Full Judgment
2. Shri V. Sridharan learned Counsel submits that the applicants manufacture wire rods by properzi process i.e. the process of continuous casting and rolling and the product is commercially known and bought and sold as wire rods only. The Finance Bill, 1988 introduced on 1-3-1988 contained provisions seeking to amend the entire Chapter 76 of the CETA so as to align it with HSN. The tariff rate of duty proposed in the Finance Bill for all Items of Chapter 76 was 50% ad valorem + Rs. 4,000/- per metric tonne which was the same tariff rate applicable to Chapter 76 immediately prior to 1-3-1988. Note l(a) to Chapter 76 defines bars and rods as "rolled, extruded, drawn or forged products, not in coils", while Note l(c) defines wires as "rolled, extruded or drawn products in coils". The learned Counsel contends that the disputed item is wire rod of unwrought aluminium falling for classification under Heading 7601.30, or alternately, under Heading 7604.10 as wire rods of wrought aluminium and emphasised that no meaning has been assigned to the expression "wire rods" in the Notes to Chapter 76. Classification lists filed by the applicants effective from 1-3-1988 were approved classifying wire rods EC grade conforming to IS 5484:1978 required by the Central Government to be supplied in pursuance of the Aluminium Control Order under sub-heading 7604.10 attracting 13% rate of duty in terms of Notification 150/86.
Non-statutory supply of wire rods/redraw rods were classified under Heading 7604.10 with effective rate of duty at 18% in terms of Notification 101/88 at Sl. No. 4 thereof covering "wire rods and other rods of aluminium wrought. Therefore, the demand is barred by limitation in the absence of any suppression on the part of the applicants who have clearly indicated in the gate passes that wire rods were cleared in coil form and these gate passes had been filed regularly along with RT 12 returns.
3. Learned Counsel submits that for the purpose of determining effective rate of duty for wire rods in terms of Notifications 150/86 and 101/88 during the relevant period, Note l(a) and l(c) of Chapter 76 are not relevant in the absence of any dispute that the items are wire rods. According to the applicants, classification of the wire rods under Heading 76.05 as aluminium wires for the purpose of tariff is not relevant for the purpose of determining the eligibility to the benefit of Notifications 150/86 and 101/88. Lastly he submits that in any event, Note l(a) to Chapter 76 would take effect only from 13-5-1988 when the Finance Bill was assented to by the President of India and hence the demand for the period upto 13-5-1988 cannot be sustained. To support this argument he relies upon the order of the Tribunal in the case of Ess Ess Metals and Alloys v. Collector of Central Excise - Order No. E/54-55/93-B1, dated 18-3-1993. He, therefore, prays for waiver of pre-deposit of duty and penalty and stay of recovery thereof pending the appeal.
4. Shri K.K. Dutta, learned DR strongly contends that the item is excluded from the definition of bars and rods and it is in coil form and is aluminium wire within the meaning of Note l(c) to Chapter 76.
Under the old Tariff, aluminium and articles thereof were classified under TI 27 and with the advent of the new Tariff, the same definition of aluminium wires and rods including wire rods as contained in the earlier tariff continued. In 1988, Chapter Note to Chapter 76 was amended in order to align the Central Excise Tariff with the HSN and by this amendment, separate definitions were introduced for bars, rods, plates, sheets, etc. of aluminium and the Chapter Notes will prevail over the commercial parlance. On the limitation angle, learned DR submits that suppression attributed to the applicants is their non-disclosure about the product being in coil form which would make a vital difference for classification of the same. He fairly concedes that the benefit of Notification 150/86 would be available to statutory supplies made by the applicants as admittedly the products are wire rods conforming to the IS specifications mentioned therein. In respect of non-statutory supply, his contention is that concessional rate of duty of 18% in terms of Sl. No. 4 of 101/88 is not available. Instead, concessional rate of duty of 20% is attracted in terms of Sl. No. 8 to the notification which covers aluminium wires. Lastly he submits that the change in tariff is effective from 1-3-1988, by virtue of Section 3 of the Provisional Collection of Taxes Act, 1931. He, therefore, prays that the application be rejected and the applicants directed to deposit the entire duty and penalty.
4A. We have heard both sides and carefully considered their submissions. We are of the view that the classification of the product is an issue to be examined only when the appeal itself is taken up for hearing, when the aspect will be considered with reference to the process of manufacture, technical literature, Chapter Notes and HSN. We are not expressing any view on the classification at this stage.
However, the applicants have made out a strong prima facie case on limitation - in the relevant classification list, the applicants have described the item for statutory supplies as "wire rods EC grade conforming to the specification IS 5484 : 1978" and indicated classification under Heading 7601.30 which has been changed to Heading 7604.10 by the Assistant Collector during approval. The non-statutory supply has been described as wire rods/redraw rods classifiable under Heading 7601.30. In both the cases the items are shown to be of unwrought aluminium. Our attention has been drawn to page 211-212 of the paper book wherein the Assistant Collector made the following endorsement: "This shall be classified under sub-heading 7604.10 instead of 7601.30 and the rate of Bed in case of wire rods conforming to the specification in ISI 5484-1978 is approved at the rate of 13% instead of 11% as claimed and in case of other than those mentioned in ISI, the rate of duty is approved at the rate of 18% ad valorem (Reference Notification Nos. 150/86, dated 1-3-1986 and 101 /88, dated 1-3-1988)".
In addition we have also seen the gate passes describing the items as cleared in coil form (see sample gate pass at page 297). We also note that from the inception of the manufacture of this item, the applicants have been describing the same as wire rod and describing them in the same manner in the gate passes, after excise duty was imposed thereon.
We also note that the problem has been resolved w.e.f. 20-5-1988 with the introduction of Notification 204/88 which amended the table to Notification 101/88 to include unwrought aluminium wire rods whether or not in coils, at Sl. No. 4 of the earlier notification. Therefore, the applicants cannot prima facie be said to be guilty of suppression of any material facts warranting application of extended period of limitation against them. Further we are also of the prima facie view that the benefit of Notification 150/86 is available to the applicants for statutory supplies. Also Section 3 of the Provisional Collection of Taxes Act, 1931 is prima facie not attracted to the facts of this case in view of the Tribunal's order in the case of Ess Ess Metals (supra) paragraph 4 of the order at pages 393-394 of the paper book wherein it has been held that Provisional Collection of Taxes Act, 1931 applies only to imposition or increase in duty and in this case, the rate of duty has remained unchanged even after 1-3-1988. Looking to the totality of facts and circumstances, we dispense with the requirement of pre-deposit of duty and penalty and stay recovery thereof pending the appeal.