Customs, Excise and Gold Tribunal - Delhi
Tube Investments Of India Ltd. vs Collr. Of C. Ex. on 30 November, 1993
Equivalent citations: 1994(71)ELT171(TRI-DEL)
ORDER S.L. Peeran, Member (J)
1. The appellant is aggrieved with the order passed by the Collector of Central Excise, Madras in order-in-original No. 29/91 dt. 6-9-1991.
2. By this order, the ld. Collector has confirmed a demand of Rs. 1,19,05,834 (Rs. One crore nineteen lakhs five thousand eight hundred thirty four only) and also imposed a penalty of Rs. 12 lakhs under Rule 173Q of Central Excise Rules, 1944 for alleging contravention of Central Excise Rules.
3. The question that arises for our consideration in this appeal is the correct classification of the goods which the department is terming it as "Collecting Electrodes Sections and parts and accessories of LC Motor Vehicles". The appellants are describing these goods in the classification list filed by them as "angles, shapes and sections of iron or non-alloy steel not further worked than cold-formed or cold-finished". In respect of this item, the further description given by the appellants in the classification list is "Guide-channel sections, angles/shapes Z Section, Sections for pollution control, equipments shutter lath sections".
4. The appellants are seeking the classification of this item under sub-heading 7210.20 upto 20-2-1988 and thereafter under sub-heading 7216.20 of the Central Excise Tariff Act, 1985. The Deptt. on the other hand are contending that its correct entry is under Chapter 8479.00 as Machines and mechanical appliances having individual functions, not specified or included elsewhere in this chapter attracting duty at 15% advalorem on the ground that the goods are "Angles shapes as sections of Iron - not further worked than cold formed or cold finished". The second item's description of the goods in the classification list is "Flat-rolled products of iron or non-alloy steel of width of 600 mm or more hot-rolled, not clad, plated or coated". In the full description column, the appellants have stated "others" (5 mm and less than 5 mm in thickness). They have asked for classification under sub-heading 7208.39 of Central Excise Tariff Act, 1985. The deptt. are claiming these items as parts of motor vehicles classifiable under sub-heading 87.08 on payment of duty @20% advalorem. The third item's description in the classification list is ferrous, waste and scrap re-melting scrap, ingots of iron or steel, claiming classification under sub-heading 7204.90. The appellants have been contending that they have been filing classification list regularly giving full description of the products and the same have been approved time and again. However, the departmental officials made investigation in respect of the goods manufactured by the appellants and examined the following persons.
1. Shri P. Rajamani, Sr. Supdt., TIMS
2. Shri M. Sankaran, Technical Service Manager, TIMS
3. Shri R. Neelakantan, Sales Officer, Tiam House and
4. Shri T.S. Sivaraman, Manager (Commercial) TIMS
5. On a thorough investigation and after examining the records, the Collector of Central Excise issued a detailed show-cause notice dt. 5-2-1991 running to about 23 pages alongwith Annexure 'A' which gives grounds leading to the allegations contained in the show cause notice. The show cause notice after detailing the statement of the witnesses and about the goods have para phased as follows :
"(i) TIMS had manufactured 'Collecting Electrodes Sections' parts of 'Electrostatic precipitators' classifiable under Ch. 84 attracting Basic Excise duty of 15% adv. and supplied the same to M/s. BHEL M/s. Voltas Ltd., M/s. L&T, M/s. GEC and M/s. Thermax discharging the duty at 15% but mis-declared the same as plain 'cold rolled formed metal sections' falling under chapter sub-heading 7210.20 upto 28-2-1988 and thereafter under 7216.20 and paid the duty at specific rate (which is lower than the advalorem rate) when supplied to M/s. Flakt India Ltd., M/s. Andrew Yule and Co. Ltd. and M/s. Andhra Pradesh Heavy Machineries Engg. Ltd.
(ii) TIMS had manufactured parts of Motor Vehicles vis. floor panels, front/rear/side panels falling under chapter heading 87.08 for light commercial motor vehicles and supplied the same to M/s. Allwyn Nissan on payment of duty at 20% adv. under Ch. 87.08 but misdeclared the same as mere 'cold rolled formed metal sections' falling under Ch. 7210.10 upto 26-2-1988 and thereafter under Ch. 7216.20 and paid duty at specific rate (which is lower than the ad valorem rate) when supplied to M/s. EICHER Motors, M/s. TELCO, M/s. DCM TOYOTA and M/s. DTL Ancillaries.
(iii) TIMS had collected certain amounts from their customers like M/s. Flakt India Ltd., Thermax, M/s. Andrew Yule & Co. Ltd. and M/s. GEC towards development and supply of implements and attachments, cost of tooling and designing of specified rollers, intended for use in the manufacture of collecting electrodes, but had not discharged the duty liability on such developing/designing/tooling charges.
(iv) TIMS had raised debit notes/supplementary invoices for certain amount on the customers like M/s. Voltas Ltd., M/s. APHMEL and M/s. Andrew Yule & Co. Ltd., towards differential value between the original invoice value (raised immediately on supply of the goods) and the revised value later worked out consequent on the increase in the cost of raw-materials, as per cost escalation clause provided in the 'order of acknowledgement' (known as 'price variation claims' in the commercial circle) in support of collecting electrodes supplied to them, and realised the amounts, but had not discharged the duty liability on such price variation clause amounts.
