Custom, Excise & Service Tax Tribunal
Shs Electronics vs Commissioner Of Central Excise on 20 November, 2014
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH
CHENNAI
Appeal Nos.E/243, 244/2004
[Arising out of Order-in-Appeal No.441/2003-CE dt. 9.12.2003 & OIA No.457/2003-CE dt. 29.12.2003 passed by the Commissioner of Central Excise (Appeals), Coimbatore]
For approval and signature:
Honble Shri P.K. Das, Judicial Member
Honble Shri R. Periasami, Technical Member
1. Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? :
2. Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not ? :
3. Whether the Members wish to see the fair copy of
the order? :
4. Whether Order is to be circulated to the Departmental authorities ? :
SHS Electronics Appellant
Versus
Commissioner of Central Excise,
Coimbatore Respondent
Appearance:
None For the Appellant Shri P. Arul, Superintendent (AR) For the Respondent CORAM : Honble Shri P.K. Das, Judicial Member Honble Shri R. Periasami, Technical Member Date of Hearing : 28-07-2014 Date of Pronouncement : 20-11-2014 FINAL ORDER No.40828-40829/2014 Per R. Periasami
1. The issues are common in both the appeals and hence both are taken up together for disposal.
2. The brief facts of the case are that the appellants are manufacturing Horn Controllers and E.P. Valve/P.T Switch and filed declaration under Rule 173B of the erstwhile Central Excise Rules, 1944 classifying the goods under sub heading 8708 of CETA, 1985. Show cause notices were issued to the assessee for re-classifying the product "Horn Controller" under CETH 8512.00 and EP Valve and PT switch under CETH 8481.80 and demanded differential duty. The adjudicating authority confirmed the classification "Horn Controller" under Chapter Heading 8512.00 and the EP Valve/PT Switch under 8481.80 and also confirmed the demand of duty. The appellant filled appeals before the Commissioner (Appeals) only on the classification of the "Horn Controller" classified under Chapter Heading 85.12. Commissioner (Appeals) in the impugned orders has dismissed the appeals and upheld the orders of adjudicating authority. Hence the present appeals.
3. The Ld. Advocate on behalf of the appellant stated that the show cause notice issued by the Range Superintendent is not maintainable and the Superintendent has no jurisdiction to issue the SCN relating to classification dispute under Rule 173B of Central Excise Rules and only the Asst. Commissioner can issue SCN. He therefore submits that SCN is not maintainable.
4. On merits, Ld. Advocate submits that the appellants are manufacturing Horn Controller on job work basis on the raw materials supplied by M/s.Roots Auto Products (P) Ltd. and cleared the Horn Controller to them on payment of appropriate excise duty under Chapter Heading 87.08. These are used as accessory of Air Horn classifiable under Chapter 87.08 as parts of Motor vehicles. It is parts of Air Horn as held by the Department.
4.1 Air Horn may function without Horn Controller. Air Horns are manufactured by different persons and cleared as a complete product. The Horn Controller is fitted with an Air Horn having two or three trumpets. By selecting the switches in the Horn Controller, the driver can operate the Air Horn in different frequencies in city or highway or ghat roads. Horn Controller is not essential for functioning of Air Horn. Therefore, it is only an accessory and not a part of Air Horn.
4.2 Heading 8512.00 deals with Electrical Lighting or other signalling equipment. The department failed to prove that Horn Controller is a part of Air Horn. The principal manufacturer M/s.Roots Auto Products (P) Ltd. cleared Horn Controller along with Air Horn, Hose kit and Technical Brochure as a single set to the dealers. M/s.Roots Auto Products Pvt. Ltd. has classified all these items under Chapter heading 87.08 which has been accepted by the Commissioner. He placed reliance on the order passed by the Commissioner of Central Excise, Coimbatore against their supplier M/s.Roots Auto Products Pvt. Ltd. vide OIO No.7/2011 dt. 31.10.2011. He relied on the following judgments :-
(a) Mehra Bros Vs Joint Commercial Officer - 1991 (51) ELT 173 (SC)
(b) Union of India Vs Garware Nylons Ltd.- 1996 (87) ELT 12 (SC)
(c) CCE Delhi Vs Insulation Electrical (P) Ltd. - 2008 (224) ELT 512 (SC)
5. On the other hand, the Ld. AR on behalf of Revenue reiterated the findings of the lower authorities. He submits that parts of horn are specifically classified under CETH 85.12 and cannot be classifiable under parts of motor vehicle under 87.08. The items are clearly distinguishable and classifiable under a specific chapter heading unless it is excluded in the chapter note or section notes. The items must be classified under respective chapter headings.
