TaxTMI 
TaxTMI 
1996 (7) TMI 370
X X X X Extracts X X X X
X X X X Extracts X X X X
.... wrong value of DM 239.00 was shown as against the price of DM 214.00 FOB; that the supplier had sent the credit note of the difference of excess value in respect of Appeal C/1457/86-B. The learned Collector (Appeals) has held that from the records, it is clear that the appellants had not produced any corroborating evidence, like third party invoice to indicate that the correct price under Section 14 of the Customs Act, 1962 was DM 214 and not DM 239. He has also observed that they had failed to prove and establish that the imported goods were covered by the tariff advice based on clarification given by CBEC. He has held that on the plain reading of the description of the goods, they are correctly classifiable under Item 68 of CET and not under Item 26AA of CET. 3. In respect of Appeals C/157-158/87-B, the learned Collector (Appeals) has held that the unit price of Crank Shaft Forging had been erroneously shown as DM 239.00 FOB as against the price of DM 214 FOB. He has noted that the appellants producing documents to prove the unit price of forgings having been shown erroneously. To that extent, he allowed their appeal on remand for de novo consideration to be decided in t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ings to give different form of shape to them. It further states that after casting or forging, fettling is done on such articles, they would continue to fall in Tariff Item No. 25 or 26AA as the case may be. However, it states that if any other process other than fettling is carried out on the casting/forgings e.g. boring of holes or cutting to give a different form and such semi-finished or finished machine parts with identities different from simple castings or forgings come into existence, such articles would fall under Tariff Item No. 68 and not under Item No. 25 or 26AA (unless it falls under any of the remaining Item 1-67 such as 52). 4. On the basis of the above circular, the importer is contending that the goods which they have imported are crank shaft forgings and it cannot be sold in the market as motor parts as they are required to undergo several processes in their factory before they are made to finished crank shaft for use in their commercial vehicles. They have filed the summary operation sheets showing about 40 processes that are required to be carried out on forged crank shaft, to make it a finished crank shaft. As regards the plea for valuation, they state....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r customs purposes under Heading 84.63 and therefore, for CVD purposes, the item cannot be considered as Raw forged crank shaft. He also pointed out to the revised invoiced which states :- "Crankshaft Forgings to Telco Drawing X 2523 0320 5113-10 Gerlach Drawing No. 98/1, Material 37 Cr S 4, Normalized, hardened and tempered, hardness of 735-880 N/mm2 with all the modifications indicated in our APRJ/RNT/1091/3331 of 29-4-1981. AA = 657.493 FKH AB = 825.935 FKH AE = 96.032 Buderus". He submitted that as the crank shaft has already been manufactured as per the importer's drawing and has undertaken several processes, therefore, it cannot be considered as a raw forged crank shaft, as it has assumed the essential characteristics of a crank shaft and hence, the authorities have rightly rejected the importer's case. He also submitted that even as per the reading of page 997 of BTN, the item would be classifiable only as a crank shaft. He also submitted that Rule 2(a) of Rules of Interpretation of the Tariff has not been applied in the present case as contended by the importer. 8. In countering the arguments, the learned Consultant submitted that the BTN was not appl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....EL (supra) rough machine forging has been held to be classifiable under Item 26AA and not under Item 68 of CET. Likewise, in the case of Bajaj Auto Ltd. (supra) iron and steel semi-finished forgings were held classifiable under Heading 84.06 and 87.09/12(1) by applying Interpretative Rule 2(a). However, for the purpose of Additional Duty (CVD) the goods were held to be classified under Item 26AA of CET as castings and forgings. This judgment also took into consideration, the judgment rendered in the case of BHEL. The Hon'ble Supreme Court in the case of Tata Iron and Steel Co. Ltd. v. Union of India as reported in 1988 (35) E.L.T. 605 took up the issue of classification of forged products in rough machined condition and held that the process of machining and polishing to remove excess surface skin are incidental and ancillary to the completion of manufacture of forged product and even where the goods are supplied as per customers specification, the item would be classified only under Item 26AA. In the case of TELCO v. Collector of Customs as reported in 1990 (50) E.L.T. 571, the Tribunal considered the classification of imported item described as non-ferrous forgings in synchrocone....
