Custom, Excise & Service Tax Tribunal
Commissioner Of Central vs M/S. Bhel on 31 March, 2009
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT CHENNAI
E/346/05/MAS
[Arising out of Order-in-Original No.5/2004 dated 19.3.2004 passed by the Commissioner of Central Excise, Trichirapalli]
For approval and signature:
Honbe Ms. Jyoti Balasundaram, Vice President
Honble Mr. P. Karthikeyan, Member (Technical)
1. Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? :
2. Whether it should be released under Rule 27 of the
CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? :
3. Whether the Member wishes to see the fair copy of
the Order? :
4. Whether Order is to be circulated to the Departmental
Authorities? :
Commissioner of Central
Excise, Trichy
Appellant
Versus
M/s. BHEL
Respondents
Appearance:
Sh. N.J. Kumaresh, SDR.
Sh. N. Venkatraman Adv.
Shri Muthu Venkatraman, Adv.
For the Appellants For the Respondent CORAM:
Ms. Jyoti Balasundaram, Vice President Mr. P. Karthikeyan, Member (Technical) Date of hearing :31.3.09 Date of decision:31.3.09 Final Order No.____________ Per P. KARTHIKEYAN This matter arises before us for the second time. Adjudicating 23 Show Cause Notices, proposing to reclassify boiler parts cleared by M/s. BHEL under CSH 8402.90 as against CSH 8402.10 adopted by the BHEL and to demand differential duty of Rs.39,10,79,512/-, were adjudicated by the original authority and affirmed by the Commissioner (Appeals) reducing the demand of Rs.35,32,83,006/-. Vide Final Order No.628/01 dated 4.5.2001 the Tribunal remanded the matter for de nova decision on the grounds that the assessment was provisional and therefore the demand of differential duty was improper; the expert opinion given by BHEL could not be ignored in the absence of another equally respectable opinion. The period of dispute is from September 95 to August 97. The impugned order had been passed following remand direction of the Tribunal as per final order mentioned above.
2. An expert opinion was obtained by the Department from the Technical Adviser (Boilers), Ministry of Commerce and Industry, Department of Industrial Policy and Promotion, New Delhi dated 12.09.2003 which, inter alia, opined that a Boiler came into existence on manufacture and erection of the following:-
i) Drum
ii) Fittings like:
Feed pipe and Steam pipe;
Economiser;
Super heater and Re-heater
iii) Mountings like valves
Following HSN note at para V Section XVI , the Commissioner found that the impugned clearances did not involve boiler parts but boiler itself in an unassembled form. The Explanatory Note provided for classification of machines transported in an unassembled state for convenience of transport under the heading appropriating the machine proper even though the components could have contributed to production of an incomplete machine having the characteristics of the complete machine. He found that the clearances were against order for production and supply of boiler and that the Revenue has no case that components in excess what could constitute a machine with the essential characteristics of a boiler. Such components had been transported in different lorries owing to the massive size of the boiler involved. Components constitute a machine with the essential characteristics of a boiler as per expert opinion obtained by the Department from the Ministry of Commerce and Industry. We find that the boiler involved several tones, which could not be transported in one lorry and were normally transported in a different consignment stackers in time. This was owing to the physical feasibility constitutes that trade practice; however the supply was against order for a full boiler and no components in excesses of what could constitute a boiler was cleared and transported. Accordingly, he held that the impugned clearances involved boilers in unassembled condition classifiable under CSH 8402.10 and dropped the demand of Rs.30,10,79,512/- .
3. The Revenue is in appeal against the above order. The following grounds are taken in the appeal. Boilers emerged only at size on assembled, erection etc. along with components received from other units of BHEL, and those sourced through vendors of BHEL and through imports. A functional boiler could not be erected with the components supplied by the assessee. The supply was made against orders received by the corporate office of BHEL at Delhi and components for the boilers were contributed by various divisions of BHEL. As per the invoices the goods cleared were classified by the assessees as boiler in CKD/SKD condition. No expert had opined that the clearance of BHEL constituted a boiler. For a machine set to be cleared SKD/CKD form of the components and parts of the machine had to be cleared as a set. In the instant case, components which could not assemble in the complete boiler had been cleared. The components cleared and also be described as an incomplete machine with the characteristics of a boiler in unassembled form. The Revenue also relied on the case law which held that clearances of a component parts could not be equated with clearances of full furnace in knocked down condition in the case of Wesman Engineering Co. Ltd. Vs. CCE, Calcutta-III [2002 (150) ELT 644 (Tri.Kolkatta)]. In a case where the appellants therein had erected furnace with parts manufactured by it and those sourced from the market. In Spaceage Engineering Projects Ltd. Vs. CCE [1995 (78) ELT 544 (Tri)], the Tribunal held that idlers, pulleys and structurals cleared by the appellants could not themselves be called collection of parts of the conveyor system, stackers/reclaimers those parts could not be said to be assembly of parts of such advanced stage has to be considered as having the main essential features of the complete conveyor, stackers/reclaimers at the time of clearances. In the cross-objection filed by M/s. BHEL, the respondent had relied on the decision of the Tribunal in CCE, Pune Vs. Thermax Bobcock & Wilcox Ltd. [2005 (182) E,LT 336 (Tri.Mum)] and CCE, Coimbatore Vs. Servall Engineering Industries [2004 (168) ELT 125 (Tri.Chen)].
