Custom, Excise & Service Tax Tribunal
Nashik vs Siemens Limited on 3 November, 2010
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI APPEAL NOS: E/2615/2003 & E/389/2005 [Arising out of Orders-in-Appeal No: CEX.XI/JMJ/180/916/NSK/ APPEAL/2003 dated 13/06/2003 & CEX.XI/JMJ/457/916/NSK/ APPEAL/2003 dated 29/10/2004 passed by the Commissioner of Central Excise & Customs (Appeals), Nashik] For approval and signature: Hon'ble Shri P.G. Chacko, Member (Judicial) and Hon'ble Shri S.K. Gaule, Member (Technical) 1. Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? : No 2. Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? : Yes 3. Whether Their Lordships wish to see the fair copy of the Order? : Seen 4. Whether Order is to be circulated to the Departmental authorities? : Yes Commissioner of Central Excise & Customs Nashik ...Appellant Vs Siemens Limited ...Respondent
Appearance:
Shri S.M. Vaidya, Authorised Representative (JDR) for the appellant Shri V.S.Nankani, Advocate for the respondent.
CORAM:
Hon'ble Shri P.G. Chacko, Member (Judicial) and Hon'ble Shri S.K. Gaule, Member (Technical) Date of hearing: 03/11/2010 Date of decision: 29/12/2010 ORDER NO: ....................................................
Per: P.G. Chacko:
In adjudication of seven protective show-cause notices issued by the department to the assessee from time to time, the Assistant Commissioner of Central Excise confirmed the demand of duty classifying the assessee's product under Heading 85.37 of the CETA Schedule vide order-in-original No. 367/98 dated 30/11/1998. In an appeal filed by the assessee, the Commissioner of Central Excise (Appeals) held the goods to be classifiable under Heading 84.71 and set aside the order of adjudication. The department's appeal No. E/2615/2003 is directed against the appellate Commissioner's order.
2. The department's appeal No. E/389/3005 is against a subsequent order passed by the Commissioner (Appeals) viz: order-in-appeal No. 457/2004 dated 29/10/2004 holding the same product to be classifiable under Heading 84.71 and setting aside order-in-original No. 38/2004 dated 14/06/2004 of the Assistant Commissioner who had approved classification of the goods viz: "Programmable Logic Controller" under Heading 85.37 of the CETA Schedule thereby modifying classification list No. 121/89 dated 28/02/1989 filed by the assessee.
3. There is a chequered history behind order-in-original No. 38/2004 dated 14/06/2004 ibid. In the above classification list, the assessee had claimed classification of their product under Heading 84.71, which was approved by the Assistant Collector. The Assistant Collector's order was reviewed and an appeal filed by the Revenue before the Collector of Central Excise (Appeals). The appellate authority accepted the Revenue's contention and classified the goods under Heading 85.37 vide Order-in-Appeal No. 89/1993 dated 02/06/1993. The appellate Collector's order was challenged by the assessee in Writ Petition No. 2609/1993 before the Hon'ble Bombay High Court on the ground that the above order-in-appeal was passed without giving an opportunity of being heard. The Hon'ble High Court set aside the order-in-appeal and remanded the matter to the Collector (Appeals) for passing fresh orders after hearing the assessee. Subsequently, the Collector (Appeals) passed order-in-appeal No. 71/1994 dated 21/02/1994 classifying the assessee's product under Heading 85.37 as claimed by the department. Aggrieved by this decision, the assessee preferred an appeal to this Tribunal, which was disposed of by order dated 22/06/1994, whereby the classification dispute was remanded to the original authority for de novo adjudication. Pursuant to the Tribunal's remand order, the Assistant Commissioner issued a show-cause notice to the assessee for modifying the classification of the goods from 84.71 to 85.37. This show-cause notice alleged inter alia that the assessee's 'Programmable Logic Controller' (PLC) was a digital apparatus used in programmable memory for storage of instructions for implementing specific functions. Relying on the opinion given by an expert (Dr. (Mrs.) K.S. Jog, Head of the Electronics and Telecommunications Department, College of Engineering, Pune), the show-cause notice alleged that the PLC was not capable of storing programmes and was not covered under the expression 'automatic data processing machine' for the purpose of Heading No. 84.71 given in Chapter Note 5A. The assessee denied these allegations and wanted to cross-examine the above expert. The Assistant