1997(09)LCX0058

IN THE CEGAT, COURT NO. II, NEW DELHI

Ms. Jyoti Balasundaram, Member (J) and Shri Shiben K. Dhar, Member (T)

SHAKUN PRODUCTS

Versus

COLLECTOR OF CENTRAL EXCISE, KANPUR

Final Order Nos. E/1300-1301/97-B1, dated 5-9-1997 in Appeal Nos. E/2126/89-B1 and E/2856/89-B1

 CASES CITED

Ideal Jawa India P. Ltd. v. Assistant Collector — 1986(01)LCX0020 Eq 1986 (024) ELT 0226 (Kar.) — Distinguished [Para 5]

Atul Glass Industries v. Collector — 1986(07)LCX0018 Eq 1986 (025) ELT 0473 (S.C.) — Distinguished                       [Para 5]

PMP Auto Industries v. U.O.I. — 1987(08)LCX0056 Eq 1987 (031) ELT 0369 (Bom.) — Distinguished                            [Para 5]

Asian Paints v. Collector — 1987(03)LCX0021 Eq 1988 (035) ELT 0003 (S.C.) — Distinguished                                            [Para 5]

Sealol Hindustan Ltd. v. U.O.I. — 1988(03)LCX0051 Eq 1988 (036) ELT 0283 (Bom.) — Distinguished                          [Para 5]

Precision Fasteners Ltd. v. Collector — 1988 (019) ECR 52 — Distinguished                                  [Para 5]

Union of India v. JMA Industries — 1995(03)LCX0132 Eq 1995 (077) ELT 0278 (S.C.) — Distinguished                        [Para 5]

Union of India v. Godrej and Boyce Manufacturing Co. — 1989(07)LCX0030 Eq 1989 (043) ELT 0225 (Bom.) — Distinguished                                     [Para 8]

Advocated By : Shri B.B. Gujral, Advocate, for the Appellant.

 Shri S. Nunthuk, JDR, for the Respondent.

[Order per : Jyoti Balasundaram, Member (J)]. - The brief facts of the above appeals which arise out of the order passed by the Collector of Central Excise (Appeals), New Delhi are that the assessees who are manufacturers of “Main Cable Harness”, “Handle Bar Harness”, “H.T. Cable Assembly” etc., specifically designed for scooters of M/s. LML Ltd., submitted classification list for the same effective from 1-4-1986 under sub-heading 8714.00 as “parts of scooters” which was approved by the Department and duty was paid and RT 12 returns were also finalised through out the financial year 1986-87. The assessees filed classification list No. 153/86-87 effective from 1-4-1987 for approval of the items under the same sub-heading and this list was approved only provisionally. A show cause notice dated 25-9-1987 was issued proposing re-classification under sub-heading 8544.00 as “cables” and proposing recovery of differential duty under Section 11A of the Central Excise Act, 1944. The Assistant Collector approved the classification list under sub-heading 8544.00 w.e.f. 1-4-1986 and confirmed a demand of differential duty of Rs. 3,62,442.87 for the period from 4-4-1986 (the date of filing of classification list No. 11/86-87) to 31-8-1987. He also directed the assessees to pay the differential duty for the period from 1-9-1987 till the date of adjudication order. The lower appellate authority upheld the order of the adjudicating authority on classification of the items, however, as regards the period of assessment of 1986-87, he held that the demand for differential duty for the period prior to 25-3-1987 was not justifiable in the face of approved classification list under sub-heading 8714.00. As regards the period of provisional assessment, he held that no time was relevant in this context and as a result, he confirmed the demand for differential duty for a period of six months prior to the date of issue of show cause notice. The assessee has filed E/2126/89-B1 against the classification and confirmation of differential duty demand for the six months period, while the Revenue, being aggrieved by the dropping of the differential duty demand for a period beyond six months, has come up in appeal in E/2856/89-B1.

