1998(06)LCX0027

IN THE CEGAT, SOUTH ZONAL BENCH, CHENNAI

S/Shri V.P. Gulati, Vice President and T.P. Nambiar, Member (J) Third Member on Reference : Shri V.K. Ashtana, Member (T)

MAK CONTROLS

Versus

COMMISSIONER OF CENTRAL EXCISE, COIMBATORE

Misc. Order No. 114/98 and Final Order No. 1173/98, dated 16-6-1998 in Appeal No. E/SB/5302/95

Cases Quoted

— 45 (STC) 332 — Referred ................................................................................................... [Para 10]

Collector v. Abel Tronics Ltd. — 1997(01)LCX0142 Eq 1997 (093) ELT 0289 (Tribunal) — Referred .................... [Para 11]

Fine Automotive & Industrial Radiators (P) Ltd. v. Collector — Referred ......................... [Para 16]

Sun Export Corporation v. Collector — 1997(07)LCX0044 Eq 1997 (093) ELT 0641 (S.C.) — Relied on .............. [Para 21]

Advocated By :   Shri A. Vijayaraghavan, Consultant, for the Appellant.

Shri S. Murugandy, JDR, for the Respondent.

[Order per : V.P. Gulati, Vice President]. - The issue in the appeal relates to the classification of the goods which are described as Ground Power Unit (GPU) for use with the Aircraft. The claim of the assessee is for assessement of the same under Tariff Heading 88.03 read with Notification No. 65/93-CX, dated 28-2-1993.

2. The ld. Lower Authority, however, has held the goods to be assessable under T.H. 85.02. The two competing headings are reproduced below for convenience of reference :

T.H. 85.02 Electric generating sets and rotary convertors

T.H. 88.03 Parts of goods of Heading No. 88.01 or 88.02

3. In the present case, the goods are claimed as parts of Heading 88.02 which covers ‘other aircraft (for example, helicopters, aeroplanes); spacecraft (including satellites) and spacecraft launch vehicles’.

4. The ld. Consultant for the appellants has pleaded that the Ground Power Unit (GPU) was not known commercially as the generating sets and the same were not sold as generator sets as understood in the trade. He has pleaded that it is a well settled law for assessment under Central Excise Tariff, the assessment should be based on the commercial parlance test in the absence of any definition of the goods as set out under the tariff. He pleaded in the impugned order, the ld. Collector himself has held in Para 13 as under :

“No doubt, it cannot be compared to ordinary Generator and it can only be used for providing power to the Aircraft. The ground power unit generates electrical power 3 phase 4 wire 400 Hz, 200/115 volts. Whereas the normal generator produce 50 Hz 415 volts.”

5. He has pleaded that once it was conceded that the GPU was exclusively used for the Aircraft Industry, the same should be treated as part of the Aircraft falling under T.H. 88.03 and the benefit of Notification 65/93 should have been extended to the same.

6. He has pleaded under the Customs Tariff by Notification No. 11/97 dated 1-3-1997, there is an exemption for the goods imported for GPU. He has pleaded that in the Aircraft Industry, GPU is the standard equipment for exclusive use of the Aircraft. He has pleaded the question as to whether the GPU could be considered as part of the Aircraft will have to be considered in the above back ground. He has pleaded that the Customs authorities have treated the item of Alternator generators which are used by the appellants for the manufacture of GPU as parts of the Aircraft and extended the benefit of the concessional assessment. In this connection, he referred us to the letter from the Indian Airlines authorities dated 14-5-1997 addressed to the Senior Departmental Representative, CEGAT. In his letter, they have informed SDR that there was some doubt about as to whether the benefit of Notification No. 99/81 was available in respect of parts of GPU used for subsequent servicing. The appellants had obtained the certificate from the Indian Airlines, Office of the Controller of Air Worthiness, Civil Aviation Department who have certified that the goods are parts of the Aircraft servicing equipment. It was recommended that the importers’ claim for classification under 88.03, Customs Tariff read with Notification No. 99/81 may be considered.

7. He has pleaded that ad hoc exemption was issued for the parts i.e. alternators which were imported for GPU. He has pleaded that this Notification 99/81 came to be rescinded in 1994 budget and subsequently Notification No. 70/94 dated 1-3-1994 was issued and which stood amended by Notification No. 53/95. In this notification, a clause was added that the parts of aircraft will also include among other parts required for servicing of the aircraft and in the subsequent Notification 11/94 these parts continued to be covered. He has pleaded that the ld. Collector was in error in holding that the classification of Customs Tariff does not help the cause of the appellants as under the said notification, these items were considered parts of the aircraft. He has pleaded if the Alternators were considered as parts of the aircraft and the benefit of exemption notification given, the assembly made out of the same namely GPU should also be considered as part of the aircraft and the benefit of Notification 65/93 therefore should have been allowed. He further pleaded that after accepting the position that the GPU was for exclusive use of the aircraft, the ld. Lower Authority’s observations that it did not help the cause of the appellants was not correct.

