1993(05)LCX0045

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

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

SHIVAJI WORKS LTD.

Versus

COLLECTOR OF CENTRAL EXCISE, AURANGABAD

Final Order Nos. E/103 to 105/93-B1, dated 20-5-1993 in Appeal Nos. E/2078 and 2048/91-B1 and E/871/91-B1

Cases Quoted

JMC Industries v. Collector — 1990(11)LCX0082 Eq 1991 (053) ELT 0321 (Tribunal)                                 [Paras 6.1, 7.2]

Collector v. Heavy Engineering Corporation — 1988(02)LCX0114 Eq 1989 (039) ELT 0664 (Tribunal)       [Paras 6.1, 7.2]

TELCO v. Collector — 1983(05)LCX0034 Eq 1983 (013) ELT 1122 (Tribunal)                                            [Paras 6.1, 7.2]

New Standard Engineering Co. v. Collector — 1986(08)LCX0039 Eq 1986 (026) ELT 0419 (Tribunal)                [Para 6.1]

BHEL v. Collector — 1987 (028) ELT 545                                                                           [Para 6.1]

TISCO v. U.O.I. — 1988(05)LCX0068 Eq 1988 (035) ELT 0605 (S.C.)                                                           [Paras 6.1, 7.2]

TELCO v. Collector — 1990(04)LCX0073 Eq 1990 (050) ELT 0571 (Tribunal)                                          [Paras 6.1, 7.3, 8]

Collector v. Motor Industries Co. Ltd. — 1988(02)LCX0038 Eq 1990 (046) ELT 0163 (Tribunal)                         [Para 7.1]

Motor Industries Co. v. Assistant Collector — 1992(03)LCX0008 Eq 1992 (062) ELT 0013 (Mad.)                       [Para 7.6]

Atul Glass Industries Ltd. v. Collector — 1986(07)LCX0018 Eq 1986 (025) ELT 0473 (S.C.)                                  [Para 8]

Advocated By : Shri A. Hidayatullaha, Sr. Advocate, Shri M.P. Baxi, Shri S. Kher, Advocates, i/b M/s. Manilal Kher Ambalal & Co., for the Appellants.

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

[Order per : P.C. Jain, Member (T)]. - A common order is being passed because issues involved are common.

2. Facts relating to the appeals of M/s. Shivaji Works Ltd. are as follows :-

2.1 M/s. Shivaji Works Ltd. (hereinafter referred to as the first appellants) are engaged in the manufacture of iron and steel castings required for the manufacture of parts of machines falling under Chapters 84 to 87 of the CETA 1985. During the period from 23-6-1988 to 3-11-1988 the appellant cleared the iron and steel castings claiming their product to be classified under Heading No. 7325.10 to 7325.90 of the CETA 1985 and were charged to duty accordingly in terms of Notification No. 223/88 dated 23-6-1988. Superintendent of Central Excise, Range-II, however, observed that the said castings manufactured by the appellant were tailor-made castings required for machines falling under Chapters 84 to 87 and are manufactured as per specific instructions and drawings supplied by the customers. He also observed that these castings could be used only by the customer on whose behalf the said castings had been manufactured. It was, therefore, felt that the castings had the essential character of the machine parts for which they were ultimately intended. The department was also of the view that the Heading No. 73.25 CETA 1985 covered only those castings which had not been specified in the new Central Excise Tariff. It was also felt that in terms of Notification No. 223/88 dated 23-6-1988 the effective rate of duty applicable to such castings was Rs. 500/- per M.T. Therefore, two show cause notices dated 13-12-1988 and 15-12-1988 were issued by the Superintendent calling upon the appellant to show cause to the Assistant Collector of Central Excise, Solapur as to why the differential duty of Rs. 25,66,080.04p and Rs. 1,067.78 should not be recovered from the first appellant on the aforesaid two grounds. The adjudicating authority after due process of adjudication confirmed the demands of duty, as mentioned above by his order-in-original No. 28/89 dated 28-2-1989/7-3-1989.

