Customs, Excise and Gold Tribunal - Delhi
Steel Authority Of India Ltd. vs Collector Of Central Excise on 28 June, 1985
Equivalent citations: 1985(5)ECR1860(TRI.-DELHI), 1985(22)ELT487(TRI-DEL)
ORDER S. Duggal, Member (J)
1. The product, which is subject-matter of the present appeal, filed originally before the Central Board of Excise and Customs, New Delhi, is what the appellants describe as: 'Wheels, Axles and Wheel Sets'. The appellants state to have commenced manufacture of these items in their Durgapur Steel Plant since 1962, which they supply primarily to Indian Railways. These were being classified, from the inception, to be falling within the category of: 'forged products in shapes and sections not elsewhere specified' as described against Sub-item (ia) of Item 26AA of the Central Excise Tariff, (C.E.T. for short).
2. According to the appellants, even after induction of Tariff Item 68 in the C.E.T., w.e.f. 1-3-1975, and on fresh classification lists having been filed, the goods; namely, wheels and axles (including sets), were duly approved by the proper officer on physical verification, to be classifiable under Tl 26AA(ia). The appellants have claimed that the Department has, all through, treated these wheels and axles as 'forged products' within the contemplation of TI 26AA(ia), and that the appellants have been clearing the goods on this assumption but the Department issued a show cause notice, covering the period 1-3-1975 to 27-4-1980, for the first time on 28-4-1980 calling upon the appellants to show cause as to why the final products, cleared as wheels, axles and wheel-sets, after having discharged duty-liability at the forging stage under TI 26AA(ia), be not assessed to duty as 'finished products' under TI 68. This notice was followed by a corrigendum issued on 30-9-1981, on which date another notice was also issued for the subsequent period: 28-4-1980 to 31-8-1981. Yet another notice was issued on 17-2-1982 for clearances effected during the period 1-9-1981 to 30-11-1981.
3. The appellants contested the notices by contending that the goods which they cleared were nothing beyond forged products, and that the Department had been accepting them as such since manufacture thereof was started in 1962 and classification-lists, filed to that effect, had been approved from time to time, including those filed after the inclusion of TI 68 in the C.E.T., till as late as in 1979. Besides pleading that it was thoroughly within the knowledge of the Department as to in what shape and condition the products were being cleared by the appellants because of the clear description in the classification-lists and, as such, there was no suppression or mis-statement of facts so as to attract the extended period and, consequently, the notices were barred by time; they also contended that, on merits, the goods had been rightly cleared by them under TI 26AA(ia).
4. In support of the plea of time-bar, in addition to the classification-lists approved from time to time, the appellants also placed reliance on the fact that RT-12 returns, filed monthly, gave full description of the goods and there had been always complete scrutiny while recording assessments on the monthly returns and, further, that in relation with the accounting procedure in RG-1 Register; the Assistant Collector, after regular proceedings and after show cause notice, recorded a detailed order on 5-7-1978 directing them that the production should be treated for purpose of recording in RG-1 Register at the stage when the goods, which are mainly supplied to the Railways, have been inspected by the Rail India Technical and Economical Services (RITES for short). It was contended that the accounting of production against TI 26AA was in issue, and that the Assistant Collector, after noting the entire procedure, details of the manufacturing process of the goods, and the final form in which they were supplied to the Railways, passed a conscious order whereunder the wheels and axles, after they had undergone the process of machining and polishing, and had been inspected by the RITES, were still treated by the Department within the ambit of Sub-item (ia) of Item No. 26AA, and that the Assistant Collector in his order clearly took note of the fact that, after inspection, only such operations as painting, joining, machining, etc., was done.
5. The contentions put forward by the appellants in reply to the show cause notices were disposed of by the Collector of Central Excise, Calcutta, by a detailed order, passed on 4-6-1982, holding that the wheels, axles and wheels-sets, as they are finally cleared and delivered to the Indian Railways, undergo substantial processes, after the stage of forging, which give them a separate commercial indentity and, consequently, the first excisable point would be when they emerge as forged goods of certain shape and size, and they have to discharge the duty-liability under TI 26AA(ia), but there would be a second excisable point when the finished wheels and axles are turned out and made into wheel-sets and since Tariff Items 1 to 67 do not cover these final products, they would be excisable under the residuary item; namely, TI 68. He also took note of the fact that the preponderant quantity is cleared in the shape of wheel-sets which entails substantial machining, joining of wheels and axles by hydraulic press, painting, etc., which are in the nature of substantial operations undertaken in a machining plant with high precision instruments and subjected to a very high quality control, and that the wheel-sets are definitely a distinct commodity.
