| SooperKanoon Citation | sooperkanoon.com/3613 |
| Court | Customs Excise and Service Tax Appellate Tribunal CESTAT Delhi |
| Decided On | Jul-02-1987 |
| Reported in | (1987)(13)ECC337 |
| Appellant | Collector of Central Excise |
| Respondent | Lawkim Pvt. Ltd. |
2. A show cause notice was issued to the respondents on 5-2-1978 alleging that the respondents had cleared sets of stator and rotor affixed with the Thermal Overloading Protectors (hereinafter mentioned as TOPs) to M/s. Voltas Ltd., Thane, the cost of which was not included in the price list before the clearances. It was urged that the respondents had suppressed the cost of TOP in the price list. The respondents were asked to pay the duty of Rs. 1,93,107.60 for the period 1-7-1976 to 31-7-1978. The respondents in the reply urged that they were following the procedure prescribed by the Assistant Collector, Bombay for the movement of TOP imported by M/s. Voltas Ltd. There was no objection to such a procedure since "1968. They have been submitting' the price list for the* hermetic Stator/Rotor sets manufactured by them for supply to M/s. Voltas Ltd. exclusive of the value of TOP since this was an optional accessory and the price lists have been passed by the Excise authorities without objections.
3. The Assistant Collector in the Order-in-Original dated 13-3-1979 held that the cost of the TOP was not included in the Contract Price though they were normal prices under Section 4 of the Central Excises and Salt Act, 1944. The Adjudicating' authority held that the TOPs were cleared duly fitted to the Hermetic Electric Motor and as such the assessable value of the Electric Motor would go up to the extent of the cost of the TOP. He confirmed the demand of differential duty. The respondents preferred an appeal and the Appellate Collector vide his order dated 10-11-1981 held that the TOP was an additional device to cut off the current when it exceeded particular voltage. It was used for safety and protection of the electric motors. It was an integral and essential part of the electric motor/stator/rotor. As such he was of the view that the value of the TOP need not be added to the value of the electric motor/ stator/rotor sets. He also found that the demand prior to the period 5-6-1978 was time barred.
4. In the Review Show Cause Notice, the Government have pointed out that the imported TOP worked as a fuse and that the assessee cleared the set of stator and rotor affixed with the TOP to Voltas Ltd. Who inturn utilised the same in the manufacture of Hermetically Sealed Compressors falling under Tariff Item 29A of the Central Excise Tariff.
The Government was of the view that the goods were cleared in an improved form with the TOP and the value should have been added. For the purpose of assessment, the Proper Officer prima-facie has to go into the condition in which the goods were cleared. The respondents in their reply to the show cause notice have stated that the TOP was not an integral part of the hermetic motor but was an accessory which had been specifically desired by M/s. Voltas Ltd. Such TOPs have not been specified by the other manufacturers as Godrej & Boyce Manufacturing Co. and M/s. Kirloskar Brothers. It is not a trade practice to supply TOP alongwith stator/rotor sets. It is not an essential part of the stator/rotor set because the stator/rotor set can work without this part.
5. Shri H.L. Verma, SDR aruged that the TOP was fixed in the coil windings and became an integral part of the stator/rotor. It is not an accessory and it protected the motor. It was fixed even while the stator was under the process of manufacture and before it was fully finished. The value of the goods should be determined at the time of the clearances and hence the value of the TOP should also be taken into onsideration. The SDR referred to the Ruling of the Hon'ble Supreme Court reported in 1985 (20) E.L.T. 179 (S.C.) (Empire Industries Ltd. and Ors. v. Union of India and Ors.). In paragraph 47, the Hon'ble Supreme Court has observed as under :- "When the textile fabrics are subjected to the processes like bleaching, dyeing and printing etc. by independent processors, whether on their own account or on job charges basis, the value of the purposes of assessment under Section 4 of the Central Excise Act, will not be the processing charges alone but the intrinsic value of the processed fabrics which is the price at which such fabrics are sold for the first time in the wholesale market. That is the effect of Section 4 of the Act."Collector of Central Excise, Bhubaneshwar v. Orissa Concrete Products (P) Ltd.], where the Tribunal has held that :- "The intrinsic value of the articles sought to be assessed should be taken into consideration irrespective of the fact that the manufacturer or the processor of the article did not pay for the cost of some of those components." 6. Shri A. Hidayatullah, Senior Counsel for the respondents argued that the manufacturer's pamphlet described the parts as device providing a range of protection from small room air conditioning compressors to 3-1/2 hp air-conditioning and heat pump units. In this pamphlet it is mentioned as follows :- "These protectors are selected for use in a compressor by varying the disc and heater resistance and the disc temperature setting. The disc remains in a closed position during normal operation of a compressor and snaps open during overheating conditions such as running overload and stalled rotor." It was urged that the TOP is not an integral part of the stator. It is fused to the windings and projects outside. It functions as a device to prevent overheating. The snap action disc resists vibration and assures positive make and break action and controls the temperature, differential.
7. In support of his contention that an accessory cannot be treated as an integral part, reliance was placed on the decision reported in 1977 E.L.T. (3 133) (International Tractor Co. of India Ltd. v. Union of India and Ors.). In that case, the High Court of Bombay held that the Wheel, Weights and Hour Metres were not essential parts of the tractors as a tractor can operate without these parts.
In 1979 E.L.T. (J 546) Jyoti Ltd., Baroda v. Union of India and Anr.), the High Court of Gujarat has held that an accessory is an object or device which is not essential in itself but adds to the beauty, convenience or effectiveness of something else. The column assembly and the discharge head assembly were held to contribute to the effectiveness of the bowl assembly. They were not performing essential function of a power driven pump.(Mahindra & Mahindra Ltd. v. Union of India and Ors.), the Bombay High Court had to consider the tractor parts such as mounted disc harrow, mounted tandem disc harrow, spring loaded tiller etc. It was held that they added to the effectiveness and proper utilisation of the agricultural tractors in the agricultural operations. Therefore, they were held to be accessories of agricultural tractors.(Macneill & Magor Ltd., Calcutta v. Collector of Central Excise, Calcutta), the Tribunal considered whether the Lower Authorities were justified in adding the value of forklift trucks with the cost of attachment and accessories such as load back rest, extra set of lights, ram attachment, crane attachment etc. The Tribunal's attention was drawn to the judgment of the Supreme Court in Bombay Tyres International Ltd. 1983 E.L.T. 1986 (S.C.). There was a Remand Order of the Calcutta High Court on the appellants' writ petition. The Tribunal while dealing with the position observed as follows :- "Neither the Supreme Court judgment nor the Calcutta High Court's remand order even remotely touched upon the issue whether the articles listed under cost category I above could be considered parts or components of forklift trucks so as to justify their inclusion of their value in the assessable value of forklift trucks."Bridge and Roofs Co. (I) Ltd. v. Collector of Central Excise, Calcutta], the Tribunal has repelled the contention of the revenue to include the value of the wheel sets, coupler sets and axle boxes, supplied by the Railways for the manufacture of the wagons.