Commissioner passed order-in-original No. 15/96 dated 05/06/1996 classifying the PLC under Heading 85.37 for the reasons recorded in his order. In an appeal filed by the assessee, the Assistant Commissioner's order was set aside by the Commissioner (Appeals) by order-in-appeal No. 196/97 dated 29/08/1997. The appellate authority remanded the case to the Assistant Commissioner to consider alternative classification of the PLC under Heading 90.32 after taking into account the relevant order issued by the CBEC under Section 37B of the Central Excise Act viz: Order No. 49/3/97-Cx dated 09/05/1997. In pursuance of this new remand order, the Assistant Commissioner granted further hearing to the assessee and passed order-in-original No. 228/98 dated 31/08/1998 once again classifying the goods under Heading 85.37, but this order of the Assistant Commissioner was also set aside by the Commissioner (Appeals) vide order-in-appeal dated 31/01/2002, wherein the Assistant Commissioner was directed to determine the classification in terms of the earlier remand order (order-in-appeal No. 196/97 dated 29/08/1997) and also the order passed by the Board under Section 37B. It was in pursuance of this new remand order of the Commissioner (Appeals) that the Assistant Commissioner passed order-in-original No. 38/2004 ibid.
4. Appeal No. E/289/05 involves the principal issue relating to classification of the product. In this appeal, the Revenue relies on the Board's order dated 09/05/1997 issued under Section 37B of the Central Excise Act, which classified PLC under heading 85.37. The appellant submits that the Board's order is binding on the lower authorities. In this connection, the appellant relies on the Supreme Court's judgment in Ranadey Micronutrients vs. Collector of Central Excise 1996 (87) ELT 19 (SC). The appellant further submits that the expert's opinion relied on by the lower appellate authority is not in conformity with the Board's order and hence not liable to be relied upon. It is submitted that the product in question is known in the market as 'Programmable Logic Controller'. Relying on the Supreme Court's judgment in Commissioner of Central Excise, Hyderabad vs. Fenoplast (P) Ltd. 1994 (72) ELT 513 (SC) the appellants submits that, in classifying the product, it has to be seen as to how it is identified by the people who use, or deal with, it. In other words, the goods in question can be classified only under Heading 85.37 based on trade parlance. The appellant further submits that the Tribunal's decision in Cincinati Milacron Ltd. vs. Commissioner of Customs, ACC, Mumbai 2002 (144) ELT 542 (Tri.-Mum), which was relied on by the Commissioner (Appeals) in the present case, is factually distinguishable and hence not applicable to the present case. The machine considered in the said case was a hybrid machine consisting of both analogue and digital systems and hence classified under Heading 84.71. The PLC involved in the present case is not identical or similar to the said machine. The learned JDR reiterated all these grounds raised in the Revenue's appeal. He also referred to Hon'ble Supreme Court's judgment dated 15/07/2010 in Civil Appeal No. 5394/2010 (Commissioner of Customs, Bangalore vs. N.I. Systems India P. Ltd.) wherein the apex court rejected the importer's claim for classification of the goods in Chapter 84 and held the same to be appropriately classifiable in Chapter 90 of the 1st Schedule to the Customs Tariff Act. The JDR pointed out that, in the said case, the apex court had considered the Board's order dated 09/05/1997 also, in the context of considering the Revenue's contention that a Programmable Automation Controller (PAC) combined a PLC and PC. The claim of the department before the apex court was that Programmable Process Controllers were suitable for use principally with industrial process control equipments i.e. sensors which measured temperature, pressure, flow, etc, and, therefore, such programmable process controllers were classifiable as part of the said equipment, instrument, or apparatus. According to the department, the programmable process controllers, being parts and accessory of a regulating or controlling apparatus, had to be classified under CTH 90.32. According to them, Programmable Automation Controllers (PACs), whether embedded or otherwise, were essentially programmable process controllers and hence classifiable under CTH 90.32 as per the Board's order dated 09/05/1997. This case of the Revenue was accepted by the apex court in N.I. System's case.