6. Pursuant to this finding, that what had been declared were only the goods falling under TI 26AA(ia), which envisages only forged shapes and sections and that, at no stage, the assessee had declared in the classification lists, submitted for approval, that TI 68 goods were being manufactured or cleared, and at no stage the fact, of wheel-sets having been cleared, having been indicated; the Collector held that it was a case where no clear statement of exact nature of the goods can be deemed to have been made and, to that extent, there was suppression as well as mis-statement, justifying attraction of relevant provisions; as available at the relevant time, for invoking the extended period of 5 years. Since the first notice was issued on 28-4-1980, the period which was beyond 5 years of this date; namely, prior to 28-4-1975, was only held to be barred by time, and the rest of the demand w.e.f. 29-4-1975 was held to be enforceable either under the provisions of Rule 9(2) read with Rule 9(1) or Proviso to Rule 10 of the Central Excise Rules, 1944, or Section 11A of the Central Excises and Salt Act, 1944, depending upon the period involved, and the date of issuance of the respective show cause notices.
7. The appellants assailed these findings in the appeal which has been transferred to the Tribunal under the provisions of Section 35P(2) of the Central Excises and Salt Act, 1944. Shri N. Mukherjee, Advocate, appearing for the appellants reiterated the contentions, set up in the appeal.
8. The Learned Counsel laid stress on the objection as to the notices and consequential demand being barred by time, urging that there was no justification for applying the extended period of 5 years inasmuch as there was no clandestine removal and, on the other hand, there had been full disclosures at various stages, from the very inception of the manufacture of these products. He referred in this regard; besides, the classification lists, to an adjudication order passed by the concerned Assistant Collector on 5-9-1978 in respect to the accounting procedure to be recorded in the RG-I Registers, which he did in pursuance to a show cause notice having been issued on 5-9-1977, and also to the fact that RT-12 returns were being regularly filed, and assessed every month, where full description of the goods had been set out. In response to a Bench query, Shri Mukherjee clarified that the last classification list effective from 1-4-1978 had been filed on 4-4-1979 which was approved by the Assistant Collector on 26-5-1979, and that that was the prevailing classification list, till the issue was raised by means of show cause notice issued on 28-4-1980. He also added that the Assistant Collector, in his order dated 5-9-1978, in respect to the RG-1 Register, had taken full note of the factum of clearances of wheel sets, which argument he put forward to counter the Collector's observation that there was lack of full disclosure for the reason that there had never been a mention of wheel sets being cleared in the classification lists. Shri Mukherjee further contended that this was a case where even the demand could not go back to six months from the date of issue of show cause notice because there was no circumstance to justify revision of the earlier approvals, accorded to the classification lists.
9. Reverting to the merits of classification, Shri Mukherjee contended that the products, described as wheels and axles, or even wheel-sets could not be considered to be falling in any category beyond forged products inasmuch as forged products were not marketable as such, and they could not be treated as a product at the black stage, and that machining was a necessary process to make them forgings and, as such, the Collector had erred in coming to the view that, because of machining having taken place, the goods went beyond the category of forged products and assumed another identity, calling for a second stage of levy of duty.
10. The learned Counsel placed reliance on certain decided cases to fortify his contention that the wheels and axles; namely, the products of the appellants, had been rightly cleared by the appellants under the description of forged products, by reference to T.I. 26AA(ia). He referred in this regard to the judgment of Patna High Court, reported in 1983 E.L.T. 17 (Pat.) in the case of Tata Yodogwa Ltd. v. Assistant Collector of Central Excise, Jamshedpur, and Ors., where it was held that steel castings were liable to duty under TI 26AA(v) of the CET and not under TI 68, adding that machining and polishing of semi-castings, which are described in the nature of incidental or ancillary processes, would not render the steel castings liable to duty firstly as semi-finished castings under TI 26AA(v) and, thereafter, as a result of cleaning, machining/polishing, again under TI 68.
