Meteor Satellite Ltd. vs Collector Of Central Excise>1989(11)LCX0066

1989(11)LCX0066

BEFORE THE CEGAT, SPECIAL BENCH ‘B1’, NEW DELHI

S/Shri K.S. Venkataramani, Member (T), G.P. Agarwal, Member (J) and Ms. V. Rajamanickam, Member (J)

METEOR SATELLITE LTD.

Versus

COLLECTOR OF C. EX.

Order No. 206-209/89-B1, dated 30-11-1989 in Appeal No. E/13/89-B1, E/2195-96/89-B1 and E/1738/87-B1

CASE CITED

MAHINDRA AND MAHINDRA v. COLLECTOR OF CUSTOMS-1986 (26) ELT 269 .. [PARAS 2 AND 4]

Advocated By: Shri D. Parikh, Advocate, for the Appellants.

Smt. Dolly Saxena, SDR, for the Respondents.

[Order per : K.S. Venkataramani, Member (T) ]. - The above-mentioned appeals arise out of orders-in-appeal passed by the Collector of Central Excise (Appeals) Bombay. The Appeal No. E/13/89-B.I has been preferred by M/s. Meteor Satellite Ltd. against the order-in-appeal dated 24-10-1988 of the Collector (Appeals); Appeal Nos. E/2195 and 2196/89-B.I have also been preferred by the same appellants against order-in-appeal passed by the Collector (Appeals) bearing different order numbers and bearing different dates viz. 3-4-1989 and 13-4-1989. Appeal No. E/1738/87-B.I has been preferred by the Collector of Central Excise, Ahmedabad being aggrieved by the order dated 24-3-1987 passed by the Collector (Appeals). There is a common issue involved in these appeals which relates to the classification of pistons for automobile engines manufactured by M/s. Meteor Satellite, under Central Excise Tariff Act, 1985. Prior to the commencement of Central Excise Tariff Act, 1985, duty was being paid on the pistons under erstwhile Central Excise Tariff Item 34A as motor vehicle parts. The Central Excise Tariff Act, 1985 came into force with effect from 28-2-1986 and the appellants filed classification list for the pistons as motor vehicle parts covered under Heading 87.08 and 87.14 of Central Excise Tariff Act, 1985. The jurisdictional Assistant Collector of Central Excise however did not accept this declared classification and on the other hand, passed an order holding that the pistons were classifiable under Heading 84.09 as parts suitable for use in spark ignition engines and as such being part of engines covered by Heading 84.07 or 84.08 of Central Excise Tariff Act, the pistons were covered by Heading 84.09 which was specific for such parts. The classification list No. 5/86-87 in respect of pistons Group V : P-790 IND-SUZUKI so approved by the Assistant Collector under Heading 84.09 was challenged in appeal by M/s. Meteor Satellite and the Collector (Appeals) by his order dated 24-3-1987 allowed the appeal holding that the pistons in question were classifiable as declared by M/s. Meteor Satellite under Heading 87.14 of Central Excise Tariff Act. The department has now come up in appeal against this order saying that Heading 84.07 covers spark ignition reciprocating internal combustion piston engines and that under Heading 84.07 of Harmonised Commodity Description and Coding System (HSN) reciprocating piston engines covered by this Heading are of a kind used for the propulsion of vehicles of Chapter 87 of Central Excise Tariff Act, 1985 and further that Notification 75/86, dated 10-2-1986 exempts parts of motor vehicles falling under Chapter 40,48,73,84 or 85 of Central Excise Tariff Act, 1985 and the notification does not cover Chapter 87 and that, therefore, pistons are rightly classified under Heading 84.09 Central Excise Tariff Act, 1985. In respect of other three appeals with which we are concerned here, the Collector (Appeals) confirmed the classification under Heading 84.09 Central Excise Tariff Act against which M/s. Meteor Satellite Ltd. who have preferred the present appeals.

