Customs, Excise and Gold Tribunal - Tamil Nadu
Sundaram Fasteners Ltd. vs Commissioner Of C. Ex. on 3 July, 1998
Equivalent citations: 1999(107)ELT331(TRI-CHENNAI)
ORDER S.L. Peeran, Member (J)
1. All these appeals arise out of the same common order in original dated 24-6-1991 passed by the Collector of Central Excise, Coimbatore. The appellants were served with four show cause notices for different periods and they have made respective replies in respect of the same issue and these show cause notices have been adjudicated by a common order in original. By this order in original, the Collector has confirmed the duty demand of Rs. 82,99,342.79. However, he refrained from imposing any penalty on the appellants. The appellants are manufacturers of sintered products as well cold extruded forged products and they have commenced their operation at the Hosur Works during 1979. They have filed classification list from time to time and the same has been approved. They claimed classification under Chapter Heading 73.26 which was approved by the department. It is also the contention of the appellants that these extruded/forged products have been classified as iron and steel only after the Central Excise Tariff Act, 1985 came into existence on 1-3-1986. These products were being classified under TI 26AA(1)(a) of the first schedule to Section 3 of the CEA, 1944. It is their contention that while classification lists were being approved certain proceedings were initiated by the AC, Central Excise, seeking to classify the products manufactured by the appellants as components falling under Tariff Item 68/Chapter Headings 84/85/86/87 and 89 as the case may be. They had filed various voluminous documents and also filed write up with regard to manufacturing process in respect of each of the item in respect of which classification had been disputed in the said proceedings and these proceedings are pending before the appellate authority or are pending after being remanded to the original authority. It is stated that inspection of the factory was done by the Assistant Collector on 8-7-1992 and they recorded statement of Shri SHBA AH Khan, Manager, PPC C.E. and Shri Karthik, Manager Finance on the classification of the extruded/forged products manufactured at their factory. The officer also came across/recovered certain documents during the inspection which related to movement of the said extruded/forged products to sub-contractors for processing and return. After a lapse of time the department issued show cause notice to the appellants dated 1-4-1993 requiring them to show cause as to why an amount of Rs. 2,86,44,243.70 shall not be demanded as differential duty in respect of extruded/forged products cleared by them in terms of exemption Notification 223/88. The demand related to the period 1-3-1988 to. 9-9-1992 and therefore, the provisions of Section 11A of the CEA, 1944, was invoked alleging suppression of fact with intent to evade payment of duty.
2. The contention in the show cause notice was that the appellants were manufacturing 48 items of auto electrical components, IC engine parts and cleared them without payment of appropriate duty by misdeclaring the same as articles of iron and steel forged or stamped but not further worked, whereas actually the said items are almost finished components and wherever required these components undergo further process either in house or at the sub-contractors and under the circumstances, it was alleged that it was incorrect on the part of the appellants to have claimed exemption for the said goods under Central Excise Notification 223/88 and hence differential duty was demanded. It was also alleged that the appellants did not specifically applied for permission for removal of certain items under Rule 57F(2) to sub-contractors for further processing though application had been filed mentioning the removal is for "general" operations at the sub-contractors premises. Appellants filed their reply dated 29-4-1993 and also a detailed reply on 7-7-1993. It was their contention that cold extrusion process was process of forging and the appellants relied upon Indian and foreign authorities to substantiate their claim that cold extrusion is a process of forging. They further contended that in the event of the product being classified as components under Chapter Headings 84, 85, 86, 87 and 89 they should be given the benefit of Notification 239/84 and 217/86 wherever the components have been supplied to the Army or for manufacture of oil engines. The appellants had time and again made submissions in the case. Thereafter the appellants were issued with a letter dated 12-2-1994 informing them that the Collector in exercise of the powers conferred under Rule 6 of the Central Excise Rules, 1944 would decide the matter pending before the AC in respect of the four show cause notices. That is how the four show cause notices were taken up for decision in the matter by the Collector.
