2003(04)LCX0123

IN THE CEGAT, SOUTH ZONAL BENCH, CHENNAI

S/Shri S.L. Peeran, Member (J) and Jeet Ram Kait, Member (T)

COMMISSIONER OF CUSTOMS, TUTICORIN

Versus

JAN DE NUL N.V.

Final Order No. 244/2003, dated 11-4-2003 in Appeal No. C/489/2002

Cases Quoted

Annapurna Carbon Industries v. State of A.P. — 1976 (37) STC 378 (S.C.) — Referred . [Para 40]

A.P. Heavy Machinery & Engg. Ltd. v. Commissioner — 2000(11)LCX0262 Eq 2001 (128) ELT 0155 (Tri.-Chennai) — Referred   [Paras 23, 25]

Boskalis Dredging India Pvt. Ltd. v. Commissioner — 1997(11)LCX0007 Eq 2001 (135) ELT 1396 (Tri.-Kolkatta) — Referred    [Paras 4, 26]

Bralco Metal Inds. (P) Ltd. v. Commissioner — 1994(01)LCX0038 Eq 1994 (074) ELT 0920 (Tribunal) — Referred [Para 25]

Commissioner v. Fykays Engg. Pvt. Ltd. — 2000(01)LCX0179 Eq 2000 (116) ELT 0341 (Tribunal) — Referred [Paras 25, 32]

Commissioner v. Goodwill Engg. Works — 2001(12)LCX0231 Eq 2002 (148) ELT 0890 (Tri. - Chennai) — Referred [Paras 23, 25]

Commissioner v. Kidwai Memorial Institute of Oncology — 1991(03)LCX0040 Eq 1991 (056) ELT 0234 (Tribunal) — Relied on     [Para 61]

Commissioner v. Perfect Machine Tools Co. Pvt. Ltd. — 1997(10)LCX0035 Eq 1997 (096) ELT 0214 (S.C.) — Relied on [Paras 45, 52]

Commissioner v. Textool Company Ltd. — 2000(04)LCX0057 Eq 2001 (136) ELT 0262 (Tri. - Chennai) — Referred [Para 23]

Commissioner v. Wood Craft Products Ltd. — 1995(03)LCX0070 Eq 1995 (077) ELT 0023 (S.C.) — Referred.... [Para 35]

Dredging Corporation of India Ltd. v. Commissioner — 2001(05)LCX0110 Eq 2001 (131) ELT 0647 (Tri. - Del.) — Referred         [Para 27]

Electrosteel Castings Ltd. v. Commissioner — 1989 (043) ELT 0304 (Tribunal) — Referred [Para 41]

Elgi Ultra Appliances Ltd. v. Commissioner — 1999(07)LCX0058 Eq 2001 (134) ELT 0245 (Tri. - Chennai) — Referred [Para 25]

Indian Telephone Indus. v. Collector — 1983(04)LCX0024 Eq 1983 (013) ELT 1012 (CEGAT) — Relied on..... [Para 61]

Kier International Ltd. v. Commissioner — 2002(04)LCX0088 Eq 2002 (144) ELT 0657 (Tribunal) — Referred [Para 23]

Larsen & Toubro v. Commissioner — 1996(07)LCX0062 Eq 1996 (088) ELT 0176 (Tribunal) — Referred........... [Para 39]

Mangalore Chemicals & Fertilizer Ltd. v. Commissioner — 1991(08)LCX0031 Eq 1991 (055) ELT 0437 (S.C.) — Referred                [Para 37]

Mehra Bros. v. Joint Commercial Officer — 1990(11)LCX0019 Eq 1991 (051) ELT 0173 (S.C.) — Referred......... [Para 42]

National Airport Authority v. Commissioner — 1990(03)LCX0025 Eq 1990 (048) ELT 0133 (Tribunal) — Referred [Para 25]

National Rayon Corporation v. Commissioner — 1999(07)LCX0161 Eq 2000 (116) ELT 0565 (Tribunal) — Referred [Para 25]

O.R.G. Systems v. Commissioner — 1998(07)LCX0050 Eq 1998 (102) ELT 0003 (S.C.) — Relied on..................... [Para 51]

Panchmahal Steel Ltd. v. Commissioner — 1997(09)LCX0178 Eq 1998 (098) ELT 0681 (Tribunal) — Referred.. [Para 46]

Raipur Bright Steel Wire v. Commissioner — 1999(06)LCX0073 Eq 2000 (116) ELT 0281 (Tribunal) — Referred [Para 25]

Sandwik Asia Ltd. v. Commissioner — 1997(03)LCX0047 Eq 1997 (093) ELT 0475 (Tribunal) — Referred........ [Para 44]

Seagull Fabricators Pvt. Ltd. v. Commissioner — 2000(10)LCX0293 Eq 2001 (127) ELT 0186 (Tri.-Mumbai) — Referred               [Paras 23, 25]

State of U.P. v. Cores (India) — AIR 1977 SC 132 — Referred........................................... [Para 43]

T.I. Miller Ltd. v. U.O.I. — 1989(11)LCX0034 Eq 1991 (053) ELT 0214 (Mad.) — Referred.......................... [Paras 39, 43]

Union Carbide India Ltd. v. State of Andhra Pradesh — 1995(03)LCX0154 Eq 1995 (076) ELT 0489 (S.C.) — Referred [Para 40]

Advocated By :   Shri A. Jayachandran, JDR, for the Appellant.

Shri V.M. Doiphode, Advocate, for the Respondent.

[Order per : S.L. Peeran, Member (J) (Oral)]. - This is a Revenue appeal against Order-in-Appeal No. 63/2002, dated 30-9-2002 passed by the Commissioner (Appeals), Trichy pertaining to classification of various items imported by the respondents and claimed classification of the same as “parts of Dredger” along with the benefit of Notification No. 23/98-Cus., dated 2-6-98 under Sl. No. 230 and Notification No. 20/99, dated 2-6-99 under Sl. Nos. 228 and 230 respectively.

2. The Commissioner after detailed discussion allowed the benefit in respect of large number of items and rejected in respect of certain items in terms of the Order-in-Original passed by the Dy. Commissioner wherein it is held that the items are in the nature of consumables and not to be considered as parts of dredger under Chapter 8905 by virtue of Section Note 2(b) of Section XVII of Customs Tariff Act. Respondents have not contested this portion of the order.

3. The revenue is aggrieved with the order pertaining to classification of the items holding them to be parts of dredger and granting the benefit of the notification in question to those items, holding them to be “parts for repair of dredgers”, in terms of the notification.

4. The revenue contends in this appeal that the assessee has not proved that the goods are integral parts of dredgers. It is stated that the goods are in the nature of ancillary or auxiliary equipments and consumables and are not meant for repair of dredgers. It is stated that the importers has not proved that the goods imported are meant for repair of dredgers. It is stated that the ‘pick points’ which are consumables cannot be said to be parts meant for repair of the dredgers. It is also stated in the grounds of appeal that the Commissioner (Appeals) has also given certain directions regarding allowing of duty drawback on the re-export of goods. It is also stated that it is seen that no finding has been given by the original adjudicating authority regarding duty drawback on the re-exported goods. If the duty drawback goods are re-exported as such, then the importer may claim drawback subject to the eligibility provisions of the relevant sections relating to duty drawback rules. It is stated that in any case, the Commissioner (Appeals) ought not to have given direction, which was not an issue before the original adjudicating authority and hence to this extent the order of the Commissioner (Appeals) is improper and not legal. It is further stated that while allowing exemption to the goods in question, the Commissioner appears to have relied upon the literature, written submissions, write ups and photos submitted by the importers. He has also held that these goods are parts of dredgers used for repair of dredgers as specified in the notification. It is stated that the Commissioner relying on the judgment of Boskalis Dredging India Pvt. Ltd.’s case where the Tribunal had allowed the exemption for various items such as pipe lines as parts of the dredger holding that the same forms an indispensable part of the mother craft, and held that the goods of the respondents is similar to that one, and on that count, he has allowed the exemption to the above parts. Revenue contend that neither in the Boskalis case nor before the AC, the issue whether the goods imported are parts for repair of dredgers was examined. Therefore, it is stated that the Commissioner (Appeals) appears to have allowed the exemption merely by holding that the various items are needed for the dredging operation.