8. He has pleaded that the GPU became integral part of the aircraft when the aircraft was on ground as it helped the aircraft to remain functional and various parameters of the engine can be kept functional to enable the aircrafts to ultimately take off and the GPU came to be detached when the aircraft was moved to the runway for taking off.

9. He has pleaded as it is under the tariff, the parts of the aircraft has not been defined in the Central Excise Tariff and in this connection, he referred us to the definition of the parts as given in the import trade policy. In the April 1992-97 Import Trade Policy in Para 7 at S. No. 29 the parts defined as under :-

“Part” means an element of a sub-assembly or assembly not normally useful by itself and not amenable to further disassembly for maintenance purposes. A part may be a component or an accessory.”

10. He has pleaded that the appellants’ goods squarely qualify on this definition as part of the Aircraft. He, in this connection, also referred us to the judgment of the Hon’ble Allabahad High Court reported in 45 (STC) 332 and referred to the following :-

“A part in the absence of which the vehicle cannot run smoothly or otherwise inasmuch as part as the steering, brake etc. In the Hindi notification, the words “Atrikt saman” has been used for “spare parts”. This further makes it clear that an article to be covered under that entry must be extra part of machinery which may be capable of being substituted. Before an article can be considered to be extra or spare part, it must be held to be part of the machinery. As unless something is part, it cannot be a spare part. A machinery may consist of numerous parts, some may be essential and integral parts of it and others may be for smooth and efficient running of the machine. All the same both are parts of the machinery. Those parts that can be replaced or substituted are described as spare parts. But merely because they can be replaced they do not cease to be parts. A part which cannot be replaced becomes a part of the machinery itself and those that are capable of being substituted become spare parts. A spare part is nothing but a part of the machinery.”

11. In this connection, he further pleaded that this Tribunal vide Order Nos. 1197 & 1198 has held that the Radiators are to be considered part of the engine by reason of the use in the engine. Likewise, he pleaded the Tribunal in the case reported in 1997(01)LCX0142 Eq 1997 (093) ELT 0289 (Tri.) = 1997 (071) ECR 116 has held that parts suitable for use solely or principally with the moulds are to be classified with the moulds under T.H. 84.80. He has pleaded, likewise, here going by the exclusive use by the GPU with the aircrafts, same has to be considered part of the aircraft.

12. He, further, referred us to the Section Notes XVII in the Central Excise Tariff and referred us to Note 3 which is reproduced below for convenience of reference :-

“References in Chapters 86 to 88 to ‘parts’ or ‘accessories’ do not apply to parts or accessories which are not suitable for use solely or principally with the articles of those Chapters. A part or accessory which answer to a description in two or more of the headings of those Chapters is to be classified under that heading which corresponds to the principal use of that part or accessory.”

13. He has pleaded this section note is a negative note and inference that can be drawn is that those parts which are solely or principally used with the item falling under Chapter 86 to 88 are to be considered as parts of those items and otherwise not.

14. He has pleaded once the exclusive use with the aircraft is established, the goods will have to be assessed under this Tariff Heading notwithstanding the Note 2 to this Section XVII under which it has been stated that the expression “parts” and “parts and accessories” do not apply to the articles enumerated thereunder in Section XVII, whether or not they are identifiable as for the goods of this Section. He has pleaded that the items which are excluded under this note are those which can be used otherwise than exclusively for the item falling under Chapters 86 to 88. He has pleaded even though under Note 2, the electrical machinery and equipments of Chapter 85 is excluded for assessment under T.H. 86 to 88, this exclusion would not apply to the GPU for the reason of its exclusive use with the aircrafts and being something totally different from the generators as understood in the trade. He has therefore pleaded that the GPU for assessment purposes stands fixed for assessment under Chapter Heading 88. He has pleaded as it is Section Note 1 of Section XVI under which the entire generators at Note 1(k) wherein it is clearly set out that articles of Section XVII stands excluded from the purview of assessment under Section XVI i.e. under Chapter 84 or Chapter 85. He referred us to the statement of facts and the grounds of appeal wherein the goods regarding the nature of the equipment have been brought out. He has pleaded that the determination of the classification has to be seen where the same is principally used. He has pleaded that Note 3 should prevail or otherwise this note will become redundant. He, therefore, urged that the goods will have to be assessed under T.H. 88.03 read with Notification No. 65/93.

