Customs, Excise and Gold Tribunal - Delhi
Tractors And Farm Equipments Ltd. And ... vs Collector Of Customs And Ors. on 24 March, 1986
Equivalent citations: 1986(25)ELT235(TRI-DEL)
ORDER K.S. Venkataramani, Member (T)
1. The Collector of -Customs, Madras has filed these appeals against the Order-in-Appeal Nos. C3/1418 A1 to A38/1984 and C3/821/84 dated 25-7-85 passed by the Collector of Customs (Appeals) Madras, admitting the appeal of the respondents in this case, M/s. Tractors & Farm Equipments Ltd. (TAFE) Madras. The firm had also come up in appeal separately as appellant against an earlier order of the Collector (Appeals) dated 28-12-82 wherein the Collector (Appeals) had rejected their appeal. As the matters are identical, all these appeals were taken together for disposal. The facts of the case are that the appellants manufacture Agricultural Tractors. They imported what has been described in their invoice and the relative Bills of Entry as Components/Sub-assemblies for agricultural tractors. These were assessed to duty by the Custom House extending the benefit of Customs Notification 200/79. This Notification exempts components required for manufacture, inter alia, of Tractors from so much of the duty as in excess of 25% subject to certain conditions. The Custom House also was doubtful initially whether the items could be imported under OGL, if considered as having the essential characteristics of complete engine because diesel engines are covered under Serial No. 407 of Appendix and not allowed for import under OGL. A clarification was sought from the DGTD by the Custom House who opined that in view of a large number of addition of parts involved, the goods cannot be held as having the essential character of complete engine, hence the Customs allowed clearance under OGL as components. M/o. TAKE preferred a refund claim on the ground that the goods are classifiable as incomplete engine having essential character of complete engine and as such, eligible for concessional assessment under Notification 341/76. This Notification exempted goods specified therein against specified heading of the CIA when imported from UAR or Yugoslavia of 30% from standard rate of duty read with any notification issued in respect of such goods under Section 25 of the Customs Act on condition that the country of origin of the goods is satisfactorily established. In this Notification, Serial No. 60 covers internal combustion piston engine under Heading 84.06-CTA and Serial No. 120 covers parts of diesel engine under Heading 84.08-CTA. M/s. TAFE claimed that, the goods will be covered by Serial No.60 and hence, the rate of duty in their case should be 12-1/2% instead of 25% as assessed under Notification 200/79. The ground for the claim was thus that as per Rule 2A of the Rules for the Interpretation of Customs Tariff, the material imported having the essential characteristics of complete engine, the exemption should be extended to them. Their claim was, however, rejected based on the DGTD's advice already given that the material cannot be treated as having the essential characteristics of complete engine. They filed appeals against this rejection before the Collector (Appeals) and in his order dated 25.7.85 dealing with the appeals No. A1 to A38, the Collector (Appeals) held that the lower authority's decision had been based mainly on the DGID's advice that the material as imported are incomplete and are not functional without the addition of indigenous components. The Collector observed that the DGTD's opinion based on whether the item was functional was not relevant to determination of essential character of an incomplete article with reference to Rule 2(a) of the Rules of Interpretation of the Customs Import Tariff. He referred to the CCCN Explanatory Notes regarding incomplete articles which showed that the point where they become functional was irrelevant. But yet they could be classified with reference to Rule 2(a) of the abovesaid Rules as incomplete articles for purposes of Customs duty. On examination of the list of items imported and photographs of the goods in the imported condition, the Collector (Appeals) was satisfied that what has been imported is a complete engine in un-assembled or dis-assembled condition to which Rule 2(a) can be applicable. According to this Rule, reference in Tariff Heading 8/4.06 to internal combustion piston engine includes a reference to the imported goods. Therefore, he held the claim of the firm to be admissible. He further observed that even if they are considered as component parts of diesel engines, they would still be eligible for the concession under Notification 341/76. He referred to Serial No. 120 of the Table to the Notification 341/76 which allowed the same concessional duty to parts of diesel engine but, however, indicated the Heading as 84.08 which covers other engines and motors. There was an amendment to the Notification 341/76 by Notification 17-Cus., dated 16-2-82 by which Tariff Heading 84.08 against Serial No. 120 was deleted. The Collector (Appeals) held that this showed that rectification was made by the amending notification making parts of I.C. piston engines also eligible for concession. Hence, by giving a retrospective effect of this rectification of an error, according to the Appellate Order, the goods would still be eligible for the concession under Notification 341/76.
