United Forgings Ltd. Vs. Collector of Central Excise - Court Judgment

Excerpt:
1. the appellant filed this appeal against the order-in-appeal, dated 23-1-1989 passed by the collector of central excise (appeals), new delhi in which he held that steel grinding balls manufactured by the appellants are classifiable under tariff heading 7308.90 of the central excise tariff as other articles of iron and steel and the collector also upheld the finding of adjudicating authority in respect of extended period under section 11a of the central excise act, 1944 read with 9(2) of the central excise rules, 1944.2. brief facts of the case are that show cause notice dated 12-10-1987 was issued to the appellant stating therein that appellants had not filed classification list for approval in respect of steel grinding media balls as required under rule 173b of central excise act, 1944. it was also mentioned in the show cause notice that these steel grinding media balls manufactured with the help of screw friction machine and directly goes in use without any machining and therefore, the same is liable to be classifiable under chapter heading 7308.90. the appellant in the classification list only mentioned the product as 'forged steel grinding media' and they have not declared the full description which is "forged steel grinding media ball". therefore they misdeclared the product and cleared 1325.870 mt of forged steel grinding media balls without payment of duty from 1-3-1986 to 26-3-1987.3. after adjudication the demand was confirmed and penalty of rs. 5,000/- was imposed. the appellant filed appeal and vide impugned order the appeals was dismissed. however the penalty was reduced to rs. 2,000/- from rs. 5000/-.4. ld. counsel appearing on behalf of the appellant submitted that appellants filed classification list and declared the goods as pieces roughly shaped by forging made out of duty paid steel ingots and claimed classification under heading 72.08 of central excise tariff.the appellant has not mis-declared the goods. they have given the description of goods as forged grinding media and claimed exemption under notification no. 208/83-c.e., dated 1-8-1983. the product in question is in the form of balls or are cylinderical in shape therefore the goods are forged pieces roughly shaped of steel. he relied upon the decision of the tribunal in the case of steel & industrial forgings ltd. v. collector of customs reported in 1991 (53) e.l.t. 609 and submitted that in this case the tribunal held that forged products are classifiable as pieces roughly shaped under tariff heading 7208 of central excise tariff act, 1985.6. in this case dispute is regarding classification of the forged steel grinding media balls. the appellant claimed classification under sub-heading 7208 of the central excise tariff act and the revenue classified the product under sub-heading 7308.90 of the central excise tariff. "pieces roughly shaped by rolling or forging of iron or steel not elsewhere specified." 8. as per the statement of shri amrit singh partner of appellant from the manufacturing process of the forged steel grinding media balls from steel record, consists of following operations : 5. tempering in electrically operated furnace for achieving desired hardness.9. the forged steel grinding media balls are cleared as such and no further process was undertaken by the appellant or the consignee. hence the product in question is a fully finished product at the time of clearance.10. the appellant relied upon the decision of the tribunal in the case of steel & industrial forgings ltd. v. collector of customs reported in 1991 (53) e.l.t. 609. in this case tribunal held that forged products subjected to processes upto and including stage of proof machining to make them ready for final machining are classifiable as pieces roughly shaped under the sub-heading 7208 of the central excise tariff.11. the facts of the present case are different from the case relied upon by the appellant.12. the tribunal relied upon the decision of the hon'ble supreme court in the case of tisco v. union of india reported in 1988 (35) e.l.t. 605 and the hon'ble supreme court held as under : "5. the next question is, whether, as a result of the polishing and machining done by the appellant on the said goods before supplying them to the railways the same were transformed into new commercial commodities, namely, finished axles, wheels, tyres and so on or whether these finished or manufactured goods which could be regarded as distinct commercial products came into existence only after precision machining done at workshops of the indian railway to enable the railway to put these goods to use to meet the actual requirements of the railways. it is not the case of the respondent that there were three distinct sets of goods, namely, one the forged steel products, two the manufactured goods supplied by the appellant to the railways and three, the finished goods as turned out from the india railways' workshops for being used by the railways. it must be regarded as common ground that duty under item no. 26aa was payable on the forged products and duty under tariff item no. 68 was payable only at the stage of the completion of the manufacture of the finished goods, namely, axles, wheels, tyres and so on. the certificate issued by a.k. malhotra, additional director, railways (stores) clearly states that the goods supplied by the appellant to the indian railways and manufactured at its plant at jamshedpur are manufactured according to specifications and drawings agreed to between the parties. axles are supplied to the railways in rough machined condition and wheels, tyres and blanks are supplied in as "rolled/as forged" condition. these wheels/tyres, axles and blanks have to be sometimes rough machined partially to remove excess steel or manufacturing defects. these are subsequently precision machined by the railways at their workshops before being put to use to meet the actual requirements of the railways. there is no challenge to the correctness of this certificate either before the collector or before the trial court and there is no reason as to why it should not be taken as correct. the certificate clearly shows that axles supplied by the appellant to the railways were in rough machined condition and wheels, tyres and blanks were supplied in rough or forged condition. sometimes wheels, tyres axles and blanks had to be even rough machined partially at the railways workshop to remove excess steel or manufacturing defects. all these products had to be subsequently precision machined by the railways before being put to use. in these state of affairs, it is quite clear that the finished goods, namely, finished wheels, tyres, axles and blanks could be said to have come into existence only after the precision machining and other processing at the railways' workshops was completed and the appellant is not liable to pay any duty on these goods as under item no. 68 of the said central excise tariff".13. from the above narration of facts it is clear that forged goods manufactured by tisco were supplied to railway and finished products came into existence only after processes machining and other processes at the railway's workshop.14. in the present case the steel grinding balls are complete item in all respects before clearance and no further process was carried out by the customer. hence the ratio of judgment relied upon by the appellant is not applicable in the facts of present case. hence we find no force in the contention of the appellant that steel grinding balls are classifiable under sub-heading 7208 of the tariff.15. sub-heading 7308.90 of the tariff includes other articles of iron and steel not specified elsewhere.16. from the process of manufacturing of the steel grinding balls, it is clear that these finished articles of steel and are used as such in cement factories without any further processing hence are classifiable under sub-heading 7308.90 of the tariff. in the classification list the appellant described the goods as forged steel grinding media only.hence we also agree with the findings that appellant have not declared the full description of the goods in question in the classification list. the appeal is dismissed.