5. It is stated that navigational equipments namely digital global positioning system are only to position the vessel and in no way can it to be treated as the parts of dredger or parts for the repair of dredger.

6. It is stated that according to the documents submitted by the importer, the Cutter Suction Dredger has a pontoon hull structure and dredging takes place when the dredger is anchored. The dredger process involves an initial powerful cutting action followed by suction and pumping of the discharge via pipeline to land mass or occasionally to barges. Cutter Suction Dredger is used with a variety of ancillary equipments including pipe lines, anchors, cutter heads, lifting equipments and so on. It is stated that as per the literature submitted by the company, the cutter head consists of various blades and is designed to cut or break out the seabed material efficiently and convey it towards the suction intake. The cutter head itself consists of cutter blades on which adapters are welded. The adapters form the base for attachment of chisels or pick points with which the soil to be dredged will be loosened and cut before being sucked by the pumps. The choice of chisels or pick points would vary depending upon the soil or dredging process. The dredged soil is pumped via pipe line with the help of dredging pumps. In the context of the aforesaid operation, the above goods cannot be the treated as the parts of dredgers and as a consequence they are not entitled for benefit of said exemption notification.

7. It is further pointed out that it has not been proved by the importer that the goods imported are meant for repair of the dredgers. It is stated that various gantry items including welding machines, earth boring machines and parts thereof, cannot be said to be “part of dredgers”. It is stated that these lathes, welding machines are only imported for carrying out the mechanical operation on the dredges and these cannot be said to be part of dredgers themselves. These appear to be goods in the nature of machines, tools or parts which are usable in connection with the dredging operation but are not parts of the dredger themselves necessary for repair of the dredgers.

8. It is also stated that the items like computer peripherals navigational equipments etc. may be necessary for the function of the dredger such as to positioning it in the sea or otherwise. It is stated that in terms of common parlance and understanding these equipments even when used on the dredgers cannot be said to be for repair of the dredgers in terms of the notification in question. It is stated that mere import of ancillary/auxiliary equipments for use on the dredger cannot be considered as import of parts of the dredger for repair of the dredger itself.

9. It is stated that the items like Spherilock cutter etc. appears to have been imported as additional cutting tools or cutter heads to replace the worn out or fatigued cutter heads used in the dredging process. These ancillary equipments which would vary depending upon the type of dredging operation cannot be said to be imported as parts of dredgers and much less for the repair of the dredger itself. It is stated that wearing plates, copper rings, articles of copper and gaskets may be considered as consumables and cannot be treated as parts of dredgers.

10. It is further stated that in the case of “hubs, pumps., propeller” while merely citing the literature furnished during the appeal, the Commissioner (Appeals) has not given any reasoning for treating these items as integral parts of dredgers.

11. It is further stated that one of the items for which the exemption is allowed is “pick points”. It is seen from the technical literature submitted by the company that these are consumable materials which are used up in the process of dredging. As and when the dredging process takes place, the pick points are consumed and need to be replaced by fresh pick points. Rebuilding of pick points is also not ruled out. These pick points which actually do the cutting of the soil and loosening and which are required to be replaced after some time cannot be said to be parts imported for repair of dredgers. It is stated that these goods are nothing but consumables and as held in the case of Gaskets of Rubber by the Commissioner (Appeals) himself, the pick points are nothing but consumables and are not parts of dredger, much less for its repair.

12. It is stated that regarding the role of ‘pumps’, they are only used for sucking the dredged materials and in no way connected with the dredging activity as such. Therefore, it is stated that “pump” as the parts of dredger is not correct. Likewise, the impeller being part of pumps cannot be considered as parts of dredger. Therefore, it is stated that the appeal of the Revenue is required to be allowed by setting aside the impugned order.

13. We have heard Shri A. Jayachandran, learned DR for the appellant-Revenue and Shri V.M. Doiphode, learned Advocate for the respondent.

14. Ld. DR took us through various Bills of Entry, technical literature, submissions made by the respondents before the lower authorities, order passed by the lower authority and the order passed by the Commissioner (Appeals). He pointed out that at no point of time, the respondents had described or declared in the Bill of Entry that the items in question were parts of dredgers. He referred to respondents’ letters dated 19-2-99, 6-3-99, 24-4-99, 8-5-99, 11-5-99 and 14-9-99 in the paper book filed by them to argue his case that even respondent have not stated that they were all parts of the dredgers. Their case was as per letter dated 19-2-99 that these items were required “to perform the dredging operation and complete the same with the contractual period of 12 months”. He also referred to letter dated 6-3-99 of the respondents wherein they had stated to the lower authorities that ….. In order to carry out our operations, we have deployed our cutter suction - dredger CSD, “Leonardo Da Vinci, which arrived at Tuticorin Port on 11-2-99. We also intend to bring in by several separate shipments (this being so for our operational convenience) dredging equipment’s floating and submersible pipe lines and all related auxiliary equipment which forms part of the whole dredging operation”.

15. Even from the letter dated 24-2-99, learned DR pointed out to para 2 the importer’s plea that the cutter suction dredger is a highly sophisticated and specially designed equipment oriented dredger for the purpose of dredging even the heaviest rock surface efficiently and effectively.

16. Ld. DR took us through the Section Note 2 to Section XVII which clearly lists out the items which are excluded from Chapter falling under Section XVII. He pointed out that Section Note 2 clearly stated that the expressions “parts” and “parts and accessories” do not apply to the articles enumerated in 2(a) to (b) whether or not they are identifiable as for the goods of the Section. He pointed out from Section Note 2(b) that parts of general use, as defined in Note 2 to Section XV, of base metal (Section XV), or similar goods of plastics (Chapter 39) are clearly excluded from this section. He also pointed out that Note 2(e) also excluded “machines or apparatus of heading Nos. 84.01 to 84.79, or parts thereof; articles of heading No. 84.81 or 84.82 or, provided they constitute integral parts of engines or motors, articles of heading No. 84.83”. He also referred to Note 3 which states that “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 and further argued that a part or accessories which answers to a description in two or more of the headings of those Chapters is to be classified under that heading which corresponds to the principle use of that part of accessory. He also referred to Interpretative Rule 3(a) which clearly lays down that a heading which has a most specific description shall be preferred to heading providing a description which is general in nature. He also referred to Rule 1 of the Interpretative Rule which clearly lays down that classification of goods shall be governed by the titles of Sections, Chapters and sub-chapters and classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the provisions laid down in the other rules of Interpretative Rules. He pointed out that from the reading of these interpretative rules and section notes, the classification has to be adopted in terms of the said rules and sections. Where there is a specific heading and section notes and rules required, that specific heading to be adopted, then in such circumstances the general heading cannot be resorted to. In this connection, he pointed out that all the items in question have specific heading and in terms of Section Notes, interpretative rules, the classification is to be in terms of merits and the items are required to be specifically classified therein as has been done by the original authority.

17. Ld. DR argued on characteristics of individual items and the correct classification to be adopted. He pointed out that the Order-in-Original correctly has concluded on the classification of each of the items which is in terms of section notes and tariff notes and requires to be upheld.

