Case: Kirloskar Oil Engines Limited Vs. Union of India

rotary. The expression "thrust washers" means a washers used at one or each end of a plain journal bearing in order to take light-duty thrust loads, and the expression "thrust Half-Washer" means one half of a split thrust washer. "Thin walled bearing line" is defined as a bearing liner in which the wall thickness is sufficiently small for the geometrical truth of the working surface to depend on the accuracy of the bore surface of the housing, while "bearing Liner" means in a journal bearing, the tubular element (often in halves) whose inner surface is the bearing bore. In IS: 4757-1968, the expression "wrapped Bush" has been defined as a bush with a longitudinal split in one place. (It is called "wrapped" because it is formed from a strip). The Assistant Collector and the Appellate Authority relied upon this specification to conclude that the function performed by thrust washers and wrapped bushes are the same as those performed by bearings and, therefore thrust washers and wrapped bushes must be treated as thin walled bearings provided the same are in accordance with the specifications given in IS: 4774-1968. It is not in dispute that thrust washers and wrapped bushes manufactured by the Company are in accordance with specifications under IS: 4774-1968, i.e. in the nominal diameter range 16 to 150 mm. Shri Nankani submitted that I. S. I. specifications refer to thin walled bearings in Section 1 and covered by the dimensions in Tables Nos. 2 to 5 whereas thrust half washers are dealt in Section 2 of the Indian Standard Specification and this differentiation proves that thrust half washers are not thin walled bearings. It is not possible to accede to the submission. Merely because the dimensions are set out in different tables cannot lead to the conclusion that thrust washers and wrapped bushes are not thin walled bearings. Indeed, as mentioned hereinabove, the standard specifies requirements both for groove bearings and ungrooved bearings and thrust washers are identical. The nominal diameter range of adjective thin wall is to apply to all the three bearings, viz. thrust half washers, thrust washers and wrapped bushes. The thrust washers and wrapped bushes have been defined as bearing liners and if used as bearings themselves and if they satisfy the requirement of wall thickness being proportionately small for the bore surface of the housing and, therefore, can well be treated as thin walled bearings. In our judgment, the view taken by the Assistant Collector and confirmed by the Appellate Authority cannot be described as perverse, unreasonable or entirely unsustainable. In the decision reported in A. I. R. 1963, supreme Court 1319 (Collector of Customs, Madras v. K. Ganga Setty) observed: "it is primarily for the Import Control authorities to determine the head or entry in tariff schedule under which any particular commodity fell; but if in doing so, these authorities adopted a construction which no reasonable person could adopt i. e. if the construction is perverse, then it is a case in which the Court is competent to interfere. In other words, if there were two constructions which an entry could reasonably bear, and one of them which was in favour of revenue was adopted, the Court has no jurisdiction to interfere merely because the other interpretation favorable to the subject appeals to the Court as the better one to adopt."It is, therefore, clear that even assuming that the view, other than one, taken by the Assistant collector and confirmed by the Appellate Authority is possible, still, it is not permissible in exercise of writ jurisdiction to disturb the conclusion of the Authorities below. We are unable to accept the claim of the Company that the view taken by the Assistant Collector is either perverse or entirely unsustainable for lack of material. The Company did not care to produce any evidence to establish how the goods are known in the trade circle or in common parlance and it is futile now to suggest that because other view is possible, the order of the authorities below should be set aside. In our judgment, the contention of the learned counsel that thrust washers, thrust half washers and wrapped bushes are not thin walled bearings cannot be accepted. ( 8 ) THE second contention of the learned counsel that the demand cannot be made in respect of clearance of the goods from August 7, 1978 but can only be from September 23, 1978 deserves acceptance. The decision of the authorities below that the decision to treat thrust washers and wrapped bushes as thin walled bearings was taken at the conference held between the representatives of the Government of India and the trade on February 9, 1978 and the decision was accepted by the Government of India on August 7, 1978 and, therefore, the Company is liable to pay excise duty from that date cannot be accepted. The decision was communicated to the Company only on the September 23, 1978 and the liability to pay excise duty can arise only from that day. Shri Desai very rightly did not support the conclusion of the Assistant Collector on this count. The demand made under demand notice dated October 16, 1978 is, therefore, required to be limited only in respect of clearance of goods from September 23, 1978 onwards.