15. The ld. JDR for the department pleaded that the GPU produces electricity like all generating sets even though it was for exclusive use with the aircraft. He has pleaded that the GPU was used for servicing of the aircraft and therefore same could not be considered as part of the aircraft. This has been certified by the Civil Aviation Department authorities and in this connection, he referred us to page 52 of the Paper Book wherein the Civil Aviation authorities stated that the GPU is needed for servicing different types of aircrafts mentioned in the said letter dated 7-10-1994.

16. He has pleaded that the GPU was to keep the systems of the aircraft working when the aircraft is on the ground. He pleaded the parts of the GPU which were earlier imported and cleared under provisional assessment were exempted by an ad hoc exemption. He has pleaded even under the HSN notes, various parts of the aircraft as are enumerated thereunder do not cover the GPU. He has pleaded that the item could not be considered as part of the aircraft but only as a generator. He has pleaded the ratio of the decision of this Tribunal vide Order Nos. 1197 & 1198 cited supra in the case of Fine Automotive and Industrial Radiators Pvt. Ltd. v. CCE, Trichy could not be applied to the facts of this case as the Radiator is fixed on the Engine unlike the GPU which was detached.

17. We have considered the pleas made by both the sides. We observe that the position that the GPU is specially designed for the use with the aircraft is not in dispute and also the same is exclusively used with the aircrafts. As set out by the appellants in the statements of facts and the Grounds of Appeal and also as accepted by the ld. lower authority in his order, the GPU is attached to the aircraft when it is on the ground to keep the aircraft in the functional condition of readiness for taking off. The appellants, in the statement of facts in the appeal memorandum in Para 3 have stated that when the aircraft is in the air, there is an inbuilt power unit which keeps the various instruments and control functionals and the GPU performs the same function on the ground when the aircraft is stationary. It has also been stated that the GPU has an inbuilt computer system which synchronizes with the aircraft mechanism and which also activates the computer operations in the aircraft. It was also pleaded that the GPU cannot be used as a normal generating sets in view of the inbuilt configuration, which facilitates the functions only with the aircrafts.

18. We observe that the ld. JDR has described the equipment as the one for servicing the aircraft while the appellants have claimed the same to be part of the aircraft. The ld. lower adjudicating authority has observed in his order that it is providing the power on the ground for the aircraft for system checking and testing of the aircraft and it is fitted on the aircraft through NATO socket during system checking. He has further gone on to observe that the exclusive nature of the appliance cannot decide the classification of the product which is based on the universally accepted classification norms of HSN. There is no dispute that the equipment is so designed that it can be fitted only to the aircraft and performs the function only servicing aircraft alone and cannot be used as a generator elsewhere for generation of electricity. When this be the position, the question is whether in the context of the plea of the appellants that it is not considered by those who deal in the generating sets as a generator can be accepted. The GPU generates the power for use in the aircraft and for which this equipment has also, as mentioned in the statement (sic) referred to above has inbuilt features which render its uses only exclusively with the aircraft. It is stated it can be synchronized only with the aircraft functioning and for that necessary inbuilt features are there so that computer and other equipments get power by synchronizing of this equipment with the aircraft. No evidence has been brought on record to controvert this position as pleaded by the appellants that the equipment was sold merely as a generator like any other generator. The department itself has chosen to call it an equipment for servicing of the aircraft. This again goes to show that this equipment has features which render it usable only with reference to the needs of the aircraft. Functionally, though, it may be that it generates power but by the features which are built in rendered usable only with the aircraft and it can be concluded that this equipment for that reason can be taken only as an adjunct of the aircraft. As it is in terms of Section Note 3 of Chapter (sic) XVII under which Chapter 88 falls, it is clearly stated that the parts or accessories which would fall under Chapters 86 to 88 would be only those which are suited principally with the articles under this Heading i.e. 86 to 88. This Section Note 3 has been reproduced in the earlier paragraph and though this is negatively put the essence of the notes what has been mentioned above inferred by us. Even otherwise, if an item falling under more than one heading in terms this section note it is to be classified under the heading which corresponds to the principle use of that part or accessory.

