Customs, Excise and Gold Tribunal - Delhi
Sree Srinivasa Foundry vs Collector Of Central Excise on 24 May, 1996
Equivalent citations: 1996(87)ELT634(TRI-DEL)
ORDER S.L. Peeran, Member (J)
1. In these batch of appeals, common questions of law and facts are involved, hence they are all taken up together for disposal as per law. The question that arises for consideration in these appeals is the correct classification of the item "Rotors" and "Stators" used in the manufacture of "Monobloc P.D. Pumps". The Collector (Appeals) held that the item is classifiable under Tariff Item 30D and not under Tariff Item 68 of the erstwhile Tariff as prayed for by the appellants.
2. We have heard the learned Advocate, Shri V. Sridharan for the appellants and the learned DR, Shri Mohd. Ali for the Revenue.
3. The learned Advocate pointed out that the issue is no longer res Integra and the same is covered by the judgment of the Tribunal in the case of EL. P.EM. Industries v. Collector of Central Excise, as reported in 1995 (79) E.L.T. 681.
4. The learned DR admitted to distinguish this judgment and claim that the items become part and parcel of an electric motors, hence they are required to be classified in Tariff Item 30D or in alternative Tariff Item 30A.
5. We have carefully considered the submissions made by both the sides and have perused the citation referred to before us. The Tribunal after careful consideration of the issue has held that the items are It seems the word 'not' is missing - Ed, Classifiable under T.I. 30D but would be classifiable under the then Tariff Heading 68. While coming to the conclusion, the Tribunal has relied on the judgments of the Hon'ble Supreme Court rendered in the case of Sahney Paris Rhone Ltd. v. Collector of Central Excise, as reported in 1995 (77) E.L.T. 13 and that of Paharpur Cooling Towers Pvt. Ltd. v. Collector of Central Excise, as reported in 1995 (77) E.L.T. 18. The findings given by the Tribunal in para 8 & 9 are reproduced herein below :-
8. Coming to the merits of the appeal, we find that a number of clarifications by way of Circulars and Trade Notices were issued by the department wherein it was clarified that rotors and stators forming component parts of monobloc pumps will have to pay duty under Item 30A before their removal for the manufacture of monobloc pumps (Baroda Collectorate) Trade Notice No. 110/81, dated 1-5-1981. Further, in the Ministry of Finance Circular dated 4-2-1981, it was clarified that rotors and stators forming part of any driving mechanism built into any such machine have to pay duty under T.I. 30(4) [presently Item 30D] prior to their removal for use as component parts. It was also clarified that in the case of monobloc pumps where electric motor does not come into existence in an identifiable manner and is not separable, its classification under Item 30 may not be warranted. In such cases, the casing and shaft is common to the pump as well as to the rotors and stators. Although, electric motor as such does not come into existence independently in such instances the manufacture of rotors and stators cannot be denied. Rotors and stators forming component parts of monobloc pumps in question will have to pay duty under Item 30(4) [presently Item 30D] before their removal for the manufacture of monobloc pumps. As against this, the learned Counsel for the appellants submitted that the Hon'ble Supreme Court in the case of Sahney Paris Rhone Ltd v. Collector of Central Excise (supra) held that self-starter motor is an electric motor fitted with additional item like solenoid and other connected apparatus which taken together would constitute self-starter motor. Though the term motor is used, it is not motor alone but something else equally important which in conjunction with others would constitute self-starter motor. Consequently, the self-starter motor is not covered under Tariff Item 30 of the erstwhile Central Excise Tariff but would be covered by the residuary Item 68. For proper appreciation, the relevant para 6 is reproduced below :
"6. A mere look at this item shows that it is comprehensive in nature and covers all sorts and parts of electric motors. The entry, however comprehensive, seeks to cover only electric motors of all types and parts consisting of such electric motors. But this entry will not cover any manufactured item which uses not only electric motor but something else to result into the manufactured item. The self-starter which the appellants are manufacturing is an item which not only contains electric motor but something more like solenoid and its all other connecting parts without which self-starter will not work."
The learned Counsel also relied upon heavily on the decision of the Hon'ble Supreme Court in the case of Paharpur Cooling Towers Pvt. Ltd. In this case, the Hon'ble Supreme Court had held that the duty under Tariff Item 33(2) of the erstwhile Tariff Item is attracted on such electric fans which are not only designed for use but are indispensable for its operation. The entry has to be read both widely and narrowly. Widely as the goods designed for use as mentioned irrespective of shape would be taxable under this tariff. Narrow because it must be electric fan. Therefore, hubs and blades known as 'Blade Assembly' is not an electric fan and hence not classifiable under Tariff Item 33(2) to the erstwhile Central Excise Tariff Item 33(2) of the erstwhile Central Excise Tariff because of the fans at the time of removal from the factory did not have any electric motor or any other kind of device to generate electricity. Rather the fans were mounted on the shaft of the motor. Now let us examine what Tariff Entry reads. It reads as under :-
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Tariff Item No. Description of goods
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30 ELECTRIC MOTORS, ALL SORTS; AND PARTS THEREOF NAMELY -
A...