11. He cited another judgment of Patna High Court 'AIR 1966 (Patna) 248' in the case of Hindustan General Electrical Corporation Ltd. v. Superintendent of Central Excise, Ranchi and Ors., wherein it was held that the stage of completion of a manufactured product was not reached until all the processes-incidental or ancillary-have also been completed. He also quoted CEGAT decision in the case of Tata Iron and Steel Co. Ltd., Jamshedpur, reported as 1983 E.L.T. 1113(CEGAT) in support of his contention that castings remain so, even after machining and polishing. He further supported his argument by referring to the Five-Member judgment of the Tribunal in the case of Tata Engg. and Locomotive Co. (P) Ltd., Bombay v. Collector of Customs, Bombay, reported as 1984 (18) E.L.T. 65 (Tribunal), wherein malleable iron castings, imported for further processing into motor parts, had been held classifiable as iron castings falling under TI 25 of the CET. A similar view had been taken, in respect to same party with goods of identical description, in an earlier Bench decision reported as 1983 E.L.T. 1122 (CEGAT).
12. Reference was also made to Notification No. 150/77-CE dated 18-6-1977 to contend that intention of the Department was clear to treat machining as a necessary part of the forging process. Shri Mukherjee also placed on record a set of photographs of the products both for the goods called as 'a black stage', and the goods as delivered to the Railways under description : 'wheels, axles or wheel-sets'.
13. Shri Mukherjee further added that, in any case, there had been no loss to the Government inasmuch as the delivery of the goods had been primarily to Indian Railways, who were manufacturers of wagons, and in case they had purchased these goods as 'duty paid' they would have got benefit of Rule 56A and, thus, the duty, which the appellants would have paid, would have been adjusted by the Railways by way of set off, and that this circumstance also had a bearing on the question of the period of limitation, inasmuch as there could not be any intent to evade duty which was a necessary condition to extend the standard period of limitation.
14. Shri Mukherjee also urged that inasmuch as the goods clearly fall within the description of forged products, as contemplated by TI 26AA(ia), there was no justification to consign them to the orphanage of the residuary item'-TI 68-for which contention, he relied on a judgment of the Supreme Court in the case of Dunlop India Ltd. and Madras Rubber Factory Ltd. v Union of India and Ors., reported as 1983 ELT 1566 (SC).
15. In reply, the Departmental representative Shri H.L. Verma argued primarily on merits, and countering Shri Mukherjee's argument that unfinished 'forged products', were not marketable as such, contended that marketability was not a relevant concept, once the goods have been made excisable by a tariff entry, and in this regard, relied on the judgments of Delhi High Court in the case of Khandelwal Metal and Engg. Works [1983 E.L.T. 292 (Delhi)], and Hyderabad Asbestos Cement Products Ltd and v. Union of India and Ors. [1980 E.L.T. 735 (Delhi)]. He further contended that the machining, which was done in the case of subject-goods, was not merely ordinary machining but of a highly sophisticated nature, as revealed by observation at page 18 of the Adjudication Order, and that the Collector had rightly held that, after the forging-stage, the processes carried out on the goods in the nature of substantial machining in the machine-shop, and fixing up of the wheels and axles to convert them into wheel-sets by a process of hydraulic-press, and painting, etc., made the final goods as a completely distinct and identifiable commodity, making them liable to pay duty as finished goods, after having crossed the stage of forging. He emphasised that machining was not part of forging-process and that there were certain processes which were carried out after a forged product had come into existence, to make them sepearate identifiable goods and relied in this v. Superintendent of Central Excise, Madras II Division and Ors. [1980 ELT-775 (Madras)l, He also produced a copy of unreported judgment of Delhi High Court in Civil Writ Petition No. 214 of 1981, decided on December 12, 1984, in the case Metal Forgings Pvt. Ltd. v. Union of India, [since reported as 1985 (20) ELT 280 (Del.)] holding in clear and categorical terms that forged products, after being machined, polished, holed etc., so as to become identifiable or usable, as machine-parts; assumed an altogether different character as from what it was, when forged, and so, wherever it is established that forged-products of iron or steel are transformed by a further process of manufacture as parts of machinery, they will be liable to additional duty of Central Excise under T.I. 68, i.e., in addition to the duty paid at the stage of forging.
