Custom, Excise & Service Tax Tribunal
Mahendra & Mahendra Ltd. vs Commissioner Of Central Excise-Nagpur on 30 January, 2023
CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL, MUMBAI
REGIONAL BENCH
Excise Appeal No. 1001 of 2012
(Arising out of Order-in-Original No. 23/2012 dated 30.03.2012 passed by the
Commissioner of Central Excise & Customs, Nagpur)
M/s. Mahindra & Mahindra Ltd. Appellant
DGM (Excise), Farm Equipment Sector,
MIDC, Hingana Road, Nagpur
Vs.
Commissioner of Central Excise, Nagpur Respondent
Telangkhedi Road, Civil Lines,
Post Box No.81, Nagpur 440 001.
WITH
Excise Appeal No. 85020 of 2013
(Arising out of Order-in-Original No. 61/2012/C dated 28.09.2012 passed by
the Commissioner of Central Excise & Customs, Nagpur)
M/s. Mahindra & Mahindra Ltd. Appellant
DGM (Excise), Farm Equipment Sector,
MIDC, Hingana Road, Nagpur
Vs.
Commissioner of Central Excise, Nagpur Respondent
Telangkhedi Road, Civil Lines,
Post Box No.81, Nagpur 440 001.
AND
Excise Appeal No. 88628 of 2013
(Arising out of Order-in-Original No. 8/2013/C dated 27.05.2013 passed by
the Commissioner of Central Excise & Customs, Nagpur)
M/s. Mahindra & Mahindra Ltd. Appellant
DGM (Excise), Farm Equipment Sector,
MIDC, Hingana Road, Nagpur
Vs.
Commissioner of Central Excise, Nagpur Respondent
Telangkhedi Road, Civil Lines,
Post Box No.81, Nagpur 440 001.
Appearance:
Shri Sriram Sridharan with Ms. Payal Nahar, Advocates, for the
Appellant
Shri C. Dhanasekaran, Special Counsel for the Respondent
CORAM:
HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL)
HON'BLE DR. SUVENDU KUMAR PATI, MEMBER (JUDICIAL)
2 E/1001/2012,85020,88628/2013
Date of Hearing: 19.12.2022
Date of Decision: 30.01.2023
FINAL ORDER NO. A/85076-85078/2023
PER: SANJIV SRIVASTAVA
The appeals as indicated in table below are in respect of
order in original of Commissioner of Central Excise, Nagpur.
Appeal No. Order in Dated Period Duty Demanded
Original
E/1001/2012 23/2012/C 30.03.12 Apr 07 - Jan Rs.17,26,89,200
11
E/85020/2013 61/2012/C 28.09.12 Feb 11- Sep Rs. 3,87,91,376
11
E/88628/2013 8/2013/C 27.05.13 Oct 11 - Jun Rs. 2,67,62,848
12
Total. Rs. 23,82,43,424
1.2 By the impugned order following has been held:
Order No 23/2012/C dated 30.03.2012
"ORDER
a] I hereby order classification of the model "Arjun Ultra - 1 CE"
cleared by the Noticee during the period from April, 2007 to
January 2011 under Chapter Sub-heading No. 8429.51.00 of the
Schedule to the Central Excise Tariff Act, 1985.
b] I hereby confirm the demand of Central Excise duty of Rs.
17,26,89,200 /- (BED - Rs. 16,76,59,417/- + ED Cess
33,53,189/- + S&H ED.Cess 16,76,594/-) (Rupees Seventeen
Crores Twenty Six Lakh Eighty Nine Thousand and two Hundred
Only) on "Arjun Ultra - 1 CE" cleared by the Noticee during the
period from April, 2007 to January 2011, under the provisions of
Section 11A of the Central Excise Act, 1944.
c] I also order recovery of interest at appropriate rate, on the
amount of duty confirmed, under Section 11AB of the Central
Excise Act, 1944.
d] I also impose penalty of Rs. 17,26,89,200/- upon the Noticee
under the provisions of Section 11AC of the Central Excise Act,
1944.
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e] Since penalty under Section 11 AC of the Central Excise Act,
1944 has been imposed upon the Noticee, I refrain from
imposing penalty under Rule 25 of the Central Excise Rules,
2002."
1.3 Other two orders are identically worded except for the
amounts hence not reproduced.
2.1 Appellant is engaged in the manufacture of various types
of tractors. Tractors are wholly exempt from payment of basic
excise duty vide Sr. No. 40 of the Notification No. 6/2006-CE
dated 1.3.2006, as amended.
2.2 Acting on intelligence that appellant are also engaged in
manufacture and clearance of tractor model having brand name
"Arjun Ultra 1-CE" along with other models manufactured and
cleared by them, investigations were initiated. In said model
certain arrangements were made during the course of
manufacture itself to make it exclusively for use as loader. From
the marketing material and literature it transpired that this
model is marketed by them as "Construction Equipment" capable
of lifting or loading a payload of more than 1 MT. In this model
appellant were providing special grade axle so as to enable it to
carry the payload of more than 1 MT. Investigations were also
made with the end users.
2.3 On conclusion of investigations revenue authorities were of
the view that the instant machine i.e. Arjun Ultra-1 CE
manufactured by the appellant is specially designed by them to
form an integral part of a machine performing function such as
lifting, dozing or attaching any other required FEL and the
resultant goods appropriately merit classification under the
subheading 8429.51.00 as "Front End Shovel Loader.
2.4 The examination of end use of the said model Arjun Ultra-
1 CE manufactured by the appellant this view is supported as the
machine has an inherent feature for lifting more than 1 M.T. load
and serves as a material handling equipment rather than tractor.
It is also clear that the Noticee are Machine is capable of
handling or loading goods or materials rather than the vehicles
as laid down in chapter Note 2 to chapter 87 which defines
"Tractors" as vehicles constructed essentially for hauling or
pushing another vehicle, appliance or load. Appellant purchase
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loading equipments (Front end loaders) from their vendors which
are manufactured as per the designs and specifications provided
to them. The Front End Loaders (FEL /FED) etc. are
manufactured under their quality control and bear their brand
name. Appellant impart training to dealer's personnel for the
attachment of FEL and also give necessary directions to them
regarding the maintenance of the equipments and also give
physical demonstrations to the customers as well as the staff
members of the dealer. The User Manuals for so-called tractors
inter alia revealed that labour free services are offered to the
customers for these FEL/FED etc., which can be availed by the
attachment owner from any authorized dealer in India. They also
warranted the FEL/FED etc. to the extent that the defective part
will be repaired or replaced through their authorized dealer.
2.5 Thus Appellant themselves differentiate between plain "Arjun
Ultra-1 605 tractor" and "Arjun Ultra-1 CE 605
model/construction equipment". Admittedly "Arjun Ultra-1 CE
605 model/construction equipment" is fitted a special axle with
"Tonplus technology" wherein the cross section of the centre bar
is more as compared to normal tractors. As per the appellants,
the models are not interchangeable as the axle is put at the time
of manufacture itself making it suitable to perform specific
function.
2.6 It. therefore, they have misdeclared their product Arjun
Ultra-1 CE as "tractor" falling under chapter sub-heading
8701.90.90 and wrongfully claimed exemption under Notification
No. 06/2006-CE dt 16.11.2006 (Sr. No. 40) instead of properly
classifying them under the appropriate heading 8429.51.00 as
Front End Shovel Loaders.
2.7 A show cause notice dated 9.03.2011 was thus issued to
the appellant asking them to show cause as to why: -
a) The Arjun Ultra -1 CE model manufactured and cleared by
them during the period from April ,2007 to January, 2011
should not be classified under Chapter sub heading
8429.51.00 of the Central Excise Tariff as Front End Shovel
Loaders;
b) Central Excise duty of Rs. 17,26,89,200 /- (BED - Rs.
16,76,59,417/- + ED Cess 33,53,189/- + S&H ED.Cess
5 E/1001/2012,85020,88628/2013
16,76,594/-) leviable on Front End Loaders falling under
subheading 8429.51.00 being manufactured and cleared
by them, should not be demanded and recovered from
them under the provisions of Section 11A(1) of the Central
Excise Act, 1944;
c) Interest at appropriate rate on the duty so payable should
not be charged and recovered from them under the
provisions of Section 11AB of Central Excise Act, 1944;
and
d) Penalty should not be imposed upon them under the
provisions of Section 11AC of the Central Excise Act, 1944.
e) Penalty should not be imposed upon them under Rule 25
of the Central Excise Rules, 2002 for contravention of the
provisions of the Rules mentioned in para supra.
2.8 Two more show cause notices dated 15.02.2012 and
08.10.2012 were issued demanding the duty for the period
February 2011 to September 2011 and October 2011 to June
2012 respectively.
2.9 The show cause notices have been adjudicated as per the
impugned orders. Aggrieved by the impugned orders appellant
have filed these appeals as indicated in para 1 above.
3.1 We have heard Shri Sriram Sridharan along with Ms Payal
Nahar, Advocates for the appellant and Shri C Dhanasekaran,
Special Counsel for the Revenue.
3.2 Arguing for the appellant learned counsel submitted that:-
Arjun Tractor is cleared by them correctly classifiable under
CSH 8701, as per Note 2 to Chapter 87 and para 1 of HSN
87.01 provide the meaning of term 'tractor', as Note 2 to
Chapter 87. It is equipped with certain components which
are essential for working on various field operations.
It has been certified by the ARAI and Central Farm
Machinery Training & Testing Institute, Ministry of
Agriculture as agricultural tractor. the Therefore, it is
designed essentially for agricultural purposes, specially
designed for the purpose of hauling/pushing.
The conclusion that it is covered by the exclusion clause in
Para 2 of the HSN Explanatory note to heading No.8701 is
without any basis. This HSN explanatory note is applicable
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for the classification of propelling bases fitted with or
incorporating robust elements and in addition comprising of
other machinery. Arjun tractor is cleared from the factory
without any fitment of any machinery. Thus, aforesaid HSN
explanatory note is wholly irrelevant for the purpose of
determining the classification of the tractor in question.