The Tribunal observed as follows :- "We are of the view that appellants have paid duty on the invoice value which does not include the value of the materials supplied by the railways free of cost. It was urged on behalf of the appellants that these parts were fitted to the wagons when they left the factory. The manufacture of the wagons was complete even without these fittings but these items were fixed with a view to afford greater efficiency to the manufactured product. There was no sale of these items by the appellants to the railways. These items were to be fixed even at the time of the manufacture and there is no proof that they could have been fitted subsequent to the manufacture." 8. Shri A. Hidayatullah referred to us to the Purchase Order of Voltas Ltd., which indicates "TOPS WILL BE SUPPLIED BY THE VOLTAS LTD.". The gate passes also disclosed that the TOP received under specified gate passes have been fixed to the stator. The learned Counsel distinguished the decision in Collector of Central Excise, Bhubaneshwar v. Orissa Concrete (P) Ltd. (cited supra) as a case not relating to accessories.
On the present facts, the TOPS were attached to the stator and rotor at the time of clearances and Voltas Ltd. who made the hermetic compressors subsequently.
(i) whether the TOP supplied by M/s. Voltas Ltd. is an accessory or device; and (ii) whether the value of such accessories could be added to the assessable value.
9A. The admitted facts indicate that M/s. Voltas Ltd. have imported the TOPs and sent them to the respondents to be fixed to the stators/ rotors as per their special designs. The respondents cleared the TOPs on Central Excise gate passes and as per the directions of the authorities. They also make mention of it in the gate passes at the time of clearing the stators and rotors. The stators and rotors are used by Voltas Ltd., for manufacturing their hermetically sealed compressors. It is also clear from the ruling reported in Jyoti Ltd. (cited supra) that an accessory is an object or device that is not essential in itself, but that which adds to the beauty, convenience, effectiveness or something else. In other words, it is a supplementary or secondary or additional device which assists in operating or in controlling the machinery. The respondents have filed a brochure regarding the Klixon Motor Protectors. The TOP is a device to protect the machinery against overloading. It also operates as a break action for control of temperature. It is fixed to the stator and protects the motors from surrounding winding heat and internal heat generated by the current. Because of its thermal location, it responds to the current changes and offers protection against overloading conditions. The LINE BREAK CAPACITY RATINGS have also been mentioned in the pamphlet. This device can be mounted either in the windings, on the windings or close to the windings and still provides the benefits of an internal protector. It is thus manifest from the brochure that the TOP is a protecting device against overloading of energy. The rotor or stator can function even without these units. The TOP is thus a device to increase the effectiveness of the stator or rotor. In other words, it is an accessory and cannot be considered an integral part of the motor.
If it is to be considered as an integral part, then it must of such an essential character that the motor could not function without these attachments. On the present facts, it is clear that the TOP is only an internal protector against overloading and is merely an accessory.
Applying the ratio of ruling reported in the case of International Tractors, Jyoti Ltd., Baroda and Mahindra & Mahindra, one can safely conclude that the TOPs are only accessories and their value cannot be added to the rotors or stators.
10. It is true that the intrinsic value of the articles should be taken into consideration for the purpose of assessment. But, the test would be whether the item concerned had become an integral part of the machinery. The facts of the present case show that these additional attachments are only for the purpose of improving the efficiency of the machines and would not become an intrinsic part of the same. The decision in (cited supra) has considered the decision of the Supreme Court in Bombay Tyres and have held that the decision of the Supreme Court was in respect of the post manufacturing expenses. The ratio of Bombay Tyres International Tractors or Empire Industries, will not apply to the facts of the present case.
11. We also notice that the respondents have followed the procedure prescribed by the authorities in respect of clearances of TOPs. The gate passes filed as also the invoices indicate that the TOPs were supplied by M/s. Voltas Ltd. Under those circumstances, if the department felt that the value should be added, they should have intimated the respondents about it. The Assistant Collector has proceeded on the basis that the normal price under Section 4 of the Act would include the value of the TOP. But we do not find any support for this conclusion. The revenue has not shown that it was the normal trade practice to supply motors and stators with TOP. On the other hand, the respondents have pointed out that in the case of other manufacturers like Godrej & Boyce and Kirloskar Brothers, their designs do not refer to the TOPs. This is another factor which proves that there is no trade practice to supply TOPs along-with stators/rotor sets.
12. The respondents have mentioned in the reply to the show cause notice that the TOP was an optional accessory. Shri H.L. Verma argued that the TOP formed an integral part of the stator and rotor set. But there is no such allegation in the show cause notice nor has the Assistant Collector given such a finding. The Appellate collector rightly held that the TOP was merely art additional device to cut Off the current when it exceeded a particular voltage, and that it was not an integral and essential part of the Electric motor/stator/rotor. In 1983 ECR. 1359D (CEGAT) [Machine Products (I) Ltd., Ahmedabad v.Collector of Central Excise, Ahmedabad], the Tribunal considered the question whether the value of bought-out parts should be clubbed with the value of their own parts supplied by the manufacturer in order to determine the eligibility under Notification 176/77-C.E., dated 18-6-J977. The Tribunal held that there was no justification in including the value of the bought-out parts because the respondents therein were doing only conversion or modernisation or upgradation job on an existing installed machinery. We also notice that the Appellate Collector has held the demand to be time barred except for the period after 5-6-1978. The review show cause notice does not touch on this aspect. However, in that view taken by us on the main question, we held that the review notice is not justified. The appeal is dismissed and the review action is quashed.
13. In the Bombay Tyre International judgment 1983 ELT 1896 the Supreme Court, dealing with the question, of what contributes to the assessable value of a product, observed at paragraph 49 : "Now the price of an article is related to its value (using this term in a general sense), and into that value have poured several components including those which have enriched its value and given to that article its marketability in the trade. Therefore, the expenses incurred on account of several factors which have contributed to its value up to the date of sale, which apparently would be the date of the delivery, are liable to be included." 14. Value is used in this sentence in the general sense and I understand this to mean that it is the value of the article rather than its cost, in terms of money, to the manufacturer. The assessees would say that the overload protectors cost them nothing as they received them free from their customer and therefore their value would not add to the cost of their stator which they sell to such customer. But the set of rotor and stator, with the overload protector installed, would carry a higher value than a set of rotor/stator without the protector.
