M/S Azra Poultry Equipments vs Union Of India & Ors. on 7 March, 2012

[Cites 10, Cited by 2]

Delhi High Court

M/S Azra Poultry Equipments vs Union Of India & Ors. on 7 March, 2012

1. The petition impugns the Trade Notice dated 19th November, 1990 issued by the Collector of Central Excise, Bangalore and consequently seeks to restrain the respondents from recovering Excise duty from the petitioner. Notice of the petition was issued and upon the petitioner offering to furnish bank guarantee in favour of the Asstt. Collector of Central Excise, Bangalore, subject to the petitioner furnishing the said bank guarantee it was directed that the petitioner‟s goods be cleared under heading no.84.36 of the Schedule to the Central Excise Tariff. Pleadings were completed and on 17 th July, 1992 Rule DB was issued and the interim order confirmed. The writ W.P.(C) No. 286/1991 Page 1 of 15 petition was dismissed in default on 15th October, 1992. An application for restoration was filed in the year 1994. The writ petition was again dismissed in the year 1995. The petitioner again applied for restoration. On 5th August, 2002 the petitioner was called upon to, in the first instance, satisfy this Court as to how the remedy by way of statutory appeal to the Customs, Excise and Gold (Control) Appellate Tribunal now Custom Excise Service Tax Appellate Tribunal (CESTAT) is not an efficacious remedy. The matter was thereafter at the instance of the parties adjourned from time to time. The writ petition was again dismissed in default on 7 th March, 2006 but was yet again restored. On application of the petitioner, early hearing was allowed. However when the writ petition came up for hearing the counsels for both parties requested adjournment. In the circumstances aforesaid, request for adjournment was denied and judgment reserved with liberty to the parties to file written submissions. The petitioner has filed written submissions. None have been filed by the respondents.

2. The petitioner claims to be a manufacturer at Bangalore of the poultry equipment like poultry cages, welded wire mesh for poultry industry etc. The petitioner claimed classification of "parts of Rearing and Laying Units or Batteries" viz top, bottom and partition made from G.I. wire claiming full W.P.(C) No. 286/1991 Page 2 of 15 exemption from payment of Excise duty under heading 84.36 of the Central Excise Tariff, 1988. However the Asstt. Collector of Central Excise, Bangalore refuted the said claim of the petitioner claiming that the said goods manufactured by the petitioner do not form part of and do not go into the making of the machines of rearing and laying units or batteries and merited classification under heading 7314. While the said issue was pending consideration, the Trade Notice dated 19th November, 1990 (supra) was issued clarifying that the heading 84.36 covers only „Poultry Keeping Machinery‟, but not equipment which does not have any mechanical functions. Challenging the said Trade Notice, this writ petition was filed.

3. It was also the plea of the petitioner in the writ petition that while the Excise Authorities at Bangalore were treating the goods of the petitioner under heading 7314 of Central Excise Tariff, the Excise Authorities in Ahmedabad and Maharashtra were treating the same goods as exempt under heading 84.36 and the petitioner was thus being discriminated against.

4. The respondents have filed a counter affidavit contesting the maintainability of the writ petition owing to the availability of remedy of appeal to CESTAT. On merits it is pleaded that top, bottom and partitions made from G.I. wire of cages meant for housing/keeping poultry do not go W.P.(C) No. 286/1991 Page 3 of 15 into the making of machines for rearing and laying units of batteries and therefore do not merit exemption under heading 84.36.

5. The petitioner has filed a rejoinder to the said counter affidavit in which it has reiterated that Wire mesh top, bottom and partitions meant for cages for keeping poultry are entitled to exemption under heading 84.36.

6. The respondent Asstt. Collector of Central Excise, Bangalore, in or about the year 1993 filed an application for vacation of stay contending that interim stay was granted to the petitioner primarily on the plea of discrimination and citing the order dated 20 th September, 1991 of Collector of Central Excise Bombay, taking the same stand as the Excise Authorities at Bangalore.

7. The petitioner filed an additional affidavit dated 21st January, 2002 in which it is inter alia stated "The petitioner‟s contention is that the poultry keeping equipment used by the end-users who are poultry farmers, is exempt from excise under 84.36 of the Central Excise Tariff Act. That the petitioner has always clearly maintained the distinction of end-users by claiming exemption under 84.36 only when the poultry keeping equipment is sold to a poultry farmer. Under other circumstances, when the wire mesh is used for other purposes are sold for other purposes, the entire excise duty has been deposited in accordance with law. This distinction maintained by the petitioner is evident from copies of a number of invoices which are collectively annexed as W.P.(C) No. 286/1991 Page 4 of 15 Annexure P/12 (colly.). These invoices relate to the period 1990-91, 1991-92 and 1992-93. By way of illustration, a sale made to a poultry farmer, M/s Supreme Poultry Pvt. Ltd. Erode, Tamil Nadu under Invoice No.1743 dated 24.10.1991 is treated as exempted from payment of excise duty and has been cleared by providing a bank guarantee. On the other hand, a sale to Newlong Wires & Weldmesh Pvt. Ltd. under Invoice No.1819 dated 13.10.1992 is cleared with payment of full excise duty under entry 74.13."

