Customs, Excise and Gold Tribunal - Bangalore
Commissioner Of C. Ex. vs Weld Fuse Pvt. Ltd. on 27 October, 2006
ORDER S.L. Peeran, Member (J)
1. The Revenue is aggrieved with the Order of the Commissioner (A) in No. 19/2004-C.E., dated 25-6-2004 dismissing the Revenue appeal and affirming Order-in-Original passed by the Deputy Commissioner in V/73/7/133/97-Class, dated 29-3-2000. Both the authorities have decided the issue pertaining to classification of parts of Poultry Keeping Machinery under Chapter Sub-Heading No. 8436 of CET. Revenue is claiming the classification under Heading 7314 of CET as "Articles of Iron and Steel wire, such as welded mesh for commercial purpose and construction purpose in the form of sheets and rolls". Revenue contend that the item cannot be treated as falling under Chapter Sub-Heading No. 8436.00 of CET attracting nil rate of duty under the description "Other Agriculture, Horticulture, Forestry, Poultry Keeping Machinery including Germination Plate fitted with mechanical part of rearing and laying unit or batteries such as tops, bottoms, partitions made from galvanized and stainless steel wire".
2. We have heard the learned JDR who relied on the grounds made in the appeal memo. The appeal memo contests the classification adopted by both the authorities under the Chapter Sub-Heading 8436.00 and granting the benefit of exemption notification.
3. Revenue seeks the classification under Chapter Heading No. 7314 as "Articles of Iron and Steel wire, such as welded mesh for commercial purpose and construction purpose in the form of sheets and rolls". They have not given any reasons for classification under this heading. There is no evidence of market, trade and commercial understanding with regard to the item to be treated as falling under Chapter Heading No. 7314.00.
4. The learned Counsel files detailed reply and relies on large number of judgments to contend that the item has been properly classified under Poultry Keeping Machinery (Equipment). The HSN note also supports their plea. He also refers to the tribunal ruling rendered in the case of CC, Madras v. Chowdary Enterprises by Final Order No. 2611/96, dated 10-12-1996 .
5. The learned JDR contended that the item is a mere poultry cages of Iron and Steel and hence, it has to be classified under Chapter Heading No. 73. He relies on Tribunal ruling rendered in the case of Poultek Engineers v. CCE, Coimbatore . The learned Counsel submits that this judgment is clearly distinguishable, as the item is not an iron cage as in the case of Poultek Engineers (supra) but it is a poultry equipment for the purpose which is described in the HSN Notes. The learned Counsel submits that in the trade, the item is understood as poultry keeping machinery and not as an article of iron and steel.
6. On a careful consideration, we notice that both the authorities have accepted the classification under Chapter Sub-Heading No. 8436 on the ground that the item is not a mere iron cages for classifying it as articles of iron and steel. The finding recorded by the Commissioner is produced herein below.
I have gone through the case records and submissions carefully. The dispute is about the classification of the impugned goods and there is no dispute about the fact that the goods are solely and principally meant for the manufacture of cages in "Poultry keeping machinery". The reasons stated in the grounds of appeal to set aside the classification under CETH 8436.00 are that the goods are not figuring in the HSN notes for the said heading and that it was decided by the Tribunal in the cases of M/s. Poultek Engineers reported in 2000 (117) E.L.T. 348 and in M/s. Anup Engg. reported in 1997 (95) E.L.T. 110 that the goods merit classification under chapter 73 as the constituent material is iron and steel only.