Judgment:
1. The appellant filed this appeal against the order-in-appeal, dated 23-1-1989 passed by the Collector of Central Excise (Appeals), New Delhi in which he held that steel grinding balls manufactured by the appellants are classifiable under Tariff Heading 7308.90 of the Central Excise Tariff as other articles of iron and steel and the Collector also upheld the finding of adjudicating authority in respect of extended period under Section 11A of the Central Excise Act, 1944 read with 9(2) of the Central Excise Rules, 1944.

2. Brief facts of the case are that show cause notice dated 12-10-1987 was issued to the appellant stating therein that appellants had not filed classification list for approval in respect of steel grinding media balls as required under Rule 173B of Central Excise Act, 1944. It was also mentioned in the show cause notice that these steel grinding media balls manufactured with the help of screw friction machine and directly goes in use without any machining and therefore, the same is liable to be classifiable under Chapter Heading 7308.90. The appellant in the classification list only mentioned the product as 'forged steel grinding media' and they have not declared the full description which is "forged steel grinding media ball". Therefore they misdeclared the product and cleared 1325.870 MT of forged steel grinding media balls without payment of duty from 1-3-1986 to 26-3-1987.

3. After adjudication the demand was confirmed and penalty of Rs. 5,000/- was imposed. The appellant filed appeal and vide impugned order the appeals was dismissed. However the penalty was reduced to Rs. 2,000/- from Rs. 5000/-.

4. Ld. Counsel appearing on behalf of the appellant submitted that appellants filed classification list and declared the goods as pieces roughly shaped by forging made out of duty paid steel ingots and claimed classification under Heading 72.08 of Central Excise Tariff.

The appellant has not mis-declared the goods. They have given the description of goods as forged grinding media and claimed exemption under Notification No. 208/83-C.E., dated 1-8-1983. The product in question is in the form of balls or are cylinderical in shape therefore the goods are forged pieces roughly shaped of steel. He relied upon the decision of the Tribunal in the case of Steel & Industrial Forgings Ltd. v. Collector of Customs reported in 1991 (53) E.L.T. 609 and submitted that in this case the Tribunal held that forged products are classifiable as pieces roughly shaped under Tariff Heading 7208 of Central Excise Tariff Act, 1985.

