1994(03)LCX0032

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

S/Shri S.L. Peeran, Member (J), G.A. Brahma Deva, Member (J) and Lajja Ram, Member (T)

MILK FOOD LTD.

Versus

COLLECTOR OF CUSTOMS, NEW DELHI

Final Order No. C/19/94-B2 and Misc. Order No. C/38/94-B2, dated 2-3-1994 in C/Misc./581/90-B in C/A. No. 2748/89-B2

Cases Quoted

Dunlop India Ltd. v. UOI — 1975(10)LCX0016 Eq 1983 (013) ELT 1566 (SC)..................................................... [Para 6]

Plasmac Machine Mfg. Co. Pvt. Ltd. v. Collector — 1990(11)LCX0033 Eq 1991 (051) ELT 0161 (SC)................... [Para 6]

Collector v. Gakso Refrigeration Engineers — 1993 (063) ELT 568...................................... [Para 7]

Modern Food Industries (India) Ltd v. Collector — 1991 (053) ELT 107.................... [Paras 7, 16]

Collector v. Mazda Packaging Ltd. — 1993 (069) ELT 283......................................... [Paras 7, 16]

Collector v. Purety Flex Pack Ltd. — 1993 (069) ELT 293........................................... [Paras 7, 16]

Advocated By : Shri L.A. Asthana, Advocate with Shri N.C. Sogani, Consultant, for the Appellant.

 Shri B.K. Singh, SDR, for the Respondent.

[Order per : S.L. Peeran, Member (J)]. - This appeal is directed against the order-in-appeal passed by Collector of Customs (Appeals), Bombay who has rejected the claim of the classification in respect of two consignments covered by two separate Bills of Entry dt. 22-11-1988. By these two consignments under the same IGM No., the goods have been described as, in so far as Bill of Entry No. 7518 dt. 22-11-1988 is concerned as “product forming, conveyor system and freezing tunnel”. The importer has claimed assessment of product forming under Heading 8438.80 of the Customs Tariff, conveyor system under Heading 8428.39 (read with Notification No. 59/87-Cus.) and freezing tunnel under Heading 8418.69 (read with Notification No. 59/87-Cus.). The goods covered under the Bill of Entry No. 7516 have been described as “enrober machine, conveyor system and coating & hardening tunnel”; claiming assessment of enrober machine under Heading 8438.80 (read with Notification No. 59/87-Cus.) and coating hardening tunnel under Heading 8418.69 (read with Notification No. 59/87-Cus.). The Department has not accepted the importer’s claim for classification under these headings but has assessed both the consignments under sub-heading 8438.80, as the complete system on the grounds that in the first consignment “product forming system” itself consists of conveyor and freezing tunnel without which it cannot work and in the other consignment, enrobing system also cannot work without the conveyor and coating hardening tunnel. The importer’s contention before the lower authorities is that forming and enrobing system in both the consignments are assessable under sub-heading 8438.80, while conveyor system and freezing system being two different systems, which have been priced separately and also have arrived in the unassembled form from the main systems, should have been assessed on merits i.e. under Heading 8428 and 8418 respectively.

2. The ld. Collector has gone through the manual in respect of the impugned goods which is titled “The Glacier 600 Operations/Maintenance Manual”, in order to understand the system properly. The ld. Collector has quoted from the Manual which is reproduced herein below :

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3. After quoting the details from the manual, the ld. Collector has held as follows :

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4. In the appeal, the appellants have submitted that they are engaged in the manufacture and/or selling and distribution of milk powder “such as skimmed baby food, pure ghee, desserts such as yogurt other frozen/non-frozen desserts” and Ice Creams. With a view to enlarge their activity for manufacture of desserts, the appellants imported from APV Glacier Industries and its associate company the following items :

4. (i) The appellants refer to the technical bulletin supplied by the said company which gives the working principle of system and also it indicates the various processes carried out with different equipments in the four sections and the same is noted herein below :

“Semi-solid mixture is extracted through stainless steel nozzles and slice on to the stainless steel conveyor blades or . . . into cuttings or boads. Chain driving conveyors carry the products into an extremely cold tunnel for repid freezing. Upon emerging from the freezing tunnel the products may be enrobed in chocolate or some other coating. They are then transferred in an in-line or other style wrapper”.