Even after the fitment of front end loaders/dozers at the
dealers end, Arjun tractor cannot be excluded from Heading
8701, for the reason that these fitments are detachable and
do not form an integral part of the tractor. The term
'integral mechanical unit' has already been interpreted by
the following HSN and SC Judgment;
o HSN notes for heading 8705 under the title 'Motor
Vehicles, Chassis or lorries combined with working
machines'
o HSN notes for heading 8430 under the title
'Machines mounted on tractor type bases.
o LMP Precision Eng, Co. Ltd. [2004 (163) ELT 290
(SC)]
Further, merely strengthening the axle of the tractor,
cannot be treated as the special constructional design or
reinforcement to make the vehicle as propelling base to
form integral part of a machine. In fact, the strengthening
was done due to breakages in the front axle of the earlier
iterations of the Arjun Tractor while hauling agricultural
implements.
The fact that some of the end-customers had fitted front
end loaders/dozers on the tractor cannot be a ground
to classify the vehicle in question itself, as a machine under
Heading No. 84.29.
As per Bureau of India Standards (BIS) for tractors there
is a specific requirement that two most essential
components - VTU/PTO should be there in an agricultural
tractor. This requirement is not prescribed for
any construction equipments like front end loaders/dozers.
It is also clear from the technical specifications given under
ARAI, that Arjun tractor conforms to all the requirements of
an agricultural tractor.
7 E/1001/2012,85020,88628/2013
CBEC Circular No. 838/15/06 dated 16.11.2006 clarifies
that primary use of tractor should be the deciding factor for
its classification. Accordingly, since Arjun tractor's
principal function is hauling/pushing essentially being used
for agricultural purposes, it is to be classified under chapter
heading 8701.
Goods have to be assessed in the form in which they are
cleared
o Dunlop India [1983 (13) ELT 1566 (SC)]
o Reliance Textile Industries Ltd. [1993 (63) ELT 67
(Bom)]
o Mahindra & Mahindra Ltd. - 2010 (262)ELT 366 (T)
Affirmed by the Apex Court in 2016 (334) ELT 193
(SC)
o Aura Solar Products Pvt. Ltd. Vs. CCE - 2021 (44)
GSTL 82 (T)
It is a settled legal position that goods presented for
assessment and cleared at different points of time, cannot
be clubbed as a single consignment for the purpose of Rule
2(a) of General Interpretative Rules while determining
classification
o Tata Motors Ltd [2008 (222) ELT 289 (T)] Affirmed
by Apex Court in [2016 (337) ELT A99 (SC)]
o L.G. Electronics India Pvt. Ltd. [2022 (8) TMI 873 -
CESTAT]
o Sony India Ltd. [2002 (143) ELT 411 (T)]
Interpretative Rules cannot be applied when an article falls
squarely under a particular tariff heading. Kindly refer:
o Shivaji Works Ltd. [1994 (69) ELT 674 (T)]
o Mukund Ltd. [2004 (167) ELT 177 (T)]
It is a settled law that the end-use to which the product is
put to, cannot determine the classification of the product,
in cases where the product manufactured falls under a
specific tariff heading. In the present case, there is a
specific tariff heading for tractor, therefore, end use is
irrelevant for the purpose of determining classification of
Arjun Tractor. In any case, the end- user statements relied
upon by the department pertains to the tractor after
8 E/1001/2012,85020,88628/2013
fitment of additional implements and hence, not relevant
for deciding classification of Arjun tractor.
o Carrier Aircon Ltd.[2006 (7) TMI 8 (SC)]
o Indian Aluminium Cables Ltd. [1985 (5) TMI 54 SC]
It is a settled law that payment of duty under a particular
tariff item must depend upon the facts of the case and not
on the advertisement gimmick of the advertiser. In any
case, the advertisements relied upon by the department
tractor after fitment of additional implements and hence,
not relevant for deciding classification
o Blue Star Ltd. [1980 (6) ELT 280 (Bom)] Leukoplast
(India) Pvt. Ltd. [1985 (20) ELT 70 (Bom)] Affirmed
by Apex Court in 1994 (70) ELT 9 (SC)
Undisputedly, there were 4041 tractors of model '605 DI
Arjun Ultra-1' cleared during the period under
consideration. As against this, only 330 loaders and 187
dozers were sold. This constitutes less than 13% of the
total sales of the tractor model. Under these circumstances,
the liability on the appellants ought to be restricted to the
number of tractors which were fitted with front end
loaders/dozers. Demand of duty on all 4041 tractors is thus
incorrect.
Explanation to Section 4(1)(a) of the Central Excise Act,
provides that, total amount received by a manufacturer will
be deemed to be price cum duty and the assessable value
should be determined accordingly. Circular D.O.F No.
384/1/2003 TRU dated 20.2.2003 also clarifies the
above position. Therefore, in the present case also, the
appellants should be given the benefit of price cum duty.
Without prejudice to the submissions made, in case the
Arjun tractor model is held to be dutiable, by classifying the
same under Chapter Heading 8429 of the Central Excise
Tariff, then the appellants will be entitled to the CENVAT
credit of the duty paid on inputs used in or in relation to
the manufacture of the said tractor model.
In order to invoke extended period of limitation, the alleged
suppression or mis-statement of fact must be willful.
However, in view of the bonafide belief of the appellants,
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there is no such willful suppression of facts in the present
case.
o Cosmic Dye Chemical [1995 (75) ELT 721 (SC)]
o Pushpam Pharmaceuticals Company [1995 (78) ELT
401 (SC)]
o Chemphar Drugs and Liniments [1989 (40) ELT 276
(SC)]
o Jai Shree Rasayan Udyog Ltd. [2015(10)TMI1777-
CESTAT DEL]
o Arani Agro Oil Industries Ltd [2020(9)TMI502-
CESTAT HYD]
Demand of penalty and interest is also not sustainable.
3.3 Arguing for the revenue learned special counsel while
reiterating the findings recorded in the impugned orders submits
The short issue to be decided in these appeals is whether
the goods in question ought to be classified under Chapter
sub-heading 8429.51.00 of the Central Excise Tariff as
front-end shovel loaders or as a tractor under Chapter 87
as tractors.
The Appellant has also taken a stand that since the Tractor
has been tested and certified as a Tractor by the Central
Farm Machinery Training and Testing Institute the same is
a tractor. In this regard, it is observed that although the
appellant has claimed that the same was tested by the said
agency which certifies only farm equipment such as a
tractor, it is seen that the appellant had got tested only the
tractor portion of the equipment without the loader and
dozer fitted to it. The test report submitted by the appellant
clearly reveals that the same were not fitted when the said
model was tested by the appellant. It is therefore clear that
when primarily and principally the machine has been built
for carrying out the activities meant for material handling
rather than those undertaken by normal tractors the same
cannot be called a tractor when sold in the complete form
as portrayed and advertised.
In this case, the end use of the machine cleared by the
appellant is to do heavy-duty loading, unloading, and
dozing. This machine is designed to perform the work of a
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bulldozer, excavator, lifter, etc and is designed for
mounting such types of equipment, hence it needs to be
classified in chapter 84295100 and can not avail exemption
of chapter 8701 which is given for tractor used for
agriculture purpose only. Even road tractors which use a
semi-trailer as mounting /equipment and have a capacity of
more than 1800 CC are taxable. Also, tractors which are
special purpose tractors falling under heading 8705 are
taxable. Tractors which are used on the railway platform
and kind of places are taxable in heading 8709. It means
the exemption was for tractors used for agriculture
purposes only.
It is noteworthy that machines cleared by the appellant in
this case, are having capacity of more than 1800 CC and
have a unique axle for loading purposes and are designed
for industrial use.
The appellant has misclassified the goods intentionally,
they were aware that these goods are not agricultural
tractors and the design of the goods is made for
industrial/commercial purposes, they availed the exemption
with the intention to evade the duty and to capture the
market by selling the goods at a lesser cost compared to
their competitors. Hence the extended period of limitation
was rightly invoked. The adjudicating authority rightly
relied upon the Larger Bench decision of the Hon'ble
Tribunal in the case of Mermaid Marine Products Pvt Ltd
[1985( 20)ELT 329(Tri-LB)].
The interest is rightly invoked against the appellant. Since
the demand for Tax has been upheld the demand for
interest will follow. As have been held in Pratibha
Processors [1996 (88) ELT 12(SC) and Kanhai Ram
Thekedar [2005-TIOL-76 SC]
The Adjudicating Authority rightly invoked the extended
period for the following reasons. It is established that the
acts of omission and commission on the part of the
appellant have resulted in conscious and willful suppression
of facts with the intent to evade the due payment of duties
of excise on the part of the appellant which renders them
liable for penalty under section 11 AC. the Adjudicating
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authority relied upon the Hon'ble Supreme Court judgment
in the case of Sony India Ltd [2004(167)ELT 385 (SC)]
4.1 We have considered the impugned orders along with the
submissions made in appeal and during the course of
arguments.
4.2 Impugned order records the following findings to hold
against the appellant:
"2. It is observed that as per the chapter Note 2 to chapter 87
reads as under, "For the purposes of this chapter, "tractors"
means vehicles constructed essentially for hauling or pushing
another vehicle, appliance or load whether or not they contain
subsidiary provision for the transport, in connection of the main
use of the tractor, of tools, seeds, fertilizers or other goods."
3. As per the explanatory notes of Harmonized System of
Nomenclature (HSN) in Section XVII, Chapter 87, Gen/87.01 the
heading 8701 does not cover propelling bases specially
designed, constructed or reinforced to form an integral part of a
machine performing a function such as lifting, excavating,
leveling, etc., even if the propelling base uses traction or
propulsion for the execution of this function. It is also specifically
excludes the propelling bases of machines, in which the
propelling base, the operating controls, the working tools and
their actuating equipment are specially designed for fitting
together to form an integral mechanical unit, as in the case of
loaders, bulldozers, motorized ploughs, etc.