16. As to the Notification No. 150/77, referred to by learned Advocate for the appellants, Shri Verma contended that, apart from the fact that exemption notification could not be used for interpretation of a tariff entry, the purpose of the said notification was entirely different and it had referred to melting scrap in certain situations, when cleared from an intergrated steel plant, and had no bearing on the controversy in issue.
17. Shri S.C. Rohtagi, DR, supplemented the arguments of Shri Verma in this regard by asserting that there had been cases of imports of goods described as 'forgings' or 'castings' to counter Shri Mukherjee's arguments that forged products were not treated as separate marketable products.
18. On the question of 'time bar', Shri Verma stated that apart from the fact that there was no disclosure in respect to the wheel-sets as such and these were never shown in the classification lists; otherwise also, the processes of machining were not described in the classification lists nor were these goods described as machine-parts, and since removals had been per classification lists, it was a case of lack of full disclosure so as to justify the application of extended period of limitation. In reply to the Bench query, that even if it were so, could there be any inference of intention to evade, Shri Verma had no particular comments to offer.
19. Shri Mukherjee, in his short rejoinder, reiterated that whatever disclosures were necessary under Rule 173B, these had been made and that even R.T. 12 returns had been accompanied by gate-passes, which showed clearances of wheel-sets, and that once the approval had been recorded by the Asstt. Collector on the classification lists, there had to be an assumption that all necessary inquiries, as to the nature of goods, had been made. He further added that before the introduction of the self-removal procedure in 1968, there had been clearances during the period 1962 to 1968 under physical control, and since the nature of the manufacturing process of the goods had not altered at any stage, it was a case where the Department was aware of the entire process and that it could not be treated to be a case of any suppression of facts or mis-statement on the part of the appellants. He again referred to the Asstt. Collector's order, passed on 5-9-1978, where there had been full discussion as to the manufacturing processes and the nature of goods. He distinguished the judgment of Delhi High Court in the case of Metal Forgings by contending that that case dealt with 'identifiable machine parts', and not with forgings, and added that the earlier process did not produce new goods and that, on facts of the present case, the goods could not be treated anything but forgings.
20. We have given our earnest thought to the matter. We would first like to deal with the question of classification, as that seems to be the primary issue. It is pertinent to note that there is no dispute that the products are excisable goods because the appellants themselves have been filing classification lists, and showing these goods, amongst others, as falling under TI 26AA(ia). The only controversy is as to whether, after hat/ing discharged duty liability as 'forged products', the goods, as they leave the factory of the appellants finally, are further liable to pay duty at the second stage as 'finished goods; not elsewhere specified, under TI 68.
21. We consider it expedient to take note of certain established, or admitted, facts in this regard. The fact that the goods were cleared under the distinct name of 'wheels and axles' is not disputed. It was in fact admitted during hearing that goods are mostly in the nature of wheel-sets, and it is only occasionally that they are cleared as wheels or axles, separately. We further find from the description in the classification lists filed by the appellants themselves-the latest being one effective from 1-4-1978 filed on 24-4-1979 and approved by the Asstt. Collector on 26-5-1979 (Annexure-IV)-that these goods called, 'wheels and axles' have been put under a general heading; namely 'Finished Steel Products. This clearly indicates that the appellants treat these wheels and axles as not bare forgings, but as finished steel products. (Emphasis supplied).