M/s. Anup Engg. case reported above is not relevant to the impugned goods as this is a dispute about classification of a specific part and various parameters exclusive to the particular part have to be discussed before arriving at the classification and an order cannot be stated to be relevant unless the specific item is covered in the said order and in the case of M/s. Poultek Engineers. It is seen that the party M/s. Poultek Engg. for some reason could not contest and the Tribunal decided the issue ex partc without any averments having been heard from the party in that case. The Tribunal in that case has taken the decision to uphold the adjudicating authorities decision without going into the details of the case or the merits of the case that have been presented in the instant case and based their order on CBEC Circular No. 36/CX/4, dated 31-8-90, in which the board has issued a clarification that equipment without any mechanical function are not considered as poultry keeping machinery and are rightly classifiable according to the constituent material. This circular is against the Section note No. 5 of the Section XVI of the Central Excise Tariff Act, 1985 wherein equipment is specifically included in the definition as machine and therefore cannot be considered as a legal circular. Moreover, when the battery of cages itself is figuring in the HSN notes as includible in the heading CETH 8436 the intention of the circular is confusing and as the circular is vague, it is not binding to decide on the classification and hence, the classification of the impugned goods should be decided on merits considering the properties of the impugned goods, the relevant tariff heading and the HSN notes guiding the tariff entry. The Supreme Courts decision in Bengal Iron Corporation v. Commercial Tax Officer wherein it was held that "So far as clarifications/circulars issued by the Central Government and /or State Government are concerned, they represent merely their understanding of the statutory provisions. They are not binding upon the Courts. It is true that those clarifications and circulars were communicated to the concerned dealers but even so nothing prevents the State from recovering the tax, if in truth such tax was leviable according to law. There can be no estoppel against the statute. The understanding of the Government, whether in favour or against the assessee, is nothing more than its understanding and opinion. It is doubtful whether such clarifications, and circulars bind the quasi-judicial functioning of the authorities under the Act. While acting in quasi-judicial capacity, they are bound by law and not by any administrative instructions, opinions, clarifications or circulars. Law is what is declared by this Court and the High Court - to wit, it is for this Court and the High Court to declare what does a particular provision of statute say, and not for the executive. Of course, the Parliament/Legislature never speaks or explains what does a provision enacted by it mean" is particularly applicable in this case considering that the opinion expressed Circular No. 36/CX/4, dated 31-8-90 is clearly against the relevant section notes of the Central Excise Tariff Act, 1985.
The appellant's contention that the goods are classifiable as articles of iron and steel as they are made of iron and steel only, does not have any bearing on the classification of the impugned goods as the general provision (B) to the Section XVI of the HSN clearly mentions that the goods of the Section XVI may be of any material and in majority of base metal. It is well settled law and the spirit of the Central Excise Tariff Act, 1985 that constituent material is not the only deciding factor to classify any machinery or part. In view of Note 2(b) to Section XVI of the Tariff, parts, if suitable for use solely or principally with a particular kind of machine, are to be classified with the machine of that kind. The exception to the Note is that parts of general use will not be covered by Section XVI, which covers Chapters 84 and 85. No evidence has been adduced by the Department to show that the impugned goods are parts of general use.
The Tariff Heading CETH 8436 reads as follows: " Other agricultural, horticultural, forestry, poultry keeping or bee-keeping machinery, including germination plant fitted with mechanical or thermal equipment; poultry incubators or brooders" and the HSN explanation to CHSH 8436 given at page No. 1318-HSN states that the term "poultry incubators or brooders" with relevance to the impugned goods includes among other equipment "Rearing and laying units or "batteries", large installations equipped with automatic devices for filling the feeding troughs, cleaning the floors and collecting the eggs".
The dictionary meaning of the word 'battery' relevant to poultry industry is "series of cages for the intensive breeding and rearing of poultry or cattle" and hence the word battery includes the impugned goods, which are parts for making cages. In fact, the entire battery is made up only of the impugned goods. The parts of the said batteries are also covered in the said headings subject to general provisions relating to classification of parts under the General explanatory notes to Section XVI as per the HSN notes on 'parts' of the machinery covered under the heading CHSH 8436-00, in the general provisions relating to Section XVI also these parts are not excluded and in fact it is mentioned in the general provisions to Section XVI that the section and the chapters cover the parts thereof also unless they fall under the exclusions and that the goods of these section may be of any material. As it is not disputed that the goods are not items of general use and it is agreed that the goods are used only for making cages which are parts of battery, which is a Poultry keeping machinery, I do not find any other basis as to how the goods can be classified under any other heading other than CHSH 8436.00. The HSN explanation has clearly included the rearing units and laying units or the batteries of poultry cages in the CHSH 8436.00. The impugned goods are therefore specifically included in the CHSH 8436 and hence the questions of attempting to classify the item in any other heading should not arise. The ratio of the Hon'ble apex courts judgment in the case of Dunlop India Ltd. & Madras Rubber Factory Ltd. v. Union of India wherein 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 it the parentage and consign its residuary item" is relevant here.
