Hindustan Gas and Industries Ltd. Vs. Commr. of C. Ex. - Court Judgment

Excerpt:
1. in this appeal filed by m/s. hindustan gas & industries ltd., vadodara, the matter relates to the classification of the "inserts", which are used as one of the raw materials for concrete sleepers for the indian railways. the appellants brought iron scrap from outside and after melting of the iron scrap, the "inserts" were manufactured through the moulds. after the inserts were taken out of the moulds, they were subjected to the processes of (1) annealing in the oil fired furnace (2) fettling and (3) removing extra burns by grinding etc.thereafter they were packed in gunny bags and removed to the manufacturers of the r.c.c. sleepers, where they were used as a raw material. before 1-3-1986, these inserts were classifiable under tariff item 25(16)(i) of the cet as "castings of iron and steel" and were found eligible for exemption under notification no. 208/83-c.e., dated 1-8-1983. after the switch over to the new tariff, the department sought to classify these inserts under sub-heading no. 7302.90 while the asses-see contended that their products were correctly classifiable under sub-heading no. 7307.10.2. the matter was posted for hearing on 12-9-1996 and was passed over to 13-9-1996.3. it is seen that the notice of hearing has been received back. after hearing shri m. jayaraman, jdr for sometime, we are of the view that this matter could be disposed of without presence of the appellants.accordingly, we proceed to deal with this matter on merits after hearing shri m. jayaraman, jdr, who is present on behalf of the respondent/revenue.4. shri m. jayaraman, jdr stated that after the inserts were taken out of the moulds, they were subjected to a number of processes and as a consequence, they became an identifiable part for the sleepers. he further stated that the collector of central excise has gone into all the aspects of the matter and had passed a reasoned order. he reiterated the points made in the order-in-appeal.5. we have carefully considered the matter. the appellants were bringing iron scrap from outside and after melting such iron scrap, they were producing cast iron inserts through the moulds. such inserts are not the final products and are used as inputs in the manufacture of concrete sleepers. as the name itself shows, they are inserted into the sleepers to give them strength.6. the points for consideration is whether the various processes to which the inserts are subjected after they are taken out of the moulds would make them as "railway or tramway track construction material" which had been named under heading no. 73.02 of the tariff. the processes to which the cast, iron and inserts were subjected, have been mentioned in para-3 of the order-in-original. they have mentioned as (1) annealing in the oil fired furnace (2) fettling and (3) removing extra burns by grinding, etc. in view of the above and keeping in view the nature of the product and their use as a raw material in the sleepers, we do not consider that they became any one of the specified materials named in heading no. 73.02, which is extracted below :-73.02 railway or tramway track construction material of iron or steel, the following: crossing pieces, sleepers (cross-ties), sleeper bars, fish- plates, chairs, chair wedges, sole plates (base plates), rail clips, bed-plates, ties and other material specialized for jointing or fixing rails.7. before the introduction of the new tariff from 1-3-1986, these inserts were classified as castings of iron and steel. they were not being classified under tariff item 68 of the tariff. in the case of tata iron and steel co. ltd. v. u.o.i. reported at 1988 (35) e.l.t. 605 (sc), the supreme court had gone to deal with the forged products in rough machined conditions. the supreme court observed that machining and polishing is done to remove excess surface skin from the forged product and was incidental or ancillary to the manufacture of forged products as per section 2(f) of the central excise act, 1944. in that case before the supreme court, the goods were supplied to the railways in rough machined condition under which excess skin or manufacturing defects were removed and those products were subsequently precision machined by the railways themselves at their workshops before being put to use. the supreme court observed that the duty was payable at two stages viz. under tariff item 26aa on the forged products and under tariff item 68 on the completion of the manufacture of finished goods.they added that since the precision machining is done at railways workshops, the appellants in that case was not liable to pay duty under tariff item 68.8. in the case before us, there is nothing on record to show that the inserts required any precision machining or that any such machining was done by the appellants. we, therefore, consider that only the first stage duty under heading no. 73.07 was chargeable, which had already been paid by the appellants. heading no. 73.07 is extracted below :-73.07 castings of iron or steel, not elsewhere specified in this chapter or in chapter 72.9. it is also seen that the matter is covered by the tribunal's decision in the case of shivaji works ltd. v. cce, aurangabad reported at 1994 (69) e.l.t. 674 (tribunal). the ld. jdr have also referred to the board's circular no. 225/59/96-cx, dated 1-7-1996, which had been issued by the board after the tribunal's decision in the case of shivaji works ltd. referred to above. the board's clarification also supports the case of the appellants.10. taking all the relevant consideration into account, we set aside the order passed by the collector of central excise & customs, vadodara and accept the appeal of the appellants. ordered accordingly.