B...
C...
D. Parts of electric motors (including die-cast rotors).
Explanation I. - In the case of any multi-speed motor, the highest rated output of the motor shall be deemed to be the rated output of the motor.
Explanation II. - This item does not include motors specially designed for use in gramophones or record players and all parts of such motors.
Explanation III. - This Item includes motors equipped with gears or gear boxes.
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It would be seen that what is included in the Tariff Entry SOD is part of electric motors (including die-cast rotors). All the evidence on record points out that rotors and stators manufactured by the appellant are of a specific design for use in monobloc pumps. It has also been brought on record that these rotors and stators are not interchangeable and cannot be used in electric motors.
Having regard to this fact and following the rulings of the Apex Court in the cases cited above, we hold that rotors and stators manufactured by the appellant and captively used for manufacture of monobloc pump sets shall be classifiable not under Item 30D but under the then Tariff Item 68.
9. Having regard to the above findings, the appeal is allowed. Consequential relief if any, shall be admissible to the appellants in accordance with law."
6. On a careful consideration of the judgments of the Tribunal noted above, we are of the opinion that there is no reason to differ from the conclusion arrived at by the Tribunal and following the ratio thereof, the impugned orders are set aside and the appeals are allowed.
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(S.L. Peeran)
Dated : 14-12-1995 Member (J)
S.K. Bhatnagar, Vice-President
7. With due respects to Hon'ble Member (Judicial), my views and orders are as follows :-
8. I observe that the process of manufacture as described by the appellant and their learned counsel and not doubted or disputed by the Department is as follows :-
"The manufacturing process of the so called rotor and stator portion of the monobloc pump is as under :-
(a) The electrical stampings are packed with end ring inside the cast iron body, pressed in hydraulic press and locked. Next end cover seating, machining, drilling, tapping are done. By these operations, the body or the casing of the monobloc is formed and in that casing, coil winding is done. (This is being construed as a stator portion of motor by the Department).
(b) Likewise, stampings packed are pressed in hydraulic press and locked. It is pressure die-casted, and thereafter machining and other operations are carried on the same. Then, it is inserted into the shaft of the monobloc pump. (This is being construed as a rotor portion of motor by the Department)."
9. This shows that stators and rotors do not come into existence independently but the whole process of manufacturing monobloc set pump is an integrated process and therefore, only the monobloc pump as a whole constitutes the final product which was excisable. In other words, no intermediate product in the nature of marketable rotors or stators comes into existence. Therefore, they were not excisable and not chargeable to duty at all. Hence, no question of exemption arises and the point was irrelevant.
10. This also shows that the Tribunal had in the cases cited above erred in observing that manufacture of rotors and stators cannot be denied. In fact, there is an error apparent on the face of record in this respect inasmuch as the whole crucial sentence in this regard consists of two self-contradictory clauses, (i) "Although, electric motor as such does not come into existence independently in such instances, the manufacture of rotors and stators cannot be denied". The contradiction is apparent from the fact that if rotors and stators do come independently into existence then together they would have undoubtedly constituted an identifiable electric motor : But, in fact not only the electric motor does not come into existence independently but even rotors and stators do not come into existence independently as apparent from the undisputed description of the manufacturing process given in the statement of facts in the appeal memorandum.
11. In view of the above factual position, in my opinion, the monobloc pump set would be classifiable as excisable product in the appropriate heading but the so-called rotors and stators which did not come into existence as separately identifiable marketable commodity but get fabricated alongwith the body of the monobloc pump in an integrated process of manufacture will not be required to be classified under any Heading whatsoever, being not excisable.
12. The impugned orders are, therefore, set aside and the appeals allowed with the above observations.
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(S.K. Bhatnagar)
Dated : 26-12-1995 Vice President
DIFFERENCE OF OPINION
In view of the difference of opinion between Hon'ble Member (Judicial) and the Vice President, the matter is submitted to the Hon'ble President for reference to a Third Member on the following point :-
"Whether in the facts and circumstances of this case, it could be said that rotors and stators had come into existence independently as excisable goods classified under Tariff Item 68 or in view of the process of manufacture described in this case, rotors and stators did not come into existence as separately identifiable marketable commodity but get fabricated alongwith the body of the monobloc pump in an integrated process of manufacture and therefore, were not required to be classified under any heading whatsoever, being non-exisable."