I observe that the impugned goods are specially designed for the making of cages to form the battery in poultry keeping and the goods cannot be marketed for any other use and are called in commercial parlance as poultry keeping machinery parts only and no evidence has been placed on record to prove otherwise by the revenue. Hence, in view of the Hon'ble Supreme court judgment in the case of G.S. Auto International Ltd. v. Collector of C. Ex., Chandigarh wherein it was held that "It needs to be ascertained as to how the goods in question are referred to in the market by those who deal with them, be it for the purposes of selling, purchasing or otherwise", the classification under the said CHSH 8436 appears to be correct.
The function of the impugned goods is only for poultry keeping, meaning rearing, feeding, cleaning, egg collecting and other functions, which are fulfilled in combination with other components such as feeders and egg collectors and hence, in accordance with the section notes 4 to Section XVI of the Central Excise Tariff Act, 1985 also, the impugned goods merit classification under CHSH 8436.
To sum up, the goods are parts of batteries of bird cages used in poultry' farms. The batteries are covered under CHSH 8436.00 by virtue of the HSN notes for the chapter and the parts of the battery of cages are covered in the said heading in terms of the HSN notes with regard to parts of machinery falling under CHSH 8436 and general provisions to Section XVI in the HSN. In view of the above discussions about the commercial sense, trade parlance and marketability of the goods, the functionality which can only be understood as Poultry keeping and the explanatory notes to CETH 8436 given in the HSN as detailed above, and ratio of the various case laws cited, I am of the view that the impugned goods were rightly classified under CHSH 8436 of the Central Excise Tariff Act, 1985.
ORDER I reject the appeal filed by the department.
6.1 The Original Authority also decided the issue in assessee's favour. We are of the considered opinion that the Revenue has failed to establish that the poultry equipment can be treated as articles of iron and steel. The articles have specific use as poultry equipment and the item is understood in the trade as well as in the commercial parlance as poultry equipment which has a specific description under Chapter Sub-Heading No. 8436 of the Central Excise Tariff. The judgment of Poultek Engineers (supra) refers to cages which does have any specific function. There is no reference to the HSN notes and any other evidence of market understanding in this cited reference. Therefore, the judgment of Poultek Engineers (supra) is clearly distinguishable. The contention of the appellant that the test of marketability is primary for purpose of classification is supported by the following Supreme Court judgments besides several other Tribunal rulings relied by them.
(i) Bhor Industries Ltd. v. CCE .
(ii) CCE v. Ambalal Sarabhai Enterprises .
(iii) G.S. Auto International Ltd. v. CCE, Chandigarh .
(iv) Dunlop India Ltd. & Madras Rubber Factory Ltd. .
(v) CCE v. Calcutta Steel Industries and Ors. .
6.2 The impugned orders are detailed ones and are required to be upheld. Furthermore, we notice that the Madras Bench in the case of CC v. Chowdary Enterprises by Final Order No. 2611/96, dated 10-12-96 has also decided the classification of this very item under Chapter Heading No. 8436.99 and has rejected the Revenue's claim for classification under Chapter Heading 73. In view of the correct order passed by the Commissioner and supported by the judgments cited including the Tribunal ruling of Chennai Bench in the case of CC v. Chorwdary Enterprises (supra), we find no merit in the present appeal and dismiss the same.
(Operative portion of this Order was pronounced in open Court on conclusion of hearing)