1992(10)LCX0071

BEFORE THE CEGAT, SPECIAL BENCH ‘B1’, NEW DELHI

Shri P.C. Jain, Member (T) and Ms. Jyoti Balasundaram, Member (J)

NAGPUR ENGG. CO. LTD.

Versus

COLLECTOR OF CENTRAL EXCISE

Order Nos. E/231-234/92-B1, dated 12-10-1992 in Appeals No. E/2788/88 with E/Cross/443/91-Bl, No. E/2846/88-B1 and E/1516/91-B1 with E/Cross/207/91-B1 and E/1517/91 - B1 with E/Cross/206/91-Bl

Cases Quoted

Collector v. Chemphar Drugs & Liniments - 1989(02)LCX0024 Eq 1989 (040) ELT 0276 (SC)                              [Para 12]

Padmini Products v. Collector - 1989(08)LCX0031 Eq 1989 (043) ELT 0195 (SC)                                                  [Para 12]

Advocated By : Shri V. Lakshmikumaran, Advocate, for the Appellants.

Shri S.K. Sharma, JDR, for the Respondents.

[Order per : Jyoti Balasundaram, Member (J)]. - All the above four appeals involve common issues and are hence heard together and disposed of by this common order.

2. The classification of anti-creep bearing plates manufactured by the appellants according to the specifications and design supplied by the Research, Design and Specification Organisation of the Ministry of Railways, Govt. of India as ‘railway track construction material’ arises for determination in Appeal Nos. E/2788/88, E/1516/91 and E/2846/91. According to the Department these bearing plates fall for classification under Heading 7302.90 of the Central Excise Tariff Act, 1985 as “other material specialised for jointing or fixing of rails” while the appellants contend that the product is to be classified under Heading 7307.10 as castings of iron and eligible to the benefit of Notification 208/83. The classification of Brake Blocks manufactured according to specifications and designs supplied by the Ministry of Railways and supplied to the Indian Railways is the issue for decision in E/1517/91-according to the appellants the classification should be under Heading 73.07 while the Department has classified them under Heading 86.07 as “parts of railways or tramway locomotives or rolling stock”.

3. We have heard Shri V. Lakshmi Kumaran, the learned Counsel for the appellants in all the appeals and Shri S.K. Sharma, the Ld. JDR for the Revenue and carefully considered their submissions.

4. Anti-creep bearing plates are placed between the rail and wooden sleepers and fixed to the wooden sleepers with four spikes/screws. The rails are placed between the two jaws of the bearing plates. The main purpose is to reduce the wear and tear of the sleepers and rails and to prevent what is known as “Longitudinal Creep” which occurs in the forward direction when a heavy rolling stock moves on the rails. In some cases, rails are fixed to the sleepers only with the help of spikes and bearing plates are not used.

5. The Ld. Counsel submits that bearing plates are not necessary for fixing the rails to the sleepers and their function is only to protect the sleepers and spikes from wear and tear and the bearing plates will not come under the category of material for fixing the rails as they are not so used. We see no force in this contention. The rail is fixed to sleepers through the bearing plates with spikes and the bearing plates between clamp the rail and the sleepers. As rightly contended by Shri Sharma, the Ld. DR, it is not spikes and screws alone which are to be treated as fixing material but keys, screws, spikes and bearing plates together are materials for fixing the rails. The bearing plate can rightly be regarded as special device and has been recognised in a number of technical books as a rail fixture and fastening. Few extracts are reproduced below:

(i) “Railways, theory and practice of permanent way Engineering” by Shriniwas T. Kale, published by Vishwakarma Publishers, 21, Khajuri Bazar, Indore City.

Page No. 24: Comparison of Bull headed rail and flat footed rail:

The bull headed rail although strong with regard to better alignment has got disadvantage that special chairs and bearing plates are required to be provided for fixing the rail on the sleeper.

(ii) “Road Railway Bridge & Tunnel Engineering written by B.L. Gupta, M.Sc. (MA & H.S) M.E.(W.R.), Roorkee. Head of Civil Engineering Department, Government Polytechnic, Bikaner (Rajasthan) published by Standard Publishers Distributors, Delhi”.

Page No. 57 : Fastening of Rails - The devices used to connect rails and sleepers together to form the track are known as fastening. Following devices are used as fastening to keep the rails in their correct position.

