S.S. Chadha, J.
1. The petitioner seeks an appropriate writ, order or direction declaring that the forged products of iron and steel, manufactured by the petitioner company, are liable to duty of the central excise, under item 26AA(ia) of the First Schedule to the Central Excise and Salt Act, 1944 (hereinafter referred to as the Act) only and not under Item 68 thereof or both. The consequential relief claimed is for a writ of prohibition against the respondents from levying, demanding and/or collecting duty of central excise on forged products of iron and steel manufactured by the petitioner under Item 68 of the First Schedule to the Act.
2. The facts and circumstances giving rise to the present petition are stated in para 4 of the writ petition in these words. The petitioner company is licensed under the Industrial (Development and Regulation) Act of 1951 and is registered with the Ferrous Industrial Directorate of the Directorate General of Technical Development, Ministry of Industries & Development, Government of India and manufactures a number of Steel forged products namely :
(a) Steel forgings for Auto & Tractors like Forged Connecting Rods, Forged Pinions, Forged Gears, Forged Shaftings.
(b) Miscellaneous Steel Forgings e.g., Rings, Step Forgings and Bars.
(c) Forged Steel Flanges & Other fittings for high pressure pipe lines of PetroChemical and other projects for export fully machined and drilled.
The aforementioned forged products, as listed in para (a), (b) and (c) here in before are manufactured by the petitioner company mostly out of steel semis e.g. billets, blooms, slabs or bars, on which proper central excise duty including product duty has been charged and paid at the source. The petitioner company also uses to some extent heavy steel out ingots on which duty is paid at source and the product duty is to be paid by the petitioner company.
3. The process of manufacture of these forged products consists of cutting of steel, pre-heating of material, heating and beating of steel material till the final shaping, nearest to the shape desired by the customer and/or specification required is achieved. The Steel Forging process involves :
(a) Open forgings process where the quantity is relatively small.
(b) Drop/Close Die Forging and/or upset forging process under which the product is made with the help of dies.
The close die forging and/or upset forging system is adopted where the requirement is large and to be repeated for future requirements so that the dies could be absorbed for large number of pieces. Thereafter the extra/unwanted material is removed by either trimming or by gas cutting or by skin cutting and/or rough machining, to achieve the shape and section nearest to the forged steel product required by the customers, and also the forging tolerances specified in the standards by ISI or international. All these products are made to order of the customers who are mostly in the field of petroChemical and/or refineries and/or Atomic and other projects.
4. The Central Excise authorities had been all through till March, 1975, after the imposition of Excise Duty on iron and steel products, by introduction of the Schedule Item 26AA in the Schedule to the Act treating all the aforesaid forged products, manufactured by the petitioner company, under Tariff Item 26AA(ia) i.e. as 'All other rolled forged or extruded shapes and sections not otherwise specified.' Schedule Item 26-AA reads as under :-
'26-AA. Iron or steel products, the following, namely :
(i) Semi-finished steel including blooms, billets, slabs, sheet bars, tin bars, and hoe bars.
(i-a) 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.
(ii) Plates and sheets (including uncoated plates and sheets intended for tinning and forms, such as, ridges, channels, other than slotted channels, rain water pipes and their fittings made from plates or sheets, but not including plates and sheets after tinning), and hoops, all sorts, other than skelp and strips.
(iii) Flats, skelp and strips.
(iv) Pipes and tubes (including banks therefore) all sorts, whether rolled, forged spin, cast, drawn, annealed, welded or extruded.
(v) All other steel castings, not otherwise specified.
Explanationn. - 'Skelp' means hot rolled narrow strip of width not exceeding six hundred millimetres with rolled (square, slightly round or leveled) edge.'
5. With effect from 1st March, 1975, Item 68 came to be added to the Schedule to the Act which reads as follows :-
'All other goods not elsewhere specified manufactured in a factory, but excluding alcohols, opium...........'
