1992(06)LCX0031

BEFORE THE CEGAT, SPECIAL BENCH B2, NEW DELHI

 Ms. Jyoti Balasundaram, Member (J) and Shri N.K. Bajpai, Member (T)

MOTOR INDUSTRIES CO. LTD.

Versus

COLLECTOR OF CUSTOMS

Final Order Nos. C/80 to 83/92-B-2, dated 30-6-1992 in Appeal Nos. C/128-130 and 132/85-B2

Cases Quoted

COLLECTOR v. MOTOR INDUSTRIES CO.LTD.
 - 1988(02)LCX0038 Eq 1990 (046) ELT 0163 (TRIBUNAL)............................................................ [PARAS 6, 8, 12]

BHARAT HEAVY ELECTRICALS LTD. v. COLLECTOR
 - 1986(11)LCX0052 Eq 1987 (028) ELT 0545 (TRIBUNAL).................................................................. [PARAS 7, 8]

KHANDELWAL METAL AND ENGINEERING WORKS v. U.O.I.
 - 1985(06)LCX0008 Eq 1985 (020) ELT 0222 (S.C.)................................................................................... [PARA 10]

Advocated By: None, for the Appellants

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

[Order per : N.K. Bajpai, Member (T)]. - While three of the appeals involve the consideration of the common question of classification of rocker lever castings, the fourth appeal (No. C/132/85-B2) relates to classification of campmates, under the Customs Tariff Act, and they were heard together and are being disposed of by a common order.

2. The appellants had imported three consignments of rocker lever castings -two of them in January 1981 and the third in July 1981 and they were assessed to duty under sub-heading No. 84.10(3) of the CTA @ 100% + 20% + countervailing duty @Rs. 100/- per M.T. under Item 68 of the erstwhile Central Excise Tariff. The consignment of completes was imported in November 1980 and was similarly assessed to duty under sub-heading 84.10(3). They filed claims for refund of duty on the ground that the goods in all the cases were correctly classifiable under sub-heading No. 73.33/40 CTA as “other articles of iron and steel” @ 60% + 15% and were entitled to exemption from duty under Notification 254/76-Cus., dated 2-8-1976. The Asstt. Collector of Customs rejected the refund claims on the ground that the drawings of the goods produced by the appellants show that the castings in the first three cases and forgings in the fourth case had acquired the essential character of finished articles and, in view of Rule 2(a) of the General Rules for the Interpretation of the Schedule, they were classifiable as finished article under sub-heading No. 84.10(3). On appeal, Collector of Customs (Appeals), Madras upheld the order on the ground that:

(a) the castings/forgings have been supplied to a fine tolerance specification limits which is normally possible only after machining etc. is done.

(b) the invoice shows Bosch Part No. 1422060040 and Customer Part No. 1774623 which can be considered as part of the pump.

(c) the sample shows that the castings are unfinished article having the essential character of a rocker lever which is classifiable under sub-heading No. 84.10(3).

(d) by application of Rule 2(a)of the General Rules of Interpretation,the heading which provides the most specific description is to be preferred to the heading providing a more general description, rocker lever castings are classifiable under sub-heading No. 84.10(3) in preference to 73.33/40 which is a residuary entry for “other articles of iron and steel”.

(e) there was no specific entry .for castings in the Customs Tariff Schedule and articles of iron and steel envisaged in sub-heading No. 73.33/40 can be construed to be such articles which are fully finished, and could include cast or forged articles but which require no further processing and could not include semi-finished articles.

3. The appellants’contention before us is that in the absence of any dispute that the goods imported are castings in semi-finished condition, the goods are ipso facto classifiable under sub-heading No. 73.33/40 and entitled to exemption under Notification 254/76-Cas., dated 2-8-1996 ‘’which classifies iron or steel castings and forgings as falling under sub-heading 73.33/40". Their argument is that when this is so, the substantive right accruing to the appellants under the Customs Act cannot be taken away by allegedly resorting to the application of an Interpretative Rule, overriding the Act. The appellants have also enclosed a certificate, dated 1-12-1983 of Robert Bosch GMBH which reads as under :-

Certificate

“This is to certify that the following item supplied by us to Motor Industries Co. Ltd., Bangalore, are raw parts without any machining operation being done by us on the forging/casting:

4. The appellants have challenged the conclusion of Collector (Appeals) that the scope of Heading 73.33/40 and Notification 254/76, dated 2-8-1976 read therewith is restricted only to articles which are fully’ finished and not semi-finished articles. The Notification also does not make any distinction between finished and semi-finished castings and forgings.