X X X X Extracts X X X X
X X X X Extracts X X X X
....) Removal of runners and risers (b) Surface clearing of surface defects (c) Chipping, filling or grinding to remove excess material (d) Annealing the stress relieving (e) Proof machining (f) Surface casting The Tribunal has considered all the judgments and technical details also while arriving at the conclusion. 11. In that view of the matter, as the appellants have shown that the several major process are required to be carried out to convert this forged item into a fully semi-finished or finished item, therefore, the claim of the appellants for classification for CVD purpose under Item 26AA is justified and requires to be allowed. As regards the claim for refund for excess payment on the valuation aspect, the Collector has already remanded the matter after due re-consideration on the basis of the evidence produced by the appellants. Hence, this order does not require modification. 12. In Appeal C/1467/86-B, the appellants have produced the evidence and the same is required to be examined and the benefit granted by the lower authorities on re-consideration of their case by the lower authorities. 13. In that vi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... mentioned in their document dated 2-9-1983 include such an operation, if we may call it so, "Receive raw crank shaft', `inspect for machining allowance, Hardness etc." and similarly, `final inspection and rectification', if necessary, but, a perusal of various varieties of operations listed therein shows that they mainly include milling, grinding, drilling and deburring. 20. The Departmental Tariff Circular relied upon by both the sides clearly states, as rightly pointed out by the learned SDR, that if merely fettling is done, it would continue to remain under Item 25 or 26AA but if any process other than fettling is carried out, then such semi-finished or finished machine part which comes into existence would take it beyond the scope of 26AA. 21. It is also noticed that in the documents produced by the appellants themselves, it is indicated in the revised invoice, that the crank shaft forgings had been normalised, hardened and tampered. 22. It is significant that the correspondence with the suppliers produced by the appellants includes a letter of the supplier dated 12th June, 1981 which mentions, inter alia, that :- "re. : Crank shafts as per drawing X....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es and sections, not otherwise specified. It is obvious that crank shafts are made by forging and therefore, called as crank shaft forgings, but even if they were `raw', they could not be considered as any article similar to those falling under sub-item (ia) of 26AA. In other words, even according to the principle of interpretation of Statutes, crank shafts would be out of company of other items mentioned in sub-item (ia). It is significant that this sub-heading is residuary in character and does not include finished or nearly finished steel castings or forgings. The items in question having been subjected to various processes before shipment and the rawness, having been reduced substantially, even if they required some further processing, they could not fall under 26AA. 26. In the case of TELCO decided by the Tribunal vide Order No. 449 to 455/84-B, dated 31-5-1984, the appellants (importer) had claimed re-assessment on the ground that in view of their composition (carbon content), they were iron castings and not steel castings. (ii) The Collector (Appeals) had accepted that they were not steel castings but had not accepted the contention that castings of iron which had go....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and relying on a Larger Bench decision in the case of BHEL and CCCN Explanatory Notes held Rule 2(a) to be applicable and therefore, classified them as components of IC engines for scooters for the purpose of basic customs duty but insofar as the additional customs duty (CVD) was concerned, they agreed that the items could be classified under 26AA. This was, however, agreed to because the learned DR had, conceded and accepted the position that since Central Excise Tariff had no such thing as Interpretative Rule 2(a), the additional customs duty would be leviable only in terms of 16AA. (iv) Thus, this order is based on the fact that the issue was conceded insofar as the CVD was concerned. In our case, the situation is different. The Department has not conceded but contested the appellants' claim and it is nobody's case that they were totally un-machined rough forgings only. The case was, therefore, distinguishable. 28. In the case of B.H.E.L. v. Collector of Customs reported in 1989 (39) E.L.T. 569 (Tribunal), the issue of course was whether rough machine castings/forgings would be classifiable under Item 26AA or Item 68. The goods had been assessed as machine parts....
X X X X Extracts X X X X
X X X X Extracts X X X X
....submitted to Hon'ble President for reference to a Third Member on the following point :- "Whether the crank shaft imported by the appellants was classifiable under Tariff Item 26AA(ia) or under Tariff Item 68 as it stood during the relevant period." Sd/- Sd/- (S.L. Peeran) (S.K. Bhatnagar) Member (J) Vice President Dated : 3-7-1996 Dated 3-7-1996 32. [Final Order per : G.R. Sharma, Member (T)]. - The above matter has been referred to the undersigned as a difference of opinion. The point for determination is whether the Crank Shaft imported by the appellants was classifiable under Tariff Item 26AA(ia) or under Tariff Item 68 as it stood during the relevant period. Without going into the details of the facts of the case as the same were set out in the paragraphs proposed by the learned Member (J) in the order, I would like to straightway deal with the issue involved in this case. 33. Shri R. Subramaniam, the learned Consultant appeared for the appellants and Shri S.N. Ojha, the learned DR appeared for the respondent Commissioner. 34. The difference of opinion centres round the question whether the imported Crank Shaft forgings had ac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ith which we are concerned would be covered by Tariff Item No. 26AA(ia) which includes forged or extruded shapes and sections, not otherwise specified. It is a common ground that the appellant is liable to pay excise duty on the said goods under Tariff Item No. 26AA(ia). The dispute in this [connection] is what is the stage at which the said goods could be said to be forged iron and steel products as contemplated in the said item; whether they could be regarded as such as soon as they are forged or after machining and polishing to remove the excess skin before being supplied to the Indian Railways. The stand of the appellant is that this machining and polishing which is done in its workshop, is not of significant character and extensive precision machining and polishing has to be done by the railways at their workshop before the wheels, tyres and axles supplied by the appellant can be attached to the rolling stock. The machining and polishing done in the workshop of the appellant was only in the nature of shaping by removing the superficial material to bring the forged items upto the Railways' specifications. A perusal of Item 26AA would show the excise duty on forged goods covered....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ry to the completion of a manufactured product. We are, therefore, of the view that in respect of the said goods the weight for the purpose of levy of excise duty under Item 26AA(ia) should be taken after the machining and polishing is done to remove the excess surface skin and the contention of the appellant in this regrd must be accepted." On perusal of the above ruling, I find that the Apex Court observed that the dispute in this case is what is the stage at which the said goods could be said to be forged iron and steel products as contemplated in Item No. 26AA(ia), whether they could be regarded as such as soon as they are forged or after machining and polishing to remove the excess skin before being supplied to the Indian Railways and came to the conclusion that it was essential that the goods should comply with the Railways' specifications and the excess steel on the surface or the excess steel as it is called, would have to be removed for that purpose. The Apex Court also ruled in that case that it is not the case of the respondent that there were three distinct sets of goods namely, (i) forged steel products (ii) manufactured goods supplied by the Railways and (iii) the ....