- (1.) This is an appeal by the Tata Iron and Steel Co. Ltd. (referred to hereinafter "the Tisco") against the judgment of a Division Bench of the Delhi High Court in writ, petition filed by the Tisco. The writ petition was filed by the Tisco for quashing, an order passed by the Collector, Central Excise, Patna on 24th Sept. 1982. The Division Bench of the Delhi High Court in the impugned judgment only granted partial relief to the TISCO and (hence) appeal in respect of the relief refused.
(2.) The relevant facts are as follows :- The appellant manufactures inter alia wheels, tyres and axles of railways. The buyers of these products are the Indian Railways. Apart from this, the appellant also makes and supplies to the Indian Railways wheels and axles as composite units. These are forged products. Before the said goods are supplied to the railways the said goods after being forged are machined and polished by the appellant and as a result of this machining and polishing the excess layer of steel which is commony referred as "excess skin" is removed, and one of the disputes is as to whether for the purpose of Item 26AA(ia) of the Central Excise Tariff set out in the First Schedule to the Central Excises and Salt Act, 1944 (referred to hereinafter as "the Central Excises Act") the weight of the steel should be calculated as at the time when the forging was complete or after machining and polishing to remove the excess skin of steel. Certain other incidental work on the said goods might have been done by the appellant, but that is not material for our purposes. The stand of the appellant was that these items were dutiable in their hands only once and under Tariff Item No. 26AA(ia). The contention of the revenue was that in the hands of the appellant they were liable to duties at two stages, namely, under Tariff Item No. 26AA(ia) when they were forged and under Tariff Item No. 68 of the Excise Tarif after they were machined and polished for being supplied to the railways. Right from 1962, the appellant was following classification list showing these goods as liable to excise duty only under Tariff Item No. 26AA(ia) and this classification list submitted by the appellant was accepted and approved by the excise authorities. In 1981 the Asstt. Collector, Central Excise, Jamshedpur who is one of the respondents before us by a show-cause notice dated 16-5-1981 called upon the appellant to show cause why it should not be proceeded against for contravention of Rule 173-B, 9(i) read with R. 173(G)(i) and R. 173(i)(a). The ground was that the goods supplied by the appellant to the railways were not forged items as such, but the said goods after they had undergone machining and polishing after being forged and had been turned into distinct commercial commodities by the process of machining and polishing which amounted to manufacture and hence the goods were also liable to the payment of excise duty as set out in Item 68. The notice also called upon the appellant to show cause as to why duty on the forged goods under Tariff Item No. 26AA(ia) should not be payable on the footing of the weight of the goods as forged and before the removal of the excess skin by the machining. The appellant by their letter dated 27th May, 1982 replied to the said notice taking up the stand that the process of forging of the goods could be said to be completed only after machining and polishing and that this was required to be done in order to bring the goods in line with the specification of the Indian Railways. The said letter addressed to the Collector inter alia. pointed out that all the wheels, tyres and axles had to be rolled and machined by the appellant to make them conform to the Indian Railways standard denominations. However, all wheels, tyres and axles supplied by the appellant were further precision machined and fine polished at the railway workshop that this futher machining at the railway workshop, is a must before the said articles could be put to use by the railways and hence the machining by the appellant did not amount to manufacture. A copy of the letter is not on record, but there is a clear reference to it in the order passed by the Collector imposing excise duties as aforesaid. The Collector rejected the stand of the appellant and held that the appellant was liable to pay differential duty under Item 26AA(ia) on the difference between weight of the said goods when forged and the, weight after machining to remove the excess skin as well as the duty under Tariff Item 68 as set out earlier. The Collector further held that the appellant was liable to penalty of Rs. 1 lac under Rule 193Q of the Central Excise Rules, 1944 for suppression of facts or giving misleading particulars. The Collector took the view that the appellant was guilty of misstatement or suppression of facts and hence the period of limitation for making the demand was 5 years prior to the service of the show cause notice. The Division Bench of the Delhi High Court accepted the conclusions of the Collector save and except that they took the view that there was no suppression or misstatement of fact on the part of the appellant and hence the period of limitation would be only 6 months prior to the service of the show cause notice.
(3.) Before proceeding further, we would like to set out the relevant items from the Central Excise Tariff. The relevant portion of Item 26AA of the Central Excise Tariff, at the relevant item reads as follows (with emphasis supplied) :- "26AA. Iron or steel products, the following, namely, :- (ia) Bars, rods, coils, wires, joists, girders, angles, other than slotted angles, channels, other than slotted channels, tees, beams, zeds, trough piling and all other rolled, forged or extruded shapes and sections, not otherwise specified.";