4. Thus it is established that those machines of chapter 84
can be distinguished from the tractors Chapter 87 by their
special constructional features (shape, chassis, means of
locomotion, etc.). IT is also observed that the said distinction
has been clearly explained in the HSN as - "For propelling bases
of the tractor type, various technical features relating essentially
to the structure of the complete unit and to equipment specially
designed for functions other than hauling or pushing should be
taken into consideration. For instance, the propelling bases not
covered by this heading incorporate robust elements (such as
supporting blocks, plates or beams, platforms for swiveling
cranes) forming a part of or fixed, generally by welding, to the
chassis-body framework to carry the actuating equipment for the
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working tools. In addition, such propelling bases may comprise
several of the following typical parts: powerful equipment with
built-in hydraulic system for operating the working tools; special
gear boxes, in which, for example, ...."
5. It is observed from the marketing material and literature
of the noticee as well as from their website that the particular
model i.e. "Arjun-Ultra 1 CE" is marketed by them as
"Construction Equipment" capable of lifting or loading a payload
of more than 1 M.T. and that the noticee have carried out certain
arrangements for fitting of hauling or lifting equipments (also
known as Front End Loaders, FEL). while manufacturing the
same.
6. IT is also observed from the exemption Notification No.
06/2006 -CE dated 16.11.2006 at Sr. no. 40 that the same
exempts the goods i.e. tractors as under-
40. 8701 All goods (except road tractors for semi-
trailers of engine capacity more than 1800 cc)
Thus it is clear that the exemption contained in the notification is
available to the tractors other than road tractors and especially
those which are primarily meant for agricultural activities.
7. This view is also supported by the instructions contained in
the C.B.E.C. Circular No. 838/15/2006-CX, dated 16.11.2006,
which specify that the primary use of Tractors should be
considered as the deciding factor for putting them into the
dutiable category. The instant model thus has been primarily
designed to take a load of more than 1 M.T. for a short distance
movement such as for lifting and loading of sand / metal for
putting in feeder of Ready-Mix Concrete Plant; Paper waste in
pulper; Coal/Ash handling in Thermal Power Plants; Loading M.S.
pipes in trucks; lifting machines and equipments such as motors,
shafts in the factory etc. (The list of usage is merely illustrative
and not exhaustive). As per the technical literature of M/s
Mahindra & Mahindra Ltd., they have provided a special grade
axle to "Arjun-Ultra 1 CE" to take a load of more than 1 ton in its
Front End Loader (FEL).
8. Further the model is equipped with a 3200 cc engine and a
56 HP engine power enabling the same to perform tasks as a
13 E/1001/2012,85020,88628/2013
loader rather than an agricultural implement. The engine
capacity and power are far more than the average requirement
of farming and agriculture. Such machines with 56 HP engine or
more are principally manufactured, marketed and used as
material handling equipment. More emphasis is given on
material handling than farming.
9. It is further seen that FEL manufacturing companies, such
as Bull Machines Ltd., M/s Chowgule and Company, and M/s
Essaey ltd., are advising their customers to purchase "Arjun
Ultra-1 CE from M/s Mahindra and Mahindra which is made
suitable for attaching the material handling equipments. The
advertising material of these companies show "Arjun-Ultra 1 CE"
in use as loader or a crane. Not a single instance of "Arjun-Ultra
1 CE" being projected as farm equipment or as a "tractor" as
defined in the Chapter Note 2 of chapter 87 is seen on the
record. These machines are neither used for hauling or pushing
of any vehicle, load or appliance and thus fail to satisfy the test
of whether the same are eligible to exemption or not. It is
noteworthy to mention that the promotional leaflets of these
companies recovered from the dealer of M/s Mahindra and
Mahindra, and that in most of the cases M/s Mahindra and
Mahindra itself had issued invoices for front end loaders.
10. It is seen from the investigations conducted that the actual
usage of these machines was also verified from various users
which are essentially industrial units, construction companies
etc. It was seen that the machines were purchased by such
users exclusively for material handling purposes and not even
once for agricultural purpose.
11. It is seen from the statement dt 08-06-2010 of Shri Vinay
Digambar Khole, Deputy Manager of AppliTrack Department of
the noticee that the said Dept.was dealing with the
sale/purchase of tractor Equipments and attachments like Front
End Dozers, Front End Loaders, tractor mounted combined
harvester and other agricultural implements. That he was the
only coordinator for the whole of India regarding sale of
equipments/implements from their dealers. That they purchased
these equipments and implements from various manufacturers
(vendors) located all over India which were manufactured as per
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the designs and specifications provided by M/s Mahindra &
Mahindra through their Head office located at Akurli Road,
Kandivali(East), Mumbai and that in some cases the equipments
designed by vendors were subsequently approved by M/s
Mahindra & Mahindra. It is seen that there is a categorical
confession by Shri Khole stated that these Front End Dozers,
Front End Loaders (FEL /FED) etc. were manufactured under
noticee's quality control and bear their brand name i.e. Mahindra
& Mahindra. This shows that not only the said equipments were
manufactured to suit the usage of the goods in question as dozer
but were planned to perform the said activities as planned. He
has also stated that on receipt of purchase orders from various
locations the Purchase Dept. at Mumbai places the purchase
orders to respective vendors for supply of these equipments.
12. It is seen that the transaction is arranged by the noticee in
the manner as admitted by Shri Khole, in his statement, which
involved placement of order by noticee's Mumbai office which
inter alia contained the details of the consignee to whom the
equipment/implement are destined. Thereafter, the
manufacturer (Vendor) cleared the Front Loader on payment of
Central Excise duty and under cover of Central Excise Invoice."
He has further stated that, "The manufacturer (Vendor) sends
the Sale Bill/ Invoice to our Mumbai Office who accounts for the
stock of the goods in their inventory. Thereafter, on receipt of
advice from their Mumbai office, through e- mail, Sale Invoices
are issued in the name of the concerned dealer of Mahindra &
Mahindra." It is also observed that the noticee was issuing
Central Excise Invoice such traded goods, admittedly, as per the
directions of Head Office." It is observed that on receipt of the
duplicate copy (transporters copy) of Central Excise invoice of
the noticee, alongwith the certificate stating therein the details
of their Area office (Stockyard), Invoice No. and Date, Dealers
name and manufacturer (vendor) particulars, the manufacturer
(vendor) clears the goods to the respective dealer of M/s
Mahindra & Mahindra on either Central Excise Invoice or
commercial invoice as the case may be and in turn, the dealer,
the latter issues a retail sale bill to the customer. It is also
admitted fact that the officials of M/s Mahindra & Mahindra also
give necessary directions regarding the maintenance of the
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equipments and also give physical demonstrations to the
customers as well as the staff members of the dealer. Thus it is
clear that the customer upon seeing the advertisement floated
for dozer places order on the dealer of the noticee and the
customer is given delivery of the front loader after procuring the
equipments from vendors and *Arjun Ultra -1 CE" from the
factory of the noticee.
13. Shri Khole has also admitted that their qualified staff visits
the factory premises of the manufacturers (Vendors) on
periodical basis to inspect the products being manufactured and
inspection reports are accordingly drawn. He further stated that
their vendors are allowed under an agreement to use brand
name "Mahindra" of M/s Mahindra & Mahindra (the noticee
herein) on the products manufactured by vendors for the noticee
by placing a sticker, painting or fixing name plate bearing the
name "Mahindra". Thus it is clear that the noticee has devised a
strategy to procure the equipment from vendors branded as
"Mahindra" and supply the front loader after attaching the
fitments required to modify the same at the end of the dealer.
14. It is observed from the user manuals for 'Mahindra Front End
Loader', 'Mahindra Front End Loader FEL 60-XTRA REACH' and
'Mahindra Front End Dozer Attachment' that:-
8. These manuals are published by the noticee's head office
at Kandivali.
9. It is categorically mentioned that this manual is
complementary to the Tractor's Operator Manual and all
the maintenance & safety precautions given therein are to
be followed along with those given in this manual.
10. Labour free services are offered to the customers for these
FEL/FED etc which can be availed by the attachment owner
from any authorized Mahindra Tractor Dealer in India.
11. The noticee warranted the product i.e. FEL/FED etc. to the
extent that the defective part will be repaired or replaced
through its authorized dealer.
12. A Field Installation Report is given in the manual which has
information regarding whether the customer is explained
and educated the operation of FEL/FED, function of each
16 E/1001/2012,85020,88628/2013
part, how to attach/detach FEL/FED to the machine,
maintenance schedule of FEL/FED etc.
13. The instructions are explicitly provided regarding Safety,
Product overview, Specifications, Loader Detachment &
Attachment, Technical details, Operating the loader,
Service schedules etc.
14. Copies of Pre-delivery Inspection (PDI) Reports are
provided in the manual which has columns showing the
name of person who does the attachment of FEL/FED. It
also shows Loader invoice No. and maintenance schedule
of FEL/FED.
Thus it is clear that the noticee is dealing with the sales-
purchase of FEL/FED etc. in as much as the noticee places the
purchase orders of these implements to their approved vendors
who manufacture FEL/FED as per the designs supplied by the
noticee. The implements are manufactured under the strict
quality control of the noticee. These FEL/FED also bear brand
name of noticee. The entire documentation of FEL/FED for whole
of India is looked after by noticee's AppliTrac division located
within their factory premises at Hingna, Nagpur. This is also
corroborated from the statement of Shri Khole, Deputy Manager
of the noticee recorded on 08-06-2010 under section 14 of the
Central Excise Act, 1944.
End Use Verification of the product -
16. .......
