1. In this appeal we are concerned with classification of 'roladeck panels'. The appellants herein, in the classification list filed by them during the relevant period 1.3.1986 to 30.6.1988 have described the product and claimed classification as under:Prior to 1.3.1988 "Angles, Shapes and Sections of Iron or Steel not elsewhere specified [other than slotted angles and channels) rolled, forged, extruded, formed, finished (T.H. 72.10)] Angles, channels and other various shapes and sections of steel (other than slotted angles and slotted channels (T.s-h 7210.10)]"W.e.f. 1.3.1988 "Iron & Steel Iron & Non-alloy Steel Angles, Shapes and Sections of Iron and Non-alloy Steel (T.H. 72.16) (i) Not further worked than cold-formed or cold- finished (T.s-h. 7216.20) Number of classification lists filed by the appellants on the above lines were approved by the competent officer.
2. Trade name of the goods involved before us and declared as above in the classification lists is Roladeck flooring panel, side panel etc.
3. Show cause notice dated 13.2.1991 alleges that the aforesaid goods were manufactured by the appellant company for motor-vehicles according to "customers specifications, as per required size, length ordered by the motor vehicle manufacturers viz. M/s. TELCO, Pune, M/s. Bajaj Tempo Ltd., M/s. Eicher Motors Ltd. etc.". It is also alleged in the said notice that "these panels are used solely and principally for the motor vehicles and are used by motor vehicle manufacturers without being subjected to any further process." From the said allegations, it has been inferred that the said panels are parts of motor vehicles and merit classification under Chapter Sub-heading No. 8708.00 as "parts and accessories of motor vehicles attracting duty @ 20% ad valorem" instead of duty at the rate of Rs. 365/- per MT paid by the appellants.
The said show cause notice, therefore, proposed recovery of Rs. 1,34,34,275.08 as duty evaded during the period 3/86 to 6/88. While proposing recovery of the said amount, it has been alleged that the appellants misdeclared the classification of goods as against the correct classification wilfully.
4. On adjudication, after consideration of appellant's reply to the above show cause notice and their oral submissions during the course of personal hearing, the concerned Collector of Central Excise has found that (i) description of the impugned goods was not correctly given inasmuch as what had been described in classification lists was on the basis of description in Central Excise Tariff and not otherwise.
(ii) details like the goods being according to specifications and as per drawings were available in other documents and not given in the classification lists.
(iii) the appellant was obliged to give the said details in the classification lists.
(iv) the appellant did misrepresent the facts which were known to them.
(v) the goods encompassed within the scope of tariff description namely 'angles, shapes and sections' will refer to the items available in the market and the said tariff description would not encompass those goods having specification as to length, width manufactured as per the drawings furnished by the customers for specific purposes.
(vi) "main use of such panels could be for flooring and side panels of motor vehicles, though, sometimes, it could also find its use as cladding material or for fencing as claimed" by the appellant.
5. On the question of invoking larger limitation provided under Section 11A, the adjudicating authority has held that "it is the prime responsibility of the assessee to correctly describe the goods under Rule 173B even if they fail to properly furnish Heading or Sub-heading.
He is required to disclose fully specification, manufacturing process, usage, etc. in regard to the product which in the instant case has not been done." 6. On the basis of the above findings, the adjudicating authority has ordered recovery of the aforesaid amount of duty and has also imposed penalty of Rs. 25 lakhs. The said authority has also confiscated the land, building and machinery and all excisable goods available on such land, building but has allowed the appellant to redeem the said land, building, etc. on payment of fine of Rs. 5 lakhs.
7. Learned Advocate Shri V. Sridharan assailing the impugned order has urged that the "process of manufacture involved is that the cold rolled coils of mild steel sheets or strips purchased from the Steel Authority of India Ltd. are slit and sheared and fed to cold forming mill. The sections formed after rolling operations are cut according to required length and then despatched to our customers. No other process is carried out." He submits that the said process set out by the appellants in their reply remains unrebutted by the Revenue. The said process clearly indicates that there is no further process undertaken by the appellants after formation of sections on rolling operations except that of cutting them to specified lengths as per customer's requirement. He also submits that the appellant's product fully satisfies the definition of 'angles, shapes and sections in note 1(n) of Chapter 72. There is no rebuttal to this plea except to a vague finding that viewed in the background of the said definition, the goods would not merit classification under Tariff Sub-heading 7216.20 since the goods were manufactured as per customer's specifications.
