Factory machining that turns iron castings into finished goods attracts excise duty; prior mistaken classification creates no estoppel against statute.

Machining and honing of cylinder liners in the factory converted crude iron castings into an identifiable finished commercial commodity, so the goods ceased to remain exempt iron castings and became dutiable manufactured goods under Tariff Item No. 68. The Court held that excise is attracted by manufacture, not by the eventual use of the product, and rejected reliance on an earlier rough-machining comparison because the present processing was more substantial. Prior approval of an incorrect classification list did not bar notice or levy, as there is no estoppel against statute; the only safeguard remained limitation. The appeal was therefore rejected.

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Issues: (i) Whether the cylinder liners, after machining and honing in the appellant's factory, ceased to be iron castings and became dutiable goods under Tariff Item No. 68; (ii) whether the department was barred from issuing notice and levying duty because an earlier classification list treating the goods as exempt iron casting had been approved.

Issue (i): Whether the cylinder liners, after machining and honing in the appellant's factory, ceased to be iron castings and became dutiable goods under Tariff Item No. 68.

Analysis: The exemption applied to iron in crude form under Item No. 25, but the goods here were not sold in that state. The finding was that the contract required supply of fully machined cylinder liners and that machining and honing in the factory transformed the crude casting into an identifiable commercial commodity. Duty of excise is attracted by manufacture, not by the eventual use of the product. The comparison with rough machining in the cited earlier case was rejected because the present goods had undergone a further and more significant transformation.

Conclusion: The cylinder liners had ceased to be iron castings and were exigible to duty under Tariff Item No. 68, against the assessee.

Issue (ii): Whether the department was barred from issuing notice and levying duty because an earlier classification list treating the goods as exempt iron casting had been approved.

Analysis: Once the goods were found to be dutiable, prior approval of an incorrect classification could not prevent the department from levying duty, subject to limitation. There is no estoppel against statute, and earlier acceptance of a classification does not foreclose lawful assessment where the goods are in fact dutiable.

Conclusion: The department was not barred from proceeding with levy and notice, against the assessee.

Final Conclusion: The appeal was rejected because the processed cylinder liners were held to be dutiable manufactured goods and the earlier classification approval did not create any bar to duty.

Ratio Decidendi: When processing in the factory converts crude iron castings into an identifiable finished commodity, excise duty is attracted on manufacture notwithstanding earlier exemption classification, and prior mistaken approval cannot operate as an estoppel against the statute.

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