20.6 Thus it is clear from the statement of Shri Nihar Banerjee,
an actual user of the subject goods that, they had intended to
purchase a Buller machine having front End Loader which
effectively act as "Mini JCB" from M/s Bull Machines, Coimbatore
who had recommended them to purchase Arjun Ultra -1 605 CE
manufactured by the noticee as the Gross vehicle Weight (GVW)
is 3500 Kg, the power is 56 HP and the axle strength is suitable
as per the requirements for mounting the Front End Loader.
Thus M/s Suguna had purchased Arjun Ultra -1 605 CE from
Provincial Tractors, Nagpur as it acts as a substitute for JCB and
performs the same functions as that of JCB i.e. material handling
purposes such as ash handling in the power plant and coal
handling. He stated that the Buller machine (i.e. Arjun Ultra -1
17 E/1001/2012,85020,88628/2013
605 CE with attached FEL) is used exclusively in their captive
power plant for filling trolleys with ash and also putting coal in
the coal bunker.
21. Thus it is seen that the noticee gives their customers a
warranty for the model Arjun Ultra -1 605 CE even after
attachment of Front End Loader; hence it is clear that the
noticee intends to manufacture a machine capable of handling or
loading goods or materials rather than the vehicles as laid down
in chapter Note 2 to chapter 87 which defines "Tractors" as
vehicles constructed essentially for hauling or pushing another
vehicle, appliance or load whether or not they contain subsidiary
provision for the transport, in connection of the main use of the
tractor, of tools, seeds, fertilizers or other goods. Such warranty
is also explicitly mentioned on the 'User Manual' of 'Mahindra
Front End Loader', 'Mahindra Front End Loader FEL 60-XTRA
REACH' and 'Mahindra Front End Dozer Attachment' submitted
by Shri Khole, Deputy Manager of AppliTrack Department of the
noticee, wherein the noticee warranted the product i.e. FEL/FED
etc. to the extent that the defective part will be repaired or
replaced through it's authorized dealer. Even the labour free
services are offered to the customers for these FEL/FED etc
which can be availed by the attachment owner from any
authorized Mahindra Tractor Dealer in India. Therefore it
becomes clear that the noticee manufactures a loader machine
as against "Tractor" as claimed by them.
22. Shri Shrikant Dube, Deputy General Manager in his
statement recorded under section 14 of the Central Excise Act,
1944 on 15-02-2011; he stated that the model Arjun Ultra 1 CE
is equipped with a special grade front axle which is heavy duty
and used for enhancing the load bearing capacity of the front
axle of these models. He categorically stated that the wording
CE stands for "Construction Equipment". As explained by him the
axle is peculiar wherein the cross section of the centre bar is
more as compared to other models. He also explained further
that all Arjun Ultra-1 CE models are equipped with Tonplus
technology axle and that the normal variety like 605 cannot be
changed to 605 CE as the CE model comes with special axle
which is not available as spare part in the market.
18 E/1001/2012,85020,88628/2013
23. It is observed that the noticee in their reply dtd. 26/12/2012
to the show cause notice have stated that the vehicles of model
605 DI Arjun Ultra-I is a tractor and not construction equipment.
It is however observed that as stated by Shri Shrikant Dube,
Deputy General Manager in his statement recorded under section
14 of the Central Excise Act, 1944 on 15-02- 2011 the very
name CE stands for "Construction Equipment and that Arjun
Ultra 1 CE is equipped with a special grade front axle which is
heavy duty and used for enhancing the load bearing capacity of
the front axle of these models. Since this is an admitted position
that the said machine is projected, used, designed and
advertised as construction equipment the contention of the
noticee is not sustainable.
24. The noticee has submitted that as per the photograph of the
said goods when cleared from the factory it can be seen that
there is no front end loader/dozer fitted and hence since the
goods are being cleared in the same state from their factory they
are required to be classified as tractors and not loader under
CETH 8429.51. They have also taken a stand that since the
same has been tested and certified as Tractor by the Central
Farm Machinery Training and Testing Institute the same is a
tractor. In this regard it is observed that although the noticee
has claimed that the same was tested by the said agency which
certifies only farm equipments such as tractor, it is seen that the
noticee had got tested only the tractor portion of the equipment
without the loader and dozer fitted to it. The test report
submitted by the noticee clearly reveals that the same were not
fitted when the said model was got tested by the noticee. It is
therefore clear that when primarily and principally the machine
has been built for carrying out the activities meant for material
handling rather than those undertaken by normal tractors the
same cannot be called as a tractor when sold in the complete
form as portrayed and advertised. It is also seen from the
Circular no. 838/15/06 dtd. 16.11.2006 that the guiding factor in
the case is whether the vehicle in question is designed and
meant for agriculture use or otherwise. In the instant case it is
crystal clear that the said goods are specifically designed, built,
engineered, advertised, projected, sold and used as dozers and
not tractors at all.
19 E/1001/2012,85020,88628/2013
25. It is contended by the noticee that the goods in question are
to be assessed in the same condition in which they are cleared
from their factory and not on the basis of the end use to which
the users were putting them to. In this regard it is observed that
the noticee have master minded a scheme to defraud the
revenue by (i) firstly clearing the impugned goods as Tractor,
and carrying out modification in the axle load capacity (making it
capable of handling one MT of load); (ii) by employing the
services of the vendors they enrolled for manufacture and supply
directly to their dealer's end, of the equipment for material
handling to be fitted to the said goods, branded with their name
i.e. Mahindra; so that the end customer recognizes it as a
product of the noticee (iii) ensuring that the goods are
advertised and known in the market as material handling
equipment of Mahindra make, (iv) printed material depicting the
said goods as material handling equipment rather than mere
tractors, (v) training the personnel as well as the customer in
handling the goods after the said equipment is fitted and ready
for material handling, (vi) extending the warranty even after
carrying out of the said fittings. Thus on one hand the noticee
would claim the benefit of the exemption notification for tractor (
for agricultural purpose) and on the other using the same as
material handling equipment. The contention that the goods
were cleared without any fitments is a clever idea adopted by
the noticee to hoodwink the revenue department, as at the same
time the orders were received for the entire Arjun Ultra Di-1 CE
fitted with equipment which were later going to be fitted for use
solely as material handling equipment. Thus the noticee was in a
way, clearing the goods in dissembled condition. In this regard it
is felt necessary to visit the decision of the Honourable Madras
High Court reported in 1983(12)ELT 681 (Mad.) in the case of TS
Cycles of India Ambattur v/s UOI in which it was held that
"Interpretative Rule 2(a) of the Customs Tariff Act, 1975
provides that incomplete or unfinished vehicles, aircraft or other
articles of this section are to be classified with the corresponding
complete or finished vehicles or aircraft or other articles,
provided they have the essential character of the latter.
Complete vehicles and other articles of this section, or those
considered as complete, imported unassembled or disassembled,
20 E/1001/2012,85020,88628/2013
are to be classified as if they were imported in the assembled
state." I also rely on the dissenting judgment of Hedge J. in the
decision reported in J.K. Steel Ltd. v. Union of India and others,
AIR 1970 SC 1175 = 1978 E.L.T. (J 355), to hold that the
Central Excises and Salt Act and the Tariff Act are cognate
legislations which are in pari materia and on the analogy of Rule
2 (a), the 'goods cleared in unassembled state should be
classified and considered equivalent to complete goods in the
unassembled state.
26. Further it is observed that since the goods were so
projected, marketed as dozers and were understood in the trade
parlance as dozers and not tractors as revealed during the
investigation carried out at the end of the buyers has and
discussed in the foregoing paras the same are to be classified as
dozers under Chapter 84 only. I place reliance on the decision of
the Apex court in the case of Atul Glass Industries v/s CCE
(1986) 25 ELT 473 (SC) in which it has been held that - "The
test commonly applied to such cases is how is the product
identified by the class or section of people dealing with or using
the product [paras 7 to 12]". It is thus clear and settled that a
consumer buys an article because it performs a specific function
for them. This mental association with a product is highly
important for classification. In such cases the extended period
has been held to be invokable. I place reliance on the decision of
Fusebase Eletoro Ltd V/s CCE Meerut reported in 2000 (120)
E.L.T. 488 (Tribunal).
27. The noticee has placed reliance on the decision of Dunlop
India V.S UOI reported in 1983(13) ELT 1566 to argue that the
goods are to be assessed on the basis of the condition at the
time of presentation to the department for assessment. However
in the present case the noticee has adopted a modus operandi of
clearing the model Arjun Ultra Di-1 CE. Disguised as Tractor for
agricultural purpose but with a clear knowledge that the same
was meant for use as a dozer in view of the fact that the same
was equipped with a modified axle capable of handling 1 MT load
which the other model did not, and there after as per the
customer's order convert the same into Loader, dozer as
advertised. Hence the ratio of the aforesaid case is not
21 E/1001/2012,85020,88628/2013
applicable to the case of the noticee. In the present case the end
use is very much relevant for the purpose of deciding the
eligibility to exemption.
28. The noticee has cited a plethora of decision on similar lines
as Dunlop referred above and I find that the ratio thereof is not
applicable to the present case as same were rendered in a totally
different situation unlike the present one.
29. It has been held in the case of Union Carbide v/s CC
reported in 1986(24)ELT 325 (Tri.) that where the classification
is related to the function of goods the predominant use of the
goods is very relevant and important.
30. In CCE v/s Yash Laboratories also it was held that when
terms of tariff require use of product to be taken into
consideration such use is to be considered. [2001 (131) ELT
469(Tri.)]
31. In the case of Camlin Ltd., v/s CCE reported in [2000 (121)
ELT 178 (Tri.)] it has been held that function of the article can
be used as an aid to classify a product.
