1994(03)LCX0112

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

S/Shri P.C. Jain, Member (T) and S.L. Peeran, Member (J)

BAKSHI STEELS LTD.

Versus

COLLECTOR OF CENTRAL EXCISE, JAIPUR

Final Order No. E/152 - 158/94-B1, dated 9-3-1994 in Appeal No. E/1575/88-B1 and 4 others

CASE CITED

Nagpur Engg. Co. Ltd. v. Collector — 1992(10)LCX0071 Eq 1993 (063) ELT 0699 (Tribunal)                                        [Paras 3, 6]

Advocated By : Shri V. Sridharan with Shri A.R. Madhav Rao, Advocates, for the Appellants.

 S/Shri S.K. Sharma and K.K. Dutta, JDRs, for the Respondents.

[Order per : P.C. Jain, Member (T)]. - In all these appeals, a common order being passed because issues are involved. Question involved in all these matters is classification of “iron inserts” used in railway sleepers. All the assessees here manufacture iron inserts which are admittedly iron castings and no further machining is carried out by the assessees on such iron inserts. The assessees contend that the iron inserts fall under Tariff Heading 7301.10 as “iron castings not otherwise specified.” On the other hand, the Revenue contends that iron inserts having a specific use for fixing rails fall under Tariff Heading 7302.90 “as other materials for fixing rails.

2. Ld. Advocate Shri V. Sridharan for the assessees has argued that insert is a part of the sleeper. It does not carry out any function of fastening the rails with the sleepers. Function of fastening, he submits is carried out by the `pandrol clip’. He therefore, submits that Tariff Heading 7302.90 would not be appropriate for the product. Since there is no other suitable heading, Tariff Heading 7307.10 would be the most appropriate heading for this product. In support of the aforesaid submission, ld. Advocate has taken us through various technical literature. He has also taken us through the descriptions of various tariff headings and sub-headings.

3. Opposing the contention of the ld. Advocate, Shri S.K. Sharma, ld. JDR for the Revenue submits that rail clip by itself cannot perform the function of fastening the rails to the sleepers unless it is complemented by `iron insert’ - the product under consideration. In other words, the function of fastening is carried out by both rail clip and `insert’. The Tariff Heading 73.02, he submits, is very widely worded as “all other material for the purpose of jointing and fixing of rails” is covered under the said heading. He therefore, submits that `insert’, though pre-embedded in the concrete sleeper, does not lose the character of fastening, in conjunction with rail clips, of sleeper and the rails. He, therefore, contends that the tariff heading adopted by the lower authorities at 7302.90 is correct. He relies for his proposition on the Tribunal’s judgment in the case of Nagpur Engg. Co. Ltd. v. Collector of Central Excise as reported in 1992(10)LCX0071 Eq 1993 (063) ELT 0699 (Tribunal).

4.We have carefully considered the pleas advanced on the question of classification by both sides. We are inclined to agree with the ld. JDR for the Revenue that insert is a fastening material for rails and sleepers and therefore, its classification would be appropriately under Tariff Heading 7302.90. Although the goods under consideration in Nagpur Engineering (supra) were different i.e. `anti-creep bearing plate’ but paras 4 & 5 would have a bearing on deciding the question of classification in this matter as well. The view sought to be taken by the ld. Advocate is only from a very narrow angle to the word `fixing’ described in Tariff Heading 73.02. He wants to restrict this entry to the items which can be brought on site for laying the track. We do not feel that the wide words of the headings, in the context of discussions in paras 4 & 5 in Nagpur Engineering, could be interpreted in the narrow sense advanced by the ld. Advocate. Closely examining his contention, we notice that `insert’ is also brought to the site as a part pre-embedded in a concrete sleeper, though not separately as insert. Accordingly, on the question of classification, we uphold the contention of the Revenue.

5. Next question involved in these appeals is of time bar of the demands made by the lower authorities and confirmed by them. Ld. Advocate has strongly relied upon paras 11 & 12 of Nagpur Engineering. He submits that para 12 brings out in details as to how the assessees were under a bona fide belief that these were classifiable under Tariff Heading 7307.10. He, therefore, submits that on that basis all the appeals except of Durgapur Malleable (P) Ltd. in appeal E/55/89-B1 would be hit by time bar, since the show cause notices in all these cases except in E/55/89-B1 have been issued beyond the period of six months. Ld. JDRs for the Revenue on the other hand submit that in these cases, the assessee have not specifically mentioned the name of the product i.e. insert. They had merely given general description of iron wrought castings. In the absence of the specific descriptions and the use to which these castings are put the authorities below were misled into classifying the products under Tariff Heading 7307.10 as against the correct Heading 7302.90. In case the appellants/assessees had any doubt, it could well be mentioned by the assessees before the departmental authorities. If the doubt had been raised, then alone it could be said by the assessees that they were under a bona fide belief.

6. We have carefully considered the pleas advanced from both the sides. In order to appreciate the plea of the ld. Advocate for the appellant/assessee, we reproduce below paras 11 & 12 of Nagpur Engineering :

“11. We also note that the supply of anti-creep bearing plates and brake blocks is almost exclusively to the railways. The Ministry of Finance, Department of Revenue Circular dt. 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 (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 September, 1985 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”.

7. We are satisfied having regard to the entire history of levy of duty on iron castings right from 1964 and as stressed in paras 11 & 12, the appellants/assessees could have bona fide belief that the goods under consideration fall under Tariff Heading 7307.10. In these circumstances, show cause notices were required to be issued within six months. The department cannot avail of the longer period of limitation of 5 years stipulated in Section 11A of the Act. Accordingly, we hold that the demands of duty in the following appeals are barred by time :

8. In view of our finding on mertis on the question of classification, we find that the show-cause notice for demand of duty in Appeal No. E/55/89-B1 in respect of M/s. Durgapur Malleable Pvt. Ltd. is entirely within time. Accordingly, we dismiss this appeal on the question of demand of duty. However, the demand of duty is required to be revised after allowing the abatement element of excise duty from the total realisation made by the appellant in respect of this appeal, in terms of the provisions of Section 4(4)(d)(ii) of the Central Excises & Salt Act, 1944.

9. In respect of appeal by CCE, Jaipur (E/2631/89-B1), there is a prayer for confiscation of goods lying in the custody of railways and for imposition of penalty which the lower authorities have not done. We have gone through the impugned order. We have heard the Counsels from both sides. We are not inclined to agree with the appellant Collector that, having regard to the facts and circumstances, there is a case for confiscation of goods lying in the custody of railways and for imposition of penalty. We have already held, while dealing with the question of time bar, that there is no wilful suppression and mis-statement of the facts on the parts of the assessees and they were acting under a bona fide belief for classification of the goods under 7307.10. We, therefore, regid the prayers, of the appellant Collector for confiscation of the goods and imposition of penalty in Appeal No. E/2631/89-B1. There is, however, one more prayer by the Collector of Central Excise, Jaipur i.e. regarding imposition of duty on pre-budget stock but clear after 1-3-1986. This prayer is of no consequences in view of the show-cause notice having been already found as barred by time for demand.

10. Question of imposition of penalty and redemption fine also does not arise in Appeal No. E/55/89-B1, 1260/89-B1 and E/364/90-B1 as we have already held in the appeal of the Collector (in Appeal No. E/2631/89-B1) that the assessees were apparently acting under bona fide belief. Therefore, penal action by way of confiscation and penalty are not called for in the facts and circumstances of these cases.

11. Appeals disposed of in the above terms.

Equivalent 1994 (071) ELT 1013 (Tribunal)