2. Shri D.V. Parikh, the learned Counsel appeared for M/s. Meteor Satellite and Smt. Dolly Saxena, the learned SDR represented the Revenue. Shri Parikh, the learned Counsel submitted that prior to commencement of Central Excise Tariff Act, 1985, they had classified the pistons as motor vehicle parts under erstwhile Central Excise Tariff Item 34A and the other parts under Item 68 Central Excise Tariff about which there has been no dispute. Even while classifying the pistons under Central Excise Tariff Act, 1985, they had adopted classification under Heading 84.09 for other engine parts while claiming 87.08 and 87.14 for pistons. He pointed out that even by commercial usage and parlance, pistons were motor vehicle parts as is indicated by the fact that a majority of their sales was to dealers in such parts. It was their contention that Headings 87.08 and 87.14 Central Excise Tariff Act, 1985 were identical with Item 34A Central Excise Tariff and Heading 84.09 would be parallel to Item 68 Central Excise Tariff. He also relied upon the Cegat decision in the case of Mahindra & Mahindra v. Collector of Customs, Bombay -1986 (26) ELT 269 which was also followed in other decision reported in 1988 (37) ELT 146 and 118 ibid in which classification of these items under Chapter 87 was confirmed. The learned Counsel referred to the reliance of Collector (Appeals) in his order dated 24-10-1988 on Section Note 2(e) to Section XVII of Central Excise Tariff Act which covers Chapter 87 for classifying pistons under Heading 84.09 and contended that the Collector (Appeals) had in coming to this finding, failed to take note of Section Note 1(k) to Section XVI which covers Chapter 84 and which says that articles covered under Section XVII are excluded from Section XVI and motor vehicle parts are clearly covered under Chapter 87 falling under Section XVII. The learned Counsel urged with reference to several case law that the burden of establishing classification under a different Heading was on the department which has failed to do so with any evidence in support of classification under Heading 84.09. The learned Counsel also argued that the Collector (Appeals) ought to have followed the earlier decision in favour of his clients by his predecessor in office which, according to them is correct in law. The product is also known in the market as motor vehicle parts and not as I.C. engine parts, and to this end referred to the literature and catalogue produced in support of the plea that the products are known in the market as motor vehicle parts.

3. Smt. Dolly Saxena, the learned SDR contended that the Central Excise Tariff Act, 1985 is a self contained Act aligned to HSN which is an internationally accepted nomenclature and in that way, it is not comparable to the erstwhile Central Excise Tariff. Classification under Central Excise Tariff Act, 1985 has to be done with reference to the Section Note, Chapter Notes, the Interpretative Rules and the description of the Tariff Headings. Under Central Excise Tariff Act, 1985, parts of I.C. engines are specifically covered under Heading 84.09 and in this context referred to and reiterated the grounds of appeal of the department already mentioned above.

4. We have carefully considered the submissions made by the learned Counsel and the learned SDR. The main contention is that the pistons for motor vehicles engines produced by this appellant are classifiable as motor vehicle parts being commercially recognised as such and hence are assessable under Headings 87.08 and 87.14 Central Excise Tariff Act, 1985. Reliance has also been placed on the Section Note 1(k) to Section XVI which says that the Section does not cover articles of Section XVII and this appellant also relies upon the Cegat decision in Mahindra & Mahindra v. Collector of Customs, Bombay - 1986 (26) ELT 269. The department on the other hand says that Section Note 2(e) of Section XVII specifically excludes articles of Headings 84.01 to 84.79 and parts thereof and hence pistons produced by the appellants will be covered by Heading 84.09 which covers parts of engines covered by Headings 84.07 and 84.08. They also place reliance upon HSN to which Central Excise Tariff Act, 1985 is aligned.

Heading 84.09 reads as follows :

Parts suitable for use solely or principally with the engines of Heading No. 84.07 or 84.08.

Heading 87.08 reads as follows :

Parts and accessories of the motor vehicles of Heading Nos. 87.01 to 87.05.

Heading 87.14 reads as follows :

Parts and accessories of vehicles of Heading Nos. 87.11 to 87.13.

Section Note 2(e) to Section XVII :

2. The expressions “parts” and “parts and accessories” do not apply to the following articles, whether or not they are identifiable as for the goods of this Section:

(e) Machines and apparatus of Heading Nos. 84.01 to 84.79, and 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.

Section Note 1(k) to Section XVI:

1. This Section does not cover:

(k) Articles of Section XVII.

