1992(12)LCX0016

BEFORE THE CEGAT, SPECIAL BENCH’B’, NEW DELHI

S/Shri P.C. Jain, Member (T) and G.A. Brahma Deva, Member (J)

QUALITY STEEL PRODUCTS PVT. LTD.

Versus

COLLECTOR OF CENTRAL EXCISE

Final Order Nos. 271 to 275/1992-B.l, dated 4-12-1992, passed in Appeal Nos. E/1737 & 1738/92-B1

CASES CITED

Case of Indian Metals & Ferro Alloys Ltd. — 1990(11)LCX0014 Eq 1991 (051) ELT 0165 (S.C.)............. [Paras 5, 6, 7, 8]

Case of Himalyan Dragon — Order No. E/47 to 50/92-B.l (Tribunal), dated 4-2-1992.... [Para 5]

Interarch Building Products (P) Ltd. v. Collector — 1990(03)LCX0022 Eq 1990 (049) ELT 0147 (Tribunal)......... [Para 6]

Bharat Forge & Press Industries (P) Ltd. v. Collector — 1990(01)LCX0072 Eq 1990 (045) ELT 0525 (S.C.).... [Paras 6, 8]

Chetna Polycoats (P) Ltd. v. Collector — 1988(07)LCX0042 Eq 1988 (037) ELT 0253 (Tribunal).......................... [Para 6]

Tata Iron & Steel Co. Ltd. v. UOI — 1987(03)LCX0037 Eq 1988 (033) ELT 0297 (Pat.)......................................... [Para 7]

Case of Bharat Petroleum Corporation — 1-Bombay - C.R. Page 310................................. [Para 7]

Advocated By: S/Shri S.S. Agarwal and V. Sridharan, Advocates, for the Appellants.

Shri M.S. Arora, JDR, for the Respondents.

[Order per : G.A. Brahma Deva, Member (J)]. - Appeal Nos. E/1737 & 1738/92-B1 are filed by the party on the issue of classification of the product “Steel Tubular Poles” and similarly Department also filed appeals against the impugned order on the similar issue in Appeal Nos. 5128/91, 5129/91 and E/2442/92. Cross-objections are also filed by the parties in the appeals filed by the Department. Hence, all these matters are clubbed .together and are being disposed of by this common order, t

2. The issue involved in all these cases is that whether Steel Tubular Poles manufactured by the parties are classifiable under Tariff Sub-heading 7306.90 as claimed by the appellants or under sub-heading 7308.90 as contended by the Department.

3. The relevant tariff entries are reproduced as under :-

4. We have heard Shri S.S. Agarwal and Shri V. Sridharan, learned Advocates for the parties and the Department was duly represented by Shri M.S. Arora, learned J.D.R. in all these cases.

5. The process of manufacture of the goods in question was explained by Shri S.S. Aggarwal that the tubes are manufactured out of duty paid Hot rolled coils which are first slitted into desired smaller widths. Slitted strips/pieces are then rolled into hollow pipes and continuously welded by manual arc welding process. The pipes are swaged and joined together. The welded tubes continue to have hollow profile and having only one longitudinal weld scam. The circumferential weld is deposited at the upper end of each joint at a slope of approximately 45^O. Holes are then coated with black bituminous paint internally and externally up to a depth which goes inside the earth, retaining their hollow profiles throughout their length in the final shape so that liquid could flow in them by gravity or under pressure or there is no blockade of passage from inside so that at no stage the product goods lose their basic characteristics of being tubes/pipes/hollow profiles as known to the trade and industry, being made out of thin H.R. coil and not heavy gauge M.S. plates. These are non-load bearing verticals. He contended that these are not structures to be classifiable under sub-heading 7308.90 and it is not even the case of the Department that they are structures and further it cannot be said that these items are prepared for use in the structure as envisaged in the last part of the sub-heading 7308.90 that tubes and the like prepared for use in structures. He submitted that this issue is specifically and squarely covered by the decision of the Supreme Court in the case of Indian Metals and Ferro Alloys Ltd., reported in 1991 (051) ELT 165. He said that though the said decision was with reference to old Tariff under 26 A.A. (iv), but since there has been no material change in respect of the description of the items in question they are correctly classifiable under sub-heading 7306.90 as tubes and pipes but not as structures or part of the structures under sub-heading 7308.90 following the ratio of the aforesaid decision. He said that further this point was considered by the Tribunal in the case of M/s. Himalyan Dragon and other three parties vide Order No, E/47 to 50/92-B1, dated 4-2-1992 that there has been no material change in the subsequent change in the tariff items.

