Customs, Excise and Gold Tribunal - Delhi
El. P. Em. Industries vs Collector Of Central Excise on 15 June, 1995
Equivalent citations: 1995(79)ELT681(TRI-DEL)
ORDER G.R. Sharma, Member (T)
1. The captioned appeal has been filed by M/s. El. P. Em. Industries being aggrieved by the order passed by the Collector (Appeals). The Collector (Appeals) in his order has held as under:
"4.1 I have considered the appeal. I find appellants have filed a classification list, which was to be effective from 18-6-1984. They had classified stators and rotors under T.I. 30D. Rule 173B of Central Excise Rules which contemplates of lodging of a classification list by an assessee, does not permit an assessee to lodge the classification list under protest, as the rule does not prohibit an assessee from claiming the classification of the excisable goods manufactured, under any of the entries of the Central Excise Tariff. Therefore, it was open to appellants to have claimed the classification of the impugned goods under T.I. 68. It is absurd to claim classification under T.I. 30D and simultaneously endorse a remark that the classification list is filed under protest. Therefore, the so-called protest letter, or the remarks relating to lodging of the classification list under this protest should have been totally ignored by the department, as this protest is not the protest contemplated under Rule 233D. When the classification list approved by the Assistant Collector without modifying the classification list, the appellants cannot complain that they were aggrieved by the order of the approval. The only course open to them is to claim refund Under Section 11B of the Act.
4.2 On the merits of the issue, I observe that I have already examined the correct classification of stators and rotors manufactured, in the course of manufacture of monobloc pumps and had held in my order-in-appeal No. 2/85 (CBE), dated 5-1-1985 that these goods are correctly classifiable as parts of electric motors. Following the ratio of this decision, I hold that appellants' request for classification of stators and rotors under T.I. 68 is not sustainable. Copy of my order-in-appeal No. 2/85 (CBE), dated 5-1-1985 is enclosed for purpose of record.
4.3 Appellants have also mentioned about the issue of an interim stay order by the High Court of Madras, in respect of an order passed by another Assistant Collector relating to their Unit No. 1. It is observed that the interim order of the High Court was with reference to the order passed by the Assistant Collector of Central Excise Coimbatore I Division, whereas in the present case the classification list has been approved by the Asstt. Collector, Coimbatore II Division without any modification, since appellants themselves have classified stators and rotors as parts of electric motors. Therefore, the interim stay order issued by the High Court with reference to an order passed by the Assistant Collector of Central Excise, Coimbatore I Division would not apply to an order passed by the Assistant Collector of Central Excise, Coimbatore -II Division."
2. The facts of the case in brief are that the appellants are engaged in the manufacture of stators and rotors as component parts of monobloc pump sets. They submitted classification list for classification of the stators and rotors under the then Tariff Item 30D indicating in the remarks column components to monobloc pump set are not dutiable under Tariff Items No. 1 to 67 and hence these stators and rotors are classifiable under Tariff Item 68 and not under Tariff Item 30D. The department was of the view that rotors and stators are correctly classifiable under Tariff Item 30D of the then Central Excise Tariff being component parts of electric motors. A show cause notice was issued to the appellants by the Range Officer asking them to explain as to why their claim of classification of rotors and stators under Tariff Item 68 should not be rejected and also as to why their protest indicated in the remarks column of the classification list should not be vacated. The appellants submitted that the correct classification of rotors and stators manufactured by them was under T.I.68 and not under T.I. 30D contending that the contention of the department is not correct in law as rotors and stators manufactured by them were not component parts of electric motors. It was also submitted by the appellants that the matter was pending before the Madras High Court on identical issue brought before it by their other unit. It was also contended before lower authorities that classification of the goods under Tariff Item 30D was also approved by the Assistant Collector and therefore, issue of show cause notice by the Range Superintendent is not valid; that the classification can be reviewed only by an authority higher than Assistant Collector and not by the Range Superintendent. It was argued before lower authorities that the electric motor was not coming into existence in an identifiable manner in a monobloc as admitted by the department and for that reason independent existence of stators and rotors is ruled out as the shaft is common to rotors and pump and casting is common to stators and pumps. It was also argued that component parts of monobloc pump are not coming under the purview of Tariff Item 30A since there was no sub-entry under T.I. 30A. It was also submitted by the appellants before the lower authorities that the stators and rotors portions of monobloc pump are not interchangeable with the stators and rotors of electric motors since they are of specific design. It was also pleaded that stators and rotors of DC generator and those of alternator are not liable to duty and in the same manner, the stators and rotors manufactured by them are not subject to payment of duty. In any event, it was argued that the stators and rotors and monobloc pump if at all liable to duty shall be liable under Tariff Item 68. Since they are captively consumed they are to be exempted from duty under Notification No. 118/75, dated 30-4-1975.