32. It is contended by the noticee that the reliance placed on the
strengthening of axles of vehicle to classify the same under
Chapter 84 is incorrect as the product remains the same even
after the said changes were made. In this regard it is necessary
to understand that no prudent business firm would needlessly
enhance capability of a product without any reason. The reason
in the present case is that the same would be used only as a
dozer after strengthening the axle, hence such technical changes
have been made. Hence the averment that the same would still
remain a tractor is not tenable. Further the technical literature
recovered regarding the product at the end of the dealer where
the product is show cased as a dozer also clearly settles the
issue against the noticee. It is also seen that in cases like these
technical literature would definitely an aid to arrive at the correct
classification.
33. I place reliance on the decision of the Apex Court in the
case of CCE, Kolkata v/s G C Jain reported in 2011 (269) E.L.T.
307 (S.C.) wherein it was held that-
22 E/1001/2012,85020,88628/2013
"It is also noted that in the technical literature given by the
manufacturer, use of the product has been shown as adhesives.
Even though the Revenue has disputed that the said literature
produced by the Respondents is not correct and is manipulated
inasmuch as the same is different than the manufacturer of
identical product in India, however, no concrete evidence to that
effect has been led by the Revenue. The Tribunal has given a
finding that the literature produced by the Respondents is of the
Korean manufacturer and is given in English language as well as
Korean language and there is no reason to doubt the veracity of
the said literature. Inasmuch, as the manufacturers themselves
have shown the use of Butyl Acrylate as adhesive as well as
textile binders, we see no reasons to take a different view".
34. The noticee has contended that the statement of the end
user are not relevant for the purpose of classification of the
product and that the advertisement cannot be a basis for
determination of the classification. In this regard it is seen that
they have also placed reliance on various decisions. However in
a specific case like the present one the same is also a
determining factor for classification as it relates to its main
function. This view is supported by the decision of the Hon'ble
CESTAT in the case of B K Products v/s CCE Patna reported in
1998 (104) E.L.T. 430 (Tribunal) in which it was held as under -
34.1 "The product is one for care of the hair, even as per the
appellants' own description in advertisements as "for bright,
thick, dark long hair, etc." It is a hair oil which has a pleasant,
fragrant odour. Hence, it has been rightly treated as a perfumed
hair oil and by virtue of Note 6 to Chapter 33 of the Schedule to
the CETA, 1985, it has correctly been held to fall under CET sub-
heading 3305.10. [paras 5.3, 6, 7]"
Incidentally this decision has been upheld by the Apex Court
[B.K. Products v. Collector - 2000 (121) E.L.T. A81 (S.C)].
35. Thus from the foregoing it is seen that the advertisement
material published by the marketing department of the noticee
also highlights this model as basically a loader machine, it states
categorically that the new Arjun Ultra-1 CE, with Front End
Loader FEL 60 comes up with specialty of Tonplus technology
which enables the machine for lifting of more than 1 Tonne load.
23 E/1001/2012,85020,88628/2013
The advertisement projects the product as useful in stone
quarries for loading stone in dumpers & trailers, for clearing ash
in furnaces, for loading molasses & compost in trucks in sugar
industry, for lifting and loading salt in salt beds, for lifting and
loading soda ash in cement factories to illustrate a few. This
particular vehicle is therefore clearly, not constructed essentially
for hauling or pushing another vehicle or hauling or pushing any
appliance or load. It is essentially constructed for lifting or
loading or dozing as against provided for in the chapter note
ibid. It therefore becomes evident that the machine
manufactured by the noticee is equipped with the special axle at
the time of manufacture itself which renders the resultant
product with enhanced load bearing capacity. This axle is fitted
to the CE models only making them as specialty construction
equipments. From the statement of Shri Shrikant Dube, it is
clear that the Tonplus technology axle in Arjun Ultra-1 CE model
is peculiar to this particular model fitted at the time of
manufacture and not available as a spare part in the market.
36. In view of the same there is no doubt at all that the noticee
have manufacturing, "Arjun- Ultra 1 CE" by making some
arrangements while manufacturing itself to make these useful
for exclusive use as a "Loader". It is forthcoming from the
records and the statements of noticee's Deputy General Manager
dt 15-02-2011, various end users and also from the
advertisement material / Service manuals of the subject goods
published by the noticee themselves that this particular model is
marketed by them as "Construction Equipment" capable of lifting
or loading a payload of more than 1 M.T. and not as tractor as
defined in the chapter note, ibid. It is, therefore, clear that the
instant machine i.e. Arjun Ultra-1 CE manufactured by the
noticee is specially designed by them to form an integral part of
a machine performing function such as lifting, dozing or
attaching any other required FEL and the resultant goods merit
classification under the subheading 8429.51.00 as "Front End
Shovel Loader".
37. Further it is clear that it has an inherent feature of having
arrangements for lifting more than 1 M.T. load and serves as a
material handling equipment rather than tractor as claimed by
24 E/1001/2012,85020,88628/2013
the noticee. It is also clear that the noticee intends to
manufacture a machine capable of handling or loading goods or
materials rather than the vehicles as laid down in chapter Note 2
to chapter 87 which defines "Tractors" as vehicles constructed
essentially for hauling or pushing another vehicle, appliance or
load. It is also an admitted position that the noticee purchase
loading equipments (Front end loaders) from their vendors which
are manufactured as per the designs and specifications provided
by noticee themselves. The Front End Loaders (FEL /FED) etc.
are manufactured under noticee's quality control and bear their
brand name i.e. Mahindra & Mahindra. The noticee impart
training to dealer's personnel for the attachment of FEL and also
give necessary directions to them regarding the maintenance of
the equipments and also give physical demonstrations to the
customers as well as the staff members of the dealer. The User
Manuals for so-called tractors inter alia revealed that labour free
services are offered to the customers for these FEL/FED etc
which can be availed by the attachment owner from any
authorized Mahindra Tractor Dealer in India. The noticee even
warranted the product i.e. FEL/FED etc. to the extent that the
defective part will be repaired or replaced through it's authorized
dealer.
38. The noticee themselves differentiate between plain "Arjun
Ultra-1 605 tractor" and "Arjun Ultra-1 CE 605
model/construction equipment". It is admitted position that the
noticee uses a special axle with "Tonplus technology" in the
latter wherein the cross section of the centre bar is more as
compared to normal tractors. As per the noticee, the models are
not interchangeable as the axle is put at the time of manufacture
itself making it suitable to perform specific function."
4.3 The General Rules For The Interpretation of Tariff read as
under
Classification of goods in this Schedule shall be governed by the
following principles:
1. The titles of Sections, Chapters and sub-chapters are
provided for ease of reference only; for legal purposes,
classification shall be determined according to the terms of
the headings and any relative Section or Chapter Notes
25 E/1001/2012,85020,88628/2013
and, provided such headings or Notes do not otherwise
require, according to the following provisions:
2. (a) Any reference in a heading to an article shall be
taken to include a reference to that article incomplete or
unfinished, provided that, as presented, the incomplete or
unfinished articles has the essential Abbreviations For 31
character of the complete or finished article. It shall also
be taken to include a reference to that article complete or
finished (or falling to be classified as complete or finished
by virtue of this rule), presented unassembled or
disassembled.
(b) Any reference in a heading to a material or substance
shall be taken to include a reference to mixtures or
combinations of that material or substance with other
materials or substances. Any reference to goods of a given
material or substance shall be taken to include a reference
to goods consisting wholly or partly of such material or
substance. The classification of goods consisting of more
than one material or substance shall be according to the
principles of rule 3.
3. When by application of rule 2(b) or for any other reason,
goods are, prima facie, classifiable under two or more
headings, classification shall be effected as follows:
(a) The heading which provides the most specific
description shall be preferred to headings providing a more
general description. However, when two or more headings
each refer to part only of the materials or substances
contained in mixed or composite goods or to part only of
the items in a set put up for retail sale, those headings are
to be regarded as equally specific in relation to those
goods, even if one of them gives a more complete or
precise description of the goods.
(b) Mixtures, composite goods consisting of different
materials or made up of different components, and goods
put up in sets for retail sale, which cannot be classified by
reference to (a), shall be classified as if they consisted of
the material or component which gives them their
essential character, in so far as this criterion is applicable.
26 E/1001/2012,85020,88628/2013
(c) When goods cannot be classified by reference to (a) or
(b), they shall be classified under the heading which
occurs last in numerical order among those which equally
merit consideration.
4. Goods which cannot be classified in accordance with the
above rules shall be classified under the heading
appropriate to the goods to which they are most akin.
5. In addition to the foregoing provisions, the following rules
shall apply in respect of the goods referred to therein:
(a) Camera cases, musical instrument cases, gun cases,
drawing instrument cases, necklace cases and similar
containers, specially shaped or fitted to contain a specific
article or set of articles, suitable for long-term use and
presented with the articles for which they are intended,
shall be classified with such articles when of a kind
normally sold therewith. This rule does not, however,
apply to containers which give the whole its essential
character;
(b) Subject to the provisions of (a) above, packing
materials and packing containers presented with the goods
therein shall be classified with the goods if they are of a
kind normally used for packing such goods. However, this
provisions does not apply when such packing materials or
packing containers are clearly suitable for repetitive use.
6. For legal purposes, the classification of goods in the sub-
headings of a heading shall be determined according to the
terms of those sub headings and any related sub headings
Notes and, mutatis mutandis, to the above rules, on the
understanding that only sub headings at the same level
are comparable. For the purposes of this rule the relative
Section and Chapter Notes also apply, unless the context
otherwise requires.