4. (ii) It is their contention that the catalogue clearly shows that the Glacier 600-E is a system comprising of several equipments arranged in sections, each section functions individually. They state that the product former is in fact a complete equipment which accepts ice cream from ice cream freezers to shape and cut into predetermined shapes. The ice cream is in commercially marketable form and can either be eaten immediately like a softy ice cream or further hardened for transportation and marketing/consumption. The further freezing for mere transportation or later marketing of the product as it emerges out of the product former in the same form could be done in separate cold storage, facilities for which already exist in the plant. They submit that this would take about 6 to 8 hours for proper freezing of the product. If, however, the product is to be subjected to further embellishments, say, chocolate coating, it would be necessary to have a system of not only rapid freezing but also a tunnel system wherein freezing could take place even as the product moves on to the next stage of chocolate coating. The rapid freezing is facilitated by the freezing tunnel where the dwelling time is about 9 minutes. The main conveyor being carriage system for conveying the products from former to the tunnel. Therefore, they submit that the parts which follow the product former are optional and are for large continuous production. They submit that the freezing section of the Glacier 600-E system is only a rapid freezing system. The desserts from product former can be taken to conventional hardening/freezing rooms and therefore, the freezing tunnel of the Section-I is independent separate equipment having different function than product former. They submit that the freezing tunnel has no common foundation or attachment to the product former. The conveyor system is independent equipment and that it is not a part of work-table or the freezing tunnel. Therefore, even without both the equipments, the imported equipments can function independently and that they are not components of the said two equipments. It is merely a conveyor to convey the product from the work-table to the freezing tunnel and then on to the other equipments. Therefore, they submit that the classification has to be done of each machine on merits in the following manner :

4. (iii) The appellants have challenged the order of the Collector (Appeals) on the ground that the lower system could be modified to suit the need for production of end-product other than ice-cream. The system comprises of four sections and in section-I the product is formed, cut and frozen. In other words, in this section an ordinary ice cream is formed in a particular form. The ice cream could be sliced in the form as it comes out of Section I and is sold in that form also. It does not go into section III. Enrobing with chocolate is an optional choice with regard to ice cream. Therefore, they state that the ld. Collector has erred in holding that enrobing is a complementary function. They state that it is purely an optional addition as the freezing could be done by means of storage in a chilled room, it takes several hours.

