute and right (L) angles. The corners may be square or rounded, the limbs equal or unequal, and the edges may or may not be "bulbed".
Angles, shapes and sections are usually produced by hot-rolling or forging blooms or billets.
The heading includes goods which have been cold-finished to a higher precision by cold-drawing, etc., and also covers angles, shapes and sections made by cold forming or folding of sheets, plates, hoop or strip, or by extrusion.
All these products remain within the heading if worked (e.g., drilled, punched or twisted), provided that they do not thereby assume the character of articles or of products falling within other headings (e.g., with heading 73.21 when prepared for use in structures).
The heavier angles, shapes and sections (e.g., girders, beams, pillers and joists) are used in the construction of bridges, buildings, ships etc.; lighter products are used in the manufacture of agricultural implements, machinery, automobiles, fences, furniture, sliding door or curtain tracks, upbrella ribs and numerous other articles.
Note 2(b) Wrought bars, rods, angles, shapes and sections (Heading No.74.03) : Rolled, extruded, drawn or forged products of solid section, of which the maximum cross-sectional dimension exceeds 6 mm and which, if they are flat, have a thickness exceeding one-tenth of the width.
Also cast or sintered products of the same forms and dimensions which have been subsequently worked after production (otherwise than by simple trimming or de-scaling), provided that they have not thereby assumed the character of articles or products falling within other headings.
Note 1(b) Wrought bars, rods, angles, shapes and sections (Heading No.76.02): Rolled, extruded, drawn or forged products of solid section, of which the maximum cross-sectional dimension exceeds 6 mm and which, if they are flat, have a thickness exceeding one-tenth of the width.
Also cast or sintered products, of the same forms and dimensions, which have been subsequently machined (otherwise than by simple trimming or de-scaling).
Note 1(b) Wrought bars, rods, angles, shapes and sections (Heading No.78.02): Rolled, extruded, drawn or forged products of solid section, of which the maximum cross-sectional dimension exceeds 6 mm and which, if they are flat, have a thickness exceeding one-tenth of the width.
Also cast or sintered products, of the same forms and dimensions, which have been subsequently machined (otherwise than by simple trimming or de-scaling).
8. Our attention has been drawn to the entries in the CET for copper, aluminium and lead. Copper and products thereof fall under T.I. 26A.Castings not otherwise specified fall under sub-item 4 of T.I. 26A while angles, shapes and sections of copper fall under sub-item 3(ii), T.I. 26A. The explanation to the tariff entry defines wrought angles, shapes and sections as follows :- "(a) any extruded, rolled, drawn or forged products of solid section (other than round, rectangular, square and hexagonal), of which the width or the maximum cross-sectional dimension exceeds 6 millimetres and which, if they are flat, have a thickness exceeding one-tenth of the width; or (b) any cast or sintered products, of the same forms and dimensions, which have been subsequently worked after production (otherwise than by simple trimming or de-scaling), provided that they have not thereby assumed the character of any article or product falling under any other item." We notice that wrought angles, shapes and sections of zinc fall under T.I. 26B(3)(ii). The explanation to the entry defines angles, shapes and sections of zinc for terms identical to such items of copper. The Tariff Item 27(4) covers castings not otherwise specified, of aluminium and a similar meaning has been attributed to wrought angles, shapes and sections. This supports the view that angles, shapes and sections have a special connotation in metallurgy. T.I. 27A(5) covers wrought lead in the form of bars, rods, angles, sections and shapes etc., the definition of angles, shapes and sections can be borrowed from the definition given to these terms in the preceding entries relating to copper, zinc and aluminium. Applying this test, the items in question do not fall within the definition as the specifications of width, thickness, subsequent working beyond the point of simple trimming, are not satisfied and therefore, the items do not fall for classification under T.I. 27A(5) and are correctly classifiable under T.I. 68 (simple trimming of the grids becomes necessary to remove rough edges and minor imperfection before stacking for use in the plate process operation).
9. The submission of the learned counsel that the items in dispute are not wrought lead is supported by the definitions of 'wrought' in various technical dictionaries. Mc-Graw-Hill Dictionary of Scientific and Technical Terms defines wrought alloy as "An alloy that has been mechanically worked after casting". The Oxford Encyclopaedic Dictionary defines as "wrought: (of metals) beaten out or shaped with hammer etc.". The New Lexicon Webster's Dictionary of the English Language defines wrought as "Wrought : (of metals) hammered and beaten into shape". We accept the contention that the items are not wrought lead.
The learned SDR's reliance on the Tribunal's order in the case of Collector of Central Excise, Pune v. Khosla Metal Brass (P) Ltd. (Order No. 72/89-B1, dated 13-6-1989) is misplaced as in that order, the technical definition of "wrought" was not brought to the notice of the Bench.
10. Further, the demand for duty in E/2989/87B1 cannot be sustained as the show cause notice dated 29-4-1986 demanding duty for the period from 1-8-1984 to 31-1-1986 has been issued by the Assistant Collector, who was not competent to issue the notice invoking the extended period of limitation subsequent to 27-11-1985 when Section 11A was amended, so as to confer such jurisdiction upon the Collector of Central Excise.
The demand is also barred by limitation as the allegation of suppression has not been established by the Department.
11. In the light of the above discussion, we set aside the impugned order in E/A/2989/87B1 and allow the appeal. We uphold the order of Collector in E/A/3357/87B1 and E/A/2424/87B1 and dismiss these two appeals.