4.4 From the perusal of the above General Rules of
Interpretation of the Tariff, it is quite evident that the
classification of the goods is to be done in according to the terms
of heading/ sub heading and relevant Section Notes and Chapter
Notes. All other tests, such as end use verification, trade
understanding of the goods etc., are only aid to understand the
nature and character of goods for determining the classification
27 E/1001/2012,85020,88628/2013
under tariff. It is also settled principle of law that classification
and assessment of the goods is to be done at the time of the
clearance of the goods and in the form in which they are
presented for assessment. The law in this respect has been
settled by the Hon'ble Supreme Court long back in case of
Dunlop India [1983 (13) ELT 1566 (SC)]]where Hon'ble Apex
Court observed as follows:
"30. The relevant taxing event is the importing into or
exporting from India. Condition of the article at the time of
importing is a material factor for the purpose of classification as
to under what head, duty will be leviable. The reason given by
the authority that V.P. Latex when coagulated as solid rubber
cannot be commercially used as an economic proposition, as
even admitted by the appellants, is an extraneous consideration
in dealing with the matter. We are, therefore, not required to
consider the history and chemistry of synthetic rubber and V.P.
Latex as a component of SBR with regard to which extensive
arguments were addressed by both sides by quoting from
different texts and authorities.
31. It is well established that in interpreting the meaning of
words in a taxing statute, the acceptation of a particular word by
the Trade and its popular meaning should commend itself to the
authority.
36. We are, however, unable to accept the submission. It is
clear that meanings given to articles in a fiscal statute must be
as people in trade and commerce, conversant with the subject,
generally treat and understand them in the usual course. But
once an article is classified and put under a distinct entry, the
basis of the classification is not open to question. Technical and
scientific tests offer guidance only within limits. Once the articles
are in circulation and come to be described and known in
common parlance, we then see no difficulty for statutory
classification under a particular entry."
In the case of Reliance Textile Industries Ltd. [1993 (63) ELT 67
(Bom)], Hon'ble Bombay High Court held as follows:
"7. Mr. Dada submitted, and in our judgment with considerable
merit, that as soon as the petitioners manufacture base yarn in
their factory at Patalganga, an excisable item comes into
28 E/1001/2012,85020,88628/2013
existence and when such excisable item is cleared from the
factory gate, the excise duty payable is at the rate of Rs. 61.25
and it is not permissible for the department to claim that a
higher excise duty which is payable in respect of texturised yarn
will be levied and recovered. It is not in dispute that 52% of the
base yarn manufactured at Patalganga factory is cleared at the
factory gate. Mr. Varma, learned Counsel appearing on behalf of
the department, submitted that the clearance by the petitioners
from Patalganga factory is only to forward to the texturising unit
of the petitioners at Naroda in the State of Gujarat. Mr. Varma
submitted that even though the base yarn is a new product liable
to excise duty when the petitioners remove such new product for
undertaking texturising process at their own factory at Naroda,
the excise duty payable while removing base yarn at the factory
gate from Patalganga factory is a duty leviable in respect of
texturised yarn. It is impossible to find any merit in the
submission of the learned Counsel. It is futile to suggest that
base yarn is an intermediary product used by the petitioners for
bringing into existence the final product of texturised yarn. The
tariff entry clearly establishes that base yarn is a product which
comes into existence on manufacture and is liable to excise duty.
The liability of the petitioners to pay duty arises as soon
as base yarn comes into existence and the same is cleared
from the factory gate. The excise duty payable is on the
basis that the manufactured product is base yarn and at
that juncture it is not permissible for the department to
levy excise duty on the basis that the manufactured
product is textured yarn. It is not in dispute that when
base yarn undergoes texturising process to bring into
existence texturised yarn, then separate excise duty is
leviable for the process of manufacture. In these
circumstances, it is impossible to accede to the
submission urged on behalf of the department that at the
time of clearance of base yarn, the petitioners are liable
to pay excise duty which is required to be paid after the
texturised yarn comes into existence. The provisional
assessment made by the department, therefore, is
unsustainable."
29 E/1001/2012,85020,88628/2013
In the case of Mahindra and Mahindra Ltd. [2010 (262) ELT 366
(T)] tribunal has held as follows:
"5. Factory as defined under Section 2(e) of the Act means:-
"Factory" means any premises, including the precincts thereof,
wherein or in any part of which excisable goods other than salt
are manufactured, or wherein or in any part of which any
manufacturing process connected with the production of these
goods is being carried on or is ordinarily carried on".
Rule 174 of erstwhile Central Excise Rules, 1944 and Rule 9 of
Central Excise Rules, 2002 required every manufacturer to be
registered and CBEC is empowered to specify conditions and
limitations. The Board vide notification No. 35/2001-C.E. (N.T.),
dated 26-6-2001 as amended has prescribed conditions.
According to the notification, if a registered person has more
than one premises, he shall obtain separate registration
certificate for each premises. The fact that each premises should
have a registration emerges from the provisions of Sec. 4 of the
Act which requires determination of value at the place of
removal. Naturally, place of removal has to be one place. What
follows from the provisions relating to registration is that each
factory or premises of a manufacturer is required to be
registered except those who are covered by exemption.
6. In terms of the legal provisions discussed above, it is quite
clear that goods have to be assessed at the place of removal and
if the value cannot be determined under main provisions of
Section 4(1)(a) of the Act, rules for valuation have to be
resorted.
7. A hypothetical example makes the position clear. Let us take
an assessee who has 4 divisions in different parts of the country,
each making plastic granules, plastic films, plastic bags and
printed bags. For the finished product of one division, the
finished product of another division is the raw material. If a
purchase order is placed on the division for printed plastic bag,
question arises whether the division clearing the granule can be
asked to pay duty on the value of printed bags or any of other
two divisions can be asked to do so. If the product undergoes a
process which does not amount to manufacture, department
cannot demand duty including cost of each process just because
30 E/1001/2012,85020,88628/2013
the unit making raw material belongs to the same company.
Legal provisions remain the same irrespective of who takes up
the process. If there is no sale or if value cannot be determined
under Sec. 4(1)(a) value has to be determined under Sec.
4(1)(b)."
While affirming this order Hon'ble Supreme Court has in its order
reported at 2016 (234) ELT 193 (SC)] held as follows:
"2. The question of law which is sought to be raised by the
Revenue/Appellant in this appeal is as to whether the value
addition made to the base vehicle viz. 'the Jeep' in question, by
way of bullet proofing, has to be added while arriving at
transaction value for the purpose of excise duty. We may
mention that in the normal course, the Jeeps are manufactured
by the respondent/assessee without any such bullet proofing.
However, there was a specific requirement of the Police
Department in various States for supply of Jeeps with bullet
proofing system, the Jeeps were supplied to them after getting
the same bullet proofing. However, the admitted facts are that
as far as clearance of these Jeeps from the factory of the
respondent/assessee is concerned, they were cleared without
any bullet proofing. It is only after clearance that the Jeeps were
sent to get the processing of bullet proofing carried out by job
workers outside the factory premises. The Tribunal has, thus,
rightly held that in such circumstances, the cost of bullet
proofing could not be added to arrive at the transaction value.
The order of the Tribunal does not warrant any interference."
In case of Aura Solar Products Pvt Ltd. [2021 (44) GSTL 82 (T)]
following has been held:
"4.3 From the facts as determined and recorded by the
adjudicating authority it is clearly evident that the manner in
which the goods were being cleared by the appellant was in a
package comprising of two lanterns along with a solar
photovoltaic panel. SPV Panel having capacity and provisions to
charge both the lanterns simultaneously. The packaging and the
manner of marketing the product also suggest that both the
lamps in the package are marketed as solar lanterns. It is an
admitted fact and a fact not in dispute that appellants do not sell
31 E/1001/2012,85020,88628/2013
the single lantern individually or separately. That being so
Revenue has no jurisdiction to vivisect the package and classify
one lantern separately. The classification of the goods need to be
determined in the form and manner in which the same is cleared
and not by unbundling/vivisecting the package into individual
components to determine their classification.
4.4 We do not find support in the technical opinion rendered by
the IIT, Mumbai to classify the goods in the manner they have
been classified by the revenue authorities. As per para 14 of the
order-in-original, technical opinion is reproduced below :
......
4.5 From the opinion as reproduced above it's quite evident that it is not in respect of the package in the manner in which it is cleared. From the facts as narrated above it is quite evident that while the goods in the form in which it is cleared was with the SPV Panel whereas the sample was without the SPV Panel. Further the opinion clearly states that the batteries of the lamp can be charged with the solar power normally but in emergency or non-availability of solar power the same can be recharged by using the normal power source with a suitable adapter. For classifying the one of two lamps in the package Revenue has relied on the fact that it can be charged with the normal power supply using suitable adapters. While doing so they ignore the fact that the technical opinion given by the IIT Professor clearly states that the normal mode of charging the batteries in the lamps will be solar power only. Further it is not even the case of Revenue that the package was being cleared with a suitable adapter to charge the batteries using normal power supply. In our view the technical opinion furnished by the Revenue is clear and loud against the stand taken by the Revenue to determine the classification of one of the two lamps being supplied in the package in the form in which it is sold.
4.6 From the findings as recorded by the adjudicating authority in order-in-original and the technical opinion given by the IIT Professor, the only conclusion that can be arrived is that the goods in the form and manner in which they are cleared for sale to consumers are nothing but "Solar Power Generating System"
or "Solar Photovoltaic Lantern" and the exemption claimed by 32 E/1001/2012,85020,88628/2013 the appellants in respect of same under Sl. No. 237 of Notification No. 6/2002-C.E. as amended (Sl. No. 18 of List 9) as claimed by them is admissible to the whole package. The vivisection of the package to classify a part of such package and deny exemption in respect of one lamp out of the (sic) is neither justified nor having any basis in law. Hence we do not find any merits in the order of the authorities below."
4.5 Before we undertake any discussion on the subject the we would like to reproduce the tariff entries of Chapter 84 & 87:
8429 Self Propelled bulldozers, angledozers, graders, levelers, scrapers, mechanical shovels, excavators, shovel loaders, tamping machines and road rollers.
- Bulldozers and angledozers:
- Graders and Levelers:
- Scrapers:
- Tamping machines and road rollers
- Mechanical shovels, excavators, shovel loaders:
8429 51 -- Front end shovel loaders
00
8429 52 -- Machinery with a 360 degrees revolving
00 superstructure
8429 59 -- Other.