19. It is significant to note that under this section note, it is not defined functionally as to what output is given by the equipment but the use to which equipment is to be put would be determinative of the classification. Going by the use of the equipment and the undisputable position that i.e. the exclusive use of GPU meant for the aircraft in terms of this section note, it qualifies as an item which will fall under Chapter 88 which covers aircrafts.

20. The Section Note 2 under which the Electrical Machinery of Chapter 85 stands excluded from purview of Section XVII will not come in the way of the classification of the goods under Chapter 88 in view of the fact that the item on market criteria of its exclusive use gets to be classified under Chapter 88.

21. We observe that a meaning has to be given to provisions of Chapter Note 3 and what is set out to be included should be given preference to what is set out to be excluded when both the notes deal with the same issue. The interpretation which is favourable to the assessee has to be preferred in view of well settled principle law as laid down by the Hon’ble Supreme Court in a number of cases the latest being 1997 (093) ELT 641 in the case of Sun Export Corporation v. CC, Bombay, the Hon’ble Supreme Court in Para 13 at the end has observed as under :-

“Even assuming that there are two views possible, it is well settled, that one favourable to the assessee in matters of taxation has to be preferred.”

In that context therefore the preference in any case has to be given to Section Note 3 as compared to Section Note 2.

22. The next question than falls for consideration is whether the item in question can be considered as part of the aircraft or a merely a servicing equipment. It is observed that the servicing equipment is a wider term and it may also include parts also which can service the aircraft. In the present case, the equipment in question is a GPU and this GPU keeps the aircraft functional by keeping the various instruments, computers and controls functional when the aircraft is on the ground and by doing that the aircraft is kept in the state of readiness for taking off. When the aircraft is in air, there is corresponding equipment in the aircraft which takes over the function of the GPU to keep all these instruments, computers and controls functional. Going by the use, the equipments therefore can be considered while as servicing equipment as also part of the aircraft. This position regarding the use and functional performance is accepted by the ld. lower Adjudicating Authority also in his order.

23. It is observed that on the representation made by the appellants that in case of the goods which were imported by them in 1992, the appellants were given exemption for the parts of GPU both for the Customs Duty under the First Schedule as well as the Additional Duty leviable under Section 3 of the Customs Tariff. This goes to show the mind of the authorities that the equipment in question has been accepted to be as for the aircraft and deserving of the duty concession both from the CVD and Customs Duty. It is clearly set out in this Order No. F.No. 605/245/92 dated 14-6-1993 as under :-

“I am directed to say that M/s. Mak Controls are manufacturing high tech/engineering products through their research & development facility. They have developed ground power unit and air jet starting system/air-conditioning system for A-320 aircrafts. They had imported engine and alternator which were to be used along with indigenous parts for the manufacture of ground power unit. The said goods were imported in 1992 at Madras and were cleared provisionally. As payment of complete customs duty would not be economical, it has been decided to give partial exemption from payment of customs duty.”

It is seen that the appellants had developed GPU and air jet starting system/air-conditioning system for the aircrafts and they had imported engine and alternator which were to be used along with indigenous parts for the manufacture of the GPU. It is by reason of the specialised nature of the equipment that this exemption was allowed.

24. Further, it is seen that the appellants have produced evidence that the equipment has to stand up to rigorous requirements for use with the aircrafts which are not required for ordinary generators. The Indian Airlines authorities as well as the Office of the Controller of Air Worthiness have placed orders for the GPU needed for servicing of A-320, A-300, B-737, F-27-500 types of aircrafts apart from others and they had been granted approval for the manufacture of the equipments in question by the Office of the Director of Air Worthiness, Hyderabad which all goes to show that the equipment in question has designed for the special purpose and exclusively meant for that purpose.

25. For the purpose of assessment of Customs duty the Notification No. 49/89 granted exemption in respect of parts of aeroplane required for manufacture or of such aeroplanes both from CVD and Customs duty and in the definition of the parts for the purposes of the notification in the explanation it was stated that this would include engine, engine parts, wireless transmission apparatus, wireless receivers, iron and steel washers and screws, ball and roller bearing and other parts. This notification came to be continued subsequently from 1-3-1994 by issue of Notification No. 70/94 also in the subsequent Notification 11/97 same position with the inclusion of these engines continues.

26. What is to be seen is that a differential treatment has been given in respect of parts which were needed in aircraft which are for manufacture or for servicing including walkie talkies. It is in this back ground therefore the Govt. of India issued an ad hoc exemption also in the case of Alternators and Engines which were imported by the appellants to manufacture the GPU. As it is the parts of the aircraft as such has not been defined except by section notes. Section Note 3, in our view, takes the precedence over Section Note 2 for the reason we have stated above. Inasmuch as we have held that the equipment in question can be treated parts of the aircraft and by reason of the item being considered as part in terms of Section Note 3, the appellants’ claim for the benefit of assessment under T.H. 88.03 read with Notification No. 65/93 has to be allowed and we order accordingly.