18. Ld. DR pointed out that navigational equipments is an electronic equipment to receive signals from satellite in order to position the dredger at the exact position/spot where it has to start dredging at the port. He submits that this is an instrument and even in terms of page 82 of the catalogue, the item has been described as “detailed compass-instrument”. He points out that being a compass-instrument it has a specific tariff entry under Chapter Heading 85.26 which covers “radar apparatus, radio navigational aid apparatus and radio remote control apparatus”. He contended that the importer’s contention for classification under Heading 89.05 as dredgers is totally unsustainable as there is no section note or chapter note or chapter heading for covering this item as “dredgers”. Chapter Heading 89.50 does not have specific entry for parts for dredgers. There is no section note or chapter note to consider the classification of independent items along with dredgers on the basis of its use along with dredgers. He contended that the item is independent one and functions independently and aids for functioning of the dredgers, but cannot be considered as used solely or principally with the dredgers. Therefore, they are rightly classifiable under Chapter 85 and not under 89 as claimed and being not a part for repair of dredger, the claim of the benefit of notification in question is not available.

19. Ld. DR, likewise, contended that computer peripherals are independent items and they cannot be called as parts for repair of the dredger. They are classifiable under a specific Heading 84.71 which classifies “automatic data processing machines” and items which have a specific entry cannot be considered to be part of a dredger and for the purpose of benefit of notification as “part for repair of the dredger”. Therefore, their claim has been rightly rejected by the original authority and the benefit granted by the Commissioner merely on the surmise without any detailed finding and is not sustainable. He points out that the Commissioner has not given any reasons at all for granting the benefit for both the items. He has merely upheld their contention in a single line as items being essential and integral part of dredger, when in fact that cannot be the basis for classification, as according to DR, when a specific entry is available then in such a case and in the absence of any entry for its classification along with dredger, finding of the Commissioner is not sustainable.

20. With regard to “pumps”, learned DR pointed out that the original authority had classified the item under the Chapter sub-heading 8413.19 under the main heading of “pumps for liquids, whether or not fitted with a measuring device; liquid elevators”. He points out that in terms of Section Note 2(e) of Section XVII the item is specifically excluded from classification under Chapter 89. When Section Note 2(e) of Section XVII clearly excludes this item falling under 8413.19 it incorporates “pumps”, then they cannot be classified along with dredgers under Chapter Heading 8905.10. He pointed out that the Commissioner has not applied his mind and he has merely stated that the pumps are used to suck dredge material and push through pipeline systems into the reclamation yard and on this basis he has considered them to be part of dredger (i) when the same cannot be classified along with dredger (ii) when there is a clear exclusion from Note 2(e) to Section XVII (iii) when there is a specific entry for “pumps” under Chapter sub-heading 8413.19.

21. He submits that with regard to items copper rings, copper wool and other articles of copper, the original authority has clearly held them to be parts of general use classifiable under Chapter 74 and they are excluded by Note 2(b) of Section XVII. He also pointed out that the importers did not give the functioning of such items in their write up and even the Bills of Entry did not disclose that they are parts for repair of the dredgers and, therefore, their claim for classification under Chapter 89 along with dredger or as a part for repair of dredger is not sustainable.

22. Ld. DR pointed out that the items like, “gantry, earth boring machines, lathes, welding machines and parts of all these machines, bearing taps, cocks, gaskets of metal sheeting shafts, propellers and its parts other machinery parts without electrical connections” have all been granted the benefit of the notification by the Commissioner holding them to be integral parts of dredger. He pointed out that these are all independent machineries and are generally used and they are all used in the workshop and not directly connected with the dredger at all. Each of these items have a specific heading under Chapter 84 and they are excluded by Note 2(e) of Section XVII. As they are not parts for repair of the dredger, the benefit is also not applicable.

23. Ld. DR also pointed out that items “spherilock cutter, spherilock adaptor, pick points (Dredge points) are all used to hold pick points and that pick points/dredge points are steel point which are used in the process of cutting the rock and cutting the earth during the dredging operation and get consumed and worn out. In terms of HSN explanatory note at page 1204, they are all classifiable under Heading 82.07 where there is a specific mention of rock drilling/earth boring items. In view of this specific entry as consumable tools they will not get the benefit as part of the dredger and as they are not parts for repair of the dredger, the benefit of notification is also not applicable. He pointed out that HSN explanatory notes are binding on the authorities for the purpose of classification and the Apex Court also has held that HSN notes are binding on the authorities for the purpose of classification under the Customs Tariff Act. He also referred to the Bills of Entry which described the items as “dredging equipment”. He pointed out that they had also claimed the items to be spare parts and their claim had been rejected for considering the same as spare parts. He pointed out that spare parts are also not entitled for the benefit of the notification. He also pointed out to the term “parts” as appearing in page 2215 of S.B. Sarkar’s Words & Phrases of Excise & Customs, 3rd Edition and also to the term “repair” as appearing at page 2648 and submitted that in terms of these two definitions in the said book, the items cannot be considered as “parts”. He relied on the judgment of CC, Chennai v. Textool Company Ltd., 2000(04)LCX0057 Eq 2001 (136) ELT 0262 (Tri. - Chennai) wherein the Tribunal has observed that parts are different from accessories. The Tribunal also observed that terms of the notification are required to be strictly construed. Further referring to the judgment of the Tribunal rendered in the case of Seagull Fabricators Pvt. Ltd. v. CCE, Mumbai-III, 2000(10)LCX0293 Eq 2001 (127) ELT 0186 (Tri. - Mum.). Ld. DR pointed out that the term “part” has to be understood as suitable for use solely or principally with the machine and it does not refer to general parts in terms of the strict definition. He further referred to the judgment of A.P. Heavy Machinery & Engg. Ltd. v. CCE, Hyderabad, 2000(11)LCX0262 Eq 2001 (128) ELT 0155 (Tri. - Chennai) wherein the Tribunal held that the goods are required to be assessed on the condition in which they are removed from the factory gate. Further he referred to the judgment of the Tribunal rendered in the case of CC, Trichy v. Goodwill Engg. Works, 2001(12)LCX0231 Eq 2002 (148) ELT 0890 (Tri. - Chennai) which laid down the ratio that the terms of the notification cannot be expanded to put therein the words which are not there and the notification is required to be strictly construed. He submits that all the required items were brought as spares and such spares cannot be considered as “parts” and as “parts for repair of dredger”, when the notification does not intend to grant the benefit. He also referred to the Tribunal’s judgment rendered in the case of Kier International Ltd. v. CC, Trichy vide Final Order No. 494/2002, dated 23-4-2002 [2002(04)LCX0088 Eq 2002 (144) ELT 0657 (T)] which did not grant benefit to two caterpillar wheel loaders and denied the benefit as claimed by the importers to consider the same as part of dredger/barges for dredging work.

24. Ld. Advocate Shri V.M. Doiphode initially argued on items to be considered as parts for repair of the dredger. Insofar as the classification is concerned, he did not seriously contend about its correct classification and left it to the discretion of the Bench. He contended that as each of the items were required for use solely or principally along with dredger and the dredger cannot function without the items, therefore, the Commissioner (Appeals) order to classify them along with dredger should be accepted. However, he contended that he would not like to press with regard to items like welding machinery, tools which are not parts for repair of the dredger. Ld. Counsel argued at great length to support the order of the Commissioner (Appeals). He contended that all the items are required for repair of the dredger and, therefore, the benefit of the notification is required to be extended. He pointed out that initially the order had been passed by the original authority, which was later set aside by the Tribunal after the appellate authority’s order was passed and remanded for de novo consideration. In the initial order of the Dy. Commissioner, the DC had noted about the visit of the officers to examine the dredgers and had accepted their contention that the items are parts of dredgers. He referred to the said Order-in-Original dated 28-4-99 wherein such observations had been made. However, in the said order, the importer’s contention of items being parts of dredger had not been accepted. But the Dy. Commissioner had held that “logically their case may be correct to the effect that the items imported under Bills of Entry referred above are parts of dredger. But in terms of Section Note XVII such parts and accessories are not to be classified under Chapter 89. As a result the concession claimed under Customs Notification Nos. 23/98 and 20/99 is also ruled out”.