8. Heading 84.36 (supra) is as under:-

"84.36 Other agricultural, horticultural, poultry-

keeping or bee-keeping machinery, including germination plant fitted with mechanical or thermal equipment, poultry incubators and brooders."

9. The question for adjudication is whether Wire mesh partitions manufactured by the petitioner which as admitted by the petitioner also in the additional affidavit (supra) can be used for other purposes also, if sold to a poultry farmer for use in cages meant for keeping poultry become exempt from excise duty under heading 84.36 (supra) or are :-

"Articles of Iron & Steel wire viz; welded wire mesh for construction purpose in the form of sheets and rolls."

within the meaning of heading 7314.

10. Before entering into the aforesaid aspect, we may notice the aspect of territorial jurisdiction though not raised by the respondents in their counter affidavit. The cause of action for the petitioner situated in Bangalore as W.P.(C) No. 286/1991 Page 5 of 15 aforesaid was the Trade Notice issued by the authorities at Bangalore. Though the petitioner in the array of respondents has also impleaded the Union of India and the Central Board of Excise at New Delhi as respondents no.1&2 respectively but the contesting respondents are the respondents no.3 to 5 being the Excise Authorities at Bangalore. It is thus evident that the entire cause of action has accrued to the petitioner at Bangalore. The Trade Notice impugned is also not issued by the Union of India for the petitioner to invoke (if at all permissible) jurisdiction of the Courts at Delhi. According to the petitioner itself the said Trade Notice is localized and is not being followed in other States. We are thus unable to comprehend as to how this Court would have territorial jurisdiction to entertain this petition. Though the writ petition is liable to be summarily dismissed on this ground alone but since the same has remained pending for the last over 20 years, we deem it appropriate to adjudicate the controversy on merits also.

11. As far as the plea of the respondents as to the maintainability of the petition owing to the availability of alternative remedy of appeal before the CESTAT is concerned, the petitioner in its written arguments has relied on:-

"(a) State of U.P. v. Harish Chandra (1996) 9 SCC 309;

(b) Dr. Bal Krishna Agarwal v. State of U.P. (1995) 1 SCC 614;

W.P.(C) No. 286/1991 Page 6 of 15

(c) Siemens India Ltd. v. UOI 2002 (140) E.L.T. 62 (Del); and,

(d) Durga Enterprises (P) Ltd. v. Principal Secretary, Govt. of UP (2004) 13 SCC 665."

to contend that writ petitions impugning Trade Notices are maintainable and the rule of exclusion of writ remedy owing to alternative remedy is not an absolute rule. Again merely for the reason of the petition having remained pending in this Court for long, we ignore the said plea also to proceed on merits of the case, though we may notice that a Division Bench of this Court in Internsil P. Ltd. v. Union of India (2007) 207 ELT 500 has held that when this Court is not found to have territorial jurisdiction and alternative remedy of appeal is available, merely because the writ petition has remained pending for long, in that case for ten years, is no ground to entertain the same.

12. The star argument of the petitioner on merits is that benefit of exemption under heading 84.36 was given to M/s Weld Fuse Pvt. Ltd., Hyderabad and the appeal preferred by the Revenue namely Commissioner of Central Excise v. Weld Fuse Pvt. Ltd. reported as MANU/CB/0332/2006 was dismissed by CESTAT, Bangalore on 27th October, 2006. It is further contended that the said order of CESTAT has not been challenged by the Revenue.

W.P.(C) No. 286/1991 Page 7 of 15

13. Though we fail to see as to why the petitioner inspite of claiming a favourable verdict from CESTAT is continuing to pursue this petition but we have examined the said judgment of CESTAT. It is found to raise identical issues. However the CESTAT, Bangalore has proceeded to hold such goods to be entitled to exemption under heading 84.36 for the reason:-

"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 W.P.(C) No. 286/1991 Page 8 of 15 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."

14. It would thus be apparent that while CESTAT, Bangalore in the aforesaid case observed that "the goods are not items of general use" and it was agreed before it "that the goods are used only for making cages which are parts of battery", it is the admission of the petitioner itself before us in the additional affidavit (supra) that the Wire mesh partitions manufactured by it are being sold to poultry farmers as well as for other uses. It thus cannot be said that the goods of the petitioner are not items of general use or W.P.(C) No. 286/1991 Page 9 of 15 are meant only for making cages for keeping poultry. The order of the CESTAT, Bangalore is thus based on the premise that the said goods cannot be marked for any other use and are called in commercial parlance as poultry keeping machinery parts only but which is not so in the present case. It thus appears that the said order of CESTAT, Bangalore was a consent order and/or on "no evidence" having been placed by the Excise Authorities to prove otherwise. Here we have admission to the contrary.

