Perfect Electric Concern Pvt. Ltd. vs Collector Of Central Excise, Patna>1997(02)LCX0179

1997(02)LCX0179

IN THE CEGAT, COURT NO. II, NEW DELHI

S/Shri Lajja Ram, Member (T) and S.S. Kang, Member (J)

PERFECT ELECTRIC CONCERN PVT. LTD.

Versus

COLLECTOR OF C. EX., PATNA

Final Order No. E/343/97-B, dated 6-2-1997 in Appeal No. E/277/89-B1

Cases Quoted

Collector v. Perfect Electrical Corpn. P. Ltd. — 1989(06)LCX0074 Eq 1989 (043) ELT 0653 (Tribunal) — Distinguished [Paras 3, 8]

Subhash Photographics v. U.O.I. — 1992(04)LCX0052 Eq 1992 (062) ELT 0270 (Bom.) — Followed [Para 9]

Urethane India Ltd. v. Collector — 1991(05)LCX0054 Eq 1991 (056) ELT 0886 (Tribunal) — Followed [Para 10]

Advocated By : Shri K.P. Choudhary, Advocate, for the Appellant.

Shri A.K. Agarwal, SDR, for the Respondent.

[Order per : Lajja Ram, Member (T)]. - In this appeal filed by M/s. Perfect Electric Concern Pvt. Ltd. being aggrieved with the Order-in-Appeal dated 21-9-1988 passed by the Collector, Central Excise (Appeals) Calcutta the matter relates to the classification of the following products.

(1) Piano Key Switch (Roof and Roof)

(2) Driving and Blinker with Horn Switch

(3) Four Pole Connector

(4) Blade Type Terminal

(5) Mechanical Brake Light Switch

The appellants had sought to classify all these products under Heading 87.08 of the Schedule to the Central Excise Tariff Act, 1985 (hereinafter referred to as the Tariff). Heading 87.08 cover the following.

“Parts and accessories of the motor vehicles of heading numbers 87.01 to 87.05". The Revenue had classified all these products under sub-heading 8536.90. Heading 8536.90 covers ”electrical apparatus for switching or protecting electrical circuits or in making connection to or in electrical circuits for example switches, plugs, sockets all kinds (including lamp holders); and starters for fluorescent tubes". Sub-heading 8536.10 covered overload protection or thermal relays, starting relays controls for refrigerating or air conditioning appliances and machinery, the rest of the electrical apparatus for switching or protecting electrical circuits or for making connections to or in electrical circuits (which were not classifiable under sub-heading 8536.10) were classifiable under sub-heading 8536.90. The Collector of Central Excise (Appeals) Calcutta had held as under :-

“I have considered the facts of the case and the submissions made by the appellant. Classification of products under the new tariff has to be in accordance with the terms of the headings and any relative section or chapter notes. In this context reference to section note 2(f), of XVII becomes relevant. The said section covers vehicles, aircraft, vessels and associated transport equipment. The section note 2 clearly provides that the expression ”parts and accessories" do not apply to articles covered under 2(a) to 2(b) whether or not they are identifiable as for the goods covered under Section XVII, 2(f) refers to “Electrical machinery and equipment” of chapter 85. In other words therefore even though these may be identifiable as parts of m.v. these cannot be classified under chapter 87 by virtue of specific exclusion provided under note 2(f) of the said section note. Reliance on aforesaid case law therefore would be of no assistance to the appellant for the reasons discussed above."

2. We have heard Shri K.P. Choudhary, Advocate for the appellants and Shri A.K. Agarwal, SDR for the Revenue.

3. Shri K.P. Choudhary, Advocate referred to the tariff entry under Heading No. 87.08 and submitted that as the goods in question were parts and accessories of the motor vehicles they were correctly classifiable under Heading 87.08 of the tariff. It was his submission that these goods were made to order and were designed for use in the motor vehicles. He referred to the earlier Tribunal decision in their own case in CCE v. Perfect Electrical Corpn. Pvt. Ltd. - 1989(06)LCX0074 Eq 1989 (043) ELT 0653 (Tribunal) when the similar products were classified by the Tribunal not under Item No. 61 of the old Central Excise Tariff but under Item No. 68 of the old Central Excise Tariff.

4. In reply Shri A.K. Agarwal, SDR stated that the classification under the new Central Excise Tariff had to be based on the rules of interpretation and Section/Chapter notes. He referred to section note 2(f) under Section XVII of the Tariff and submitted that as the switches were electrical equipment they were not classifiable under Section XVII under which the Chapter 87 falls. He referred to the impugned order-in-appeal where the matter had been discussed as why the goods were correctly classifiable under sub-heading 8536.90.