4. Among others and the HSN notes, we have carefully considered the facts of the case and the rival submissions. On a perusal of the expert opinion provided by the Department from the Technical Adviser (Boilers) of the Ministry of Commerce and Industry a boiler came into existence on manufacture, erection of :
i) Drum
ii) Fittings like:
Feed pipe and steam pipe Economiser;
Super heater and Re-heater iii) Mounting like valves.
The Commissioner found that the impugned clearances involved clearances of components of machines with essential characteristics of boilers in terms of the above opinion. During hearing the ld. Counsel for the respondents showed us the description of the parts sought to be classified as parts of boilers which comprised the components essentially required to erect a boiler as per the expert opinion mentioned above. The impugned order found that clearances were components of boilers against orders for supply of boilers. The Revenue has not adduced any documentary evidence to contradict the above finding of the Commissioner. In arriving at the finding that the impugned clearances had to be classified as boiler cleared unassembled form. The Commissioner followed the HSN note extracted below:
For convenience of transport many machines and apparatus are transported in an unassembled state. Although in effect the goods are then a collection of parts, they are classified as being the machine in question and not in any separate heading for parts. The same applies to an incomplete machine having the features of the complete machine (see Part (IV) above), presented unassembled (see also in this connection the General Explanatory Notes to Chaptere84 and 85).However unassembled components in excess of the number required for a complete machine or for an incomplete machine having the characteristics of a complete machine, are classified in their own appropriate heading. The above note is an authority to classify complete machine or machines which have acquired were essential characteristics all under the heading appropriating the complete machine when cleared under unassembled form in different consignments for convenience of transportation. We find that the Commissioner has decided the classification of the impugned goods as a boiler of CSH 8402.10 in accordance with the statutory provisions.
5. We also find that in the Thermax Babcock & Wilcox Ltd. (supra) which dealt with an identical dispute held as follows:
But we still hold that this variance in opinions expressed, does not alter the fact that the parts of boilers as cleared by the respondents, do constitute an incomplete boiler in an unassembled form. The facts as come out clearly indicate that the essential parts of boilers are cleared from the factory as it is not possible to clear a complete boiler in one go. Even when one considers that some of the parts removed from the factory are of auxiliary nature, one has to agree that an incomplete boiler in unassembled form is cleared. That the boiler in unassembled form is removed in several lots on different dates itself does not mean that parts but not the whole are cleared from the factory in view of the fact that the respondent has a contract to erect and commission a boiler and has been disclosing this fact to the Department Both sides to the dispute submitted that the above decision dealt with a case of identical facts and the Thermax (supra) also are engaged in the manufacture of huge boilers like BHEL which are cleared in several consignments to the site of erection. This decision of the Tribunal was upheld by the apex Court as reported in 2007 (217) ELT 186A (SC). In the circumstances, we do not find any reason to interfere with the order of the Commissioner of Central Excise.
6. We have also considered the case law cited by the Revenue in its appeal in the case of Wesman Engineering Co. Ltd. Case (supra) the facts do not appear to be that a furnace which had acquired essential characteristics had come into existence in the appellants factory and the same was cleared unassembled condition; the Tribunal observed that component parts manufactured and cleared from the appellants factory could not be equated with the clearance of full furnace in a knocked down condition. We find that this ratio obviously does not apply to the facts of the subject case. As regards the Spaceage Engineering Projects Ltd case (supra) the appellants had cleared some components which constituted parts of the conveyor system, stackers/reclaimers with their essential features. Only when the parts involved were assembled and erected at site of the customer along with bought out items and were interconnected with the transmission devise like conveyor belt, the whole assembled erected machinery became conveyor system. The facts of this case are also a different from those of the instant case. These case law, therefore, not support the case of the Revenue. The appeal filed by the Revenue is dismissed.
(Dictated and pronounced in open court)
(P. KARTHIKEYAN) (JYOTI BALASUNDARAM)
MEMBER (T) VICE PRESIDENT
Swamy
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