25. Ld. Advocate pointed out to the literature to argue that the items “spherilock cutter, spherilock adaptor, pick points/dredge points” are not consumables as contended in the appeal memo. The Counsel read out the appeal memo and countered each point taken therein by the Revenue. He also referred to the Bills of Entry wherein they had claimed these items to be parts for repair of dredger. He contended that pick points are not consumables but parts for replacement of worn out parts while the repair being done and hence it satisfies the terms of the notification. In order to press this point, he relied on the following two judgments :

(i)      Raipur Bright Steel Wire v. CCE - 2000 (116) ELT 281

(ii)     National Rayon Corporation v. CCE - 1999(07)LCX0161 Eq 2000 (116) ELT 0565 (T)

wherein a view has been expressed that parts which are used for replacement are required to be considered as for repairs. He submitted that when the item pipeline has been granted the benefit of the notification by the Dy. Commissioner, then the same logic should have been adopted for granting benefit to all other items. He referred to the judgment rendered in the case of Elgi Ultra Appliances Ltd. v. CCE, Coimbatore, 1999(07)LCX0058 Eq 2001 (134) ELT 0245 (Tri. - Chennai) which deals with an item pertaining to Drip Irrigation System and the classification has been decided in terms of Section XVI. Although, the learned Counsel pointed out that terms of Sections XVI and XVIII of the Customs Tariff Act are different but yet the fact of the drip irrigation systems was considered as one for classification as a single unit, therefore, the said ratio should be accepted for his proposition also. He further relied on the judgment rendered in the case of CCE Bombay v. Fykays Engg. P. Ltd., 2000(01)LCX0179 Eq 2000 (116) ELT 0341 (T) wherein the pyrometer was held to be parts of thermocouple and it was found that pyrometer was suitable for use solely or principally with thermocouple and hence they were considered as parts of thermocouple. He submits that in the present case also the items are parts which are solely used with dredger and hence the benefit should be extended. He attempted to distinguish the judgment cited by learned DR. He pointed out that the judgment rendered in the case of National Airport Authority v. CC, 1990(03)LCX0025 Eq 1990 (048) ELT 0133 (T) is distinguishable. He submits that although the judgment referred to the classification of navigational instrument but the question therein was with regard to Distance Measuring Equipment being entitled to benefit of notification which granted exemption to apparatus wireless reception. He also contended that the judgment cited by DR in the case of CC v. Goodwill Engg. Works; A.P. Heavy Machinery & Engg. Ltd. v. CCE, Hyderabad, and Seagull Fabricators Pvt. Ltd. v. CCE, Mumbai (supra) are in fact more supportive to the importer’s claim. He also contended that the Tribunal in the case of Bralco Metal Inds. (P) Ltd. v. CC, Bombay, 1994(01)LCX0038 Eq 1994 (074) ELT 0920 (T) has held that spare part is an item which may be an assembly or sub-assembly of the machine or can be required to be replaced with a part or sub-assembly is worn out and hence in that light the Tribunal held that cutters fitted with scalping machine are inter-changeable tools for the purpose of cutting operation.

26. Ld. Counsel filed the written submissions on the basis of his arguments. In the written submissions, he has reiterated his oral arguments. He has relied on the Boskalis Dredging India Pvt. Ltd v. CC, Bhubaneswar, 1997(11)LCX0007 Eq 2001 (135) ELT 1396 (Tri. - Kolkata) in which the Tribunal held that pipe lines attached with suction dredger forms an indispensable part of main mother craft. However, he pointed out that the Bench did not go into the question of the exemption notification. He submits that the analogy would apply to the facts of the present case also for grant of benefit to all other items. He submits that when the pipeline has been considered as a part of dredger, then all these items are also required to be considered as parts of dredger.

27. In counter, learned DR reiterated his submissions and contended that the Tribunal in the case of Dredging Corporation of India Ltd. v. CC, Bombay, 2001(05)LCX0110 Eq 2001 (131) ELT 0647 (Tri.-Del.) held that spares are not entitled for the benefit of the notification in question as the terms used therein is only for parts and are not spares. He also submitted that the department has not admitted as contended by the Counsel that the item is a part and the Counsel has not correctly read out the details of Order-in-Original which has already been set aside. The issue before the authorities right through has been as to whether the items are parts for repair of the dredger or not and the original authority had not accepted the claim. He distinguished all the judgments relied on by the importer-respondent. He also pointed out from page 19 of the catalogue of ‘Cutter Suction Dredger’, which on the correct reading would show that it is only a consumable item. He pointed out from the catalogue that barge loading system instrument was an optional. Even in terms of importer’s own claim the item is an optional item and it cannot be given the benefit. He submits that none of the items can be considered as parts for repair of the dredger and hence the original authority had rightly rejected the benefit. He also pointed out that in terms of HSN Explanatory Notes, the parts are required to be classified on merits and not along with main item. In view of the above submissions, learned DR pleaded for allowing the Revenue’s appeal by setting aside the order of the Commissioner (Appeals).

28. We have carefully considered the submissions. We have perused the order of both the authorities and have gone through entire records including the arguments and submissions made by both sides.

29. In order to examine the question of the classification of each of the items and also to find out as to whether they are eligible for the benefit of the notification as “parts for repair of dredger” as per Sl. No. 252 of Notification No. 20/99-Cus. and Sl. No. 230 of Notfn. No. 23/98-Cus., dated 2-6-1998 which has same terms, it is necessary to examine the salient features to be noted for the purpose of classification of goods under the Customs Tariff Act, 1975. The First Schedule to the Tariff comprises of the general rules of interpretation of this Schedule which are rules framed under Section 2 of the Customs Tariff Act. It states that classification of the goods in the Schedule of the Customs Tariff Act shall be governed by the principles laid down therein and that the important rules are to be observed for the purpose of classifying the goods, which should be in terms of respective section notes and chapter notes. Rule 1 lays down that 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 and, provided such headings or Notes do not otherwise require, according to the rules mentioned subsequently noted therein. Rule 2(a) and 2(b) refers to classification of an article in a heading shall be taken to include a reference to mixtures or combinations of that article incomplete or unfinished, provided that, as presented, the incomplete or unfinished article has the essential character of the complete or finished article. Rule 2(b) lays down the classification of 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. It lays down that the classification of goods consisting of more than one material or substance shall be according to the principles of Rule 3. Rule 3 states that 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, the 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, insofar as this criterion is applicable.

(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.”

Rule 4 lays down that the 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 more akin. For the purpose of our discussion, Rule 5 is not relevant herein, while Rule 6 lays down that 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-heading 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.

30. As we note from the above rules, the classification has to be adopted in terms of the rules laid down therein. Rule 1 has laid down very clearly that the classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and Rule 3(a) further states that the heading which provides the most specific description shall be preferred to the headings providing a more general description.