2.2 On appeal before the Collector of Central Excise (Appeals), Bombay, the first appellants did not succeed. Hence the appeals by the first appellants.

3. Facts relating to the appeal of M/s. Continental Castings Ltd. are as follows :-

3.1 M/s. Continental Castings Ltd. are the manufacturers of iron and steel castings. It is alleged that these castings are used in machines/engines/motor vehicles falling under Chapters 84 to 87 of CETA, 1985. It is further alleged that the cast articles are identifiable as machine parts and have characteristics of complete or finished articles. It was, therefore, felt by the department that the castings would be assessable under sub-heading 8708.00 and were chargeable to duty at the rate of 20% ad valorem BED plus 5% SED for the period 1-3-1988 to 22-6-1988. Thereafter, these were allegedly chargeable to duty at the rate of Rs. 500/- per M.T. Basic plus 5% in terms of Rule 2(00a) of Rules of Interpretation of CETA 1985. Accordingly, two show cause notices demanding duty of Rs. 12,74,731.84 BED plus Rs. 63,736.59 SED for the period 1-3-1988 to 22-6-1988 and another for demanding duty of Rs. 74,003.35 BED plus Rs. 3700.17 SED for the period 23-6-1988 to 31-7-1988 were issued to the second appellant. Order-in-original No. 116/90 dated 28-3-1990 was passed by the Assistant Collector of Central Excise, Nasik, confirming the aforesaid amounts of duty.

3.2 On appeal, the second appellant herein did not succeed. Hence this appeal before the Tribunal.

4. In the matters relating to M/s. Shivaji Works, the lower appellate authority has held that although the castings manufactured by the appellant continue to be castings but they are identifiable as machines parts falling under Chapters 84 to 87. Therefore, rate of duty of Rs. 500/- per M.T. as mentioned at S. No. 3 of Notification No. 223/88 is applicable to the castings manufactured by Shivaji Works.

4.1 With regard to the castings of M/s. Continental Castings Ltd., lower appellate authority has held that castings manufactured by the appellant are recognizable parts of motor vehicle and the same would fall under sub-heading 8708.00 as per Rule 2(a) of the General Rules for Interpretation of CETA, 1985.

5. In order to appreciate the arguments of both sides, we reproduce below the relevant Tariff Heading, Exemption notification and Interpretative Rule 2(a) :-

Rule 2(a) - Any reference in a heading to goods shall be taken to include a reference to those goods incomplete or unfinished, provided that, the incomplete or unfinished goods have the essential character of the complete or finished goods. It shall also be taken to include a reference to goods consisting wholly or partly of such material or substance. The classification of goods consisting of more than one material or substance shall be according to the principles contained in Rule 3.

Exemption Notification No. 223/88-C.E., dated 23-6-1988 - In exercise of the powers conferred by sub-rule (1) of rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts goods of the description specified in column (3) of the Table hereto annexed and falling under heading Nos. or sub-heading Nos. of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as are specified in the corresponding entry in column (2) of the said Table, from so much of the duty of excise leviable thereon which is specified in the said Schedule, as is in excess of the amount calculated at the rate specified in the corresponding entry in column (4) of the said Table.

THE TABLE

Provided that the said goods have not been subjected to any machining, or surface treatments, other than -

(a) annealing, tempering, case-hardening, nitriding and similar heat treatments to improve the properties of the metal.

(b) rough coating intended solely to protect products from rust or other oxidation, to prevent slipping during transport and to facilitate handling for example, paints containing an active anti-rust pigment such as red lead, zinc powder, zinc oxide, zinc chromate, iron oxide (iron minium, jewellers rouge) and non-pigmented coatings with basis of oil, grease, wax, paraffin wax, graphite, tar or bitumen.

(d) removal of small portions of the metal for testing purposes, and

(e) removal of surface defects, or of excess material by grinding, chipping, filing or proof-machining, provided that in both the cases there is no change in the form of the product.