It is noted that the Central Excise Tariff Act, 1985 is aligned to the Harmonised Commodity Description and Coding System (HSN). The Headings extracted above in the Central Excise Tariff Act, 1985 are identical with those in the HSN. Hence, a reference to the Explanatory Notes to HSN will be appropriate as an aid to the classification of items under Central Excise Tariff Act, 1985. Proceeding on this basis, we find that the HSN Explanatory Notes to Heading 84.07 shows that reciprocating piston engines of a kind used for the propulsion of vehicles of Chapter 87 are included therein and it is also found that Heading 84.08 covers engines of a kind used for propulsion of vehicles under Chapter 87 under compression ignition internal combustion piston engines (diesel or semi-diesel engines). The Explanatory Notes under both these headings further shows that parts of the engines under these headings are classified under Heading 84.09. The Explanation to Note 2 to Section XVI also says that separate headings are provided for parts of engines of Heading 84.07 or 84.08 in Heading 84.09. Further, what is excluded under Note 2(e) to Section XVII is also given in the HSH :-

III. Parts and Accessories

(A) Parts and accessories excluded by Note 2 to Section XVII.

This Note excludes the following parts and accessories, whether or not they are identifiable as for the articles of this Section:

(1) Joints, gaskets, washers and the like, of any material (classified according to their constituent material or in Heading 84.84) and other articles of vulcanised rubber other than hard rubber (e.g. mudguard-flaps and pedal covers) (Heading 40.16).

(2) Parts of general use as defined in Note 2 to Section XV, for example, cable, chain (whether or not cut to length or equipped with end fittings) nails, bolts, nuts, washers, cotters and cotter-pins, springs (including leaf springs for vehicles) (such goods of base metals fall in Chapters 73 to 76 and 78 to 81, and similar goods of plastics fall in Chapter 39), and locks, fittings or mountings for vehicle coachwork (e.g. made up ornamental beading strips, hinges, door handles, grip bars, foot rests, win-down opening mechanisms), number plates, nationality plates, etc. (such goods of base metals fall in Chapter 83, and similar goods of plastics fall in Chapter 39).

(3) Spanners, wrenches and other tools of Chapter 82.

(4) Bells (e.g. for cycles) and other articles of Heading 83.06.

(5) Machines and mechanical appliances, and parts thereof of headings 84.01 to 84.79, for example :

(a) Boilers and boiler equipment (Heading 84.02 or 84.04).

(b) Producer gas generators (e.g. for cars) (Heading 84.05).

(d) Engines of all kinds including engines fitted with gear boxes and parts thereof, falling in Headings 84.07 to 84.12.

Therefore when the Section Note 2(e) of Section XVII of Central Excise Tariff Act, 1985 is seen in this background, it becomes clear that parts of engines of Headings 84.07 and 84.08 are excluded from Section XVII and in that view of the matter, these parts of engines will not be covered by the exclusion of articles in Section XVI spelt out in Section Note 1(00k) to Section XVI on a harmonious construction of the Section Notes and the concerned Tariff Headings. The appellants have also relied upon Cegat decision in Mahindra & Mahindra Ltd. v. Collector of Customs, Bombay - 1986 (26) ELT 269. A perusal of that decision shows that it dealt with an import under the Customs Tariff Act, 1975 of a consignment of gear box parts of jeeps and not engine parts at a time prior to the alignment of Customs Tariff with the Harmonised Commodity Description and Coding System (HSN) whereas the present appeal has to do with the Central Excise Tariff Act, 1985 which is aligned to the HSN and, further, the Cegat in that decision did not have occasion to consider in detail the Explanatory Notes to HSN which we have examined in this case. Hence, the two cases are not comparable, .since in this case, the classification of the articles is possible to be determined with reference to the Section Notes and description of the Tariff Entry of Central Excise Tariff Act, 1985. In the circumstances, it has to be held that the pistons for motor vehicle engines produced by the appellants M/s. Meteor Satellite Limited are correctly classifiable under Heading 84.09 Central Excise Tariff Act, 1985. The appeals preferred by M/s. Meteor Satellite Ltd. are, therefore, rejected and the appeal preferred by Collector of Central Excise, Ahmedabad is accordingly allowed.

Equivalent 1990 (045) ELT 0697 (Tribunal)