Judgment:
1. In this appeal filed by the Revenue, the matter relates to the classification of the goods Rotors and Stators. The Respondent, M/s.
Jyoti Electric Motors Ltd. were engaged in the manufacture of Die Cast Rotors and Stators. These Rotors and Stators were used in the manufacture of power driven pumps. The assessee had claimed exemption in respect of these Rotors and Stators under Notification No.64/86-C.E., dated 10-2-86 (as amended) on the ground that their Die Cast Rotors and Stators were parts of power driven pumps, which were primarily designed for handling water. The Power Driven Pumps were centrifugal pumps (Horizental). The Revenue had classified these Die Cast Rotors and Stators under Heading No. 85.03, which covered, "parts suitable for use solely or principally with the machines of Heading Nos. 85.01 and 85.02". Heading No. 85.01 covered, "Electric motors and generators (excluding generating sets, Electric generator sets and rotary Converters were classifiable under Heading No. 85.02. Initially, the respondents paid excise duty on these Rotors and Stators as applicable to parts of electric motors. On 21-4-86 they filed a revised classification claiming classification under Heading No. 84.13 i.e.
applicable to pumps for liquids, whether or not fitted with a measuring device; liquid elevators. They also claimed exemption under amending Notification No. 236/86, dated 3-4-86, which had amended Notification No. 64/86-C.E., dated 10-2-86. The Asstt. Collector held that the Stators and rotors which were being manufactured by M/s. Jyoti were separately classified under Chapter Heading No. 85 and they were primarily designed to create a motive power and even when this motive power is generated to the mono block pump, it will be correctly classifiable under Heading No. 85.03. The Collector (Appeals) while referring to the Board's clarification at page 11 of his order to the effect that Rotors and stators forming component parts of monoblock pumps in question, will have to pay duty under Item 30(4) before their removal for the manufacture of monoblock pumps, had set aside the order of the Asstt. Collector and relied upon his earlier decision, in which it has been held as under : "The product monoblock pump cannot be treated as parts suitable for use solely or principally with electric motor or electrical generating sets which are classified under sub-heading No. 8501.00 or 8502.00. In view of the above and in view of my earlier decision cited, I am of the view that Monoblock pump which is pump is appropriately classifiable under sub-heading 8413.00 as per Rule 2(a) of Interpretation of Rules, in respect of Central Excise Tariff Act, 1985." 2. The matter was heard on 25-9-96 when Shri M. Jayaraman, JDR appeared for the appellants/Revenue. Shri A.P. Hathi, Advocate represented the party.
3. The ld. JDR briefly stated the facts and submitted that the Collector (Appeals) had decided the matter on the basis of the classification of the monoblock pump. Before their use in the monoblock pump, the Die Cast Rotors and Stators came into existence and had to be classified. The rotors and stators are specifically covered in Heading No. 8503.00 and they cannot be taken straight away to the parts of power driven pumps. The ld. JDR also submitted that the order passed by the Collector (Appeals) was not sustainable. In reply, the ld. Advocate referred to the respective tariff entries and submitted that in the case of monoblock pumps, the rotors and stators used thereof were specially designed and that they could not be considered as parts suitable for use solely or principally with the electric motors. He referred to the Tribunal's decision in the case of EL.P.EM. Industries v. CCC -1995 (79) E.L.T. 681 (Tri.) wherein it has been held that with regard to the old Central Excise Tariff that rotors and stators which were manufactured by the appellants in that case were of specific design for use in monoblock pumps. It was also added that theses rotors and stators were not interchangeable and cannot be used in electric motors. They were held to be classifiable under T.I. 68. The ld.Advocate also referred to the order passed by the Collector (Appeals) wherein their submissions have been recorded that these rotors and stators were specially designed for monoblock pump. It was his submission that they were part of the power driven pump and enjoyed exemption available to them under Notification No. 64/86-C.E., dated 10-2-86 as amended by Notification No. 236/86-C.E., dated 3-4-86.