5. The other contention of the appellants is that even according to Interpretative Rule 3(a), sub-heading 73.33/40 provides more specific description read with Notification 254/76 which specifically classifies iron or steel castings.

6. In their letter, dated 2-8-1991, the appellants have requested that they would not appear for the hearing and the Tribunal should decide the appeals on the basis of their written submissions. They have also stated that in a similar issue, where they had attended the hearing, the Tribunal have passed orders against them vide order No. 55-69/89-B2, dated 19-2-1988. We observe that this is the order which has now been reported in the Excise Law Times’ as Collector of Customs v. Motor Industries,Co. Ltd. -1990 (046) ELT 163 relating to the import of adjusting pins, camplates and control lever forgings.

7. The case was argued by both the Departmental Representatives S/Shri M.S. Arora and S.K. Sharma. A reference was first made to the same decision of-the Tribunal to which,the appellants have invited attention in their letter. This relates to the import of adjusting pins, camplates and control lever forgings in which, while interpreting Rule 2(a) of the Interpretative Rules, the Tribunal held that indication of specified part number in the drawings constituted clinching circumstance which showed that the imported items had attained the approximate shape or outline of the finished article and could be used only for the completion of the finished article. The Tribunal, therefore came to the conclusion that there was no basis to hold that they do not have the essential character of the finished article. Operations like turning, grinding, cross- hole drilling etc. are merely minor operational processes. The learned SDR submitted that if the principle enunciate fin this tension is applied to the present appeals, there would be no doubt that rocker lever casting which bear part numbers in the drawing as well as in the invoice, have correctly been classified under sub-heading No. 8.10(3). They also referred to the decision of the Tribunal in the case of Bharat Heavy Electricals Ltd. v. Collector of Customs, Madras -1987 (028) ELT 545, in which the factors relevant for the application of Interpretative Rule 2(a) were considered, and it was held that once the imported product had attained the approximate shape or outline of the finished article, it could be said that it had the essential character of the complete or finished article.

8. We have carefully considered the appeals and the arguments of the learned Departmental Representatives. The appellants’ contention that rocker lever castings imported by them being in semi-finished condition, are classifiable as “other articles of iron and steel” under sub-heading No. 73.33/40 and are ipso facto entitled to exemption under Notification 254/76-Cus., dated 2-8-1976, overlooks the basic fact that they have a specified part number indicated in the drawing as well as in the invoice and, in view of the two decisions of the Tribunal in the Motor Industries case (supra) and the Bharat Heavy Electricals case (supra), they have the essential character of the finished goods in view of Interpretative Rule 2(a), having attained the approximate shape or outline of the finished goods. Their classification under sub-heading 73.33/40 as “other articles of iron or steel” under a residuary entry is, therefore, ruled out. The argument that a substantive right which has accrued under the Customs Act cannot be taken away by resorting to the application of an Interpretative Rule overriding the Act is totally misconceived. The classification of the goods for the purpose of levy of duty is done under Section 12 of the Customs Act, 1962 which provides that duties shall be levied at such rates as may be specified under the Customs Tariff Act, 1975. The rates are specified in the Schedule to the Customs Tariff Act and Section 2 of this enactment is as under:-

“2. The rates at which duties of customs shall be levied under the Customs Act, 1962 are specified in the First and Second Schedules”.

9. The First Schedule which relates to the Import Tariff incorporates certain rules which are described at the beginning of the First Schedule itself as “General rules for the interpretation of this Schedule” and the relevant portion of these rules which explains the position is as under :-

“Classification of goods in this Schedule shall be governed by the following principles:

1. The titles of Sections, Chapters and sub-Chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the following provisions.