6. Shri Arshad Hidayatullaha, learned advocate for the appellant herein has urged that the appellants are merely manufacturing castings. They are not undertaking any processes on those castings other than those mentioned in Notification No. 223/88. The goods manufactured by them continue to remain castings although the castings are meant for their ultimate use as machine parts or parts of motor vehicle but such parts of machine or of motor vehicles are brought into existence only by further machining of substantial nature and vital importance at the customer’s end or in another factory of one of the appellants wherein they are cleared as machine parts after payment of duty under the relevant Chapters 84 to 87. In short, he has submitted that the castings manufactured by the appellants do not acquire the essential character of machine parts/motor vehicle parts and they cannot be considered as falling under Chapters 84 to 87 liable to duty at the rate applicable to such parts under those Chapters or at the rate of Rs. 500/- per M.T. mentioned at S. No. 03. of the Table to the Notification 223/88. These pleas were sought to be substantiated with the help of photographs and produced in the form of album which was taken as an additional evidence on record. The department was also given an opportunity to verify the correctness of the aforesaid photographic evidence and give its comments thereon. The Collector of Central Excise, Aurangabad vide his letter dated 13-10-1992 has enclosed in turn the report of the Assistant Collector, Solapur and has confirmed that the said Assistant Collector has found illustrations in the photographs to be factually correct. Report dated 8-10-1992 of the Assistant Collector which has been brought on record is given below :-

“The party is having plant ‘A’ and ‘B’ for the operations illustrated at photographs No. 1 to 14 and plant ‘C’ for the operations illustrated at photographs from 15 to 47 for the machining on raw castings after proofmachining. I have studied and verified the process/stages from pouring of molten metal into the moulds to the raw castings upto the stage of proof-machining or/and machined casting stage by stage and I have observed that :

(1) At the stages shown at photographs No. 1 to 4 no process is undertaken on the castings but the sand of moulds is separated in these stages.

(2) at photograph No. 5 and 6 the sand which could not be removed in earlier stages is being removed from castings by shot blasting. No process is undertaken on castings in this stage also.

(3) from the photographs at Sr. No. 7 to 14 the fettling process is undertaken in which excess material of castings is being removed by grinding. In this process various type of grinders are used to remove the excess material such as abrasive wheel/grinding wheel to remove the excess material on outer surface of the castings.

(4) By point emery and pneumatic chipping the excess material appearing at corners and inner side of the castings is being removed where the wheel grinders can not work.

In the above all stages only excess material is being removed from castings and then inspected to see whether the castings are fit for further machining or otherwise i.e. the proof-machining stage/process. The castings upto the stage of proof machining are the raw castings still having excess metal for machining according to the requirement in order to achieve the required size to make an essential part of particular machinery and can not be used in the respective machinery as it is.

Further, in the plant `C’ the party is undertaking various machining operations on the proof-machined castings in which they are inserting some bought-out items, also. After machining and fitment of bought-out items, the machined castings become a part of respective machinery. On physical verification of the proof-machined castings and machined castings it can easily be observed that the proof-machined castings are in a rough form and can not be used as such, as a part of any machinery, whereas, the machined castings give a look of finished, smooth and ready to use form of a particular part of a machinery.

Thus, it is observed that, what is stated in the note and illustrated in the photographs is factually correct.

The party is supplying the cylinder heads to Indian Railways as raw castings (Proof-machined) as well as machined castings (part of machinery) on payment of appropriate duty under respective sub-heading. The enquiries made in this behalf reveal the value of the raw castings is very much less when compared with that of machined castings of the same class."

6.1 Learned advocate has pointed out a number of decisions in his support that the machining undertaken by them does not convert rough casting as it comes out of the casting mould, into a machine part. The essential character still remains that of a casting. He relies on the following decisions of the Tribunal and the relevant extracts therefrom are reproduced below :-

(1) JMC Industries v. CCE [1990(11)LCX0082 Eq 1991 (053) ELT 0321 (Tribunal) - Para 4.1].

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(2) CCE v. Heavy Engineering Corporation Ltd. [1988(02)LCX0114 Eq 1989 (039) ELT 0664 (Tribunal) - Para 8].