00
Chapter 87
2. For the purposes of this Chapter, "tractors" means vehicles constructed essentially for hauling or pushing another vehicle, appliance or load, whether or not they contain subsidiary provision for the transport, in connection with the main use of the tractor, of tools, seeds, fertilizers or other goods.
Machines and working tools designed for fitting to tractors of heading 8701 as interchangeable equipment remain classified in their respective headings even if presented with the tractor, and whether or not mounted on it.
8701 TRACTORS (OTHER THAN TRACTORS OF HEADING
8709)
8701 10 - Pedestrian Controlled Tractors
00
8701 20 - Road Tractors for semi trailers;
33 E/1001/2012,85020,88628/2013
8701 20 --- Of engine capacity not exceeding, 1800 cc
10
8701 20 --- Other
90
8701 30 - Track laying Tractors:
--- Garden tractors:
8701 30 ---- Of engine capacity not exceeding, 1800 cc
11
8701 30 ---- Other
19
--- Other;
8701 30 ---- Of engine capacity not exceeding, 1800 cc
91
8701 30 ---- Other
99
- Other
8701 90 --- Of engine capacity not exceeding, 1800 cc
10
8701 90 --- Other
90
4.6 From the plain reading of the heading 8701, it is quite
obvious and evident that all sort of tractors other than those classifiable under heading 8709 need to be classified under this heading. However impugned order while determining the classification of tractor, has sought to limit the scope of this heading to agricultural tractors and have sought to classify the tractors fitted with certain attachment after their clearance from the factory at the instance of the customer by the dealers, as machinery under heading no 84295100. In view of what we have observed in para 4.4, we are not in agreement with the approach of the Commissioner in determining the classification of the goods as cleared by the appellant on the basis of the attachments provided by the dealers at the instance of the customer.
4.7 It is settled position in law that HSN Explanatory Notes provide necessary assistance for determining the classification of the goods. In case of Uni Products India Pvt Ltd. [2020 (372) ELT 465 (SC)] Hon'ble Supreme Court held as follows:
34 E/1001/2012,85020,88628/2013 "25. ..... Revenue's argument is that the Explanatory Notes have persuasive value only. But the level or quality of such persuasive value is very strong, as observed in the judgments of this Court to which we have already referred. Moreover, the Commissioner himself has referred to the Explanatory Notes in the order-in-original while dealing with the respondent's stand.
Thus, we see no reason as to why we should make a departure from the general trend of taking assistance of these Explanatory Notes to resolve entry related dispute. ....."
In case of Gujarat Perstorp Electronics Ltd. [2005 (186) ELT 532 (SC)], Hon'ble Supreme Court held as follows:
"54. The matter could be looked at from another angle also. As noted earlier, HSN has dealt with the point and as per Explanatory Note, it would fall under Chapter Heading 49.01. If it is so, it would not be covered by sub-heading 4911.99.
55. In this connection, we may refer to a three-Judge Bench decision of this Court in Collector of Central Excise, Shillong v. Wood Craft Products Ltd. - 1995 (77) E.L.T. 23 (S.C.) = (1995) 3 SCC 454. The Court, in that case, considered the question whether 'plywood' was classifiable under sub-heading 4408.90 or sub-heading 4410.90? HSN Explanatory Notes was considered by this Court and it was observed;
"We are of the view that the Tribunal as well as the High Court fell into the error of overlooking the fact that the structure of the Central Excise Tariff is based on the internationally accepted nomenclature found in the HSN and, therefore, any dispute relating to tariff classification must, as far as possible, be resolved with reference to the nomenclature indicated by the HSN unless there be an express different intention indicated by the Central Excise Tariff Act, 1985 itself. The definition of a term in the ISI Glossary, which has a different purpose, cannot in case of a conflict, override the clear indication of the meaning of an identical expression in the same context in the HSN. In the HSN, block board is included within the meaning of the expression "similar laminated wood" in the same context of classification of block board. Since the Central Excise Tariff Act, 1985 is enacted on the basis and pattern of the HSN, the same expression used in the Act must, as far as practicable, be 35 E/1001/2012,85020,88628/2013 construed to have the meaning which is expressly given to it in the HSN when there is no indication in the Indian tariff of a different intention."
4.8 HSN explanatory notes clearly explain the difference between the machinery classifiable under 84, for the purpose of reference we refer to Excerpts of HSN Explanatory Notes for Chapter Heading 8426, 8429 and 8430.
Excerpt from 8426 and 8430 explaining the Classification of Self Propelled and Other Mobile Machines SELF-PROPELLED AND OTHER "MOBILE" MACHINES In general, the heading covers not only fixed or stationary machines, but (with certain exceptions referred to below concerning machines mounted on transport equipment of the type falling in Section XVII) also mobile machines, whether or not self-propelled.
The exceptions are :
(a) Machines mounted on vehicles proper to Chapter 86. ....
(b) Machines mounted on tractors or motor vehicles proper to Chapter 87.
(1) Machines mounted on tractor type bases.
Certain working parts of the machines of this heading may be mounted on tractors which are constructed essentially for hauling or pushing another vehicle, appliance or load but, like agricultural tractors, are fitted with simple devices for operating the working tools. Such working tools are subsidiary equipment for occasional work. In general, they are relatively light and can be mounted or changed at the working site by the user himself. In such cases, the working tools remain in this heading provided they constitute machines of this heading, or in heading 84.31 if they are parts of those machines, even if presented with the tractor (whether or not mounted thereon), while the tractor with its operating equipment is classified separately in heading 87.01.
On the other hand, this heading covers self-propelled machines in which the propelling base, the operating controls, the working tools and their actuating equipment 36 E/1001/2012,85020,88628/2013 are specially designed for fitting together to form an integral mechanical unit. This applies, for example, to a propelling base resembling a tractor, but specially designed, constructed or reinforced to form an integral part of a machine performing one or more of the functions mentioned in this heading (lifting, handling, etc.). Presented separately, such propelling bases also fall in this heading, as incomplete machines having the essential features of complete machines of the same kind. Propelling bases potentially classifiable in several of the headings 84.25 to 84.30 because they can be equipped with several different working parts, are classified in accordance with Note 3 to Section XVI or by application of Interpretative Rule 3 (c).
For more detailed criteria for distinguishing between the tractors of heading 87.01 and the propelling bases of this Chapter, see Explanatory Note to heading 87.01.
(2) Machines mounted on automobile chassis or lorries. ...
(c) Machines on floating structures proper to Chapter 89....
Excerpt Explaining the goods classifiable under Chapter 84.29 84.29 - Self-propelled bulldozers, angledozers, graders, leveilers, scrapers, mechanical shovels, excavators, shovel loaders, tamping machines and road rollers.
- Bulldozers and angledozers:
8429.11 -- Track laying 8429.19 -- Other 8429.20 - Graders and levellers 8429.30 - Scrapers 8429.40 - Tamping machines and road rollers
Mechanical shovels, excavators and shovel loaders:
8429.51 -- Front-end shovel loaders
8429.52 - Machinery with a 360 revolving superstructure
8429.59 -- Other
37 E/1001/2012,85020,88628/2013
The heading covers a number of earth digging, excavating or compacting machines which are explicitly cited in the heading and which have in common the fact that they are all self- propelled.
The provisions of Explanatory Note to heading 84.30 relating to self-propelled and multi-function machines apply, mutatis mutandis, to the self-propelled machinery of this heading, which includes the following:
(A) Bulldozers and angledozers. ....
(B) Graders and levellers. ...
(C) Scrapers. ...
(D) ....
(E) Self-propelled road rollers .....
(F) Mechanical shovels (boom, jib or cable type) which dig into the soil, above or below machine level, by means of an excavating bucket, grab, etc., operated either directly from the end of a boom or jib (shovel excavators, drag shovels, etc.) or, to increase the working range, on a cable or by means of a hydraulic jack suspended from the jib (draglines). In long range excavators (slackline draglines), the bucket is operated on a cable running between two movable structures some distance apart.
(G) Multi-bucket excavators in which the digging buckets are fitted on endless chains or on rotating wheels. These machines often incorporate conveyors for discharging the excavated soil, and they are mounted on wheeled or track-laying chassis.
Special models are designed for digging or cleaning out trenches, drainage channels, ditches for use in open-cast (open- pit) mines, etc. (H) Self-propelled shovel loaders. These are wheeled or crawler machines with front-mounted bucket which pick-up material through motion of the machine, transport and discharge it.
Some" shovel-loaders" are able to dig into the soil. This is achieved as the bucket, when in the horizontal position, is capable of being lowered below the level of the wheels or tracks.
(IJ) Loader-transporters used in mines. ....
38 E/1001/2012,85020,88628/2013 This heading also covers self-propelled shovel loaders having an articulated arm with a bucket, mounted on the rear.
4.4 HSN Explanatory Note for 87.01 reads as follows:
87.01 Tractors (other than tractors of heading 87.09) (+).
8701.10 - Pedestrian controlled tractors
8701.20 -Road tractors for semi-trailers
8701.30 - Track-laying tractors
8701.90 - Other
For the purposes of this heading, tractors means wheeled or track-laying vehicles constructed essentially for hauling or pushing another vehicle, appliance or load. They may contain subsidiary provision for the transport, in connection with the main use of the tractor, of tools, seeds, fertilisers or other goods, or provision for fitting with working tools as a subsidiary function.
The heading does not cover propelling bases specially designed, constructed or reinforced to form an integral part of a machine performing a function such as lifting, excavating, levelling, etc., even if the propelling base uses traction or propulsion for the execution of this function.
The heading covers tractors (other than tractors of the type used on railway station platforms, falling in heading 87.09) of various types (tractors for agricultural or forestry work, road tractors, heavy duty tractors for constructional engineering work, winch tractors, etc.), whatever their mode of propulsion (internal combustion piston engine, electric motor, etc.). It also includes tractors which can be used both on rails and on road, but not those which are designed exclusively for use on rails.
