ORDER
G.R. Sharma, Member (T)
1. By the impugned order ld. Collector confirmed demand of duty of Rs. 5,42,750.67, imposed a penalty of Rs. 20,000/- and confiscated the goods valued at Rs. 2,83,905.00. Being aggrieved by this order the appellants have filed the captioned appeal.
2. The facts of the case in brief are that the appellants are engaged in the manufacture of Motor Vehicle Parts and M.C.I. Inserts. It was alleged that the appellants did not file any classification list or did not hold any licence for the manufacture of MCI Inserts which were classifiable under Chapter sub-heading 7302.90. Accordingly, a SCN was issued to the assessee asking him to explain as to why the MCI Inserts should not be classified under Chapter sub-heading 7302.90 and why duty should not be demanded from them and why seized goods should not be confiscated and why penalty should not be imposed. In reply the appellants sought provisional release of the seized goods. The goods were released provisionally after the appellants executing a bond for Rs. 2,83,905/- and after depositing a cash security of Rs. 80,977/-. The appellants in reply to the SCN stated that M.C.I. Inserts were castings, were classifiable under chapter sub-heading 7307. In support of their contention they produced two certificates one from National Metallurgical Laboratory, Field Station, Batala and another from the General Manager, Northern Railway, Delhi. It was explained by the appellant that M.C.I. Inserts are used as one of the raw materials in the manufacture of Prestressed Reinforced concrete sleepers and provide only a rigid hole previously drilled; that prior to its use in the sleeper, these are just castings; that inserts are processed before fixing the rail to the sleeper. Therefore, it was argued that inserts cannot be called as material for jointing or fixing the rails. It was also contended that this view was supported by the railway authorities to whom the materials were supplied. The appellants also contended that they were only undertaking the process of chipping, grinding and cleaning which does not amount to manufacture under Section 2(f) of the Central Excise Act, 1944. It has also been argued by them that castings were fully exempt from duty in terms of Notification No. 208/83 dated 1-8-1983 and thus they were also exempt from licensing control in terms of the provisions of Rule 174A. It has also been contended that there was no suppression or misstatement inasmuch as the appellants had filed Classification List in respect of M.C.I. Inserts and that these classification lists were approved by the Department. It was also argued that duty was calculated on the \cumduty price and that the Excise Duty element has not been excluded while arriving at the assessable value. The appellants therefore, contended that there was no mens rea and therefore, penalty under Rule 173Q cannot be imposed.
3. Arguing the appeal Shri Sudhir Malhotra, ld. Counsel submitted that he is arguing the appeal on two points. The first point is that the Tribunal has already finally decided that M.C.I. Inserts shall be classifiable under Chapter heading 7307.10. He submits that the ratio of the judgments of this Tribunal in the case of Bakshi Steels Ltd. v. CCE, Jaipur reported in 1994 (71) E.L.T. 1013, in the case of Shivaji Works Ltd. v. CCE, Aurangabad reported in 1994 (69) E.L.T. 674, in the case of Hindustan Gas & Industries Ltd. v. CCE, Vadodara reported in 1996 (88) E.L.T. 413 fully covers their case as the facts in the two cases are identical.
Ld. Counsel submits that in the instant case, SCN was issued on 26- 12-86 by the Asstt. Collector. He submits that in the instant case suppression and misstatement was alleged and the period of demand was extended beyond six months and therefore; the SCN itself is ultra vires and the Asstt. Collector was not the proper officer to issue a SCN in this case in terms of Section HA (1) proviso. Ld. Counsel submitted that the Apex Court in the case of KLJ Plastics Ltd. v. Collector reported in 1997 (92) E.L.T.-A123 held that in such cases the SCN for the extended period can be issued only by the Collector. Ld. Counsel submits that thus the SCN is ultra vires and non est prays that the appeal may be allowed.
5. Shri H.K. Jain, Ld. SDR submits that he is reiterating the findings of the authorities below in so far as classification of the inserts are concerned. He submits that in so far as the SCN and its validity is concerned, he is relying on the decision of the Apex Court in the case of Collector v. Safari Industries Ltd. – 1996 (84) E.L.T. 9 wherein it has been held that the AC/Supdt. is competent to issue SCN for a period of six months under the proviso of Section 11A(1) of the Central Excise Act, 1944. He submits that in this view only the demand beyond the period of six months shall be effected.
6. We have heard the rival submissions. We have perused the case law cited in regard to the classification. We have perused the evidence cited and relied upon by both the sides. We find that in the case of Shivaji Works Ltd. reported in 1994 (69) E.L.T. 674, this Tribunal held that castings of machine parts/motor vehicle parts are classifiable under heading 73.25 which is now equivalent to 7307.10. Again this Tribunal in the case of Hindustan Gas & Industries Ltd. reported in 1996 (88) E.L.T. 413 held that inserts used as a rawmaterial in the manufacture of concrete sleepers, subjected to the processes of annealing in the oil fired furnace, fettling and removing extra burns by grinding etc., not becomes any one of the specified material named in Heading 73.02 of the Central Excise Tariff but will be classifiable under Heading 73.07. Further in the case of Bakshi Steels Ltd. reported in 1995 (71) E.L.T. 1013, this Tribunal held that iron inserts though pre-embedded in concrete sleeper acts as a fastening material for rails and sleepers and shall be classifiable under sub-heading 7302.90 of Central Excise Tariff Act, 1985 as other materials for fixing rails.