2. In the other appeal where M/s. TAFE are the appellants against the order of the Collector (Appeals) dated 28-12-82, the Collector (Appeals) had held that the description in the notification is specific for internal combustion piston engines which does not include parts and that on strict interpretation of the notification, only complete engines will be eligible for exemption.
3. Appearing for the department, Shri J. Gopinath, the learned SDR argued that according to their own declaration in the Bill of Entry, which has been a truthful declaration as per Section 46 of the Customs Act, the goods have been described as components and sub-assemblies and as engine components. According to the Explanatory Notes in the CCCN, the parts that are included under 84.06 are listed in the Notes specifically and according to Section XVI of Customs Tariff Act, Section Note 2(a), parts of machines are to be classified under their respective headings if they are described in the Headings of Chapter 84 and 85 and in this case, Chapter Heading 84.63, 84.10(3) and 84.06 would cover several of the parts imported specifically. Further, according to para 201 of the ITC Policy 1980-81, Rules for Interpretation of the Customs Tariff will apply to clearance of consignments imported under the Policy. It has been found by the Custom House that the goods in the form in which they were imported did not have the essential characteristics of diesel engine. Further, they have themselves in their letter dated 29-4-81 to the Collector of Customs, Madras stated that by no stretch of imagination can the same item be complete engine for the purposes of Customs Tariff. The learned SDR drew attention to the case law reported in 1983 ELT 34 (Madras) werein the Madras High Court had considered a Supreme Court judgement AIR 1970 SC 755 and it was held that it is well established that in a taxing statute, there is no room for any intendment that regard should be had to the clear meaning of the words. He also cited the Supreme Court judgment in the case of Khandelwal Metal Engg. Works (1985 ELT SC 282) in this connection. M/s. TAFE, according to the learned SDR cannot give one description of their goods for ITC purposes and another for Customs purposes. Therefore, the Orders in appeal A1-A38 dated 27-5-85 of the Collector (Appeals) should be set aside and the order dated 28-12-82 of the Collector (Appeals) should be sustained.
4. Appearing for M/s. TAFE, Shri Rama Subramaniam, the learned counsel contended that matters relating to import licence under the ITC Policy are different from Customs classification issues. He referred to the case law 1981 ELT 235 Lokesh Chemicals' case laying down that the Customs authorities and the licensing authorities are operating in different fields. The counsel stated that they had been importing the goods from July 79 to March 81 and all along, they had claimed concession under Notification 341/76 which had been denied and they had paid duty under protest. He pointed out that even the Show Cause Notice refers to the goods imported as having essential character of an engine. They have imported 9 specified parts in assembled condition described as engine assemblies and in the light of Rule 2(a) of the Rules for Interpretation of Customs Tariff, the imparted goods are complete engines but having the essential characteristics thereof. Evidence has also been led before the Appellate Collector in support of this. The goods as imported have assumed the character of a complete engine. The counsel referred to the Treaty of 1967 between the Govt. of India, UAR and Yougoslavia and stated that Notification 69 dated 15-6-68 was issued in pursuance of this Treaty. With the change over to Customs Tariff Act 1975, Notification 341/76 was issued to continue the concessions extended under the Treaty but, according to the counsel, an error crept in Serial No. 120 wherein the CTA Heading 84.08 was cited in the Notification. Thereby he argued that a concession which was available to the firm under the old Tariff was denied. The amendment brought out by Notification 17/82 hence by way of rectification only and being of a clarificatory nature, according to the counsel, should have retrospective effect because the exemption was in pursuance of the Treaty obligations. Therefore, the counsel argued that by application of Interpretative Rule 2(a), the goods imported be having essential characteristics of diesel engine would be covered by Serial No. 60 or in the alternative as component parts. They would be eligible for the concession by the clarificatory amendment of the above-said notification brought about by Notification 17/82. The view of the Collector (Appeals) in the Orders No. A1 to A38 were valid and should be upheld and the order of the Collector (Appeals) dated 28-12-82 should be set aside. In reply, Shri J. Gopinath pointed out that even on a perusal of the sets of items imported, it is found that the list of components/sub-assemblies were not in such members as would make complete sets. He referred to the two certificates appearing in the list of components of M/s. TAFE, endorsed by the DGTD dated 12-7-79 and 13-12-79. On a perusal of these two certificates, it was evident that item of 3 Cylinder Fuel Injection Pump with Feed Pump appearing in the list dated 13-12-79 was not there in the earlier list and the numbers were only 1000 as against 2000 of other items in the list and numbers 1120 in the earlier list. He further pointed out that the argument that by change over to the CTA and issue of the new Notification, the-concession previously available was denied is not acceptable. The Notification 341/76 specified at S.No. 60-CTA Heading 84.06 which covers all I.C. engines whereas the corresponding entries under the old ICT were not exactly the same because 72(a) ICT covered industrial type, stationary type and Tractor type engines; 75(2) ICT covered engines used in motor cycles/ scooters and 76 ICT covered Air Craft engines. Therefore, the concession extended was not a blanket one for all engines earlier too. There was also no call for giving retrospective effect to the exemption notification unless a notification expressly contains such a provision.