22. According to the Collector, as discussed in detail in the Adjudication Order and summed up in the last para of 'Summary', it is clearly mentioned that after the forging-stage, the goods are transferred to a separate section, known as 'Machining Section', where they undergo processes such as substantial machining, joining of wheels and axles by a hydraulic press, and painting, etc., which the learned Collector described to be substantial operations undertaken in a huge machining plant with high precision instruments and subjected to a very high quality control. These facts have not been controverted during hearing in the appeal. The photographs furnished at the time of hearing also give a clear indication that the machining, which these goods have undergone, is not in the nature of rough or proof machining which are incidental or ancillary to the forging process to make the forgings or castings as clean and free of defect, but these essentially transform the nature of the goods. In view of this, and in view of the clear admission that the major portion of the cleared goods was in fact in the nature of wheel-sets, the photograph at the bottom (No. 4) gives the undispu-table impression that an entirely different commodity, as distinct from the forgings or blacks, comes into existence for which, according to the adjudication order, a highly sophisticated process, including that of joining with a hydraulic-press with the help of high precision tools in a separate 'Machine Section', had taken place. We have, therefore, no hesitation in holding that the goods as cleared, which are mostly in the nature of wheel-sets and even as separate wheels and axles, have gone much beyond the stage of bare forgings and have assumed a distinct character as identifiable parts of a railway wagon and, thus, assumed a separate entity and a distinct nomenclature.
23. In view of the judgment of Delhi High Court-with which we are in respectful agreement-in the case of Metal Forgings (supra), where a clear distinction has been laid down between that amount of rough machining which is necessary for a forged product to come into existence as such, and that of machining, polishing or other pocesses, such as making holes, etc., on the forged products making them fit for being used as machine parts assuming different name, character and usage; and laying down the principle that merely because manufactured goods are used subsequently for the manufacture of another article, it does not mean that the earlier process of manufacture was not complete or finished goods had not come into existence; and further holding that whenever forged-products of iron or steel are transformed by a further process of manufacture, as parts of machinery, they become liable to additional duty of Central Excise under TI 68 in addition to the duty at the stage of forging; we confirm the view taken by the Collector in the impugned order to the effect that the steel forgings in this case had crossed that stage and become, as a result of further machining and other processes as described therein, separate identifiable goods to be used as part of the railway wagons, and they have to discharge duty liability at the second stage, after having paid duty under TI 26AA(ia) as forged-products.
24. Although there was no reference by either party but we find that this Tribunal in another case has taken a similar view in the case of Pefco Foundary and Chemicals Ltd. v. Collector of Central Excise, Pune '1985(19) E.L.T. 103 (Tribunal)', holding that whereas proof machining could be considered to be an integral part of the forging process with the result that forged products merely undergo rough machining so as to remove some defects from the forgings and make them smooth and clean ones and also as part of testing-process; the machining to which the goods are further subjected to make them fully machined identifiable part of machines will render them liable to pay duty further under TI 68. It is remarkable to note that even though it was contended in that case that some further processes still remained to be performed on the goods by the customers at their end, it was nevertheless held that those further processes were nothing but fitment operations of a peripheral nature and what had come out of the appellants' factory were almost finished machinery components even if not fully finished and they have ceased to conform to the description of mere castings.
25. In the Madras High Court judgment in the case of Brakes India Ltd. (supra), relied upon by the learned DR, also it was held that the process of drilling and trimming or chamferring of brake lining, amounted to manufacture, requiring a separate manufacturing-licence inasmuch as in that case the petitioners therein had been shown to be purchasing brake-lining blanks only, and subjecting them in their own factory, to the process of drilling or trimming or chamferring which was held to be a manufacturing process necessary to the completion of the brake-lining. On the same analogy, it would be held that the forged shapes, shown as 'blacks' by the appellants in the photographs, have undergone substantial processing of manufacture in the nature of machining much beyond the stage of proof-machining, joining of wheels and axles into wheel-sets by a special process, and polishing etc., and, therefore, acquired a distinct identity ready to be used straightaway by the Railways for the manufacture of wagons, as identifiable parts thereof, and thus the plea that they ought to be treated still as forgings of different shapes or sizes, is not tenable.
