Judgment:
1. Appeal No. E 621/98 is against the Order-in-Original No. 70/97 of the Commissioner who has determined and demanded a duty of Rs 21,79,115/- under rule 9 (2) read with proviso the Section 11(a) of Central Excise Act 1944 and imposed a penalty of Rs. 3 lacs under rule 173 Q after coming to a conclusion that the entity being assembled in the registered premises of the appellants should be classified under 9010 of the Central Excise Tariff and not eligible for the benefit of SSI exemption notification No. 1/93 CE.2. Appeal Nos. 2958-2959/98 are filed by the same appellants against an Order-in-Appeal No 460/98 of Commissioner Appeals, Bangalore who vide his order determined, that the activity undertaken in the appellant's premises amount to manufacture and the entity was correctly classified under 9010/00 and benefit of exemption under notification No. 111/94 dated 3.6.94 was not admissible as the same is applicable only to goods classified under 9022 and since the appellants were manufacturing specified goods with a brand of another person (foreign manufacturer) the benefit of exemption under SSI notification No. 1/93 CE was nit available to them 3. We have heard these three appeals together and are deciding by this common order the same after hearing both sides and considering their submissions made, we find that: (a) The appellants are engaged in the importation of OPTIMAX brand developing tanks (automatic) for medical/dental, X-ray, which are also known as and called as X-ray film processors. The goods were manufactured in Germany and are imported in CKD condition and assembled by the appellants in India They are meant tobe and exclusively sold and used in hospitals, nursing homes and other wholesale buyers like M/s Wipro (GE) Medical Systems, who in turn sell the same to persons for use exclusively for medical/dental, X-ray film processing and related activity. Appellants are registered under the Central Excise Law and filed necessary declarations which were approved; The Revenue took up the matter to the Commissioner (Appeals) whose Order-in-Appeal is before us today. The Commissioner, Bangalore separately got the matter inquired and issued a show-cause notice and conducted the proceedings terminating in the Order-in-Original No. 70/95 now in appeal before us.
The goods at the time of import as seen from the Bill of Entries produced before us, were classified under heading 90.22 and benefit of notification for use as medical equipment was granted. Those classifications under the Customs Tariff have not been impugned in any fasion.
(b) From the order in original No. 70/95, para 43 thereof we find that the Commissioner has come to the following findings: "I have also considered the expert opinion submitted by the assessee. Even the said experts have opined that the goods in question are used in association with the apparatus or equipment whose function is based on 'X' rays. However, this fact is not in dispute and this fact alone cannot render the goods to qualify for classification under Ch.9022. It is clearly established that it is an independent machinery which is used for processings/developing the X-ray films. Since, the said machineries have been used in the hospital/labs it cannot be classified under Ch.9022 in as much as the said facts have already been discussed in the earlier paras. The fact that the automatic processing machine are rightly classifiable under Ch.9010 of Central Excise and Tariff Act 1985 is fully established in the earlier paras. As such in terms of Note 2 of Ch.90 of said schedule, the goods in question are barred from being classified as an accessory of goods falling under heading 9022." Thereafter classified them under 2010. We find from the above findings that the Collector is not disputing the entity under dispute tobe an accessory to an equipment and apparatus based on 'X-rays'. On the other hand he is coming to a directly contradictable finding : "it is clearly established that it is an independent machinery which is used for processing/developing the X-ray films". Thus it is not clear whether the entity is an accessory or an independent machine, which is essential to decide the classification.
(c) The collector (Appeals) on the other hand, has found the very same entity, being assembled in the appellants premises to be 'nothing but X-ray film processors which are nothing but apparatus which develops X-ray films and are in the nature of radio graphy or rediology apparatus as admitted by the appellants themselves in their return reply to Assistant Commissioner dated 19.3.96." However, the Commissioner (Appeals) does not give any reasons, why he considers the subject entity tobe 'apparatus' (d) we find that the Revenue is relying upon the HSN Explanatory Notes in respect of Chapter heading 9022 which excludes independent machines for developing radio graphic or radio photographies places them, under 9010. This is leading Revenue to contend that the product is excluded from heading 9022 by virtue of this exclusion note in the HSN from heading 9022 & covered under 9010 being machine for automatically developing photographic (including cinematographic) laboratories (including apparatus for projection or drawing of patterns on sensitive semi conductor materials) not specied or included elsewhere in this chapter, negetoscopes production screens. Further, We find, that this reliance of HSN Explanatory notes, arrived at by both i.e. the adjudicator and the appellate authority have ignored Chapter note 2 to Chapter 90, which specified that classification of parts and accessories for machines, apparatus, instruments or articles of this chapter i.e. chapter 90 are tobe classified as per the rules thereunder and rules thereunder prescribes other parts and accessories if suitable for use solely or principally with particular kind of machine instruments or apparatus or with a number of machines instruments or apparatus of the same heading are tobe classified with the machines, instruments or apparatus of that kind. When we find that no reasons have been arrived at by Commissioner (Appeals) to call the entity tobe 'apparatus' and the Commissioner in his Order-in-Original No 70/95 para 43 is vague and not clear in as much as he is accepting the item tobe accessory of X-ray machine and thereafter he is calling the same tobe and independent machine, lead us to the only conclusion that the mater requires tobe redetermined as to the nature of the entity i.e. whether it is an independent machine or an accessory and for this purpose the matter needs tobe remanded back to the Commissioner who should redecide the matter. So that it could be determined whether Chapter No.2 rules for classification of accessories is applicable or the exclusion clause under HSN heads notes is applicable.
(e) During the course of the hearing the learned advocates of the appellants strongly urged that their written submissions were not considered by the learned Commissioner nor were the certificates regarding the technical opinion obtained from experts by them about the entity considered. He also submitted that their requiest for cross-examination of the expert whose opinion has been strongly relied upon by the Commissioner was asked but has been denied to them. We have considered the submissions and find that for this purpose alone the order can be stet aside on the grounds of denial of natural justice.
4. In this view of the matter and our findings herein above, we set aside the order-in-Original No. 70/95 and remand the same to the learned Commissioner for denovo adjudication with directions that cross-examination as requested should be granted and there-after the matter decided. As regards the orders of the Commissioner (Appeals) the same are also required tobe set aside as he has not come to a finding as to how the product is a separate independent apparatus. After finding the same only thereafter it could be decided whether Chapter No 2 or HSN exclusion clause would be applicable. For this purpose the Order-in-Appeal of Commissioner (Appeals) is also set aside with directions that the matter should be redetermined after following the principles of natural justice. The appeals are allowed as remanded for denovo adjudication.