5. We have given careful consideration to the submissions made by the learned SDR and the learned counsel. In this case the Customs authority had initially issued Show Cause Notice to M/s. TAFE considering that the goods imported had the essential character of diesel engines and as such could not be imported under OGL. However, on obtaining a clarification from the DGTD that the goods imported cannot be so considered, the proceedings were dropped. It is also clear that para 199(3) of the Import Policy 1980-81 laid down that clarification in such matters would be given by DGTD as the competent authority. Hence the Customs House had correctly relied upon it in dropping the proceedings. The argument of M/s. TAFE is that Rules of Interpretation of the Customs Tariff Schedule will apply to clearance of goods under the Import Policy as per para 201 of the Policy. But a reading of that para, which begins with "Save as above", would show that where in the earlier paras authorities competent to give clarification had been specified, policy interpretation was not dependent on the interpretative Rules of the Customs Tariff Schedule, and as per para 199(3), DGTD was the competent authority for giving clarification in respect of the goods imported. Besides, the description of the goods in the Bills of Entry and in the invoice was also as components/sub-assemblies (engine components) for agricultural tractors. M/s. TAFE claim exemption under Notification 341/76 on the ground that the goods, having essential character of diesel engines would be covered by Serial No. 60, "Internal Combustion Piston Engines" appearing in the Notification. Reliance is placed on Rule 2(a) of the Rules for Interpretation of CTA and Explanatory Notes to the Customs Cooperation Council Nomenclature. In this context it has to be borne in mind that primarily in this case, interpretation of an entry In an exemption notification issued under Section 25 of the Customs Act is involved. As has been observed by the Hon'ble Delhi High Court in the case of Khandelwal Metals & Engg. v. Union of India 1983 ELT 292 (Del) the rate of duty mentioned in the Customs Tariff Act has to be read along with the power of exemption given under Section 25 of the Customs Act and that to determine the classification of an article, the Court observed, one must necessarily refer to the Rules for interpretation of the Schedule and Chapter Notes and Rules of classification in the Section Notes. It is also relevant in this connection to refer to the observation of the Larger Bench of this Tribunal in the case of Saurashtra Chemicals v. Collector of Customs, Bombay in Orders Nos. 276 and 277/85-D dated 26-7-85, 1986 ELT 283 (Tribunal) wherein it has been observed that relevant Headings in the tariff have to be interpreted in the light of the Section Notes and Chapter Notes and that the Section Notes and Chapter Notes have an overriding force on the respective Headings. The Section Notes to Section XVI have also to be read along with the interpretative Rules, and Section Notes 2(a) and 2(b) cover classification of components, and it will then be seen on such a logical reading of the Rules and the Section Notes that the claim made by M/s. TAFE for the exemption stops short with the insistence on the application of the Interpretative Rules only, ignoring the applicability and coverage of the Section Notes in deciding the classification and thereby the eligibility to exemption. Hence we are unable to accept the argument. As for the contention that Notification 17/82 was clarificatory and hence should be given retrospective effect, it has to be pointed out that such an interpretation cannot be valid unless the Notification itself explicitly provides for such an application, in the light of the well settled law that Notification would have only prospective application. Regarding further argument that the exemption was in implementation of the trade Expansion and Economic Cooperation Agreement which had continued from 1969 under the old Indian Customs Tariff, and could not be denied under the CTA, it has been shown that the coverage of IC Engines under 72(a), 75 and 76 ICT and parts thereof under 72(3) and 75(10) ICT was not exactly similar to the coverage under Heading 84.06 CTA. In the result, the orders in appeal Nos. C3/1418A1-A38/84 and C3/821/84 dated 25.7.85 are set aside and the order in appeal No. 489/1982 dated 28-12-82 is upheld. The appeals of the Collector are allowed and the appeal filed by M/s. TAEE is rejected.