6. The question arose whether the forged products manufactured by the petitioner-company were 'Iron & Steel Products' described in sub-item (ia) of Item 26AA of the Schedule or any of one of the said items, manufactured by the petitioner company by the further process of machining or cutting holes etc. attracted the newly introduced Tariff Item 68. The petitioner company received a letter No. GL6/Misc/75/423 dated June 24, 1975 from the Superintendent, Central Excises (MOR IV) wherein it was stated that 'Forged Products which are machined and are ultimately parts of machinery should be classified under Tariff Item 68.' The said letter of the Superintendent, Central Excise was replied by the petitioner company vide their letter No. MF/OPB/SC/75-76/3167 dated July 2, 1975. Subsequently, the petitioner company received another letter, being letter dated July 10, 1975, from the Asstt. Collector, MOD III, in which it was stated 'Your products are covered under Item 68' without making any reference to the fact whether the same are machined or unmachined. On receiving the said letter dated July 10, 1975 from the Assistant Collector, MOD III, the petitioner company represented the matter to the Chairman, Central Board of Customs and Excise and to the Collector. Central Excise, Delhi vide telegram and letter dated July 12, 1975 whereby the petitioner company, inter alia, requested the authorities concerned to give them a copy of the order by which it has been decided that the products manufactured by the petitioner company were covered under Schedule Item 68.
7. The extracts of the various impugned orders passed by Officers of the Central Excise in the case are now on the record. It may be apposite to reproduced the order of Shri K. D. Tyal, Assistant Collector of Central Excise, dated January 22, 1976 :-
'Goods classified by the party at Seriall No. 2(b), (c), (d) and 4(b), (c) and (d) will be covered under the Tariff Item 68 and will be chargeable to duty at the rate of 1% ad valorem. These goods, it might be mentioned, will also bear the duty liability under Tariff Item 26AA at the initial forging stage and as the same goods subsequently become identifiable parts of machinery etc., they will at the later stage, after machining be covered also under Tariff Item 68.'
8. The order in appeal against the said order dated January 22, 1976 was passed by Shri K. K. Kapur Appellate Collector on June 19, 1976 upholding the order of the Assistant Collector. The order in revision was passed by the Government of India on August 2, 1980 adopting the reasoning in the Order No. 176 of 1979 dated March 3, 1979 passed in the case of M/s. Guest Keen, Williams Ltd. It was held there :-
'Government observe that all rolled, forged or extruded shapes and sections not otherwise specified are excisable under sub-item (ia) of Item 26AA of the C.E.T. In other words, if the forged products are specified under other Tariff Items namely from Item 1 to Item 67, these alone would go outside the scope of sub-item (ia) of Item 26AA. Parts of motor vehicles etc. would come in this category. However, if such product are not specifically covered under Items 1 to 67, these would necessarily be classifiable under sub-item (ia) of Item 26AA. In respect of those forged shapes and sections which may be subsequently used as components for machinery the classification has necessarily to be under sub-item (ia) of Item 26AA. If such products are processed further to make them suitable and identifiable as parts of machinery these products would attract duty again under Item 68 which was inserted in the C.E.T. w.e.f. 1-3-1975. The result would be that at the forged stage even products which are intended to be used as component parts of machinery others than those which fall under any of the items from 1 to 67 C.E.T. have necessarily to pay duty under sub-item (ia) of Item 26AA. Thereafter, if other process which make them identifiable parts of machinery are undertaken duty liability will further arise under Item 68.'
9. The petitioner seeks the quashing of all these orders and a declaration that the forged products of iron and steel manufactured by the petitioner company are liable to duty of Central Excise under Item 26AA(ia) only and not under Item 68.