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(3) Tata Engg. & Locomotive Co. Ltd. v. C.C. Bombay [1983(05)LCX0034 Eq 1983 (013) ELT 1122 (Cegat) - Para 2].

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(4) New Standard Engineering Co. Ltd., Bombay v. Collector of Customs, Bombay [1986(08)LCX0039 Eq 1986 (026) ELT 0419 (Tribunal) - Para 9].

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This decision takes into account, points out the learned advocate, Rule 2(a) of the CTA, 1975 which is pari materia Rule 2(a) of Interpretative Rules of CETA, 1985.

(5) BHEL v. Collector of Customs, Bombay [1987 (028) ELT 545 - Paras 8, 9, 10].

This is an important decision which has examined the scope of Rule 2(a) of the Interpretative Rules of CTA, 1975 and has laid down the test for the application of the said rule. Para 8 in that connection is relevant which is reproduced below :-

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(6) TISCO v. UOI [1988(05)LCX0068 Eq 1988 (035) ELT 0605 (S.C.) - Para 5].

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(7) TELCO v. Collector of Customs [1990(04)LCX0073 Eq 1990 (050) ELT 0571 (Tribunal)].

He has drawn attention to the functional test laid down by the Tribunal relying on Supreme Court’s decision in the case of Atul Glass Industries Ltd. & Others v. Collector of Central Excise [1986(07)LCX0018 Eq 1986 (025) ELT 0473 (S.C.)] in paras 11 and 12 of the said judgment. They are reproduced below :-

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This judgment, learned advocate points out, has taken into account the Interpretative Rule 2(a) of CETA, 1975.

7. Opposing the contentions of the learned advocate, Shri M.S. Arora for the Revenue has submitted that castings are the first step in making a part of a machinery. Therefore, castings are linked with the ultimate product. Identifiable shape of a product is invariably contained in the casting of that product. Relying on a book titled as “Materials Science and Processes by S.K. Hajra Choudhury, he has pointed out that ”casting is the oldest process known for forming materials. Almost all metallic objects begin their individual careers by being cast. By definition, casting is the pouring of molten metal into a fire proof container or mould, where solidification occurs." He further points out that there are various casting processes which are given below, as extracted from the said Book :-

SAND CASTING

It involves pouring molten metal into a cavity in a mass of packed sand, basically SiO2 together with small amounts of clay .............Sand casting requires a wooden or metal pattern from which sand moulds can be made. Since molten metal and alloy decrease in volume as they cool and solidify, it is necessary to make the pattern slightly larger than the final casting by an amount known as shrinkage allowance. If machining is to be performed, further allowance must be added to the pattern.

INVESTMENT CASTING

This process of making castings is often referred to as `lost wax casting’ and `precision casting’.

CENTRIFUGAL CASTING

A Centrifugal casting process consists of pouring molten metal into a revolving mould.

CONTINUOUS CASTING

This process of casting is used, in general, for the production of rods, pipes, sheet-metal and other articles as semi-finished products in an uninterrupted process.

7.1 Learned JDR has also relied upon Explanatory Notes to HSN on which is based CETA, 1985 pertaining to relevant Tariff Heading 73.25. These are reproduced below :-

“This heading covers all cast articles of iron or steel, not elsewhere specified or included.

This heading includes inspection, traps, gratings, drain covers and similar castings for sewage, water, etc. systems; hydrant pillars and covers, drinking fountains; pillar boxes, fire alarm pillars, bollards, etc.; gutters and gutter spouts; mine tubing; balls for use in grinding and crushing mills; metallurgical pots and crucibles not fitted with mechanical or thermal equipment; counterweights; limitation flowers, foilage, etc. (except articles of heading 83.06); mercury bottles.

This heading does not cover castings which are falling in other headings of the Nomenclature (e.g. recognisable parts of machinery or mechanical appliances) or unfinished castings which require further working but have the essential character of such finished products.

The heading also includes :

(a) Articles of a kind described above obtained by processes other than casting [e.g. sintering (heading 73.26)]

(b) Statues, vases, urns and crosses of the type used for decoration (heading 83.06)."