8.1 He has also shown the samples of the product. Along with the samples, he has also shown the photographs of the product which it goes through at the end of the motor-vehicle manufacturer before the product can be used as part of motor-vehicle chassis. He has also drawn attention to letters dated 12.3.1989 from Bajaj Tempo, dated 15.4.1989 from TELCO, dated 1. 4.1989 from Eicher Motors which indicate the various operations undertaken by them before the panels supplied by the appellant become ready for use in motor-vehicle bodies/chassis. For the sake of appreciating the same, we reproduce a copy of one of the above letters i.e. from Bajaj Tempo: We are currently buying floor panels from you for our Pick-up Hold. After you supply these, the following operations/material additions are required before your material can be identified as Pick-up hold. 1. No. of Section across length and width in terms of side panel, stiffener section, angle, plate etc. totalling in weight more than the weight of floor panel supplied by you, has to be assembled.
2. All above components have to be tack welded on special welding fixture.
3. All above sub-assemblies have to be spot welded and CO2 welded in sub-assly to be assembled together.
4. Additional items like reflector, hooks, hinges etc. are either welded or bolted or screwed on to this assembly.
8. The above body is to be assembled on to the vehicle chassis to make it capable of carrying load.
8.2. Learned Advocate further submits that a section cut to specified length, according to customer's requirement does not and cannot alter its character as a section of steel.
8.3. Learned Advocate further submits that the finding of the adjudicating authority that the said panels are used mainly in assembling the body of a motor-vehicle as side flooring panels and that it could find use for some other purposes such as cladding or fencing in stray cases is without any evidence. The adjudicating authority, he submits, ignores the facts on record. About 40% of the total production of such 'shapes & sections', has gone to persons other than motor-vehicle manufacturers, 40% sale to other manufacturers cannot be treated as stray-uses.
8.4. He also points out that Tariff Heading 72.16 is more specific than Tariff Heading 87.08. Tariff Heading 72.16 relates to "angles, shapes & sections" which the goods in question are whereas Tariff Heading 87.08 relates to 'other' parts and accessories of motor-vehicle. The expression "other" is patently an expression of general nature without any particularisation or specificity. Further, as pointed out earlier, 'panels' cleared as such cannot be used as 'parts' of motor-vehicles.
These have to be further worked upon by welding other supports as mentioned - letters of three of their customers - Bajaj Tempo, TELCO and Eicher Motors. Consequently 72.16 is a more appropriate Tariff Heading by applying Rule 2(3) of Rules for Interpretation of Central Excise Tariff.
8.5. On limitation, learned advocate submits that mere non-mention of the goods being manufactured as per customer's specifications and drawings cannot call for invoking the larger period of limitation. The manufacturing process was fully known to the Departmental officers.
Gate-passes showed the name of the consignees which are well-known motor-vehicle manufacturers. All this information was available to the Department. Appellant's learned advocate, therefore, submits that the demand is wholly barred by time since show cause notice has been issued well beyond the period of six months. Classification lists had been approved and RT 12 returns had been assessed. He, therefore, prays for setting aside the demand of duty on the ground of time bar.
8.6. Learned advocate also submits that the quantum of demand in any case is highly inflated. Duty to the aforesaid extent has been demanded on the ground that the panels have been supplied to the motor-vehicle manufacturers and only stray uses are for other purposes. He points out that out of total quantity of 5807.655 MTs cleared during the relevant period, 2266.347 MTs have been supplied to parties other than motor-vehicle manufacturers. This quantity is not a "stray use". Demand on the latter quantity as motor vehicle parts is uncalled for and unsustainable.
9.1. Opposing the contentions, learned SDR Shri R.K. Sharma submits that the issue already stands decided by a three-Member Bench of the Tribunal in Revenue's favour in the case of Tube Investments of India Ltd. v. Collector of Central Excise, Madras . In this connection he draws attention to para 16 of the said order. Learned SDR submits that it has been clearly held by the Tribunal that different panels supplied by the appellant therein were identifiable as specific parts with specific use and part numbers.
They have been found to be tailor made according to the specific design of each motor vehicle. The users had made known to the appellant therein that they could not adopt the design of others, as they are patented. Mere fact that the-panels required to be painted and some fitment work was required to be done did not make the panel a "cold rolled formed section". Learned SDR submits that these findings of the Tribunal apply with full force to the present case.