4. We have carefully considered the matter. There is no dispute that the respondents were engaged in the manufacture of Die Cast Rotors and Stators. Before the change in the new Central Excise Tariff, they were paying central excise duty as parts of electric motors. From 1-3-86 also, they were paying excise duty as parts suitable for use solely or principally with the electric motors. It was on 21-4-86 that they revised their classification and the Asstt. Collector rejected their classification under Heading No. 84.13 and classified them under Heading No. 84.03.
5. The Collector (Appeals) had held that the product monoblock pump could not be treated as parts suitable for use solely or principally with electric motor or electrical generating set. This was not the issue before him. The classification of monoblock pump was not in dispute. The question was whether the rotors and stators before they are used in monoblock pump are to be classified as parts of electric motors or as parts of monoblock pump. Although the respondent have submitted that the rotors and stators were specially designed and manufactured for the manufacturer of the final product, the question for consideration is whether they were in-suitable for use solely or principally with the electric motors. The rotors and stators form an essential part of the electric motor. Before the change over to the new tariff, rotors and stators were specifically included in the tariff entry and when used in the manufacture of electric motor, set off was given on the duty already paid on rotors and stators. In the new Tariff although there is no specific reference to rotors and stators, the classification under Heading No. 85.03 for the parts of electric motors continued with the same rate of excise duty as before the change over.
The ld. Advocate had submitted that before the change over they had classified their products as parts of electric motors.
6. The Collector (Appeals) had referred to the Boards's Circular, which reads as under :- "In the case of monoblock pumps where electric motor does not come into existence is an identifiable manner and is not separate. In such cases, the casing and shaft is common to the pump as well as to the rotors and stators. Although electric motors as such does not come into existence independently in such instances, the manufacture of rotors and stator cannot be denied. Rotors and stators forming component parts of monoblock pumps in question will have to pay duty under Item 30(4) (presently Item 30D) before their removal for the manufacture of monoblock pumps".
7. Rotors and stators are marketable commodity and had to be assessed on their own merit. It is the settled position that the goods even if they are used captively they had to pay CED at the appropriate rate before their clearance for captive use. In this case, at the stage of the rotors and stators even if they are specifically produced for power driven pump, their classification under Heading No. 85.03 could not be disputed.
8. As regards Heading No. 84.13, it relates to pumps for liquids, whether or not fitted with a measuring device liquid elevators. The power driven pumps even when they are cleared without motor are classifiable under this heading.
9. The ld. Advocate had referred to the Tribunal's decision in the case of EL.P.EM. Industry v. CCE - 1995 (79) E.L.T. 681 (Tribunal). This was a matter under the old Central Excise Tariff where the Tariff entry was different. The Tribunal had held that all the evidence on record pointed out that rotors and stators manufactured by the appellants were of a specific design for use in monoblock pump. It has also been brought out to our notice that those rotors and stators were not inter-changeable and could not be used in electric motors. As the Tariff had undergone the change and as it is settled position that question has to be based on the tariff entry as is in force and the decisions under the old Tariff are not applicable to the new Tariff, we find that this decision is of no assistance in the case of respondent.
10. As we have discussed above, although activating force is essential application of the pump, it is not necessary that in all cases both the power part and the motivating part should be together. It is only in the monoblock pump that both motivating force and water drawing part is housed together.