[Emphasis supplied by ld. JDR]

He has also relied upon a judgment of the Tribunal, namely -

Collector of Customs v. Motor Industries Co. Ltd. [1988(02)LCX0038 Eq 1990 (046) ELT 0163 (Tribunal)].

Taking into account the principles laid down in the Larger Bench judgment of BHEL, mentioned supra, the Tribunal came to the conclusion that forgings of adjusting pins, chemplates control lever forgings had essential characteristics of finished products in that case.

7.2 Learned JDR has further submitted that some of the various judgments relied upon by the ld. advocate for the appellants pertain to the erstwhile Central Excise Tariff which did not contain any “Interpretative Rules” as are contained in the present tariff. Department’s case is based upon Rule 2(a) of the said Interpretative Rules which envisages classification of incomplete/unfinished goods in the same heading/sub-heading of the tariff as the classification of complete/finished goods provided the former have the essential character of the latter. On the above submissions, he rules out the application of the following judgments, mentioned supra, relied upon by the appellants’ advocate, since question of the scope of Rule 2(a) of Interpretative Rules was not involved therein :-

(i) JMC Industries (Tribunal)

(ii) Heavy Engineering Corporation (Tribunal)

(iii) TELCO [1983(05)LCX0034 Eq 1983 (013) ELT 1122 (Tribunal)]

(iv) TISCO [1985 (035) ELT 0571 (Tribunal)]

7.3 Regarding applicability of Tribunal’s judgment in TELCO’s subsequent case i.e. 1990 (050) ELT 571 he submits that the ratio laid down therein requires reconsideration. He points out that one of the reasons given therein for not accepting the forging of a machine part as not acquiring the essential character of a machine part and consequently the forging not having the classification of a machine part is that the relevant tariff entry would become redundant. And then he went on to submit that the tariff entry would not be redundant; it would still be valid for a number of castings/forgings which are not ultimately intended for use as part of machine or a vehicle.

7.4 Learned JDR has sought to assail Tribunal’s decision in TELCO [1990 (050) ELT 571] on the ground that the ‘functional’ test laid down by the Tribunal would make the Interpretative Rule 2(a) itself redundant because no incomplete/unifinished article would be able to perform the function of a complete/finished article, even if the former had acquired the essential character of the latter.

7.5 Learned JDR has attempted to advance, what he called a theory of progression. When an article is manufactured by casting after it comes out of the mould, it would be one article; when further machining is done on it, casting progresses to another article. It will have to be examined whether the subsequent machined article has progressed to such a stage that it cannot be completed in another article but a predetermined finished article, then the former article should be treated to have the essential character of the predetermined finished article. Looked at from this angle, he submits that the so-called “castings” in question, on account of some machining on the cast articles as those came out of the casting mould should be considered to have acquired the essential character of the predetermined finished article i.e. part of a machine or a vehicle.

7.6 Learned JDR, in fairness, has drawn attention to a recent judgment of a single Judge of the Madras High Court in the case of Motor Industries Co. Ltd. v. Assistant Collector of Customs [1992(03)LCX0008 Eq 1992 (062) ELT 0013 (Mad.)] wherein the scope of the said Rule 2(a) has been considered. It lays down in para 10 of the said report as follows :-

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Learned DR, however, submits that the department has filed a L.P.A. before the Division Bench. Fate of the department’s appeal was not known. He would apprise the Bench about it later, if the Tribunal’s order is not passed by them. Learned JDR by his application received on 26-2-1993 has informed that Division Bench of Madras High Court has stayed the aforesaid order by its ex parte ad interim order dated 13-7-1992.

