Customs, Excise and Gold Tribunal - Delhi
Collector Of Customs vs Jolly Exports (P) Limited on 12 August, 1986
Equivalent citations: 1990(45)ELT612(TRI-DEL)
ORDER M. Santhanam, Member (J)
1. The review show cause notice issued by the Governement under Section 131 of the Customs Act, on transfer to the Tribunal, is being treated as an appeal.
2. The respondents imported three crates surface plates in stainless steel valued at Rs. 1,81,647/- from Sweden under Bill of Entry No. 1016/121-21.12.1978. The goods were surface plates in stainless steel of size 3mm x 5070 mm x 1310 mm and were described in the invoice as Grade Avesta 832 H ground one side with emery 220, complete with 18 lugs per plate. The Department assessed the goods to duty under heading 73.15(2) CTA 75 @ 220% plus CVD. The importers disputed the classification and submitted that the goods were classifiable under heading 84.59(1). In his order of assessment, the Assistant Collector of Customs, Bombay held that the surface plates could not be said to be components of hot press necessary for its operation, but could not only be said to be the parts of a system for the manufacture of the hard board. He referred to Chapter note I (n) of Chapter 73, sheets and plates which have been cut to non-rectangular shape, perforated, corrugated, channelled, ribbed, polished or coated still remain as sheets or plates provided that they do not thereby assume the character of articles or product as falling within the other heading. He was of the opinion that the surface plates were finely polished like other polished stainless steel plates. Depending upon the composition, physical properties and the finish of the plates, he held that they were not different from similar stainless plates used for various other purposes.
3. Aggrieved by the decision, the respondents filed an appeal. The Collector of Customs (Appeals), Bombay, in his order dated 3-9-1979 held that the lugs which were fixed to these plates in eight or more different places according to the size of the plates were in the nature of a very specific fabrication for specific end use. He also held that the proviso to Chapter note I (n) were rendered totally inoperative if the restricted meaning given by the Assistant Collector was approved. The Collector of Customs was satisfied that these goods required to be classified as functional parts solely or principally for the hot presses and therefore, allowed the appeal accepting the classification of the respondents. The Governement have come forward with this review.
4. Shri J.Gopi Nath, SDR urged that the invoice described the goods as "surface plates". The respondents have sought classification under heading"84.59(l)". These plates are required for use in hydraulic press. He urged that the function of the surface plates was related to the fibre mat which was to be compressed for obtaining desired surface quality and this function imparted to the goods the character of an accessory as distinguished from that of a part considered essential. The hydraulic press could operate even without the surface plates and hence the imported goods cannot be parts but accessories. The SDR drew our attention to the decision of the Tribunal reported in 1986 (25) E.L.T. 240 (Tribunal) - (Bakelite Hylam Limited, Bombay and Anr. v. Collector of Customs, Bombay and Anr.). In that case also, the question arose regarding the classification of moulds. The Tribunal, by a majority, held that the goods performed the function of moulding and would meit classification as such and not under heading "73.15(2)". Shri Gopi Nath stated that the facts of the present case were totally different from the facts of that case. He drew our attention to Section XVI Note II which described how a part should be classified. Section XVII referred to accessories and Note III in particular made mention of part or accessory which answer to a description in two or more headings of those of Chapters 86-88 and how they should be classified. Since the hydraulic machines could work even without the surface plates, Shri Gopi Nalh urged that under interpretation Rule 3(c) the assessment should be under the heading appropriate to the goods to which they are most akin. The polished stainless steel plates would, therefore, attract duty under heading 73.15(2). We find that the import licence granted to the party also described the goods as "spare parts" meant for maintenance of imported machinery.