It is this value that has to be taken into account for the purpose of their assessment.
15. In Empire Industries 1985 (20) ELT 179 the Supreme Court said that in order to arrive at the value of textile fabrics for the purpose of their assessment, the intrinsic value of the processed fabrics must be taken. Here is the relevant passage from paragraph 47 : "When the textile fabrics are subjected to the processes like bleaching, dyeing and printing etc. by independent processors whether on their own account or on job charges basis, the value for the purposes of assessment under Section 4 of the Central Excise Act will not be the processing charges alone but the intrinsic value of the processed fabrics which is the price at which such fabrics are sold for the first time in the wholesale market. That is the effect of Section 4 of the Act." 16. This passage is very significant. The Supreme Court lays down the rule here that there can be two values one value for the unprocessed fabrics and another for the processed fabrics. The value for the processed fabrics will be its intrinsic value: that is to say, the value of the grey fabrics and anyting else that may be put into it such as dyes, bleaches, starch for sizing, processing, etc. It may be possible for a processor to say that he received the bleaching powder, the dyes or starch, free and that he is not charging for them. But all their contribution to the value of the fabrics will have to be counted because the Supreme Court says that the instrinsic value must form the assessable value.
17. It was strongly argued by the learned Counsel on behalf of M/s.
Lawkim Limited that the overload protector were received free and would not form part of the value of the rotor/stator set. But since the rotor/stator sets carry in them the overload protector, their value goes up by the corresponding amount at least equal to the value of the protector. It is therefore logical to add its value to the value of the rotor/stator set.
18. The learned Counsel also argued that this overload protector is only an accessory and is not essential to the rotor/stator set. The motor assembled from the rotor/stator set can run perfectly well even if there were no overload protector in it. This is correct, but it does not answer the question that is raised here.
19. The printed paper of the KLIXON MOTOR PROTECTOR (of Texas Instruments Incorporated) which was read by the learned Counsel emphasises at the number of places that the protectors were devices and they were only protectors. There is no disputing the fact that these protectors are devices; but when they are installed they are installed in such a way that they integrated fully and completely into the system winding, becoming part of the motor. The paper thus records "KLIXON On-Winding Motor Protectors are linebreak, automatic reset devices wired in series with, and mounted on, the motor windings".
20. However and whatever the method of their installation, if the protectors are wired in series, they will inevitably form part of the circuit in the winding. Now without such integral and componential installation, it will not be possible for make-and-break action of the unit to operate whenever the load factor temperature becomes critical, or to reclose the circuit when the load factor/winding temperature returns to normal. It is easy from this to see, therefore, that the overload protector device is part of the motor winding and, therefore, should form part of it for all purposes, and that its value should enter the value of the rotor/stator set.
21. There is an inherent danger to revenue in the claim that parts such as this overload protector are only accessories, and that even without them the motor will work quite well, and that, therefore, their values should not be added to the value of the motor or rotor/stator. Many appliances today have auxiliary or optional components without which the appliances gadgets etc. can work quite well. Thus television receiving sets frequently have in-built voltage stabilizers. The television sets can work quite well without the voltage stabilizer; but it would not do, in my opinion, to say that the value of the stabilizer should not be added to the value of the television sets if the sets carry them. This is true of many high valued electrical apparatus like refrigerators, air conditioners etc. It will be possible for the manufacturers to say that they have installed the so-called accessories/optional devices only on the request of the customers, or without any charge, and so their value should be excluded from the calculation of the assessable value.
22. A car manufacturer can demand that as a car can run without ammeter, temperature gauge, fuel gauge, mile/speedo meter, hub caps, fenders, the value of these components must be excluded. We can even say that though it is unsafe - but that is of course, a different matter - the car can run without brakes, lights, windscreens, rear viewer mirror, horn. These only enhance, improve, aid the performance of the car, or add to the safety of the passengers or aid the vision of the driver, and so on. Hence, they should have their value deducted.
The effect on the public revenue can be well imagined. Such exemples can be multiplied.
23. However if we are to go by the Supreme Court injunction given so clearly and unambiguously, we will have to recognise that the last value at the factory must form the value for the purpose of assessment.
In the Bombay Tyre International judgment, the Supreme Court, discarding all judgments and rulings that favour exclusion of this and that expenses, said that all expenses and components that have enriched the value of the article must have their expenses contribute to its value and that factors which have contributed to that value on the date of the delivery are liable to be included in the assessable value. It is not just a value in term of monetary expenses: as specified in the Empire Industry judgment, it is the intrinsic vlaue that must be counted.
24. I am led to my conclusion by these words of the Hon'ble Supreme Court which show clearly how one should proceed in assessing the value of an article. Furthermore, I am also led to this conclusion by the thought that exclusion of the value of such so-called accessories would be a risk that the revenue cannot afford to run. For these reasons I respectfully differ from my learned brother and rule that overload protectors should have their values included in the assessable value of the rotor/stator set. But the six month bar will operate on the demand.
25.The two learned Members who heard the above appeal differed on the following point :- "Whether in the facts and circumstances of the case the value of Thermal Overload Protectors should be included in the assessable value of rotor/stator." The case was accordingly referred to the President in terms of the proviso to Section 129C (5), Customs Act, 1962, as applicable to Central Excise. The case was heard on the 2nd June, 1987.
26. At the outset, Shri Hidyatullah offered to hand over a sample of the "Thermal Overload Protector" (TOP), as well as a copy of the leaflet of the manufacturers of this article, M/s. Texas Instruments Incorporated. It was noted that these had been referred to at the earlier hearing and were already on record. A copy of the leaflet of M/s. Lawkim, illustrating their products, was also found to be on record.
27. On behalf of the Collector, Smt. Zutshi supported the view taken by Member Shri Syiem. She referred to the order recorded by Member Shri Santhanam. The question was whether the TOP was an integral part of the motor or an accessory. The Department had argued that the TOP had inextricably become a part of the rotor or stator. The Department had placed reliance on the decision of the Supreme Court in the case of Empire Industries Ltd. 1980 (20) ELT 179 (S.C). The Supreme Court's decision in that case had overruled the High Court decisions in the case of Vijay Textiles and Pio Food Packers.
28. It had been argued for the manufacturers that the TOP had not been manufactured either by them or by their customer, M/s. Voltas. These articles had been imported. They were supplied to the manufacturers by their customer, and the manufacturers were not aware of the cost. Smt.
