PEFCO FOUNDRY CHEMICALS LTD. versus COLLECTOR OF CENTRAL EXCISE, PUNE

Citation: [1992] 1 S.C.R. 891 · Decided: 19-02-1992 · Supreme Court of India · Bench: A.M. AHMADI · Disposal: Dismissed

Judgment (excerpt)

• 
' 
PEFCO FOUNDRY CHEMICALS LTD. 
A 
v. 
COLLECTOR.6J'·CENTRAL EXCISE, PUNE 
FEBRUARY 19, 1992 
(AM. AHMADI, K. RAMASWAMY AND R.M. SAHAI, JJ.] 
B 
Central Excises and Salt Act, 1944/Central Excise Rules, 1944 : 
Section 4/Rule 8-Entry 68--Cylinder liner-Manufactured and sup-
plied after machining and honin15Whether identifiable as machine C 
part-Whether e.xigible to duty. . 
The appellant was manufacturing cylinder liner by casting molten 
iron in specific shape. The rough surface of the cylinders was removed 
and after ma10hining and honing it was delivered to Railways. 
The respondent took the view that at the time the cylinders were 
supplied to Railways, they became identifiable as machine part attracting 
duty. According to the appellant, the cylinders continued to he iron 
D 
1 
casting and only after Railways further treated the cylinders with honing 
and chrome plating, they became machine_ parts and excisable under the 
Central Excises & Salt Act, the duty being exigible under Entry 68. 
E 
On appeal, the Tribunal gave a finding that by the time the goods 
were cleared from the factory, they ceased to be casting and assumed the 
charader of fully machined cylinders, identifiable as such and exigible to 
duty under Entry 68. 
Being aggrieved against the Tribunal's order, the assessee preferred 
the present appeal. 
F 
The appellant contended that till the cylinder liner was finaUy 
processed by the Railways, it was incapable of being used as machine part, G 
and as such no excisable commodity came into being at the time when the 
cylinder liners were supplied to,.Railways. 
It was also contended that the authorities were precluded from issuing 
notice and adjudicating whether the cylinder liner was a machine part, since 
in respect or an earlier period the classification list claiming it as iron H 
891 
892 
SUPREME COURT REPORTS 
[1992] 1 S.C.R. 
A 
casting and th11s exempt from duty, has been approved by the authorities. 
Dismissing the appeal, this Court, 
HELD: 
1. The Tribunal found that the contract in pursuance of 
which the goods were manufactured was for supply of 'fully machined 
B cylinder liner'. The Railways would not have accepted the cylinder unless it 
tallied with the specification. There was no dispute before the authorities 
that first machining and honing was done in assessee's factory. Also, from 
the letter issued by Railways, it is clear that what was supplied by appellant 
·was fully machined cylinder liner. That was the contract as well. Thus, the 
{ -
C 
tribunal's finding that the contract was for supply of, 'fully machined 
cylinder liners' stands supported by the letter of Railw~ys also. The 
i . 
Tribunal, in the circumstances, was justified in recording the finding that by 
the time the goods cleared from factory they had.ceased .to be casting, and 
had assumed the character of fully machined cylinder liner or fully machined 
or proof machined cylinders which were identifiable as such. Since duty 
D under Centra.1 Excises and Salt Act is leviable on manufacture of goqds 
produced, the ·cylinder liner became exigible to duty under Entry 68. The 
duty of excise is on manufacture of a good and not on its use, as in the instant 
case, by the Railways. [894G-H; 89SA, D, G-H; 896A) 
E 
Tatalron&SteelCo.Ltd. v.Unionoflndia, [1988] 3SCR1025; Union of 
India v. Delhi Cloth & General Mills Ltd., [1963] 1 SCR 587 referred to. 
2. 
Once the tribunal found that cylinder liner ceased to be cast 
iron it is obvious that the department could not be precluded from levying 
duty on it subject to the law of limitation. Since show cause notice which 
F 
resulted in these proceedings was for a period other than for which 
proceedings had been dropped, it cannot be said to be review proceed· 
ings. [896B] 
Plasmac Machine Mfg. Co. Pvt. Ltd. v. Collector of Central Excise, AIR 
G 1991 SC 999 relied on. 
CIVIL AP PELLA TE JURISDITION : Civil Appeal No. 4457 of1984. 
From the Order dated 17.8.1984 of the Customs Excise and Gold 
{Control) Appellate Tribunal, Delhi in Appeal No. ED {SB) 776/83- B) 
H 
Order No. 623 - Bl 84. 
PEFCO CHEMICALS v. COLLECTOR [SAHAI, J.] 
893 
R.F. Nariman, Sumant Bhardwaj, B.R.Agarwala and Sunil Goyal for A 
the Appellants. 
A.Subba Rao, A.D.N. Rao, G.V.Rao and P. Parmeswaran for the 
Respondents. 
The Judgment of the Court was delivered by 
R.M. SAHA!, J .. 
Two questions arise for consideration in this 
B 
appeal directed against the order of the Customs, Excise & Gold (

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