| SooperKanoon Citation | sooperkanoon.com/12202 |
| Court | Customs Excise and Service Tax Appellate Tribunal CESTAT Delhi |
| Decided On | Nov-26-1997 |
| Reported in | (1998)(99)ELT62TriDel |
| Appellant | Raja Bahadur Motilal Poona Mills |
| Respondent | Collector of C. Ex. |
2. We have heard Shri L.B. Attar, learned Advocate for the appellants and Shri K.K. Jha, learned DR for the respondents and carefully considered their submissions.
3. The appellants manufacture drafting machines and parts of drafting machines. Parts of drafting machines are captively consumed in the manufacture of drafting machines. Show cause notice was issued during the period August 1986 to April 1988 raising to demands of duty on parts of drafting machines. The Assistant Collector of Central Excise, Division IV, Pune classified parts of drafting machines under sub-heading 9033.00 of the Central Excise Tariff and confirmed the demand and subsequently show cause notices were issued demanding duty on parts of drafting machines from June 1988 to October 1991. Meanwhile the appellants had appealed against the classification order and the lower Appellate authority vide order dated 14-6-1990 set aside the order for re-determination of the issue of classification, exemption and valuation. In the de novo proceedings, the Assistant Collector held that protector head, scales, drawing board and pantograph were to be classified under Heading 90.17 and entitled to exemption under Notification No 71/86; he however, directed payment of duty on the stands and other small parts manufactured by the appellants and used in the drafting machines on their respective values. The Collector (Appeals) vide order dated 30-7-1993, upheld the order of the Assistant Collector that the products which go into the manufacture of the drawing and mathematical instruments will not be entitled to exemption and that the stand for the drafting machines was not eligible to the benefit of exemption. In respect of show cause notices issued from 3-6-1988 to 1-10-1991, the Assistant Collector confirmed a demand of approximately Rs. 56 lakhs vide order dated 28-10-1993. In the impugned order, the lower Appellate authority has confirmed classification of the drafting machines and parts thereof under sub-heading 9017.00 in view of Note 2(b) of Chapter 90 of the Schedule to the Central Excise Tariff Act but denied the benefit of the notification to parts of the drawing machines. The notification only exempts drawing and mathematical instruments and does not exempt parts thereof. The classification of the stand under Heading 9017.00 will not automatically result in extension of the benefit of the notification which under SI. No. 8, provides for exemption only for drawing and mathematical instruments and not parts thereof. From the clear language used in the notification, it is apparent that parts of machines specified therein are not entitled to benefit of the notification. The learned Counsel's reliance on the judgment of the Bombay High Court in the case of Nibs v. Union of India reported in [1990 (49) E.L.T. 337] is misplaced - in that case, the department never made a distinction between the instruments (Cones of Variant B Technical drawing pens) on one hand and spares or accessories on the other while levying duty on the imported items, and it was in this context that the Court held that it was not permissible for the department to subsequently claim that what was imported by the petitioners therein, were merely parts of drawing instruments and not entitled to advantage of the exemption notification. Hence the above case is distinguishable.
4. The decision of the Hon'ble Supreme Court in the case of fain Engineering Company v. Collector of Customs reported in [1987 (32) E.L.T. 3 (S.C.)] cited by the learned Counsel for the appellants, is also not applicable to the facts of this case as the notification involved in that case viz. Notification No. 281/76-Cus., dated 2nd August, 1986 provided that the internal combustion piston engine as well as parts thereof were exempt from certain portion of Customs duty and hence the exemption was held available to parts also.
5. In the present case, as already noted above, the notification grants benefit of concessional rate of duty only to drawing and mathematical instruments and does not include parts thereof. In the light of the above discussion, we see no reason to interfere with the impugned order and accordingly confirm the same and reject the appeals.
6. The appellants contention that the duty demand relates to stands even when the drafting machine is cleared as a whole, cannot be accepted, being unsubstantiated.
7. With due respects to Hon'ble Member (Judicial), my views and orders in the matter are as follows.
8. Learned Counsel for the appellants has stated that they are manufacturers of Drafting Machines and parts thereof. In their classification lists effective from 1-3-1986, the appellants had classified the aforesaid drafting machine under Chapter Heading 9017.00, claiming the effective rate of duty as Nil under the Notification No. 71/86, dated 10-2-1986 and/or Notification No. 164/86, dated 1-3-1986 which were approved finally by the jurisdictional Assistant Collector.
