KIRLOSKAR OIL ENGINES LTD Vs. UNION OF INDIA

JUDGEMENT

(1.) THE petitioner No. 1 is an Existing Company within the meaning of Section 3 of the companies Act, 1956 and manufactures at the factory at Khadki, Pune, bimetal bearings suitable for various applications. The bimetal bearings are used in engines and chassis of motor vehicles and tractors and thus become parts of motor vehicles and tractors. Bimetal bearings manufactured by the Company are : (1) Thin-walled bearings, (2) Thrust Half washers, (3)Wrapped Bushes, and (4) Thrust washers. The manufacture of products by the Company became liable to payment of excise duty after insertion of Tariff Item No. 34a in Schedule 1 to Central excises and Salt Act (hereafter referred to as the 'act') by Finance Act, 1971. The description of goods under Tariff Item No. 34a is :

(2.) TILL September 22, 1978, the Company manufactured and cleared various bimetal bearings produced in the factory and paid excise duty on thin walled bearings heaving total thickness of 3/16" or below which, according to the opinion of the Central Board of Excise and Customs based on Circular dated August 3, 1971, were thin walled bearings. The Company did not pay any amount of duty on the manufacture of thrust washers, thrust half washers and wrapped bushes in accordance with Exemption Notification dated May 29, 1971. On September 23, 1978, the Superintendent of Central Excise, Kirloskar Oil Engines Range, pune addressed letter to the Company advising that the thrust washers, thrust half washers and wrapped bushes attract excise duty provided they are manufactured to I. S. Specification No. IS : 4774-1968 and are used to have application as motor vehicles parts. The Superintendent found that the Central Board of Excise has done away with D. G. T. D's restrictive definition of thin walled bearings. The Company was called upon to file a fresh classification list and pay appropriate excise duty from the date of receipt of the letter. The Company was also called upon to furnish particulars as regards clearance of bearings from the factory from August 7, 1978. The superintendent of Central Excise received the reply dated October 7, 1978 from the Company furnishing the requisite information and intimating that the goods would be cleared on payment excise duty, under protest.

(3.) THE Superintendent of Central Excise on October 16, 1978 served notice of demand for duty of Rs. 1,79,504. 21 in accordance with Rule 10 of the Rules. The Notice, inter alia, recites that as per Tariff Advice dated August 7, 1978 and Poona Central Excise Collectorate Trade Notice dated September 23, 1978 all the thin walled bearings attract central excise duty and in view of the fact that thrust washers and bushes are thin walled bearings, the Company is liable to pay excise duty on the clearance effected from August 7, 1978 onwards. On November 18, 1978, the company sent reply claiming that the demand of duty from August 7, 1978 is incorrect and the company is prepared to pay duty on such bushes and washers with effect from September 23, 1978, i. e. the date on which the revised orders were communicated to the Company. The company also claimed that the classification list approved earlier was in operation till receipt of communication dated September 23, 1978 and, therefore, the duty with retrospective effect from august 7, 1978 cannot be recovered in violation of the provisions of Rule 173-B of the Rules. The Superintendent of Central Excise then fixed the hearing in respect of demand notice and the company was heard and permitted to file written submissions. In the written submissions, it was claimed that thrust washers and wrapped bushes cannot be treated as thin walled bearings although it was accepted that thrust washers, thrust half washers and wrapped bushes manufactured by the Company are bearings. The only contention raised was that though thrust washers and wrapped bushes are bearings, they are not thin walled bearings. The Company also claimed that Indian Standard Specifications describes thin walled bearings and thrust half washers and wrapped bushes as different articles and having different dimensions for the purpose of specifications and, therefore, thrust washers and wrapped bushes cannot be treated as thin walled bearings. The Asstt. Collector, Central Excise, Pune by adjudication order dated June 22, 1979 came to the conclusion that the thrust washers and wrapped bushes are thin walled bearings falling under item No. 34a of First Schedule and are liable to payment of excise duty. The Assistant Collector did not accept the claim of the Company that only bearings which are manufactured according to the dimensions mentioned in Tables Nos. 2 to 5 of IS : 4774-1968 are "thin Walled bearings" and not those which are shown in Table No. 8 in the said IS : 4774-1968. The Assistant Collector further held that the liability to pay excise duty arises from August 7, 1978 though communication was sent on September 23, 1978 because the decision was taken on February 9, 1978 in the meeting, held between the representatives of Government of India and the representatives of trade held at New Delhi, that all kinds of bushes would fall within the category of bearings but the relevant dimensions as laid down in IS : 4774-1968 should be taken into account to decide whether a bearing is a thin walled bearing and that decision at the meeting was approved by the Government of India on August 7, 1978. The Asstt. Collector felt that as the representative of the Company was present at the conference and was aware of the decision taken, the liability to pay duty arises from the date when the Government of India accepted the decision taken at the Conference, i. e. on August 7, 1978. The Superintendent of Central Excise observed that Tariff Advice makes the legal position clear and Tariff Advice is part of the law so far as it relates to the classification of goods. On the strength of this finding, the Asstt. Collector confirmed demand for Rs. 1,79,504. 21.