Harish Chander, Member (J)

1. M/s. Vee Kay Industries, B-22/1, Wazirpur Industrial Area, Delhi-110052 have filed an appeal being aggrieved from the order passed by the Collector of Central Excise, New Delhi. Briefly the facts of the case are that M/s. Vee Kay Industries are engaged in the manufacture and clearance of Elastic Rail Clips, Cotters and other fabricated items falling under Tariff Item 68 of the Central Excise Tariff.

On 16th January, 1986, the Central Excise Officers visited the factory premises of the appellant and resumed the relevant records for scrutiny and investigation. On enquiry the process of manufacture of elastic rail clips had been revealed as under :-

"An Iron rod is cut into a required size. Then the rod is put into an oil fired furnace. After it becomes red hot, it is put into a bending machine, which is a horizontal power press, give it a U-shape. The U-shape rod is again put on the horizontal power press to give another U-bend to the rod at a different angle; thereafter the piece is put into a vertical power press to convert it into a desired shape. After the oil dip, it is given heat treatment in an electric furnace at a required temperature to harden the same. After testing its strength it becomes final finished product i.e. Elastic Rail Clip."

The adjudicating authority in view of the manufacturing process had taken the view that elastic rail clip was a distinct and identifiable finished product falling under T.I. 68. From the scrutiny of the records it was observed that the party had cleared the said excisable goods valued at Rs. 2,96,45,435.00 involving central excise duty of Rs. 22,89,044.46 during the year 1981-82 to 1985-86 (upto 18th December, 1985). On the basis of the above, it appeared that the party had contravened the provisions of Rules 9(1), 52A, 53, 173B, 173C, 173G, 174 and 226 of the Central Excise Rules, 1944 and a show cause notice was issued vide letter dated 28th February, 1986 requiring the appellant that as to why the goods manufactured by them should not be classified under T.I. 68 and duty amounting to Rs. 22,89,044.46 should not be recovered from them under Rule 9(2) of the Central Excise Rules, 1944 read with Section 11A of the Central Excises and Salt Act, 1944 and why the penalty should not be imposed on them under Rules 173Q, 52A and 226 of the Central Excise Rules, 1944. In reply to the said show cause notice the party denied the allegations raised in the show cause notice and stated that their product was classifiable under T.I. 26AA(ia) prior to 1st August, 1983 and under T.I. 25(11) thereafter. It was also contended that no further duty was attracted in respect of their product when the same was made from duty-paid rod and that since there was no exclusion clause adopted by the legislature while incorporating the definition of angles, shapes and sections, so all shapes and sections irrespective of their use remained covered under T.I. No. 25(11). In support of their contention, the appellants quoted a series of trade notices, tariff advices and judicial pronouncements including the decision of the Collector (Appeals), Central Excise, Madras in the case of Guest Keen Williams Ltd. vide his order-in-appeal No. 284/83(B). It was also contended that elastic rail clips were being manufactured by various manufacturers in India and their classification throughout India was under T.I. 25(11). Their first main contention was that the rail clips were merely forged products falling under T.I. 25(11), shapes and sections, etc. and the process of tempering and heating treatment does not amount to manufacture. The appellants had contended before the Collector that the classification of the goods would fall under T.I. 25(11) which was as follows :-

"Angles, shapes and sections of iron or steel, not elsewhere specified, other than slotted angles and slotted channels, rolled, forged, extruded, formed, finished, sheet piling of iron or steel whether or not drilled, punched or made