LexKIRLOSKAR OIL ENGINES LTD versus UNION OF INDIA AND ORS.
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A KIRLOSKAR OIL ENGINES LTD. v. UNION OF INDIA AND ORS. MAY 9, 1995 B [R.M. SAHA! AND S.C. SEN, JJ.] Central Excises and Salt Act, 1944 : First Schedule Item 34- A. Excise Duty-'Thrust washers~ 'Thrust half washers' and 'Wrapped C bushes'--Exclusive use in motor vehicles-Clearance of goods under Notifica- tion providing exemption-Meeting between Excise Board and Trade Repre- sentativr-Decision to classify the goods as 'thin walled bearings' if they meet !SI specification-Absence of material to supports decision-Issue of trade notice and levy of duty on goods cleared-Held not proper-Matter remitted to High Court for redetennination. D The appellant-Company was manufacturing bushes and washers which were exclusively used in motor vehicles. It cleared these goods under notification No. 99 of 1971 without payment of excise duty from 1971 onwards. The said notification provided that motor vehicles parts and E accessories falling under Item No. 34-A of the First Schedule to the Central Excises and Salt Act, 1944 were exempted from payment of excise duty except the items mentioned in the said notification. However, in a meeting held in 1978 between the Central Excise and Tariff Board and representatives of the Trade it was decided that washers and bushes F manufactured by the appellant were bimetal bearings and tha! they could be classified as 'thin walled bearing' if they satisfied the specifications as provided in Indian Standard 4774-1968. Accordingly, a trade notice was issued and acting on it the Superintendent of Central Excise issued a letter demanding Rs. 1,79,504,21 from the appellant stating that the goods cleared by the appellant were thin walled bearing liable to excise duty. The G appellant contested the demand on the ground that 'wrapped bushes' and 'thrust washers' manufactured by it were articles different from 'thin walled bearing' and therefore not excisable from the date of exemption notification. Rejecting the contention the Assistant Collector held that the goods in question were thin walled bearing liable lo duty under item No. H 34-A. The Collector affirmed the view of Assistant Collector but did not 90 , ., KIRLOSKAROILENGINESLTD. v. U.0.I. 91 record any finding whether the goods satisfied IS: 4774-1968 specification. A On further appeal the High Court held that (i) there was no material to determine how the bushes and washers were understood in the trade circle; (ii) ISi specification was irrelevant and could not resflect trade under- standing; and (iii) since the function performed by the bushes and washers manufactured by the appellant was the same as those performed by the B bearings, they were liable to be treated as thin walled bearings as they were in accordance with the specification given in the ISi schedule. The asses- see-Company preferred appeal before this Court. Allowing the appeal and setting aside the order passed by the High Court, this Court HELD : 1. A bush and washer manufactured by the appellant could not normally be treated as bearing except when it is understood in techni- c cal sense. Before a decision was taken by the Board, there was no material available with the Department which could furnish basis for deciding D whether bushes or w~sbers manufactured by the appellant could be classified as bearing much less 'thin walled bearings' within the meaning of notification issued in 1971. Further the entire proceedings were initiated by the Superintendent of Central Excise on the basis of trade notice inviting the appellant to classify these goods as 'thin walled bearings' if E they satisfied the specification of 4774. The High Court rightly held that a trade notice is not binding, but it omitted to consider that there was no other material with the Department on which it could assume that the washers and bushes manufactured by the appellant were 'thin walled bearings'. The basis for initiation of proceedings being Indian Standard Booklet it was not proper either for the High Court or for the assessing authorities to ignore it and levy the duty treating these good to be 'thin walled bearing' on assumptions llithout any material. The High Court's observation that it was undisputed that thrust washes and wrapped bushes F were in accordance with incorrect. (98-H, 99-A-C] specification under IS: 4774-1968 is factually 2. Since the High Court and the assessing authorities approached G the case with an entirely in
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