5. The JDR also produced literature on PLC downloaded from Wikipedia, which says that a PLC is a digital computer used for automation of industrial processes, such as control of machinery on factory assembly lines and that, unlike general purpose computers, PLC is designed for multiple input and output arrangements, extended temperature ranges, immunity to electrical noise, and resistance to vibration and impact. A copy of "Siemens" brochure on COROS 2000 (Multi-Terminal System for Demanding Operator Process Communication and Process Visualization Tasks) was also produced by the JDR, who, however, could not establish a convincing relation between the literature and the goods under classification. He could only submit that, as per the literature, COROS 2000 was designed to be used in conjunction with certain programmable control systems. He finally prayed that the Revenue's appeals be allowed.
6. The learned counsel argued for the respondent in defence of the appellate Commissioner's orders and submitted that the original authority had gone beyond the scope of the earlier remand orders of the appellate Commissioner, to classify the goods under Heading 85.37. In this connection, he referred to the Tribunal's decision in K.K. Mehra vs. Commissioner of Central Excise, Pune - II 2008 (228) ELT 448 (Tri.-Mumbai) and Collector of Central Excise, Aurangabad vs. Tigrania Metal & Steel Industries 2001 (132) ELT 103 (Tri.-Del.). In both the cited cases, the impugned orders passed by the Commissioner / Collector of Central Excise were found to have travelled beyond the scope of earlier remand orders of the Tribunal. The counsel also justified the reliance placed by the lower appellate authority on the expert's opinion, by submitting that, in the absence of any contra opinion, the expert's opinion brought on record by the assessee was a reliable evidence in favour of classification of the goods under Heading 84.71. In this context, the learned counsel relied on the Tribunal's decision in the cases of Wipro Ltd. vs. Commissioner of Customs, Chennai 1999 (107) ELT 398 (Tribunal) and Television & Components vs. Commissioner of Central Excise, Ahmedabad 2003 (157) ELT 529 (Tri.- Mumbai).
7. We have given careful consideration to the submissions. In the relevant classification list, the assessee claimed classification of their product under Heading 84.71 of the CETA Schedule, which was approved by the Assistant Collector. In an appeal of the Revenue, the appellate Collector classified the goods under Heading 85.37 as claimed by the Revenue. At one stage of further litigation between the department and the assessee, the Tribunal remanded the case to the Assistant Commissioner, whereupon the Assistant Commissioner issued a show-cause notice to the party proposing to modify the classification of the goods from Heading 84.71 to 85.37. The litigation continued. Eventually, before the Commissioner (Appeals) the assessee submitted that, if the product could not be classified under Heading 84.71, it should alternatively be classified under Heading 90.32 as 'Programmable Process Controller' in terms of the Board's order dated 09/05/1997 issued under Section 37B of the Central Excise Act. At this stage, the classification dispute practically turned out to be "Heading 90.32 vs. Heading 85.37" between the assessee and the department. The appellate Commissioner by order dated 29/08/1997 remanded the issue to the original authority. The operative part of the order-in-appeal dated 29/08/1997 reads as follows:
"3. I have carefully considered the submissions made by the appellants. I find that as per the Board's clarification vide Section 37B order which is binding on the Assistant Commissioner clear distinction has been brought out between the programmable logic controller and programmable process controller and from the findings given by the Asstt. Commissioner it does appear that the appellants' product is somewhat similar to the programmable process control which has been held by the Board to be classifiable under chapter heading 90.32. Since this chapter heading was never canvassed before the Asstt. Commissioner, I remand the matter back to him to consider the alternative classification of the appellants' product under chapter heading 90.32 after taking into account the order issued by the Central Board of Excise & Customs under Section 37B as referred to by the appellants."
