Customs, Excise and Gold Tribunal - Delhi
Collector Of Central Excise vs L And T Ltd. on 22 October, 1992
Equivalent citations: 1993ECR228(TRI.-DELHI), 1993(63)ELT717(TRI-DEL)
ORDER Jyoti Balasundaram, Member (J)
1. The eligibility of benefit of exemption under Notification 160/86, dated 1-3-1986 to "Contactors" manufactured by the respondents herein is the issue to be decided in this appeal filed by the Revenue.
2. The respondents are engaged in the manufacture of goods falling under Chapter 85 of the Central Excise Tariff Act, 1985. Classification list Nos. 13/86-87 effective from 1-3-1986 and 22/86-87 effective from 2-4-1986 were filed classifying the product under Heading 8536.90 and claiming the benefit of notification...than the switches. As the Assistant Collector of Central Excise approved both classification lists extending the benefit of notification, the Department preferred an appeal before the Collector of Central Excise (Appeals), Bombay on the ground that the scope of the term switches used in the notification is wide enough to cover contactors which is also a device for opening and closing or for changing the connection of a circuit. The lower appellate authority rejected the appeal, relying upon the HSN Explanatory Notes at page 1389 wherein it is mentioned that "Contactors, which are also considered as relays, are devices for making and breaking electrical circuits which automatically, reset without a mechanical looking device or hand operation. They are generally operated and maintained in active state by an electric current."
The Collector (Appeals) also relied upon the different ISI specifications to hold that contactors are different from switches. Hence this appeal by the Revenue.
3. We have heard Shri M.S. Arora, learned JDR and Shri JJ. Bhatt, learned Advocate for the respondents.
4. The learned DR refers to the dictionary meanings of "switch" and "contactor" as contained in (i) The Illustrated Dictionary of Electronics, (ii) Gerrish's Technical Dictionary. According to the Dictionary of Electrical Engineering by K.G. Jackson and R. Feinberg switch is understood in the mechanical and non-mechanical sense. He submits that what is the paramount consideration for classificaion of a product is its function and trade parlance is only secondary and cites the judgments of the Hon'ble Supreme Court in the cases of Bharat Forge and Press Industries (P) Ltd. v. Collector of Central Excise reported in 1990 (45) E.L.T. 525 and Indian Metals and Ferro Alloys Corpn. v. Collector of Central Excise reported in 1991 (57) E.L.T. 165 in support of this argument. He contends that as the 'contactor' performs the same function as a 'switch' it is to be classified as a switch. He next refers to the Supreme Court judgment in the case of Atul Glass Industries v. Collector of Central Excise reported in 1986 (25) E.L.T. 473 in which ISI specifications were ignored in favour of the function and trade parlance tests. He submits that existence of different ISI specifications for switches and contactors is not conclusive for determining classification. According to him, switches and contactors cannot be distinguished on the basis that one (i.e. switch) makes and breaks electrical circuit non-automatically as technology has now advanced to such a stage that there are switches which operate automatically and the Tariff has to be interpreted so as to take into account advance in technology, as has been held by the Tribunal in the case of Fusebase Eltoto v. Collector of Central Excise reported in 1990 (47) E.L.T. 401 . He, therefore, urges that contactors are switches and so they are excluded from the purview of Notification 160/86.