5. Shri R.J. Gagrat and Ms. Sushma Manchanda, Advocates, appeared for the respondents. Shri Gagrat submitted that the whole "list" was that the goods were treated as stainless steel sheets without any regard to the fundamental function of the goods. He urged that these goods could not be sold as stainless steel sheets and the cost would be prohibitive. No one in the trade would buy the subject goods fitted with lugs as "stainless steel sheets". He stated that, for all practical purposes, the surface steel became part of the platen. This is not a product which could be bought and sold by a stainless steel vendor. He drew out attention to the letter from the Collector wherein the term 'accessory' was mentioned for the first time. The Assistant Collector, in his order, has conceded that these surface plates are parts of the system for the manufacture of the hard board. The Collector, in the course of the appeal, has confirmed that these goods were merely parts of the machine. The show cause notice was issued in the present case because at that time the Governement had issued a review notice in the case of M/s Bakelite Hylam Limited, Bombay. Shri Gagrat contended that in view of the decision of the Tribunal in the Bakelite Hylam Limited's case the classification of the surface plates under Tariff Heading 73.15(2) would not be justified. He drew our attention to the import licence and invoice where the nature of the goods has been described as "surface plates". The respondents have explained, in their letter dated 15-11-1978, the nature and function of these goods. The metallurgical properties lend support to the goods being parts of a machinery. He emphasised that there was no justification for review, more so, after the decision of the Tribunal in the Bakelite Hylam Limited's case.
6. For the purpose of understanding the controversy that two competing entries are set out below, the Department seek to classify the goods under Heading 73.15(2) which is as follows:
"73.15 : Alloy steel and high carbon steel in the forms mentioned in Heading Nos.73.06/07 to 73.14:
1. Not elsewhere specified 60%
2. Coils for re-rolling, strips, sheets and plates, of stainless steel.
300% Chapter note(n) reads as follows:
"Heading No. 73.13 is to be taken to apply, inter alia, to sheets or plates which have been cut to non-rectangular shape, perforated, corrugated, channelled, ribbed, polished or coated provided that they do not thereby assume the character of articles or of products falling within other Headings;"
The respondents prayed that the classification should be under the Heading No. 84 -Machinery, mechanical appliances, etc. Heading 84.59 reads as follows :
Standard Rate of duty "Machines and mechanical appliances, having individual functions, not falling within any other heading of this Chapter :
1) Not elsewhere specified 60% 2) Machines and mechanical appliances designed 40% for the production of a commodity, machinery for treating metals, wood or similar materials for stripping and cutting of tobacco leaf or for cutting or rolling tea leaves; machines for mounting card clothing; nuclear reactors."
Though Shri Gagrat argued that the classification would be more appropriate under 84.59(2), since the respondents have urged, even in their grounds of appeal to the Appellate Collector seeking the classification under heading 84.59(1), and in the absence of a cross-appeal, we are not considering the classification under heading 84.59(2).
7. The two competing entries are, therefore, 73.15(2) and 84.59(1). Shri Gopinath very fairly stated that, if these goods are treated as parts then the classification under 84.59(1) would be justified. Per contra, if they are treated as accessories, then the classification under 73.15(2) would be reasonable. In the B.T.N. Section XVI in respect of parts we find the following:
"Subject to the general provisions regarding the classification of parts (See General Explanatory Note to Section XVI), the heading also covers parts of the machinery and apparatus of the present heading, including moulds other than those covered elsewhere (in particular, heading 84.60)"
The term 'Accessory' has been defined in McGraw Hill Dictionary of Scientific and Technical Terms as follows :
"Accessory (Mech Eng): A part, sub-assembly, or assembly that contributes to the effectiveness of a piece of equipment without changing its basic function; may be used for testing, adjusting, calibrating, recording or other purposes."
A 'part' has been defined as follows :
"Part (Eng) : An element of a sub-assembly, not normally useful by itself and not amenable to further disassembly for maintenance purposes."
If, in order to determine whether the subject goods are accessories or parts, the distinction to be drawn is on the basis whether they are integral parts used for smooth and efficient functioning. A part of a machinery is capable of being substituted or replaced. An accessory, on the other hand, means something which contributes in a subordinate degree to attain a general result or effect. For example, oil-cans or steel files would be accessories of chaff-cutters. If a machinery cannot be worked without the part, then it ceases to be an accessory. If it adds merely to the convenience or effectiveness of a machinery like a speedometer it would be an accessory. A motor vehicle could run without a speedomotor. With this basic background, we will have to find out the functional aspect of the goods in question. They have been described as spare parts for maintenance of imported machinery. In the licence and even in the bill of entry they have been mentioned as spares. The invoice described the goods as surface plates in stainless steel, ground on one side with emery 220 complete with 18 lugs per plate. The appellants have written to the Assistant Collector at the time of assessment, the nature and function of these parts. It is useful to extract the relevant portion which is as follows :
"In the manufacture of hardboard, wood fibre mat with a moisture content of about 60 to 65% is pressed in a hot press. The press has twenty day-lights, hence twenty wet mats can be pressed at a time. Under each platen a stainless steel surface plate is clamped. Lugs are provided on all the four sides of the plates for clamping.