6. In this case dispute is regarding classification of the forged steel grinding media balls. The appellant claimed classification under Sub-heading 7208 of the Central Excise Tariff Act and the Revenue classified the product under Sub-heading 7308.90 of the Central Excise Tariff.

"Pieces roughly shaped by rolling or forging of iron or steel not elsewhere specified." 8. As per the statement of Shri Amrit Singh partner of appellant from the manufacturing process of the forged steel grinding media balls from steel record, consists of following operations : 5. Tempering in electrically operated furnace for achieving desired hardness.

9. The forged steel grinding media balls are cleared as such and no further process was undertaken by the appellant or the consignee. Hence the product in question is a fully finished product at the time of clearance.

10. The appellant relied upon the decision of the Tribunal in the case of Steel & Industrial Forgings Ltd. v. Collector of Customs reported in 1991 (53) E.L.T. 609. In this case Tribunal held that forged products subjected to processes upto and including stage of proof machining to make them ready for final machining are classifiable as pieces roughly shaped under the Sub-heading 7208 of the Central Excise Tariff.

11. The facts of the present case are different from the case relied upon by the appellant.

12. The Tribunal relied upon the decision of the Hon'ble Supreme Court in the case of TISCO v. Union of India reported in 1988 (35) E.L.T. 605 and the Hon'ble Supreme Court held as under : "5. The next question is, whether, as a result of the polishing and machining done by the appellant on the said goods before supplying them to the railways the same were transformed into new commercial commodities, namely, finished axles, wheels, tyres and so on or whether these finished or manufactured goods which could be regarded as distinct commercial products came into existence only after precision machining done at workshops of the Indian Railway to enable the Railway to put these goods to use to meet the actual requirements of the Railways. It is not the case of the respondent that there were three distinct sets of goods, namely, one the forged steel products, two the manufactured goods supplied by the appellant to the Railways and three, the finished goods as turned out from the India Railways' workshops for being used by the Railways. It must be regarded as common ground that duty under Item No. 26AA was payable on the forged products and duty under Tariff Item No. 68 was payable only at the stage of the completion of the manufacture of the finished goods, namely, axles, wheels, tyres and so on. The certificate issued by A.K. Malhotra, Additional Director, Railways (Stores) clearly states that the goods supplied by the appellant to the Indian Railways and manufactured at its plant at Jamshedpur are manufactured according to specifications and drawings agreed to between the parties. Axles are supplied to the railways in rough machined condition and wheels, tyres and blanks are supplied in as "rolled/as forged" condition. These wheels/tyres, axles and blanks have to be sometimes rough machined partially to remove excess steel or manufacturing defects. These are subsequently precision machined by the Railways at their workshops before being put to use to meet the actual requirements of the Railways. There is no challenge to the correctness of this certificate either before the Collector or before the Trial Court and there is no reason as to why it should not be taken as correct. The certificate clearly shows that axles supplied by the appellant to the Railways were in rough machined condition and wheels, tyres and blanks were supplied in rough or forged condition. Sometimes wheels, tyres axles and blanks had to be even rough machined partially at the Railways workshop to remove excess steel or manufacturing defects. All these products had to be subsequently precision machined by the Railways before being put to use. In these state of affairs, it is quite clear that the finished goods, namely, finished wheels, tyres, axles and blanks could be said to have come into existence only after the precision machining and other processing at the Railways' workshops was completed and the appellant is not liable to pay any duty on these goods as under Item No. 68 of the said Central Excise Tariff".

13. From the above narration of facts it is clear that forged goods manufactured by TISCO were supplied to Railway and finished products came into existence only after processes machining and other processes at the Railway's workshop.

14. In the present case the steel grinding balls are complete item in all respects before clearance and no further process was carried out by the customer. Hence the ratio of judgment relied upon by the appellant is not applicable in the facts of present case. Hence we find no force in the contention of the appellant that steel grinding balls are classifiable under Sub-heading 7208 of the Tariff.

15. Sub-heading 7308.90 of the tariff includes other articles of iron and steel not specified elsewhere.

16. From the process of manufacturing of the steel grinding balls, it is clear that these finished articles of steel and are used as such in cement factories without any further processing hence are classifiable under Sub-heading 7308.90 of the Tariff. In the classification list the appellant described the goods as forged steel grinding media only.

Hence we also agree with the findings that appellant have not declared the full description of the goods in question in the classification list. The appeal is dismissed.