(i) Fishplate

(ii) Spike, Fang Bolts & Nook Bolts

(iii) Chairs and Keys

(iv) Bearing plates

Page No. 66: Bearing Plates :

Chair used for flat footed rails are known as bearing plate.

Page No. 89 : To prevent creep, anti-creep bearing plates are provided for wooden sleepers.

(iii) ‘Railway Track’ by K.F. Antia, B.Sc (Eng.) Hon’s (London), Diploma of King’s College, London, M.Sc. Engg. (London), Former Deputy Chief Controller, Min. of Railways.

Page No. 230 : Americal Practice, where long lengths of welded rails are in use, is to provide anchorage through bearing plates."

6. The alternate submission of the appellants is that Anti-creep bearing plates can be considered as sole plates. The Ld. Counsel refers to the explanatory notes at page 1013 wherein sub-para 5 reads as follows :

“Sole plates (base plates, sleeper plates) are used in fixing flat-bottomed rails to sleepers. They protect the sleepers and are fixed to them by cramps, bolts, coach screws, spikes or, in the case of steel, by welding”.

If the bearing plate is considered as a sleeper plate then the same would merit classification under Heading 7302.10 as sleepers and in terms of Trade Notice 218/87 dated 19-8-1987 issued by the Calcutta-II Collectorate would be exempt from duty under Notification No. 208/83-C.E., dated 1-8-1983. We do not agree with this contention as the tariff itself recognises sole plates as a separate item of railway track construction material under Heading 73.02. Therefore, we do not accept Ld. Counsel’s argument that anti-creep bearing plates are sole plates.

7. We therefore, hold that anti-creep bearing plates fall for classification under Heading 7302.90 which covers

73.02 - Railway or tramway track construction material of iron or steel, the following:

rails, switch blades, crossing frogs, point rods and other crossing pieces, sleepers (cross-ties), sleeper bars, fish plates, chairs, chair wedges, sole plates (base plates), rail clips, bed plates, ties and other material specialized for jointing or fixing rails.

7302.10 - Railway track construction material, namely, rails, sleepers(cross-ties) and sleeper bars

7302.90 - “others”, and not as castings of iron not elsewhere specified

in Chapter 73 or in Chapter 72.

8. Coming to the classification of brake blocks, the contention of the appellants in E/1517/90 is that the brake blocks are merely castings and have yet to be machined before coming locomotive part. Castings which had not been subjected to processes other than the following should be classified only under Heading 73.07 according to Ministry of Finance Circular No. 139/48/86 dated 8-2-1987 - (a) removal of runners and risers (b) surface cleaning and removal of surface defects, (c) chipping, filing or grinding to remove excess material (d) annealing and stress relieving (e) proof machining (f) surface coating. However, we find that there is no evidence as to any machining undertaken by the buyers namely the Ministry of Railways to whom the majority of the production of brake blocks is supplied. Further Chapter 86 specifically covers “railway or tramway locomotives rolling stock and parts thereof”. The brake block is fixed to a brake glove and together it is used as a brake. Thus, it is clearly a part of rolling stock and therefore to be classified under Heading 8607.00. Classification under Heading 73.07 is ruled out as this heading, though covering all kinds of castings is more general in nature and Heading 86 is more specific for parts of railways locomotives.

9. Contention of the appellant is that the demands in all four cases are barred by limitation. The details of the period of demand and dates of show-cause notices in the four appeals are as tabulated below :

From the above tabulation, it will be seen that in appeal Nos. 2788/88, 2846/91, major portion of the demand is beyond the period of six months while in other two appeals, the entire demand is beyond the period of six months from the date of issue of show cause notice. Shri V. Lakshmikumaran submits that the extended period of limitation is not available to the department as the appellants had been filing declarations in terms of Notification No. 111/78 (exemption from licensing) for the relevant period namely 1986-87 and 1987-88 declaring the manufacture of bearing plates and brake blocks, as iron castings falling under Heading 7307.10. He submits that prior to the introduction of the 1985 tariff, the bearing plates and brake blocks were classified under T.L 25 as iron castings and fully exempt from duty under Notification 208/83 dated 1-8-1983. Therefore, the appellants were under the bona fide belief that even after the change in tariff, the items in question were classifiable as iron castings under Heading 73.07. Therefore, the failure of the appellants to take out the Central Excise Licence would not amount to suppression in the absence of anything positive on the part of the appellants. The Ld. DR on the other hand contends that the failure to take the Central Excise Licence ipso facto amounts to suppression and the extended period of limitation has been rightly invoked by the Department. We are unable to accept the contention of the DR.

