Customs, Excise and Gold Tribunal - Delhi
Collector Of Customs vs Utkal Machinery Ltd. on 19 April, 1988
Equivalent citations: 1988(17)ECC92, 1988(17)ECR593(TRI.-DELHI), 1988(36)ELT171(TRI-DEL)
ORDER I.J. Rao, Member (T)
1. The circumstances leading to the present appeal, which originally was a review proceeding by the Government of India and was transferred to the Tribunal to be disposed of as an appeal, are as follow.
2. The respondents imported Sand Scrubber machine and a Lump Breaker machine and sought classification of the same under Heading 84.56 CTA. The Assistant Collector of Customs passed an order classifying the machines under Heading 84.59(1) CTA. In appeal the Appellate Collector allowed the appeal inter alia holding that the assessment order was based on the explanatory note to the CCCN and that this application was wrong because the explanation about mineral products that these include the products of Section V are not incorporated in the -notes to Section XVI, notes to Chapter 84 or in the Heading 84.56 of the Customs Tariff, 1975. He further observed that the department's argument that the machines under reference are not used in extractive industries is not justified since the explanatory notes to the CCCN also do not specify that these machines have to be for extractive industries only. He further observed that on the contrary the explanatory note mentions that the "machines mainly in the extractive industries" are covered by the Heading 84.56.
3. The Government of India, who at the relevant time enjoyed revisionary powers were of the tentative view that the impugned goods were correctly classifiable under Heading 84.59(1) of CTA, 1975. The Government's reasons were as follows :
"It appears that the subject machines work on sand moulds and lumps obtained from the sand moulds, the ultimate purpose being reclamation of sand from the used sand moulds. It further appears that the scope and meaning of the explanatory notes of CCCN (on which CTA 75 is broadly based) under different headings can be taken for guidance for classification of an item under CTA 75, unless a contra-intention is evident in the scheme and wordings of the respective headings of the CTA 75. The explanatory notes under Heading 84.56 of CCCN indicate that the said heading covers, inter alia, machines for treatment of solid mineral products,, in general the products of Section V of the CCCN which covers the minerals in crude form. It appears that the sand moulds on which the impugned goods work are prepared generally by the process of casting and pressing natural sand either into a mould to form a foundry core or round a pattern in a moulding box to form a mould. These sand moulds therefore appear to be classifiable under Heading 84.60 of CTA, 1975 and therefore these do not appear to be covered by Section V of CCCN. Besides, as per Webster's Dictionary, 'mineral' is a homogeneous or apparently homogeneous and usually solid substance (such as ore, coal, stone, rock sand and earth) obtained for man's use usally from the ground. It therefore, appears that minerals have necessarily to be in crude form and are not supposed to be subjected to any mechanical or physical processes except minor" operations like crushing, grinding, washing, separating etc. which do not change the structure of the product itself. The impugned machines which appear to be machines for working on sand moulds, therefore do not appear to be covered by the description of the Heading 84.56 or any other heading of the Chapter 84 of CTA 75."
4. Shri Gopinath, the learned SDR submitted that the Assistant Collector correctly relied on the CCCN explanation under Heading 84.56 as this item was totally lifted from CCCN and therefore the explanation to CCCN is of persuasive value. He submitted that crushing moulds and pieces thereof to recover sand therefrom does not amount to the extraction of mineral substance. He argued that Heading 84.56 includes machines for forming moulds but not the present machines which do not do such a job. The learned SDR further argued that Heading 84.56 covers machines for extractive industries only and in general this heading applies to products covered by Section V/Chapter 25 of the CTA. He explained that in Chapter 84 the machines are divided according to their functions and in the present case the broken moulds do not consist only of sand. They also consist of cement and molasses used as binding agents. Therefore, these machines cannot be taken to have been specified in any of the other Headinqs in Chapter 84 and were therefore correctly classifiable under Heading 84.59(1). The impugned order therefore has to be set aside, according to the learned SDR.
