Customs, Excise and Gold Tribunal - Delhi
Kirloskar Cummins Ltd. vs Collector Of Customs on 3 June, 1985
Equivalent citations: 1985(5)ECR1904(TRI.-DELHI), 1985(22)ELT74(TRI-DEL)
ORDER K. Prakesh Anand, Member (T)
1. These matters were applications for revision, filed before the Government of India under Section 131 of the Customs Act, against Orders-in Appeal No. S/49-1401/77 R, dated 23-3-1978 and No. S/49-911/78 R, dated 14-7-1978, passed by the Appellate Collector of Customs, Bombay. They have since been transferred and are now being dealt with as appeals before the Tribunal. Since both the appeals are based on similar facts, they are being disposed of through this single order. Shri S.C. Rohatgi, Deptt. Representative, has appeared on behalf of the respondents. Appellants have filed only written submissions.
2. The appellants have imported diesel engine components, which have been classified as motor vehicle parts chargeable to countervailing duty under Item 34A of Central Excise Tariff. Appellants have claimed re-assessment of the goods on the ground that they cannot be assessed as motor vehicle parts and that, therefore, countervailing duty could not be charged in respect of them.
3. The case of the appellants is that what they have imported are I.C. Engine components. For purposes of payment of Customs Duty, they have been accepted as machinery parts and not as motor vehicle parts. Appellants have stated that they are, in fact, holding industrial licence for manufacture of I.C. Engines only and not for motor vehicles or motor vehicle parts. They have also urged that their products are predominantly stationary/industrial type of engines.
4. It is pointed out by the appellants that the question of correct classification of their own products, both for Excise Duty and Countervailing Duty, has come up for a decision before the Tribunal a number of times before and the following orders have been passed already in their favour :
(1) Order No. B-59/83 (ECR April 1983 355D). (2) Order No. 972/1983-B dated 8-12-1983. (3) Order No. 750/1984-B (ECR 1984 2716). (4) Order No. 67/85-B dated 31-1-1985.
5. Appellants have also cited the order passed by the Bombay High Court in their Appeal 414/1979 in Miscellaneous Petition No. 320 of 1973, in which it was held that the type of diesel engines assembled or manufactured by the appellants, on the basis of predominance of use, were rightly to be treated as of stationary type and not vehicular type warranting classification as motor vehicle parts.
6. Our attention has specially been drawn by the appellants to the decision of the Supreme Court in the case of Annapurna Carbon Industry Ltd. v. State of Andhra Pradesh (AIR 1976 SC 1418), in which it was held that the deciding factor in the matter of classification would be the predominant use or ordinary purpose to which a product is put and that it is not enough to show that the Article can be put to other uses also. It was held that the general or predominant use would determine the category in which an Article should fall.
7. On behalf of the respondents, Shri Rohatgi, learned Departmental Representative, has at the very outset admitted that there are a number of orders of the Tribunal, which are against the Department. He also volunteered the information that in this matter the department had gone before the Supreme Court and that their appeal had failed. In this background, we had put it to the learned DR that there was no point in his contesting the appeal. However, he has insisted on submitting certain arguments which he says are in the nature of new grounds proposed to be raised by the department. These arguments are briefly summarised in the following paragraph.
8. It is submitted that the Bombay High Court judgment, in the appellants' own case (1980 E.L.T 557), did not deal with the question of countervailing duty. It is urged that the principles of classification under the Customs Tariff Act have no nexus with the principles of classification under the Excise Tariff. In this connection, reference has been made to the decision of the Supreme Court in the case of J.K. Steel Works v. Union of India, in which it was held that entries in the Indian Customs Tariff 1934 could not throw any light on the interpretation of entries to the Schedule of the Excise Act. It is also stated, in the case of Lucas TVS Ltd., Madras v. Union of India (1978 E.L.T. J 711), it was decided by the High Court of Madras that liability to pay duty under the Excise is dependent on considerations arising out of the provisions of the Excise Act and that classification of an Article for purposes of levying of Customs Duty could not prevail for purposes of determining liabilty to Central Excise Duty. It is also submitted that as per the decision of the Supreme Court in the Dunlop India Ltd. case (1977 AIR S.C. 597), the end use of a product is not relevant unless this itself is expressly referred to in the relevant Tariff Entry. It is also submitted that the Customs Tariff has undergone a radical change with the adoption of the Customs Tariff Act of 1975, with effect from 2nd August, 1976. The decision of the Bombay High Court in the case of the appellants, being prior to this date, could not be considered as a precedent for deciding classification in respect of goods subsequently imported. Special emphasis has been laid on the fact that, in so far as countervailing duty is concerned, the competition is not between two specific entries relating to specific commodity Tariff Items but a specific commodity Tariff Item, namely Central Excise Tariff Item 34A, relating to parts of motor vehicle, and a residuary Tariff Entry, Item 68. In this connection, the department has cited the decision in the case of Dunlop India Ltd. v. Union of India (AIR 1977 S.C. 597), in which it was held that when an Article is, by all standards, classifiable under a specific item in the Tariff Schedule, it would be against the very principle of classification to deny the parentage and to consign it to an orphanage of a residuary item.