(v) TIMS had cleared plain rolled sections to their job workers under Rule 57F(2) got the same galvanised (coated with zinc) brought back the galvanised section to their factory and cleared the same as mere 'rolled sections' paying lower rate of duty under Ch. 7216.20 instead of higher rate of duty under Ch. 7216.30.
(vi) TIMS had cleared 'Z' purlins/Sections falling under chapter sub heading 7216.20 to one of their job workers under Rule 57F(2), where the Z purlins were subjected to post rolling operations like, punching, extra length cutting, decreasing, phosphating and painting, by which the Z purlins attained the characteristics of 'parts of structures' prepared for use in structures falling under Ch. sub-heading 7308.90 attracting duty of 15% adv.; brought back the processed Z purlin and then cleared the same to various customers paying duty at specific rate under chapter sub-heading 7216.20 instead of at advalorem rate, and
(vii) TIMS had collected from certain customers packing charges separately for packing the Collecting Electrodes manufactured and supplied to them, but failed to include the packing charges collected in the value of collecting electrodes and had not paid the duty payable on the packing charges.
It also appears from the foregoing that M/s. TIMS had wilfully suppressed :
(i) the fact of supply of collecting electrodes manufactured in their factory to M/s. Flakt India Ltd., M/s. APHMEL and M/s. Andrew Yule & Co. Ltd.
(ii) the facts of supply of 'floor panels, front/rear/side panels' the parts of Light Commercial Motor vehicles to M/s. EICHER Motors, M/s. TELCA, M/s. DCL Toyota and M/s. DTL Ancillaries,
(iii) the facts of collecting of tooling designing, development and supply of implements and attachment charges from M/s. Flakt India Ltd., Thermax, GEC and Andrew Yule Co. Ltd. in connection with the collecting electrodes supplied to them,
(iv) The collections of price variation amounts' raising debit notes/supplementary invoices from the customer, M/s. Voltas Ltd., M/s. APHMEL and M/s. Andrew Yule & Co. Ltd. in respect of collecting electrodes supplied to them,
(v) the fact of manufacture of galvanised steel section through their job workers,
(vi) the fact of manufacture of parts of structures prepared for use in structures through their job workers and
(vii) the facts of collection of packing charges separately from certain customers, for packing of collecting electrodes manufactured in their factory and supplied to them all the above with the intention to evade payment of duty in respect of Section Nos. 3, 4, and 7 above and at advalorem rate in respect of Section Nos. 1, 2, 5 and 6 above (higher than the specific rate of duty) payable thereon.
(b)(i) TIMS had failed to file clasification list in respect of parts of motor vehicles manufactured and supplied to M/s. EICHER Motors; M/s. TELCO, M/s. DCM Toyota and M/s. DTL Ancillaries,
(ii) in respect of manufacture and clearance of galvanised sections of steel (coated with zinc) and
(iii) in respect of manufacture of parts of structures proposed for use in structures, all in contravention of the provisions of Rule 173B of the Central Excise Rules, 1944.
(c) TIMS had failed to determine the correct duty payable on the collecting electrodes, parts of motor vehicles galvanised section of steel and parts of structures proposed for use in structures, manufactured in their factory and cleared to various customers, taking into account the tooling designing/developing charges, price variation amounts and packing charges collected from the customers, all in contravention of the provisions of Rule 9(1) read with Rules 173F and 173G and;
(d) TIMS have not fulfilled the responsibility cast on them under SRP procedure under Chapter VII-A of the Central Excise Rules, 1944.
All the above contraventions attract liability to penalty under Rule 9(2), 173G and 226 of the Central Excise Rules, 1944 and it also attract the extended time limit under Rule 9(2) of the Central Excises Rules, 1944 read with the proviso to Sub-section (1) of Section 11A of the Central Excises and Salt Act, 1944 for demanding (a) the differential duty between the duty payable at ad valorem rate of duty and the actual duty paid at specific rate of duty on,
(i) Collecting electrodes manufactured and cleared to M/s. Flakt India Ltd., M/s. Andrew Yule & Co. Ltd. and M/s. APHMEL and
(ii) parts of Motor vehicles manufactured and supplied to M/s. EICHER Motors, M/s. TELCO, M/s. D.T.L. Ancillaries and M/s. D.C.M. Toyota,
(iii) galvanised sections of steel manufactured and cleared from their factory and
(iv) parts of structures prepared for use in structures cleared from the factory.
(b) the duty payable on the amount collected
(i) as tooling/designing/developing charges
(ii) price variation amounts, realised by raising debit notes/supplementary invoices and
(iii) packing charges collected separately from certain customers.
Accordingly, the following amounts of duty are liable to be demanded from M/s. TIMS for the period from1-3-1986 to 30-11-1990.
BED (Rs.) SED (Rs.) 1. Collecting Electrodes 60,00,118.36 1,22,641.69 2. Parts of Motor Vehicles 72,07,751.23 2,89,246.02 3. Duty on tooling/designing 3,40,086.24 11,416.81 and developing charges 4. Duty on price variations 2,16,687.76 8,917.23 5. Duty on Galvanised Steel 35,655.45 1,714.66 Sections 6. Duty on parts of structures 2,34,214.61 11,710.73 Total: 1.40.34.513.65 4,45,647.14 M/s. TIMS have voluntarily paid the following amounts towards their duty liability. (a) 25-7-1990 by debit in RG 23 A Part II Rs. 1,61,268.96 (b) 9-8-1980 by debit in RG 23A Part II Rs. 11,31,390.19 (c) 10-8-1990 by debit in PLA Rs. 35,00,000.00 Total: Rs. 47,92,659.15
The appellants seriously contested the show cause notice by filing a detailed reply dt. 6th May 1991.
