1. The issue raised in these appeals are common i.e., the eligibility of certain items for exemption under Notification No. 164/87-CE dated 10.6.1987. The items in question are: There is no dispute that each of these items has been manufactured according to specific drawings for use as parts of "T-72 Main Battle Tanks". Originally, these items were cleared as exempt under the Notification against C.T.2 Certificates issued by the Central Excise Officer in-charge of Avadi factory of the Ordinance Board, where the "T-72 Main Battle Tank" is manufactured. However, subsequently the exemptions were denied on the basis that these items did not fall for classification under tariff entries specified in the exemption notification. The appellant-assessee claims classification of these items under Tariff Heading No. 87.10, which reads as under: Tanks and other armoured fighting vehicles motorised, whether or not fitted with weapons, and parts of such vehicles.
2. The contention of the Id. Counsel for the appellant's is that, it is well settled that items for sole use in a particular machine should be classified as parts of that machine, while items of general use should be classified under their respective tariff. The Id. Counsel in this context has taken us to the decision of the Apex Court in the case of G.S. Auto International Ltd. v. Collector of Central Excise Chandigarh and Elgi Equipments v. Collector of Central Excise 2002 (51) R.L.T. 382 : 2002 (104) ECR 312 (SC). The Counsel has also taken us to the decision of the Commissioner of Central Excise (Appeals) Trichy dated 26.5.2003 in the appellant's own case as well as the Circular No. 341/57/97/-CX dated 7.10.1997.
3. As against the above submissions of the Id. Counsel, Id. SDR has taken us through the decisions of the lower authorities and have submitted that the items in question remain specifically mentioned under other tariff headings and they are required to be classified under those headings. He has also pointed out this is the scheme of classification under the tariff and lower authorities were right in classifying the items accordingly. Ld. SDR has also pointed out that the exemption for "parts" under Notification No. 164/87 is in regard to the items classifiable under the tariff headings mentioned in the Notification itself and not to all items used in the Main Battle Tank, irrespective of tariff classification.
4. We have perused the records and considered the submissions made by both sides. It is noticed that the exemption under Notification No.164/87 is in respect of "parts of Main Battle Tanks falling within Chapters 45, 48, 68, 73, 85 or 87 of the Schedule to the Central Excise Tariff, 1985." A perusal of these Chapter headings shows that the exemption is in respect of a wide range of goods. For example, Chapter Heading No. 45 related to "Cork and articles of cork." Similarly, Chapter Heading No. 48 is in respect of "Paper and paperboard; articles of paper pulp, of paper or of paperboard", while Chapter Heading No. 68 is in respect of "Articles of stone, plaster, cement, asbestos, mica or similar material." Chapter Heading No. 73 is in respect of "Articles of iron or steel" and Chapter Heading No. 85 is in respect of "Electrical machinery and equipment and parts thereof." It is clear from the wide variety of goods covered by these Chapter Heading that the exemption has a wide sweep and is not restricted as contended by the Revenue.
When viewed from this angle, it is clear that the Notification treat items that are otherwise classifiable various headings "as parts of" Main Battle Tanks and give them the exemption.
5. A perusal of the judgment of the Apex Court in the cases of G.S.Auto International and Elgi Equipments makes it clear that the Rule for treating items as parts of machinery is whether the items in question were solely for use in the machinery in question or as items for general use. If an item is solely for use in a particular item of machinery, it should be treated as its part. In the present case, admittedly, the items are specifically manufactured according to designs and drawings supplied by the purchaser as parts for the Main Battle Tank. The items are definitely not capable of general use in many machines. The order dated 26.5.2003 of the Commissioner (Appeals) also took the same view i.e., if the item is specifically designed for use for T-72 Main Battle Tank and "cannot be used elsewhere", it should be treated as part of Main Battle Tank. The clarificatory Circular dated 7.10.1997 of the Board also states that the many items put together as a cluster of instruments should be treated as part of the machinery and not as individual instruments.
6. When the assessee's claim for the above said three items is seen in the light of the ruling contained in the aforesaid judgements of the Apex Court, that items solely for use in a particular machine should be treated as parts of that machine. It is clear that the three items qualify the test of being "parts" of the Main Battle Tank. Accordingly, we are of the view that the items in question are eligible for exemption under Notification No. 164/87 and the lower authorities were not correct in denying the exemption. In the result, the appeal are allowed after setting aside the impugned orders.