31. When we proceed to examine the section notes, we notice that each of the section notes has laid down guidance for classifying the goods in the respective chapters. The section notes clearly laid down the rules for exclusion of certain items within the said chapter and the headings therein. We notice that main imported goods in the present case is dredger which fall under sub-heading 8905.10 under Section XVII. Importers are claiming all the individual items in question to be classified along with dredger. There is no separate heading for parts with a section note that parts, if suitable for use solely or principally with a particular kind machine, or with a number of machines of the same heading, are required to be classified therein based on its suitability for use principally along with goods falling under Chapter 89. This provision of classification of parts on the basis of its suitability along with its suitability if used solely or principally with a particular kind of machine is incorporated only under Section XVI and not under Section XVII.

32. Ld. Counsel has relied on the Larger Bench judgment rendered in the case of CCE, Bombay v. Fykays Engg. P. Ltd. (supra) which examined the classification of the item pyrometer and it was found that the item cannot function without thermocouple and in terms of the said Chapter Note to Section XVIII, the classification was determined. Therefore, at the outset we observe that the citation relied by the learned Advocate for the respondent to say that parts which are suitable for use solely or principally with a particular kind of machine are required to be classified thereunder, as in the present case, is not sustainable and does not arise for consideration in view of absence of any specific chapter heading for parts under Section XVII and Chapter 89 respectively. Only “dredger” per se has been noted for classifying under sub-heading 8905.10 Section Note to Section XVII has laid down five notes. For the purpose of our consideration of the above items, we are required to examine these notes. Note 1 clearly lays down that “this section does not cover articles of Heading No. 95.01, 95.03 or 95.08...” . Note 2 lays down that the expressions “parts” and “parts and accessories” do not apply to the following articles whether or not identifiable as per the notes on this section. Note 2(a) to (k) reads as follows :

“(a)    Joints, washers or the like of any material (classified according to their constituent material or in heading No. 84.84) or other articles of vulcanised rubber other than hard rubber (heading No. 40.16);

(b)      Parts of general use, as defined in Note 2 to Section XV, of base metal (Section XV), or similar goods of plastics (Chapter 39)

(c)      Articles of Chapter 82 (tools)

(d)      Articles of heading No. 83.06;

(e)      Machines or apparatus of heading Nos. 84.01 to 84.79, or parts thereof; articles of heading No. 84.81 or 84.82 or, provided they constitute integral parts of engines or motors, articles of heading No. 84.83;

(f)       Electrical machinery or equipment (Chapter 85);

(g)      Articles of Chapter 90;

(h)      Articles of Chapter 91;

(i)       Arms (Chapter 93);

(j)       Lamps or lighting fittings of heading No. 94.05; or

(k)      Brushes of a kind used as parts of vehicles (heading No. 96.03).”

33. Likewise Note 3 also lays down 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. It states that part or accessory which answers 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.

34. In view of this clear cut interpretative rules, and the notes laid down under Section XVII, the learned original authority has proceeded to classify parts on the basis of its merits. He has found that each of the above items in question is specifically covered by chapter headings and the description found therein. They are covered by section notes in each of the headings and after detailed discussion, after examining the use of the items has found it suitable to be classified under the respective headings. It has to be observed at this stage that the Commissioner (Appeals) has not followed the rules laid down for the purpose of classification and his order is not in terms of the interpretative rules, section notes and the chapter notes. Therefore, he has fallen into the basic error in accepting the plea of the importer and also in not giving any reasons for adopting a contrary classification against the well laid down principle of classification which guided the original authority to classify the items in his order.

35. For the purpose of classification, the HSN Explanatory Notes have a persuasive value. The Hon’ble Apex Court has laid down in the case of CCE, Shillong v. Wood Craft Products Ltd., 1995(03)LCX0070 Eq 1995 (077) ELT 0023 (S.C.) that HSN Explanatory Notes are required to be applied for the purpose of classification of the items under respective section notes and chapter notes. We find that the original authority has examined the HSN Explanatory Notes to classify the items which the learned Commissioner (Appeals) has failed even to take cognizance.  Therefore, at this stage itself, we have to observe that there are several infirmities in the impugned order which requires to be modified.

36. It is to be observed at the outset that the learned Advocate had argued that the department had admitted with regard to the item being parts for classifying along with dredgers. On examination of this aspect, we find that the goods were cleared on provisional basis. Only after a detailed examination of the items along with literature, the show cause notice was issued to the importers calling upon them to explain as to why the classification should not be revised. There is no estoppel in the taxing statute and the authorities under the Customs Act can proceed to reassess the goods. While the goods have been assessed provisionally, show cause notice was issued to finalise the assessment. In this case, the goods were not assessed finally and therefore the question of importers’ contention that they have imported the goods for the purpose of fulfilment of contract and they would be exporting the same and would get entitled for duty drawback does not arise for consideration at this stage. Therefore, at the outset itself, the ground taken by Revenue that the Commissioner (Appeals) has crossed his limit in considering this point in his order is sustainable. Revenue has rightly urged the ground that the proceedings for claim of rebate is an independent proceeding and the importers are required to file their claim and establish their claim for the purpose of claiming duty drawback. As regards the question of granting the benefit for export of the items as noted by the Commissioner, the order itself is not acceptable as there was no adjudication on this aspect of the matter by the authorities. The importers were required to file their claim as per law. Further, the Counsel also clearly admitted that no such claim had been filed by the importer. It is further noted that proviso (c) to Section 129A(1) does not grant any power to Tribunal to consider the aspect pertaining to payment of drawback as provided in Chapter X and Rules made thereunder. The Tribunal cannot go into this aspect of the matter. This is incidentally mentioned as the Commissioner has referred about it in the order. Therefore, at this stage, we are required only to examine the issue of classification and the benefit of notification to the item in question and all other aspects are not within the ambit of this appeal. In this context, the learned Advocate also conceded that the issue pertaining to duty drawback was not a point for consideration before the lower authorities and that they are required to file a separate claim.

37. As regards the salient features for granting the benefit of a notification, we have at this stage to clarify that the burden of claiming the benefit of notification is always on the importer-assessee. It is for the importer/assessee to claim the benefit of notification by establishing that they are entitled for the benefit of notification. The burden for grant of benefit does not shift to the Revenue as is well laid down and well settled. [See Mangalore Chemicals & Fertilizer Ltd. v. Dy. Commissioner, 1991(08)LCX0031 Eq 1991 (055) ELT 0437 (S.C.). We have to examine in this case as to whether the importers have discharged their burden for claiming the benefit of notification in question in respect of each of the items imported by them.

38. It would also be necessary to bring out the salient features pertaining to the terms “parts” and “accessories”. The definition of parts as appearing in page 2215 of S.B. Sarkar’s Words & Phrases of Excise & Customs, 3rd Edition is that “part” is (1) a piece or portion of a whole (2) an integral constituent of something (3) an amount less than the whole; bit (4) one of several equal divisions (mix two parts flour to one part water) (9) a component that can be replaced in a machine, etc.... (The New Collins Concise Eng. Dic.) - 3. A component of a machine, etc. (spare parts, needs a new part) - 4. A constituent piece of a machine or tool. (Random House abridged ed.) - A portion; that which along with other makes up, has made up, or may at some time make-up, a whole; a constituent; a component;...........(Chambers Concise Dic.).

39. In the case of Larsen & Toubro v. CC, 1996(07)LCX0062 Eq 1996 (088) ELT 0176 (T) in para 5, the Tribunal observed that a part may be a finished product by itself, it can also be used as part in manufacturing other products. In the case of T.I. Miller Ltd. v. UOI, 1989(11)LCX0034 Eq 1991 (053) ELT 0214 (Mad.) the Hon’ble Madras High Court observed that since a dynamo can be used for ccycle, it is not part of a cycle.

