Customs, Excise and Gold Tribunal - Delhi
Needle Roller Bearing Co. Ltd. vs Collector Of Customs on 1 November, 1996
Equivalent citations: 1997ECR350(TRI.-DELHI), 1997(92)ELT622(TRI-DEL)
ORDER Shiben K. Dhar, Member (T)
1. This appeal is directed against Order-in-Appeal No. 1560/89-BCH, dated 19-9-1989 of Collector of Customs (Appeal).
2. The appellants imported Surface finish or Roughness Testing Equipment used in Ball Bearing Industry. They imported also along with it Surgraphic Recorder. Surgraphic Recorder it is claimed is part and parcel of the Surtronic 3P equipment and without this Recorder, any manufacturer of Bearings cannot manufacture bearings of any kind requiring high precision and high tolerance. The Customs Authorities while granting exemption under Notification 26/88, dated 1-3-1988 to main instrument, denied it to Surgraphic Recorder on the ground that it is optional and there is no evidence that it was supplied compulsorily. Collector (Appeals) upheld this order. The appellants have now come up before Tribunal against this order.
3. Arguing for the appellants, ld. Advocate submits that letters from the agent of the manufacturer make it clear that Surtronic 3P equipment comprises various items including Surgraphic Recorder without which the best result while checking the entry roller ball bearings cannot be obtained. No separate prices have been charged from them. In fact it was claimed before Asstt. Collector that the Recorder is a part of the equipment and the equipment cannot work without recording the results. In this view of the matter, it has to be treated only as a part of equipment itself and given exemption as the equipment for checking and measuring bearing components. The correspondence would clearly indicate that they had no choice but to purchase this and in fact price was also a composite price and it was not purchased as an optional instsument. Catalogue also does not indicate it optional by itself but only indicates the function of recording the results.
4. Arguing for the Revenue, ld. DR submits that while main instrument which checks is complete as soon as results are displayed on digital indicator other parts added to the machine to increase its versatility can only be called optional. In this view of the matter, such parts which increase the versatility of the machine cannot be treated as machine itself, and being parts of the machine exemption cannot be granted.
5. We have heard both sides. From letter from the Machine Tools (India) Ltd. placed at page 16 of the appeal papers, we find that the agents have written to the appellants that Rank Taylor Hobson Surtronic 3P System ordered by them was complete for specific measurements to be undertaken by the bearing industry. Generally throughout the world for the bearing industry Rank Taylor Hobson offer a system for surface checking which should include all the equipment including surgraphic recorder covered by their order. Recording facility is essential part of the system and "We have offered you a complete system and separate prices for individual items such as recorder are not available".
We also find that as early in May 1988, they had written to Asstt. Collector of Customs, Bombay vide letter placed at page 17 of the appeal papers, that Surgraphic Recorder is an essential part of the equipment. The relevant part of the letter of the appellant is reproduced below:
"Machine Tools (India) Ltd., the Agents for Rank Taylor Hobson, U.K. advised us to import Surtronic 3P comprising of various items including surgraphic recorder, so as to obtain the best results while checking the needle roller bearing components. They further informed us that throughout the world for bearing Industry Rank Taylor Hobson offer a system for surface checking which includes all equipment including surgraphic recorder. They have informed us that separate price for individual items such as surgraphic recorder are not available. In this connection, we enclose their letter Ref. BKM/HD/MFL 534908, dated 3rd may.
Kindly note that without a recorder no surface/roughness testing equipment can be used in the bearing industry. This is explained below in respect of bearing rings and needle roller:
During manufacturing of rings first few pieces are checked critically for all the specified parameters. This is essential to confirm that right quality is produced later.
Generally the defects like grinding marks, grinding patches, circular marks, chattering marks, etc. occur. These defects are not visible to the naked eye. To take corrective action during manufacturing, it is required to know the value and position of the defect. Corrective action can then be taken accordingly.
Display traverse unit of Surtronic 3P can measure the defect, but the location of the defect still remains unknown. Hence the information is inadequate to take proper corrective action.
Surgraphic Recorder provides graphic record of the measured profile which unables to find out the location of the defect with the help of this recorder.
The Display Traverse Unit with Surgraphic Recorder makes the corrective action possible during manufacturing and eventually helps in production of right quality".
6. In fact, the invoice itself placed at page 19 of the appeal papers, at page 21 indicates Surtronic 3P comprising items like Standard Pick-up, Plate, Remote Start, Traverse Unit, Surgraphic recorder etc. There is no dispute about the other items which were treated as comprising the machine. There is no reason when invoice itself indicates that Surtronic 3P comprises among other items Surgraphic Recorder it should not be treated as a part of the equipment itself. The appellants admittedly have not been charged separately for the Surgraphic recorder. Purchase order also indicates that the appellants have ordered for one Surtronic composite equipment. Collector (Appeals) himself records that the users require bearings of very high precesion and "even insist on a record of the nature of the surface of the bearing and the appellants is, therefore, required not only to satisfy about the smoothness of the surface of the bearing but also to submit a copy of the graph to the customer'.
Having recorded this as an essential part of the high precesion checking the roughness of the surface in case of precision instrument like bearing one could not draw the conclusion contrary to only logical conclusion: it is in fact a part of the machine for checking the surface of a precision product like bearings. It was pleaded before us that defects like grinding marks, grinding patches are generally not visible to the naked eye and display traverse unit of Surtronic 3P can measure the defect but the location of the defect still remains unknown. Surgraphic recorder provides graphic records of the measured profile which enables to find out the location of the defect. In view of this we must uphold that the equipment comprises various items indicated in the invoice including the recorder and recorder cannot be taken out of what can be called a composite machine.
Collector's findings that catalogue indicates the recorder as optional accessory is not borne out by the catalogue placed at page 10 of the appeal papers. The catalogue states that when permanent graphs are required of tested profiles, the Surgraphic Recorder can be added to the system, connected directly to Surtronic 3P, or via the Parameter Module, or used remotely with an interconnecting lead. It was pleaded before Asstt. Collector that it is essential to locate the defects and for this, surgraphic recorder is essential. The system also includes all the equipments including surgraphic recorder. Revenue had not produced any evidence in rebuttal. It will be clear that in a system where it is essential to have graphic record to measure the accuracy of the results reading the sentence in the catalogue which states the instruments versatility can be further increased by addition of a parameter to hold the impugned goods are optional part is not a correct approach for appreciating the character of the goods. When the catalogue says that where permanent graphs are required, and the appellants have through-out pleaded that for manufacture of bearings, permanent graphs are required of tested profiles, it cannot be held that catalogue indicates that the item is optional.
For the reasons mentioned herein-before we set aside the impugned order and allow the appeal.