9. We have very carefully considered the facts of the case and the submissions made before us. The department has not disputed that there are already a number of decisions of this Tribunal, which are against them. They have sought, however, to advance, what they call new grounds, which have been discussed above. We have carefully considered these submissions and, we find, they are, in fact, not new grounds for our consideration. Some case law has been cited but it appears that the import of the findings in the cases cited has either been missed or mis-interpreted. For instance, it is stated that in the case of Tata Yodogwa Ltd. v. Assistant Collector of Central Excise, Jamshedpur and Ors. [1983 E.L.T. 17 (Pat.)], it has been held by the Patna High Court that if the goods find specific mention under a particular Tariff Item, then they must be classified under that Tariff Item and that the ultimate use of the goods cannot be taken note of for the purpose of classification. This observation cannot come in support of the respondents in view of the fact that it cannot be their case that the goods which are sought to be classified are specifically mentioned in Tariff Item 34A of the Central Excise Tariff. In fact the whole difficulty in regard to classification arises because of the broad description of the Tariff Item relating to "parts of motor vehicles" and it, therefore, becomes necessary to decide whether the goods in question are parts of motor vehicles or not. It is in this connection that in matters of doubt or dispute, it becomes relevant to consider the use to which the goods are put.
10. In view of what is stated above, it cannot also be claimed by the department that, in terms of the aforementioned decision of the Supreme Court, this is a case where the Article to be classified "is, by all standards, classifiable under a specific item in the Tariff Schedule and that, therefore, it would be against the very principle of classification to deny it the parentage and consign it to an orphanage of a residuary item". Considering the very nature of the product in question, namely stationary diesel engines and the predominant use of the parts imported, it is not possible to maintain that the goods are classifiable as motor vehicle parts.
11. Shri Rohatgi had also referred to the decision of the Bombay High Court in the case of Sainet Private Ltd. and Anr. v. Union of India and Anr., (1984 (18) E.L.T. 141), in which it was held that Item 68 of the Central Excise Tariff "is a house of the last resort". For the reasons that we have discussed above, this is a case where, in fact, recourse to the "house of last resort" becomes necessary because the specifically worded entries do not provide cover to the articles in question.
12. The department has also cited the decision of the Madras High Court in the Case of Lucas TVS Ltd. v. Union of India (1978 E.L.T. J 711), in which it was held that the schedules to the Customs Tariff Act and those appended to the Excise Act do not have the same basis of classification and that provisions of Section 2 and 2(a) of the Tariff Act have to be read without reference to the other and also that a classification need not necessarily be good for purposes of both the sections. This is not a principle on which there is any scope for doubt or dispute. We concede that classification under Customs and Central Excise Tariff has to be determined independently of each other. However, this does not help the department's case since the decisions as regards liability to countervailing duty in earlier decisions of the Tribunal have been taken on the basis of Central Excise Tariff itself and not on the basis of Customs classification.
13. Since the department has relied so heavily on the decision of the Supreme Court in the case of Dunlop India Ltd. (AIR 1977 S.C. 597), we should like to point out the emphasis in this decision of the Supreme Court is on being guided by the understanding of people in trade and commerce in the matter of interpretation of fiscal statutes. This would fully support reference to end use and understanding of the trade.
14. We may here refer again to the decision of the Supreme Court in the case of Annapurna Carbon Industry Ltd. v. State of Andhra Pradesh (AIR 1976 S.C. 1418), cited by the appellants in their favour, in which it was held that the deciding factor in such cases would be the predominant or ordinary purpose or use to which the product to be classified is to be put.
15. In view of the foregoing findings and, with due deference to earlier decisions of the Tribunal, with which we fully concur, these appeals are allowed with consequential relief to the appellants.
S.D. Jha, Member (J)
16. I have given my most anxious and careful thought to the order proposed by brother Anand and concurred in by brother Rekhi. I have not been able to reconcile myself into agreeing with the proposed order. I record my reasons for doing so.
