Custom, Excise & Service Tax Tribunal
Techno Forge Ltd vs Vadodara-I on 19 November, 2019
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT AHMEDABAD
REGIONAL BENCH - COURT NO. 03
Excise Appeal No. 737 of 1996
[Arising out of OIO-73-DEMAND-95 passed by Commissioner of Central Excise, Customs
and Service Tax-VADODARA--I]
M/s Techno Forge Ltd. .....Appellant
P.No. 1019, 1021,GIDC,
Ankleshwar-Gujarat
VERSUS
C.C.E. & S.T., Vadodara-i .... Respondent
1st Floor, Central Excise Building, Race Course Circle, Vadodara, Gujarat-390007 APPEARANCE:
Shri. Shailesh Seth, Advocate for the Appellant Shri. S.K. Shukla, Authorized Representative for the Respondent CORAM: HON'BLE MEMBER (JUDICIAL) , MR. RAMESH NAIR HON'BLE MEMBER (TECHNICAL), MR. RAJU FINAL ORDER NO. A/ 12210 /2019 DATE OF HEARING:14.11.2019 DATE OF DECISION: 19.11.2019 RAJU This appeal has been filed M/s Techno Forge Ltd. against demand of Central Excise duty and imposition of penalty.
2. Ld. Counsel for the appellant pointed out that they are manufacturer of various forged and cast items which are subsequent used by the buyers for manufacture of machinery parts. The primary issue in this dispute is if the items manufactured by the appellant falling under chapter heading 7326 or under chapter 84.
3. Learned Counsel pointed out that a Show cause notice was issued to the appellants seeking to demand duty on the goods manufactured by them and seeking to dispute the classification 7308.90 of Central Excise Tariff Act, 1985 claimed by the appellant. He pointed out that the show cause notice claims that the appellant were manufacturing machine parts of chapter 84 as they were also engaged in using the drilling process apart from the following:
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(a) Removal of runner and risers
(b) Surface cleaning and removal of surface defects
(c) Chippings of runner grinding to remove excess material
(d) Annealing an stress reliving
(e) Proof machining and
(f) Surface coating 3.1 Learned counsel pointed out that the issue regarding classification of forged items was a matter of dispute between Revenue and various assessees and in this regard a clarification was issued vide No. 139/7/88- CX.4, dated 28-07-1989 in the said clarification following was clarified.
"Castings - Machinery Notification No. 275/88-C.E., dated 4-11-1988 Clarification - Reg. [Chapter 72, 73, 84 & 85] This is to say that representations have been received from the trade regarding denial of benefit of exemption under Notification No. 275/88-CE., dated 4-11-1988 to be un-machined iron castings and un-machined cast articles of iron which have been injected to fettling operations.
2. The matter has since been examined in the Board. TRU have intimated that exemption would be available on un-machined castings and un-machined cast articles which have not been subjected to any machining other than fettling as described in the iron castings and cast articles of iron which have been subjected to process of fettling un-machined cast articles eligible for exemption under Notification No. 275/88-C.E., dated 4-11-1988. [Based on M.F. (D.R.) letter F. No. 139/35/89-CX. 4, dated 1-8-1989] Iron & Steel Castings [Chapters 72, 73, 84 & 85] I am directed to say that certain doubts have been expressed regarding:
(i) Classification of products obtained by castings.
(ii) The scope of sub-heading 7307 (prior to 1-3-1988) of the CET.
(iii) The validity of Board's Circular 1/87 (F. No. 139/48/86-CX. 4 dated 18-2-1987 and the need to amend and modify it.
The matter has been examined. Under the old CET (prior to 1-8- 1983) there was two stage levy as castings under T.I. 25 and on final machining as finished machine under T.I. 68. This position has been upheld by the Hon'ble Supreme Court in the case of M/s TISCO v. Union of India - 1983 (35) ELT 605. In the subsequent period upto 27-2-1986 the position of two stage under T.I. 25(16) and 68 continued.
After the introduction of new CET, the chapters on metals were not aligned with HSN during the period 28-2-1986 to 29-2-1988 and continued to be based on the earlier T.I. 25 of the old Tariff. Therefore, the scope of heading 73.07-"casting of iron & steel not elsewhere specified in Chapter 72"-is not identical with that of 73.25 of the HSN.
