1990(08)LCX0090

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

S/Shri D.C. Mandal, Member (T), S.L. Peeran, Member (J) and G.A. Brahma Deva, Member (J)

PAHARPUR COOLING TOWERS PVT. LTD.

Versus

COLLECTOR OF CUSTOMS

Order No. 922/90-C, dated 9-8-1990 in Appeal No. C/1957/86-C with C/Misc. 166/90-C

Advocated By : Shri K. Narasimhan, Advocate, for the Appellants.

Shri L. Narasimha Murthy, D.R., for the Respondents.

[Order per : S.L. Peeran, Member (J)]. - This appeal arises from the impugned order of the Collector of Customs (Appeals) Calcutta No. Cal-Cus-3016/85 dated 9-12-1985 by which he confirmed the order-in-original dated 5-6-1985 passed by the Dy. Collector of Customs, Calcutta.

2. The main question that arises for our consideration in this appeal is regarding the classification of goods described in the bill of entry for home consumption dated 30-6-1984 as “1 x 20’ 8’ 6’ Container STC Extruded/Moulded PVC components of cooling tower fill pack assembles Co-parts of cooling tower for air conditioning equipment” under Heading 84.12 or 84.65 or 84.17(i) as sought for by the appellants or Heading 39.01/06 as done by the Department at 100% + 40% + C.V. 50% + 5% special on C.V. The original assessing authority held the goods i.e. extruded/moulded PVC components of cooling towers fill pack assembles, on physical examination, reveal that the goods are PVC sheets surface worked/embossed and are qualified for installation in cross and counterflow cooling towers as well as for repairs and performance increase of available cooling towers. He has further held that they are PVC sheet embossed/surfaced worked falling under Heading 39.01/06 of the Customs Tariff.

3. Shri K. Narasimhan, advocate appearing for the appellants, argued the case and submitted that the imported goods merit classification only under Heading 84.17 of the revised Customs Tariff Schedule which he submitted is identically worded as Heading 84.19 of the Excise Tariff Schedule revised (HSN based schedule). He submitted that the first shipment was classified as component parts of air-conditioning machine falling under Heading 84.12 after the matter was remanded by this Bench in fresh re-adjudication done by the Asstt. Collr. by his order dated 21-7-1989 and submitted that this matter also deserves same classification as done in the previous shipment. Now the Asstt. Collector has given a clear finding that these fill packs are specially designed parts of ‘cooling tower’ which obviously is a machine falling under Chapter 84. He submitted that in the second shipment, which is the subject matter of dispute, the importers had sought for classification under Heading 39.01/06 initially by mistake but had applied for cancellation of the home consumption Bill of entry and had filed an into bon B/E [as provided in Sec. 46(5) of the Customs Act] for warehousing the goods pending settlement of the disputed issue for which an appealable order was asked for from the Dy. Collector of Customs, who had in the meantime taken over the adjudication of the case, but however, the Dy. Collector had confirmed the order under Heading 39.01/06 on the basis of the invoice wherein the suppliers had suggested the Heading 39.02 CCCN. Shri Narasimhan submitted that the original authority had mis-read the supplier invoice, as at the relevant time, the CCCN had only seven digits. As for Indian Customs Tariff, even to this day under HSN there are only six digit headings/sub-headings. He submitted that the Dy. Collector had lost sight of the fact that on the same page of the invoice, the supplier had in fact shown BTN Heading as 84.12 which was the classification declared in the Bill of entry by the appellants. Therefore, he submitted that note (ii) to Chapter 39 of the tariff excludes from its purview articles falling under Sec. XVI (Chapter 84 and 85). By virtue of note 2 to Sec. XVI, fill pack assembly being a specially designed component, it has to be classified under the relevant machinery heading in Chapter 84 and hence the question of classification in Chapter 39 does not arise. He further submitted that the finding of Dy. Collector that the impugned goods are PVC sheets is erroneous even by looking at the sample. He displaced the sample of the impugned goods and pointed out that the scope of expression surface working/working referred to in note 3(d) of Chapter 39 has been clarified in para (5) of general comments on page 570 of the Explanatory notes to BTN. It has necessarily to be confined to surface embellishment like polishing, embossing or colouring or mere curving and/or corrugation. Sh. Narasimhan pointed out that entries (h) to Note B(1) to (3) of the Explanatory notes under Heading 39.07 excludes ‘machinery and mechanical appliances and parts thereof within the meaning of Sec. XVI are excluded from Heading 39.07. Sh. Narasimhan submitted that the impugned goods had lost its character as a PVC strip and had taken a cubic shape with several strips being pasted together permanently in a manner so as to give the specially formed 12 mm fluting and serrations having 60º angle to the horizontal arc fixed in a criss-cross formation for optimum thermal effect. The hot water from the top trickles through the fill of the impugned goods and reaches the cold water basin. The impugned goods are parts of the cooling tower, directly used without any modification or work to be done to it. Sh. Narasimhan submitted that the Dy. Collector had failed to notice these facts despite the samples and relevant literature being shown to him.

