Full Judgment
2. The appellants herein are, inter alia, engaged in the manufacture of forged rings. They had claimed benefit of Notification No. 223/88-C.E., dated 23-6-1988 and filed a classification list accordingly. The benefit of notification was approved by way of approval of the classification list. Later on the department appeared to have a change of mind and show cause notices were issued that the benefit of the said notification was not available inasmuch as it was subject to the condition that forged goods had not been subjected to any machining or surface treatments, other than :- (a) annealing, tempering, case-hardening, mitriding and similar heat treatments to improve the properties of the metal; (b) descaling, pickling, scraping and other processes to remove the oxide scale and crust formed during the heating of the metal; (c) rough coating intended solely to protect products from rust or other oxidation, to prevent slipping during transport and to facilitate handling for example paints, containing an active Anti-Rust pigments, such as red lead, zinc powder, zinc oxide, zince chromate, iron oxide (iron minium jewellers rough) and non pigmented coatings with a basis of oil, grease wax, paraffin wax graphite, tar or bitumen; (e) removal of surface defects, or of excess material by grinding, chipping, filing or proof machining provided that in both the cases there is no change in the form of the product.
2.1 The appellants in manufacturing the forged rings are undertaking the following processes as has been set out in the impugned orders :- (i) the forged rings (inner and outer) are manufactured by cutting the bars of alloy steel into required length of pieces and this piece is feeded in oil fired furnace for hearing purpose.
(ii) these heated cut pieces are subjected to forging process in which these are shaped into TIKKI; (iii) then the said 'TUCKF is further subjected to squeeze forging process to obtain combined piece of inner-outer rings; (iv) the said product is then fed to power press machine in which a 'hole' is pierced; (v) this is further fed to power press machine to separate the inner and outer rings.
2.2 On due adjudication, Collector has come to the conclusion that the appellants after manufacturing forged products had been undertaking the process of punching the hole and the process of separating the inner and outer ring by the power press machine and had been machining all dimensions of forged rings to achieve the nearest dimensions of bearing race keeping grinding allowance, heat treatment and grinding operations; therefore, the rings which come into existence become clearly identifiable parts of ball bearings. Hence, by invoking Rule 2(a) of the Interpretative Rules of the Tarrif, the Collector has held that the goods manufactured by the appellants fall under Tariff Heading 84.82; they cease to be forged products and hence the benefit of Notification 223/88 has been denied.
3. Learned Chartered Accountants submits that the learned Collector has fallen into error by treating the process of punching the hole and the process of separating the inner and outer ring by the power press machine as a process subsequent to the process of forging the forged products. He submits on the authority on Technical literature given in a book entitled "FORGING INDUSTRY HAND BOOK" edited by Ion E. Jenson that process of punching and process of separating the inner and outer rings is well and truly a part of forging the hollow products. In this connection, he relies on the following extracts from the said Book :- "The horizontal forging machine is particularly suited for producing hollow and pierced components, because hollows can be made with very small or no taper, and because piercing can be performed with little or no material loss.
In the simplest case, the ends of a tube are upset. If the material is gathered so as to increase the outer diameter, the same rules apply as for the upsetting of solid bars, except that the wall thickness of the tube is now substituted for the diameter of the bar. Heavier deformation is permissible if the outer diameter is kept constant and the inner diameter reduced, as the natural flow of the material tends to give sound flow patterns even at higher reductions.
Deep holes are pierced progressively, using relatively sharp punches of approximately 60-70 included angle. If the hole is to have a square bottom, the next to last piercer may have an included angle of 120 maximum, followed in the final stroke by a flat punch.
Normally, however, the flat punch is used directly after a 75 piercer. The penetration of the punch into a long unsupported bar would lead to buckling and eccentric piercing. A rim forged initially will prevent this, as shown by the forging of a drag link.
If it is not desired in the final product, the rim may be trimmed off subsequently.