8.0 Learned advocate, in his rejoinder, has submitted that Tribunal’s judgment in TELCO’s case [1990 (050) ELT 571] squarely applies to the facts and circumstances of this case. Theory of progression is nothing but theory of ‘point of no return’ referred to by the adjudicating authority in the case of TELCO. Tribunal has categorically held that the test of “point of no return” laid down by the Collector of Customs was not a good test. Regarding the submission of the learned JDR on ‘functional test’ approved by the Tribunal in TELCO’s case to the effect that it would make the Interpretative Rule 2(a) redundant, learned advocate has submitted that the submission is misconceived. The Supreme Court in Atul Glass case [1986(07)LCX0018 Eq 1986 (025) ELT 0473 (S.C.)] relied upon by the Tribunal, speaks of “a mental association in the mind of the Consumer between the article and the need it supplies in his life” in the context of function of an article. It is not in terms of the actual function or performance of the article which may not be in existence in the case of an unfinished/incomplete article. He has further submitted that Tribunal’s judgment in TELCO’s case is a unanimous judgment of three Members and is, therefore, of a binding character.

9.0 We have carefully considered the pleas advanced on both sides. Short question involved in these matters is whether the castings of machine parts or motor vehicle parts upto the proof-machining stage acquire the essential character of those machine parts or motor vehicle parts, as the case may be, so as to attract classification under Chapters 84, 85 and 87 of the CETA, 1985 after applying Rule 2(a) of the Interpretative Rules for the First Schedule of the CETA, 1985. If the answer is in the negative, subject appeals succeed.

9.1 We have already extracted in para 6 the type and character of further working to which the castings, as they come out of the mould, are subjected. The Assistant Collector in his report has clearly stated that “castings upto the stage of proof-machining are the raw castings still having excess metal for machining according to the requirement in order to achieve the required size to make an essential part of particular machinery and cannot be used in the respective machinery as it is.” This factual position is not denied by the learned JDR. The fact that the goods under consideration remain castings is also clear from the Notification 223/88 which is sought to be applied to these goods inasmuch as notification is applicable to castings only (apart from forgings) and no process other than specified in the proviso to the said notification has been undertaken in respect of the goods. These goods are sold by the appellants as raw castings and unmachined castings to their customers who further machine these castings by various processes such as turning, drilling, boring, spot-facing, chamfering, broaching, tapping etc. to convert them into machined parts for use in respective machines. Customers need castings of machine parts. It is this need of the customers which is fulfilled by the goods in question. It is the function of castings which the goods perform for their customers.

9.2 We are of the view that the `functional test’ laid down by the Tribunal in TELCO’s case, supra is the correct test for determining the character of a product. Function of a product is determined by the “mental association in the mind of the consumer between the article and the need it supplies in his life”. Castings are commodities/articles recognised as separate articles in the trade as also in the First Schedule to CETA 1985 and are different from parts falling under Chapters 84, 85 and 87. Therefore, `castings of parts’ by themselves cannot be treated as having the essential character of “parts” so as to classify the former with the latter. Before an article must be considered to have the essential character of the parts, it must, at least, lose the character of `castings’ and must go beyond the stage of castings. In other words, an article, to have an essential character of a `machine part’ must at least fall in between the proof-machined casting stage and the `machine part’ itself ready for use. To what extent an article must go beyond the stage of `casting’ so that it can be said to have the essential character of the machine part will depend upon the facts and circumstances of each case, the extent and nature of machining undertaken by the manufacturer and the extent and nature of machining required to be undertaken by the customer to convert it into a `machine part’ ready for use. This is a question which does not fall for consideration here in these cases. It is admitted to both sides that the goods in question are `castings’ - raw or unmachined or proof-machined - still having excess metal for machining according to the requirement in order to achieve the required size to make an essential part of a particular machinery. This subsequent machining is either done by the customer at his workshop or in another factory of one of the appellants herein who clears such parts after payment of due duty. This latter fact is another important factor in not treating the goods as `parts of machinery’ or as goods having acquired the essential character of parts of machinery inasmuch as the goods if made liable to duty as `parts of machinery’ on the strength of Rule 2(a), no further duty would be exigible on such goods after machining them into parts ready for use.