10. In the counter affidavit filed in the affidavit of Shri R. D. Vasudeva, Assistant Collector, Central Excise, the facts and circumstances mentioned by the petitioner in the writ petition are not disputed as regards to the method of manufacture. It is, however, pleaded that products manufactured, which obtains the shape of identifiable machine parts, after the process of machining are liable in addition to payment of Central Excise Duty livable under Tariff Item 68. The manufactured articles which had acquired the shape of identifiable machinery parts, have been held to be liable to Central Excise duty under Tariff Item 68 with effect from March 1, 1975 by various orders passed by Officers of the Central Excise. It is also significant to note here an additional plea taken by the respondents it is stated that the petitioner had himself objected to the classification of his products under Tariff Item 26AA(ia) in C.W.P. 1037/74 filed on August 27, 1974. The plea taken there is that the petitioner manufacturers machinery parts and components, namely, flanges, rings and discs for heat exchangers, spindles for lathe machines, centrifugal worm shaft for sugar mills crankshafts, connecting rods, etc. for diesel engines and other components or parts of machine tools which are either machined (completely finished) or unmachined (semi-finished) according to the order of the customer. It is averred that these products manufactured by the petitioner company are made mostly out of steel billets, blooms, slabs or bars on which appropriate central excise duty including product duty has been charged at the source. Then the process of manufacture is stated in the earlier writ petition as is stated in the earlier writ petition as is stated in the present writ petition. It is then stated that these components so developed are either sold as such or are taken for the further processing i.e. heat treatment machining and/or grainding as per condition of the order. The contention raised there is that the petitioner is manufacturing these machinery parts either unmachined or machined as per orders of the customers. The writ petition came up for admission before the Division Bench on August 28, 1974 when Rule Nisi was issued. During the pendency of the writ petition, the petitioner moved an application, being C.M. 1442 - W/75 on July 14, 1975. It was stated in that petition that the matter was discussed in the Association of Steel Forging Units, which in turn examined the practice and procedure prevalent in this regard in other Central Excise Collectorates in the country and as a result of the said examination, the petitioner company was advised and was satisfied that the goods manufactured by the petitioner company are in fact covered under Schedule Item 26AA(ia). The petitioner sought leave of the Court to withdraw the writ petition. The same was dismissed as withdrawn under the orders of the Court on August 5, 1975. It is urged by the respondents that the petitioner is estopped by pleading now that his manufacture fall under Tariff Item No. 26AA(ia) when he expressly sought its classification as machinery parts under Item No. 68. The submission now made by the respondents is that the petitioner company itself admitted that forged machinery parts after undergoing further process of machining, drilling etc. do make them identifiable machine parts and that the petitioner has been manufacturing machinery parts besides forged iron and steel products which are liable to central excise duty under Tariff Item No. 68.
11. Tariff Item No. 26AA(ia) is comprehensive enough to include all the forged products manufactured by the petitioner company. Item 26AA(ia) is of very wide amplitude as the words 'all other rolled, forged or extruded shapes and sections, not otherwise specified' indicate. It embraces within its concept all rolled or forged articles of iron and steel not otherwise provided in Items 1 to 67 of the First Schedule to the Act. It constitutes a residuary clause for such specific products i.e. rolled or forged iron and steel products. In other words, the residuary character with regard to rolled forged products of iron and steel shows that this item is intended to cover all rolled or forged products of iron and steel. The Central Government in the impugned order also conceded that if rolled, forged or extruded shapes and sections of iron and steel are not covered under Items 1 to 67, these would necessarily be classifiable under sub-item (ia) of Item 26AA(ia). In respect of those forged shapes and sections the classification has necessarily to be under Item 26AA(ia). Ever since Schedule Item No. 26AA(ia) was added to the Central Excise Tariff by Finance Acts XX of 1962 and XIII of 1963, the Central Excise authorities have all along classified and assessed all forged and rolled products of iron and steel manufactured by the petitioner including later machined or semi-machined finished products of all types under the Item 26AA(ia). Item 26AA(ia) does not restrict itself to forged articles which are in a rough condition, nor does it restrict itself to crude forged articles or exclude from its operation forged articles which have later been subjected to any further process of machining, tooling, polishing and/or drilling holes. The petitioner company and the authorities of central excise have taken a common stand that all the forged products of iron and steel manufactured by the petitioner-company are liable to duty under Schedule Item 26-AA(ia).