Zutshi relied on the decision of the Tribunal in the case of Collector of Central Excise, Bhubaneshwar v. Orissa Concrete Products (P) Ltd 1986 (26) ELT 284 for the proposition that it was not material whether or not the manufacturers had paid for the TOP.29. Smt. Zutsrii submitted that by fitting the TOP to the rotor or stator, a definite improvement had been made to the main article. It was not an accessory like a tool kit. It was fused in the winding. The customers, M/s. Voltas, had asked for motors which had been fitted with the TOPs. The article asked for and supplied was complete only when the TOP had been attached. It was not a case of an accessory being fitted later on.
30. It had been argued for the manufacturers that it was not the normal trade practice to affix the TOP on a rotor or stator. In this case it had been done as per a special design of the customers, who had thus ordered a special type of motor. A motor with TOP fixed was not a normal or standard motor.
31. In para 10 of his order, Member Shri Santhanam, had observed that the TOP would not become an integral part of the machinery. This was not correct. By affixing the TOP, the character of the goods, namely the motors, had been changed.
32. The learned Member had observed that the ratio of the Supreme Court decision in the Bombay Tyres case would not apply, since, that case was in respect of post-manufacturing expenses. Smt. Zutshi submitted that this observation was not correct.
33. In para 12 of his order, Member Shri Santhanam had referred to the Tribunal's decision in the case of Machine Products (I) Ltd. (1983 ECR 1359 Cegat). The Tribunal had held that in the case there was no justification for including the value of the bought-out parts in the value of the machinery. That decision was not applicable to the present case, which was not one of upgradation. On the other hand, the case was covered by the Tribunal's decision in the case of Orissa Concrete Products (para k supra).
34. Smt. Zutshi referred to the leaflet of the manufacturers, in which they had described themselves as "Specialised motor makers". There was no doubt that the motor supplied to M/s. Voltas was a specialised item, for which the TOP was an item of "raw material".
35. Smt. Zutshi referred to the leaflet of Texas Instruments Incorporated, manufacturers of the "Klixon" motor protectors. The leaflet set out in detail the description and functioning of the TOPs.
From this leaflet it was clear that the function of the TOP was not only to make the motor more efficient, but that it charged the essential character of the motor. It could also be seen from, the leaflet that when placing an order very specific data regarding the motor on which it was to be fitted and the conditions of use had to be given. This would show that the TO? was not necessary for an ordinary motor.
36. Turning to the order recorded by Member Shri Syiem, Smt. Zutshi referred to para 13, where the Supreme Court judgment in the Bombay Tyre International case had been quoted. The Supreme Court had taken note of the fact that several components had gone towards imparting marketability to an article. Thus marketability was a very important factor.
37. In para 19 the learned Member had pointed out that the mere fact that the TOP was a "device" did not dispose of the matter. Almost any article could be called a device. However, the TOP when integrated into the system became a part of the motor.
38. In para 22 of his order Member Shri Syieim had made reference to various articles that are normally found in a car (such as the horn), which one could argue were not essential but in the nature of accessories.
39. Smt. Zutshi submitted that the rotor or stator supplied by the manufacturers to M/s. Voltas with the TOP fitted was a different product from what was sold to other customers without such a TOP. It should be treated on its own merits and the assessable value should include the value of the TOP. She submitted that the view taken by Member Shri Syiem was correct.
40. On behalf of the manufacturers Shri Hidyatuallah submitted that both the learned Members had agreed that the TOP was an accessory. He referred to para 18 in Member Shri Syiem's order. According to him the words "This is correct" in that para meant that the learned Member had accepted the TOP to be an accessory.
41. Shri Hidyatullah referred to para 9A in Member Shri Santhanam's order. (There are two paragraphs numbered as 9. For convenience, the second of these is referred to as para 9A). It had been observed in this para that the rotor or stator could function even without the TOP.Accordingly, it was only an accessory.
42. Shri Hidyatullah referred to para 21 of Shri Syiem's order wherein reference had been made to the consequences if the claim of the manufacturers were to be accepted. He submitted that the learned Member had adopted a wrong approach in the matter of interpretation He should have considered what the correct interpretation was, without being swayed by its possible consequences. His reference to a voltage stabilizer had no relevance. Although the learned Member had accepted that the TOP was an accessory, and therefore should have allowed the appeal, he had come to the different decision on the basis of the consequences to the revenue.
43. Further, Shri Syiem's observations were contrary to the decisions of the Tribunal, thus, in Vardhaman & Co. v. Collector of Central Excise 1984 (15) ELT 426 it had been held that a stabilizer was an accessory and its value should be excluded from the assessable value.
In the case of Orient General Industries v. Collector of Central Excise 1985 (21) ELT 326 it had been held that regulators for ceiling fans were accessories.
44. The learned Member, had relied on the decision of the Supreme Court in the Bombay Tyre International case. He had not taken into account the Tribunal's order in the case of Mac Neill and Magor Ltd. 1986 (25) ELT 556. In that case the Tribunal had held that the Supreme Court's observations in para 49 of the Bombay Tyre International judgment were not relevant to the question whether the value of an "accessory" should be included. This decision of the Tribunal was binding on the learned Member. The present Bench should also follow the previous decision of the Tribunal on this point, as Member Shri Santhanam had done.
45. Shri Hidyatullah submitted that it had been consistently held by the Courts that the value of an accessory should not be included in the assessable value of the main article.
46. Shri Hidyatullah referred to the leaflet of Texas Instruments Incorporated where the TOPs had been referred to as "devices". He relied on the decision of the Gujarat High Court in the case of Jyoti Ltd., Baroda (1979 ELT 546) where certain devices had been held as not parts of pumps. A similar view had been taken by the Bombay High Court in the case of Mahindra and Mahindra Ltd. 1984 (18) ELT 262. It had been noted in that case that an accessory was something which contributed to the effectiveness of an article. In the present case the TOP contributed to the effectiveness of the motor, as it provided a protection in case of an overload. It was not necessary for the functioning of the motor. The design specifications for similar motor supplied to other customers did not incorporate TOPs.
47. The case of Orissa Concrete Products (para 4 supra) related to a question of "intrinsic value", with reference to the point whether payment had been made for the part in question. The item was not an accessory as in the present case. Therefore, that decision was not relevant to the present case.
48. With reference to para 20 of the order, where Member Shri Syiem had observed that the TOPs were "wired in series", Shri Hidyatullah was asked whether this observation was accepted as factually correct. Shri Hidyatullah replied that it was correct. However, the physical location of the TOP could be anywhere on the finished article. He referred to one of the illustrations of the leaflet of the manufacturers, showing "wound stators awaiting final electrical testing", where the TOPs could be seen projecting from the inside of the stator.
