Eureka Forbes Limited vs Commissioner of Central Excise, Meerut>2000(08)LCX0036

2000(08)LCX0036

IN THE CEGAT, COURT NO. II, NEW DELHI

Ms. Jyoti Balasundaram, Member (J) and Shri V.K. Agrawal, Member (T)

EUREKA FORBES LIMITED

Versus

COMMISSIONER OF CENTRAL EXCISE, MEERUT

Final Order Nos. 1772-1775/2000-B, dated 21-8-2000 in Appeal Nos. E/1623-1626/2000-B

Cases Quoted

Bharat Earth Movers Ltd. v. Collector — 1989 (042) ELT 62A (Tribunal)
— Referred .................................................................................................................... [Para 3]

Collector v. Blue Star Ltd. — 1996(04)LCX0042 Eq 1996 (085) ELT 0193 (Tribunal) — Referred .......................... [Para 5]

Collector v. Madras Fertilizers — 1989(10)LCX0020 Eq 1990 (045) ELT 0339 (Tribunal) — Referred)................... [Para 3]

Collector v. Bharat Earth Movers Ltd. — 1990 (048) ELT A25 — Referred......................... [Para 3]

Hico Products Ltd. v. Collector — 1983(09)LCX0061 Eq 1983 (014) ELT 2483 (Tribunal) — Referred ................ [Para 4]

Jyoti Plastics. v. Collector — 1992(10)LCX0039 Eq 1993 (064) ELT 0291 (Tribunal) — Distinguished ........ [Paras 3, 7]

Plastic Craft Industries v. Collector — 1990(10)LCX0022 Eq 1991 (052) ELT 0084 (Tribunal)
— Referred .................................................................................................................... [Para 3]

Sealol Hindustan Ltd.. v. U.O.I. — 1988(03)LCX0051 Eq 1988 (036) ELT 0283 (Bom.) — Referred....................... [Para 3]

Union Carbide India Ltd v. Collector — 1985(10)LCX0016 Eq 1986 (024) ELT 0325 (Tribunal)
— Referred .................................................................................................................... [Para 4]

DEPARTMENTAL CLARIFICATION CITED

C.B.E. & C. Circular F. No. 145/12/87 CX-4, dated 18-3-1988 .................................... [Paras 3, 8]

Advocated By : S/Shri H.C. Daroowala, M.H Kane, Advocates, for the Appellant.

Shri R.D. Negi, SDR, for the Respondent.

[Order per : V. K. Agrawal, Member (T)]. - In these four appeals, arising out of a Common Order Nos. 140-43/2000 dated 3-3-2000, passed by the Commissioner (Appeals), issue involved is whether the plastic hoses manufactured by the Appellants, M/s. Eureka Forbes Ltd., are classifiable under Heading 39.17 of the Schedule to the Central Excise Tariff Act, as confirmed by the Commissioner (Appeals) or under Heading No. 85.09 of the Tariff as claimed by the Appellants.

2. Shri H.C. Daroowala, ld. Advocate, submitted that the Appellants manufacture Vacuum Cleaner and parts thereof, falling under Heading 85.09 of the Tariff; that Vaccum hose manufactured by them is an integral part of the Vacuum Cleaner; that the vacuum cleaner cannot function without the hose which is specially designed for use only with the vacuum cleaner, that the impugned hoses are not items of general use; that Note 1 (g) to Section XVI of the Tariff provides that this Section does not cover “Parts of general use, as defined in Note 2 to Section XV, of base metal (Section XV), or similar goods of plastics (Chapter 39 ); that Note 2 to Section XV defines “ Parts of general use” as under :

(a) Articles of Heading Nos. 73.07, 73.12, 73.15, 73.17 or 73.18 and similar articles of other base metal;

(b) Springs and leaves for springs, of base metal, other than clock or watch springs (Heading No. 91.14); and