12. As already noticed, the process of manufacture of forged products consists of cutting of steel, pre-heating of material, heating and beating of steel material till final shaping is achieved. The steel forging process involves open forging process where the quantity is small and drop/close die forging and/or upset forging process under which the product is made with the help of dies. Thereafter the extra/unwanted material is removed by either trimming or by gas cutting or by skin cutting to achieve the shape and section nearest to the forged steel product required and also the forging to clearances specified in the standards by I.S.I./or International. It is conceded by the Government that forging would not cease to be forging by process like removal of superfluous extra skin of case iron. The stand of the Central Excise authorities is that the forged products of iron and steel which are subjected to further process like machining, drilling holes etc. which convert the forged products into an identifiable machine part would render the final products livable to additional duty under Schedule Tariff Item 68. On the other hand, the case of the petitioner is that a product does not cease to be a forged or rolled product merely because it may have been machined or tooled or polished to remove forging defects or to make marketable.
13. Neither the petitioner nor the respondents contend that the process of forging is an intermediary process in the manufacturer of machinery parts and components which are being subjected under the impugned orders to additional excise duty under Item 68. In law there can be manufacture even at the intermediate stage if a distinct and different product known to the commercial world comes into existence. An intermediate product which is by itself an excisable article is liable to excise duty even though it is not removed from the factory because the duty of excise is on manufacture or production of goods. The taxable even is the manufacture of the goods and not their removal from the place of the manufacture. In 'J.K. Cotton Spinning and Weaving Mills and another v. union of India' 1983 E.L.T. 239, a Division Bench of this Court held 'that so long as the goods are identifiable and capable of physical removal would attract duty whether they are physically removed or not'. The forged products of iron and steel manufactured by the petitioner are excisable goods having come into existence as a result of manufacturing process. The removal of the extra/unwanted material, by either trimming or by gas cutting or forged products, by either trimming or by gas cutting or by skin cutting for the removal of superfluous extra skin of cast iron to achieve the prescribed dimensions and tolerances is not a further process of manufacture. This process is incidental or ancillary to the process of manufacture. They do not cease to be forged products as known in the market. All the manufactured goods can ordinarily come to the market to be bought and sold as forged products. They are known as such to the commercial community. Central Excise Authorities have been treating these forged products under Tariff Item 26AA(ia) and there is no grievance to it by the petitioner.
14. It is, thereforee, necessary to consider whether the Central Excise authorities have proceeded on correct basis for determining that if such products are processed further to make them suitable and identifiable as parts of machinery these products would attract duty again under Item 68. The jurisdiction of this Court is invoked under Article 226 of the Constitution of India and, thereforee, it is not appellate. It is primarily for the Central Excise authorities to determine the item in Tariff Schedule under which any particular manufactured goods fell, but if in doing so these authorities adopted a construction which no reasonable person could adopt i.e. if the constitution is perverse, then it is a case in which the Court is competent to interfere (See 'Super Traders v. Union of India' 1983 E.L.T. 258 (Del) and 'Khandelwal Metal and Engineering v. Union of India' 1983 E.L.T. 292 (Del).
15. As I have already said the duty is on manufacture or production of goods. Manufacture means making or fabricating articles or materials by physical labour or by skill or by mechanical power vendable and useful as such. Manufacture implies a change but every change is not manufacture exigible to duty. To be manufacture exigible to duty there has to be such transformation that a new and different article which can ordinarily come to the market to be bought and sold and known to the market having a distinctive name, character and usage must emerge. In other words, it should be a different commercial commodity. The Supreme Court has also emphasised the importance of an article being known as such in the commercial community for consideration whether an article in question becomes an article as mentioned in the Schedule to the Act. The concept of being known to the market is important not from the point of view whether the goods are manufactured. By the process of forging as detailed above, ma forged product of iron and steel comes into existence. It acquires distinguishable identity as forged product. Now once an article comes into existence with the definite identity, the process of manufacture is complete and it is exigible to duty. Merely because a manufactured goods is used subsequently for manufacturing another article, it cannot be concluded that the earlier process of manufacture was not complete or finished goods had not come into existence. Forged products which are machined, polished, holled etc. and made fit for being used as machine parts assume a different name, character and usage. Such forged products as are machined/drilled/polished assume an altogether different character from what it was when forged and so as to make them identifiable or usable as machine parts. It is, thereforee, for the Central Excise authorities to determine as to which of the forged products of iron and steel manufactured by the petitioner are transformed by a further process of manufacturer as parts of machinery which are liable to additional duty of Central Excise under Tariff Item 68 i.e. in addition to the duty at the stage of forging.