9.2. Learned SDR draws attention of the Bench to annexure 5 of the appeal papers which are at p/37, refer to Plant III operations. Learned SDR submits that it is clear from the said papers that the appellant has further worked upon the cold rolled formed sections when that page refers to norms of production of 'Panel Embossing', 'Panel Jogging', 'Panel Launching', 'Panel 45 Bending', 'Stiffener first bending', 'Stiffener second bending', etc. This shows clearly, submits the learned SDR, that the claim of the appellant that rolled formed panels have not been worked upon is not correct.
9.3. As regards the appellant's claim that further supports have been added and that these panels have been further worked upon to convert them into parts of motor-vehicles by the concerned motor-vehicle manufacturer, learned SDR submits that the activities undertaken by the concerned motor-vehicle manufacturer at his end upon the panels received by it do not detract from the character of the panels being parts of motor vehicles because these are specifically designed for a particular motor vehicle. At the worst, such panels may be treated as incomplete motor vehicle parts. Rule 2(a) of the Rules for Interpretation of the CET will come into play which rules that an incomplete article, so long as it has the character of a complete article, will be classifiable as that complete article.
9.4. On the question of limitation, learned SDR again relies on Tribunal's judgement in Tube Investments (supra) which holds that since the use of panels had not been disclosed by the appellant therein (as admitted by various witnesses in that case) there was a suppression of material fact calling for invokation of larger limitation of five years.
10.1. In his rejoinder, learned advocate for the appellant urges that the Tribunal in Tube Investment (supra) has not focussed its attention to the provision in note 1(n) of Chapter 72 of the CETA 1985, although attention of the Bench in that case was drawn to the said note. He submits that once the terms of the said note (which is a statutory definition for angels, shapes & sections) are satisfied the goods have to be classified under Tariff Sub-heading 7210.10 or 7216.20. In the face of statutory definition, all other tests like common parlance, end use, purposes, etc. are of no help. He further points out that Rule 1 of the said Rules has to applied first. If the classification can be made according to Rule 1, one need not go to subsequent rules. In this connection, he relies on the Explanatory Notes to Rule 1 and draws particular attention to paras (III) and (V) thereof which for better appreciation are reproduced below: (III) The second part of this Rule provides that classification shall be determined: (a) according to the terms of the headings and any relative Section or Chapter Notes, and (b) where appropriate, provided the headings or Notes do not otherwise require, according to the provisions of Rules 2, 3, 4 and (V) In provision (III)(b), the expression "provided such headings or Notes do not otherwise require" is intended to make it quite clear that the terms of the headings and any relative Section or Chapter Notes are paramount, i.e. they are the first consideration in determining classification. For example, in Chapter 31, the Notes provide that certain headings relate only to particular goods.
Consequently those headings cannot be extended to include goods which otherwise might fall there by reason of the operation of Rule 2(b).
10.2. Learned advocate also relies on a judgement of a Double Member Bench of the Tribunal in the case of Collector v. Tube Investment of India Ltd. , having co-ordinate jurisdiction as the three Member bench delivering judgement in Tube Investment (supra). It holds that 'cold rolled formed section' for shutters, not further worked, are classifiable under Tariff Heading 7216.20 instead of 73.08. He also takes support for his aforesaid submission on the following circulars of the CBEC and case laws.
10.2.1. Circular No. 139/48/81-CX. 4 dated 26.4.1983 (page 227, Vol.
III) issued by the Central Board of Excise and Customs clarified that cold rolled sections manufactured out of metal strip/coil would be covered under Tariff Item 26AA(ia) of old tariff which inter alia, covered rolled shapes and sections. In Circular No. 139/6/86-CX. 4 dated 21.10.1986 (page 228-229, Vol. III) issued by the CBEC, channels were held to be classified under sub-heading 7210.10 as 'cold roll formed angles, shapes and sections and not under Heading 73.08 of the new tariff, as other articles of iron or steel. The Tribunal in Final Order No. 639/86-B1 dated 6.10.1986 in the case of M/s. Unitech Metals Ltd. (page 230-244, Vol. III) held that cold rolled, formed channels were classifiable under Tariff Item 26AA (ia) of the old tariff.
Similarly, in in the case of Unitech Metals Ltd. (page 245-247, Vol. III) the above products have been held by the Tribunal to fall under Heading 7216.20 under the new Central Excise Tariff. In Chloride India Ltd. v. Collector of Central Excise , the Tribunal after elaborate consideration of the definition of angles, shapes and sections occurring in all the Chapters covered by Section XV of the Central Excise Tariff held that the term 'angles, shapes and sections' have a special connotation in metallurgy.
Hence, the assumption of the Collector that these items are not available in the open market is wholly irrelevant and incorrect test.