The tractors of this heading may be fitted with coachwork (a body) or may have seats for the crew or a driving cab. They may be equipped with a tool box, with provision for raising and lowering agricultural implements, with a coupling device for trailers or semi-trailers (e.g., on mechanical horses and similar 39 E/1001/2012,85020,88628/2013 tractive units), or with a power take-off for driving machines such as threshers and circular saws.
The chassis of a tractor may be mounted on wheels, on tracks or on a combination of wheels and tracks. In the last case, only the front steering axle is fitted with wheels.
This heading also covers pedestrian controlled tractors. These are small agricultural tractors equipped with a single driving axle carried on one or two wheels; like normal tractors, they are designed for use with interchangeable implements which they may operate by means of a general purpose power take-off. They are not usually fitted with a seat and the steering is effected by means of two handles. Some types, however, also have a one- or two-wheeled rear carriage with a seat for the driver.
Similar pedestrian controlled tractors are also used for industrial purposes.
The heading includes tractors fitted with winches (e.g.. as used for hauling out bogged-down vehicles; for up-rooting and hauling trees; or for the remote haulage of agricultural implements).
The heading further includes straddle-type' tractors (stilt tractors) used, for example, in vineyards and forestry plantations.
The heading also excludes motor breakdown lorries equipped with cranes. lifting tackle, winches, (heading 87.05).
TRACTORS FITTED WITH OTHER MACHINERY It should be noted that agricultural machines designed for fitting to tractors as interchangeable equipment (ploughs, harrows, hoes, etc.) remain classified in their respective headings even if mounted on the tractor at the time of presentation. The tractive unit in such cases is separately classified in this heading.
Tractors and industrial working tools are also classified separately when the tractor is designed essentially for hauling or pushing another vehicle or load, and includes, in the same way as an agricultural tractor, simple devices for operating (raising, lowering, etc.) the working tools. In such a case, the interchangeable working tools are classified in their appropriate headings, even if presented with the tractor, and whether or not 40 E/1001/2012,85020,88628/2013 mounted on it, while the tractor with its operating equipment is classified in this heading.
In the case of articulated motor lorries with semi-trailers, tractors coupied to semi-trailers, and heavy duty tractors coupled, in the same way as to semi-trailers, to working machines of Chapter 84, the hauling element is classified in this heading whereas the semi-trailer or the working machine is classified in its appropriate heading.
On the other hand, this heading does not cover the propelling bases of machines referred to, for example, in headings 84.25, 84.26, 84.29, 84.30 and 84.32, in which the propelling base, the operating controls, the working tools and their actuating equipment are specially designed for fitting together to form an integral mechanical unit. Such is the case with loaders, bulldozers, motorised ploughs, etc. As a general rule, propelling bases forming an integral part of a machine designed for handling, excavating, etc., can be distinguished from the tractors of this heading by their special constructional features (shape, chassis, means of locomotion, etc.). For propelling bases of the tractor type, various technical features relating essentially to the structure of the complete unit and to equipment specially designed for functions other than hauling or pushing should be taken into consideration. For instance, the propelling bases not covered by this heading incorporate robust clements (such as supporting blocks, plates or beams, platforms for swivelling cranes) forming a part of or fixed, generally by welding, to the chassis-body framework to carry the actuating equipment for the working tools. In addition, such propelling bases may comprise several of the following typical parts: powerful, equipment, with built-in hydraulic system for. operating the working tools; special gear boxes, in which, for example, the top speed in reverse gear is not less than the top speed in forward gear; hydraulic clutch and torque converter; balancing counterweight; longer tracks to increase stability of the base; special frame for rear mounted engine, etc. 4.9 Revenue do not dispute the preposition as stated in the para 4.7 above but have sought to refer to the certain portions of explanatory notes, which would suit their purpose. However in 41 E/1001/2012,85020,88628/2013 terms of HSN Explanatory Notes reproduced above we are of the view that even the heavy duty tractors for constructional engineering work will be classified under the heading 8701 only and not under the heading 8429 as determined by the revenue. In case of LMP Precision Engineering Co Ltd. [2004 (163) ELT 290 (SC)] Hon'ble Apex Court has held as follows:
"15. Besides the Tariff Headings in the HSN specifically include "mobile drilling derricks" under Tariff Heading 8705.20. A derrick has been defined in the Concise Oxford Dictionary (7th Edition) at page 258 as a : "contrivance for moving or hoisting heavy weights, kind of crane with adjustable arm pivoted at foot to central post, deck, or floor; framework over oil-well or similar boring". Therefore mobile oil rigs such as those manufactured by the respondent would fall within Chapter 87 and not 84 of the HSN. This is made further clear by the note appended to the Tariff Heading 8705 of the HSN which says that the Tariff Heading includes "lorries fitted with a derrick assembly, winches and other appliances for drilling, etc."
16. In view of this specific inclusion of mobile drilling derricks in the HSN Tariff Heading 8705.20, even if we assume that the explanatory note to the Section indicates to contrary, nevertheless the express words of the Tariff Heading would prevail. This also answers the submission made on behalf of the respondent that the Section notes relevant to Chapter 84 of the HSN indicated that the goods manufactured by the respondent were classifiable under Heading 84.30. In any event the particular Section Note referred to by the respondent does not support the submission that the goods were classifiable at any material point of time under Heading 84.30. The Section Notes relied on read :
"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."
"Where a machine (including a combination of machines) consists of individual components (whether separate or 42 E/1001/2012,85020,88628/2013 interconnected 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."
17. The Section Notes have been further expounded under different parts. Part VI : Multifunctional machines and composite machines and Part VIII : Mobile machinery have been separately detailed. Part VI pertains inter alia to "composite machines consisting of two or more machines or appliances of different kinds, fitted together to form a whole, consecutively or simultaneously performing separate functions, which are generally complementary and are described in different headings of Section XVI, and also classified according to the principal function of the composite machines". This would cover those machines which are classifiable in Chapter 84. But the machine with which we are concerned is referred to under Part VIII, namely "mobile machinery". In this Part it is said that reference should be made not only to the explanatory note to the Headings for the machines under Chapter 84.25, 84.28, 84.29 and 84.30 but also to the explanatory notes to the chapters and headings of Sec. XVII. That Section includes Chapter 87. We have already noted that the Tariff Heading 8705.20 clearly includes machines of the kind manufactured by the respondent and the Tribunal erred in holding to the contrary."
4.10 In view of the above decision of the Hon'ble Apex Court and the HSN Explanatory notes we have no doubt that the impugned goods in the form and manner as cleared are tractors classifiable under heading 8701. Now we take look at the entries of the exemption notification No 06/2006-CE dated 16.11.2006, which is reproduced below:
40 8701 All goods (except road tractors for semi Nil -
trailers of engine capacity more than 1800 cc) From the perusal of the above entry it is quite evident that all goods classifiable under heading 8701 are exempt from payment of duty, except for the road tractors for semi trailers of engine 43 E/1001/2012,85020,88628/2013 capacity more than 1800 cc. Road Tractors for the semi-trailer of engine capacity more that 1800 cc are classifiable under heading 87012090. Thus all plain reading of the Tariff entries and the entries in the notification it is evident that all goods of CETH 8701, except those which are classifiable under 87012090 are exempt from payment of duty. It is not even the case of the revenue that the tractors manufactured and cleared by the appellant are classifiable under this category.
4.11 Circular No 838/15/2006-CX dated 16.11.2006 do not state that the exemption under this entry is admissible only to the agricultural tractors. The text of the said circular is reproduced below:
"Representations have been received in the Board that certain field formations are proposing to charge excise duty on agricultural tractors on the ground that besides agricultural work, these tractors are used for haulage of farm products, fertilizers, etc. thereby qualifying as "road tractors for semi- trailers" attracting Central Excise duty @ 16%. "Road tractors for semi-trailers" attract Central Excise duty at the rate of 16%, if the engine capacity is more than 1800 cc.
2. Tractors falling under Chapter heading 8701 were exempted from excise duty in Budget 2004-05 with the intention to give exemption to agricultural tractors, in order to encourage farm sector. A tractor primarily designed and meant for agriculture purposes can also be incidentally used to take goods to the nearest market. But that is an incidental use, and such tractors are not primarily designed to haul trailers. Therefore, incidental use of hauling trailers will not put such tractors in dutiable category. Therefore primary use of tractor should be the deciding factor."
In our view the only thing which has been stated in the circular is respect of the exception carved by the Notification in respect of road tractors for semi trailers of engine capacity more than 1800 cc. The clarification issued only states that some incidental use of hauling trailers will not put such tractors in dutiable category. Hence reliance placed by the revenue do not advance the case of revenue.
44 E/1001/2012,85020,88628/2013 4.11 Since we determine the classification of the impugned goods in the form and manner which they are clear as tractor, the fact which is well supported and certified by Central Farm Machinery Training and Testing Institute, Ministry of Agriculture and the Automotive Research Association of India. Also in terms of the provisions of the Central Motor Vehicle Rules, 1989 the said goods are considered as tractors only. Thus we conclude by holding the classification of the impugned goods under heading 8701.
4.12 Since we have concluded that impugned goods are classifiable under heading 8701, the exemption claimed by the appellant under Sl No 40 of the exemption notification no 06/2006-CE will be admissible to them.
4.13 Since we have held in the favour of the appellants on merit itself we are not inclined to consider the other submissions on cum duty price, admissibility of CENVAT credit, limitation, interest and penalty etc., advanced by the appellant for deciding these appeals.
5.1 Appeals are allowed.
(Order pronounced in the open court on 30.01.2023) (Sanjiv Srivastava) Member (Technical) (Dr. Suvendu Kumar Pati) Member (Judicial) tvu