5. In rejoinder the learned Adv. stated that sub-heading 8536.90 was a residuary entry and as there was a specific entry for parts and accessories of motor vehicles, there was no justification for classifying the same under a residuary entry. He also submitted that in common parlance the goods were known as parts of motor vehicles.

6. We have carefully considered the matter. The appellants had sought classification of the goods which are switches of different types under Heading 87.08 as parts and accessories of the motor vehicles. There is no dispute that the switches in question were electric in nature. In the Tribunal decision relied upon by the appellants it had been observed that the various switches in question were electric in nature. Under the scheme of the new Central Excise Tariff in force from 28-2-1986 the classification had to be determined under the rules of interpretation and various sections/chapter notes. All parts and accessories of the motor vehicles are not classifiable under heading 87.08. The parts and accessories which are specifically included in any other heading/sub-heading had to be classified in their specific heading/sub-heading and not under Heading 87.08. For example the motor vehicle parts as tyres, tubes, bearings, gears etc. although motor vehicle parts are not classifiable under Heading 87.08 in view of the fact that they are specifically covered under specific headings/sub-headings.

7. Chapter 87 of the tariff is under Section XVII of the tariff. Section note 2 of Section XVII provides that the expression “parts and accessories” do not apply to other electrical machinery and equipment whether or not they are identifiable as for the goods of this section. According to this section note the electrical machinery and equipment were classifiable under Chapter 85. Chapter 85 of the Tariff falls under Section XVI of the tariff. Section note 2 of the Section XVI provides as under :-

“2. Subject to Note 1 to this Section, Note 1 to Chapter 84 and to Note 1 to Chapter 85, parts of machines (not being parts of the articles of heading no. 84.84, 85.44, 85.45, 85.46 or 85.46) are to be classified according to the following rules :-

(a) Parts which are goods included in any of the headings of Chapter 84 or Chapter 85 (other than heading Nos. 84.85 and 85.48) are in all cases to be classified in their respective headings.

(b) Other parts, if suitable for use solely or principally with a particular kind of machine, or with a number of machines of the same heading (including a machine of heading No. 84.79 or heading No. 85.43) are to be classified with the machines of that kind. However, parts which are equally suitable for use principally with the goods of heading Nos. 85.17 and 85.25 to 85.28 are to be classified in heading No. 85.17.

8. In section note 5 it has been provided that for the purpose of section notes under section XVI the expression `machine’ means any machine, machinery plant, equipment, apparatus or appliance cited in the headings of chapter 84 or 85. Heading 85.36 covers the electrical apparatus for switching or protecting electrical circuits or for making connections to or in electrical circuits. The scope of the heading had been explained by giving the examples of switches, relays, fuses etc. In the example switches have been specifically mentioned under sub-heading 8536.90 the goods which were otherwise classifiable under heading 85.36. Sub-heading 8536.90 is not a general residuary entry but is only a residuary to the extent that the goods which were not otherwise classifiable under sub-heading 8536.10 were covered by sub-heading 8536.90. Learned Advocate had referred to the decision as reported in 1989(06)LCX0074 Eq 1989 (043) ELT 0653 (Tribunal). In the Tribunal decision it had been specifically mentioned that the goods manufactured by the respondents were switches and that the switches were electric in nature. The Tribunal was concerned with the classification of switches between item 68 and item No. 61 of the old Central Excise Tariff. The Tribunal observed that item 61 referred to electric light fittings and not to electric fittings. After considering that the switches in question were for motor vehicles it was held that the switches in question were classifiable under item 68 as goods not elsewhere specified and not as electric light fittings. We are concerned with the new Central Excise Tariff under which the goods had to be classified under the scheme of the tariff itself. While there is no dispute that the switches in question were for motor vehicles, as we have referred to above all parts of motor vehicles are not classifiable under heading 87.08. Only those parts which are not classifiable in any other specific tariff heading, will be classifiable under heading 87.08 read with various inclusion and exclusions as per various sections/chapter notes.

9. In the case of Subhash Photographics v. U.O.I. - 1992(04)LCX0052 Eq 1992 (062) ELT 0270 (Bom.) the Bombay High Court had held that the section notes and chapter notes were part of the tariff and that the classification was to be determined in accordance with the terms of headings, section notes, chapter notes and rules of interpretation. Para 20 from that decision is extracted below.