10.3. As regards facilities for certain operations being available in the appellant's premises for further working upon the cold rolled formed sections (panels), learned advocate submits that it does not mean that the appellant has further worked upon those panels in the instant case. The appellant is undertaking further fabrication on cold rolled formed sections and paying duty thereon as parts of motor vehicles on such fabricated items after proper declaration in the classification list and approval thereof by the appropriate authorities. Panels in question, asserts the learned advocate, have not been further worked upon. This is not even the allegation of the Revenue in the show cause notice, nor the finding of the adjudicating authority. Lower authority has treated the panels after cold-rolled forming itself, without being further worked upon, as parts of motor vehicles and has thus classified the same under Tariff Heading 87.08.
Despite the foregoing pleas, learned advocate submits that he has no objection to classification under sub-heading 7210.10 and 7216.20 being qualified subject to the condition that the panels have not been further worked upon.
10.4. Learned advocate, while rebutting classification of the goods as parts and accessories of motor vehicle also places reliance on the General Explanatory Notes to Section XVII of the CET wherein it is stipulated, that even if parts and accessories are identifiable as those of motor vehicles, these should not be more specifically included in the Nomenclature. He submits that Tariff sub-heading 7216.20 is more specific to the panels in question and, therefore, should be preferred over Tariff sub-heading 8708.00.
11.1. We have carefully considered the pleas advanced from both sides.
We observe that the pleas advanced by the learned advocate now before us were also advanced before the Bench in Tube Investment's case (1994 (71) 171 involving identical goods. Similar material was placed before that Bench as has now been placed before us. Those pleas did not find favour with the Bench in 71 ELT 171 which is against the appellant herein.
11.2. On the other hand another judgment delivered by Double Member Bench in another case of the same party consisting of two of the three Members comprising the Bench delivering the judgment in holds to the contrary and classifies under Tariff Sub-heading 7216.20. Later judgment is in favour of the appellant herein inasmuch as it has been held that cold-rolled formed sections have not been further worked upon and substantial work is undertaken by the customers of the appellant herein before they are ready for use as shutters (see para 14 of the judgment). Although similar was the factual position in , but classification of the panels has been made under Tariff Sub-heading 8708.00. The work undertaken by the customers (motor vehicle manufacturers) has been dismissed as fitment work. The sole basis for treating the classification of panels as parts of motor vehicles appears to be that the panels have been made according to the drawings and specifications (which include part Nos. ) of the motor vehicle manufacturers. Use of excisable goods after clearance does not determine classification is well-settled proposition, unless the description of goods in the proposed classification refers to its use for a particular purpose. There is no reference to the use of the goods either in 7210.10 or 7216.20 on the one hand and Tariff Sub-heading 8708,00 on the other hand. User of the goods under consideration as parts of motor vehicles in our view is immaterial to the classification of the goods. We may at this stage observe that further operations undertaken by the customers (motor vehicle manufacturers) of the appellant herein does not detract, as rightly held by the adjudicating authority from the user of the goods and drawings. Panels, in the form these are cleared, can be said to be for specific use in motor vehicles. In view of the specifications as per drawings, no other use for those panels could be envisaged. It has not been brought on record, by adducing evidence, by the appellant that panels sold to others i.e.
other than motor vehicle manufacturers were also of the same specifications as given in the drawings of motor vehicle manufacturers.
Nevertheless, as already observed since the panels in question are the result of cold-rolled forming and are not further worked upon, Tariff Sub-heading 7210.10 prior to 1.3.1988 and 7216.20 after 1.3.1988 would be appropriate as per the Tribunal's other judgment .
11.3. There are, therefore, two conflicting judgments on the question of classification in this case i.e. and 12. We are, therefore, of the view that it is a fit case for referring the question of classification to a Larger Bench of the Tribunal.
Registry should, therefore, place the papers before the Hon'ble President to constitute a Larger Bench for resolving the classification issue.
13. We make it clear that so far as the question of limitation of demand of duty is concerned, facts and circumstances of this case being identical or at least strongly similar, to that of Tube Investment , we would not like to differ from that judgment which holds that larger period of limitation is liable to be invoked. We also hold accordingly. Consequently, demand of duty will not be barred by time.
14. On the question of quantum of demand, we agree with the submission of the learned advocate that the case of the Department being that the panels have been supplied to motor vehicle manufacturers as per the latter's drawings, demand has to be confined to the goods cleared to the motor vehicle manufacturers and not to others. Quantification of demand of duty needs to be revised on the basis of this finding, if it is ultimately held against the appellants herein on the question of classification.