ORDER
K.L. Rekhi, Member (T)
1. A common issue is involved in these 19 appeals, they relate to the same appellants and were argued before us together. This combined order will dispose of all of them.
2. The appellants imported Connecting Rod forgings and Cross forgings, made of steel, for eventual use in the manufacture of their two-wheeler and three-wheeler scooters. The lower authorities had assessed the goods to basic customs duty under Heading 84.06 (as part of internal combution engine) and 87.09/12(1) (as part of scooter) respectively, with additional customs duty under Item 26AA of the Central Excise Tariff in some cases and under Item 68 thereof in others. In doing so, the lower authorities have held that by application of the Interpretative Rule 2(a) of the Customs Tariff Act 1975, both the goods were deemed finished components. The appellants’ prayer is that the goods in both cases were only rough forgings, that Interpretative Rule 2(a) was not applicable and that the basic customs duty should be assessed only under Heading 73.06/ 07(2) as rough forgings and the additional customs duty should be assessed uniformally under Item 26AA of the CET only. This is the common point of dispute in all the 19 appeals.
3. The arguments of the appellants are two-fold :
(1) The Interpretative Rule 2(a) could not apply to their goods which, as imported, were totally unmachined. They very fairly referred to the Larger Bench judgment of this Tribunal [1987 (28) ELT 545 – BHEL] which had evolved certain norms on the scope and meaning of Rule 2(a). They pleaded that the norms laid down by the Larger Bench were cumulative and ultimately the Larger Bench had laid down that each case had to be decided on its own merits. Coming to the merits of their own case, they argued that their goods, as imported, were totally unmachined rough forgings only. After importation, the Connecting, Road forgings underwent 38 different operations. Similarly, the Cross forgings underwent 20 different operations. It was only thereafter that the two became finished components of 1C engineers and scooters. The post-importation processes were mechanical, chemical and electrical in both cases. They produced certain samples of the goods as imported and as they became after all the post-importation operations were over in support of their pleadings. The appellants admitted that the samples were not certified ones, but they added that there was nothing on record to doubt the genuineness of the samples as produced by them.
(2) The predecessor Appellate Collector had held in his order dated 5-4-1980 that the goods were unmachined rough forgings only and that, therefore, they were classifiable under Chapter 73 of the CTA. This order was not revised by the Central Government and hence it became final. The Department followed this order for about three years. The successor authorities, could, no doubt, change the classification prospectively but they could do so only for sound and cogent reasons vide 1983 ELT 328 (Delhi) -J.K. Synthetics Limited. No such sound or cogent reasons had been brought on record.
4. The learned representative of the Department argued, with the help of the invoices and drawings placed on record by the appellants, that both the goods as imported satisfied each and every norm laid down by the Larger Bench of this Tribunal in the case of BHEL aforesaid. However, so far as the additional customs duty is concerned, he accepted the position, in view of the earlier judgments of this Tribunal, that since the Central Excise Tariff had no such thing as the Interpretative Rule 2(a), the additional customs duty could be levied only under Item 26AA (steel forgings) of that Tariff.
5. We have given the matter our earnest consideration. It is not in dispute that the Interpretative Rule 2(a) is a statutory part of the Customs Tariff Art, 1975 and it has to be given its due weight. The material portion of this Rule reads as follows :
“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 imported the incomplete or unfinished article has the essential character of the complete or finished article.”
In this connection, the Larger Bench also referred to the CCCN Explanatory Notes, according to which the provisions of Rule 2(a) also apply to ‘blanks’, the term ‘blank’ being taken to mean an article not ready for direct use, having the approximate shape or outline of the finished article or part, and which, other than in exceptional cases, could only be used for completion into the finished article or part. After careful consideration the Larger Bench observed as under :
“8. It, therefore, appears that in order to apply the provisions of Rule 2(a) it has to be seen (1) whether the imported product had attained the approximate shape or outline of the finished article; (2) whether the said imported article can only be used for completion into the finished article and (3) these would have to be determined with reference to the nature of the material, its bulk, quantity, weight or value. This very enumeration would therefore establish that no general principles can be laid down as to how and in what circumstances Rule 2(a) could be pressed into service for assessment of the imported unfinished article. In each case the factors enumerated above would have to be taken into consideration individually, and then collectively, to determine whether the imported article had attained the approximate shape or outline of the finished article and could be used only for completion into the finished article.”
