Judgment:
1. Cummins India Ltd., the respondent to this appeal, was engaged in the manufacture of supercharger and fuel injection equipment to be supplied to heavy vehicles factory, Avadi, for fitment to the main battle tank that was being manufactured by their factory. The assessee classified both these items in heading 87.10 of the Central Excise tariff as parts of the tank and claimed total exemption from duty contained in entry 245 of the table to notification 5/98, which exempts from duty parts of main battle tank classifiable in specified chapters of the tariff, including Chapter 87. The notice issued to the assessee proposed to deny the exemption on the ground that the goods were not classifiable in Chapter 87 they were classifiable in heading 84.09-parts suitable for use solely or principally or solely with internal combustion engines. It called upon the assessee to show cause when the goods should not be classifiable in heading 84.09, why the exemption claimed by the assessee should not be denied and duty payable consequentially should not be paid and penalty should not be imposed.
The Assistant Commissioner in his order concluded that the goods are classifiable in heading 84.09, denied the exemption and confirmed the demand for duty. On appeal by the assessee, the Commissioner (Appeals) held that the goods were parts. They were in fact classifiable in heading 87.10 and entitled to exemption. This is challenged in the appeal by the Commissioner.
2. The departmental representative reiterates the ground in the appeal, that supercharger and the fuel injection system comprise parts of internal combustion engine and hence classifiable in heading 84.09.
Therefore by application of note 2(e) to Section XVII which excludes, the goods cannot be considered to parts of armoured vehicle classifiable in heading 84.87. Hence the benefit of the exemption is not available.
3. We do not find it possible to accept the classification put forth by the department. Heading 84.09 is for parts suitable for use solely or principally with the engines of heading 84.07 or heading 84.08 (Spark-ignition internal combustion piston engines and diesel and semi designed engines). We shall consider each of the items. The supercharger is nothing more than a pump. It is fitted to internal combustion engines with the object of blowing air under pressure into the inlet manifold of the engine. The object of this is to enable greater power to be produced by the engine. The McGraw-Hill Dictionary of Scientific and Technical Terms defines supercharger to be "An air pump or blower in the intake system of an internal combustion engine used to increase the weight of air charge and consequent power output from a given engine size." It is therefore correctly classifiable as an air pump in heading 84.14. The fuel injection system supplied by the respondent consists of the fuel pump including booster pump, high pressure pipes and injection assembly. There is not a separate heading in the tariff for fuel injection equipment; the component of this system will have to be classified separately on merits. The items such as fuel pump etc. which are separately classifiable in other heading of this chapter will be excluded from this chapter by application of note 2(e) to this chapter. Thus fuel pumps would be classifiable in heading 84.13, fuel filter in heading 84.21.
4. The counsel for the respondent is not really able to defend the classifiable arrived at by the Commissioner of these goods in Chapter 87 as parts of engine.
5. From this, it will follow that the benefit of the exemption would not be available to these goods, since they are not classifiable in Chapter 87 and it is not the respondent's case that the goods classifiable in any of the other chapters specified in the relevant entry to the table to the notification. Counsel for the respondent however raises a different point. This is that the ground on which the exemption is sought to be denied by the department is that the goods are classifiable in heading 84.09 is not found to be correct. The department's case fails and the exemption cannot be denied. He relies for this purpose upon the ratio of the Supreme Court's judgment in Prince Khadi Woollen Handloom Prod. Coop. Indl. Society v. CCE 1996 (88) ELT 637, Reckitt & Colman of India Ltd. v. CCE 1996 (88) ELT 641 and Warner Hindustan Ltd. v. CCE 1999 (113) ELT 24. The common ratio of these decisions is that the ground on which the department proposes to deny a particular exemption or demand duty cannot be altered at a later stage, even if by doing so, the same conclusion the denial that the exemption or the demand for duty is arrived at. Thus, in Warner Hindustan Ltd., the department sought to classify ayurvedic medicines manufactured by the assessee in heading 3003.30. The Tribunal, on appeal, classified the goods as confectionery in heading 17.04. In Reckitt & Colman of India. Ltd., the Tribunal justified the denial of an exemption notification to the patent barely manufactured by the assessee on the ground that it was a preparation of flour and hence excluded by the exemption, although the department's case earlier was that the goods being a preparation of starch, they were exempted by the notification. In Prince Khadi Woollen Handloom Prod. Coop. Indl.
Society, the original contention of the department was that the exemption was not available to the assessee because it did not satisfy the condition of being registered as handloom cooperative society or by any organisation set up or approved by the Government for development of handlooms. The Tribunal rejected this contention but to confirmed the denial of exemption on the ground that another condition in the notification that the factory was owned by the assessee had not been satisfied. In each of these cases, the Supreme Court noted that the Tribunal had upheld the department's contention, not on the ground that was originally advanced by it, but on a completely different ground. It concluded that the Tribunal could not make out a new case, at this stage. It therefore set aside the Tribunal's order in each case, allowing the assessee's appeal.
6. Counsel for the respondent also emphasises that the department's appeal is entirely based on the classification of the goods in heading 84.09 and asked for restoration of the Assistant Commissioner's order classifying the goods in heading 84.09 and denying the exemption. The latter point has to be accepted. The sole basis in the appeal in support of this prayer for setting aside the Commissioner (Appeals)'s order is that the Commissioner (Appeals) erred in setting aside the classification determined by it of the goods in heading 8409.00. The apeal emphasises that classification in heading 8409.00 would "only" appear to be proper. The show cause notice issued to the assessee also proceeded on the basis that the goods are to be classifiable as parts of engines in heading 8409.00 and "for this reason, the noticee does not appear to be eligible for exemption." The Assistant Commissioner in his conclusion has confirmed this view that the benefit of the exemption not available as the goods are classifiable in heading 8409.00.
7. The net result therefore would be that while the benefit of the exemption would not be available to the goods prospectively, the basis for the denial of the exemption has to be set aside as also the ground in the appeal.