9.3 Notification 223/88, at the first blush, presents some difficulties in its interpretation. Table to the notification is applicable to `castings and forgings’ and not to `machine parts’. Different rates of duty have been provided for different types of `castings’. S. No. 3 of the Table speaks of “castings and cast articles of iron and steel’ falling under any heading or sub-heading of Chapters 84, 85 or 87. Bench desired to know the type of castings which would fall under those Chapters and yet remain castings. We have been given to understand that such castings are ”investment castings". Castings in such cases are so perfect or near perfect that further machining is not required. We give below the details about `investment casting’ as are available in the book “Materials Science and Processes”, extracts from which have been brought on record by the learned JDR :-

“this process of making castings is often referred to as `lost wax casting’ and `precision casting’. It consists of two stages. A master pattern is first made of a fusible alloy around which a mould is formed. In the second stage, the master mould is filled with liquid wax, which solidifies to form the wax pattern. The second pattern produced in this way is used for preparing the casting mould properly. The wax pattern is coated with slurry consisting of silica, flour, and small amounts of kaolin and graphite mixed in water. This process is referred to as the investment of the pattern. After casting, coarser sand is shaken over the pattern. This sand adheres to the wet slurry and builds up a quartz shell. This mould after properly dried is baked, causing, the wax to melt and flow out, leaving a cavity of the desired shape. The mould is then sintered and cooled to increase its resistivity. Molten metal is poured into the mould cavity, and after the metal has solidified the mould material is broken away, leaving the final casting.

Excellent dimensional accuracy is possible, and a high degree of surface finish results from the very smooth mould surfaces, sections as thin as 0.5 mm can be cast with no difficulty. This is completely automated and economically feasible when large number of small intricate castings are to be made. Turbine blades, parts of motor cars, sewing machines, typewriters, calculating machines, various instruments, are usually made by the process.”

It is not the case of the department that any of the goods under consideration is investment casting or that there is such “excellent dimensional accuracy” and such “a high degree of surface finish” that no machining is done subsequently. In the absence of any such plea, it is not possible to hold that the goods in question are parts of machine or parts of motor cars.

9.4 Lower authorities have relied on Rule 2(00a) of Interpretative Rules to arrive at the finding that the ‘castings’ in question are parts of machine or parts of motor vehicle. We shall now examine and analyse the wording of Rule 2(a) whether such a result is possible. Rule 2(a) has already been extracted in para 5 above. It states that any reference in a heading to goods shall be taken to include a reference to those goods incomplete or unfinished, provided that the incomplete or unfinished goods have the essential character of the complete or finished goods. In other words, taking the example of the concerned Heading 73.25, reference to “other cast articles of iron or steel” would include reference to incomplete or unfinished other cast articles of iron and steel. We have already observed that a cast article is complete when it has been proof-machined and surface defects have been removed. Earliest form of ‘cast article’ is when it comes out of the casting mould. The Heading 73.25 would, therefore, include all “castings” from the stage of their emergence from the casting mould to the stage of being proof-machined. Similarly, an incomplete/unfinished part of machine or motor vehicle would also be covered under Chapters 84, 85 or 87 as the case may be. A machine part or motor vehicle part, subject to any section or Chapter note, would normally be one which is ready for use in a particular machine or motor vehicle. Application of Rule 2(a) would lead us to conclude that an incomplete or unfinished part of a machine or motor vehicle would fall under Chapters 84, 85 or 87, subject to fulfilment of the condition of “essential character”. Rule 2(a) does not permit us to conclude that when an article squarely falls under a particular tariff heading, it can be made to fall under another heading by invoking the concept of essential character. This is against the plain reading of Rule 2(a). But this is precisely what is attempted to be done by the lower authorities in the impugned orders. It is not denied that ‘castings’ of iron and steel do fall under Heading 73.25, but because the castings have the ‘essential character’ of products under Chapters 84, 85 or 87, such ‘castings’ should be deprived of their most appropriate and only classification. Such an interpretation of Rule 2(a) is untenable. It will create clashes within different headings and disturb their harmony.

10. In view of the foregoing discussion, impugned orders are set aside and the appeals are allowed.

Equivalent 1994 (69) ELT 674 (Tribunal)