40. With regard to the term “accessory” the Apex Court in the case of Annapurna Carbon Industries v. State of A.P.- (1976) 37 STC 378 (S.C.) observed that the deciding factor to consider the item to be an accessory is the predominant or ordinary purpose or use and it is not enough to show that the articles can be put to other uses also. It was held therein that the general or predominant use seems to determine the category in which an article will fall. Examining the term “accessories” in respect of the different entries used in the Schedule to describe the goods, the Apex Court held that it was shown that the word was construed taking into account the fact whether the goods have been manufactured for use as an aid or addition to any of the specified articles in the entry or not. It was also laid down that when it was intended to confine the entry to particular gadgets and particulars thereof, the entry said so; and, therefore, the expression “accessories thereof must mean a general or predominant use of the article only as an accessory of one of the specified items mentioned in that entry. Applying that test, in the case of Union Carbide India Ltd. v. State of Andhra Pradesh, 1995(03)LCX0154 Eq 1995 (076) ELT 0489 (S.C.), the Apex Court held that dry batteries or cells which were not marketed as “for transistors” and were multipurpose cells were manufactured for predominant use as accessories of the wireless reception instruments.

41. In the case of Electrosteel Castings Ltd. v. CCE, 1989 (043) ELT 0304 (Tribunal), the Tribunal held that a component, whose absence will disable a machine or appliance, must be regarded as an essential ingredient or part of that machine.

42. The Hon’ble Apex Court in the case of Mehra Bros. v. Joint Commercial Officer, 1990(11)LCX0019 Eq 1991 (051) ELT 0173 (S.C.) examined the issue of car seat covers to be covered under the term “accessories”. The Apex Court referred to page 13 of the Black’s Law Dictionary (ELT page 175 para 4) wherein the term “accessories” has been defined as “anything which is joined to another thing as an ornament, or to render it more perfect, or which accompanies it, or is connected with it as an incident, or as subordinate to it, or which belongs to or with it, adjunct or accompaniment, a thing of subordinate importance. Aiding or contributing in secondary way of assisting in or contributing to as a subordinate”. Further the Apex Court held that “correct test would be whether the article or articles in question would be an adjunct or an accompaniment or an addition for the convenient use of another part of the vehicle or adds to the beauty, elegance or comfort for the use of the motor vehicle or a supplementary or secondary to the main or primary importance. Whether an article or part is an accessory cannot be decided with reference to its necessity to its effective use of the vehicle as a whole. General adaptability may be relevant but may not by itself be conclusive. If the test that each accessory must add to the convenience or effectiveness of the use of the car as a whole is given acceptance, many a part in the motor car by this process would fall outside the ambit of accessories of the motor car. This would not appear to be the intention of the legislature. Thus car seat covers or upholstery are accessories as an addition; an adjunct : an accompaniment for comfortable use of the motor vehicle or for adding elegance to the seat. Admittedly, the appellant manufactured car seat covers and upholstery for sale as an automobile part in the regular course of business. Therefore, they are exigible to sales tax at 13% under Entry 3 of Schedule I read with Section 3(3).

43. The Madras High Court in the case of T.I. Miller Ltd. v. UOI, 1989(11)LCX0034 Eq 1991 (053) ELT 0214 (Mad.) held that the principle of estoppel is not applicable in tax matters and that assessment for one period is not final and conclusive for subsequent assessment periods. While examining the issue pertaining to dynamo to be considered as cycle part or not, the High Court held that since cycle can be used without dynamo, it is not part of a cycle. It observed that further as to how the use of a dynamo in relation to a cycle has been understood by the Govt. of India for the purpose of this Act (Excise Tariff Act) and whether it was treated as an accessory or as a cycle part, the Notification No. 3/86-C.E., dated 16-1-86 provided sufficient guidance. The notification chose to grant relief for cycle accessories and that the notification has not treated dynamo as cycle part but only as an accessory. Therefore, it held that dynamo cannot but be treated as an exemption by relying upon Notification Nos. 54/75, 86/79 and 102/80. In this regard, the judgment rendered by the Apex Court in the case of State of UP v. Cores (India) - (AIR 1977 SC 132) was relied upon wherein the Apex Court had laid down that for the purposes of classification of goods in a particular item only popular and commercial view is required to be ascribed.

44. In the case of Sandwik Asia Ltd. v. CCE, Pune, 1997 (093) ELT 475, the Tribunal observed that the part is one without which particular machinery was not operational or could not suitably discharge the function for which it had been designed.

45. In the case of CC, Bombay v. Perfect Machine Tools Co. Pvt. Ltd. 1997(10)LCX0035 Eq 1997 (096) ELT 0214 (S.C.), the Apex Court has laid down that when a particular item is not expressly excluded from exemption notification, then it is not necessarily to be treated to have been included also. Likewise, the Apex Court held that mere fact that the Electronic Pitch Tester attachment cannot be operated independently of the main machine, it does not mean that it is not an accessory and is a part of the machine. The Apex Court held that even in the absence of such attachment, the machine can be operated. It observed that once it is held that ‘Electronic Pitch Tester Attachment’ is an accessory to the main machine, it cannot be held that since the notification providing for concessional rate of customs duty has not expressly included the accessories for the purpose of grant of concessional duty, the benefit of the concessional duty would not be available in respect of such accessory.

46. In the case of Panchmahal Steel Ltd. v. CC, Bombay, 1997(09)LCX0178 Eq 1998 (098) ELT 0681 (T), the Tribunal noted the appellants’ filing separate declaration showing classification for determinator and for parts and accessories. Separate prices were shown in respect of determinator and other goods. No material was produced nor the items and their place in the direct reading carbon/sulphur determinator was described. It was found that certain items were in the nature of chemicals which could not be considered as part of determinator. Therefore, the Tribunal held that the burden of proof on the importer has not been discharged and that the importer has argued against his own declaration. It held that the determinator was classifiable under Heading 90.25(1) of the Customs Tariff Act, 1975 and “accessories and spares” classifiable under different headings on merits.

47. In the light of the illustration of principles for classification of the items under the Customs Tariff Act and the principles governing the interpretation of notifications and case law on “parts and accessories”, we have to proceed to examine the issue involved in this appeal to consider as to whether they are entitled for the exemption as claimed by them under the respective serial numbers of the notifications in question. Accordingly, we discuss the issue in respect of each items separately as under :

48. Navigational Equipment : It is an electronic equipment to receive signals from satellite in order to position the dredger at the exact position where it has to start dredging. Digital Global Position System Antenna is required for positioning the dredger accurately during the dredging process at the appropriate place. The importers have claimed this item as constituent of the dredger and for its classification along with dredger under Tariff Heading 8905.10 of CTH. As already noted, this tariff sub-heading refers only to dredgers and also as noted, the Section XVII does not have a note for classifying the parts suitable for use solely or principally with a particular kind of machine. Section Note 2 clearly states that the expression “parts” and “parts and accessories” do not apply to articles contained in (a) to (1) whether or not they are identifiable as per the goods of the Section. Note 2(e) refers to machines or apparatus of Heading Nos. 84.01 to 84.79, or parts thereof; articles of Heading No. 84.81 or 84.82 or, provided they constitute integral parts of engines or motors, articles of heading No. 84.83.

49. In view of this exclusion clause in 2(e) of Section XVII and in the absence of the terms “suitable for use solely or principally with the particular kind of machine” to fall along with dredger, the claim of the importer cannot be accepted to consider this item as part and parcel of dredger. These equipments are sophisticated equipments and are having an individual function. There is a separate heading for classification under Heading 85.26 with a specific description of “radar-apparatus, radio navigational aid apparatus and radio remote control apparatus”. The classification as noted has to be done in terms of Interpretative Rules and a heading which is more appropriate should be adopted, as otherwise the classification of goods in terms of section notes and chapter notes and in terms of the description given therein would become redundant. We also find that the importers in none of the correspondence with the Asstt. Commissioner which are enclosed in the paper book have pressed relief for this item. Even the learned Counsel did not press this point nor placed any evidence to show the item being essential and integral part of the dredger. In that view of the matter, their claim on the classification under Heading 8905.10 as “Dredger” is rejected.