9. Further, in the aforesaid classification lists, the appellants had claimed the parts and accessories of the aforesaid drafting machine under Chapter Heading 9033.00, chargeable to duty @ 15% ad valorem if cleared as such, and this was also approved in the aforesaid classification list finally by the jurisdictional Assistant Collector.
10. However, all along, the appellants were clearing the aforesaid drafting machine as a whole without payment of duty as per the approved classification list. It is pertinent to note that if any of the parts of the said drafting machine was cleared by the appellants separately, the appellants were clearing the same on payment of duty under appropriate according to the aforesaid classification lists and the assessments were being finalised accordingly.
11. As regards 'stand' of the aforesaid drafting machine, a dispute was subsequently raised by the Department. In spite of the fact that the stand is an essential part of the said drafting machine and being cleared with the said machine as forming part of the said drafting machine, the department sought to recover duty on the same as applicable to a part of the drafting machine, denying exemption from payment of duty under the aforesaid notifications.
12. It was his submission that along with other issues raised by the Department, the aforesaid issue was taken up by the appellants up to the Collector (Appeals), Bombay. The Collector (Appeals) set aside the order of the Assistant Collector and referred back the issue to the jurisdictional Assistant Collector for redetermination. After about one year, the Assistant Collector issued a show cause notice and thereafter passed the impugned order. Being aggrieved of the aforesaid order-in-original, the appellants had filed an appeal to the Collector who dismissed their petition.
13. It was his submission that the aforesaid classification list was approved finally and was neither revised and/or reviewed by the Department by following proper appellate procedure; And the same being final was binding on the Department.
14. He also submitted that the Tariff Entry No. 90.17 has been read by the Department erroneously; and an issue has been raised contending that the entry covers only the drafting machine and not the stand although in fact, it is part and parcel of the machine; And, the appellants have been asked to pay duty on the stand separately in spite of the fact that the stand is being cleared along with the drafting machine.
15. It was his submission that there is no provision under the law to treat any part of a machine separately when the machine is cleared as a whole and to recover duty on such part separately when the machine is exempted from payment of duty. He also contended that Collector (Appeals) has vaguely concluded in the impugned order that stand is not specifically mentioned in Tariff Heading 90.17 by name and therefore, it cannot be considered as entitled to exemption under Notification No.71/86 as it extends only to drawing and mathematical instruments falling under Chapter Heading No. 90.17.
16. It was his submission that in the aforesaid Tariff Entry 90.17, the drafting machine which is an integral part of the machine is automatically included. Separating the stand from the machine when the machine as a whole is cleared and the recovery of duty on the stand denying the exemption under the aforesaid notifications is perverse.
The appellants quote and rely upon the Pages No. 1485, 1486 and 1487 of the Harmonized Commodity and coding system wherein it is conspicuous that parts and accessories (which in the instant case include the stand, as aforesaid) are also covered under Heading 9017.00.
17. He further submitted that under the premise, not only the said drafting machine but also the parts and accessories of the said machine are covered under Heading No. 90.17 and therefore, the same are exempt from payment of duty under the aforesaid Notification No. 71/86 and/or Notification No. 164/86. This being an independent notification, the scope of the notification cannot be reduced by any internment by causing them to pay duty on stand when the whole machine is cleared as such. In view of this, denial of the said exemption from payment of duty on stand is without jurisdiction and as such, the impugned order is without jurisdiction. He also submitted that by labouring under a common mistake, the appellants had erroneously classified the parts and accessories of the aforesaid drafting machine under Heading 9033.00, (though the Heading 90.17 was covering parts and accessories of the drafting machine as aforesaid) and they were mistakenly paying duty depriving themselves of the entitlement of exemption under the aforesaid notifications. Labouring under the same mistake, the department also had approved the classification under Heading 9033.00 and was recovering duty, though the Heading 9033.00 was not applicable to the parts and accessories of the aforesaid drafting machine.
18. It was his submission that under the facts and circumstances stated above, the appellants were entitled to exemption under the aforesaid notifications and were not only required to pay duty on drafting machine but also on parts and accessories thereof, right from 1-3-1986.
In view of this, the duty recovered by the department right from 1-3-1986 was without the authority of " law and therefore, illegal.