27. [Contra per : T.P. Nambiar, Member (J)]. - I have perused the orders passed by the learned Vice President. With great respect, I am unable to agree with the reasonings which are mentioned in the above said order.

28. The facts of the case as well as the arguments advanced by both the sides have been dealt with in detail from Paras 1 to 16 of the order of the ld. Vice President. Hence, I am not repeating the same.

29. The question for consideration is whether the appellants are entitled for the benefit of Notification No. 69/93-C.E., dated 28-2-1993. According to the above said notification, the Central Government exempted parts of Aeroplanes and Helicopters falling under sub-heading No. 88.03 of the Schedule to this Central Excise Tariff Act, 1985 from the whole of duty of excise leviable thereon which is specified in the Schedule. Therefore, in order to entitle the appellants for the benefit of this notification, there are two conditions which are to be fulfilled. The first condition is that the same should be part of the aeroplane and secondly the same should fall under the sub-Heading 8803.00 of the Central Excise Tariff Act, 1985. In this back ground, it is to be found out whether the Ground Power Unit (GPU) is a part of the aeroplane or not.

30. The GPU is attached to the aircraft only when it is on the ground in order to keep the aircraft in the functional condition of readiness for taking off. Therefore, the expert evidence which is produced by the appellants also has to be looked into in this connection. The appellants had produced a letter of Dy. Director of Stores & Purchase of Indian Airlines dated 4-8-1992 which is at Page 45 of the Paper Book which reads as follows :-

This is to certify that we have placed an order for Six Nos. of 90 KVA, 115 V, 400 Hz. 3 Phase Power Units suitable for A-320 Airbus Aircraft with M/s. Mak Controls, Coimbatore, vide our Order No. HSP/GS/92-93/004, dated 3-8-1992.

M/s. Mak Controls will be using imported engines and generators to incorporate in these power units suitable for the aircrafts. These 90 KVA power units will be used only in aircrafts and they have no other application.

31. It is therefore seen that according to this certificate, it is only mentioned that the GPU will be used only in the aircrafts and they have got no other applications. This certificate will not show that GPU is a part of the aircraft.

32. Another Certificate from the Indian Airlines dated 17-11-1992 is produced by the appellants which is filed at Page 46 of the Paper Book which reads as follows :-

Ground Power Unit ordered on M/s. Mak Controls vide our Purchase Order No. HSP/GS/92-93/04 dated 5th August, 1992 using Deut: BF6L913 Engine and Anton Piller Alternator No. 90, 90 KVA 400 Hz is only for servicing, A-320, A-300 and B-737 Aircraft and it has got no other application”.

This certificate clearly goes to show that the function of GPU is only for servicing A-320, A-300 and B-737 aircrafts and it has got no other application. Therefore, this certificate of an expert from the Indian Airlines clearly goes to show that this is only a servicing apparatus for servicing the aircraft in question.

33. In page 47 of the Paper Book, they have also produced a certificate from the Madras Airport which reads as follows :-

 Sub : Import of Internal Combustion Engine and Alternator constituting a power unit for servicing A-320, A-300 and B-737 Aeroplanes.

Dear Sir,

Reference may please be made to your Letter No. MST/92/CC dated 19-11-1992 on the above subject.

This is to certify that Ground Power Unit consisting of Deutz BF6L913 Engine and Anton Piller Alternator NKT-90, 90 KVA 400 Hz is only for servicing A-320, A-300, and B-737 aircraft and it has got no other application.

This certificate clearly goes to show that the GPU is only for servicing the above said aircrafts and it has got no other applications. So also the certificate produced by the appellants which is dated 4-9-1994 issued by the Controller of Airworthiness, Civil Aviation Department, states that the Ground Power Unit is needed for servicing the aircrafts. So also the Certificate from the Govt. of India, Civil Aviation Deptt., issued by the Controller of Airworthiness which is at Page 52 of the Paper Book which reads as follows :-

Sub : Import of Internal Combustion Engine and Alternators with All other parts thereof constituting a power unit for servicing A320, A300, B737 aircraft.