5. Shri Lakshmikumaran, the learned Advocate for the respondents, opposing the arguments submitted that this being review proceedings new grounds cannot be taken. He argued that the Government of India proceeded on the basis that the sand scrubber imported by the respondents is used for reclamation of sand from used moulds and the lump breaker works on a vibration principle and is used for dry reclamation of sand lumps obtained from the mould after mechanical casting by sand. Shri Lakshmikumaran argued that the Government were wrong in observing that the scrubber is used for sand reclamation from used sand moulds and stated that it is broken pieces of moulds from which sand is reclaimed by. this machine and not from moulds. He emphasised that moulds are different from broken pieces thereof. On this ground alone, the learned Advocate argued, the show cause notice should be dropped.
6. The learned Advocate further argued that applying the explanation contained in CCCN to Heading 84.56 CTA is completely wrong because while Heading 84.56 was adopted totally from the CCCN, Chapter 25 (Section V) was not so lifted. In fact there was a complete transformation and the original chapter was "mould" during adaptation according to the Advocate as 32 headings in CCCN- were clubbed into one to form Chapter 25 CTA.
7. Arguing that the sand contained in the broken moulds consisted of sand, molasses and cement, Shri Lakshmikumaran submitted that when the mould is used molasses are almost completely burnt leaving only traces thereof. Cement itself is a mineral substance and is specifically covered by Chapter 25. While this circumstance alone should enable the sand and cement, the remnants in the broken pieces of moulds, to be covered by Chapter 25, interpretative Rule 2(b) which should be applied would definitely allow the classification of the broken pieces under Chapter 25. As a result, the machines working on the broken pieces of moulds become classifiable under Heading 84.56. He submitted that broken moulds if imported would be classifiable not under Heading 84.56 but under Chapter 25. Finally, Shri Lakshmikumaran relied on a judgment of the Tribunal in Somany Pilkingtons Ltd. v. Collector of Customs, Calcutta reported in 1983 (14) ELT 2005.
8. We have considered the arguments of both sides. In so far as the preliminary objection of Shri Lakshmikumaran is concerned, we observe that; though the machines work on broken pieces of moulds and not on moulds, the Government's basic claim that the goods are classifiable under Heading 84.59(1) and not under 84.56 CTA has been clearly stated. As the Tribunal can and should go into all the facts, this circumstances alone does not render the notice void.
9. The Assitant Collector based his order on the explanatory notes in Section V of the CCCN, and held that the Headings of Chapter 25 will apply only to goods which are in crude shape or which have been crushed ground or concentrated by magnetic separation or other mechanical or physical processes but not subjected to any further process. On the basis of the explanatory note he came to the conclusion that lump breaker will not be classifiable under Heading 84.56 as articles made of by shaping or carving will not be covered by Section V. The same reasons were applied to sand scrubber also. The Appellate Collector rejected this finding as in his view the explanatory notes in CCCN cannot be applied in the present case since the explanations about mineral products, that these include the products of Section V, were not incorporated in the notes to Section XVI/ or Chapter 84 or in the Heading 84.56 of the Customs Tariff Act, 1975. We observe that as submitted by Shri Lakshmikumaran, the learned Advocate, while Heading 84.56 has been adopted in full, Chapter 25 was not so adopted by CTA. In fact there is a metamorphosis undergone by the Chapter between its origin in 'CCCN and its arrival in CTA. In addition we note the arguments of the learned Advocate that the broken pieces of moulds consist, particularly, of sand and cement only and both of these fall under Chapter 25. Even without the application of interpretative Rule 2(b) such a classification seems to be unassailable.
10. In these circumstances, we find that the Government's tentative view communicated in the Government of India's notice dated 3-6-1981 cannot be sustained. The Appellate Collector's order impugned before us cannot be said to be incorrect in law. This view, incidentally, will be in consonance with the earlier order of the Tribunal in Somany Pilkingtons Ltd. (supra). We, therefore, reject this appeal and drop the show cause notice.