1998(01)LCX0088

IN THE CEGAT, COURT NO. II, NEW DELHI

S/Shri K. Sankararaman, Member (T) and S.L. Peeran, Member (J)

INDUSTRIAL ELECTRONICS & ALLIED PRODUCTS

Versus

COLLR. OF C. EX., PUNE

Final Order No. E/69/98-B1, dated 20-1-1998, in Appeal No. E/813/90-B1

Advocated By : Shri L.B. Attar, Advocate, for the Appellant.

Shri S. Nunthuk, JDR, for the Respondent.

[Order per : S.L. Peeran, Member (J)]. - This appeal arises from order dated 2-2-1990 passed by Addl. Collector, Pune revising the classification of the product “DESOLDERING PUMP” under Chapter Heading 8467.00 as tools for working in hand which are pneumatic or with self contained non-electric motor as against the approved classification done from time to time by the department under Chapter Heading 8468.00 which reads :

“Machinery and apparatus for soldering, brazing or welding whether or not capable of cutting other than those of Headings No. 85.15; gas-operated surface tempering machines and appliances.”

2. In the impugned order, the Addl. Collector has not only revised the classification from time to time but has upheld the allegation on suppression of facts in the classification list and in this context he has imposed a penalty of Rs. 25,000/- besides ordering for confiscation of plant and machinery under Rule 173Q(2) and granting option of redemption on payment of Rs. 25,000/-. He has also confirmed the duty under Rule 9(2) read with Section 11A of Central Excises & Salt Act, 1944. The Addl. Collector’s notings on visiting to the factory had become part of Annexure `A’ to the show cause notice which is reproduced below :

“During the visit of the Addl. Collector, Central Excise, Pune to the factory premises of M/s. Industrial Electronics and Allied Products, it was observed that they are manufacturing `Desoldering Pumps’ which is essentially a hand tool used in Electronic Industries. This is used to suck the molten solder instantly through a small pump operated by hand, like a syringe, wherever defective components in printed circuit boards are to be removed. The body and nozzle is mainly of plastic and the sucking pump is of aluminium. They have classified this product under Chapter Heading 8468.00 attracting duty @ 15% Adv. instead of Chapter Heading 8467.00 attracting duty @ 20% Adv. Chapter Heading 8468.00 applies to machinery and apparatus for soldering and hence would not apply to apparatus used for desoldering. Hence it would correctly be classifiable under Chapter Heading 8467.00 attracting duty @ 20% Adv.”

On the basis of his personal notings, the Addl. Collector issued the show cause notice dated 21-9-1989 alleging mis-classification by the appellants and clearing the same without determining and paying the appropriate amount of duty due thereon which works out to Rs. 1,08,799.63. He has alleged in the show cause notice that the product is classifiable under Chapter Heading 8467.00 instead of 8468.00 and hence proviso to Section 11A is invokable.

3. By a detailed reply to the show cause notice, the appellants seriously contested the said allegation and Additional Collector’s attempt to re-classify the approved classification adopted by the department from time to time for the last several years. They pleaded that the Additional Collector should have kept his mind open till he came to a decision and raising the question of reclassification on the basis of his personal observation and visit to the factory and that has reopened the case himself by issue of show cause notice is totally unsustainable. They also pleaded that there is no pump either attached or inbuilt in the apparatus as alleged in the show cause notice. The apparatus consists of M.S. Rod, Spring and rubber “O” rings inside the plastic body. The rod is pushed down and locked on its release, molten material is sucked automatically. There is no pump provided for such action. It is neither pneumatic apparatus, nor operated with self contained non-electric motor. It is a simple mechanical apparatus. They challenged the classification as “hand tool” and submitted that the term “handy tool” does not mean that the item is a hand tool as alleged. It simply means that it is convenient to use in hand and by such use, the item does not satisfy the definition of the “hand tool” which is an independent item, used as a `tool for implement’. They have given a list of 16 tools which are covered under Heading 84.60 and hence the product is not classifiable in the group of items which are considered as hand tool, as it is neither pneumatic nor operated with self contained non-electric motor. The examples as per HSN Notes to classify as tools are as follows :

1. Drilling, tapping, or reaming machines.

2. Boring machines, rock drills etc.

3. Wrenches, screw-drivers, nut setters, and the like.

4. Filing machines, grinders, sanders, polishers, etc.

5. Wire brush machines.

6. Circular saws, and Chains saws.

7. Hammers of various types, such as chipping hammers, de-scaling hammers, caulking hammers, revetting hammers, concrete breakers.

8. Squeeze-type reviters.

9. Sheet metal cutters (shear type or nibbler type).

10. Sand rammers for foundaries, decoring tools for removing cores from castings, mould vibrators.

11. Earth compacting rammers for road building etc.

12. Automatic spedes.

13. Concrete vibrators to facilitate the flow and setting of concrete.

14. Hydraulically driven boiler type de-scalers.

15. Compressed type greasing pistols for garages etc.

16. Portable machine for trimming lawns, cutting grass along walls, borders or under bushes for example. Such machines have a self contained internal combustion engine in a light metal frame and a cutting device usually consisting of one or more thin nylon threads.