15. CESTAT, Bangalore in the order aforesaid has negatived the contention of the Revenue, of the goods falling under heading 7314 by observing as under:-

"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.

W.P.(C) No. 286/1991 Page 10 of 15

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".

16. We are unable to agree with the reasoning aforesaid. It seems to have escaped CESTAT, Bangalore that when CHSH 8436 at page 1318 SHN referred to batteries it was in the context of large installations "equipped with automatic devices for filling the feeding troughs, cleaning the floor and collecting the eggs". A manufacturer of such batteries which are not merely a series of cages but are also equipped with automatic devices as aforesaid would definitely qualify as machinery and the Wire mesh partition used in such cages would be part of machinery and would be exempt under heading 84.36. However a manufacturer of Wire mesh partitions and one of the uses of which Wire mesh partition may be for assembly as cages, cannot claim exemption under heading 84.36 (supra).

17. What is significant is that heading 84.36 refers to poultry keeping „machinery‟. A mere equipment or structure for "poultry keeping" would W.P.(C) No. 286/1991 Page 11 of 15 not qualify classification under heading 84.36. To fall under heading 84.36 the test, of being a machinery has to be satisfied. The Concise Oxford Dictionary 10th Edition defines „machine‟ as an apparatus using or applying mechanical power and having several parts, each with a definite function and together performing a particular task. „Machinery‟ is defined as machines collectively, or the components of a machine. Similarly the Black‟s Law Dictionary 8 th Edition defines „machine‟ as a device or apparatus consisting of fixed and moving parts that work together to perform some function.

18. A Division Bench of Gujarat High Court in Ambica Wood Works v. State of Gujarat 1979 43 STC 338 was called upon to decide whether wooden tables covered with buff-leather and fitted with steam pipes below them with a view to have instantaneous drying of the prints intended for screen printing could qualify as machinery. The High Court concluded that a combination of things, the harmonious working of which results in a desired end, qualifies to be known as machinery. It was further observed that mere assembly of articles or things or some solid structure with no moving parts cannot be termed as machinery; it would be machinery only if such structure, complete in itself, has moving parts in relation with others W.P.(C) No. 286/1991 Page 12 of 15 when they move interdependently by application of force-mechanical or manual-with an avowed object to produce a given product. The Gujarat High Court found that the entire assembly of tables, pipes, screen prints and rolls constituted machinery and thus the tables were accessories of the machinery.

19. Reference may also be made to Corporation of Calcutta v. Chairman of the Cossipore Municipality and Chitpore Municipality AIR 1922 PC 27 where the question was whether a raised reservoir for storing water by erecting a solid steel tank with supporting structure was machinery. The tank was connected with pipes with the pumping house which was situated at a distance. However a reservoir had been constructed on the ground under the tank, where water was stored. It was held that „machinery‟ must mean something more than a collection of ordinary tools; it must mean something more than a solid structure built upon the ground whose parts either do not move at all or if they do move, do not move the one with or upon the other in interdependent action. „Machinery‟ was further described as meaning some mechanical contrivances which by themselves or in combination with one or more other mechanical contrivances, by the combined movement and interdependent operation of their respective parts generate power, or evoke, W.P.(C) No. 286/1991 Page 13 of 15 modify, apply or direct natural forces with the object in each case of effecting definite and specific result. The tank and its supporting structure were not found to satisfy the said definition.

20. A Full Bench of the Allahabad High Court in Engineering Traders v. State of U.P. 31 STC 456 held „machinery‟ as meaning instruments designed to transmit and modify the application of power, force and motion. „Machinery‟ was held to include all appliances and instruments whereby energy or force is transmitted and transformed from one point to another.

21. A Division Bench of the Karnataka High Court in D.B. Bhandari v. State of Mysore MANU/KA/0069/1965 was called upon to decide whether handlooms were machinery, for spare parts of handlooms to fall as accessories to the machinery. It was held that the mode or manner in which power is fed or force is applied should not make any difference. Thus handlooms propelled by hand power were held to qualify as machinery.

22. Applying the aforesaid test, there can be no doubt that the Wire mesh manufactured by the petitioner even if sold to a poultry farmer for assembling of cages for poultry or battery of such cages cannot qualify as machinery under heading 84.36 and would be an article of iron and steel W.P.(C) No. 286/1991 Page 14 of 15 wire within the meaning of heading 7314.

23. We therefore even on merits do not find any merit in the contention of the appellant.

24. The writ petition is accordingly dismissed. No order as to costs.

RAJIV SAHAI ENDLAW, J ACTING CHIEF JUSTICE MARCH 7, 2012 „pp.‟ W.P.(C) No. 286/1991 Page 15 of 15

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