49. The learned Member had argued that one should see the article as it left the factory premises. This was contrary to the decision of the Bombay High Court in the case of International Tractor Co. of India Ltd., which had also been confirmed by the Division Bench 1977 ELT 133 -and 1985 (22) ELT 780. In para 22 it had been observed that the real test would be to find out at what point of time the petitioners could be said to have manufactured a tractor with all its essential parts. It was at that point of time that it would be excisable to attract excise duty. Again, in para 25 of the judgment it had been observed as follows :- "Although it may be correct to say that the assessable value of a manufactured article is to be ascertained at the time of the article leaving the licensed premises, the excise duty could be levied only on the excisable goods, in this case a 'tractor'. However, when it is admitted in this case that the said two accessories were not essential for the purpose of the manufacture of "a tractor' as such, the price of the said parts, though fitted to the tractor before leaving the petitioners' licensed premises, cannot be included in the assessable value of the tractor." 50. It was put to Shri Hidyatullah that the concept of excluding parts which could be said to be accessories rather than essential parts could lead to a host of doubts and disputes. An assessee might seek to constructively strip down an article like a motor car by seeking the exclusion of the various "accessories" such as those mentioned by Member Shri Syiem in para 22 of his order. Could one support an interpretation which would lead to such a result? Again, would the concept of the tariff being interpreted to mean an article "as known to the market" not imply that a particular description in the Excise Tariff would be applicable to the article as ordinarily marketed and known to customers, without having to decide whether various parts were essential or not? 51. Shri Hidyatullah replied that, according to Government spokesmen before the Public Accounts Committee of Parliament, the assessment of Central Excise duty was not based on "transaction value". It was based on the nature of the article and he had cited sufficient legal authority for the view propounded by him.
52. For the Department, Smt. Zutshi submitted that in the case of International Tractors there was a stage when a complete tractor had been manufactured. The accessory was added thereafter. However, in the present case the TOP was fixed before the manufacture of the motor could be said to be completed. Further, in the case of International Tractors, the Court had given great weight to the fact that there was a controlled price fixed by the Government which covered certain specified attachments. There was no such controlled price in the present case.
53. As regards the decision in the case of Mac Neill and Magor Ltd., the mere fact that the Klixon TOP had been described as a "device" had no significance. The question was the function which it performed.
54. Member Shri Syiem had no doubt referred to the risk to the revenue.
However, this should be considered as an obiter dictum. She again submitted that the view taken by Member Shri Syiem should be supported.
55. I have carefully considered the views expressed by the two learned Members, and the arguments advanced from both sides.
56. To begin with, some minor points may be got out of the way. Shri Hidyatullah had argued that Member Shri Syiem had also accepted the view that the TOP was an accessory. This argument was based on para 18 of Shri Syiem's order. A reading of that paragraph would however show that the learned Member's observation "This is correct" applied only to the argument that the motor could run perfectly well even if there were no overload protector in it. The learned Member has followed the above observation by adding "but it does not answer the question that is raised here". To say that Member Shri Syiem had agreed that the TOP was an accessory requires drawing an inference from what he said, and not relying on what he actually said.
57. Shri Hidyatullah also found fault with Member Shri Syiem for taking into account the revenue implications of the view advanced by the appellant. I would agree that every case has to be decided according to law and not on the basis of the consequences to the revenue. It would however be clear from para 24 of the order that Shri Syiem's conclusion was not dependent on the revenue consideration and that it was only an added factor to support the conclusion which he had arrived at on the basis of his reading of the Supreme Court's judgment in the Bombay Tyre International case. Thus: "I am led to my conclusion by these words of the Hon'ble Supreme Court which show clearly how one should proceed in assessing the value of an article. Furthermore, I am also led to this conclusion by the thought that exclusion of the value of such so-called accessories would be a risk that the revenue cannot afford to run".
58. On behalf of the Department, Smt. Zutshi had stressed that the TOP was an integral part of the motor. She had also stressed that a motor fitted with a TOP in accordance with the Customer's design was an article in its own right, distinct from similar motors not fitted with TOPs.
59. As against this, Shri Hidyatullah had referred to a number of judgments where certain "parts" of excisable goods were held to be accessories or otherwise not to be considered as parts of the main excisable articles. (In this order the word "part", within quotation marks, is used to indicate a thing whose function - i.e. whether as an integral part or as an accessory - is in dispute). He went to the extent of saying that it had consistently been held by the Courts that the value of an accessory should not be included. In this connection it must be observed that the very fact of terming an article an "accessory" implies a finding that it is distinct from the main article (and consequently that its value should not be included in the value of the main article). It is not therefore to be expected that there would be any decision where a "part" would be held to be an accessory and yet its value would be held to be includible in the value of the main article. Even so, it is not as if there is no decision to the contrary effect. Shri Hidyatullah had referred to the Tribunal's decision in the case of Orient General Industries 1985 (21) ELT 326 holding that regulators for ceiling fans were accessories. In that very decision reference has been made to the decision of the Andhra Pradesh High Court in the case of 3ay Engineering Ltd., Hyderabad v. Government of India and Ors. (1982 ELT 378). In that decision a Division Bench of the Andhra Pradesh High Court gave an unequivocal finding that a regulator was an indispensable part of a ceiling fan. While doing so the Andhra Pradesh High Court took note of, and differed from, the earlier decision of the Delhi High Court 1981 ELT 284 (Del.) to the effect that the special regulator was not an integral or indispensable part of the electric fan. It would not therefore be correct to assume, as Shri Hidyatullah would like the Bench to do, that the judicial decisions on this issue are all to one effect.
60. In my view, the present case raises a general question and a restricted question. The general question is whether and to what extent it is open to a manufacturer who puts a particular product into the market, to contend that certain of its "parts" should be ignored for the purpose of arriving at the assessable value of the product, on the ground that they are accessories and are not integral or essential to the main article. The restricted question, which might in itself be sufficient for deciding the present case, is whether the TOP could be considered as an accessory in the sense in which this term has been interpreted by the Courts. I shall deal with the general question first.
