Metal Impacts Pvt. Ltd. vs Collector of Customs>1992(11)LCX0022

1992(11)LCX0022

BEFORE THE CEGAT, SPECIAL BENCH ‘B2’, NEW DELHI

S/Shri P.C. Jain, Member (T) and S.L. Peeran, Member (J)

METAL IMPACTS PVT. LTD.

Versus

COLLECTOR OF CUS.

Order No. C/167/92-B2, dated 9-11-1992 in C/Appeal No. 455/91-B2

CASE CITED

Vaz Forwarding (P) Ltd. v. Collector - 1987(06)LCX0066 Eq 1989 (043) ELT 0358 (Tribunal) [Paras 5, 11, 12, 12.1 ]

Advocated By : Shri N.C. Sogani, Consultant, for the Appellants.

Shri M.S. Arora, DR, for the Respondents,

[Order per : S.L. Peeran, Member (J)]. - The appellants are aggrieved with the order dated 23-11-1990 passed by the Collector of Customs (Appeals), Madras. The appellants imported ‘Clutch and Brake assembly’. They filed the bill of entry describing the goods as ”Single Clutch and Brake assembly" Part No. 84836009, Clutch disk giving Part No. 84836009 and ‘Brake Disk’ also carrying the same part number. They claimed classification under Chapter Heading 8466.94 of Customs Tariff Act with benefit of Notification No. 156/86 dated 1-3-1986 claiming the goods as spare for ‘Herlan Impact Extrusion Press Model P-8’. The goods had been separately valued in the invoice. The lower authorities classified the goods as ‘Transmission Parts’ under Chapter Heading 8483.60 CTA 1985. Before the lower authorities, the appellants contended that the imported items are not merely clutches but are clutch and brake assembly. Such an assembly cannot be classified under Heading 8483.60 which is confined to those articles which are specified in that heading only. They further contended that in general principle of classification, a part of a machine should be classified under the heading which covers the main machine excepting for exclusions contained in the notes to Chapter 84 of the Customs Tariff. They further pointed out that clutch and brake assembly does not figure in the said exclusion.

2. The learned Asstt. Collector rejected their contention and held that as per Section Note 2(a) of Section XVI, parts which are goods included in any of the headings of Chapter 84 or 85 in all cases, are to be classified in their respective headings. He has held that clutch and transmission parts being specifically mentioned in Heading 8483.60 and, therefore, the assessment made by them is in order. He has also held that only other parts that are not specifically mentioned elsewhere in Chapter 84 or 85 should be assessed as components for machineries and goods are also classifiable under Heading 8483.60 is as also interpretative Rule 3(a). The benefit of Notification No. 156/86 was also rejected on the ground that the notification mentions only component parts and not spare parts of a machinery falling under Chapter 84.86 and as the goods are classified under Chapter Heading 84.66, the benefit of the notification has also been held to be not available.

3. The Collector (Appeals) has rejected the appeal and has held that the goods are having specific heading in Chapter 84 of Customs Tariff and fall under Heading 8483.60 and are not classifiable under Heading 84.66 as component parts of machine tools for working metals. He has also observed that for all practical purposes these items may form the part(s) of the machine tools but because of separate specific heading, the goods have to be classified separately and hence the benefit of the notification in question was also denied.

4. The appellants are contending in this appeal that the Heading 84.83 or its sub-headings are specifically not covering the impugned goods. They contend that the items in question are different items technically and functionally. It is stated by them that Notification No. 156/86 as amended, inter alia covers “Component parts of machine tools for working metals” and the goods in question are nothing but “component parts of machine tools for working metals” and they are also so used and therefore, the benefit of the notification is available to them. They contend that there is a separate identity for ‘clutches and shaft couplings’ on the one hand and those of ‘clutches’, ‘brakes’ (and consequently clutch discs and Brake discs) and single clutch and brake assembly, on the other hand the imported item ‘clutch discs’ and ‘brake discs’ are nothing but component parts of ‘Clutch and Brake assembly’ as a single unit in its working and are totally different from what could be covered by the term ‘clutches’ separately and ‘brakes’ separately or even ‘Clutch and Shaft Couplings’. They submit that the Collector (Appeals) has already stated that the imported item is a ‘machine tool for working metals’ and are ‘component parts thereof, and in that view of the matter their claim has to be upheld. They further contend that once the clutch and break assembly is imported in one single unit, they cease to be ‘clutches and shaft couplings’ alone, which figures specifically in the tariff and that it does not constitute a set of article. The item is a complete unit which has also been used for fitment in the machine tool and are only parts thereof and hence they claim it to be classified accordingly.