3. Shri A.R. Madhav Rao, the learned Advocate appearing for the appellants submitted that the authorities ought to have held that the appellant is entitled to pay the duty under protest as the stators and rotors used in the manufacture of monobloc pumps were a subject matter in dispute before the Hon. Madras High Court by way of writ and the stay order obtained by various manufacturers including the appellant's unit at Coimbatore No. 1; that the stators and rotors used in the monobloc pumps are given a special shape and size and could not at all be used for making electric motors; that the stators and rotors manufactured by the appellants could be treated as component parts of monobloc pumps and should have been classified under T.I. 68 only and not under T.I. 30D; that a reading of the tariff description of Item 30 of the Central Excise Tariff together with a reading of sub-item (D) will clearly show that only parts of electric motors, all sorts will be liable to be classified under the then T.I. 30D; that monobloc pumps are classifiable under T.I. 30A; that rotors and stators are component parts of monobloc pumps; that since parts of monobloc cones are not dutiable under any item from 1 to 67 of CET and hence they were classifiable only under T.I. 68 of CET; that the driving mechanism of monobloc pumps cannot be equated with the electric motors and that they fall under different entries in the CET; that the driving mechanism is peculiar to a particular type of machinery; that it cannot be equated to the driving mechanism of another; that the stators and rotors of monobloc pump sets are altogether different in design and application from the rest used in electric motors. Another point that was vehemently agitated before us by the learned Advocate was that the show cause notice was not maintainable as the classification list was already approved by the Assistant Collector and the show cause notice was issued by the Superintendent who is subordinate to Assistant Collector and therefore the learned advocate pleaded that the show cause notice should be quashed. In support of his contention, he cited and relied upon the following case law :
(a) Quadromatic Engg. Pvt Ltd. v. Collector of Central Excise, Pune reported in 1994 (71) E.L.T. 452 (Tribunal)
(b) Collector of Central Excise v. Mahendra Engg. Works reported in 1993 (67) E.L.T. 134 (T)
(c) Sahney Paris Rhone Ltd. v. Collector of Central Excise reported in 1995 (77) E.L.T. 13 (SC).
(d) Paharpur Cooling Towers Pvt. Ltd. v. Collector of Central Excise reported in 1995 (77) E.L.T. 18 (SC).
The learned Counsel also referred to a copy of Baroda Collectorate Trade Notice No. 110/81, dated 1-5-1981, CBEC Circular dated 4-2-1981, CBEC Circular dated 13-12-1989, CBEC Circular dated 25-9-1986, Ministry of Finance letter dated 18-2-1975 and CBEC letter dated 19-7-1974 in support of his contentions.