50. As regards the claim for the benefit of the notification which specifically grants benefit for “parts for repair of dredger”, we notice that the present claim of the importer is that this is meant for repair of the dredger. The importers have also stated that this is used for positioning the ship and that it is an one time use of the item and not to be replaced. The Counsel also during the course of his arguments admitted that these were all imported in second consignment for fitment on the dredger and they were to be re-exported. It clearly shows from the submissions and the records that these were not meant to be used as parts for repair of the dredger. Therefore, the importers have not discharged their burden of proof. The item does not satisfy the wordings of the notification. Therefore, their claim for the benefit of the notification is rejected. The Commissioner has not given any finding as to how this item is entitled for the benefit of the notification and without application of mind, and without mentioning the chapter notes, he has just accepted the claim which is not sustainable. The order-in-original clearly lays down and analyses the section notes and also refers to Explanatory Notes at page 1449 for its classification under sub-heading No. 8905.10 of Customs Tariff Act. Therefore, the impugned order on this item is also set aside and the Order-in-Original on this aspect is confirmed.

51. Computer Peripherals : The Commissioner has noted that dredger is basically computer operated vessel and only a computer can read the signals and aid in the dredging operation. Therefore, he has held that they are essential and integral part of dredger. The Commissioner has clearly fallen in error in noting in the order with regard to this item also. We find that computer peripherals are imported for use of dredger and not as an integral part of the dredger. It may be required for the purpose of feeding the data but it does not dredge per se. There is clear cut Section Note 2(e) which classifies machines or apparatus of heading Nos. 84.01 to 84.79, or parts thereof; articles of heading No. 84.81 or 84.82 or, provided they constitute integral parts of engines or motors, articles of heading No. 84.83 and they all are excluded from the ambit of Section XVII. There is a clear heading for computers under 84.71 under the heading “automatic data processing machines and units thereof”. The classification has to be dealt with regard to the items as has been held in several judgments of the Tribunals and the Apex Court. The Hon’ble Apex Court in the case of O.R.G. Systems v. CCE, Vadodara, 1998(07)LCX0050 Eq 1998 (102) ELT 0003 (S.C.) noted that computer peripherals and other systems software were merely additional devices meant to increase the memory or storage capacity of the computers and other facilities. In the light of this judgment, they are parts of computers and they are required to be classified under Heading 84.71 as held by the lower authorities.

52. In the case of CC, Bombay v. Perfect Machine Tools Co. Ltd. (supra), the Apex Court has clearly noted that when an accessory imported along with machine, then they cannot be treated as part and parcel of the machine. Merely because without the attachment, the machine cannot work independently is no ground for granting the benefit of exemption. It was also noticed therein that an accessory/attachment cannot be treated as part of the machine merely because it cannot be operated independently since the machine can be operated in the absence of them. This has been the settled position of law. Therefore, the Commissioner (Appeals) has fallen in error, without giving any reasoning and without application of mind and examining the terms of the notification has granted the benefit, which is not legal and proper. The computer peripherals are not used as “parts” or “parts for repair of dredger” and it has no independent function as parts for repair of dredger and, therefore, the claim was unsustainable. Therefore, the impugned order is set aside and the Order-in-Original in respect of this item is also confirmed.

53. Pumps : The Commissioner has not given the classification of the item but has merely held that they are used to suck the dredged material and push through the pipeline system into the reclamation yard. He has held that without pump, dredging process will be incomplete. He has further in para 4.5 merely held in one line that benefit of exemption as contained in Sl. No. 230 of Notification 23/98-Cus., dated 2-6-98 and Sl. No. 252 of Notification No. 20/99-Cus., dated 20-2-99 is applicable to the items noted by him in that paragraph without examining as to whether the terms of notification are satisfied or not.

54. On the other hand, the adjudicating authority has held the same to be classifiable under Heading 8413.19 which has a specific heading for “pumps for liquids, whether or not fitted with a measuring device; liquid elevators”. He has also held that the item cannot be classifiable under sub-heading 8905.10 as claimed by the importer by virtue of Section Note 2(e) of Section XVII as noted supra. The item is required to be classified in the appropriate heading and in view of exclusion clause in Section Note 2(e) of Section XVII, the classification adopted by the lower authority under Heading 8413.19 is proper and correct which is upheld by setting aside the Commissioner (Appeals) order.

55. As regards the notification, it is also seen that both the authorities have not given any finding on the same. In the Bill of Entry pertaining to this item, the importers have declared the item as “pump casing - spare parts for repair of ocean-going dredger CDs”. The technical literature clearly shows that this is a part of dredger and in view of the fact that this gets worn out and requires to be replaced, they satisfy the terms of the notification as parts for repair of the dredger and hence the benefit granted by the Commissioner on this item, though the Commissioner has not given any finding, is allowed after due consideration of submissions and in terms of literature and declaration made in the Bill of Entry.

56. Copper rings, copper wall and other articles of copper : As noted, the Commissioner has not examined the classification issue but merely has held that the fact that they are integral part of dredger without giving any finding on the classification although noting the lower authority’s finding that they are parts of general use classifiable under and excluded from Chapter 89 in view of Section Note 2(b) of Section XVII. We are inclined to set aside this portion of the Commissioner (Appeals) as the items are clearly excluded by Section Note 2(b) which clearly excludes parts of general use, as defined in Note (2) to Section XV, of base metal (Section XV), or similar goods of plastics (Chapter 39). There is no argument made by the learned Counsel also on this classification and therefore the classification adopted by the lower authority under Chapter 74 is confirmed.

57. As regards the claim of benefit of notification is concerned, we notice that even in the Bill of Entry, the importers have declared that they were all meant for repair of the dredger. These items are used along with dredger and stated to be used as parts for repair of the dredger. Therefore, in view of the write up and literature, the claim for the benefit of the notification on this item is allowed.

58. Gantry, earth boring machines, lathes, welding machines and parts of all these machines, bearing taps, cocks, gaskets of metal sheeting shafts, propellers and its parts under machinery parts without electrical connections : As noted earlier, the Commissioner has not at all applied his mind on these various items and merely held that they are integral part of dredger. Although, he has noted that the lower authority had held that these items are meant for general use classifiable under CTH 84 and that these items are excluded from Chapter 89 by virtue of Section Note 2(e) of Section XVII. Further, he has also noted the finding of the lower authority that these items were imported and presented separately along with individual value. The Commissioner was bound to have given individual findings to say as to how they are not excluded by Section Note 2(e) of Section XVII for the purpose of classification under individual headings under Chapter 84. They are not something which are integral part of dredger as can be seen from clear reading of heading like, Gantry, Earth boring machines, Lathes, Welding machines etc., they are all separate individual machines used in the workshop and they are by no stretch of imagination integral parts of dredger. The party also did not press their claim and have clearly contended that they are individual machines used in the workshop. Ld. Counsel also fairly accepted this position. In that view of the matter, they being not covered by Chapter sub-heading 8905.10 as dredger, but have individual headings for their classification and that they are excluded by Section Note 2(e) of Section XVII, they are held to be classified under the respective Chapter headings of 84 as held by the lower authorities and hence the impugned order of the Commissioner on this aspect of classification is set aside.