3. The ld. Advocate, further, submitted that Heading 73.07 refers to Tube or pipe fittings (for example, couplings, elbows, sleeves), of iron or steel; that accordingly the definition of general use does not cover pipe or tube of base metal or of plastics, falling under Heading No. 39.17; that only fittings of tubes, pipes, and hoses of plastics which also fall under Heading 39.17 would be “parts of general use”; that pipe fittings means joints and hose by itself is not a fitting; that in Jyoti Plastics v. CC, 1992(10)LCX0039 Eq 1993 (064) ELT 0291 (T), the Tribunal had misconstrued Note 2 to Section XVI; that the findings in Para 11 of the said decision were on account of misreading of Note 1(g) to Section XVI. He also mentioned that vacuum hoses are clearly classifiable under Heading 85.09 by virtue of Note 2(b) to Section XVI as these are specially made for use only with the vacuum cleaners and cannot be used for any other purposes; that once the goods can be classified as per Section Note, Rules of Interpretation cannot be resorted to. He relied upon the decision in the case of Sealol Hindustan Ltd. v. U.O.I., 1988(03)LCX0051 Eq 1988 (036) ELT 0283 (Bom.), wherein it was held that Note 2 prescribes rules for classification of parts of machines. According to Note 2(b), parts suitable for use solely or principally with a particular kind of machine are to be classified with the machine. In that case mechanical seals which were specifically designed for centrifugal pumps or compressors and could be used only with them were held to be falling by virtue of Note 2(b) under Heading 84.10(1) or 84.11(1). Reliance was also placed on the following decisions and Board’s Circular.

(i) C.C. v. Madras Fertilizers, 1989(10)LCX0020 Eq 1990 (045) ELT 0339 (T)

(ii) Plastic Craft Industries v. CCE, 1990(10)LCX0022 Eq 1991 (052) ELT 0084 (T)

(iii) Bharat Earth Movers Ltd. v. Collector of Customs, 1989 (42) E.L.T 62A wherein Rubber hoses were classified under Heading 84.23 of the Customs Tariff as these hoses were made of hardened rubber and fitted with clamps. This decision has been confirmed by the Supreme Court as reported in 1990 (048) ELT A 25.

(iv) Board’s Circular F. No. 145/12/87 CX-4, dated 18-3-1988 wherein it was clarified that chillier pumps, ice trays, freezer doors, evaporator doors, etc., would be integral parts of Cabinet for the refrigerator and would be classified under Heading No. 84.18 as parts of refrigerator and not as articles of plastics under Chapter 39 of the Tariff.

4. The ld. Advocate also submitted that burden of proof regarding classification is on the Department as held in the case of Hico Products Ltd. v. CCE, Bombay, 1983 (013) ELT 2483 (T) and Union Carbide India Ltd. v. CC,Bombay, 1985(10)LCX0016 Eq 1986 (024) ELT 0325 (T). Finally he mentioned that no interest under Section 11/AB of the Central Excise Act can be demanded inasmuch as the show-cause-notice did not call upon the Appellants to show cause as to why interest should not be demanded; that no penalty is imposable unless there is positive evidence of any mala fide mis-classification; that the mere change in classification by the Appellants cannot lead to any presumption that they have changed the classification for purpose of evading payment of excise duty.

5. Countering the arguments, Shri R. D. Negi, ld. SDR, submitted that the Appellants are removing hoses independently which shows that the hoses are finished goods by themselves and they are specifically mentioned in Heading 39.17 of the Tariff and applying Rule 3(a) of the Interpretative Rules, the heading which provides the most specific description shall be preferred to headings providing a more general description; that in their application for Registration under Rule 174 of the Central Excise Rules, they mentioned hoses as independent product which was first classified by them under Chapter 85 and later on under Heading 39.17 of the Tariff; that when rate of duty was increased in 1997, they again classified the impugned product under Chapter 85 which clearly brings out their intention to evade payment of appropriate duty. The ld. SDR also emphasised that end use cannot be determinative of classification; that in any case the hose can be used with other products and as such it is rightly classifiable under Heading 39.17 of the Tariff. The ld. S.D.R. relied upon the decision in CCE, Bombay-III v. Blue Star Ltd., 1996(04)LCX0042 Eq 1996 (085) ELT 0193 (T) in which it was held that in determining the classification “it would be necessary to first determine the inherent quality and character” of the product. In that case Polyurethane Foam Panels and Doors were classified under Heading 39.25 and not as parts of refrigerating appliances. He contended that accordingly hoses made of plastics would be appropriately classifiable under Heading 39.17.

6. In reply the ld. Advocate mentioned that the impugned hoses have been designed solely and principally to be used with Vacuum Cleaner; that as such the goods in question does not legitimately fall under Chapter 39 of the Tariff.