10. We find that there was a long standing practice of classification of castings under TI 25 and exemption under Notfn. No. 208/83 was available to castings, which exemption continued for castings falling under Heading 73.07 even subsequent to the introduction of the new Tariff in 1986. The appellants had also been filing declarations during the relevant period, declaring the manufacture of bearing plates and brake blocks as iron castings under Heading 7307.10. One such declaration dated 2-4-1986 by Jaiswal Steel Enterprises which is found at Pages 49 to 51 of the paperbook in E. 2846/91 is reproduced below:

“Notification No. 174 - C.E. dated 1-3-1986

FORM

To

The Superintendent,

Central Excise,

New Khursipar,

Bhilai (Dist. Durg)

We M/s. Jaiswal Steel Enterprises Pvt. Ltd. declare that to the best of my/our knowledge and belief the information furnished in the Schedule below is true and complete.

We undertake to apply for a Central Excise Licence in the proper form as soon as value of the goods, mentioned in the said Schedule cleared in a Financial Year, reaches rupees five lakhs.

We undertake to maintain such records and follow such procedure as may be prescribed by the Collector in relation to exempted goods.

We also undertake to intimate any change in the information furnished in the said Schedule.

SCHEDULE

A similar declaration has been filed for the year 1987-88 also by both the appellants.

11. We also note that the supply of anti-creep bearing plates and brake blocks is almost exclusively to the railways. The Min. of Finance, Deptt. of Revenue Circular dated 8-2-1987 referred to by the appellants also clarified that castings which have not been subjected to processes other than the following should be classified only under Heading 73.07:

(a) removal of runners and risers

(b) surface cleaning and removal of surface defects

(c) chipping, filing or grinding to remove excess material

(d) annealing and stress relieving

(e) proof machining

(f) surface coating

12. Therefore, the appellants can be said to have been under a bona fide belief that bearing plates and brake blocks even after the change in tariff w.e.f. 1-3-1986, were classifiable as iron castings under Heading 73.07. In the light of the above, the failure of the appellants to apply for Central Excise Licence cannot tantamount to suppression, specially in the absence of any conscious or deliberate withholding of information. It has been held by the Hon’ble Supreme Court in the case of Collector of Central Excise v. Chemphar Drugs and Liniments [1989 (040) ELT 276] that “something positive other than mere inaction or failure on the part of manufacturer or producer or conscious or deliberate withholding of information when the manufacturer knew otherwise, is required, before it is saddled with any liability beyond the period of six months. In the case of Padmini Products v. Collector of Central Excise [1989 (043) ELT 195] the Hon’ble Supreme Court held that mere failure or negligence on the part of the producer or manufacturer 1[not to take out] a licence in case where there was scope for doubt as to whether licence was required to be taken out, would not attract Section 11A of the CESA, 1944. In this case we have already held that the appellants were under a bona fide belief that no licence was required to be taken out by them in view of the long standing practice of classification of castings under T.I. 25 and availability of the benefit of Notification No. 208/83 even subsequent to 1-3-1986 when castings fall under Heading 73.07. This bona fide belief is further fortified by the fact that HSN Explanatory Notes were available only in Sept. ‘85 and complete alignment of the Central Excise Tariff with the HSN took place only in 1986. In the light of the above discussion, we hold that the extended period of limitation will not be attracted in these cases. Consequently, the demands in Appeal Nos. E/1516/91 and Appeal No. E/1517/91 are entirely barred by limitation. In Appeal No. E/2788/88 and Appeal No. E/2846/91, the demand is confirmed for a period of six months prior to the issue of show-cause notice.

13. In the result, we hold as follows :

(a) Anti-creep bearing plates fall for Classification under Heading 7302.90.

(b) Brake blocks fall for Classification under Heading 8607.00.

The demands in Appeal No. E/1516/91 and Appeal No. E/1517/91 are set aside on the ground of limitation. The demand in Appeal No. E/2788/88 is confirmed for the period 5th Feb. ‘87 to 31-3-1987 and the demand in Appeal No. E/2846/91 is confirmed for the period from 17-2-1987 to 31-3-1987. The penalties in all four appeals are set aside as unwarranted in the facts and circumstances of the case.

14. The appeals are disposed of in the above terms.

Equivalent 1993 (63) ELT 699 (Tribunal)