61. In para 22 of his order Shri Syiem has taken the example of a motor car and has referred to a number of "parts" which could be claimed to be "accessories" in the sense that they only enhance, improve or aid the performance of the car, or add to the safety of the passengers, or aid the vision of the driver, and so on. He has referred to the ammeter, temperature gauge, fuel gauge, brakes, lights, rear view mirror, horn and other "parts". To these could be added floor mats, seat covers, adjustable sunshades, windscreen wipers, ash trays, the spare wheel and even the emblems affixed to the cars. One could contend without serious opposition, that the performance of a car is no way dependent on the metallic emblem attached to the body. Should it then follow that the value of the emblem should be excluded from the assessable value of the car? Following this logic further, should it also follow that the value of other "accessories", particularly easily removable ones such as the hub caps,, rear view mirror, floor mats and seat covers and windscreen wipers -not to mention the spare wheel - should also be excluded? Following the train of thoughtstill further, should one accept a situation where there could be prolonged debates and disputes in regard to the utility and essentiality of a multitude of items, all of which go with the car as it is marketed, and which a customer would expect to find in the car? 62. Shri Hidyatullah had argued that the interpretation of a legal provision should not be influenced by the consequences of adopting a particular interpretation which might appear to be the correct one. To the extent that an interpretation which flows from the wording of the statute should not be avoided because it could lead to loss of revenue, the argument has force. But it appears to be quite permissible to test the validity of a proposition by applying it to different cases and considering whether the results which follow are such as the Legislature could have intended. It appears to me extremely unlikely that the Legislature could have intended that a manufacturer should be at liberty to raise a controversy regarding a multitude of "parts", all of which are contained in the product which he markets, based on the essentiality or otherwise of each "part". This would certainly not be in accordance with the concept of "certainty", which is regarded as one of the canons of taxation.
63. Apart from general considerations, there is support in judicial decisions for the view I have expressed. Member Shri Syiem had placed reliance on the observations of the Supreme Court in para 49 of its monumental judgment in the Bombay Tyre International case. Shri Hidyatullah had argued that the Bench was precluded from considering these observations as applicable to the present issue, in view of certain observations by another Bench in the case of Mac Neill and Magor Ltd. 1 shall come to that judgment later. But 1 would observe that the Bombay Tyre International judgment and the situation that led to it would have relevance to the present case, from a different angle.
The Bombay Tyre International judgment had the effect of setting at rest a controversy which started as a result of certain observations of the Hon'ble Supreme Court in the well-known Voltas case. Basically, what was decided in the Voltas case was that the Excise authorities were not entitled (where the transaction was at arm's length) to make an addition to the actual price to wholesalers on the ground that it was not a "wholesale cash price". However, certain observations made by the Hon'ble Supreme Court in the course of its judgment were invoked by assessees to argue that the assessee was entitled to make a deduction from the actual cost price to wholesalers, in respect of elements of cost which though actually incurred and passed on to the wholesaler and the consumer, were "post-manufacturing expenses". In the Bombay Tyre International judgment the Supreme Court firmly rebutted this argument and held that in principle all the components that have gone into the value and therefore the price of an article, are liable to be included in the assessable value.
64. The present case and some of the others which have been cited, involve a somewhat similar situation. The facts of the respective cases, and the exact terms in which the decisions were given, will be discussed later. But in brief what the Courts have held is that a "part" which does not perform an essential function, which may not be physically attached to the main article, or which may be attached after the main article as known to the market has been manufactured, should not be included in the value of the main article. This does not however assure the validity of the contrary argument that a "part" which is incorporated in the main article can be notionally removed for the purpose of valuation.
65. As explained above, it appears to me that the Legislature could not have intended that a manufacturer should be at liberty to constructively or notionally strip down the product he has made by asking for the exclusion of certain "parts" on the ground that they are not essential and therefore are only "accessories". In support of this view there is also the established principle that entries in the tariff should be interpreted according to common parlance or the market understanding. Thus, the ordinary customer for a car would expect it to be equipped with various meters, windscreen wipers, a rear view mirror, a spare wheel, and so on. In other words, a motor car as known to the market, and particularly to those who deal in or with motor cars, would be equipped with these items as well as a number of others which would not be essential for the bare functioning of the car. Since however the term "motor car" has to be interpreted in the sense in which it is known to the market, it would not be permissible for a manufacturer who markets a motor car equipped with such "parts" to seek their exclusion from the assessable value: because, notwithstanding their precise function, a motor car without those "parts" would not be a motor car as ordinarily known and accepted in the market.
66. The above view finds support even from some of the judgments on which reliance has been placed on behalf of the appellant. In the case of International Tractor Co. (1977 ELT 133), the Court took this aspect into consideration. In para 21 of the judgment reference has been made to affidavits of traders and purchasers. It has been observed that the two accessories in question were not essential parts of the tractor, nor would the people in the trade reject the same as a tractor without the said accessories or one of them being fitted to it.
67. Again, in the judgment of the Gujarat High Court in the case of Jyoti Ltd., Baroda (1979 ELT 546), stress was placed on the test of common parlance. The Court observed as follows :- "6. It is well settled law that in cases like the present one when questions of interpretation of items or entries in excise schedules arise, the test to be applied is the test of how it will be understood by those who are accustomed to deal with power driven pumps in their ordinary avocations. It is what is known as common parlance test but common parlance of those who are familiar with the subject...." The Court considered the evidence of an expert in order to decide what was the common understanding of the term "pump".
68. Therefore, while the function of a particular "part" may become relevant in certain circumstances, the market understanding has always to be taken into account: and this requirement could override the arguments based on the function of a specified part.
69. I shall now refer to some of the cases on which reliance has been placed by the parties.
70. The appellants have strongly relied on the judgment of the Bombay High Court in the case of International Tractor Co. of India Ltd., (1977 ELT 3 133). This related to the question of wheel weights and hour meters which were claimed to be optional accessories of tractors.
The wheel weights were to be attached to the tractors when these were to be used in abnormal conditions. Hour meters were fixed to tractors where the intention was to hire them out, the charges being based on the time for which they were used. While holding that the wheel weights and hour meters were not essential components of a tractor and their value should not be included in the assessable value of the tractor, the Court took the following circumstances into account :- (a) There was a statutory price control on tractors, under the Essential Commodities Act, 1955-, (b) For the purpose of price control, Government had specified certain accessories/attachments, which were required to be supplied with every tractor. These did not include wheel weights or hour meters; and (c) At the material time wheel weights and hour meters, on the basis of their classification under Item 34A, were exempt from excise duty.
71. In coming to its conclusion, the Court observed that including the value of the two articles in the value of the tractor would amount to indirectly levying excise duty on accessories which were exempted from excise duty, which would not be permissible. The Court also observed that the real test would be to find out at what point of time the petitioners could be said to have manufactured a tractor with all its essential parts. It was at that point of time that it would be excisable to attract excise duty. The Court observed that admittedly the wheel weights and the hour meter were fitted to the tractor at the option of the purchaser subsequent to the tractor as such being manufactured by the petitioners. The reasoning of the Single Judge was upheld by a Division Bench on appeal in a brief judgment 1985 (22) ELT 780 (Bom.).