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(S.L. Peeran) (S.K. Bhatnagar)
Dated : 29-12-1995 Member (Judicial) Vice President
13. When this difference of opinion matter came up for hearing before me, as the third Member, Shri V. Sridharan, learned counsel for the appellants in these eleven appeals stated that they are not pressing the point that the items in question namely rotors and stators are not excisable goods at all. He submitted that the order proposed by the learned Judicial Member holding that the said rotors and stators are classifiable under Tariff Heading 68 of the Central Excise Tariff as applicable at the material time and not under item 30D as Parts of electric motors may be concurred with. In reply, the learned Departmental Representative conceded that the matter stands concluded by the Tribunal decision in EL.P.EM. Industries v. Collector of Central Excise, which has been reported in 1995 (70) E.L.T. 681. He left the matter for decision by the Bench.
14. I have taken note of the submissions. I have perused the record. On a careful scrutiny of the two separate orders proposed by the learned Judicial Member and the learned Vice President, it is seen that both of them have held the appeals are to be allowed setting aside the impugned orders, the only difference in their orders being that the former had proposed re-classification of the goods under Item 68 of the erstwhile Central Excise Tariff while the latter had held that rotors and stators did not come into existence as separately identifiable marketable commodity but get fabricated along with the body of the monobloc pump in an integrated process manufacturer and, therefore, were not required to be classifiable under any heading whatsoever being non-excisable.
15. The issue involved had been decided by the Tribunal in an earlier appeal filed by one of the present appellants themselves, M/s. EL.P.EM. Industries holding that the items rotors and stators manufactured in the course of manufacture of monobloc pumps are not rotors and stators forming part of a motor as no motor comes into existence as a separate identifiable commodity in the course of manufacture of such monobloc pumps. It was held that such rotors and stators are not classifiable under Item 30D of the Central Excise Tariff but under the residual Item 68. In coming to the said conclusion the Bench took note of a Tribunal decision in Quadromatic Engineering Pvt. Ltd. v. Collector - 1994 (71) E.L.T. 452 and two Supreme Court decisions in Sahney Paris Rhone Ltd. v. Collector - 1995 (77) E.L.T. 13 and Paharpur Cooling Towers Pvt. Ltd. v. Collector - 1995 (77) E.L.T. 18. In the Sahney Paris Rhone case, it was held that self-starter motor is not a motor alone and not covered under Tariff Item 30. In the other case of Paharpur it was held that hubs and blades which are Blade Assembly did not constitute a fan under Tariff Item 33(2) as it did not have any electric motor or any other kind of device to generate electricity. They were in fact mounted on the shaft of the motor. Going by these decisions, the Tribunal held in the earlier EL.P.EM. case that rotors and stators of the monobloc pump were not parts of electric motors and that Tariff Item 30D was not attracted but residual item 68.
16. In the partially dissenting order proposed by the learned Vice President, the view has been taken that not only the electric motor does not come into existence independently in the monobloc pump but even rotors and stators do not come into existence independently as apparent from the description of the manufacturing process and hence the conclusion has been drawn that the so called rotors and stators do not come into existence as separately identifiable marketable commodity. This conclusion, I find, goes beyond the grounds agitated by the appellants in their appeal. The order proposed by the learned Judicial Member follows the earlier decision of the Tribunal relating to one of the present appellants. The question that the goods are not dutiable at all was not the issue raised in the appeal and it was also not argued before the Bench. On the contrary, the learned counsel for the appellant specifically submitted that they are not pressing for the acceptance of the view that the goods are not excisable at all as held by the learned Vice President in his order. In that view of the matter, I agree with the view expressed by the learned Judicial Member in his order which follows the earlier decision of the Tribunal reported in 1995 (79) E.L.T. 681 that the rotors and stators come into existence independently as excisable goods classifiable under Tariff Item 68.
17. The papers may be placed before the regular Bench for passing the final order in accordance with the majority view.
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(K. Sankararaman) Member (T) FINAL ORDER In accordance with the majority opinion, keeping in view the scope of this appeal, affected, inter alia by not pressing of the point of excisability; the rotors and stators are treated as having come into existence in this case independently as excisable goods which are classifiable under the then tariff item 68 as such. The appeals are therefore accepted.
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(S.K. Bhatnagar)
Dated : 22-5-1996 Vice President
I agree for accepting the appeals in terms of earlier judgment of the Tribunal.