When the wet mats are pressed against these surface plates, boards thus formed will have smooth surface.
After every seven hundred presses or neat about these plates are taken out for cleaning, removing any dents caused during the operation and polished.
These surface plates are very vital spares of the hot press for the manufacture of hardboards."
The above narration indicates that these surface plates perform an essential function of the hydraulic presses and is not merely for purpose of ornamentation or for additional efficiency. The Assistant Collector has observed in a portion of his order they they are the parts of the system. However, since they have polished surface, he thought that the classification as "stainless steel sheets" would be appropriate. They are component parts of the hot press and the polishing of the surface has been done with a view to secure uniformity in the ultimate production. They are spare parts of the hot press and not merely polished stainless steel sheets.
8. We also notice that both the surfaces of the plates are not polished. On one side, it is ground with emery and have been fixed with 18 lugs welded on it. The surface platen with lugs fixed on the bottom side of the press plates provides a clamping device. We do not normally find stainless steel sheets with lugs welded to them.
9. The lugs have been welded on the surface plates so that the press platen is in perfect position and avoid the possibility of positional dislocation. Considering the high pressure and also the heat required for the manufacture, in the hot presses, the surface plates are absolutely essential as parts of the machinery.
10. From the arguments of Shri Gagrat, it is manifest that the presses would be ready for operation only after the surface plates are attached to the bottom side of the press platon. It is not an ordinary hydraulic press manufacturing the goods by mere pressure. The machine would be ready for operation only after the surface plates are fitted in their appropriate position and the lugs are suitably tightened. It is also not shown to us that these press plates are useful for other purposes for which ordinary stainless steel plates are used. The nature of the fabrication of these plates justifiably call for classification under 84.59(1).
11. The respondents also rely on the Conference Tariff Advice No. 30 published in Customs House Public Notice No. 5 dated 22-4-1978. The caul plates which are also used in similar hydraulic presses are classified under 84.59(1). The welding of the lugs at specified places in the plates in question show that these plates have assumed the character of articles of machinery and would thus be excluded from Chapter 73.
12. The Collector of Customs (Bombay) has rightly said that the intention of designing the surfaces with different patterns is also functional. Whatever pattern is engraved or carried or imparted to the surface is automatically given to one side and the hardboard which comes in contact with this plate and which is frontside of the hardboard for the customer. The brochure issued by the manufacturers indicate that the goods are parts of the machinery.
"We have obtained balanced metallurgical properties in the use of a modified AISI 410 stainless steel by heat treating to a Rockwell C scale hardness of 35-42 (Brinell 327 to 390) which provides the resistance to localized indentations. By keeping the elongation properties relatively high, we prevent cracking of the plates. The modified 410 alley has a low co-efficient of thermal expansion which resists warpage."
13. They also filed a certificate issued by the manufacturers which show that these are unaviodable parts of the imported press and as they are subject to wear and tear they have to be replaced now and then as spare parts. The review notice refers to conveyors, elevators, belts, etc. which were not taken as parts of machinery in the B.T.N. But, we notice that these items have been expressly excluded under the section, "Machinery and mechanical compliance and electrical equipment parts". We are also fortified in coming to the above conclusion by the judgement of the Tribunal in the Bakelite Hylam Limited's case. The material in dispute was an aritcle which the Department wanted to classify as steel plate. But the importers call them as "mould". After considering the several aspects, the Tribunal has observed that the press plates perform the function of moulding. The process of manufacture unmistakably indicated that the products which emerge as plastic laminates, came into being only as a result of the constituent material being put under pressure in the hydraulic-press, sandwitched on interleaved between these press-plates, placed on the top and the bottom. The Tribunal has emphasised on the functional aspect of the impugned goods before arriving at a conclusion. On the same basis and in view of the several aspects placed before us, we are justified in coming to the conclusion that the impugned goods are only parts and not accessories. The classification of the goods under Tariff heading 84.59(1) is justified. The review show cause notice is dropped and the appeal is dismissed.