6. The ld. Collector granted personal hearing to the appellants. However, he was not satisfied with the explanation or with the arguments advanced by the appellants and rejected the same and confirmed the order.
7. The appellants in this case have given the process of manufacture of their products and the classification of the same, before and after 1-3-1986 as follows :
"1. Steel strips in Coils, either hot rolled or cold rolled, are fed through a rolling mill wherein work rolls are placed in position and the steel strip is passed through these work rolls, which impart the necessary shape or profile to the strip. The profile is determined by the arrangement of the rolls placed on the machine. By altering the arrangement of the rolls, the profile of the section can be varied according to the requirements and needs. The profiles are rolled in running length and cut to appropriate sizes. We have mills of different capacity and the largest mill can accommodate 1000mm width strips. All the mills have same process mechanism and they are different only to the extent of the size of the strip and the capacity they can handle.
2. ITEM Before After 1-3-1986 1-3-1986 Guide Channel Sections T 125(II) 7210.20 Angles other than -do- -do-
slotted angles
Z Sections -do- -do-
Sections for Pollution -do- -do-
control equipment
Other cold rolled -do- -do-
formed sections
Shutter Lath Sections -do- -do-
II HR/CR/Scrap & T125(5)(ii) 7204.90
Waste for melting
III Square Welded Hol- T125(15)(b)(i)
low Tubes
IV CR Steel Strips T(125)(12)(i)(a) 7209/7211
V HR Steel Strips T125(12)(i)(c)
VI Other Sections
1. Punched C Sections T168 8538.00
2. Collecting Electrode -do- 8485.90
Sections
3. Opzel Sections - do - 8485.90
4. Collecting Plates - do - 8485.90
5. Fabricated Sections - do - 7326.00
6. Chassis Frame Side -do- 8708.00
Members
VII Other Items(Auto)
1. Frame Guard Assembly T168 ALLWYN
with Board Header
2. Sill Main RH Vehicle - do - NISSAN
Parts
3. Sill Main LH
4. Bolster Assy. FR. VEHICLE
45 Bolster Floor Part T168 PARTS
No.93621 T.6001
6. Bolster Floor part 8708.00
No.93621 T.8000
7. Bolster Floor Part No.
93621 T.8910
8. Floor Panel Center
9. Floor Panel Side
With effect from 1-3-1986 the CET 1985 underwent changes with reference to chapters 72 and 73 and thereby the items which were earlier classified under 7210 became classifiable under 7216. Suitable amendments were made in a classification list to bring it in line with the amendments under the CET 1985. The appellants at the stage submit that the classification lists both prior to 1-3-1986 and subsequent to the introduction of the new Tariff Scheme were not approved as a matter of routine and approval was accorded only after detailed enquiry, investigation, factory visits and clarification raised through queries. In other words, the appellants submit that the department at every point was aware of the manufacture of various excisable goods and got acquainted very well with the facts through a systematic approach and upon complete satisfaction approved the various classification lists. In fact, the CERA Audit, in the course of their inspection did raise objection which was communicated to the assessee but department after consideration being convinced about the approval has not altered the status quo. This being so, consequent to an inspection on 14-6-1990 and 15-6-1990 and thereafter on various dates between 27-06-1990 and 20-8-1990 the Department issued show cause notice in C. No.V/04/50/15/70 Cx. Adj. /8/71 dt. 5-2-1991 alleging the following :
(a) the sections removed in unfabricated conditions are classifiable under Chapter 72 and not under Chapter 84.
(b) the sections supplied to various automobile manufacturers for use as panels are classifiable under 8708 and not under 7216.
(c) galvanisation of steel amounts to manufacture and hence classifiable under 7216.30 instead of existing classification under 7216.20.
(d) "Z" Purlins are not classifiable under 7216 but are classifiable only under 7308.90 as structural.
(e) proposal to levy duty on tooling charges.
(f) proposal to levy duty on packing charges.
(g) duty on the amounts collected on price variation.
(h) the show cause finaly alleged suppression and misdeclaration of facts and thereby entitling the department to invoke the extended period of limitation."