11. The Gujarat High Court in Special Civil Application Nos. 4656/86, 4658/86 & 1139/87, dated 7th September, 1987 [1992 (61) E.L.T. 421 (Guj.)] in the case of Saga Windel Engineers had recorded at page 5 of their judgment as under :- "In view of the above, it is now obvious that the rotors arid stators used in the manufacture of mono block pumps fall within Tariff Item 30(D) and not 30(A). That being so, the impugned show cause notices issued by the concerned revenue authorities officer against the petitioners calling upon them to show cause why rotors and stators should not be assessed to duty under Tariff Item 30(A) will not survive. Mrs. Mehta, the ld. Senior Central Government Standing Counsel is unable to contend otherwise. With effect from 1st March, 1986 electric motors and parts suitable for use solely and principally with electric motors fall under Headings 85.01 and 85.03 respectively of the new tariff. Heading No. 85.01 refers to electric motors and generators (excluding generating sets) whereas Heading No. 85.03 refers to parts suitable for use solely and principally with the machines of Heading No. 85.01 or 85.02. We are not concerned with the goods described in Heading No. 85.02. Rotors and stators being parts suitable for use with electric motors would fail within Heading 85.03 and be liable to duty as the rate specified in column (4). Mr. Trivedi, the ld. Advocate for the petitioners, concedes the fact that rotors and stators manufactured for use in monoblock pumps would be liable to duty under Heading No. 85.03 in view of the concluded controversy by the Tribunal's order of 5th April, 1988 rejecting the appeal of the petitioner in the first petition." 12. The Hon'ble Supreme Court in the case of Elson Machines Pvt. Ltd. v. U.O.I. - 1988 (38) E.L.T. 571 (S.C) had observed as under:- "4. For the financial year 1 April, 1980 to 31 March, 1981 the appellant had disclosed a clearance value of Rs. 13,43,443.55 on account of electric motors for home consumption and a clearance value of Rs. 6,51,138.50 on account of electric motors "for captive consumption" in the manufacture of monoblock pumps. It was contended by the appellant that the electric motors used for making monoblock pumps could not be taken into consideration when calculating the clearances eligible under the Notification. According to the appellant the captive consumption did not amount to clearance. The claim was disputed by the Department, which relied on Explanation V to the aforesaid Notification dated 19 June 1980. The explanation declared : "Explanation V. - Where any specified goods (hereinafter referred to as inputs) are used for further manufacture of specified goods (hereinafter referred to as finished goods) within the factory of production of inputs and where such inputs and finished goods fall under the same item of the said First Schedule to the said Act, the clearances of such inputs for such use shall not be taken into account for the purposes of calculating the aggregate value of clearances under this notification." The Appellate Tribunal observed that in terms of the Explanation the clearances of inputs could not be taken into account for calculating the aggregate value of clearances only when the inputs and finished products fall under the same Item of the First Schedule to the Act.
It pointed out that while electric motors were mentioned under Tariff Item 30, power driven pumps were specified under Tariff Item 30-A. It said that consequently the electric motors captively consumed as inputs in the manufacture of power driven pumps could not be excluded when determining the appellant's clearances. The appellant urged that the appellant had mistakenly stated that electric motors had been used for monoblock pumps whereas only rotors and stators which were integral components of monoblock pumps had been used, and that, therefore, the same Tariff Item was attracted, thus entitling the appellants to the concession. The submission was rejected by the Appellate Tribunal. Accordingly, it found that the appellant had exceeded the limit stipulated by Notification No. 80/80-C.E. dated 19 June, 1980, and was, therefore, disentitled to the concession.
5. It is contended before us that the Appellate Tribunal erred in rejecting the submission of the appellant that the goods manufactured by the appellant did not entitle it to the benefit of Explanation 5 of the Notification. It is urged that the goods in question were rotors and stators, that they were integral components of monoblock motors and could not be considered as components of general purpose Motors and therefore fell within the same Tariff Item as monoblock pumps. The question has been considered by the Appellate Tribunal. It is a question of fact and we do not propose to entertain it at this stage.
6. It is then urged that stators and rotors should be considered under Tariff Item 68, which is a residuary item. The Appellate Tribunal has proceeded on the basis that what was manufactured by the appellant were electric motors. It is only in the alternative that it considered the submission of the appellant that the goods should be regarded as rotors and stators. In the circumstances recourse cannot be had to Tariff Item 68 by the appellant." 13. Taking all the relevant considerations into account, we find that the ld. Collector (Appeals) had not decided the matter correctly and we set aside his order. As a result, the appeal filed by the Revenue is allowed. Ordered accordingly.