72. In the case of Jyoti Ltd., Baroda v. Union of India and Anr. 1979 ELT 546 (Guj.), the Gujarat High Court considered "a short but interesting question as to what is the meaning of the word pump1 occurring in Item 30A of the Schedule to the Central Excises and Salt Act, 1944". The petitioners were manufacturers of power-driven pumps.
It was noted that what the petitioners manufactured and what was loosely called a pump, fell into three divisions, namely, the "bowl assembly", "column assembly" and "discharge head assembly". According to the Department, all the three assemblies were parts of the power-driven pump. According to the petitioners, only the bowl assembly which housed the impellers, comprised the "power driven pump", and the column assembly, through which water or liquid would go up, and the discharge head assembly, through which water or liquid is discharged and passed on to the distribution system, were merely accessories of the pump. Evidence as to the trade understanding was produced by the petitioners, in the shape of one Lal-chandani, who was a technically qualified man as well as an industrialist. The Court took note of the definition of the term "accessories" as adopted by the Supreme Court in Annapurna Carbon Industries Co. v. State of Andhra Pradesh (37 STC 378). It quoted the following paragraph from that judgment :- "We find that the term 'accessories' is used in the schedule to describe goods which may have been manufactured for use as an aid or addition. A sense in which the word "accessory* is used is given in Webster's Third New International Dictionary as follows: 'an object or device that is not essential in itself but that adds to the beauty, convenience, or effectiveness of something else'. Other meanings given there are : 'supplementary or secondary to something of greater or primary importance'; 'additional'; 'any of several mechanical devices that assist in operating or controlling the tone resources of an organ". 'Accessories' are not necessarily confined to particular machines for which they may serve as aids. The same item may be necessary for more than one kind of instrument".
The Gujarat High Court adopted the above definition of accessories. It took note of the fact that T.I. 30A dealt only with power-driven pumps and did not refer to accessories. It observed that the column assembly and the discharge head assembly contributed to the effectiveness of the bowl assembly, but they were not performing the essential function of a power-driven pump, namely, building up pressure in the liquid. That essential function was performed only by the impellers which were housed in the bown assembly. Consequently, the High Court held that the Department was wrong in treating the column assembly and the discharge head assembly as components or essential elements of power-driven pumps manufactured by the petitioner.Mahindra & Mahindra Ltd. v. Union of India and Ors.
1984 (18) ELT 262, the goods in question were implements such as a mounted disc harrow, a rigid line cultivator, a heavy duty tiller, etc.
It was contended by the petitioners that these implements fell under Item 34A as it existed at the material time. This item covered "parts and accessories, not elsewhere specified, of motor vehicles and tractors, including trailers". It was the case of the Department that the goods fell under the residuary Tariff Item 68. Apparently, classification under Item 34 A was more favourable to the petitioners than classification under Item 68.
74. The Court took into account the definition of "accessories" as followed by the Supreme Court in the case of Annapurna Carbon Industries Co. (vide para 47 supra). It held that the implements could be considered as accessories of agricultural tractors. In the result, the petition was allowed, the implements were held classifiable under Item 34A, and the Department directed to make the consequential refund.
75. It appears that in this case the implements were being cleared and sold separately from the tractors. Thus, no question as in the present case arose. Further, the question which did arise was not whether the implements should be classified as parts of tractors or accessories of tractors. The question was whether they were "parts and accessories" falling under T.I. 34A, or "goods not elsewhere specified", falling under T.I. 68. Whether the implements were classified as tractor parts or as tractor accessories would have made no difference to the petitioners, but would have been equally welcome to them. This decision is, therefore, not of assistance where the question is of deciding between parts and ctccessories.Mac Neill & Magor Ltd. v. Collector of Central Excise, Calcutta 1986 (25) ELT 556, was by this Tribunal. Two questions were involved. One was as regards the inclusion in the assessable value of packing, forwarding and other charges. The other was as regards inclusion in the assessable value of various articles such as battery, a battery-charger, crane attachment, etc.
77. What is relevant to the present case is the second question. This question was not examined or decided on merits by the Bench. The Bench took note of the fact that the point at issue stood settled in the appellants' favour by a series of orders-in-appeal passed by the Appellate Collector/Collector (Appeals) in the appellants' own case. No appeals had been filed by the Department against these orders which had, therefore, become final.
78. Clearly, therefore, there was no finding by the Tribunal on merits which would be relevant to the present case. The case has however been relied upon by Shri Hidyatullah because of certain observations made by the Bench while passing its order. It was submitted to the Bench that, although the abovementioned orders-in-appeal subsisted, it was open to the Department at the level of the Assistant Collector to re-open the matter, in the light of paragraph 49 of the Supreme Court decision in the case of Bombay Tyre International Ltd. The Bench held that the above paragraph was not a sufficiently cogent reason for reopening a settled issue. It observed that the said paragraph 49 related to deductions from value claimed as "post-manufacturing expenses". The judgment did not even remotely touch on the issue whether the articles under consideration in the case before the Bench could be considered as parts or components of fork lift trucks so as to justify inclusion of their value in the assessable value of fork lift trucks.
79. In the present case, Member Shri Syiem has placed reliance on the same paragraph 49 of the Supreme Court-judgment in the Bombay Tyre International case. Shri Hidyatullah submitted that, in view of the observations of a three-Member Bench of the Tribunal in the Mac Neill & Magor case, Member Shri Syiem was not at liberty to rely on the said paragraph 49, nor could the present Bench do so. 1 find it difficult to accept that we are so precluded. As already mentioned, the present issue was not examined on its merits in the Mac Neill & Magor case. In fact, that case was about a totally different article. The observations made by the Bench with reference to para 49 of the Supreme Court judgments in the 'Bombay Tyre International case, were only by way of additional support to the view already taken by it that the Department was not at liberty to agitate before the Bench an issue which was already settled. It does not appear that the observations made by the Bench in this context, which were not material to its decision in the case before it, should preclude us from considering the true effect of the observations of the Hon'ble Supreme Court and their bearing on the case before us.
