H.R. Syiem, Member (T)

1. The dispute in all these 15 cases is whether the forgings imported by M/s. Motor Industries are to be assessed as parts under the respective heads as claimed by the department or as steel forgings under the forgings head. The Appellate Collector of Customs, Madras in various orders ruled that the steel forgings were mere pieces of forged iron/steel and had no similarity with the finished product except their outward shapes. He also recorded that the imported adjusting pins had to undergo, the process of tumbling, turning, grinding, heat treatment, chromium plating, lapping, etc., after which alone the finished product could be fitted in the governor. Minor faults in such sensitive parts would lead to their rejection and so he concluded that the finished items had no resemblance with the rough blanks imported. He, therefore, decreed that the rough forgings did not have the essential characteristics of the finished items and would not attract the provision of Rule 2(a) of the Rules for the Interpretation of the First Schedule of the Customs Tariff of 1975. He assessed the goods under Heading 73.33/40 with Notification No. 254/76-Cus. as more appropriate, with countervailing duty under Item 26AA of the Central Excise Tariff and ordered refund to the appellants of the excess duty claimed by them. By notices under Section 131 of the Customs Act, 1962, the Government of India called upon the importers M/s. Motor Industries to show cause why the Appellate Collector's order should not be set aside, and the Assistant Collector's order assessing them as parts should not be restored, etc.

2. The dispute that we have to arbitrate is only in respect of this application of Rule 2(a) of Interpretation and not any other matter. The importers M/s. Motor Industries imported other goods like camplates for distributor pumps, control lever forgings used in governors, measuring head and retraction device. In all the decisions, whether it is camplate, or adjusting pin or control lever, the dispute between the two sides is the same, although the processing and finishing may vary from item to item. These processes and their details are not important; what is important is that they are necessary to convert the forgings into parts ready to be fitted in the distributors or the governors, etc. as finished products. The two sides agree that these different processings and finishings have to be carried out on the imported forgings before they can be finally fitted as components of distributors, governors. The difference of opinion arises only from the department's move to assess these unfinished forgings as complete parts under respective heads, that is to say, an adjusting pin, forging as an adjusting forging for governor, a camplate forging as a camplate for a distributor pump and so on. Both sides also agree that the imported forgings are not ready to be fitted as finished components in the distributor pumps or the governor etc. Only the processing and finishing to be carried out in India by the importers M/s. Motor Industries will bring them to the level of completion and finish before they become suitable for fitment.

3. The two sides argued their respective view points with great learning and vigour. The learned Counsel for M/s. Motor Industries urged that these imported forgings cannot qualify to be assessed as parts because they are not parts. They simply cannot be fitted as parts and they cannot be sold as parts. Much work still remains to be done to the forgings, most of it of a highly complicated and intricate nature since precision and fidelity are absolutely necessary because their exact measurements and fit determine their satisfactory performance. Any deviation from the rigid standards will result in a rejected part. He referred also to the drawings they have submitted. It can be seen from these drawings that the forgings are only rough approximation of the shapes of the adjusting pins, camplates, control lever etc