Rings of a relatively low weight-to-diameter ratio are easily produced in an upsetting and piercing operation, starting from stock that is the size of the hole diameter. Where the diameter of the hole desired in a ring is larger or smaller than the diameter of the stock most suitable for upsetting, special techniques are used to modify the stock diameter adjacent to the ring before punching the ring from the stock. A particular advantage of this operation is the saving of material through elimination of internal flash." He submits that after undertaking the aforesaid processes of punching and separating the two rings no further process is undertaken by way of any post forging processes as given in the Notification 223/88. He submits that the applicability of Notification 223/88 to such goods is now beyond question in view of Tribunal's judgments in the cases of :-International Steel Foundry Ltd. v. Collector 1993 (65) E.L.T. 552 He also submits that in relation to old Tariff under the Customs Tariff Act, 1975 i.e. prior to 28-2-1986, there is a direct decision of the Tribunal on the forged rings in the case of C.C. v. Antifriction Bearing Corporation 1984 (16) E.L.T. 613, wherein it has been held that forged rings are forged products liable to duty under the then Chapter 73 for the Customs duty and under Tariff Item 26AA of the erstwhile Central Excise Tariff as against the Revenue's contention that it was liable to duty as part of roller bearings under Chapter Heading 84.62(3). He submits that Tariff description of Chapter Heading 73.06/07 which was ultimately upheld by the Tribunal and Chapter Heading 84.62(3), as contended by the department more or less similarly worded as the Tariff description now under consideration. He further submits on the authority of a submission in TELCO v. Collector 1990 (50) E.L.T. 571 (Trib.) that this judgment of the Tribunal in the case of Antifriction Bearing Corp. has been upheld by the Supreme Court [Para 7.1 of TELCO]. On the basis of the aforesaid submissions, learned Chartered Accountant has submitted that the appeal deserves to be allowed on merits alone. However, he submit that he has a strong case on the demand being hit by limitation inasmuch the classification list has been duly approved. The show cause notice has been issued in the case of Dhanpati Steel Mill on 12-3-1993 for the period of Jan. 1990 to March 1992. In the case of SLM Udyog show cause notice has been issued on 10-12-1992 for the period October 1991 to Feb. 1992.
4. Learned JDR, Shri K.K. Dutta, on the other hand reiterates the findings of the adjudicating authority. He submits that the process of punching and the process of separating the inner and outer rings mentioned at S. Nos. (iv) and (v) of the process of manufacture set out above, have been held by the Collector to be the post forging processes i.e., machining processes. Further, he draws attention to para 7 of the adjudication order in the case of SLM Udyog, wherein the Collector has held, as already set out above, that machining is done on the goods to achieve the nearest dimensions of bearing race keeping the grinding allowance, heat treatment and grinding operations in view. He, therefore, submits that the goods manufactured by the appellants no longer merely remain forged products and they have a machining beyond that stage. Therefore, by application of Rule 2(a) as rightly applied by the Collector, the goods would fall under Chapter Heading 84.62. On the question of limitation, learned JDR, has submitted that the two processes at S. Nos. (iv) and (v) were not disclosed to the department.
Therefore, there is a wilful suppression of facts and hence larger time limit of 5 years is available to the Revenue. From that angle the show cause notices are within time.
5. We have carefully considered the pleas advanced on both sides. From the technical literature brought on record as well as the products shown to us during the course of hearing, we are satisfied that the forged rings are merely forged product. The two processes namely that of punching and of separating the inner and outer rings, cannot be treated as post forging operations. It is not disputed that the appellants have been clearing and selling their products as forged rings. Nothing has been brought on record that the two processes are subsequent to the process of forging of hollow bodies. We are unable to appreciate Collector's finding that the aforesaid two processes of punching and separating inner and outer forged rings are processes of machining inasmuch as all dimensions of forged rings are nearest to the dimensions of bearing race because no further process of manufacture has been brought on record while the Collector has set out the process of manufacture in 1st para of the impugned orders. From the process brought on record there is a clear evidence that no operation subsequent to forging at all is undertaken by the appellants herein, not even the processes which are mentioned in Notification 223/88. The products of the appellants are, therefore, pure and simple forged products falling under Chapter Heading 7326.19 of the CETA, 1985.
Accordingly, we hold that the benefit of Notification 223/88 is applicable to the goods under consideration here.
6. In view of the aforesaid finding, the question of limitation becomes merely of academic interest. However, having regard to the facts and circumstances of the case and particularly of the approval of classification list, we hold that the demands are time barred.
7. In view of the foregoing findings, appeals are allowed with consequential relief to the appellants.