Shri S.S. Agarwal said that steel tubular poles are manufactured by the parties as per Specifications of IS 2713 /1980 and are largely meant for overhead power lines. These could also be used for flag masts and a few other applications; but nevertheless they never lose their prime characteristics of being tubes, pipes and hollow profiles. The majority customers also happen to be SEBs who use these poles for overhead transmission lines. An end product having a specific application, manufactured as per laid down specification for that application and also known as such in trade parlance could not merit classification under a generic entry viz., 7308.90. Apart from the merits of the case, he submitted that one more point is involved in the cases he is representing since the demand is also barred by time. He said that Tribunal has been consistently holding that where a long standing practice has been allowed to continue by the Department by means of orders or by approving the price list, change of classification, if any, will come into force from the date of issue of show cause notice and demand could be enforceable with effect from the date of notice. He said that in the concerned cases classification was approved under Tariff sub-heading 7306.90 for a considerable time and on 23-3-1990 the Assistant Collector issued a show cause notice for classifying the item under sub- heading 7326.90 without any valid reason. Further it was amended by issuing a corrigendum on 13-7-1990 replacing the sub-heading 7326.90 with the sub- heading 7308.90 raising the demand for the period September 89 to February 90. Hence demand pertains to the earlier to the date of corrigendum is barred by time. He referred to the series of decisions in support of his contention.

6. Shri Sridharan appearing for the respondents in Appeal Nos. E/5128 and 5129/91-B.l and E/2442/92-B.1, while adopting the arguments of Sri S.S. Agarwal on merits, submitted that goods in question cannot be treated as structures since they cannot bear any load. Reliance was placed by him in the case of Interarch Building Products (P) Ltd. v. Collector of Central Excise. 1990(03)LCX0022 Eq 1990 (049) ELT 0147 (Tribunal) wherein Tribunal held that shapes section formed by cold rolling process out of aluminium strips cannot be treated as structurals and they cannot bear any weight or load following the ratio of the decision of the Supreme Court in the case of Bharat Forge and Press Industry (P) Ltd. v. Collector of Central Excise, reported in 1990(01)LCX0072 Eq 1990 (045) ELT 0525 (S.C.) which had considered the question of classification of pipe fittings under T.I. 26AA in preference to T.I. 68. He emphasised that an item should be one prepared for use in structure as envisaged under Heading 73.08 and since the item in question cannot be said that it is prepared for use in structures and as such it will not come under purview of Heading 73.08. He said that Rule 3(a) of Explanatory Note to H.S.N. also specifies that the heading which provides the most specific prescription shall be preferred to headings providing a more general description. He contended that description by name is more .specific rather than description by clause. He referred to the general explanation in Page 1011 of Explanatory Notes to H.S.N. and said that item in question should be classified by name and nature of the product under specific heading rather than under residuary entry. He said mat Explanatory Notes to the Harmonised System Nomenclature on which the Central Excise Tariff, 1985 is based are useful aid of classification in the Central Excise Tariff so long as the interpretative Rules and Headings of the latter and case law do not point to contrary conclusions, relying upon the decision of Chetna Polycoats (P) Ltd. v. Collector of Customs [1988 (037) ELT 253]. Since this issue is squarely covered by the decision of the Supreme Court in the case of Indian Metals & Ferro Alloys Ltd., (supra) and in the absence of specific tariff entry with reference to item in question, Department was not justified in classifying as residuary item under sub-heading structures.

7. Shri Arora arguing for the revenue submitted that new tariff was introduced with effect from 1-3-1986 with detailed sub-headings under the respective heads. The new tariff is introduced based on the Harmonised System Nomenclature and no classification matter relating to the new Tariff can be decided on the basis of tariff entries prior to 1986. He said that change in the tariff makes a new distinction and nature of the item is to be classified as per the description given in the relevant tariff entry. He said that said Tubular Steel Poles are manufactured by the assessees as per specification given in I.S. 2713/1980 and nature and function of the item is in conformity with the description given in the General Explanation in Chapter Notes to Chapter 73 of H.S.N. He argued that it is not correct to say that these goods cannot bear any weight or load and on the other hand it carries load as can be seen in para 2.1 of I.S. 2713/1980. Further scope of the item in question in I.S. 2713/1980 refers to it shall conform to grade Yst 240 of IS 1161-1979 and IS 1161-1979 inter alia which refers to specification for Steel Tubes for structural purposes. He submitted that decision of the Supreme Court in the case of Indian Metals & Ferro Alloys Ltd., is not applicable .to these cases as the classification of transmission poles was with reference to old Tariff Item 26AA as opposed to T.I.68 in that case. He said that further 26AA of the erstwhile tariff was wide compared to 7306.90 and 7306.90 does not talk of all sorts of pipes and tubes as highlighted in 26AA. He said that ratio of the said decision is not applicable as the facts are not similar in as much as tariff entries are altogether different. He referred to the decision in the case of Tata Iron & Steel Co. Ltd., v. Union of India [1988 (033) ELT 297] wherein it observed that ratio deidendi is the rule deductible from the application of law to the facts and circumstances of a case and not some conclusion based upon facts which may appear to be similar.