( 9 ) SHRI Nankani submitted that the demand notice dated November 24, 1981 served by the superintendent of Central Excise under Section 11a of the Act is invalid because the demand is made for the period commencing from July, 1980 to August, 1981 and the demand prior to the period of six months from the date of service of notice is not valid. We are unable to accept the submission because this demand is made only as a consequence of the decision given by the assistant Collector and confirmed by the Appellate Authority. The demand being in consequence to the adjudication that thrust washers and wrapped bushes are thin walled bearings, in our judgment, the limitation will not be attracted.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]It cannot be disputed for a moment that the Assistant Collector and the Appellate Authority while exercisingpowers cannot fetter the discretion with the direction contained in the trade notice or by trade advice and the discretion must vest only upon the material available with the Department to determine how the goods should be classified. It is now well settled that the burden to establish that certain goods can be classified and excise duty can be levied under a particular tariff item is entirely on the Department. It is also well settled that for classifying the goods for the purpose of levying duty, evidence can be led as to how the goods are known in the trade parlance. In the present case, the Company led no evidence as to how the goods are known by the traders dealing in these goods in the market. The only material available to the Assistant Collector and the appellate authority was Indian Standard specifications and which was produced by the company. The contention of Shri Nankani that the Indian Standard Specification reflects trade understanding is not accurate. Merely because the Committee constituted for determining the standard by Indian Standard Institution includes the representatives of the trade cannot lead to the conclusion that the Indian Standards Specification reflects the trade understanding and it is not necessary for the Company to lead any evidence to establish how the goods are known in the trade parlance. The reliance by Shri Nankani in this connection on the decision in the case of collector of Central Excise, Kanpur v. Krishna Carbon Co. reported in 1988 (38) E. L. T. 480 is entirely incorrect. The learned counsel referred to the observation made in paragraph 11 of the judgment but we are unable to conclude foam reading of this paragraph that the Supreme Court held that the Indian Standard Specifications reflect trade understanding. What the Court observed was that Indian Standard Specifications can also be considered as evidence for ascertaining classification of the goods. The contention of Shri Nankani that the Supreme Court has held in 1987 (32) E. L. T. 3 that there is difference between bearings and bushes and, therefore, the orders passed by the authorities below treating thrust washers and wrapped bushes as thin walled bearings should be set aside is entirely incorrect. It is not in dispute in the present case and that fact has been repeatedly stated by the Company in the petition that thrust washers and wrapped bushes are bearings and the only contention raised is that they are not thin walled bearings. It is, therefore, futile to claim that this question is determined by the Supreme Court. We are not concerned in the present case as to whether there is distinction between the bearings and the bushes but required to answer the question as to whether the bearings in the present case can be treated as thin walled bearings.( 7 ) AS mentioned hereinabove, the authorities below have relied upon Indian Standard specifications which was produced by the Company to hold that the bearings are thin walled bearings. Turning to the IS: 4774/ 1968, paragraph 0. 2 sets out that the walled bearings were originally developed for use in the automobile engine due to their advantages, such as facility of replacement, smaller weight and space required. Paragraph 1. 1 sets out that the standard specified requirements for:(a), grooved bearing in the nominal diameter range 16 to 150 mm; (b), ungrooved bearing in the nominal diameter, range 16 to 150 mm; and (c)rs in the nominal diameter range 16 to 150 mm. Paragraph 2 gives definitions of various words and the expression "bearing" means an element of mechanism which allows a force to be transmitted between two relatively moving parts. The expression "journal bearing" means a plain bearing in which the relatively sliding surfaces are cylindrical and the motion is rotary. The expression "thrust washers" means a washers used at one or each end of a plain journal bearing in order to takethrust loads, and the expression "thrustmeans one half of a split thrust washer. "Thin walled bearing line" is defined as a bearing liner in which the wall thickness is sufficiently small for the geometrical truth of the working surface to