5. We have heard Shri Sogani, learned Consultant for the appellants and Shri Arora, learned DR for the Revenue reiterating the grounds of appeal, Shri Sogani argued that the item ‘clutch and break assembly’ being in a single unit, it could not be classified under Heading 8483.60 which refers to clutches and shaft couplings (including universal joints). Likewise the other items are ‘clutch disc’ which is not a clutch but a part of clutch and it would be classifiable under Heading 8483.90 as parts and as a consequence would ......... be benefit for the Notification No. 156/86 dated 1-3-1986. The item clutch and break assembly had been imported as a replacement for the machine tool falling under Heading 84.62. The Heading 84.66 refers to ‘parts and accessories suitable for use solely or principally with the machines of heading 84.56 to 84.65 including work or tool holders, self opening die heads, dividing heads and other special attachments for machine tools, tool holders for any type of tool for working in the hand’. The item being a part of machines falling under Heading 84.62, its classification under Heading 8466.94 which refers “...For machines of Heading 84.62 or 84.63 under heading ‘other’ or Heading 84.66 cannot be denied. He also placed reliance on the HSN of 84.83 appearing at page 1328. He also placed before us the product literature of the item and the machine in which it is used. He referred to the decision of the Tribunal rendered in the case of Vaz Forwarding (P) Ltd. v. Collector of Customs [1989 (043) ELT 358] wherein it has been held that components are different from spares.

6. Shri Sogani, learned Consultant contended that this citation is distinguishable inasmuch as that spares when fitted in the machines become component parts. He also referred to Import Policy 1993 Para 7(15) which gave the definition of component as the Customs Tariff Act did not give any definition of component parts and stressed his point that when spares are used as component parts, it should be considered so and hence the items are parts of machinery. Shri Arora reiterated the findings of the lower authorities and placed reliance on Note 3 of Section XVI.

7. We have carefully considered the submissions made by both the sides and perused the records. The lower authorities have rejected the classification of the items under Heading 8466.94 as parts suitable for use with the machine falling under Item 84.62 which refers to “machine tools (including presses) for working metal by forging, hammering or die-stamping, machine tools (including presses) for working metal by bending, folding, stearing, flattening, punching or notching, presses for working metal or metal carbides, not specified above” on the ground that there is specific Heading 8483.60 for clutches and shaft couplings (including universal joints) and the same is required to be classified as per Note 2(a) of the Section XVI. Although it is not in dispute that the items may form part(s) of the machine tools.

8. Now we have to see as to the fact whether Note 2(a) of Section XVI applies to the facts of this case and if not, can the items be classified as parts suitable for use with the machine falling under Item 8462, on which there does not seem to be any dispute, that is the items may form the part(s) of machine tools, but for the specific entry in Heading 8483.60. The appellants contentions are two fold. Firstly, they state that Note 2(a) of Section XVI is wrongly applied and even if that be so, the item is not a mere clutch but the item is a ‘clutch and brake assembly’ and the other items clutch disc and brake disc are also not a ‘clutch and shaft couplings’ but are parts and hence would fall under Heading 8483.90 under sub-heading ‘parts’. Note 2(a), (b) and (c) of the Section XVI reads as follows -

“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 85.47) are to be classified according to the following rules -

(a) Parts which are goods included in any of the headings of Chapters 84 or 85 (other than Headings 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 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 Headings Nos. 85.17 and 85.25 to 85.28 are to be classified in Heading No. 85.17.

As can be seen from Note 2(a), it states that parts which are goods included in any of the headings of Chapter 84 are required to be so classified. Note 2(b) as noted above, stated that all other parts if suitable for use solely or principally with a particular kind of machine are to be classified with the machines of that kind. Therefore, it is first to be seen as to whether the item falls as a part included in the Heading 8483.60 as ‘clutches and shaft couplings (including universal joints)". If it does not fall in this, as the importer are contending then it requires to be classified as per Note 2(b) as a part suitable for use solely with a particular kind of a machine.