Further to this office Letter No. M/F-1/IA/4621, dated 14-9-1994, this is to certify that the following items also forms one of Ground Power Unit. Components apart from those mentioned in the above referred letter :-

1. Part No. AB3050-30 Air Start Hose Assembly.

Ground Power Unit is needed for servicing A320, A300, B737, F-27-500 type of aircraft apart from others.

This certificate also goes to show that the GPU is needed for servicing the aircraft.

34. Another certificate issued by the Officer In-Charge, Aircraft & Engine Holding Unit dated 12-6-1995 which is filed at Page 53 of the Paper Book which reads as follows :-

It is certified that the Ground Power Unit (GPU), capable of generating electrical power of 200/115V AC, 400 Hz, 3 phase, is a specific to type ground support equipment for providing electrical power to the aircraft. It is further certified that the Ground Power Unit is complementary to aircraft operations, especially for launching the aircraft.

Being specific to type in that the output frequency is 400Hz, the GPU is not usable for any other requirement wherein a frequency output of 50 Hz is normally required.

This certificate clearly goes to show that the Ground Power Unit is complementary to the aircraft operations, especially for launching the aircraft. These are the expert opinions produced by the appellants themselves which clearly goes to show that this is required for servicing the aircraft and it is complementary to the aircraft. Therefore by no stretch of imagination, it can be said that this is a part of the aircraft. Mere fact that it cannot be used anywhere else for power generation is no ground to consider it as part of the aircraft. Therefore on the available evidence in this case which is in the nature of expert evidence which the appellants themselves produced before the Tribunal, the only conclusion is that it is complementary to the aircraft and it is needed for servicing the aircraft. Such an instrument cannot be treated as part of the aircraft.

35. Chapter Note 3 merely states that reference in Chapters 86 to 88 to parts or accessories do not apply to parts or accessories which are not suitable for use solely or principally with the articles of those chapters.

36. It is further stated that a part or accessory which answers to the description in two or more of the headings and those chapters are to be classified under that heading which corresponds to the principal use of that part or accessory. Chapter Note 3 can be applicable only if it is found that GPU is part or accessory. As already stated by me on the available evidence on record it can never be said that this part or accessory.

37. The GPU no doubt is attached to the aircraft only when it is on the ground to keep the aircraft in the functional condition of readiness for taking off. The appellants have said so in the appeal grounds also. But when the aircraft is in the air, there is an inbuilt power unit which keeps the various instruments and control the functionals. But the aircraft when it is on the ground, the GPU is used for servicing the aircraft as could be seen from the above certificates which are produced by the appellant themselves. The mere fact that GPU cannot be used as a normal generating set is no ground to hold that it is a part of the aircraft. It is no doubt true it is designed in a way that it could function only in servicing aircraft and cannot be used as a generator elsewhere. But that is not the reason to hold that it is a part of the aircraft itself. In order to avail of the benefit of Notification 69/93, it should be shown that this is a part of the aeroplane. The evidences produced in this case only show that it is complementary to the aircraft and it is needed for servicing the aircraft and such an equipment cannot be held to be a part of the aircraft.

38. Functionally, it is seen that this GPU generates power and this power is generated for servicing the aircraft as could be seen from the certificates. Therefore, it cannot be considered parts or accessories falling under Chapters 86 to 88 and Section Note 3 has no relevance in determining the question whether this is a part of the aircraft or not. In this view of the matter, I am of the view, that there could also be no two views possible in this matter. The reason is that from the evidence available the only conclusion is that it is complementary to the aircraft and is meant for service of the aircraft. Therefore it cannot be said as part of the aircraft.

39. It is further seen that this is attached to the aircraft when it is in the ground position so as to generate electricity which in turn keeps the aircraft functionally by keeping various instruments, computers etc., the aircraft is kept in a state of readiness by the Power generation and this GPU does that power generation. But that is not sufficient to hold that the same is part of the aircraft in view of the fact that all the certificates goes to show that it is used for servicing the aircraft and it is complementary to the aircraft.

40. In such circumstances, I am of the view that on the evidences available the only conclusion is that this is not a part of the aircraft and that being so, the appellants are not entitled for the benefit of the said notification. Hence, the appellants claim of the benefit of assessment under T.H. 8803 read with Notification No. 65/93 cannot be allowed and in this view of the matter, the appeal of the appellants is dismissed.

DIFFERENCE OF OPINION

41. In view of the difference of opinion between the ld. Vice President and the ld. Member (J), the following points requires to be resolved by referring to learned Third Member :-

(1)     In the facts and circumstances, whether the Ground Power Unit (GPU) can be considered as part of the aircraft and in terms of Section Note 3 and the appellants claim for the benefit of assessment under Tariff Heading 88.03 read with Notification No. 65/93 has to be allowed as held by the Hon’ble Vice President.