26. We would like to point out that the Patna High Court, in the case of Tata Yodogwa Ltd. (supra), have based the judgment on the uncontroverted position, as set up by the petitioners therein, that the goods which they cleared to different customers as castings, underwent further machining as well as processing like groove, cutting, grinding, combing, etc., at the customers' end before they could be put into use, inasmuch as certificates, given by different customers to this effect and annexed with the petition, had remained unrebutted by the Deptt. It was, thus, a clear case where it was shown that the goods as cleared by the party therein required substantial machining and processing of different natures by the customers, before being used as machine-parts; whereas, in the present case, there is no such suggestion even, that the Railways have to subject the goods to any further processes before fixing them on to the wagons, and it can rather be inferred from the combined circumstances that the goods as cleared in the form of wheel-sets, and even as wheels and axles which may be kept as spares, do not require any further processing at the end of appellants' customers; namely, the Railways.
27. The Delhi High Court also had this distinction in view while holding in the case of Khandelwal Metal and Engg. that the goods, after the stage of forgings or castings; when subjected to further processes of machining, trimming or drilling of holes, etc., before clearance, whether to outside customers or for captive consumption as intermediatory goods, so as to become identifiable machine parts, they become liable to pay excise duty at the second stage under TI 68 and, to the same effect, is the reasoning in the case of Pefco Foumlary and Chemicals Ltd. decided by the Tribunal (supra).
28. We also find no substance in the plea that forgings as such are not marketable products because we are of the view that they would not find mention as a separate tariff heading in the form of 26AA(ia), if forgings as such were not being cleared; apart from the fact, as held by the Delhi High Court in the case of Khandelwal Metal and Engg. (supra) and Hyderabad Asbestos Cement Products Ltd. (supra), that once the goods find specific mention in a tariff entry, the concept of marketability was not relevant. It was also held in the Khandelwal Metal and Engg. case that even at the intermediary stage, a distinct and different product known to the commercial world could come into existence, and would, thus, become liable to discharge duty liability.
29. We also find, on a reference to the case of Tata Engg. and Locomotive Co. (P) Ltd. (supra), that goods described as "casting in semi-finished conditions; for manufacture of motor vehicle CKD parts-rear axle hosing--'iron castings", had even been imported. These very goods were the subject-matter of another appeal which was disposed of by a Five-Member Bench '1984(18) E.L.T. 65 (Tribunal)'. It is interesting to note that whereas the Deptt. was treating these goods as castings under TI 25 of the CET on the contention that the processes, which the goods were shown to have undergone in the foreign country before despatch, such as annealing, straightening, puffing and rough machining, and surface protection by metallic or non-metallic coating did not convert them into another identifiable article and the goods still remained iron castings; it was the party who contended (because it suited them to say so), that by undergoing these processes, the goods ceased to remain as mere castings of iron and became semifinished articles but the Bench upheld the Department's contention that the processes carried out on the goods in the foreign country were only in the nature of cleaning and strengthening of the iron castings, and they had undergone only rough machining to give them smooth surface, and since the real processing and machining to convert them into motor-vehicle parts took place after importation into India, the goods were liable to be assessed to CV duty, with reference to TI 25 of the CET.
30. In the case of Tata Iron and Steel Co. Ltd. (supra) relied upon the appellants, again there was clear admission on the part of the Departmental authorities that the goods were in the nature of forged products, and the Adjudication Order of the lower authorities indicated that the factory of the appellants manufactured only forged products and it was in that context that the Bench held that the type of machining which those products, cleared as products of a forging-factory, had undergone was of an incidental nature and did not convert them into goods further liable to duty under TI 68, particularly when the contention of the appellants in regard to one of products; namely, hammers, as being covered by TI 26AA, was upheld and the other two products of the same factory were held to be falling under TI 68, without assigning any reason. This case, therefore, also lends no assistance to the case of the appellants where, as discussed in detail, the goods assumed a distinct character as wheel-sets, wheels or axles, ready for use in the manufacture of wagons by the Railways, which are shown in the classification lists by the appellants themselves under the heading 'finished steel products'.
31. We, therefore, hold that the Collector had rightly held them liable to discharge duty liability under TI 68, at the second stage after having paid duty as forged products under TI 26AA(ia) We also observe that reference to Notification No. 150/77-CE dated 18-6-1977 by learned Counsel of the appellants seems to be wholly misplaced as the contents of that Notification have no bearing on the controversy.