17. In our earliest order B-59/83, taking into consideration Bombay High Court judgment in appellants' own case-1980 E.L.T. 557(Bom)-we held that it would not be correct to class an engine the predominant use of which is for non-vehicular application as of vehicular type. By the same logic, components of such an engine can also not be called parts of motor vehicle. With this reasoning the components imported for the manufacture of non-vehicular type industrial engines were held not chargeable to CV duty as applicable to motor vehicle parts. It would be seen that in coming to a decision we were guided by the classification for basic customs duty under ICT of engines as machinery not otherwise specified under Item 72(a) of the erstwhile Indian Customs Tariff on the basis of principal use. The next order 972/83-B which also related to a period when erstwhile ICT was in force followed the earlier decision in Order No. 59/83-B and for failure of the D.R. to distinguish the decision given by the Tribunal. The same is true of Order No. 750/84-B.
18. As for the appellants' reliance on principal or predominant use being the basis of classification and reliance on Annapurna Carbon Industries v. State of Andhra Pradesh-AIR 1976 SC 1418, I have carefully gone through the decision. The decision related to assessment of Arc carbons known as Cinema Arc carbons under Entry No. 4 of the 1st Schedule of the Andhra Pradesh General Sales Tax Act 1957. The main discussion is to be found in paras 7 to 11 of the decision. The relevant entry fell in that part of Schedule in which description of goods to be taxed was indicated by the expression 'required for use therewith'. Para 8 of the decision would show that the first entry in the Schedule excluded certain other articles by using the words 'not being such articles as are ordinarily also used for other purposes than as parts and accessories of motor vehicles'. It appears that the finding with reference to Entry No. 4 dealing with goods in question as to the deciding factor being predominant or ordinary purpose or use was given with reference to the expressions used in the Act as also the fact that the goods in question were known as Cinema Arc Carbon in the market and the decision may not be helpful for the present dispute.
19. After coming into force of Customs Tariff Act, 1975 the basis of classification for basic customs duty has changed. The Bombay High Court decision in appellant's own case-1980 E.L.T. 557 (Bom.) would not therefore help the appellants. As already said, in the said decision, diesel dengines were classified as 'machinery not otherwise specified' on the basis of principal or predominant use by the importer. Now in the new Tariff we have Heading No. 84.06 for all Internal Combustion Piston engines irrespective of their end-use-whether they are for vehicular or non-vehicular use. With this change in Tariff the Bombay High Court decision with reference to import after the new tariff came into force would have no precedential value.
20. In the present appeal the goods imported are 'bearings and bush' and have been for the purpose of basic customs duty classified under Heading 84.63 of of CTA. This classification is not disputed by the appellants. Accepting the appellants' own reasoning that the classification for the purpose of basic customs duty and countervailing duty should be in consonance with one another, it has to be seen whether bearings fall for classification under Heading 34-A as an item specified therein or under residuary tariff item 68. There is no dispute that the thin walled bearings specified in Tariff Item 34A is the same product as the goods imported. Now, should the predominant use of the product by a particular importer be taken into consideration for classifying the product under Tariff Item 34-A. From the order of the Appellate Collector it is noticed that appellants admitted that component parts imported by them were fitted into diesel engines which sometimes have vehicular application. The Internal combustion engines manufactured by the appellants are interchangeable with motor-vehicle engines. The Collector went on to say that the purpose and application of the diesel engines manufactured by the appellants with component parts imported by them is well-known, i.e. they have vehicular application. It is not shown or suggested that use of diesel engines for vehicular application is stray or eccentric use. One should therefore presume that it could be regular use. If one wanted a regular use of the Internal Combustion engine in a motor vehicle is possible. In view of this admission and the inference I propose to draw I will not consider it necessary for the Customs authorities to go and enquire as to what is the preponderant use of the bearings. Keeping this in view, bearings being specified in Tariff Item 34, it has by all standards a reasonable claim to be classified under this Item and as laid down in AIR 1977 SC 597 it will be against the very principle of classification to deny it the parentage and consign it to an orphanage or residuary Clause, i.e. Tariff Item 68, on the basis that the Internal Combustion engines manufactured by the appellants are predominantly for non-vehicular application. I would therefore hold that classification of bearings and bush under Tariff Item 34-A by the lower authorities is correct and calls for no interference and I would dismiss the appeals.
Order : In accordance with decision of majority the appeals are allowed with consequential relief to the appellants.