3. The Collector noted that the Mc Graw Hill Dictionary of Scientific Terms defines "process of extrusion of cold metal is variously termed as cold pressing, cold forging, cold extrusion, forming extrusion, pressing and impact extrusion. The other names for the process of cold extrusion include impact extrusion, extrusion forging, cold forging, extrusion processing and heavy cold forming. He also held that the product manufactured by the appellants is through the process of cold extrusion. He noted that Notification 223/88 dated 23-6-1988 exempts forging and forged articles from duty as in excess of 12.5% adv. He rejected the claim of the appellants that extrusion process is nothing but cold forging. The appellants reliance on the technical books was rejected by the Collector on the ground that dictionary meaning is delusive guide and it will not be helpful in solving the problem. Further he has also noted from the book "Materials and process in manufacturing" by E. Paul Degarmo, on page 350,4th edition wherein the four process of major cold working operations are (i) Squeezing (ii) Bending (iii) Shearing (iv) Drawing. He has further noted that the process of cold forging and extrusions are sub-divisions of the major working operation i.e. squeezing. He has also held that if forging is to be equated with extrusion there is no need for a separate sub-division for cold forging and cold extrusion. He has held that what emerges from the above is that cold forging and cold extrusions are two different processes understood by the Engineering Industry. He has also quoted one line from page 495 of the book titled "Text book of Production Engineering" by Shri P.C. Sharma, wherein it is stated that 'in a forming the main body of the metal is the product and flash is cut away and discarded. In extrusion the flash is the product and the slug remaining in the die is not used'. It is stated that it is evident that books are available to support both the assessee's contention and the department's stand as to the eligibility of the products to Notification 223/88 dated 23-6-1988. The Collector has discarded the contention of the appellants that on the basis of the technical understanding the meaning given in the Mc Graw Hill Dictionary Encyclopedia need not be applied for understanding the meaning of the word forging and forged articles given in the Notification. He rejected their contention that the process of cold extrusion can also be called forging. He has also rejected the trade parlance understanding relied upon by the party. He has also rejected the customers affidavits in support of the contention put forth by the appellants. He has come to the conclusion that forging is the earliest process of shaping the metals. He has also held that as the technology advanced the products initially manufactured through forging started getting manufactured through more advanced techniques. Despite change in technology, the industry colloquially started calling the products as forged products. He has held that this per se does not make forging and extrusion one and the same process. He has also noted that in the delivery challans prepared by the manufacturer, described the process as cold extrusion and hence they are interchangable and therefore, they are different and not covered by the Notification. He has rejected the judgment rendered by the Tribunal produced by the appellants more particularly the judgment of the Tribunal rendered in the case of C.C.E. v. Metal Impact vide Final Order No. E/43 & 44/94-B1 in Appeal No. E/1457/85-B wherein on examination of the Technical literature the Tribunal held that forging and cold extrusion are one and same process and in this regard relied upon the Technical literature and thus confirmed the Collector's order and dismissed the Revenue appeal. The Collector has noted that the Tribunal had proceeded on the basis of meaning given in the Dictionary/Encyclopedia and had observed that extrusion is another form of forging and has observed that he is unable to persuade himself to subscribe to the view that forging and cold extrusion are one and the same and that the issue is entirely unrelated to application of Notification 223/88, dated 23-6-1988. He further noted that already the appellants have recognised forging and extrusion as different as can be seen from the Tariff Heading 72.16. He has noted that Notification 223/88, dated 23-6-1988 the terminology "hot drawn, hot extruded and forging' have been used. Therefore, the obvious conclusion that is inescapable from the above facts is that the Central Excise Tariff Act, 1985 exempts and recognises forging and extrusion as two different processes employed in the Iron and Steel industry. He came to the conclusion that the cold extruded products manufactured by the appellants are not forging and forged articles of steel as envisaged in Notification 223/88 and hence rejected their claim for the benefit of the Notification. The Collector has also noted the definition of the authority appearing in Chapter 72 of HSN wherein it is stated that : "forging means not deformation of the metal in the mass by means of drop hammers or on forging presses to obtain pieces of any shape". He has held that the items in question are not manufactured in that way and hence they do not come within the ambit of Chapter 72.
4. After having rejected the claim of the appellants the Collector has held that the 44 items of the party's components should be classified under Chapters 84, 85, 87, and 93. However, he has not gone into the individual classification of the items.
5. The Collector has also confirmed the allegation of suppression of fact and wilful misdeclaration of the same. Hence he has held that the longer period of limitation is invocable. He has dropped the claim of the department for imposing penalty.