Further in view of the difference in headings the HSN Explanatory Notes could not be simply and directly invoked to interpret the CETA, 1985 as has been held by Gujarat High Court in the case of M/s Echjay Industries. In view of this Board decided that an amendment or alteration is required to Board's F.No. 139/48/86- CX.4 dated 18-2-1987 clarifying the scope of 'castings' under heading 73.07 as covering all castings of Iron & Steel which have not been subjected to any other process except (a) removal of runner and risers (b) surface cleaning and removal of surface defects (c) chippings, filing or grinding to remove excess material
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(d) annealing and stress reliving (e) proof machining and (f) surface coating.
As regards to period from 1-3-1988 there was no generic heading of casting and the metal chapters were fully aligned with HSN. It was observed that heading 73.25 HSN has a restricted scope covering only such cast articles covered by Sec.XV as had not been specified in other headings of Chapter 72 & 73, together with semi-finished articles by virtue of Rule 2(a) of the Rules of interpretation. Castings for other articles like machine parts falling under Chapters 84, 85, 86, 87 etc. would not be covered by Chapter 73 in view of Section Note 1(f), (g), (h) to Section XV, as also HSN Explanatory Notes for heading 73.25 at page 1037. Such castings as they emerge from the moulds or after fattling etc. would be appropriately regarded as semi finished articles having the essential character of the finished machine parts as a blank for machine parts which be application of Rule 2(a) of the Rules of Interpretation would be classified, under Chapter 84, 85, 86, 87 etc. After alignment of CETA with HSN, this position would also prevail under CETA with HSN, this position would also prevail under CETA, 85 w.e.f. 1-3-1988."
[Based on M.F. (D.R.) letter F.No. 139/7/88-CX.4, dated 28-7-1989] He pointed out that the SCN has been issued essentially on the ground that the process of drilling is not one of the processes specified in the Circular and therefore, the show cause notice seeks to deny them the benefit of classification under heading 7308.90. 3.2 Learned counsel pointed out that the drilling process is used essentially to provide hold to these items while other processes are being conducted and for shifting of the item from one place to another in the factory. He pointed that these items are heavy and therefore, some place is needed to place hook for shifting of items from one place to another and from one machine to another. He pointed out that in the statement of Sh. Ashokbhai Mansukhlal Kapashi, Partner of the appellant firm had clarified that drilling machine is used for drilling for the purpose of handling the job. He also stated that sometimes to fix the job with other parts by bolting. He has also clarified that the final drilling has been carried out at the customer ends. He argued that in that perspective no material change occurs in the forged item. He argued that interpreted Rule 3(a) has wrongly been invoked as by mere drilling no change in essential character can be imparted on these goods.
3.3 He also raised the issue of limitation and pointed out that the issue was the subject matter of clarification issued by Revenue, and therefore, there could not have any intention to evade the Central Excise duty.
4. Learned Authorized Representative relies on the impugned order. He argued that as per interpreted Rule 3(a) the items manufactured by
4|Page E/737/1996-DB the appellant after having obtained the essential character of finished machinery part should be classified in Chapter 84 and not in chapter 73. He further clarified that the appellants are conducted the process of drilling which is not specified in CBEC Circular No. 139/7/88-CX.4, dated 28-07-1989.
5. We have considered rival submissions. We find htat the CBEC has clarified that after forging if the following processes are carried out the item remains classifiable under Chapter 73.
a) Removal of runner and risers
b) Surface cleaning and removal of surface defects
c) Chippings of runner grinding to remove excess material
d) Annealing an stress reliving
e) Proof machining and
f) Surface coating In the instant case apart from these process, the appellants are also doing a drilling operation. The appellants have explained that the drilling is done to create a hole on the item for the purpose of providing a hold for other operations and for the purpose of carrying these items from one place to another. Apparently, such drilling operations has no impact on the essential character of the item manufactured by the appellant and thus, the classification cannot change solely on the ground of drilling operation. In view of above, we do not find any merit in the arguments of Revenue that the classification needs to be changed from Chapter 73 to chapter 84. The appeals is consequently allowed.
(Order pronounced in the open court on 19.11.2019) (RAMESH NAIR) MEMBER (JUDICIAL) (RAJU) MEMBER (TECHNICAL) Neha