19. Learned DR drew attention towards order-in-original and order-in appeal and in particular to the observations of the Collector regarding the 'stand'. He also drew attention to Chapter Note (2) of Chapter 90 and the Collector's observations to the effect that Chapter Note 2 consists of three parts namely 2(a), 2(b) & 2(c) and when their applicability in relation to any item is to be determined, the rules have to be sequentially examined in their serial order i.e. first Rule 2(a) has to be seen and then 2(b) and what is residuary could only fall under Rule 2(c). It will be seen that as it was necessary to consider the ^ scope of the tariff heading in relation to the parts of instruments in the light of the Chapter Note 2, the learned Collector has directed the A.C. to conduct an exercise in relation to all the items that are found to be part of the instrument. Insofar as the question of exemption is concerned, the A.C. has been directed to determine the eligibility for Notification No. 71/86 after deciding the status of each item (whether instrument or part). He has also held that it is premature to go into valuation at this stage; Only if the goods are found to be dutiable, price becomes an issue. In the circumstances, the order of the Collector may be upheld.20. Learned Counsel also drew attention to the Tariff Entry 9017.90 HSN to illustrate his point of view and also drew attention to the ISI Standard Specification for Drafting Machine (Second Reprint APRIL 1981) and in particular to the scope and general requirements under Headings 1.1,2.1 (Drafting Unit), 2.2 (Drawing Board), 2.3 (Protractor Head), 2.4 (Scales) and 3 (Stand).
21. He also further stated that in fact, there are several judgments and orders which support his contention and he would like to draw attention in particular to the following case law :Jain Engg. v. C.C.E. (iv) Sealol Hindustan Ltd. v. U.O.I, reported in 1988 (36) E.L.T. 283 (Bom.).
22. Learned DR drew attention to the impugned orders and emphasised that Stand by itself is not drawing instrument. It is only a part of the drafting unit and the parts and accessories of goods falling under Chapter 90 are required to be classified in the light of Chapter Note 2; and Heading 90.33 covers parts and accessories for instruments etc.
of Chapter 90. Furthermore, Notification 71/86 covers only drawing and mathematical instrument under 90.17.
23. In any eventuality, the Collector (Appeals) has only remanded the matter for de novo consideration by the A.C. in the light of his observations and findings.
24. I have considered the above submissions. I observe that there is no doubt or dispute that headings and sub-headings have to be read in the light of the relevant Chapter Note (s) (and the rules of interpretation for that matter). In the present case, there is no dispute that the Drafting Machine by itself is an item classifiable under Heading 90.17.
However, insofar as parts and accessories are concerned, their classification is governed by Chapter Note 2. The appellants have, apart from making submissions, enclosed a pamphlet showing the photograph of the item and indicating its features and bearing an endorsement "The drafting unit and stand bear the ISI mark 2287 : 1970" and the Stand has been described as a 'Tubular Stand' and its characteristics were described as follows :- (iii) Positive locking for height and inclination adjustment of drawing board.
But, what is important from our point of view is whether in view of its design and the above characteristics, it was suitable for use solely or principally with this particular type of drafting machine. However, at this stage, beyond repeating that it was an integral part of the drafting machine, no other evidence has been produced to show that the above parameters were satisfied and as observed by the Collector, the A.C. has also not taken note of the provisions of Chapter Note 2. It was, however, necessary on the part of the A.C. to do so because of another reason as well namely, the applicability of Notification 71/86 inasmuch as the benefit of this notification would be available only subject to its classification in view of the fact that this notification covers inter alia Chapters-85 & 90 and various sub-headings specified therein and some of them but not all of them relate to parts and components. Further, of all the case law cited by the learned Counsel, the Hon'ble Bombay High Court's judgment in the case of Nibs India v. U.O.I, reported in 1990 (49) E.L.T. 337 refers to Heading 90.17 and Notification 71 /86 (as amended). But, the main point which emerges from this judgment is that you cannot treat the same item differently for classification purposes and differently for notification purposes when the notification specifically refers to headings and the tariff. This Tribunal has also had occasion to mention this very aspect and distinguished between notifications which could be read independently of the tariff entries and those which have to be read with the tariff entries and considered in the light thereof.
25. In the present case, since the notification refers to tariff entries and covers only those items which fall under the specified headings and sub-headings, this aspect is required to be kept in view.
26. I am mentioning this also because the other case law cited by the learned Counsel relates to different products and the situation both in the tariff and the notification (s) varies from products to products necessitating the incorporation of provisions like Chapter Note 2.
27. It is further noticed that the learned Collector has, in his order, remanded the matter to the A.C. for de novo consideration in the light of his directions and Chapter Note 2 and for examining other aspects involved in the wake thereof. Therefore, there is no reason to interfere with his directions at this stage in view of the above position. The appeal is, therefore, rejected as already announced in the open Court.