6. The appellants contend that the judgment of the Tribunal in the case of Metal Impact v. C.C.E., is binding on the department as it was on identical issue and once the same has been pronounced and the Revenue appeal having been dismissed after examination of the literature, the judgment has to be followed by the Collector. They contend that the non-following of the judgment is a judicial indiscipline, besides the appellants have relied upon a number of technical literature over and above the Customers affidavits, opinion of the technical experts and the understanding of the product in the trade. They contend that cold extrusion is nothing but a process of forging. They contend that the Collector has not examined affidavits and the expert opinion produced. Hence the finding of the Collector is totally a non-speaking one. They submitted that the HSN refers to forging by drop hammers or on forging presses. But the manufacturing process is different inasmuch as it comes out in continuous form. They also relied upon the judgment of the Tribunal including that of Sikka Heat Treatment Centre v. C.C.E., New Delhi, a larger bench decision reported in 1996 (81) E.L.T. 628 (Tribunal) which approves the earlier detailed judgment in the case of Aravali Forgings Ltd. v. C.C.E., reported in 1994 (70) 693 wherein the Tribunal noted that the Board's circular and the judgment of the Delhi High Court and the other judgments noted to what extent the manufacturing activity can be considered as forging. It is stated that in the present case, the Collector has not wilfully followed these judgments and has rejected the claim of the appellants based on his understanding to reject the contention of the appellants that cold extrusion is also forging. The main ground of dispute is that even the Collector has failed to take up the aspect of classification of all the 44 items to the respective headings under Chapters 84, 85, 86, 87 and 89 which on logical conclusion the Collector ought to have gone into and decide as to which of the item fall under which of the tariff heading. Therefore, his order is not sustainable.
7. We have heard Shri V. Lakshmikumaran, learned Counsel for the appellants and Shri V. Thyagaraj, the learned SDR. The learned Advocate took us through the eight paper books especially, the technical literature, the affidavits and the Tribunal judgments on the aspect to show that the appellants case is covered by the judgment of the Tribunal and that their case is also very strong in terms of the technical understanding that forging and cold extrusion is one and the same. The learned SDR defended the order of the original authority.
8. On careful consideration of the submissions made we are of the considered opinion that the order is violative of the principles of natural justice. The entire technical material including the affidavits and opinion of the technical expert has not been gone into with the result, the order is totally a non-speaking order. Further the Collector's stand that the judgment of the Tribunal are not binding on him is not a correct finding. The judgments of the Tribunal in the case of Sikka Heat Treatment Centre v. C.C.E., (supra), Aravali Forgings Ltd. (supra) and VK Industries, reported in 1997 (94) E.L.T. 5 (SC), Echjay Engineering v. C.C.E., reported in 1994 (72) E.L.T. 98 (T) and Jaypee Forgings v. C.C.E., reported in 1996 (83) E.L.T. 49 and Metal Impact (P) Ltd. (supra) all deal with the aspect pertaining to forging. It also deals with the aspect pertaining to forging having part numbers and it discusses as to what extent it has not acquired essential characteristics of a finished product for classification under Chapter 72. In all these judgments, the contention of the Revenue for classification of forging items as parts of machinery under Chapters 84, 85, 86, 87 and 89 respectively has been rejected. Therefore, it was necessary for the Collector to have gone into the entire detailed technical aspect of the matter and ought to have called for technical opinion of the experts from the department in respect of the 44 items. The Collector has not discussed as to what these 44 items are and how and in what stage they are in existence. Without examining the individual items and their use it was not proper to hold that they have assumed the characteristics of parts classifiable under the respective headings. As also there is no discussion for classification of the items under Headings 84, 85, 86, 87 and 89. For rejection of the claim of the appellants, it was necessary for the. Collector to have gone into the classification of the items, which he has not done, thereby the order is not a speaking order. The appellants have produced enormous technical evidence, affidavits of the customers, expert opinion, the trade parlance have been produced by the appellants; the non examination of these documents and per se rejection without discussion makes the order a non speaking one. The appellants have been classifying the goods under Chapter 72 time and again and their classification list had been approved earlier. All these details were available with the department. Therefore, the conclusion that there is suppression of fact does not appear to be correct. However, this aspect is required to be kept open while remanding the case for de novo consideration. We have gone through the entire case records including the enormous paper book. The Collector has not considered the entire evidence with the result, the order is not a speaking one. Hence the same is required to be set aside and remanded for reconsideration. The Collector is at liberty to have the 44 items examined afresh. The technical nature of the items, if examined and opinions taken should be made available to the appellants for their comments and reply and thereafter the Collector shall proceed to examine the entire material on record after giving a fair opportunity of hearing to the appellants and decide the case in the light of the cited judgments on the issue. The appeals are allowed by remand for de novo consideration and decision.