4. Shri Sharad Bhansali, the learned SDR appearing for the respondent submitted that the classification list was finally approved by the Assistant Collector who was competent to do it, that there was no cause for appeal inasmuch as the appellants themselves had requested the classification of rotors and stators manufactured by them under the then Central Excise Tariff Item 30D; that there was no dispute insofar as the classification of the goods was concerned, that the Hon. Tribunal in the case of SRF Industrial Fabrics v. Collector of Central Excise reported in 1994 (73) E.L.T. 146 had held that an assessee was not entitled to file an appeal unless aggrieved that similar view was also expressed in the case of Hyderabad Plywood Ltd. v. Collector of Central Excise reported in 1991 (55) E.L.T. 62 (T) in which the Tribunal had held that classification list in respect of flush doors filed under Item 16B of the erstwhile Central Excise Tariff was approved by the Assistant Collector. In the circumstances, the assessee could not be said to be aggrieved by the order of the Assistant Collector since the Assistant Collector had accepted the classification list as filed by the assessee. It was also held in that case that appeal before Collector (Appeals) was not maintainable. The learned SDR also referred to Rule 233B of the Central Excise Rules and submitted that the Rules speak of procedure to be followed in cases where duty is paid under protest; that this Rule does not provide for protest of classification. Learned SDR therefore, submitted that a completely new case has been made by the appellants and therefore the appeal was not maintainable. On merits also, the learned SDR submitted that the appellants do not have any case whatsover he therefore, prayed, appeal may be rejected.
5. Heard the submissions of both sides and considered them. On careful consideration of the submissions made by both sides, we feel it necessary to consider the issues in the following order :-
(a) whether the show cause notice was valid when the Asstt. Collector had approved the classification list classifying the itemunder 30D as was claimed by the appellants.;
(b) whether the appeal was maintainable when the Asstt. Collector had agreed with the classification claimed by the appellant;
(c) on merits what should be the classification of the product, whether under T.I. 30D as held by the deptt. or under T.I. 68 as claimed by the assessee.
The learned SDR has very forcefully argued before us that the appeal was not maintainable whereas the appellants submitted that there was always grievance that in the remarks column of the classification list, the appellants had indicated the goods manufactured by them were not classifiable under T.I. 30D but were classifiable under T.I. 68, that this clearly shows that there was a dispute in regard to not only the classification of the goods but also in respect of rate of duty. Since the classification generally attracts under different T.I. a different rate of duty and therefore, the protest though recorded in the classification list can be treated as a protest tinder Rule 23313.
6. The Department relied heavily on the decision of the Tribunal in the case of SRF Industrial Fabrics cited (supra) [paras 5-7] are as under :
* * * * * 6A. On the issue whether the show cause notice was valid when the Assistant Collector had approved the classification list classifying the item under 30D as was claimed by the appellants, we observe that the admitted position is that the appellants in the remarks column of the classification list had indicated that the product manufactured by them was not classifiable under the then T.I. 30D but was classifiable under the T.I. 68. Thus, the position appears that the department wanted the appellants to submit the classification list under T.I. 30D perhaps in compliance of this verbal instruction of the department, the appellants in the column of Tariff Item indicated 30D but at the same time in the remarks column they recorded their protest. The Assistant Collector approved the classification list without taking note of the protest recorded in remarks column and therefore, this approval of the classification list cannot be termed as an approval in view of the fact that the protest recorded in the remarks column was not taken into consideration. In all fairness to the appellants, the Superintendent took note of the protest of the appellants recorded in the remarks column and asked the appellants to show cause as to why their protest should not be rejected. We therefore, having regard to circumstances and facts of the instant case hold that the approval of the classification list was not valid inasmuch as the appellants were not given an opportunity of showing the cause as to why their protest should not be rejected and therefore, we hold that the show cause notice issued by the Superintendent was valid in law and the decision thereon given by the Asstt. Collector after considering the submissions made by the appellants was the real approval of the classification list.
6B. On the question whether the appeal was maintainable when the Assistant Collector had agreed with the classification claimed by the appellants. On this issue we find that the appellants right from the beginning had lodged their protest on the question of classification of the product under the then Tariff Item 30D. While approving the classification list, the Assistant Collector had not taken note of the protest recorded in the remarks column of the classification list. We therefore, hold that in the absence of affording an opportunity to the appellants representing their case on the approval of the classification list was a failure, miscarriage of justice which was rectified by issue of show cause notice . We, therefore, hold that the appeal before the Collector (Appeals) was maintainable.