“The next point that arises for consideration relates to the value of the Chapter Notes for the purposes of interpretation of tariff headings. In this connection it may be pertinent to observe that the Chapter Notes in the Customs Tariff Act are part of the Act itself. They are intended to provide mechanism for resolving controversy regarding classification of goods. The Customs Tariff Act, 1975 itself lays down elaborate rules of interpretation of First Schedule and classification of goods therein. These rules, in the form of principles, are laid down in the beginning of the First Schedule itself as well as in each Chapter. Every heading therefore, has to be interpreted in the light of the relevant principles of interpretation, section notes and chapter notes. All the relevant rules of the interpretation in the import tariff are to be applied for classification of goods. The classification, therefore, has to be determined according to the terms of the heading read with the relevant chapter notes and rules of interpretation. If the chapter notes empowers the Board to define an expression used in the heading and declares that such expression shall have the meaning assigned to it by the Board, any definition given by the Board in exercise of legislative mandate contained in Chapter Notes shall be within its regulation making powers, and shall be the definition of the expression for the purpose of the Customs Tariff Act itself. It shall, in effect, get incorporated in the Act itself.”

10. In the case of Urethane India Ltd. v. CC - 1991(05)LCX0054 Eq 1991 (056) ELT 0886 (Tribunal) the Tribunal had held that section notes were significant in classification of product under Tariff Schedule, having the effect of either expanding or restricting scope of tariff heading. Para 4 from that decision is extracted below.

“4. The submissions made by both the parties have been carefully considered. The main contention of the appellants is that PTMAG is a Diol and as such is specifically covered by Heading 2905.39 as other Diols. Heading 29.05 covers Acyclic alcohols and their halogenated, sulphonated, nitrated or nitrosated derivatives. Therefore, there is a lot of force in the reasoning of Collector (Appeals) that to merit classification under Heading 29.05, an item should basically be an alcohol. PTMAG imported is admittedly not an acyclic alcohol and their halogenated sulphonated, nitrated or nitrosated derivatives. It is more than a Diol and in particular it contains an ester chain provided by the adipic acid. The appellants, however, in the appeal, have submitted that the products under Heading 29.05 and listed thereunder are not necessarily derived from alcohol. They have contended that even if PTMAG contains an ester chain provided by the adipic acid, it does not cease to be a diol or glycol. However, as against this we have to go by the General Explanatory Note to the Tariff Note No. 1 is to the effect that where in Col. 3 of the Schedule the description of an article or a group of articles under a heading is preceded by ”-" (dash) the said article or group of articles shall be taken to be sub-classification of the article or group of articles covered by the said heading. Under Heading 29.05 under the Heading `Acyclic alcohols and their halogenated, sulphonated, nitrated or nitrosated derivatives’, the description `Diols’ is preceded by single “-”. This shows that Diols, as mentioned in the Tariff Heading 29.05, should be an article covered by the description in the said heading. Therefore, if it is not possible to say that the description of Heading 29.05 will not include polymerised derivatives of alcohol, then such products cannot be brought under that heading. The classification of the PTMAG under Heading 3907.99 is supported by the Chief Chemist’s report which has not been challenged by the appellants herein. In that Report, the Chief Chemist has clearly opined that the goods imported are squarely a polymer with the number of monomer units being much more than five as seen from the molecular weight and that the product is only Polyol and not a reaction product of polyol with isocyanate. The classification on the basis of the units of monomer being more than 5 under Chapter 39 is also supported by Chapter Note 3(c) to Chapter 39 and it is well-settled that the Section Notes have a vital significance in the classification of the products under Tariff Schedule because these have the effect of either expanding or restricting the scope of the tariff heading itself. Even according to the Textual authorities, in Kirk Othmer dealing with Urethane polymers, it is stated at page 585 that polyester polyols most frequently used in the production of speciality polyurethane flexible foam and thermoplastic polyurethane elastomers and fibres are based on adipic acid. The appellants, admittedly, have imported PTMAG with adipic acid and are to use it as a raw-material, for the manufacture of thermo-plastic polyurethane. Therefore, the Collector (Appeals) conclusion on a detailed consideration of textual authorities and HSN Notes that PTMAG is correctly classifiable as other polyesters meriting classification under Heading 3907.99 and not under Heading 29.05 as other Diols is well founded and is upheld. The alternate claim made is for classification under Heading 38.23 covering residual products of chemical or allied industries not elsewhere specified. This claim is also not acceptable because the product as has been pointed out by the Collector (Appeals), is not a mixture of glycols. In the circumstances, there is no reason to interfere with the order passed by the Collector (Appeals). The appeal is rejected."

11. As there is no dispute that the switches were for motor vehicles but were not otherwise classifiable under Heading 87.08 in view of the section/chapter notes, there is no ground for not classifying them under specific applicable entry on the basis of the common parlance test.

12. Taking all the relevant considerations into account we do not find any merit in this appeal and the same is rejected.

Equivalent 1997 (93) ELT 622 (Tribunal)