Judgment:
1. In this appeal filed by M/s. Hindustan Gas & Industries Ltd., Vadodara, the matter relates to the classification of the "Inserts", which are used as one of the raw materials for Concrete Sleepers for the Indian Railways. The appellants brought Iron Scrap from outside and after melting of the Iron Scrap, the "Inserts" were manufactured through the moulds. After the Inserts were taken out of the moulds, they were subjected to the processes of (1) annealing in the oil fired furnace (2) fettling and (3) removing extra burns by grinding etc.

Thereafter they were packed in gunny bags and removed to the manufacturers of the R.C.C. Sleepers, where they were used as a raw material. Before 1-3-1986, these Inserts were classifiable under Tariff Item 25(16)(i) of the CET as "Castings of Iron and Steel" and were found eligible for exemption under Notification No. 208/83-C.E., dated 1-8-1983. After the switch over to the new Tariff, the Department sought to classify these Inserts under sub-heading No. 7302.90 while the asses-see contended that their products were correctly classifiable under sub-heading No. 7307.10.

2. The matter was posted for hearing on 12-9-1996 and was passed over to 13-9-1996.

3. It is seen that the notice of hearing has been received back. After hearing Shri M. Jayaraman, JDR for sometime, we are of the view that this matter could be disposed of without presence of the appellants.

Accordingly, we proceed to deal with this matter on merits after hearing Shri M. Jayaraman, JDR, who is present on behalf of the Respondent/Revenue.

4. Shri M. Jayaraman, JDR stated that after the Inserts were taken out of the moulds, they were subjected to a number of processes and as a consequence, they became an identifiable part for the Sleepers. He further stated that the Collector of Central Excise has gone into all the aspects of the matter and had passed a reasoned order. He reiterated the points made in the Order-in-Appeal.

5. We have carefully considered the matter. The appellants were bringing Iron Scrap from outside and after melting such Iron Scrap, they were producing Cast Iron Inserts through the moulds. Such Inserts are not the final products and are used as inputs in the manufacture of Concrete Sleepers. As the name itself shows, they are inserted into the Sleepers to give them strength.

6. The points for consideration is whether the various processes to which the Inserts are subjected after they are taken out of the moulds would make them as "Railway or tramway track construction material" which had been named under Heading No. 73.02 of the Tariff. The processes to which the Cast, Iron and Inserts were subjected, have been mentioned in para-3 of the Order-in-Original. They have mentioned as (1) annealing in the oil fired furnace (2) fettling and (3) removing extra burns by grinding, etc. In view of the above and keeping in view the nature of the product and their use as a raw material in the sleepers, we do not consider that they became any one of the specified materials named in Heading No. 73.02, which is extracted below :-73.02 Railway or tramway track construction material of iron or steel, the following: crossing pieces, sleepers (cross-ties), sleeper bars, fish- plates, chairs, chair wedges, sole plates (base plates), rail clips, bed-plates, ties and other material specialized for jointing or fixing rails.

7. Before the introduction of the new Tariff from 1-3-1986, these Inserts were classified as Castings of Iron and Steel. They were not being classified under Tariff Item 68 of the Tariff. In the case of Tata Iron and Steel Co. Ltd. v. U.O.I. reported at 1988 (35) E.L.T. 605 (SC), the Supreme Court had gone to deal with the forged products in rough machined conditions. The Supreme Court observed that machining and polishing is done to remove excess surface skin from the forged product and was incidental or ancillary to the manufacture of forged products as per Section 2(f) of the Central Excise Act, 1944. In that case before the Supreme Court, the goods were supplied to the Railways in rough machined condition under which excess skin or manufacturing defects were removed and those products were subsequently precision machined by the Railways themselves at their workshops before being put to use. The Supreme Court observed that the duty was payable at two stages viz. under Tariff Item 26AA on the forged products and under Tariff Item 68 on the completion of the manufacture of finished goods.

They added that since the precision machining is done at Railways workshops, the appellants in that case was not liable to pay duty under Tariff Item 68.

8. In the case before us, there is nothing on record to show that the Inserts required any precision machining or that any such machining was done by the appellants. We, therefore, consider that only the first stage duty under Heading No. 73.07 was chargeable, which had already been paid by the appellants. Heading No. 73.07 is extracted below :-73.07 Castings of iron or steel, not elsewhere specified in this Chapter or in Chapter 72.

9. It is also seen that the matter is covered by the Tribunal's decision in the case of Shivaji Works Ltd. v. CCE, Aurangabad reported at 1994 (69) E.L.T. 674 (Tribunal). The ld. JDR have also referred to the Board's Circular No. 225/59/96-CX, dated 1-7-1996, which had been issued by the Board after the Tribunal's decision in the case of Shivaji Works Ltd. referred to above. The Board's clarification also supports the case of the appellants.

10. Taking all the relevant consideration into account, we set aside the order passed by the Collector of Central Excise & Customs, Vadodara and accept the appeal of the appellants. Ordered accordingly.