8. We have considered the rival submissions with reference to the facts of the cases and perused the records including citations. On going through the nature and manufacturing process of the item in question, we are convinced that this item should be assessed under the category of tubes and pipes made of iron or steel. But the point for our consideration in all these cases is in the absence of specific entry with reference to the item or in other words name of the item as such does not appear under any sub-heading, whether it is to be assessed as other types of tubes and pipes or the item like tube prepared for use in the structure. Heading 73.08 broadly refers to three items, viz., structures, parts of the structures, tubes and the like prepared for use in the structures. This heading specifically excludes prefabricated buildings of heading No. 94.06 and it is not the case of the Department that these are structures or the item appeared in sub-headings 7308.10, 7308.20, 7308.30 & 7308.40. Hence only point left is whether these items can be considered as item like tubes prepared for use in structures. We are not having any evidence on record to show that these steel tubular poles were prepared for use in structures. Structure is not defined in the tariff. Structure means anything built or constructed, any piece of work artificially lock-up can be structure but not necessarily a building as it was observed in Bharat Petroleum Corporation of Greater Bombay, reported in 1-Bombay-C.R. Page 310. But there is no evidence to show the poles manufactured by the parties would fit into structure as and when so used as parts of structures or they were prepared for use in structures. We are not convinced with the arguments of the D.R. that the goods in question have to be treated as structurals since they bear load and were manufactured as per I.S.I. specifications. Although it has got an incidental loading capacity, it is only theoretical load and not significant as the predominant function of the tubular poles is to provide medium not to expose wires and as such these cannot be called as structurals as it was argued by the Representatives of the Assessees. It is settled principle that unless the Department can establish that the goods in question can, by no conceivable process of reasoning, be brought under any of the tariff items, resort cannot be had to residuary item as it was held in the case of Bharat Forge & Press Industries v. Collector [1990 (45) ELT525 (S.C.)] and same view was affirmed in Indian Metals & Ferro Alloys Ltd., (supra).

Further, change in tariff does not change the nature of goods. It is true that 26AA (iv) of erstwhile Central Excise Tariff was wide compared to 7306.90 of the new Tariff and there was only one single entry covering all sorts of tubes and pipes as against number of sub-headings in the new Tariff as it was argued by the D.R. But mere change in tariff or incorporating number of headings and sub-headings will not take away the nature of the goods unless name and description of the very goods is so specified under the relevant tariff entry for the purpose of classification. This issue was precisely considered by the Hon’ble Supreme Court in the case of Indian Metals & Ferro Alloys Ltd., (supra). Although the said decision was in the context of the old tariff but the principle laid down regarding classification of such poles would be equally applicable in the present context. The question arose in that case whether pipes, tubes and poles made of iron & steel were liable to excise duty under Item 26AA or under Item 68, on introduction of Item 68 into the old tariff. While deciding the issue the Supreme Court made some observations which we can find in para 13 of the said judgment and the relevant part is reproduced below :

Para 13:"......The sum and substance of the descriptions given by the Assistant Collector in the assessment order is only (a) that the poles produced by the appellants are not ordinary pipes and tubes which convey a fluid from one place to another and (b) that they are manufactured by a very elaborate sophisticated process. So far as the first point is concerned it will be appreciated that just as pipes and tubes are generally intended to carry a fluid from one place to another the poles with which we are concerned enable wires to be passed through them for the transmission of electric energy, a function not very different in nature from that of other ordinary pipes and tubes. That apart even tubes and pipes are not always necessarily used for such purpose. They can be used as flag masts or for purposes of scaffolding or other purposes which they do not serve as a medium for the transmission of a fluid. This is not therefore a sound objection. In regard to the second point, it is perhaps sufficient to point out that sub-item(iv) of Item 26AA refers to pipes and tubes (including blanks thereof) all sorts, whether rolled, forged, spun, cast, drawn, annealed, welded or extruded. It is comprehensive enough to take in all sorts of pipes and tubes and even those obtained by the processes of forging, drawing and so on. The ultimate product in the present case is merely a set of pipes or tubes of different diameters attached to one another by different methods. The so called manufacture is nothing but the putting together of a number of pipes or tubes by one or other of the processes mentioned in the tariff item. The goods produced, therefore, do not cease to be iron and steel products or pipes and tubes of the description mentioned in Item 26AA (iv). It may not be also correct to characterise them as different commercial commodity. Some of them are called poles, an expression which means “a long slender piece of metal or wood commonly tapering and more or less rounded”. Electric poles, being hollow ones, are not much different from pipes and tubes. The statement that they are commercially distinct commodities is merely based on their being called ‘poles’. They are also available in the same market in which normally pipes and tubes are otherwise available. Neither the circumstance that certain processes to the “mother” pipes or tubes nor the fact that in order to identify the particular type of tube or pipe one needs, one may use different names is sufficient to treat the article as a commercially different commodity."

9. In view of our foregoing conclusion and following the ratio of the aforesaid decision, we are of the opinion that these steel tubes poles are not classifiable under Tariff Heading 7308.90 and accept the contention of the parties that the goods in question are assessable to duty under sub-heading 7306.90. In the above view it is not necessary to go into other issues including limitation which have been raised before us by the assessee-appellant.

10. These appeals and Cross Objections are disposed of in the above terms.

Equivalent 1993 (65) ELT 513 (Tribunal)