8. The appellants have stated that they are manufacturers of plain sections as cold formed with on line punching, and fabricated sections for collecting electrode with weldments. It is the case of the appellants that whenever sections were cleared in a fabricated form they merit classification under sub-heading 8485.90 and when cleared in plain forms without fabrication, the same would come under sub-heading 7216.20. They state that this conceptual consistency has been maintained prior and subsequent to 1-3-1986 and classification lists have been approved after the detailed examination and proper scrutiny of various and non-statutory records. They further state that in the case of LCV panels, whenever goods are cleared in a fully completed form resembling very much as a part, and used as a ready fitment, the same would merit classification under the sub-heading 8708.00, while if clearances are effected in the form of plain sections or in the other words corrugated panels they remain only as cold formed sections at the point of clearance from the factory premises and hence classifiable under sub-heading 7216.20. It is their further contention that both in the case of galvanisation and in the case of punching holes on "Z" Purlins the process cannot be equated to manufacture and an attempt to disturb the classification is not proper. It is their further case that with regard to the tooling charges, the collection is in accordance with Section 4 and they bear no nexus to the products produced and cleared from the factory. They further state that price revision being a post-removal act cannot inflate the assessable value on already cleared goods. As regards packing, they state that packing is not done in the normal course and is purely to the requirement of the individual customers and as many despatches have been made without packing, charges collected towards them are not to be included in the assessable value. As regards the allegation on invocation of larger period, they state that they have produced supportive documents to prove consistency, bonafides, disclosures and adequate knowledge of facts by the department. They state that the goods in question have not attained the status of an identifiable part, they ought not to have been classified as part of pollution control equipments under sub-heading 8549.00 and as parts of Motor Vehicles under sub-heading 8708.00 respectively. It is their further contention that the classification list for plain section under Chapter 72 and for fabricated collecting electrodes under Chapter 84 has been separately filed and approved by the department. They state that difference between the plain and fabricated section is due to the use of weldments and on line punching. Therefore, they deny the allegation that they have cleared the goods of Chapter 84 as under 72. They state that the Collector has wrongly proceeded to come to the conclusion that the plain cold rolled formed sections would come under Chapter 84 on the basis of three purchase orders without any reasonable basis. They further state that the clearances for APHMEL had been made in three parts as bottom ted poles, top ted poles and modules. Clearances were effected under the same purchase order and duty paid under Chapter 84 for bottom and top ted poles as it involved the process of welding, they had paid duty under Chapter 72 for the modules as they were plain sections, as per the approved classification list. Therefore, in the light of approved classification list, price list filed alongwith the contract copies and the same having been approved by the department and checked the gate passes, the inference of suppression and misclassification arrived at by the ld. Collector is not sustainable.
9. The appellants further state that the ld. Collector has misinterpreted the section & chapter notes, while deciding the re-classification of both plain sections and sections cleared to automobile manufacturers. They further state that the ld. Collector without technical basis has concluded that the use of weldments does not change the commercial identity of the sections and even in its absence goods in question are not classifiable only under Chapter 84. Their further plea is that the ld. Collector having accepted the alternate use of the goods in question, yet, classifying the product LCV Panels under the chapter sub-heading 8408 of Central Excise Tariff, 1985 on the basis of end use would not be appropriate. They had filed their brouchure to the department and the same had been examined, along with gate passes and therefore, extension of larger period is not justified. Their further plea is that what is cleared to automobile manufacturers are ony plain sections, which after use of other raw materials and components and after undergoing a series of processes, emerges as an identifiable part, for ready to use in motor vehicles. It is their case that these processes are carried out at the customers' end and as such the tariff entry 87.08 is not attracted, and the item continues to remain as plain sections under sub-heading 72.16 of Central Excise Tariff, 1985.
10. It is their further plea that the process of galvanisation and punching holes in the 'Z' purlins do not amount to manufacture and in the absence of change in the identity of goods, the goods in question does not warrant a separate classification. They rely on the ruling of the Hon'ble Supreme Court as rendered in the case of Bhor Industries v. Collector of Central Excise 1989 (40) E.L.T. 280. They further plead that the department had granted permission under Rule 57F(2) for despatch of CR sheets and to receive galvanised steel section and in this event of the matter, larger period is not admissible. They pleaded that packing is not done in all cases but done in cases, where there is a request from the purchaser and hence its cost ought not to have been included to arrive at the assessable value. Likewise, they plead that the inclusion of tooling charges also is not proper. The ld. Collector not having considered the affidavits filed on their behalf is also a ground raised by them.
11. We have heard Sh. N. Venkataraman, ld. advocate for the appellant and Sh. Siddharth Kak Ld. JCDR for the Revenue. Ld. advocate elaborating the grounds of appeal as detailed above pleaded for allowing the appeal both on merits and on time-bar.
The ld. advocate pointed out to the statement of Sh. Balakrishna to show that what is being done by assessee on the steel section does not make it an identifiable part. He also pointed out to the letter dt. 10-12-1990 issued by D.C.M. Toyota Ltd. in support of their plea. Besides referring to the designs and drawings to show that the goods continue to remain as plain section and cold roll section. He pleaded that these sections have alternate uses and in this context referred to a few passages from the article "The abc's (and q) of coldformed Steel Design" by Paul A Seaburg appearing in the book "Civil Engineering A SCE January, 1981". At page 52 of this book, a passage is referred to, which reads as follows :
"Almost all steel building now use cold formed Steel products in same manner. Approximately 70% of the components by weight of a typical pre-engineered metal building are cold-formed members. They are used in the floor systems of High rise buildings, as permanent form work for concrete bridge decks, components of trusses and storage racks, diaphrams to resist seismic forces, and many, many other uses. Why the popularity of this product? They are easily mass produced, functional, and an economical solution for structural applications not requiring the strength of a hot rolled shape..."
He further referred to a passage appearing in the same book at page 8 under the title 'Cold Roll Forming' which reads :
"Cold roll forming is a process whereby a flat strip of metal (principally in coil form but sheets can be utilized) is passed through a series of rolls arranged in tandem and is progressively formed into the ultimate shape. The number of rolls required is determined by the intricacy of the finished profile."
Few other passages are also referred to, which read as follows :
"The automobile provided the impetus to the industry in earlier days and is still a vast user of cold formed sections but the building industry has now become the largest consumer."