4. The Collector (Appeals) had simply rejected the importers’ appeal without recording their submissions and giving a clear finding on their submissions. He had simply upheld the Deputy Collector’s finding. Therefore, he prayed for setting aside the impugned order by classifying the impugned goods under Heading 84.17(1). He also relied upon the Calcutta Excise Trade notice No. 48/GL-19/88 dated 23-3-1988 based on Government of India, Ministry of Finance circular letter F. No. 145/4/87-CX-4 dated 29-2-1988 which had classified cooling tower under Heading 84.19 of the HSN based on CET which is verbatim similar to Heading 84.17 of the Customs Tariff Act, 1975 based on BTN. He concluded by saying that fill packs being parts of cooling towers would also go under the same Heading 84.17 which being more specific should prevail over the residuary Heading 84.59. Finally, he submitted that the ex-bond clearance having been taken after 28-2-1986 decision in the present appeal will have to be given with reference to the headings in the revised schedule of the Customs Tariff Act.

5. Sh. L.N. Murthy, learned Departmental Representative defended the impugned orders. He submitted that in the Bill of entry, the impugned goods were described as PVC moulding. It could not be known whether further work is required before it could be used as a machinery part. Therefore, the Collector (Appeals) was justified in rejecting the appellants’ contention. Although the impugned goods were not sheets but being a plastic article, it deserved to be classified as plastic article in residuary column of Chapter 39. He submitted that if the impugned goods were in ready to use condition, then it could be considered as component. But this being a factual point, it requires reconsideration by lower authorities. He submitted that the impugned goods were in running length and hence it cannot be considered as a part.

6. Shri Narasimhan, advocate in the counter reply, submitted that the impugned goods were components and parts of cooling towers and had been supplied as per specification and it was not in running length which point could be gathered from the literature placed before the Bench by Misc. application, which had been allowed.

7. We have heard both the sides, carefully gone through the literature and documents produced before us. The point that arises for consideration is as to whether the impugned goods are PVC sheets or component parts of a machinery meriting classification as sought for by the appellants in the specific Tariff Entry 84.12 or 84.17 or 84.59 of CTA, 1975.

8. The Dy. Collr. of Customs, Calcutta in the order-in-original dated 13-6-1985 has classified the impugned .goods under Heading 39.01/06 of the Customs Tariff 1975 on the fact that the goods are PVC sheets. Although, he has admitted that the goods are qualified for installation in cross and counterflow cooling towers as well as for repairs and performance increase available in cooling towers. He also accepts that the goods in question are manufactured for use as fill in cooling tower, (emphasis supplied).

9. In his crisp order, the Collector of Customs (Appeals) Calcutta has merely accepted the finding in the order-in-original. He has noted the submissions of the appellants and also of their producing the literature but there is no discussion regarding it. He has rejected the prayer of the appellants for classification of the goods under Heading 84.12 or 84.65 or 86.17 (i) on the ground that the suppliers had indicated the classification to be Heading 39.02 of CCCN.

