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

The appellant is manufacturer of the bushes and washers which are exclusively used in motor vehicles. They are thus parts and accessories and were dutiable under Itemwhich read as underItem No. Description of Goods Rate of DutyParts and accessories not Twenty per cent ad elsewhere specified of motor valorem vehicles and tractorstrailersExplanation I : The expression "Motor Vehicles" has the meaningassigned to it in Item No. 34Explanation II : The expression `Tractors shall includeagricultural tractorsIn 1971 Notification No. 99 was issued exemption motor vehicles accessories and parts except those which are mentioned in the Schedule. The notification is reproducedexercise of the powers conferred by(1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts motor vehicles parts and accessories, falling under Item No.of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944), other than those specified in the Schedule hereto annexed, from the whole of the duty of excise leviable thereonTHE SCHEDULE1. Brake linings2. Clutch facings3. Engine valves4. Gaskets5. Nozzles andPiston rings7. Shock absorbers8. Sparking plugs9.bearings10. Tie rod ends11. Electric horns."effect of this notification was that from the date it was issued every accessory and part of the motor vehicles became exempt from payment of any duty except the items mentioned in it. Since the bushes and washers manufactured by the appellant were accessories and parts of motor vehicles, it was not liable to pay any duty and consequently the appellant cleared these goods produced in the factory without paying and duty from 1971 onwards. In February 1978 a meeting was called by the Board in which representatives of the trade participated. Two decision appear to have been taken by consensus, one that such washers and bushes as were manufactured by the appellant were bimetal bearings and second, they could be classified as "thinwalled bearings" if they satisfied the specifications as provided in Indian Standard 4774/1968. The consensus arrived at the meeting is extracted(i) Bushes, bearings and thrustwould fall within the category of bearings;(ii) the question whether a bearing should be considered as a thinwalled bearing should be decided after taking into account the other relevant dimensions as laid down in ISI specification IS :(it was understood that this had not been further revised)(iii) the question whether a bearing was or was not bimetallic or multimetallic would not be relevant for deciding whether it was as led to issuing of trade notice datedwhich read asis considered that valve rocker arm bushes, axle bushes, suspension bushes, steering bushes, thrust washers, sintered bushes, and miscellaneous bushes would fall within the category of bearings. However, the relevant dimensions as laid down in ISI specification IS :should be taken into account to decide whether a bearing isbearing. Whether a bearing is or is not bimetallic or multimetallic would not be relevant for deciding whether it is ae appellant is manufacturer of the bushes and washers which are exclusively used in motor vehicles. They are thus parts and accessories and were dutiable under Itemh read asunderItem No. Description of Goods Rate of Dutys and accessories not Twenty per cent ad elsewhere specified of motor valorem vehicles and tractorsn I : The expression "Motor Vehicles" has the meaningassigned to it in Item No. 34Explanation II : The expression `Tractors shall includeagricultural tractorsIn 1971 Notification No. 99 was issued exemption motor vehicles accessories and parts except those which are mentioned in the Schedule. The notification is reproducede of the powers conferred by) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts motor vehicles parts and accessories, falling under Item No.of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944), other than those specified in the Schedule hereto annexed, from the whole of the duty of excise leviable thereonTHE SCHEDULE1. Brake linings2. Clutch facings3. Engine valves4. Gaskets5. Nozzles andn rings7. Shock absorbers8. Sparking plugs9.. Tie rod ends11. Electric horns."t of this notification was that from the date it was issued every accessory and part of the motor vehicles became exempt from payment of any duty except the items mentioned in it. Since the bushes and washers manufactured by the appellant were accessories and parts of motor vehicles, it was not liable to pay any duty and consequently the appellant cleared these goods produced in the factory without paying and duty from 1971 onwards. In February 1978 a meeting was called by the Board in which representatives of the trade participated. Two decision appear to have been taken by consensus, one that such washers and bushes as were manufactured by the appellant were bimetal bearings and second, they could be classified as "thinwalled bearings" if they satisfied the specifications as provided in Indian Standard 4774/1968. The consensus arrived at the meeting is extracted) Bushes, bearings and thrustwould fall within the category of bearings;(ii) the question whether a bearing should be considered as a thinwalled bearing should be decided after taking into account the other relevant dimensions as laid down in ISI specification IS :t was understood that this had not been further revised)(iii) the question whether a bearing was or was not bimetallic or multimetallic would not be relevant for deciding whether it was as led to issuing of trade notice datedh read ass considered that valve rocker arm bushes, axle bushes, suspension bushes, steering bushes, thrust washers, sintered bushes, and miscellaneous bushes would fall within the category of bearings. However, the relevant dimensions as laid down in ISI specification IS :should be taken into account to decide whether a bearing is. Whether a bearing is or is not bimetallic or multimetallic would not be relevant for deciding whether it is a

Reasoning:
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