7. The Tribunal in the case of Quadromatic Engg. Pvt. Ltd. [Para 10] had held as under :
* * * * * * *
8. Coming to the merits of the appeal, we find that a number of clarifications by way of Circulars and Trade Notices were issued by the department wherein it was clarified that rotors and stators forming component parts of monobloc pumps will have to pay duty under Item 30A before their removal for the manufacture of monobloc pumps (Baroda Collectorate) Trade Notice No. 110/81, dated 1-5-1981. Further, in the Ministry of Finance Circular dated 4-2-1981, it was clarified that rotors and stators forming part of any driving mechanism built into any such machine have to pay duty under T.I. 30(4) [presently Item 30D] prior to their removal for use as component parts. It was also clarified that in the case of Monobloc pumps where electric motor does not come into existence in an identifiable manner and is not separable, its classification under Item 30 may not be warranted. In such cases, the casing and shaft is common to the pump as well as to the rotors and stators. Although electric motor as such does not come into existence independently in such instances the manufacture of rotors and stators cannot be denied. Rotors and Stators forming component parts of monobloc pumps in question will have to pay duty under Item 30(4) [presently Item 30(D)] before their removal for the manufacture of mono bloc pumps. As against this, the learned Counsel for the appellants submitted that the Hon. Supreme Court in the case of Sahney Paris Rhone Ltd v. Collector of Central Excise (supra) held that self-starter motor is an electric motor fitted with additional item like solenoid and other connected apparatus which taken together would constitute self-starter motor. Though the term motor is used, it is not motor alone but something else equally important which in conjunction with others would constitute self-starter motor. Consequently, the self-starter motor is not covered under Tariff Item 30 of the erstwhile Central Excise Tariff but would be covered by the residuary Item 68. For proper appreciation, the relevant para 6 is reproduced below :
"6. A mere look at this Item shows that it is comprehensive in nature and covers all sorts and parts of electric motors. The entry, however comprehensive, seeks to cover only electric motors of all types and parts consisting of such electric motors. But this entry will not cover any manufactured item which uses not only electric motor but something else to result into the manufactured item. The self-starter which the appellants are manufacturing is an item which not only contains electric motor but something more like solenoid and its all other connecting parts without which self starter will not work."
The learned Counsel also relied upon heavily on the decision of the Hon. Supreme Court in the case of Paharpur Cooling Towers Pvt. Ltd. In this case, the Hon. Supreme Court had held that the duty under Tariff Item 33(2) of the erstwhile Tariff Item is attracted on such electric fans which are not only designed for use but are indispensable for its operation. The entry has to be read both widely and narrowly. Widely as the goods designed for use as mentioned irrespective of shape would be taxable under this tariff. Narrow because it must be electric fan. Therefore, hubs and blades known as 'Blade Assembly' is not an electric fan and hence not classifiable under Tariff Item 33(2) to the erstwhile Central Excise Tariff Item 33(2) of the erstwhile Central Excise Tariff because of the fans at the time of removal from the factory did not have any electric motor or any other kind of device to generate electricity. Rather the fans were mounted on the shaft of the motor. Now let us examine what Tariff Entry reads. It reads as under :-
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Tariff Description of goods
Item No.
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30 ELECTRIC MOTORS, ALL SORTS; AND PARTS THEREOF
NAMELY -
A. ...
B. ...
C. ...
D. Parts of electric motors (including die-cast
rotors).
Explanation I - In the case of any multispeed
motor, the highest rated output of the motor shall
be deemed to be the rated output of the motor.
Explanation II - This item does not include motors
specially designed for use in gramphones or record
players and all parts of such motors.
Explanation HI - This Item includes motors equipped
with gears or gear boxes.
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It would be seen that what is included in the Tariff Entry 30D is part of electric motors (including die-cast rotors) All the evidence on record points out that rotors and stators manufactured by the appellants are of a specific design for use in mono bloc pumps. It has also been brought on record that these rotors and stators are not interchangeable and cannot be used in electric motors. Having regard to this fact and following the rulings of the Apex Court in the cases cited above, we hold that rotors and stators manufactured by the appellants and captively used for manufacture of monobloc pump sets shall be classifiable not under Item 30D but under the then Tariff Item 68.
9. Having regard to the above findings, the appeal is allowed. Consequential relief if any, shall be admissible to the appellants in accordance with law.