10. Both the authorities seem to have been carried away by the suppliers’ suggestion for classification of the invoice. This does not appear to be the correct position as has been explained by the appellants. The invoice reads “Customs Tariff No. 3902.540". The CCCN at the material time had only four digit headings, whereas the above heading has been shown in seven digits. Under the Customs Tariff, there are only six digit headings/sub-headings. The invoice also shows the BTN heading as 84.12; which appears to be the correct entry suggested by the suppliers. The explanation given by the appellants in this regard is acceptable. The goods have been classified under Chapter 39. Note (ij) to Chapter 39 of the tariff excludes from its purview articles falling in Section XVI (machines and mechanical or electrical appliances). Chapter 39 falls under Section VII. Section VII reads: Artificial resins and plastic materials, cellulose esters and ethers and articles thereof; Rubber, synthetic rubber, factice and articles thereof. Chapter 39 reads Artificial resins and plastic materials, cellulose esters and ethers, articles thereof.

11. The lower authorities have classified the goods under Chapter 39.01/06, which reads as under :-

“Note 3 of Chapter 39 reads -

3. Heading No. 39.01/06 is to be taken to apply to materials in the following forms only -

a) liquid or pasty (including emulsions, dispersions and solutions);

b) blocks, lumps, powders (including moulding powders), granules, flakes and similar bulk forms;

c) monofil of which any cross-sectional dimension exceeds one millimetre; seamless tubes, rods, sticks and profile shapes, whether or not surface worked but not otherwise worked;

d) plates, sheets, films, foil and strip (other than that classified in Heading No. 51.01/03 by the application of note 4 to Chapter 51) whether or not printed or otherwise surface worked uncut or cut into rectangles but not further worked (even if, when so cut, they become articles ready for use); and

e) Waste and scrap".

12. The lower authorities have taken these impugned goods as PVC sheets falling under Heading 3901/06 qualifying to fall under this heading by virtue of reading note 3(d). Admittedly, the impugned goods are manufactured for use as fill in cooling towers. The lower authorities have not disputed the use of the impugned goods or to their nature and the technical data and literature produced by them. In that event, the impugned goods qualify to be treated as articles falling within Section XVI. Hence, by virtue of note 1(ij), the impugned goods will be taken out of Chapter 39. Further, they are not in the nature of materials as described in note 3(d). The scope of note 3 (d) of Chapter 39 has been clarified in para (5) of general comments on page 570 of the Explanatory notes of BTN -

“(5) Plates, sheets, strip, film and foil, whether or not containing fillers or colouring matter, may be printed or otherwise surface-worked (polished, embossed, coloured, etc.) or merely curved and/or corrugated but not otherwise worked. They may also be cut into rectangles even if, as the result of being cut, they may become finished articles (e.g. tiles, wall coverings, table-cloths)”

Even by reading the detailed elucidation in the note (B)(1) to (3) on pages 582-583 of the Explanatory notes under Heading 39.07 of BTN, we are convinced that the impugned goods do not fall under Chapter 39 and hence they are to be excluded from it. From the reading of the technical literature of the impugned goods, it would disclose that they are directly used as fill in the cooling towers. This fill pack assembly has been fabricated in a complex way specially designed by the suppliers. It is in the form of cubic shape with several strips being pasted together permanently in a manner so as to give the specially formed 12 mm fluting and serrative having 60° angle; to the horizontal arc fixed in a criss cross formation for optional thermal effect especially when the hot water from the top trickles through fills to reach the cold water basin. From the nature of the impugned goods being specially designed by the suppliers, it would follow that they are not PVC sheets as has been understood by the lower authorities and hence they are not classifiable under Chapter 39.

13. The appellants have relied upon the explanatory notes to BTN on pages 1203 and 1205 under Heading 84.17 (1) with regard to the classification of cooling towers. They have also relied on the Calcutta Central Excise Trade notice No. 48/GL-19/1988 dated 23-3-1988 based on the Government of India, Ministry of Finance, circular letter F.No. 145/5/87-CX-4 dated 29-2-1988 wherein it has been classified that ‘cooling tower’ Will fall under Heading 84.19 of HSN based Central Excise Tariff, which the appellants claim to be verbatim to the same Heading 84.17 of the Schedule to the Customs Tariff Act, 1975 based on BTN. Therefore, they seek the impugned goods ‘Fill packs’ as parts of cooling tower classifiable under Heading 84.17; being more specific over residuary Heading 84.59. The note 2 of Section XVI (Machinery and mechanical appliances, electrical equipment, parts thereof) reads as follows -

