Customs, Excise and Gold Tribunal - Tamil Nadu
Beacon Weir Ltd. vs Commissioner Of Central Excise on 1 May, 1997
Equivalent citations: 1997ECR682(TRI.-CHENNAI), 1997(95)ELT140(TRI-CHENNAI)
ORDER
V.P. Gulati, Vice President
1. The issue in the appeal relates to the ineluctability or otherwise of the value of the electric motor which is supplied by the appellants along with the power driven pumps. The learned lower appellate authority in his order has observed that the contract of the appellants with their buyers is for the supply of the pump fitted with the motor and for that reason, therefore, the applicants can be taken to have supplied the commodity i.e. pump with motor as a separate entity.
2. The learned Advocate for the appellants Shri Ramesh has pleaded that the issue stands squarely covered in favour of the assessee by the ratio of the decision in the case of C.C.E. v. Kishore Pumps Pvt. Ltd. reported in 1997 (91) E.L.T. 91 (Tribunal). He has pleaded in that case the Tribunal after taking note of the contract of the supply of the pump with the motor has clearly held that for the reason that power is necessary for PD Pump to function does not make the source of power a component or integral part of the pump. In this connection he has drawn our attention to Paras 8 and 9 of the said judgment which are reproduced below for convenience of reference :
8. Electric Motor is a device which converts electrical energy into mechanical energy and attracts erstwhile T.I. 30. Erstwhile T.I. 30 reads as follows :
"Power driven Pumps (including motor pumps, turbo-pumps, monoblock pump sets) for liquids whether or not fitted with measuring devices."
Pump is intended for moving liquid from one point to another. Part which guides liquid to the impeller, impeller which slaps the liquid and guine-vans which straighten the flow are the principal parts of pump. It is said that Bowl assembly by itself is without any accompaniment a pump and can function as such. This was how the High Court of Gujarat explained the position in Jyoti Ltd. case. There can be units constituting pump and Electric Motor which may be motor pump set or Monoblock pump set which are different from mere pump or power-driven pump. Erstwhile T.I. 30A artificially indicates PD pumps to include such combined units. In common parlance and commercial sense, a pump is distinct from a unit combining pump and Electric Motor. Customers may have different needs. A customer may require his pump to be operated not with the help of an Electric Motor but to be operated with the help of Electric power generated elsewhere and supplied to him. Another customer may have an Electric Motor with him or may intend to buy an Electric Motor elsewhere and uses it to operate a newly purchased PD Pump. Yet another customer may require to buy both Electric Motor and PD Pump from the same source. There are distinct commercial and trade patterns prevailing in the market. Conversion of electric energy into mechanical energy is the function of motor and not pump. They are different entities functionally and commercially. Electric Motor cannot be regarded as a component or integral part of a pump unless the excisable product manufactured is a unit combining both articles or is a component system which also may be known to the trade. The fact that without electric power a pump cannot be operated (barring cases of small mechanically operated pumps) does not render the former a component or integral part of the latter, except in combined or composite system. PD Pump is complete in itself as excisable goods. It is marketed as such without electric motor. Hence, it is clear that Electric Motor is not essential even to the marketing of PD Pump, though for the sake of convenience a retail customer may buy both articles from the same shop or source. The fact that power is necessary for PD Pump to function does not make the source of power a component or integral part of pump. In this view, Electric Motor can only be regarded as a distinct article, or at best, as an accessory. On the facts, the decisions in Lawkin Put. Ltd., Tata Unisys Ltd. and Uptron India Ltd. cases cannot be inapplicable.
9. That there is provision in PD Pumps for fitting electric Motor cannot have much relevance. We notice that couplings dealt with in Digvijay Cement Company Ltd. case had grooves for fitting rubber rings. Electric Motors are not fitted to PD Pumps or Agitators at the time of clearance. Electric Motors are supplied only optionally at the request of buyers and not compulsorily to all customers. Therefore, even as accessories, the value of Electric Motors supplied in the case cannot be included in the assessable value of PD Pumps. The same is the position in relation to Agitators for the reasons which are relevant to PD Pumps and for the reason that respondent has been following invoice procedure showing the price of Electric Motors separately in cases where motors are also sold and Department has no case that respondent was not entitled to the benefit of such procedure.
3. He has pleaded that the facts in the present case are similar to the facts dealt with by the Tribunal in the order referred to supra and, therefore, for that reason the applicants prayer for exclusion of the value of the motors from the assessable value of the motors has to be allowed.
4. The learned JDR for the Department has pleaded that the very fact that the contract for supply was for the PD Pumps with the motor. The entity which was supplied was a combination of power driven pumps and electric motor. He has pleaded that the goods have to be assessed based on the condition on which they are cleared from the factory.
5. We have considered the pleas made by both the sides. The admitted position is, along with the power driven pump a bought out electric motor is supplied by the appellants based on the contract for supply entered into with their buyers. We are informed that this supply of the electric motor is optional and is supplied only to some of the customers who choose to buy the PD Pump with the electric motors. We have enquired from both the sides whether the motor is a built on or built in and mounted on a common place along with the pump and both the sides informed that this is not so. In this connection, we had examined Section Notes 3 and 4 to Section XVI and adverted to the scope of the same in the HSN. These two Section Notes are reproduced below for convenience of reference:
3. Unless the context otherwise requires, composite machines consisting of two or more machines fitted together to form a whole and other machines adapted for the purpose of performing two or more complementary or alternative functions are to be classified as if consisting only of that component or as being that machine which performs the principal function.
4. Where a machine (including a combination of machines) consists of individual components (whether separate or inter-connected by piping, by transmission devices, by electric cables or by other devices) intended to contribute together to a clearly defined function covered by one of the headings in Chapter 84 or Chapter 85, then the whole falls to be classified in the heading appropriate to that function.
5. We had put it to the learned JDR whether the supply of the motor along with the pump would be covered by any one of these two Section Notes for the purpose of assessing the two together as one entity. After referring to the notes in the HSN it could not be pointed out as to how the two items put together would in any way be covered within the ambit of Section Notes 3 and 4 as above for being assessed as one entity. In view of the above, we are of the view that the ratio of the decision referred supra squarely covered the issue before us. Respectively, therefore, following the ratio of the decision above, we allow the appeal of the appellants with consequential relief.