1994 (9) TMI 70 - SC - Central Excise

Supreme Court affirms classification of 'Throw-Away Inserts' as 'Tool Tips' under Tariff Item 62.

INDIAN TOOL MANUFACTURERS Versus ASSISTANT COLLECTOR OF C. EX., NASIK

INDIAN TOOL MANUFACTURERS Versus ASSISTANT COLLECTOR OF C. EX., NASIK - 1994 (74) E.L.T. 12 (SC), 1995 AIR 180, 1994 (4) Suppl. SCR 1, 1994 (3) Suppl. SCC ... Issues Involved:1. Classification of 'Throw-Away Inserts'.2. Demand for differential duty.3. Trade parlance and market understanding.4. Basic character, function, and use of 'Throw-Away Inserts' vs. 'Tool Tips'.5. Applicability of Tariff Items 51A(iii) and 62.Detailed Analysis:1. Classification of 'Throw-Away Inserts':The primary issue in the judgment was whether 'Throw-Away Inserts' should be classified under Tariff Item (T.I.) No. 51A(iii) or T.I. No. 62. Initially, these Inserts were classified under T.I. No. 68, but due to an amendment, they were reclassified under T.I. No. 51A. However, the Assistant Collector issued a Show Cause Notice proposing to reclassify them under T.I. No. 62 as 'Tool Tips'. The Tribunal upheld this reclassification, noting that both Tool Tips and Throw Away Inserts are made from carbide powder, undergo similar manufacturing processes, and perform the same function of machining metals. The Tribunal observed that the basic character, function, and use of Inserts are not different from Tool Tips, thus falling under T.I. No. 62.2. Demand for Differential Duty:The appellants faced a demand for differential duty resulting from the reclassification of Inserts. The Collector of Central Excise (Appeals) held that the demand for the period January 1979 to February 1979 was barred by limitation, but the demand for March 1979 to April 1980 was sustainable. The Tribunal supported this view, emphasizing that the reclassification was correct and thus the differential duty was justified for the specified period.3. Trade Parlance and Market Understanding:The appellants argued that in the absence of a statutory definition, the classification should rely on trade parlance and market understanding. They contended that Throw Away Inserts and Tool Tips are known by different names in the market. However, the Tribunal found that this distinction in names did not constitute adequate evidence of trade parlance. The Tribunal noted that Inserts were also referred to as Tips in international standards, indicating that the trade and industry did not consider them fundamentally different.4. Basic Character, Function, and Use of 'Throw-Away Inserts' vs. 'Tool Tips':The Tribunal and the Department concluded that the basic character, function, and use of Throw Away Inserts were identical to those of Tool Tips. Both products are used for machining metals, are made from similar materials, and undergo similar manufacturing processes. The Inserts, being detachable and having multiple edges, did not alter their classification as Tool Tips. The Tribunal emphasized that differences in the method of fixing (clamping vs. brazing) and the shorter lifespan of Inserts did not make them different goods from Tool Tips.5. Applicability of Tariff Items 51A(iii) and 62:The judgment analyzed the relevant Tariff Items to determine the correct classification. T.I. 51A(iii) pertains to tools designed to be fitted into hand tools or machine tools, while T.I. 62 covers 'Tool Tips in any form or size, unmounted, of sintered carbides of metals such as tungsten, molybdenum, and vanadium'. The Tribunal and the Court concluded that Throw Away Inserts, being a variety of Tool Tips, fell under T.I. 62. The Court noted that the form or size of the Inserts was immaterial, and their detachable nature did not exclude them from the description in T.I. 62.Conclusion:The Supreme Court dismissed the appeals, affirming the Tribunal's decision that Throw Away Inserts should be classified under T.I. 62 as Tool Tips. The Court emphasized that the basic character, function, and use of Inserts were not different from Tool Tips, and differences in market names or fixing methods did not alter their classification. The demand for differential duty for the specified period was upheld, and the appeals were dismissed with no order as to costs.