"In building industry wide use of section is made for cladding building exteriors, shop and office facades, building purlins and roof trusses, floor joists, permanent shuttering or decking, wall studding systems ceiling systems, roller shutter doors etc. cold roll formed sections are superior in many ways to hot rolled or extruded sections. Three principal reasons can be stated. First, the work hardening which takes place in cold forming. Secondly, the uniform thickness and shape and thirdly, the smooth, clean surface finish."
The ld. advocate referred to para 11 of the affidavit of Sh. R. Devanathan, which reads as follows:
"11. The panel sections supplied to Auto industry are very similar to corrugated sheets available in the market. The use of panels need not be restricted to load bodies alone but they can be used in construction as roof cladding, side cladding, trenching sheets and so on. A large supply of these formed panels was made use of by Indian Army for building storage sheds, helicopter sheds etc. These panels have been used as floor support for an administrative building put up in (T 1 Diamond Chain Ltd, Ambattur)."
In support of the above statement, photographs and diagrams were exhibited and shown to us. The ld. advocate drawing support from these materials argued that the item in reference, therefore, does not, become a part of motor vehicle but continues to be a cold rolled panel sections. He further referred to such classification being adopted by competing units and also referred to their gate passes. The ld. advocate pointed out that ld. Collector did not rebut to these materials produced before him. He drew his support from the note l(n) of Chapter 72 and also the explanatory notes appearing at page 1001 of HSN. He further submitted that section note 3 of section XVII is not applicable and hence classification under Chapter 86, has to be ruled out. In this context, the ld. advocate relied on the ruling of the Tribunal, rendered in the case of Shivaji Works Ltd. v. Collector of Central Excise, Aurangabad & Pune as reported in 1993 (22) ETR 598. It is his plea that Rules of interpretation can not be seen, when chapter notes can decide the classification. In this context he relied on the ruling rendered in the case of Rajasthan Synthetic Industries Ltd. v. Collector of Central Excise as reported in 1989 (42) E.L.T. 24 (T).
12. As regards the item pollution control, the ld. advocate pointed out that this item was converted into 'Collecting electrodes'. The department had classified this item under chapter sub-heading 84.21; while the party had pleaded for sub-heading 7216.20. He also referred to the technical evidence placed by the party in support of their plea. However, the ld. advocate submitted that the appellant were agreeable to pay duty, if the item were cleared as a set. As regards product 'Z' purlins', he relied on the Explanatory notes appearing at page 1001 of HSN and argued that the classification should be confirmed under sub-heading 7216.30 as against the claim of department under 7308.90 as structurals. As regards galvanisation of sheets with zinc coating, the ld. advocate conceded to the findings of the ld. Collector and also to the duty imposition on price variation and escalation clause in the contracts. But the ld. advocate, however, submitted that packing charges were not includible as the items were sent in the naked packing and referred to the evidence placed by the Party in this contract.
13. As regards the question of extended period of limitation, the ld. advocate pointed out that the ld. Collector had relied on two purchase orders, which reliance is not proper in the context of approved Classification Lists from 1983 onwards and all the records being checked and audited from time to time. He also submitted that penalty is also not imposable and relied on the ruling of Collector of Central Excise v. Chemphar Drugs & Liniments as reported in 1989 (40) E.L.T. 276.
14. The ld. JDCR arguing for the department, fully supported the find- i ings of the ld. Collector. He submitted that the goods were parts of MV and it had been manufactured as per specification and designs. They had no other value and could not be used for any other purpose. The customer was carrying out only fitment processes and therefore, the question of it being considered as a panel did not arise. It is his further plea that the department was fully justified in relying on the note 1 (g) of Section XV of the Central Excise Tariff, 1985. The item did not have a part number and therefore, note l(g) was fully applicable in the facts and circumstances of the case. Ld. JDCR argued that the mental association of the item and the manner it is traded and understood in commerce is an important aspect for the classification of the product. The item is being understood and traded as a MV part and not as a panel and therefore, the classification adopted by the department is fully justifiable. In support of this principle, he relied on the ruling rendered in the cased of Telco v. Collector of Customs as reported in 1990 (50) E.L.T. 571 para 11 and 12 and that of the ruling rendered in the case of Central Railway v. Collector of Customs, Bombay as reported in 1984 (16) E.L.T. 510. He reiterated the findings of the ld. Collector as regards the item "collecting Electrode" and 'Z purlin'. On time bar also, the ld. JDCR relied on the findings of ld. Collector and cited the decision rendered by Madras High Court in the case of Limenaph Chemical v. Union of India as reported in 1993 (68) E.L.T. 77 para 12 & 15.
15. We have carefully considered the submissions of both the sides, perused the entire evidence, case law and the order of the ld. Collector. As can be seen the issues involved has been summarised in the show cause notice, which is extracted above. We will proceed to record our findings on the basis of the issues dealt in the Order-in-Original.