16. There is no merit to the plea of estoppel raised by the parties is different contexts. There is no estoppel in a taxing statute. The principle of equitable estoppel which is a rule of equity cannot prevail against law. If an excise duty is not paid due to incorrect interpretation, still the Central Excise authorities are empowered to recover the duty due and payable by an assessed by virtue of Section 11A. If an assessed has wrongly classified his goods, then it cannot be taken as an estoppel for claiming a correct or revised classification. The principles of estoppel or rest judicata are not applicable to tax matter. The view taken by an authority in respect of any assessment period will not be binding for subsequent periods.
17. Great reliance is placed by the counsel for the petitioner on 'Tata Yogodwa Ltd. v. Asstt. Collector of Excise' 1983 E.L.T. 17 (Pat.). The question arose whether the Steel Casting manufactured by the petitioners there were excisable under Item 26AA(v) when taken out of the mould and in addition under Item 68 after the same were machined or polished. The process of Case Rolls was stated in the petition and accepted as correct by the respondents. On appreciation of the material it was concluded that the steel castings when taken out from the moulds and put to further processing for bringing it according to designs and specification of customers, do not cease to be steel castings as known to the market. It was observed that the whole process from the start to finish must be held to be manufacture within the meaning of the Act. In my view the manufacture of the goods is not complete until all the processes incidental or ancillary to have been completed. In case of forged products the removal of extra unwanted material by either trimming or by gas cutting or by skin cutting for the removal of superfluous extra skin of cast iron is a process incidental to the forging. But when the forged products are machined/drilled/polished, they assume an altogether different character from what it was when forged. In that case before Patna High Court it was asserted that the goods supplied by the petitioners, there to its customers could not be used in that condition as it required further machining for using it as machine parts. In the case before me they are identifiable and usable as machine parts without any further process.
18. The counsel is right when he says that the taxing even is the manufacture and the excise duty is livable when the goods leave the factory gate. The condition of the article at the time when it leaves the factory gate is the determining factory for the purposes of levy of excise duty. End use of the goods cannot determine their classification in general except where classification is related to the function of the goods as in Tariff Item No. 68. The question as to what would be the possible ultimate use or end use of a forged product or the use of which the trade might put the said goods after they leave the factory as forged products is altogether immaterial (See 'Dunlop India Ltd. v. Union of India' AIR 1977 S.C. 597). This is applicable to forged products of iron and steel which have not undergone the further process of machining/drilling/polishing. The forged products which have to undergone the further process of manufacture to make them suitable and identifiable as machine parts, leave the factory gate into a form known to the commercial community as machinery parts. They are liable to duty under Tariff Item 68.
19. The counsel has also urged that the method used by the petitioner company for manufacturing the forged products including machining thereof was with a view to bring it to the requisite standards laid down by the Indian Standards specifications and the American Standards specifications. It is also submitted that the said processes are also resorted to by the Government companies like Hindustan Steel Limited (Alloy Steel Plant), Hindustan Steel Limited, Rourkela, Durgapur, Tata Iron & Steel Company, Telco Heavy Engineering Corporation Limited, Ranchi and other forging units in the country. It is contended that their similar products even after deseaming/scarfying/machining are still considered as forged iron and steel products and subjected to duty under Tariff Item 26AA(ia). In my view, the petitioner has not laid the foundation for this submission. The petitioner placed before the Central Excise authorities as also on the record of this case only certificates from the parties as to how those products of this case only certificates from the parties as to how those products were being dealt with. Not one order of any adjudicating authority or of Appellate Collector or of the Government has been produced by the petitioner. It is, thereforee, not possible to inter that the forged products which are machined and are ultimately parts of machinery have been classified by some Collectors under Tariff Item No. 26AA(ia).
20. The result of the above discussion is that the writ petition fails and is hereby dismissed. The Central Excise authorities are granted liberty to determine as to which of the forged products of iron and steel manufactured by the petitioner are transformed by a further process of manufacture as parts of machinery liable to duty under Tariff Item 68 in addition to the duty at the stage of forging. On the facts of the case, I make no order as to costs.