(2)    Whether the GPU concerned in this case not a part of the aircraft and that the appellants’ claim for the benefit of assessment under T.H. 88.03 read with Notification No. 65/93 has to be disallowed as opined by the ld. Member (J).

42. [Order per : V.K. Ashtana, Member (T)]. - The difference of opinion between learned Vice President (since retired) and learned Member (J) (since retired) is being considered as per above reference.

43. Heard learned Consultant Shri A. Vijayaraghavan. He reiterated his earlier arguments and submitted that they imported (a) Alternator and Diesel Engine and (b) certain other electronic items were purchased from indigenous sources. When assembled, they formed the ground support unit for aeroplanes when on ground. Thus it is not an ordinary electricity generating set but an extension of certain sub-systems of the aeroplane which it is servicing. He further submitted that neither ld. Vice President nor ld. Member (J) dispute that it services the aeroplane.

44. He further submitted that said GPU was part of an aircraft because -

(i)      When the above imported components were cleared by Customs as parts of aircraft; then the fully assembled GPU was even more so a part of aircraft.

(ii)     as per explanation to Notification No. 52/94-C.E. parts used in servicing of aircrafts is a part thereof.

(iii)    CTA 11/87 lays down that GPU is distinct from and more than an ordinary generating set. That is why it costs over Rs. 23 lakhs whereas a simple D.G. set would cost ten times less.

(iv)    He discussed the relevancy of Note 3 of Section XVII and argued that since GPU was exclusively used with aircrafts therefore it will remain in Chapter 88 and not Chapter 84.

(v)     He also referred to the definition of “part” in ITC policy, which has not been at all considered by Hon’ble Member (J).

(vi)    He referred also to Note 1(k) of Section XV of CETA ’85.

(vii)   He cited :

(a)    45 (STC) 332 Allahabad HC on definition of “part”;

(b)    1993(07)LCX0044 Eq 1993 (067) ELT 0030 (S.C.) in case of M/s. Fusebase Eltoto Ltd. wherein Hon’ble Supreme Court has held that classification is to be as per common parlance and primary function;

(c)    1997(06)LCX0122 Eq 1997 (094) ELT 0644 (Tribunal) in the case of M/s. Sanghvi Swiss Refills, wherein it was held that Section Notes/Chapter Notes, being statutory, will have precedence over common parlance; and

(d)   1996(09)LCX0005 Eq 1996 (087) ELT 0012 (S.C.) Garware Nylons, wherein it was held that burden of proof is on department which alleges a particular classification. The impugned Order-in-Original has not adduced any such irrefutable evidence.

45. Learned Consultant, therefore, supported the opinion and order of Hon’ble Vice President.

46. Heard learned JDR, Shri Murugandy. He argued that department supported the opinion and order of Hon’ble Member (J) on the following grounds :

(a)     Issue being of 1992-93, only notifications in force then are relevant and not those issued later;

(b)     The GPU’s essential function is to generate electricity for a grounded aircraft. Therefore, it cannot be a ‘part’ of the aircraft;

(c)      Section Note 1(k) not be applied as this item does not fall under Section XVII; and

(d)     even the Customs notification does not talk of ‘part’ of aircraft but only of ‘servicing’ thereof.

47. I have carefully considered these arguments as well as the orders on record of Hon’ble Vice President and Hon’ble Member (J).

48. It is a well established law that any taxing notification is to be read and understood as per its text and there is no room for any intendment. It is also an equally well established law that the words and phrases of a notification issued under one statute should not normally be used to interpret the meaning of words and phrases in another statute. On both these counts, the Notification No. 65/93-C.E., dated 28-2-1993, the exemption contained in which is claimed by the appellant, is to be read and understood on its own and not with reference to any other notification issued under the Customs law or definitions contained in ITC Policy.

49. But before one can claim exemption under this exemption notification, one has to first classify the Ground Power Unit (GPU). Department proposes under Heading 8502 as D.G. Set, while appellants under Heading 8803. However, one thing is clear. If it would merit to fall under 8803 as parts of aircraft, then this position surely would allow it the benefit of the said exemption, because it becomes a ‘part’ of an aircraft.

50. Therefore, the moot point for consideration is whether the GPU is a unit which merely ‘services’ a grounded plane or whether it is a ‘part’ thereof. Instead of taking resort to the ITC Policy or the Customs notifications, I am of the humble opinion that whether a GPU is a ‘part’ of an aircraft or not is more a question of fact than of law.