5.1 Horns, sirens and other electrical sound signalling appliances are rightly classifiable under heading 85.12. He further submits that as per their own description, the Horn Controller cannot function without electrical signal. Horn Controller, is parts of horn and cannot be parts of motor vehicle. He submits that the adjudicating authority has rightly classified Horn Controller as parts of electrically operated horns, which was upheld by the Commissioner (Appeals).
6. We have carefully considered the both oral and written submissions made by the appellant and Revenue and also perused records. On the preliminary objection raised by the appellant that Range superintendent has no powers to issue SCN on classification, we find that the lower appellate authority has examined the issue in detail. We find from the impugned order that the Appellants raised this issue before the adjudicating authority as well as before Commissioner (Appeals). The Commissioner (Appeals) has examined the issue in detail and given clear findings at paragraphs 5.2 & 5.3 and relied on the Hon'ble Supreme Court's decision in the case of Easland Combines Vs CCE Coimbatore - 2003 (152) ELT 39 (SC). Therefore, we do not find any infirmity in the findings in the impugned order and we hold that the SCN issued by the Range Superintendent is sustainable
7. On merits, the only issue to be decided in the present appeals is whether the Horn Controller manufactured and cleared by the appellants was classifiable under Chapter sub-heading 8512.00 or under chapter sub-heading 8708.00 of the CETA during the relevant period. The period involved in these appeals relates to 1.1.98 to 3.7.98. The amounts of differential duty demand is Rs.29,107/- and Rs.45,041/-.
7.1 The detailed write up on function of Horn Controller is brought out at para-15 of the adjudication order is reproduced as under :-
"The function of the Horn Controller is to control the air flow to the trumpets according to the needs/choice of the driver i.e. for city traffic, highway traffic and for creating musical sounds. The "Write up" given by the assessee is reproduced below :-
The horn Controller functions in the following way : When the electric power is given to the controller through the cables provided, the electronic circuit actuates the Auto Relay in the controller. When the relays are actuated, the contact in the relay closes and breaks in the predetermined sequences which ultimately actuates the solenoid valve to open or close the air passages. The sequence is controller by the sliding switch fitted in the controller depending upon the position in which it is kept. There are 3 positions, namely, city, Highway, Musical. When it is in the "City" position, the auto relays actuate only one solenoid switch and the rest of the two will not function. When it is in the "Highway" position two of the auto relays actuate respective solenoid valves simultaneously, and when it is in the "Musical" position the auto relays actuate the three solenoid valves one after the other and ensure that only one is operating at a time."
7.2 From the above, it is clearly evident that Horn Controller through Electronic Circuit actuates the relay in the controller which in turn activates the solenoid valve to open or close the air passages. The appellant's main contention is that Horn Controller are used in the motor vehicles and classifiable under 87.08 as parts of Motor vehicles. It is pertinent to note that the Heading 87.08 of CETA as it stood during the relevant period covers "parts and accessories of the motor vehicles of Heading 87.01 to 87.05". It is relevant to see the section notes of Section XVII of CETA. Section Note (2) (f) to Section XVII covering Chapter 87 and 88 of the Schedule to the Tariff reads as under:
(2) The expression "parts" and "parts and accessories" do not apply to the following articles, whether or not they are identifiable as for the goods of this section.
(f) - Electrical machinery and Equipment (Chapter 85) As per the Section note 2(f) above electrical machinery or equipment of Chapter 85 are excluded from this Section (which governs Chapter 87). As evident from the above technical write up on Horn Controller, it is apparent that it contains electronic circuit and switches i.e. auto relay which actuates the controller which is used to control the airflow of the Horn. Therefore, by virtue of the exclusion provided under section note 2(f) of Section XVII of the Schedule, the Horn Controller do not fall under Ch. 87.08 of CETA as parts of motor vehicles.