32. However, in view of the position that right from 1962, these goods were being cleared under physical control upto 1968, and, even thereafter, they were allowed to be cleared after paying duty only under TI 26AA(ia) even though classification lists were filed from time to time which were duly approved by the Assistant Collectors concerned, which situation continued after the induction of Tl 68 in the year 1975 in the CET; for the latest classification list, as on record (Annexure-IV), having been filed on 24-4-1979 was approved on 26-5-1979, it is remarkable to note that the description of the goods is, as already pointed out, under heading 'Finished Steel Product' and under the clear name 'wheels and axles'. The appellants are justified in contending that the Asstt. Collectors, before according approval on the classification lists, wese aware of this fact, and are expected to have conducted necessary enquiry, as to the nature of the goods, and the manufacturing process. They contend that R.T. 12 returns duly accompanied by gate-passes were being submitted; one for the month of June, 1980 has been even filed before us at Serial No. IXA, which again contained full description of the goods. An Asstt. Collector had, in separate proceedings initiated by means of show cause notice issued on 5-9-1977, had passed an order on 5-9-1978 that the product be recorded in the RG-I Register after the RITES had conducted inspection. There is clear mention of even wheel-sets in this order (Annexure-B) so as to negate the assertion that there was no disclosure as to the factum of wheel-sets being cleared from the factory.
33. Collector's observation, which the learned SDR endeavoured to support, that there was no indication in the classification list of machining processes having been undergone or that there was no reference to Tl 68 goods is, in fact, begging the question because that is the real controvercy, and in case the appellants entertained a bonafide belief that their goods were falling under TI 26AA(ia), which belief the Department endorsed by going on to approve the classification lists, till as late as May, 1979, and issued the show cause notice for the first time only in April 1980; it does not lie in the mouth of the Department to even suggest that there was suppression on the part of appellants, much less mis-statement, or that it was a case of any clandestine removal. We also find justification in the plea of the appellants that in case they were obliged to pay duty, they could pass it on to the customers who could claim set off under Rule 56A and, as such, there could be no intention to evade duty, nor any loss of revenue to the Department, and that it was apparently a case of genuine belief as to classification.
34. We are, therefore, of our considered view that there is absolutely no justification in invoking or applying the extended period of limitation of 5 years. It was held by the Supreme Court in the case of N.B. Sanjana, Assistant Collector of Central Excise, Bombay, and Ors. v. Elphinstone Spinning and Weaving Mills [AIR 1977 (SC) 2039], that in the case of classification lists being filed and the stand, as indicated therein, being endorsed by the Deptt., by according approval to the classification lists; the provisions of Rule 9(2) could not be invoked.
35. There can be, thus, no disputing the contention of appellants that there was no justification in applying the period of 5 years from the date of issue of show cause notice. What requires consideration is the further contention of appellants that the Excise authorities could not go back even six months from the date of show cause notice assuming that departments' stand on classification was correct, because of there being no existence of any fresh reason, for changing the stand as established by the long standing practice, approved by the Department right from the inception of the manufacture of goods in 1962, for 17/18 long years, upto 1979-80, when the last classification list was approved, and till the first show cause notice was given. We find substance in this plea. The Tribunal has held in the case of Inarco Ltd., Bombay, v. Collector of Central Excise, Bombay [1984 ECR 2164 (CEGAT)], that m such a situation, the demand for additional duty by reference to TI 68 is enforceable only with effect from the date of issue of show cause notice. That was also a case of a long-standing practice having been allowed to continue by the Department by means of orders issued and approvals recorded both from the period prior to introduction of TI 68 as well as subsequent dates; till the issuance of show cause notice in 1980. We feel inclined to adopt a similar view on the peculiar facts of this case, and hold that the demand for additional duty in this case under TI 68 can be held enforceable only with effect from the date of issue of the first show cause notice, i.e., 28-4-1980.
36. As a result, whereas the appeal is dismissed on merits and the goods, cleared as (wheels, axles and wheel-sets), are held liable to pay excise duty under TI 68, in spite of duty having been paid on the forged products under TI 26AA (ia); the appeal is allowed partly on the point of limitation; namely, the period for which the additional demand is enforceable, will be only with effect from 28-4-1980. The appeal is disposed of accordingly.