Collecting Electrodes
(i) The main allegation of the department against the assessee is that the company had classified the item 'Collecting Electrodes', which are parts of 'Electrostatic Principitors' under chapter 84, cleared and supplied the same to the customers namely M/s. BHEL, M/s. L & T, M/s. G.E.C. and M/s. Thermax, correctly discharging the duty at 15% adv. But, while supplying the said Collecting Electrodes to the customers like M/s. Flakt India, M/s. A.P.H.M.E.L. and M/s. Andrew Yule, the company had fully misdeclared the same in the GPI's as 'Cold rolled formed sections', falling under chapter sub-heading 7210.10 of Central Excise Tariff Act, 1985 upto 28-2-1988 and thereafter under 7216.20 and paid duty at specific rate and that the fact of supplying Collecting Electrodes to these customers was not disclosed to the department which had resulted in short payment of duty of Rs. 60,00,118.36(BED) and Rs. 1,22,641.69 (SED) on the Collecting Electrodes cleared and supplied to the above mentioned three customers only. Initially the witnesses whose state- ments were recorded on 2-7-1990, 22-8-1990 and 23-8-1990 admitted the charges and also admitted to pay the difference of short duty evaded by them. However, these witnesses have filed affidavits dt. 8-6-1991 and 8-7-1991 by which they have attempted to clarify the admissions made by them. It has to be observed that these affidavits have been filed much belatedly after filing reply dt. 6-5-1991, filed by the assessee. It has to be noted that the ld. Advocate has not chosen to argue on this charge, nor he has referred to any of the evidence placed by the department, in support of the charge. The ld. advocate had submitted that the assessee is agreeable to pay duty on such items which had been cleared in sets. Only on a specific query after the conclusion of arguments of both sides, the ld. Advocate had feebly attempted to say, that he would adopt the arguments advanced for 'cold rolled formed sections' alleged to have been cleared as parts of M.V. for this item also. Therefore, it has become necessitiated to record our specific findings on this issue, although we make it clear that no arguments have been advanced on this charge is concerned. It is also seen that there is no specific grounds taken in the memo of appeal in respect of the enormous evidence produced by the department, as well as on the admissions made by the witnesses examined by the preventive staff at the time of investigation. It has to be noted that the appellant on their own have debited duty of Rs. 47,92,659.15 in RG 23A part II and PLA on 25-7-1990, 9-8-1990 and 10-8-1990.
(ii) Let us now examine the evidence of the department in support of this charge. The ld. Collector has examined the purchase orders placed by the customers for the supply of Collecting Electrodes, and the acknowledgements or orders and invoices issued by M/s. T.I.M.S. The ld. Collector has found that in all these documents the item is referred as 'Collecting Electrodes Sections/Plates' only except in the connected GP l's the item supplied to M/s. Flakt India, A.PH.M.E.L. & M/s. Andrew Yule are described as 'CR Sections' falling under Chapter 72. The ld. Collector has also noticed that purchase order placed by M/s. Flakt India bearing No P-70/339/444 dt. 21-8-1989 was for supply of 'Collecting plates' as per drawing No K-2400212 Group 27. The related order of acknowledgement No 7892539 dt. 29-8-1989 also shown as for supply of Cold rolled formed fabricated Collecting Electrodes as per Flakt Drawing No. K-2400212 including weldments. The ld. Collector has also referred to another purchase order No. P-70/336/512 dt. 29-7-1986 was for supply of Cold rolled formed Collecting Electrodes as per drawing No. KW 28220093C with weldments welded to section. "The related order of Acknowledgement No. 7862609 of the appellant dt. 20-8-1986 was also for the same. It was noted that duty had been paid under chapter 72 instead of under chapter 84.
(iii) The ld. Collector has in the same manner examined :
(i) Purchase Order No.11475 dt. 23-11-1987 along with its corresponding Acknowledgement No. 7892506 dt. 1-2-1989 of the appellant.
(ii) Purchase order No. 11475 dt. 23-11-1987 of M/s. Andrew Yule & Co, and its corresponding acknowledgement order.
(iii) Letter dt. 25-1-1989 of TIMS address to M/s Andrew Yule and Co., states that one Collecting Electrodes plate - Module of Collecting plate comprises of Top Plate, Middle plate, Bottom plate open joint tunes and HR angles. The ld. Collector has further noticed from the letter the details of work to be carried out by the appellants.
(iv) Purchase orders dt. 7-2-1987 and 17-2-1987 and related acknowledgement order No. 2874608 and 2874609 dt. 19-2-1987.
(v) acknowledgement of order No. 7862615 dt. 24-11-1986 and various other orders dt. 7-8-1986,20-8-1986,24-11-1986,25-11-1986 and 10-12-1986 have been examined.
(vi) purchase order of M/s. G.E.C. has also been examined by ld. Collector.
In all these orders, the ld. Collector has found a clear description of 'Collecting Electrodes' and the corresponding acknowledgements have been manipulated by the appellants. Therefore, on a clear examination of all these purchase orders, correspondence, and drawings, the ld. Collector has concluded that as per note l(n) of chapter 72, it excludes the items which conform to any of the definition of (1) (g) (k) (1) or (n) of note 1 of chapter 72. Note l(k) of chapter 72 excludes flat rolled products with pattern in relief derived directly from rolling (for example, grooves, ribs, chequers, tears, buttons, lozenges) and those which have been perforate, corrugated or polished, if they, thereby assume the character of articles or products of other headings. The ld. Collector has referred to note l(f) of Section XV, which excludes articles of Section XVI (machinery, mechanical appliances and electrical goods) from the Section XV (i.e. chapter 72 & 83). Therefore, the ld. Collector has concluded that, accordingly, machineries and parts thereof irrespective of the constituent material and process of manufacture automatically get covered under chapter 84 or 85 as the case may be, as they assume the characteristics of articles or products of other heading. The ld. Collector has also relied on Rule 2(a) of interpretative rules to come to the conclusion that the goods are classifiable under chapter 84. We have carefully considered these findings and we do not find any infirmity in this order and hence we confirm these findings.