7. In regard to classification the pertinent point for consideration before us is whether the various processes to which the inserts are subjected after they are taken out of the moulds would make them as “Railways or tramway track construction material” which had been named under Heading No. 73.02 of the Tariff. The processes to which the cast, Iron Inserts were subjected are mentioned as annealing in the oil fired furnace, fettling and removing extra burns by grinding. In view of the above and keeping in view the nature of the product and their use as a raw material in the sleepers, we do not consider that they became any one of the specified materials named in Heading No. 73.02 which is extracted below :
Heading No. Description of Goods
73.02 Railway or tramway track construction material of iron
or steel, the following:
Rails, switch blades, crossing frogs, point rods and
other crossing pieces, sleepers (cross ties), sleeper
bars, fishplates, chairs, chair wedges, sole plates
(base plates) rail clips, bedplates, ties and other
material specialised for jointing or fixing rails.
8. Before the introduction of the new tariff effective from 1-3-1986, these inserts were classified as castings of iron and steel. They were not being classified under Tariff Item 68 of the then tariff. In the case of Tata Iron & Steel Co. Ltd. v. Union of India and Ors. reported in 1988 (35) E.L.T. 605, the Hon’ble Supreme Court had gone in details while dealing with the forged products in rough machined condition. The Hon’ble Supreme Court observed that machining and polishing is done to remove excess surface, skin from the forged products and was incidental or ancillary to the manufacture of forged products as per Section 2(f) of the Central Excise Act, 1944. In that case before the Supreme Court, the goods were supplied to the railways in rough machine condition under which excess steel or manufacturing defects were removed and those products were subsequently precision machined by the Railways themselves at their workshops before being put to use. The Hon’ble Supreme Court observed that the duty was payable at two stages viz. under Tariff Item 26AA on the forged products and under Item 68 on the completion of the manufacture of finished goods. They added that since the precision machining is done at Railways workshop, the appellant in that case was not liable to pay duty under Tariff Item 68.
In the case before us there is nothing on record to show that the inserts required any machining or that any such machining was done by the appellants, we therefore, consider that only the first stage duty under heading 73.07 was chargeable.
9. We also find that the matter is covered by the Tribunal’s decision in the case of Shivaji Works Ltd. v. CCE, Aurangabad reported in 1994 (69) E.L.T. 674. We also note that the Central Board of Excise & Customs after the decision of the Tribunal in the case of Shivaji Works Ltd. issued a circular No. 225/59/96-CX., dated 1-7-1996 which clarified the position and which supports the view that we have taken.
10. Taking all the relevant considerations into account, we hold that M.C.I. Inserts in the instant case shall be classifiable under Chapter subheading 7307.10.
11. In so far as the question of jurisdiction is concerned, our attention was drawn to Courtroom Highlights reported in 1997 (92) E.L.T. A.143 wherein the Apex Court dismissed the Civil Appeal filed by M/s. K.L.J. Plastics Ltd., Hyderabad. In that case this Tribunal had held
“That the demand show cause notice issued by the Supdt. of Central Excise under Section 11A of the Central Excise Act, 1944 for a period of six months was valid, though it had made allegations of suppression of facts etc. with intent to evade payment of duty. This was held to follow from the judgment of the Karnataka High Court in the case of Reletronics Ltd. v Asstt. Collector of Central Excise which has been upheld by the Supreme Court as reported in 1993 (64) E.L.T. A134 and in the instant case the Collector who adjudicated the case ignored the allegation of suppression of facts etc. as agreed in the Karnataka High Court judgment. The Tribunal also relied on the decision of the Supreme Court in the case of Collector v Safari Industries reported in 1993 (64) E.L.T. A197”.
It was also brought to our notice that the Supreme Court in the case of CCE, Baroda v. Safari Industries (I) Ltd. reported in 1996 (84) E.L.T. 9 held
“That the show cause notice issued on 22-1-87 for the period covering 5-7-86 to 10-9-86. If the period of six months is counted from backward it goes to 22-7-86. Therefore, the Show cause notice may be treated as valid under Section HA for the period 22-7-86 to 10-9-86 and the judgment of the Tribunal may be set aside, and fresh order may be passed by the appropriate Officer of Central Excise, Baroda in accordance”.
12. On a careful perusal of the above decisions, we find that the facts in the present case are identical to those decided by the Apex Court in the case of Safari Industries v. CCE. Baroda reported in 1993 (64) E.L.T. A197. Following the ruling of the Apex Court in the above case, we hold that the SCN will be valid for the period from 26-6-86 to 19-11-86 and the order of the Id. Commissioner is set aside with the direction that appropriate officer of Central Excise shall pass a fresh order in accordance.
13. The appeal is disposed of in the above terms.