80. Reference was also made to the decision of the Tribunal in the case of Bridge and Roof Co. (1) Ltd. v. Collector of Central Excise, Calcutta 1986 (24) ELT 671. That was a case where the appellants manufactured structural fabrications and goods wagons out of raw materials supplied by other parties and paid duty only on the conversion cost without including the cost of the raw materials. The case was decided by the Tribunal in favour of the appellants. It is not necessary to examine this case in detail because it is not really relevant to the issue before the Bench. It related to goods classifiable under T.I. 68, and to the interpretation of exemption Notifications No. 119/75 and 120/75. It was not concerned with the question of the correct assessable value in terms of Section 4, Central Excises and Salt Act.Machine Products (I) Ltd., Ahmedabad v. Collector of Central Excise, Ahmedabad (1983 ECR 1359D CEGAT). It is not necessary to dwell on this case either, because it also does not have much relevance to the present case. It was a case where, in pursuance of contracts with textile mills for converting or upgrading drafting mechanisms of frames already installed in the mills, the manufacturers used their own manufactured duty-paid components of drafting mechanisms as well as duty-paid bought-out parts. The dispute was whether the value of the bought-out parts should be clubbed with the value of the appellants' own parts in the value of their clearances, for eligibility for the small scale industry exemption.
This is totally different from the issue in the present case.
82. Reference was also made on behalf of the Department to the decision of the Tribunal in the case of Collector of Central Excise, Bhuba-neswar v. Orissa Concrete Products (P) Ltd. 1986 (26) ELT 284. In that case the respondents manufactured concrete sleepers for supply to the Indian Railways. The Railways supplied an iron component which was incorporated in the sleepers. The question arose whether the cost of the iron component should be included in the assessable value of the sleepers. Following the judgment of the Supreme Court in the case of Empire Industries Ltd. 1985 (20) ELT 179 SC, the Tribunal held that the cost of the iron component was includible in the assessable value, since the assessable value has to take in the entire intrinsic value of the article sought to be assessed, irrespective of the fact that the manufacturer or the processor of the article does not pay for the cost of some of its components. This judgment would meet the argument that because the present appellants did not pay the cost of the TOPs, that cost should not be included in the assessable value. It is not, however, 'necessary to dwell on this aspect because Shri Hidyatullah understandably did not argue this point, but based himself entirely on the argument that the TOPs were only accessories (of para 23 supra).
83. Shri Hidyatullah had also referred to the decision- of the Tribunal in the case of Vardhman Spinning & General Mills Ltd. v. Collector of Customs, Bombay 1984 (15) ELT 426. That was a customs case where the appellants imported various articles including a computer and a voltage stabilizer to be used with the computer. The Department contended that the voltage stabilizer and the computer were to be treated as one unit.
The Tribunal rejected this argument. It held that the voltage stabilizer was an item of goods in its own right, and that it would not be appropriate to classify the same along with the computers with which it was to be worked.
84. This decision also does not have much relevance to the present case. It related to a question of classification under the Customs Act, and not to valuation under the Central Excises and Salt Act. Again, the article in question, the voltage stabilizer, was clearly separate from the main equipment (unlike the inbuilt voltage stabilizers referred to in para 21 of the Member Shri Syiem's order). It may also be noted that the Bench did not use the term "accessory" but held that the voltage stabilizer was an item of goods in its own right.
85. The above study of cases cited before the Tribunal shows that each of them was decided with reference to its own facts. In the International Tractor case, what weighed most with the Bombay High Court was that the tractor had already come into existence as an excisable article. The definition of a tractor for the purpose of statutory price control did not include the wheel weights or the hour meter. Neither of these was attached to the tractor at the time it came into existence as a finished article: in fact, the wheel weights were to be attached only on rare occasions under abnormal conditions.
86. In the case of Jyoti Ltd., the Gujarat High Court went by expert evidence, supported by standard literature, as to what constituted a pump, and whether certain assemblies which no doubt were attached to the bowl assembly, should be considered as parts of the pump. In the light of the evidence before it, the Gujarat High Court held that the essential function of the pump was performed by the bowl assembly, which therefore constituted the "pump", and the column assembly and the discharge head assembly, which were attached to the bowl assembly, were only accessories. In the present case the TOP, whatever its function may be, is a part and parcel of the motor, being wired in series with the main winding.
87. Neither the above two decisions, nor the others which have been cited, would justify an assumption that a part which is incorporated in the main article could be notionally removed, merely on the ground that it performs an accessory and not an essential function.
88. The above detailed discussion was undertaken with reference to what was called the general question raised in this case. In the light of the discussion, it appears to me that in principle it would not be open to a manufacturer to market a particular article and yet seek the exclusion from its assessable value of certain "parts" of the article as cleared and marketed, on the ground that they are not incorporated in his main article or are not essential to its operation.
89. On this finding alone the present appeal should fail. However, even if a different view were to be taken as regards the general question, it appears to me that the examination of the restricted question, that is, whether the TOP was an accessory or not as interpreted in judicial decisions, would lead to the same result.
90. There is no doubt that the function of the TOP is to protect the motor in the event of excessive temperatures and currents in the winding. The literature of the manufacturers, M/s Texas Instruments Incorporated, shows that the TOP is not a simple safety device like a fuse. According to the leaflet, "as a result, you can choose a protector combination that will allow the motor to be safely rated to its maximum capacity.... They (the TOPs) may also be used in commercial motors which must function in destructive environments such as chemicals, fuels and water".
91. It is clear from the above that by incorporating a TOP in the motor, its range of functioning is improved. Thus, instead of keeping a prudent margin of safety in giving the rating of a motor, the use of a properly chosen protector combination will allow the motor to be safely rated to its maximum capacity. The TOP not merely comes into play when the motor becomes overloaded but gives it a higher rating in its normal operation.
92. In order to play its part, the TOP has to be carefully selected or designed with specific reference to the conditions under which the particular motor is to operate. It is instructive to read the information which has to be given when ordering a sample :- 2. Maximum winding temperature allowed, at overload and stalled rotor conditions.
93. Most important of all, the TOPs have to be wired in series with, and mounted on, the motor windings. They are not detachable, or usable at will or according to need, like the wheel weights or hour meter of the tractor. Nor are they like the column assembly or discharge head assembly of a pump, which are distinct from the pump connected to them, and where one can say "This is where the pump ends and the accessory begins." If someone were to detach the TOP, the main circuit would be broken and the rotor or stator would not function at all. There is no point of time at which it could be said that the manufacture of the rotor or stator is complete, but the TOP is not yet in position. For those reasons, there is no analogy between the TOP and its function in this case, and the "accessories" in question in the case of International Tractor Co., or Jyoti Ltd., or Mahindra and Mahindra Ltd. In these circumstances the TOP cannot be treated as a mere accessory but is clearly an integral and important part of the motor.
94. Thus, the answers to both the general question and the restricted question lead to the same conclusion, namely that the Thermal Overload Protector should be considered as part of the rotor or stator and that its value should be included in the assessable value of the rotor or stator, as the case may be.
95. The case should now go back to the Members of the original Bench for disposal in the light of this order.
96. In accordance with the majority view, the value of the thermal over load protector shall be included in the assessable value of the rotor/ stator.