2(a) Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as presented, the incomplete or unfinished article has the essential character of the complete or finished article. It shall also be taken to include a reference to that article complete or finished (or falling to be classified as complete or finished by virtue of this rule), presented unassembled or disassembled."

10. It will thus be seen that the authority to invoke Rule 2(a) in the present case flows from the First Schedule of the Customs Tariff Act which specifies the rates of duty applicable to imported goods by virtue of Section 12 of the Customs Act, 1962. Thus, the “General Rules for Interpretation of the First Schedule” are part of the Schedule itself and there is no basis for the contention that by applying the Rules, the authorities have taken away the substantive right which has accrued under the Customs Act Such a view finds support in the judgment of the Supreme Court in the case of Khandelwal Metal & Engineering Works v. Union of India -1985 (020) ELT 222, specially paragraph-28, to which our attention was invited by the learned Departmental Representative.,

11. If the argument is that exemption given by Notification 254/76-Cus., dated 2-8-1976 issued under Section 25(1) of the Customs Act, is sought to be taken away by the Interpretative Rule, the simple answer is that the question of exemption would arise only after the classification of the subject goods under the Schedule to the Customs Tariff Act is first determined in accordance with the principles incorporated in the Interpretative Rules. Since the subject goods have not been found to merit classification as “castings”, they are not entitled to the exemption stipulated in the notification. It will thus be seen that the argument is totally misconceived and is, therefore, rejected.

12. We now proceed to examine the supplier’s certificate dated 1-12-1983. It is certified that the parts supplied are raw parts without any machining operation being done on the forging/casting. In the decision of the Tribunal in appellants’ own case-1988(02)LCX0038 Eq 1990 (046) ELT 0163 (supra), it was held that machining etc. did not alter the essential character of the goods which were classifiable under the same heading as the finished article by virtue of Rule 2(a). Moreover the mention in the certificate of the part number furthere supports the conclusions in the orders of Collector (Appeals). Thus, the certificate is of no avail to the appellants.

13. In view of the foregoing, it is not necessary for us to go into the contention that Collector (Appeals) has limited the scope of sub-heading No. 73.33/40 by saying that it applies only to articles which are fully finished. Even without going into this aspect, we observe that the appellants do not have any case on merits for classification under sub-heading 77.33/40 in view of the decisions of the Tribunal cited by the learned Departmental Representatives.

14. The last contention of the appellants is that even according to Interpretative Rule 3(a), sub-heading No. 73.33/40 provides more specific description read with Notification 254/76-Cus., dated 2-8-1976. As we have seen, once it is held that even the unmachined casting has the essential character of the finished article and has to be classified according to Rule 2(a), the question of its being taken to 77.33/40 would not arise. The first question that has to be decided is the classification of the goods in terms of the Schedule to the Customs Tariff Act and it is only after this has been done that one would have to see whether the goods, as identified for classification purposes, are covered by any exemption Notification. We have discussed in paragraph-11 how the subject goods not being classifiable as “castings”, are not entitled to the exemption under the Notification.

15. So far as A. No. C/132/85-B2 relating to classification of Camplates is concerned, the appellants’ claim before the lower authorities was that these are semi-finished steel forgings in crude form and cannot be assembled into distributors pump straightaway, and further processing such as turning, grinding, broaching, group cutting, heat treatment etc. is required to be undertaken before they can be used in the pump. Both the authorities had held that the invoice described Camplates (Bosch Part No. 14 66 11 1033) and (Customer Part No. 1 77 48 76) and there is no indication that these are semi-finished. It was held that Camplates had the essential character of the finished component and further processing is in the nature of finishing processes for the purpose of fitment terms of Rule 2(a) of the Interpretative Rule, the goods are to be considered as Camplates and assessment under sub-heading No. 84.10(3) was maintainable. The reasoning applicable to classification of rocker lever castings is equally applicable to Camplates which are forgings, because the facts in the two cases are the same. Accordingly, the appellants’ contentions in this case too are liable to rejection.

16. Thus, upon consideration of all the grounds, all the four appeals fail and are rejected.

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Equivalent 1992 (62) ELT 412 (Tribunal)