5. In reply, Shri Bhatt commences his arguments by submitting that Heading 85.36 itself recognises a distinction between switches and relays as it mentions both as examples of electrical apparatus for switches or protecting electrical circuits. The admitted position is that switches and contactors are known differently in the market as brought out by several affidavits filed before the lower appellate authority (pages 21 to 28 of the paper book filed by the respondents). He refers to a Trade Notice dated 1-9-1990 (page 29) which clarifies that air-circuit breakers cannot be treated as switches and will merit classification under Heading 85.35 or 85.36 depending on the voltage for which they had been designed and the benefit of Notification 160/86 would be available to them. All the technical dictionaries define switches and contactors separately and they are not treated as synonymous; he refers to Newnes Concise Encyclopaedia of Electrical Engineering page 1389. The ISI specifications are different for both. Even the HSN treats them separately. The learned Counsel submits that 'contactors' satisfy all tests for classification set out in the Krishna Carbon case reported in 1988 (37) E.L.T. 480. He cites the Supreme Court judgment in Jain Engineering reported in 1987 (32) E.L.T. 3 wherein it has been held that the trade parlance test prevails for classification. He seeks to distinguish the Bharat Forge and Indian Metals and Ferro Alloys citations on the ground that in both cases, TI 26AA(4) which fell for interpretation, covered "pipes and tubes, all sorts" and as the Tariff Entry called for no distinction, the Supreme Court held that 'pipe fittings' fall squarely within the meaning of the expression "pipes and tubes", while in this appeal, the Tariff Heading itself distinguishes between a switch and a contactor. He submits that the Fusebase decision (supra) is distinguishable inasmuch as both contactors and switches were already known to the market and yet treated distinctly and separately. As the Notification excludes only switches, plugs, sockets and not relays (to which contactors are most akin), contactors must be held not to fall within the scope of the exclusion clause of Notification 160/86 and the benefit of the Notification should be extended to them.
6. In rejoinder, Shri Arora, the learned DR submits that the absence of the expression "all sorts" in Heading 85.36 would not alter the position that contactors are to be treated as switches and cites the decision in Kupling (India) reported in 1991 (53) E.L.T. 370 in support of the submission that wordings in the Tariff cannot be used as an aid to interpret a Notification. He further submits that trade parlance cannot be relied upon by the respondents as it was not the basis of the Collector (Appeals) findings. Lastly he cites the order of the Tribunal in Collector of Customs v. Blue Star reported in 1990 (50) E.L.T. 186 to contend that, as contactors are a species of switches and perform the same functions, they would also be disentitled to the benefit of exemption in terms of Notification 160/86.
7. We have heard both sides and carefully considered their submissions and perused the records. The Dictionary of Electrical Engineering by K.G. Jackson and R. Feinberg defines contactor as follows :
"Contactor : A device for repeatedly opening and closing electric circuits. Electrically, relays and circuit breakers also fulfil the same function. The difference between these and contactors is one of detail design. Relays are of light construction, generally without any arc control devices, and designed to operate frequently in circuits carrying only low currents. Circuit-breakers are built to interrupt heavy fault currents. They have heavy contacts and powerful arc control devices, and operate infrequently. Contactors fall between these two groups; they are heavier than relays, possess effective arc-control means, but are not as heavy and powerful as circuit-breakers. They are employed for controlling currents from a few amperes up to a few thousand amperes at voltages up to 600 V; special designs are available for higher voltages. Depending on duty and installation conditions, the contacts are of the oil immersed, mercury-in-glass, or air-break type. The last is the most usual.
Switch has been defined as a mechanical or electronic device for making or breaking non-automatically the load current in a circuit. It differs from a circuit-breaker in that it is designed to make but not break the fault current in the circuit, and it is usual to protect the circuit which the switch controls by means of fuses or a circuit-breaker.
The Illustrated Dictionary of Electronics gives the following definition of Electronic Relay, Electronic Switch and Switch :
Electronic Relay : 1. A switching circuit employing one or more tubes or transistors, which performs the relay function without moving parts. 2. An electronic component designed to switch on application of appropriate getting signals (the triac, diac, silicon controlled rectifier are examples).
Electronic Switch : 1. A non-mechanical device, such as a flip-flop or gate, whose characteristic on-off operation can be used to make and break an electric circuit. Compare contact switch. 2. A device employing tune or bleeder resistor, Compare smoothing choke.
Switch : A circuit or device (electronic, electromechanical, or mechanical) for opening and closing a circuit or for connecting a line to one of several different lines, e.g. rotary selector switch. 2. To change the logic state of a circuit or device. 3. In a computer programme, a branch instruction directing the programme to a line number dependent on the value of a variable or result, e.g. BASIC'S ON...GOTC 4. To cause an electrical circuit to change states, as from on to off or vice versa.