9. The items in question are ‘clutch and-brake assembly’ ‘clutch disc’ and ‘Brake disc’. Does this fall in the description of ‘clutches and shaft coupling’. The answer is a single no. The reason is that although the first item also performs the function of clutch but it cannot be so called as it is a composite item of clutch and brake assembly. The diagram of the item and that of the machinery used, placed before us clearly supports this view. A composite item cannot be separate to say that it is only a clutch, when it is not so designed to solely function that way. The description in the heading does not give scope to include a part of diverse and multiple use in the specific description unless the heading had so specified. Therefore, the Note 2(a) Section XVI is not applicable to this item. Note 2(b) of Section XVI is quite clear that parts suitable for use solely with a particular kind of machine are to be classified with the machines of that kind. There is no dispute that this item is a part used solely for the machine falling under Heading 84.62 and it is to be classified under Heading 8466.94 as claimed by the appellants.

10. As regards clutch disc and brake disc, it is very clear that they are parts of clutch and not the entire clutch assembly itself to fall under Heading 8483.60 as clutches and shaft couplings (including universal joints). They are required to be classified under Heading 8483.90 as parts.

11. Shri Arora placed reliance on Note 3 of Section XVI. This note applies to composite machines and not to parts imported for use solely for a particular kind of machine. He also relied on the ruling of Vaz Forwarding (P) Ltd. In this ruling, the term ‘component part’ had been used in the Notification No. 284/1976 and the Tribunal was interpreting the term of the notification. We are not on that point and the ruling cannot be applied for classification purpose.

12. As regards the claim of the Notification No. 156/86 dated 1-3-1986 the lower authorities have denied the benefit on the ground that component parts are different from spare parts. What have been imported by the appellants are spare parts whereas the notification gives benefit of concessional duty to the component parts. For this distinction the learned JDR relies on Tribunal’s decision in the case of Vaz Forwarding (P) Ltd. v. C.C. [1987(06)LCX0066 Eq 1989 (043) ELT 0358 (Tribunal)]. Learned Consultant, Shri N.C. Sogani, however, submits that no distinction can be made between component parts and spare parts. When a component part in a machine or apparatus wears out, it is replaced by a spare part and the latter performs the same function as that of the component part. After the fitmet of the spare part in the machine or apparatus, distinction between the spare part and component part is lost. He, therefore, submits that the decision of the Tribunal relied upon by the learned JDR should be strictly confined to the Notification 284/76-Cus. under consideration in Vaz Forwarding, supra. He has taken us, in support of his plea, through the definition of the expression ‘spare part’ given in the ITC Policy AM 1990-93. He submits that there is no definition of spare part and component in a Customs Tariff as such. It would, therefore, be appropriate for the Tribunal to rely upon the definition of such expressions in allied enactments such as ITC Policy.

12.1 We have carefully considered the pleas advanced by both sides on this issue. We have also gone through the judgment of the Tribunal in the case of Vaz Forwarding, (supra). The Tribunal was considering the Notification 284/76 which gave exemption to an apparatus for wireless reception of two different types mentioned in S. No. 1 and 2 of the Table to the said notification and component parts thereof. It is to be observed that the notification giving concessional rates to component parts was not in isolation by itself but was in conjunction with apparatus for wireless reception. It is a peculiar form of this notification that the Tribunal construed the words ‘component parts’ as parts which went into the initial assembly or manufacture of the machine or the apparatus. It is in this context that the words ‘component parts’ were given the aforesaid narrow meaning. This is clear from the following sentence in para 5 of the said Report :-

“If it was the intention of the notification to exempt parts used for initial assembly as well as parts imported later for replacement, the notification should not have used the word ‘component’ and should have really mentioned ‘parts’.”

The position, however, is different in the present Notification 156/86. The exemption has been extended to ‘component parts of machine tools for working metals’ falling under Tariff Heading 84.66, as mentioned at S. No. 4 of the Table to the said notification. Component parts are, therefore, mentioned in isolation and not in conjunction with the machine tools. In the scheme of notification, therefore, we are of the view that there is no difference between component parts and spare parts. It is admitted by the lower authorities that these are parts of machine tools. Therefore, the benefit of Notification 156/86 should be extended to those parts which we have held above as falling under Tariff Heading 84.66. Those parts of machine tools which, however, do not fall under Tariff Heading 84.66 would not be entitled to the benefit of this notification.

13. Appeal is disposed of in the above terms.

Equivalent 1993 (64) ELT 286 (Tribunal)