They have pointed out that under Chapter Heading 84.67 or the Customs Tariff Act, 1975 three sub-classifications are adopted viz : (i) Pneumatic (ii) other tools and (iii) Parts. They submitted that sub-classification “other tools” under chapter sub-heading 8467.89 refers to `tools’ for working in hand other than pneumatic but with self contained non-electric motor. They submitted that their product is not covered under Chapter Heading 8467.89 of Customs Tariff Act, 1975. They pointed out that their classification had been approved from time to time effective from 2-4-1986 onwards by the Asstt. Collector. During the visit by Addl. Collector and his examining the goods in question, the classification list dated 2-4-1986, was approved provisionally subject to verifi-cation of leaflet. It was submitted that the said product and leaflet was examined and thereafter the classification list was approved from time to time. Therefore, the Addl. Collector’s personal observation and his proceedings to reclassify on the allegation of mis-classification by invoking proviso to Section 11A is totally unsustainable. It was contended that the department could have initiated proceedings under Section 35E of the Act against the approval of the classification. They also produced technical opinion from Prof. S.K. Pande, Asstt. Prof. of Mechanical Engineering Deptt., College of Engineering, Pune countersigned by Dr. D.K. Joshi, Prof. & Head of Mechnical Engineering Deptt., College of Engineering, Pune-5. By their opinion dated 30-11-1988 they had stated that the item is not a hand tool but only an accessory to a soldering process kit.

They contended that the item was correctly classified under Heading 84.68 along with apparatus for soldering as the item in question was used along with soldering the electronic PCB. Large number of judgments were cited by the appellants in their reply to show cause notice to support each of the contentions raised by them.

4. We have heard ld. Advocate Shri L.B. Attar and Shri S. Nunthuk, ld. JDR.

5. On a careful consideration of the submissions made by both the sides, we are of the considered opinion that the Additional Collector has proceeded on his own personal observation and visit to the factory and he has also enclosed his observations to raise the demand by alleging mis-classification. The Addl. Collector has not obtained any opinion from any of the technical authorities or from Trade circle to show that the item in question is being sold as a hand tool and that it has got all the features of a hand tool under Chapter Heading 8467.00 and the item cannot be used along with soldering apparatus to suck the excess molten metal material on the printed circuit board. The appellants on the other has shown that the item had been classified only after due enquiry, examination of the product and the leaflet by the Addl. Collector and the classification had been approved from time to time. Therefore, if at all the department intended to challenge the said classification, they ought to have filed a review application under Section 35E of the Act and an appeal before the Collector (Appeals). The same has, however, not been done. The department had all the details of product and therefore, the allegation of the Addl. Collector that they had mis-classified is not only misleading but also unsustainable in the facts and circumstances of the case. The proceedings cannot be initiated on the basis of personal observations without getting technical opinion and opinion from the experts besides obtained trade and commercial understanding of the product. In the present case no such exercise has been done by the Addl. Collector and he proceeded to reclassify the product on the basis of his own understanding and that too by alleging mis-classification against the appellants. Ld. Addl. Collector has also proceeded to confiscate plant, machinery and building under Section 173Q(2) on the allegation that mis-classification has been done deliberately to evade duty. We can not appre- ciate the reasoning given by the Addl. Collector to confiscate plant and machinery and also to impose penalty. The department had classified the product time and again along with soldering apparatus under Heading 84.68. We notice that the appellants have produced technical opinion from two experts and the said opinion has not been controverted by getting any opinion from other experts to contradict the opinion given by the Prof. of Mechanical Engineering Deptt., College of Engineering. The manner in which the evidence has been dealt with by the Addl. Collector cannot be appreciated as the Addl. Collector cannot substitute his own personal opinion for the opinion of technical experts.

6. It has also been shown from the HSN Explanatory Notes that the item cannot be considered as a hand tool under Heading 84.69. Besides, the items which have been treated as “tool for working in hand” are not akin to the items in question. Undisputedly the item is used along with apparatus of soldering the manual parts on the circuit boards. After soldering, excess molten material is required to be sucked out and for this purpose the item in question is used, which is an apparatus for soldering and not a tool for working in hand. The technical evidence and also the commercial understanding is that the item is an apparatus for soldering and not a tool for working in hand. We have examined HSN Explanatory Notes appearing at page 1289 which deals with Heading 84.67 the description “tools for working in hand, pneumatic or with self contained non-electric motor”. This heading notes clearly state that this heading covers tools which incorporate a compressed air motor (or compressed air operated piston), an internal combustion motor or any other non-electric motor (e.g. small hydraulic turbines); the compressed air motor is generally operated by an external source of compressed air, and in the case of internal combustion motor the ignition batteries are generally separate. It however, states that in pneumatic tools the action of the compressed air is sometimes supplemented by hydraulic connections. On reading this note, it is very clear that the item in question does not have all these features of having a compressed air motor etc. The note further states that the heading covers such tools “only” if it is for working in the hand. It further states that the expression “tools for working in the hand” means tools designed to be held in the hand during use, and also heavier tools (such as earth rammers) which are portable, that is which can be lifted and moved by hand by the user, in particular while work is in progress, and which are also designed to be controlled and directed by hand during operation. It further states that to obviate the fatigue of taking their full weight during operation they may be used with auxiliary supporting devices (e.g. tripods, jacklegs, overhead lifiting tackle). The note also gives the items which are to be included under this heading which are already reproduced above. On a careful reading of the HSN Explanatory Notes under Heading 84.67, it is very clear that the item is not akin to the items shown in HSN Explanatory Notes and it does not satisfy the same and therefore, the reclassification adopted by the Addl. Collector on his personal opinion is totally unsustainable. In that view of the matter, there is no case made out by the Addl. Collector for initiating proceedings against the appellants for reclassifying the goods under Heading 8467.00. There is no mis-classification or suppression for invoking the proviso to Section 11A of the Act. There is no clandestine removal for invoking Rule 9(2) of Central Excise Rules and we further hold that the entire proceedings initiated by the Addl. Collector is totally unsustainable in law. In that view of the matter, the impugned order is set aside and the appeal is allowed.

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Equivalent 1998 (100) ELT 232 (Tribunal)

Equivalent 1998 (024) RLT 0814