2. We have heard Shri B.B. Gujral, learned Advocate and Shri K.K. Jha, learned SDR.

3. For a proper understanding of the classification dispute, the rival entries are reproduced below :

4. The assessees received PVC wires/insulated wires and insulated electric conductors classified under 8544.00 of the Schedule to the Central Excise Tariff Act, 1985 in their factory on payment of duty, these wires were cut to different sizes according to specifications and then fitted with connectors such as terminal lugs. The other inputs used by them in the manufacture of cable harness and handle bar harness and wire harness are PVC sleeves, cowl bush assembly, HT cable and fork. The credit of duty paid on the inputs is availed under Rule 57A of Central Excise Rules at the time of clearance of the final excisable products. The appellants’ contention is that the goods in question are manufactured as per drawings and specifications of M/s. L.M.L. Ltd. and they cannot be used for any other purpose except for scooters and that too, for scooter models Alpha, T-5 and NV because of their specific lengths and connectors which are required for these models only. However, since the goods in question are an assembly of insulated wires and cables of specified lengths fitted with connectors and are specifically covered under sub-heading 8544.00, they fall for classification under this Heading on an application of Rule 3(a) of the Rules for the Interpretation of the Schedule to the Central Excise Tariff which provides that when goods are prima facie classifiable under two or more Headings, the Heading which provides the most specific description shall be preferred to Headings providing a more general description. Further since the items in dispute are in themselves goods included in Chapter 85 (sub-heading 8544.00) they are to be classified in that Heading, by virtue of Note 2(a) to Section XVI of the Schedule to the Tariff which provides that, “subject to Note 1 to Section XVI, Note 1 to Chapter 84 and Note 1 to Chapter 85, parts of machines which are goods included in any of the Headings Chapter 84 or 85 ..... are in all cases to be classified in their respective Headings.” Note 1 to Section XVI, Note 1 to Chapter 84 and Note 1 to Chapter 85 exclude certain items from the coverage of Section XVI, Chapter 84 and Chapter 85. But we find that the items in dispute are not excluded by those Notes. Therefore, Note 2(a) to Section XVI is attracted and the goods are rightly classifiable under sub-heading 8544.00. Moreover, we find that the HSN Explanatory Notes to Heading 85.44 at page 1404 clearly states that wires, cables, etc. remain classified in this Heading if cut to length or fitted with connectors (e.g., plugs, sockets, lugs, jacks, sleeves or terminals) at one or both ends. The Explanatory notes state that Heading 85.44 also includes wires, etc., of the type described above made up in sets e.g. multiple cables for connecting motor vehicle sparking plugs to the distributor. The HSN Explanatory Notes to Section XVII (covering Chapters 86 to 89) Part 3, which deals with parts and accessories excludes “other electrical fittings such as insulated electric wires and cables (including wiring sets) and electrical articles of graphite or other carbon whether or not fitted with terminals .....” from the coverage of Section XVII under which Chapter 87 falls (see exclusion Clause 7(m) at Page 1411 of Vol. 4 of HSN. We also find that there is a Trade Notice of December, 1988 reported in 1989 (039) ELT T9, clarifying that wiring harness used in automobiles are classifiable under Heading 85.44 of the CETA, 1985 and that it is a new product which is different from wires and cables. The Trade Notice states that in view of Note 2(f) to Section XVII of the Central Excise Tariff, parts and accessories in Section XVII will not apply to machinery and equipment of Chapter 85 and wire harnesses are also used in machines other than motor vehicles, e.g. they are used in air-conditioners, generators, photocopiers, VCRs and compressors. In view of the above, we agree with Revenue that the classification of the disputed items has been correctly arrived at under sub-heading 8544.00.

5. The case law cited by the learned Counsel for the appellants viz. :

1. 1986(01)LCX0020 Eq 1986 (024) ELT 0226 (Kar.) - Ideal Jawa India P. Ltd. v. Assistant Collector of Customs, Mysore;

2. 1986(07)LCX0018 Eq 1986 (025) ELT 0473 (S.C.) - Atul Glass Industries v. Collector of Central Excise;

3. 1987(08)LCX0056 Eq 1987 (031) ELT 0369 (Bom.) - PMP Auto Industries v. Union of India;

4. 1987(03)LCX0021 Eq 1988 (035) ELT 0003 (S.C.) - Asian Paints v. CCE;

5. 1988(03)LCX0051 Eq 1988 (036) ELT 0283 (Bom.) - Sealol Hindustan Ltd. v. UOI;

6. 1988 (019) ECR 52 - Precision Fasteners Ltd. v. CCE, Bombay;

7. 1995(03)LCX0132 Eq 1995 (077) ELT 0278 (S.C.) - Union of India v. JMA Industries.

are distinguishable. The cases at Sl. Nos. 1 to 4 and 6 to 7 were decided in the context of the Schedule to the erstwhile Central Excise Tariff as it stood before the introduction of the new Tariff in 1986 and are, therefore, not relevant in the present context where we are concerned with the classification under the new Tariff containing Section Notes and Chapter Notes and where HSN Explanatory Notes can be looked into for the purpose of arriving at the correct classification. The case law at Sl. No. 5 above was a decision in the context of the new Tariff, but is also distinguishable - the High Court applied Note 2(b) to Section XVI which states that parts suitable for use solely or principally with the particular kind of machine or number of machines falling within the same Headings are to be classified with the machines of that kind, and held that mechanical seals specifically designed for centrifugal pumps or compressors fell under Heading 84.10(1) or 84.11(1) of Schedule 1 to the Central Excise Tariff Act, 1975. In the present case, however, the items in dispute have been found to be suitable for use not solely or principally in motor vehicles but for use in air-conditioners, generators, photocopiers, VCRs and compressors also and, therefore, Note 2(b) to Section XVI will not be attracted to the goods in question.