Further, in paragraphs 9 and 10 of their order, the Larger Bench held that to lay down a general rule, that the applicability of Rule 2(a) would depend on the percentage of cost of post-importation operation as compared to the c.i.f. value of the import, would not be a proper criterion. It also held that while it may be true that the question whether the imported incomplete article had already attained, though in an incomplete form, the engineering/functional quality of the finished article may also be relevant, it would not be proper to say that the shape or contour of the imported article would not be relevant. It is in the light of these norms laid down by the Larger Bench that we have to approach the point of dispute now before us.
6. We find that the two representative import invoices described the goods as under :
(i) “SEMI FINISHED COMPONENTS FOR BAJAJ SCOOTERS : Connecting Road forgings as per your part drawing No. 40.0022.03”
(ii) “SEMI FINISHED COMPONENTS FOR BAJAJ 3 WHEELERS : Cross Forging as per your part drawing No. 40.0007.03 and old Part No. 3779/S/1/7”
We note that in the import invoices, the suppliers themselves described the goods as semi-finished components. We also note that the goods were forged to specific part drawings. On account of these facts, coupled with our visual inspection of the samples produced by the appellants, we are satisfied that the goods as imported had attained the approximate shape and outline of the finished article. We find further that the imported goods were not general purpose blanks that could be further machined for being fitted in any one of the several machines that may require the complete article. On the contrary, the goods having been precisely shaped and forged to specific dimensions according to specified part drawings, they could be finished only into the Connecting rod and Cross, the two components which fitted the appellants’ vehicles. We find also that the goods were made of special steel – EN 353 and EN 28. In the circumstances, we agree with the learned Representative of the Department that the goods as imported satisfied all the norms laid down by the Larger Bench. The post-importation operations, though split up by the appellants into numerous steps, were essentially those of heat treatment, smoothening of the forgings, turning and cleaning only. Even in the absence of these operations, the goods, as imported, could be deemed to be components of 1C engines and scooters by virtue of the Interpretative Rule 2(a), as held by the lower authorities. We confirm the classification arrived at by the lower authorities so far as the basic customs duty is concerned;
7. Coming to the second argument of the appellants, we find that contrary to what the appellants had pleaded, there were good and cogent reasons for the successor authorities to make a departure from the view taken by the earlier Appellate Collector in his order dated 5-4-1980. It is not that the Appellate Collector’s order on classification had been accepted by the Department; the Department had sent up similar classification orders for revision to the Central Government. This particular order dated 5-4-1980 could not be taken up for revision because the revision was found to be time barred. But what is more important is that in the meanwhile, this Tribunal had passed an order on 25-1-1983 in M/s. BHEL appeal No. C/387/80-B in which the scope of Rule 2(a) had been considered and it had been held that it included even ‘blanks’ which were not ready for direct use and which had attained the approximate shape or outline of the finished article. Delhi High Court judgment [1983 (12) ELT 328] relied on by the appellant itself says that a different order on classification passed by a higher Court would constitute sufficient reason for changing the earlier classification. All the three impugned orders passed by the Collector (Appeals) took note of this Tribunal order dated 25-1-1983. We hold, therefore, that there were good and cogent reasons for the lower authorities to change the classification held by the earlier Appellate Collector on 5-4-1980.
8. However, so far as the additional customs duty is concerned, we agree that for the reasons given by the learned representative of the Department, the additional customs duty could only be levied with reference to Item 26AA of the Central Excise Tariff.
9. In the light of our above discussion, we allow these appeals with consequential relief to the appellants so far as only the additional customs duty is concerned. The appeals are otherwise rejected.
