Case: Kirloskar Oil Engines Limited Vs. Union of India and Others

or entirely unsustainable 4. Various submissions were advanced by Shri. Hidayatullah, the learned Senior Counsel appearing for the appellant. He urged that functional test to determine taxability or assessability was rejected by this Court as far back as 1988 in Jain Engineering Co. v. Collector of Customs1, therefore, the High Court gravely erred in rejecting the claim of the appellant only because the bushes and bearings manufactured by the appellant were performing the same function as bearings. Reliance was also placed on Union of India v. Delhi Cloth & General Mills2 and it was urged that the specifications by the Indian Standard Institute furnished very strong and indeed incontrovertible evidence and, therefore, the High Court was in complete error in its opinion that the Indian Standard specifications do not reflect trade understanding. The learned counsel challenged the finding recorded by the High Court on merits and urged that the specifications as given by the Indian Standard Institute have not only been understood erroneously, but even applied incorrectly as the Assistant Collector found that the bush and bearing manufactured by the appellant were of dimension of 4775 and the consensus having been arrived at the meeting between the Board and the trade representatives for including those bushes and washers which were of dimension of 4774 the High Court could not have in the absence of any other material held that the goods manufactured by the appellant were thin-walled bearings. On the other hand Shri. A. K. Ganguli, learned Senior Counsel appearing for the Department urged that it has been held by a Constitution Bench of this Court in Novopan India Ltd. v. CCE and Customs3 that the burden was on the assessee to prove the exception and in the absence of any material brought on record as to how the goods were understood in the trade circle the High Court was justified in dismissing the writ petition 5. A bush in normal sense is understood as "a thin metal sleeve or tubular lining serving as a bearing or guide". In Van Nostrands Scientific Encyclopaedia it is explained as under "In mechanical terminology, to bush is to reduce the size of a hole. A bushing is a hollow cylinder used as a renewable liner for a bearing or a drill jig." * Similarly, washer is understood as "a flat ring or drilled disc of metal used under the head of a bolt or nut to spread the load when tightened". In McGraw-Hills Encyclopaedia of Science & Technology it is explained as "a flattened, ring-shaped device used to improve the tightness of a screw fastener". The use of washer in common parlance is explained in the dictionary as "for placing beneath a nut or an axle bearing or joint, to serve as a cushion, to relieve friction etc. " A bearing is normally understood in mechanical sense to be a "part that rests on something or on which something rests or in which a pin etc. turns" (Encyclopaedia Britannica, Vol. 2). In normal sense, therefore, a washer has different purpose than bearing 6. Wrapped bushes and thrust washers, however, find a very wide application in engineering industry, particularly automobile industry. In the Foreword to the Indian Standard Booklet, published in 1974 it is mentioned that wrapped bushes save both space and weight and thrust washers with wrapped bushes are intended to take light thrust loads. A bearing on the other hand is generally understood as mentioned in the same booklet "an element of mechanism which allows a force to be transmitted between two relatively moving parts". A bush and washer manufactured by the appellant could not normally be treated as bearing except when it is understood in technical sense. It appears when the Indian Standard Specifications were published and washers and wrapped bushes, thrust washers and thrust half washers were mentioned in the booklet as goods which are extensively used in automobile industry, the Department invited the trade representatives to discuss the matter, the result of which has been extracted earlier. Therefore, before a decision was taken by the Board, there was no material available with the Department which could furnish basis for deciding whether bushes or washers manufactured by the appellant could be classified as bearing much less "thin-walled bearing" within the meaning of notification issued in 1971. Not only that the entire proceedings were initiated by the Superintendent of Central Excise on the basis of Trade Notice referred to earlier inviting the appellant to classify these goods as "thin-walled bearings" if they satisfied the specification of 4774. It is true, as held by the High Court and by the authorities that a trade notice is not binding, but what the High Court omitted to consider was 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 published by the Indian Standard Institute, it was not proper either for the High Court or for the assessing authorities to ignore it and levy the duty treating these goods to be "thin-walled bearings", on assumptions without any material. The observation in the judgment of the High Court that it was specification under IS : 4774-1968 is factually incorrect. The written note of the appellant given before the assessing authority has been extracted. It is obvious that the order was made under misapprehension7. Since the High Court and the assessing authorities approached the case with an entirely incorrect perspective, their orders cannot be maintained. Yet it would be hazardous for this Court to examine the dimension and specification of these bushes and washers and decide whether they can be classified as thin-walled bearings. For that purpose it would be expedient to sent the case back to the High Court which may decide it either itself or send it to the Tribunal which has now been constituted. In view of this it is not necessary to decide any other issue

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

Explanation:
1[ds]6. Wrapped bushes and thrust washers, however, find a very wide application in engineering industry, particularly automobile industry. In the Foreword to the Indian Standard Booklet, published in 1974 it is mentioned that wrapped bushes save both space and weight and thrust washers with wrapped bushes are intended to take light thrust loads. A bearing on the other hand is generally understood as mentioned in the same booklet "an element of mechanism which allows a force to be transmitted between two relatively moving parts". A bush and washer manufactured by the appellant could not normally be treated as bearing except when it is understood in technical sense. It appears when the Indian Standard Specifications were published and washers and wrapped bushes, thrust washers and thrust half washers were mentioned in the booklet as goods which are extensively used in automobile industry, the Department invited the trade representatives to discuss the matter, the result of which has been extracted earlier. Therefore, before a decision was taken by the Board, there was no material available with the Department which could furnish basis for deciding whether bushes or washers manufactured by the appellant could be classified as bearing much lessbearing" within the meaning of notification issued in 1971. Not only that the entire proceedings were initiated by the Superintendent of Central Excise on the basis of Trade Notice referred to earlier inviting the appellant to classify these goods asbearings" if they satisfied the specification of 4774. It is true, as held by the High Court and by the authorities that a trade notice is not binding, but what the High Court omitted to consider was that there was no other material with the Department on which it could assume that the washers and bushes manufactured by the appellant werebearings". The basis for initiation of proceedings being Indian Standard Booklet published by the Indian Standard Institute, it was not proper either for the High Court or for the assessing authorities to ignore it and levy the duty treating these goods to bebearings", on assumptions without any material. The observation in the judgment of the High Court that it was specification under IS :is factually incorrect. The written note of the appellant given before the assessing authority has been extracted. It is obvious that the order was made under misapprehension7. Since the High Court and the assessing authorities approached the case with an entirely incorrect perspective, their orders cannot be maintained. Yet it would be hazardous for this Court to examine the dimension and specification of these bushes and washers and decide whether they can be classified asbearings. For that purpose it would be expedient to sent the case back to the High Court which may decide it either itself or send it to the Tribunal which has now been constituted. In view of this it is not necessary to decide any other issue