6. In the light of the above discussion, we uphold the classification of the disputed items under sub-heading 8544.00 of the Schedule to the CETA, 1985.

7. The alternate argument of the learned Counsel that since what is received by the assessees is only wires and cables which are only being fitted with connectors, no manufacture is involved as no new product with a different name, character and use emerges as a result of the fitting with connectors is also not well founded - from the list of inputs set out in the order of the Assistant Collector, we find that wires and cables are fitted with connectors and put in a casing and that a distinct, different commercial commodity emerges as a result of the processes carried out by the assessees and the new commercial commodity has a different name, character and use - the inputs are wires and cables and the final product is cable harness/wire harness, etc.; the character changes from mere wires and cables into cable/wire harnesses and the use is also different. The submission of the learned Counsel that no manufacture is involved since both wires and cables and cable harness/wire harness fall under the same sub-heading also cannot be accepted since change in Tariff Heading is not a sine qua non for manufacture. In other words, it is not necessary that a manufactured product should fall under a Heading different from its raw materials, and if the test of manufacture laid down by the Supreme Court viz. emergence of a new, distinct commercial commodity with different name, character and use is satisfied, then it has to be held that manufacture has taken place notwithstanding the fact that the manufactured product/products fall for classification under the same Heading or sub-heading as the input material.

8. The challenge to the differential duty demand for a period of six months prior to the issue of show cause notice which has been confirmed in the impugned order is also not maintainable. The classification list filed w.e.f. 1-3-1987 was approved provisionally and came to be finalised with the issue of the adjudication order assessing the goods under sub-heading 8544.00, after the issue of show cause notice. The combined show cause notice, in addition to proposing re-classification of the goods/modification of the classification list also simultaneously proposes recovery of differential duty on goods already cleared prior to the issue of the show cause notice viz. upto 31-8-1987. The Assistant Collector by the order of adjudication has approved classification of the items under sub-heading 8544.00, finalised the classification list No. 153/86-87 which was earlier provisionally approved and then, in the same order confirmed the demand of differential duty. It is not as if the demand has preceded the adjustment of duty after final assessment [the date of adjustment of duty after final assessment thereof is the relevant date for computing time limit for issue of demand notice under Section 11A(1) as defined in 11A(3)(ii)(b)]. The judgment of the Hon’ble Bombay High Court in the case of Union of India v. Godrej and Boyce Manufacturing Co. reported in 1989(07)LCX0030 Eq 1989 (043) ELT 0225 (Bom.) relied upon by the learned Counsel for the assessees is not applicable - in that case it was held that since Section 11A vests the Central Excise officers with power to issue show cause notice within a stated time from the relevant date, that the relevant date has come and gone is a sine qua non of the valid exercise of the power conferred by sub-section (1) and it is not clear from the judgment as to whether the show cause notice which was stayed by the learned Single Judge of the Bombay High Court whose order was upheld by the Division Bench was only a notice for demand of duty but it appears that the notice demanding duty was issued before adjustment of duty after final assessment. In the present case, however, as already noted earlier the classification list No. 153/86-87 was finally assessed by the Assistant Collector’s adjudication order and as a consequence thereof, he has confirmed the demand for differential duty. Therefore, we hold that the differential duty demand for the period of six months prior to the issue of show cause notice (from 25-3-1987 till 31-8-1987) is sustainable.

9. As for the Revenue’s appeal, since CL No. 11/86-87 filed w.e.f. 4-4-1986 was finally approved on 24-7-1986 as seen therefrom (pages 41 and 42 of the paper book filed by the assessees) and as admitted in the show cause notice itself, the demand for the period prior to 25-3-1987 has been rightly dropped as time barred and we see no reason to interfere with the finding of the lower appellate authority on this score.

10. In the result, both the appeals are rejected.

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Equivalent 1997 (96) ELT 184 (Tribunal)