7.3 The Hon'ble Supreme Court in the case of Intel Design Systems (India) Pvt. Ltd. Vs CCE 2008 (223) ELT 135 (SC) observed as under:-
"4.?As per Rule 1 on Interpretive Rules, classification of excisable goods is to be determined according to the terms of the Heading and in terms of Section/Chapter notes. Note 2(f) to Section XVII (which governs Chapter 87) excludes the goods viz. electrical machinery and equipment (Chapter 85). The goods in question i.e. contractors, switches, control box etc. are the goods used for switching, protecting electrical circuits or for making connections to or in electric circuit. These parts/components are specifically covered under CSH 8536.90. The CBEC Circular relied upon by the assessee is not relevant.
5.?As per the Explanatory Notes to HSN the parts falling under Chapter Heading 8710 would be covered under the said chapter, provided they fulfill both the conditions i.e. they must be identifiable as being suitable for use solely or principally for such vehicles and that they must not be excluded by the provisions of Notes to Section XVII. The identifiable parts under the said heading bodies of armoured vehicles and parts thereof, cover special road wheels for armoured cars, propulsion wheels for tanks, tracts etc. As per this requirement, the goods should not only be identifiable to be armoured vehicles, but it should so not have been excluded by Notes to Section XVII. The Chapter note 2(f) excludes electrical machinery and equipment falling under Chapter 85. Explanatory Notes to HSN relating to the parts and accessories excluded by Note 2 specify items with reference to specific Chapter Heading as per (7) (a), (k) which excludes photographs and other current collectors for electric traction vehicles, fuses, switches and other electric apparatus of Heading No. 85.35 or 85.36. The items, therefore, manufactured by the appellants are identifiable or are in the nature of goods falling under Chapter Heading 85.36. Since these fall under the category of excluded goods under Chapter Notes, even though they are used specifically solely or principally with the armoured vehicles of Chapter Heading 8710, they are classifiable under Chapter Heading 8536.90 only as held by the adjudicating authority."
The ratio of the above decision is applicable to the facts of this case. The Horn Controller is classifiable under Chapter 85 and not under Ch.87 as contended by the appellants.
7.4 The adjudicating authority has classified the Horn Controller under Ch.85.12. Heading 85.12 as existed during the relevant period reads as follows :-
"85.12 8512.00 Electrical lighting or signalling equipment (excluding articles of heading no.85.39), windscreen wipers, defrosters and demisters, of a kind used for cycles or motor vehicles."
There is no further sub-heading provided under Heading 85.12. It is well settled law that HSN Explanatory Notes to be given due weight for determination of any product especially when entry in HSN is fully aligned to corresponding Tariff heading in the Central Excise Tariff Act. Therefore, it is relevant to look into the HSN Explanatory Notes of Heading 85.12, which covers electrical apparatus and appliances specialised for use on cycles or motor vehicles for lighting or signalling purposes. The heading includes interalia electrical wind screen wipers, defrosters and demisters of motor vehicles. Sl.No.12 of the heading covers items viz. Horns, sirens and other electrical sound signalling appliances.
7.5 As already discussed above, the product, the Horn Controller manufactured by the appellants is used as parts for Horns. From the description of the goods, it is evident that by use of the Horn Controller in the Horn, the Horn is selectively operated. The Horn Controller contains electronic circuit which actuates the auto relay in the controller which in turn controls the solenoid valves for producing sound horn. The different switches fitted in the controller itself confirms that without electrical energy, it cannot actuate the valves to create different sounds or musical sounds of different frequencies depending on the usage.
7.6 Note 2(a) to Section XVI of the Schedule to the CETA'85, stipulates that parts which are included in any of the heading of Chapter 84 or 85 are to be classified in their respective headings. Therefore, by virtue of HSN Explanatory Notes to Chapter Heading 85.12, Sl.No.12 clearly covers "Horns, sirens and other electrical sound signalling appliances". The order relied upon by the appellant in the case of M/s. Roots Auto Products (P) Ltd. relates to goods cleared by the assessee whether amounts to "manufacture" and not related to classification of Horn Controller.
8. Accordingly, we hold that Horn Controller manufactured and cleared by the appellants is rightly classifiable under Heading 85.12 of the CETA, 1985. Hence, we do not find any infirmity in the impugned order passed by the Commissioner (Appeals) and uphold the same (Appeals). Both the appeals are dismissed.
(Pronounced in open court on 20-11-2014)
(R. PERIASAMI) (P.K. DAS)
TECHNICAL MEMBER JUDICIAL MEMBER
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