(iii) We have also independently examined the other materials on record and we find that these materials clinch the issue. These materials are now referred herein below:
(a) The purchase order No. P76 - 310.009 dt. 5-4-1990 of M/s. Flakt India Ltd.(Page 190-193 of paper book) reveals that although, the description in the order of the goods is shown as "Forming and supply of collecting plate sections made out of 1.6 mm/1.5 mm C.R. Sheets conforming to l.S. 513 Grade 'O' as per our Drg. No. V-2554080-43 including labour and materials (length: 14060 mm, width 750 mm) the exemption of clauses of the order reveals that -
(i) "7.1 All materials are subject to the inspection by us/our client prior to despatch. The buyer requires at least 4 weeks advance to depute their Inspection Engineer to supplier's work for conducting inspection. I set of Raw material Test Certificate must be forwarded to the buyer alongwith the Inspection Call and another set should be handed over to buyer's Inspection Engineer at the time of inspection. The inspection call must be supported with supplier's internal inspection report."
(ii) "9 Job No., Sub No. & Part No. should be marked in all steel crates with necessary colour code as instructed by the buyer after inspection and acceptance of the material for easy identification at site".
(iii) Acknowledgement of order dt. 22-10-1990 of the appellant at page 197 shows "Electrodes are to be packed as per Flakt drawing No. KP189413th. It Ack. Order dt. 5-10-1990 also shows that the supply is "as per customer requirement".
(iv) The type of manufacture of this item leaves any doubt that what has emerged is a mere "Cold rolled Formed Sections of different shapes". It has assumed a character of a part, although it is contended that further processing is required to be done. This by itself will not make the item as not to consider it as a part, in view of further evidence to be noted below.
(b) Shri. Rajamani, Sr. Supdt. in his statement dt. 30-6-1990 admitted that the collecting electrodes manufactured by them are being supplied to various parties like M/s. Voltas, BHEL, Flakt India Ltd., Andrew Yule & Co. Ltd. APHMEL 'THERMAX and M/s. L&T. He farther admitted that in respect of the Collecting Electrodes meant for M/s. Andrew Yule & Co. Ltd., they supplied Top Plate, Middle Plate, open joint tube sections, bottom plate and angles; that these items were fabricated at site notched & welded at sight that at Kotyagudam Thermal Power Station site they have done fabrication job of Collecting Electrodes for M/s. Andrew Yule & Co. & M/s. APHMEL. He also admitted that for M/s. Flakt three types of profiles of Collecting Electrodes viz. 400, 500 and 750 were manufactured by them; that depending upon customer's requirement, 400 profiles were manufactured both with or without weldment or with or without any fabrication; that for 500 profile, after rolling while cutting on line both punching & window cutting had been done that for 750 profile also the same operations were carried out, besides notching which was done on line.
(c) This statement was corroborated by Shri J.S. Sivaraman, Manager (Commercial). He admitted that Collecting Electrodes were supplied to customers like M/s. Voltas, Andrew Yule & Co. Ltd., APHMEL, BHEL, Flakt, L&T, GEC and Thermax. He admitted and agreed that regarding Collecting Electrodes supplied to M/s. Flakt, wherever post rolling operations (punchings) were made off the line excise duty on advalorem would be paid; on the Modules supplied to M/s. APHMEL with notching and that he also agreed to discharge duty liability on packing charges where duty was payable on advalorem basis.
(d) Shri M. Sankaran, Technical Service Manager also admitted that "Technically speaking, they supply collecting electrodes to M/s. Andrew Yule by clearing various components from the factory and assembling it at site". He admitted likewise for supplies made to M/s. APHMEL, Voltas Ltd., GEC, L&T, Thermax, BHEL and Flakt India Ltd.
(e) Shri R. Neelakantan, Sales Manager corroborated the statements given by above witnesses. He admitted that "Collecting Electrodes Sections were used in electrostatic precipitator, that automobile sections such as floor/side/front/rear panels are used in the manufacture of light commercial vehicles; that the panels supplied to M/s. Allwyn, Nissan & other similar customers are used only in the manufacture of light commercial vehicles". In his further statement dt. 22-8-1990, he admitted that they had mistakenly cleared the said galvanised steel sections under chapter heading 7216.20 by paying lower rate of duty and agreed to pay the differential duty involved on the clearance already effected. Regarding 'Z' purlins, he stated that they had wrongly availed Rule 57F(2) procedure for movement of the goods to M/s. Padmavathy Devi Industries and agreed to pay the differential duty involved on the clearances already effected. He also admitted that they had not given any intimation to the Deptt. regarding the end use of the panels supplied to various LCV manufacturers. In his further statement dt. 3-8-1990, he clearly admitted that they had supplied to M/s. Andrew Yule & Co., Collecting Electrodes cleared in unassembled condition and subsequently assembled at site by using rivets and welding electrodes and added that though the goods have assumed the characteristics of Collecting Electrodes, when cleared from the factory, since they were seen in plain condition, they had classified them under Tariff sub-heading 7216.20 as Cold Rolled Sections and paid specific rate of duty and he also admitted that the fact of manufacture and supply of panels for LCV to M/s. DCM, Toyota, M/s. Telco, M/s. Eicher Motors were not intimated to the deptt. nor classified.