59. The Commissioner has also not given the finding as to how they are required to be considered as parts for repair of dredger in respect of these items but has merely by one line order granted the benefit holding them to be entitled for the benefit. We regretfully note the manner in which the Commissioner (Appeals) has disposed of the matter without due application of mind on this aspect also. They are all independent machines and they are not parts. They are having separate functions and are meant for the purposes of individual functions and not used as “parts” or “parts for repair of the dredger”. Nowhere the importers have made a claim that they are parts and that they are used for repair of the dredger. Therefore, the finding being incorrect and unsustainable, we set aside the same and confirm the order-in-Original denying benefit of notification on these items.

60. Spherilock cutter, Spherilock Adaptor, Pickpoints (dredge points) : As noted from the Order-in-Appeal, the Commissioner (Appeals) has not given any finding on the classification except to say that the course to adopt CTH 8431 is not correct and holding that they are essential part of cutter suction dredger though they get consumed and require frequent replacements. In view of specific exclusion for being classified under sub-heding 8905.10 as dredger and parts are excluded also from its classification along with dredger and they are required to be classified under the respective heading and in terms of HSN Notes appearing in pages 1204 and 1449 they are not classifiable under Chapter sub-heading 8905.10, therefore the order-in-original is confirmed. Incidentally, as noted the Commissioner has not given any finding on the classification except to note that the lower authority had classified the item under Chapter Heading 8431. We note that the Commissioner (Appeals) ought to have given his finding on classification. On our own detail consideration and noting that they are excluded from Section Notes 2(b) and 2(e), they are required to be classified under the respective heading as held by the lower authority which is supported by the HSN Explanatory Notes which are having persuasive and binding effect for the purposes of classification. The classification adopted for this item under Heading 84.31 is confirmed.

61. As regards the claim of benefit of the notification is concerned, we notice that the Commissioner has noted that these are essential parts of cutter suction dredger though they get consumed and require frequent replacements. The Revenue contends that these are consumable tools and are not parts of dredger. We have perused the literature produced by the importer on cutter suction dredger. It is noticed from this literature that these items are the main ingredients or parts which carry out the dredging process which involves an initial powerful cutting action, followed by suction, and pumped discharge via pipeline, or occasionally to barges (page 6 of the paper book). Page 7 of the paper book which is an extract of page 183 of the literature also refers to main advantages of the dredger. It also lists out the various work carried by cutter suction dredger. Page 8 of the paper book refers to the method of operation which states that the soil or rock to be dredged is cut, dislodged, or broken, by a powerful crown cutter. The cutter typically has live or six plain edged or toothed blades according to the ground conditions. The cutter head may be electrically or hydraulically driven. It encloses the suction intake pipe work of a centrifugal dredge pump. The cutter head is mounted at the extremity of a fabricated steel structure, called a ‘ladder’ which also supports the suction pipe. The cutterhead drive motor may be mounted immediately behind the cutter at the ladder extremity, or on large dredgers may be mounted at the inboard end of the ladder with a long drive shaft. The literature states that the ladder is attached to the main hull heavy hinges which permit rotation in the vertical plane. On a reading of the entire literature, it is clear that dredging is done through this cutter suction and while during its function, some of these parts worn out and requires replacement. In the Bill of Entry, the importers have described them to spares for repair and as also parts for repair of dredger. In that view of the matter, the notification gave benefit to parts for repair of dredger falling in all chapter headings. Therefore, the claim for the benefit of exemption notification cannot be denied on the ground that they are consumable tools. We note that they are not consumable tools and are parts and benefit is required to be extended. We also notice that the Tribunal in the case of CC v. Kidwai Memorial Institute of Oncology, 1991(03)LCX0040 Eq 1991 (056) ELT 0234 (T) held that Caesium Pellets, a radio  active material, enclosed in a stainless steel container imported for use in the treatment of cancer was held to be not as consumable item as held by the Revenue and Revenue’s appeal was dismissed. In the case of Indian Telephone Industries v. Collector, 1983(04)LCX0024 Eq 1983 (013) ELT 1012 (CEGAT) the Tribunal noted that “consumable” means something that can be consumed. ‘Consume’ means to destroy by wasting, fire, evaporation etc.; to use up; to devour; to waste or spend; to exhaust”. (Chambers 20th). An article of silicon rubber is not “consumable”. In this judgment, it was held that the expression “consumable item” would apply more appropriately to chemicals, etc. used up in the course of research. Therefore, Revenue’s claim that these are consumable tools is not accepted and as the importers have shown through the literature, in their declaration, and in the Bill of Entry that these are all parts of dredger, and have imported separately for the purpose of repair and replacement, the benefit of notification is extended. The impugned order is confirmed on this item for the reasons recorded by us.

62. Wearing Plates and Impellers : The Commissioner has held them to be as parts of “pumps” which are used in the pumping of dredging material. He has also held them to be integral part of dredger which is connected to the pipeline. He has noted that the Madras Custom House has already extended the benefit of exemption and on that ground has allowed the benefit. On consideration of the material on record, we notice that grant of benefit of exemption notification is justified in view of use of the item in the Dredger as parts. However, the Commissioner has not given any finding on the issue of classification. The lower authority has held these items to be not classifiable under Chapter sub-heading 8905.10 but as they are parts of pumps, they are classifiable under Heading 8413.91 in terms of Section Note 2(e) of Section XVII and also on reading of Explanatory Notes to HSN, we are satisfied that the findings given by the lower authorities on classification about being parts of pumps and pumps being classifiable under Chapter Heading 84.13 which parts are classified under Heading 8413.91 and hence the classification as adopted by the lower authority is confirmed.

63. Hubs : In the impugned order, the Commissioner (Appeals) has negatived the classification under 73.26 as held by the lower authority considering the items to be steel parts of Cutter Head in view of specific exclusion in Note 2(b) of Section XVII but has not given any finding except to hold that the literature furnished by the importer shows them as integral part of dredger. As noted by us, the Commissioner’s non-application of mind on this item is evident. There is clear Section Note 2(b) of Section XVII which excludes these items from classification as “dredger” under sub-heading 8905.10. Although, they are parts of dredger, they have a specific classification under Heading 73.26 as steel parts of Cutter Head. Therefore, lower authority’s order on classification in respect of these items is sustainable and classification adopted by the Commissioner (Appeals) is set aside.

64. So far as the grant of benefit of notification is concerned, we notice from the literature that the Hubs are imported by the importer as spare parts and in the Bill of Entry they have ultimately stated that they are parts for repair of dredger. As noted, all these parts for use in the cutter head used in the cutter suction and they get worn out. Hence the benefit of notification has been rightly granted although no reasons have been given by both the authorities. However, on our own consideration of the material on record, we extend the benefit of notification to this item.

65. In the result, the order of the Commissioner (Appeals) is modified on the classification as well as on grant of benefit of notification to the extent indicated in view of individual heads of each items by us in our order. The ’Revenue’s appeal is partly allowed in view of our observations and findings made above. Thus, the Revenue’s appeal in respect of the following items is allowed :

(1)     Navigational Equipments

(2)     Computer Peripheral

(3)     Gantry, Earth boring machines, Lathes, welding machines and parts of all these machines, Bearing taps, Cocks, Gaskets of metal sheeting shafts, Propellers and its parts other machinery parts without electrical connections.

The Revenue’s appeal in respect of the following items is partly allowed insofar as the classification is concerned and the grant of benefit of notification by Commissioner (Appeals) is upheld :

(1)     Hubs

(2)     Pumps

(3)     Copper rings, Copper Wool and other articles of Copper

(4)     Spherilock Cutter, Spherilock Adaptor, Pickpoints Dredger Points

(5)     Wearing Plates and Impellers

Thus, the Revenue appeal is disposed of accordingly in the above terms.

Equivalent 2003 (161) ELT 642 (Tri. - Chennai)