depend on the accuracy of the bore surface of the housing, while "bearing Liner" means in a journal bearing, the tubular element (often in halves) whose inner surface is the bearing bore. In IS:the expression "wrapped Bush" has been defined as a bush with a longitudinal split in one place. (It is called "wrapped" because it is formed from a strip). The Assistant Collector and the Appellate Authority relied upon this specification to conclude that the function performed by thrust washers and wrapped bushes are the same as those performed by bearings and, therefore thrust washers and wrapped bushes must be treated as thin walled bearings provided the same are in accordance with the specifications given in IS:It is not in dispute that thrust washers and wrapped bushes manufactured by the Company are in accordance with specifications under IS:i.e. in the nominal diameter range 16 to 150 mm. Shri Nankani submitted that I. S. I. specifications refer to thin walled bearings in Section 1 and covered by the dimensions in Tables Nos. 2 to 5 whereas thrust half washers are dealt in Section 2 of the Indian Standard Specification and this differentiation proves that thrust half washers are not thin walled bearings. It is not possible to accede to the submission. Merely because the dimensions are set out in different tables cannot lead to the conclusion that thrust washers and wrapped bushes are not thin walled bearings. Indeed, as mentioned hereinabove, the standard specifies requirements both for groove bearings and ungrooved bearings and thrust washers are identical. The nominal diameter range of adjective thin wall is to apply to all the three bearings, viz. thrust half washers, thrust washers and wrapped bushes. The thrust washers and wrapped bushes have been defined as bearing liners and if used as bearings themselves and if they satisfy the requirement of wall thickness being proportionately small for the bore surface of the housing and, therefore, can well be treated as thin walled bearings. In our judgment, the view taken by the Assistant Collector and confirmed by the Appellate Authority cannot be described as perverse, unreasonable or entirely unsustainable. In the decision reported in A. I. R. 1963, supreme Court 1319 (Collector of Customs, Madras v. K. Ganga Setty) observed: "it is primarily for the Import Control authorities to determine the head or entry in tariff schedule under which any particular commodity fell; but if in doing so, these authorities adopted a construction which no reasonable person could adopt i. e. if the construction is perverse, then it is a case in which the Court is competent to interfere. In other words, if there were two constructions which an entry could reasonably bear, and one of them which was in favour of revenue was adopted, the Court has no jurisdiction to interfere merely because the other interpretation favorable to the subject appeals to the Court as the better one to adopt."It is, therefore, clear that even assuming that the view, other than one, taken by the Assistant collector and confirmed by the Appellate Authority is possible, still, it is not permissible in exercise of writ jurisdiction to disturb the conclusion of the Authorities below. We are unable to accept the claim of the Company that the view taken by the Assistant Collector is either perverse or entirely unsustainable for lack of material. The Company did not care to produce any evidence to establish how the goods are known in the trade circle or in common parlance and it is futile now to suggest that because other view is possible, the order of the authorities below should be set aside. In our judgment, the contention of the learned counsel that thrust washers, thrust half washers and wrapped bushes are not thin walled bearings cannot be8 ) THE second contention of the learned counsel that the demand cannot be made in respect of clearance of the goods from August 7, 1978 but can only be from September 23, 1978 deserves acceptance. The decision of the authorities below that the decision to treat thrust washers and wrapped bushes as thin walled bearings was taken at the conference held between the representatives of the Government of India and the trade on February 9, 1978 and the decision was accepted by the Government of India on August 7, 1978 and, therefore, the Company is liable to pay excise duty from that date cannot be accepted. The decision was communicated to the Company only on the September 23, 1978 and the liability to pay excise duty can arise only from that day. Shri Desai very rightly did not support the conclusion of the Assistant Collector on this count. The demand made under demand notice dated October 16, 1978 is, therefore, required to be limited only in respect of clearance of goods from September 23, 1978are unable to accept the submission because this demand is made only as a consequence of the decision given by the assistant Collector and confirmed by the Appellate Authority. The demand being in consequence to the adjudication that thrust washers and wrapped bushes are thin walled bearings, in our judgment, the limitation will not be attracted.