Neither the department nor the assessee chose to challenge the above order of the Commissioner (Appeals). However, litigation continued, and, ultimately, the Commissioner (Appeals) accepted the assessee's plea for classification of the product under Heading 84.71 and accordingly set aside the demands of duty.
8. It appears from order-in-original No. 38/2004 dated 14/06/2004 of the Assistant Commissioner that he considered the Board's order as directed by the Commissioner (Appeals). It further appears that, before the Assistant Commissioner, the assessee admitted that they manufactured both Programmable Logic Controllers (PLCs) and Process Control Systems (PCS). The assessee produced two sets of invoices, one describing the commodity as PLC and the other describing the goods as PCS. However, the assessee argued that both PLC and PCS were one and the same, which argument was rejected by the Assistant Commissioner, who examined the purchase orders and invoices and discerned a difference in trade understanding in regard to PLC and PCS. What was found to be the commodity under classification was PLC and the same was classified by the Assistant Commissioner under Heading 85.37 in accordance with Board's order dated 09/05/1997. The learned Commissioner (Appeals), in the impugned order, noted that classification of the product under heading 85.37 had already been set aside in order-in-appeal dated 31/01/2002, and therefore, the surviving classification dispute was "Heading 84.71 vs. Heading 90.32". We also find that, in order-in-appeal dated 31/01/2002, the Commissioner (Appeals) had set aside the classification but, to our mind, the appellate Commissioner's order dated 31/01/2002 did not purport to be conclusive with regard to classification of the goods under Heading 85.37. In that order, the learned Commissioner (Appeals) set aside the Assistant Commissioner's order (wherein the product was classified under Heading 85.37) and remanded the classification dispute to the lower authority for appropriate classification of the goods by applying the Board's order dated 09/05/1997. Therefore, we do not agree with the following finding recorded in the impugned order.
"From the above, it is clear that the Commissioner (Appeals) has set aside the classification of the product under CH 85.37 of the schedule to the Central Excise Tariff Act." (vide para 9 of the remand order) The learned Commissioner (Appeals) wrongly proceeded on the premise that any classification of the product under Heading 85.37 had already been ruled out in order-in-appeal dated 31/01/2002 and consequently he confind himself to the question of classifying the goods under Heading 84.71 or Heading 90.32. Obviously, the impugned order is liable to be set aside for this reason.
9. The real issue to be considered is whether the product in question is classifiable under Heading 85.37 as claimed by the Revenue or under Heading 84.71 / 90.32 as claimed by the assessee. The lower appellate authority will have to address this issue keeping in view the Board's order dated 09/05/1997 and other relevant materials such as the manufacturer's brochure / literature on the product, trade parlance, etc. We are of the considered view that the Hon'ble Supreme Court's recent judgment in N.I. Systems case (supra), wherein their Lordships elaborately examined the features / attributes of various equipments, including programmable process controllers and programmable logic controllers and classified the goods in question under CTH 9032 90 00, after taking into account the relevant tariff schedule provisions and HSN Explanatory Notes, would be of considerable aid to the lower appellate authority in taking correct decision.
10. Therefore, without taking any view on the rival contentions, we set aside the impugned orders and allow these appeals by way of remand with a request to the learned Commissioner (Appeals) to pass fresh orders in accordance with law and in terms of this order, after giving the assessee a reasonable opportunity of being heard.
(Pronounced in Court on 29/12/2010) (S.K. Gaule) Member (Technical) (P.G. Chacko) Member (Judicial) */as 14 14