In Gerrish's Technical Dictionary contactor has been defined as a heavy duty magnetic relay used in high current electrical circuits. Relay is defined as a magnetic switch. A switch is defined in Gerrish's as :-
Switch (Elec): A device for directing or controlling the current flow in on electric circuit, switches are manufactured in many types and forms. They may be single pole, three way, four way, etc., a switch is usually mounted in a metal wall case and is then covered with a switch plate.
Newnes Concise Encyclopaedia of Electrical Engineering defines contactor as follows :
Contactor : A device for repeatedly opening and closing electrical circuits. Electrically, relays and circuit breaker also fulfil the same function. The difference between these and contactors is only of detail design. Relays are intended to operate in circuits carrying only low and very low currents, while circuit-breakers are built to interrupt heavy fault currents, they are not intended to operate frequently. Consequently, relays are of light construction, generally without any arc control devices and can operate very frequently i.e. up to several thousand times per hour. Circuit-breakers are of massive construction, fitted with heavy contacts and powerful arc-controlling devices. Contactors fall between these two groups, i.e. they are heavier than relays, possess effective arc control means, but are not as heavy and powerful as circuit breakers. They are employed for controlling currents from a few amperes up to many hundred and even thousand amperes at voltages up to 600 V; special designs are available for higher voltages. Depending on duty and installation conditions, the contacts are of the oil-immersed, mercury-in-glass, or of the air break type. The latter is the most usual.
8. The preponderant view that emerges from the technical literature is that a contactor is a device for making and breaking electrical circuits which automatically reset without a mechanical device or hand operation and they are generally operated and maintained in active state by an active current. On the other hand a switch is a mechanically operated device for making or breaking electrical contact. The HSN Explanatory Notes at page 1389 states that contactors are also considered as relays. Heading 8536.90 cites both switches and relays as examples of electrical apparatus for switching or for protecting electrical circuits which indicates that the Tariff itself recognises a distinction between the two. Therefore, contactors which are akin to relays cannot be equated with switches. They are known differently in the market as different commercial commodities as is evident from the affidavits of various dealers filed before the Lower Appellate Authority. One such affidavit of a dealer is reproduced below:
"I Mohan Maggon, aged 41 years residing at A2/16, Paschim Vihar, New Delhi do solemnly affirm and state as follows :
I say that I am dealing in electrical goods of various companies including Larsen & Toubro Limited.
I say that contactors and switches are two distinct products and one cannot substitute the other.
I say that we place orders for switches when we need switches and we place orders for contactors when we need contactors.
I say that we do not buy switches when we need contactors. I say that we do not buy contactors when we need switches.
I say that even our customers place orders for contactors when they require contactors and place orders for switches when they require switches.
I say that none of our customers purchase switches in place of contactors and vice versa as these two products are different."
9. The Hon'ble Supreme Court has held in the case of Jain Engineering Co. v. Collector of Customs reported in 1987 (32) E.L.T. 3 (S.C.) that it may be that the two articles i.e. bushings and bearings have the same functions. But nonetheless they are distinct and separate. As the functions of bushings are the same as that of bearings, sometimes bushings are also called bearings. But when these two articles are known in the market by two different names, it is difficult to uphold the contention that they are same and identical even though they perform the same functions. The test laid down by the Supreme Court is satisfied in this case, as admittedly the switches and contactors are known in the market differently.
9.1 The test of trade parlance has also been laid down by the Supreme Court in the case of Atul Glass Industries v. Collector of Central Excise, reported in 1986 (25) E.L.T. 473 (S.C.) wherein it has been laid down in paragraph 8 of the judgment that the trade parlance test is the common test i.e. how is the product identified by the class or section of people dealing with or using the product.