“2. Subject to note 1 to this section, Note 1 to Chapter 84 and Note 1 to Chapter 85, parts of machines not being parts of the articles described in Heading No. 84.64 or parts of the following articles falling within Heading No. 85.18/27, namely - (i) Insulators or insulated electric wire and the like, (ii) carbon articles used for electrical purposes, or (iii) electrical conduit tubing and joints therefore, are to be classified according to the following rules -

a) goods of a kind described in any of the Headings of Chapters 84 and 85 (other than Heading Nos. 84.65 and 85.28) 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 falling within the same heading (including a machine falling within Heading No. 84.59 or electrical goods and apparatus falling within Heading No. 85.18/27) are to be classified with the machines of that kind. However, goods which are equally suitable for use principally with the goods of Heading Nos. 85.13 and 85.15 are to be classified in Heading No. 85.13);

c) all other parts are to be classified in Heading No. 84.65 or 85.28".

The reading makes it clear that parts of machines are to be classified in the manner laid down by rules (a) and (b) of note 2 of Section XVI.

Chapter 84 comes within Section XVI. The reading of the Chapter note clarifies that the parts of machines have to be classified in heading in which the kind of machine falls into. Therefore, we have to see into which heading the machinery “Cooling towers” falls into.

14. Shri Narasimhan, learned advocate for the appellants, submitted that the ‘cooling towers’ are classifiable under Heading 84.17. He based his reliance on the Calcutta Central Excise Trade Notice No. 48/GL-19/1988 dated 23-3-1988 wherein, it has been held that cooling towers will fall under Heading 84.19 of the HSN based Central Excise Tariff which is verbatim to Heading 84.17 of the Schedule to the Customs Tariff Act, 1975 based on HSN. Therefore, he submitted that imported item - fill packs being parts of ‘cooling towers’ would also go under the same Heading 84.17 which is more specific and it should prevail over the residuary heading 84.59. The heading 84.12, 84.17 and 84.59 are reproduced below -

15. The “cooling towers” are not air-conditioning machines and hence they do not fall under Heading 84.12. The Heading 84.17 covers machines which are for the treatment of materials by a process involving a change of temperature such as cooling, heating etc. The purpose of “cooling towers” is to achieve evaporative cooling of water by rejection of the process heat into the environment. The extract of Mc-Graw Bills Encyclopadia of Science and Technology, page 619 on “cooling towers” confirms this function. The function of “cooling towers” has also been discussed in Calcutta Central Excise Collectorate’s Trade Notice No. 48/Gr-19/1988 dated 23-3-88 wherein it has been stated that “cooling towers” will fall under Heading 84.19 of the HSN-based Central Excise Tariff which is in verbatim to Heading 84.17 of the Schedule to the Customs Tariff Act, 1975 based on HSN. At page 1173 of the Explanatory Notes to Harmonised Commodity Description and Coding System (in short HSN), it is stated that Heading 84.19 “includes a very wide range of machinery and plant of the types described below”. The said sentence is followed by various groups of plants and machinery. Group (I) describes “(I) Heating or Cooling Plant and Machinery”. It is stated that “this group covers plant of general use in many industries for the simple treatment of materials by heating, boiling, cooking, concentration, evaporation, vaporation, cooling, etc.” Page 1174 of the Explanatory Notes to HSN gives examples of machinery and plant which are covered by the heading. Serial (7) of the examples mentions “(7). Cooling columns (e.g., for the bread grain milling industry)”. Although bread grain milling industry has been mentioned as an example within this serial, but the cooling towers will fall within the broad description of “cooling columns”. “Cooling tower” also clearly falls within the purview of machinery and plant designed to submit materials (solid, liquid or gaseous) to a cooling process in order to cause a simple change of temperature. Therefore, “cooling towers” will fall under Heading 84.17. Parts of a machine is classifiable under the heading in which the main machine is classified. The imported fill packs are parts of cooling towers. Hence, the imported goods are classifiable under Heading 84.17. Since the goods are classifiable under this specific heading, the residuary Heading 84.59 is ruled out.

16. The appeal is allowed in the above terms.

Equivalent 1990 (50) ELT 621 (Tribunal)