(f) From the statement of the personnels of TIMS and from the records/documents recovered from the factory and the corporate office, it is seen beyond doubt that 'Collecting electrodes' were supplied to them as per their specification and drawings. The same is referred in detail in show cause notice. M/s. Flakt India Ltd. admitted in their letter dt 20-4-1990 that the items were intended for Pollution control purposes. In their letter, they have admitted placing orders for 'supply of such goods or equipments intended for installation/erection of pollution control/plant/systems at customers site'. Shri R. Rajamani, Sr. Supdt. has also admitted about the further operations done on the formed sections i.e. Collecting Electrodes, supplied to M/s. Flakt India Ltd.
(ii) Shri Sankaran T.S. Manager admitted in his statement dt. 6-7-1990 that two types of collecting electrodes were manufactured and supplied to M/s. Andrew Yule & Co. Ltd. He finally admitted that technically they supplied collecting Electrodes to M/s. Andrew Yule & Co. Ltd.
(iii) The minutes of the meeting held between M/s. Andrew Yule & Co. Ltd. and TIMS on 8-9-1988 and other correspondence also supports the dept's plea. They have specifically placed orders for 'complete manufacture and supply of collecting electrodes flat types, furnishing the details of the connected drawing numbers.
(g) The examination of evidence placed in respect of M/s. APHMEL also confirms the department's charge. Shri K. Neelakantan, Sales Officer in his statement dt 20-8-1990 has confirmed supply of collecting electrode sections to them and its use in the electrostatic precipitators.
(h) Thus it is clear that as per exclusion clause contained in Section Note l(f) of Section XV of CET, 85, Articles covered under Section XVI (i.e. machinery, mechanical appliances and electrical goods) are excluded from the purview of chapter 72 and 83. As such, a machinery part irrespective of the constituent material and process of manufacture will automatically get covered under chapter 84 or 85. Thus the classification adopted and confirmed by ld. Collector is correct and we approve of the same.
16. Parts of Light Commercial Motor Vehicles - The next main allegation is that the appellants had evaded payment of duty at appropriate adv. rate by misdeclaring the LCV panels supplied to M/s. Eicher Motors, M/s. TELCO and M/s. DCM Toyota and M/s. DTL Ancillaries as mere 'Cold rolled formed metal sections' under chapter sub-heading 7210.10 upto 28-2-1988 and thereafter under chapter sub-heading 7216.20 of CET Act, 1985, instead of chapter heading 87.08 of CET 1985. The allegation is that the appellants had not intimated to the department of the fact of manufacture and supply of LCV Panels, as part of motor vehicles.
The ld. Collector has examined at length the evidence relied by the department. These evidence are in the nature of order of Acknowledgement. It is noticed from these orders of acknowledgement that the orders placed by these parties were for supply of different panels as per drawings and specifications and they were fitted on the load bodies/deck of light commercial vehicles. These were clearly identifiable as specific parts, with specific use and part numbers. They have been found to be tailor made according to the specific design of each motor vehicle. The users have made known to the appellant, that they cannot adopt the design for others, as they are patented. These are parts for light commercial vehicles. The mere fact that they require to be painted and some fitment work is required to be done, does not make it a mere 'cold rolled formed section'. In the case of 'cold rolled formed sections', the edges are sharped and they are not rounded off. They are not of a design of a MV part. These items have emerged clearly as a part of a motor vehicle and they are understood and identified in commercial parlance as parts of motor vehicles and not as mere cold rolled sections. Although, the process of manufacture may be same but they are clearly distinguishable, as these parts cannot be used for other purposes of roofings as contended by ld. Advocate. The design for a roofing is different than that of this item in question. The technical literature is also not helpful to the appellants, especially in the face of clear admission of several persons, whose statements have been recorded and in the face of the records resumed by the department. Therefore, the various pleas urged by the ld. Advocate deserve to be rejected. There is clear admission of the witnesses examined by the department that they had not disclosed about the use of these items to the department and that they had misdeclared. Hence, in the light of the appellants' own admission and confessions, the larger period is clearly attracted and the confirmation of duty for larger period is clearly justified. In this context the ruling of the Hon'ble Supreme Court in the case of Collector of Central Excise v. Jay Engineering Works Ltd., Calcutta as reported in 1989 (39) E.L.T. 169 (S.C.) is clearly attracted. The ruling of the Hon'ble Madras High Court as in the case of Limenaph Chemical v. Union of India (Supra) also supports the department's case. The ld. Advocate relied on the classification lists having been checked and confirmed for earlier period. But the fact of misdeclaration has come to light on a thorough investigation and in view of clear admission by the witnesses, there is no defence left for the appellant and the plea now raised is not acceptable. The rulings relied are clearly distinguishable. The ld. Advocate had further contended alternately that if the cold sections are considered as parts of motor vehicles then also they would be entitled to the benefit of Notification No. 239/86-C.E., dt. 3-4-1986. The lower authorities have not considered this plea. The matter, therefore, requires consideration and we direct the original authorities to consider the plea of exemption notification and grant the benefit, if available.
17. As regards galvanisation of sheets with Zinc coating, the ld. Advocate conceded on this point and in view of this matter, no further findings is required.
18. As regards packing charges, the appellant's evidence has not been appreciated and we direct the original authorities to reconsider the appellant's plea. With this modification, otherwise there is no merit in the appellant's plea and the same is dismissed.