9.2 In the case of Collector of Central Excise, Kanpur v. Krishna Carbon Paper Co. reported in 1988 (37) E.L.T. 480 (S.C.) , the Supreme Court has held that it is well settled that where no definition of an item is provided in the Statute itself the correct guide is the context and trade meaning and trade meaning is one which is prevalent in that particular trade where that goods is known or traded and if special type of goods is subject matter of a fiscal entry then that entry must be understood in the context of that particular trade, bearing in mind that particular word.
9.3 The citations relied upon by the learned DR viz. the Supreme Court judgments in the case of Bharat Forge and Press Industries supra and Indian Metals and Ferro Alloys supra do not advance the case of the Department. In the case of Bharat Forge & Press Industries the Supreme Court was seized of the issue of classification of pipe fittings and the rival entries therein were TI 26AA(iv) and TI 68 of the Schedule to the erstwhile Central Excise Tariff. The Supreme Court held that the Tariff Entry 26AA(iv) calls for no distinction between pipes and tubes manufactured out of sheets, rods, bars, plates or billets and those turned out from larger pipes and tubes and in these circumstances it is difficult to say that pipe fittings, though they have a distinct name or badge of identification in the market are not pipes and tubes. The Court held that though it is true that all pipes and tubes cannot be described as pipe fittings, still it would not be correct to say that pipe fittings are not pipes and tubes as they are only a species of pipes and tubes and the use of the words "all sorts" and the reference to the various processes by which the excisable item could be manufactured set out in the Tariff Entry are comprehensive enough to sweep within their fold the goods presently under consideration.
9.4 In the case of Indian Metals and Ferro Alloys the classification of poles for transmission of electric energy, whether under TI 26AA(iv) of the CET as pipes and tubes or under the residuary entry TI 68 arose for consideration. The Supreme Court held that application of certain processes of heating and forging to pipes and tubes to make poles does not change the commercial character of the goods marketed by the assessee so as to take them away from the scope of Item 26AA. (emphasis supplied), as the language of the Entry is very wide and comprehensive enough to take in all sorts of pipes and tubes. These two decisions arose in the context of classification between a widely worded specific entry for pipes and tubes all sorts (TI 26AA) and residuary entry (TI 68).
9.5 Even in the case of Kupling (India) v. Collector of Central Excise, reported in 1991 (53) E.L.T. 370 the Tribunal held that sockets were classifiable under TI 26AA(iv) upto 1-8-1983 and TI 25(15) after 1-8-1983, holding that the omission of the expression "all sorts" under TI 25(15) was not to be a deterrent as the Supreme Court has held that small pipes and tubes should also be considered as pipes and tubes in preference to a residuary item.
10. In the present appeal, however, the issue is different viz. whether contactors are a different commodity from switches or whether they are the same commercial commodity and, therefore, excluded from the benefit of concession under Notification 160/86. In our view contactors are a different commercial commodity from switches as is evident from the technical literature, HSN Explanatory Notes and trade parlance and are, therefore, not excluded from the scope of the above notification. According to us the trade parlance test has not been given the go-by the Supreme Court and the test of trade parlance is still paramount and is satisfied in this case where a contactor is recognised as a different item from a switch. Reliance by the learned DR on the order of the Tribunal in the case of Fusebase Eltoto reported in 1990 (47) E.L.T. 401 is misplaced - it was held therein that the projection of TV signals in the form of a picture on to the screen is a technological improvement over the conventional sets and, therefore, it cannot be said that the purpose of the machine is not to receive TV signals and to convert them into TV pictures. This order was cited by the DR to support his argument that the tariff cannot be static; it has to keep abreast of the advance in technology. In the appeal before us switches and contactors are already existing recognised different items and, therefore, the ratio of the above decision will not apply in the facts herein.
11. In the light of the above discussion we hold that the contactors manufactured by the respondents are eligible to the benefit of exemption under Notification 160/86, dated 1-3-1986. We uphold the impugned order and reject the Revenue's appeal.