51. Then what are the facts? They are that this GPU is :

(a)     a specially designed machine or sub-system which can be only used in attachment to a specific model and brand of an aircraft viz., Airbus 320;

(b)     almost five times as costly as a normal 90 KVA D.G. Genset would be, because of certain special inbuilt features; and

(c)      used as a substitute of the inbuilt power unit in the aircraft, when it is on the ground.

52. Facts at (a) and (b) above need no further examination, as these are not disputed. However, (c) is the cause of the dispute - it raises the moot question that whether such a use would qualify it to become a ‘part’ of an aircraft or only a ‘servicing’ unit thereof.

53. One is tempted to conclude on the basis of the numerous certificates of the technical authorities and airlines, as has been done by Hon’ble Member (Judicial), that since GPU “services” an aircraft on ground it is merely a servicing unit thereof but not a ‘part’. Yet, I am unable to accept such a simplistic view of the matter. The question which torments me is - Exactly what is the nature and scope of this “servicing”? Yet the answer is rather simple and is as follows :-

After a modern aircraft lands on the ground, its engines need to be switched off, both in the interests of fuel economy as also its safety. When this is done, its power generating unit(s) which are in turn provided motive power by these engines, also of necessity shut down. But a modern aircraft needs power also when it is temporarily on ground for a short technical halt, after which it has to take-off. This is for two reasons. First, to keep certain of its sub-systems operational e.g. air ventilation, lights, PA system, toilet equipment etc. Secondly, to provide power to restart the engines for take-off. There are 2 different ways this could be done :-

(i)       by having an auxillary source of power (either battery bank or generator) inside the aircraft itself, or

(ii)      by having an external auxillary source of power (again either a battery bank or generator).

54. Now, a modern aircraft is designed with operating cost factors in mind. Thus it cannot afford to be heavier that it should be, or conversely, the lighter it is, the more cost effective. Therefore, the inbuilt auxillary power source of the aircraft of yester years has been now taken out and instead placed on the ground, connected with the aircraft by the NATO connector - its so to say umbelical cord! So whenever the aircraft has to remain functional (as opposed to being in storage in the hanger) so as to also take-off, the GPU is a necessity because it is the erstwhile inbuilt auxillary power source of the aircraft, now kept out of its airframe. It is nobody’s case that an auxillary power source built in an aircraft is not a part thereof. So, why should the same source - a GPU - not be a ‘part’ thereof, merely because it is kept on the ground, but connected to the aircraft?

55. This brings us to the interesting preposition that can a unit capable of rendering such a ‘service’ to the aircraft be called its ‘part’. It is not disputed that the word “part” is not to be limited to connote only a mere bolt or washer or tyre or hinge - i.e. a primary function article. Even a component or a sub-system can be a ‘part’ of the full system. An aircraft is a complicated system - partly mechanical, partly electrical, partly electronic and partly aerodynamical. The GPU, as an auxillary power system, as discussed above, is also its sub-system. Without it neither the aircraft can take-off, nor can its other sub-systems function when it is on ground but its engines are off. Therefore, while in loose terms, a GPU may be used to ‘service’ an aircraft, but the nature of this ‘service’ being that of a sub-system of the aircraft, one cannot deny that it is clearly a ‘part’ of an aircraft. This is its specific use. Generation of electricity is only its generic use.

56. It is in this context that the Note 3 to Section XVII is to be appreciated and read. GPU are suitable, may, exclusively designed, for use solely (not merely principally) with an aircraft (falling under Chapter 88) and therefore is covered by any reference to ‘parts’ or ‘accessories’ in that chapter.

57. In view of the aforesaid analysis, I agree with the views of Hon’ble Vice President, that being a ‘part’ of an aircraft falling under Heading 88.03 of Central Excise Tariff Act, 1985, this GPU is entitled to the benefit of exemption under Notification No. 65/93-C.E., but with utmost respect beg to differ from the views of Hon’ble Member (Judicial).

MAJORITY ORDER

58. In view of the aforesaid orders, the following final orders are passed :

The Ground Power Unit (GPU) in question is classifiable under sub-heading 8803 of Schedule to Central Excise Tariff Act, 1985 as a `part’ of an aircraft and is therefore eligible to the duty exemption contained in Notification No. 65/93-C.E. The impugned order-in-original is set aside and the appeal succeeds accordingly.

Equivalent 2001 (138) ELT 1152 (Tri. - Chennai)