7. We have considered the submissions of both the sides. The rival Tariff Headings are as under :

“3917.00 Tubes, pipes & hoses, and fittings therefore (for example, joints, elbows, flanges) of Pastics.”

“8509.00 Electro-machanical tools for working in the hand, with self-contained electric motor.”

There is substance in the submissions of the ld. Advocate for the Appellants that as per definition of ‘Parts of General use’ given in Note 2 to Section XV of the Tariff, tubes, pipes & hoses are not parts of general use as the heading relating to tubes & pipes is not mentioned in the said Note 2. Tubes and pipes of Iron or Steel are covered by Heading Nos. 73.03 to 73.06 of the Tariff which are not mentioned in Note 2 to Section XV which defines ‘Parts of general use’. It mentions Heading No. 73.07 which covers - “Tube or pipe fittings of iron or, steel”. According to Mc Graw-Hill Dictionary of Scientific and Technical Terms, Pipe Fitting means ‘A piece, such as couplings, unions, nipples, tees and elbows for connecting length of pipes. “The product in question is hose which is not a pipe or tube fittings. Accordingly for the purpose of Tariff it cannot be termed as ‘Parts of general use” and as such the goods in question is not excluded from the purview of Section XVI in view of Note 1(g) to the said Section. In Jyoti Plastic v. Collector of Customs, 1993 (064) ELT 291, the point that tubes and pipes are not covered by the definition of “parts of general use” was not raised and as such not considered by the Tribunal.

8. It has been emphasised by the ld. Advocate for the Appellants that the hoses manufactured by them can be used only as part of the Vacuum cleaner due to special design and are not capable for general use. According to Note 8 to Chapter 39, the expression ‘tubes, pipes and hoses’ means hollow products of a kind generally used for conveying, conducting or distributing gases or liquids. The Revenue has not brought any evidence on record that the impugned product is capable of being generally used for conveying, conducting or distribution gases or liquids. Every hollow products will not automatically would be classifiable under Heading No. 39.17 unless and until it is of a kind generally used for conveying, conducting or distributing gases or liquids. This burden of proof has not been discharged by the Department. On the other hand it is mentioned by the Adjudicating Authority, in the Adjudication Order, that the hoses are “removed within their factory either for captive consumption for the manufacture of Vacuum Cleaner or cleared from their factory as such....” The Adjudicating Authority did not make any enquiry as to the uses these are put after clearance from the factory whether these are used for conveying, conducting or distribution gases or liquids or only as spare parts of vacuum cleaner. No doubt end use of the product is not generally relevant for classification but as per Note 8 to Chapter 39 it is to be determined first that the impugned goods is a product of a kind used for conveying, conducting or distributing gases or liquids. Such a fact was not in dispute in Jyoti Plastics, supra. Further Note 2(n) to Chapter 39 clearly provides that Chapter 39 does not cover “Articles of Section XVI (machines and mechanical or electrical appliances)”. On the other hand Note 2 to Section XVI provides the rules for classification of parts of machine. According to Note 2(b) parts which are suitable for use solely or principally with particular machines or apparatus are classified in the same heading as those machines or apparatus. This has been confirmed by the Appellate Tribunal and Courts in many cases, including the decision in Sealol Hindustan Ltd., supra, and Plastic Craft Industries, supra, relied upon by the ld. Advocate for the Appellants. The Board also clarified vide letter F. No 145/12/87-CX4, dated. 18-3-88 that Ice trays, freezer doors, etc. would be classified under Heading No. 84.18 as parts of refrigerator. The Board, however, classified butter box under Chapter 39 as it was not solely designed for use with refrigerator. Accordingly we hold that applying Rule 2(b) to Section XVI, hoses in question are appropriately classifiable along with vacuum cleaner under Heading No. 85.09 of the Tariff. We also agree with the ld. Advocate that no penalty under Section 11 AC of the Central Excise Act is imposable merely on the ground that the Appellants changed the classification of the impugned goods in the classification list filed by them. In any case, as we are allowing the appeal on merit, the question of imposing penalty and charging interest does not arise.

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Equivalent 2001 (130) ELT 146 (Tri. - Del.)

Equivalent 2001 (042) RLT 0027