4. (iv) They submit that even the ancillary apparatus essential to the application of low temperature produced in such installation are classified under Heading 84.18 provided they are presented together with other components of these installations. Such apparatus include, example, sectional tunnel type quick freezers for confectionery or chocolate etc. They state that they have imported two tunnel type quick freezers, one for use for freezing the product during its freezing between product forming and the enrober and the other after chocolate enrobing for the purpose of further freezing the chocolate enrobed product, called the hardening tunnel. Therefore, they state that the tunnel freezer and the hardening tunnel should be classified under heading 8418.69. They submit that the operation manual itself would show that the product forming machine, the freezing tunnel and the main conveyor system are 3 different machines which accomplish three different tasks and they are independent machines and not components of the same machine. Therefore, Rule 2(a) is not applicable at all in the present case. They refer to the Explanatory Notes on page 1171 of the Harmonized System of Nomenclature, Volume 3 under Heading 84.18 which includes under this heading certain refrigerating installations of larger type. Referring to this note, they submit that ancillary apparatus essential to the application of the low temperature produced in such installations are classified in this heading provided they are presented together with the other components of these installations. Therefore, they state that the freezing tunnel is essential to the application of the low temperature product and has been presented together with other components of these installations and hence in terms of the aforesaid Explanatory Note, it would be classified under Heading 84.18 only and not under any other heading. They further submit that the main conveyor system can only be classified under Heading 84.28 and not under Heading 84.38 as part of the Product Forming Machinery. Therefore, they state that the main conveyor system has no connection with and is not connected to the Product Forming Machine, namely, the Work Table. They submit that if the product is passed through the freezing tunnel it has to be carried to the next equipment. Such a carriage is nothing but a mechanical handling of materials or goods. Conveyors and other handling equipments are treated as part of certain machines and machinery such as industrial furnace and ovens incorporating equipment for charging or discharging, for manipulating the doors, covers, hearths or moving parts, or for tilting the furnaces. It is their submission that such lifting or handling equipments are to be classified with the furnace, ovens or other equipments provided it forms an integral part thereof; otherwise it will be classified under Heading 84.28. They submit that the main conveyor system under Section I is not such a handling equipment which would be classified with the main machine. They submit that it is not an integral part of the machine and in fact is not connected to the Product Forming Machine at all. They submit that Rule 3(c) of interpretative rule is not applicable in their case. It is their submission that the freezing tunnel and conveyor system on the one end and the Product Forming Machine are not housed together or fitted together to form a whole. They do not even have a common base or frame. The Freezing Tunnel is mounted separately above the main conveyor system and they are not fitted together to form a whole or mounted on the other, or mounted on a common base or frame or in a housing. They state that both the equipments have separate housing. The system produced frozen food articles and it is necessary to protect them from contamination, particularly dust and atmosphere contamination. There is another cabinet provided for protecting the conveyor housing and the freezing tunnel housing. In any case, they submit that the conveyor system and similarly the handling system can only be treated as an integral part of a machine if they satisfy the conditions stipulated. However, they submit that main conveyor system is not an integral part of the Freezing Tunnel at all. Likewise, they also submit that Coating Hardening Tunnel is also not a part of freezing tunnel. It is further submitted by them that the main conveyor system is essential only when a further process of the product is required and it is to be carried to other stations. Otherwise, it could straightaway have been taken to the wrapping section from the main freezer for packing and hardening/storage. They state that the enrober is required only when the product has to be chocolate coated and not otherwise and that considerable part of the product is not so coated. The misc. application for additional document is also taken on record.

5. We have heard Shri L.P. Asthana, ld. Advocate for the assessee and Shri B.K. Singh, ld. SDR for the Revenue.

6. Arguing on these grounds of appeal, Shri L.P. Asthana, ld. Advocate submitted that goods were not in CKD condition and the imported goods are neither parts of the main ice cream forming machine nor are they composite machine and therefore, their assessment as a single machine is incorrect and as such rule 2(a) & Note 3 of Section XVI would have no applicability. The product forming machine does not manufacture or make the ice creams, but it only makes and gives shapes to the already prepared ice cream. Although, the licence granted was for the entire composite plant but the importer had not imported the same and therefore its classification is required to be done only on merits on the basis of its function. The manual referred to each section and not to machines. The machines under Section II had not been imported and the imported machines also do not fall under the Section II and thus the conclusion of the lower authorities that a complete machine had been imported is erroneous. The ld. Advocate pointed out that the ld. Asstt. Collector had rejected the claim for the assessment as a individual machine on the ground that they were in CKD condition, while the ld. Collector had proceeded on the basis of interpretative Rule 2(a) & Section Note 3 of Section XVI and hence there was obvious error in the findings of both the authorities. The enrober had its own control panel and it worked on its own and hence it could not be also taken as a part of a single unit. He submitted that unless there is a provision in law for a combined assessment of different machines, the assessment under a single heading is not permissible except those items specifically referred to in Note 3 of Section XVI. Elaborating his arguments, the ld. Counsel made the following other points :

i. If there is a specific heading, classification cannot be made under a general heading.

ii. Note 3 of Section XVI is not applicable in the present case.

iii. Product forming and freezing are different machines and not one machine.

iv. Enrobing, conveyor and hardening machines are three separate machines and not a single unit.

Ld. Advocate submitted that the `Freezing Tunnel’ is Refrigerating equipment and its classification has to be done only under heading 8418, as a Refrigerating equipment and in this context reliance on page 1171 of HSN Explanatory is also relied. The conveyor system is also required to be classified under heading 8428. The deptt. had also not made a case of the machines being multi-function and in the circumstance, the machines cannot be treated as a composite one. He pleaded that Heading 8438 is a residual heading and it cannot be preferred to a specific heading. In this context, the ld. Advocate has relied on the following rulings :

i. Dunlop India Ltd. & Others v. Union of India & Others - 1975(10)LCX0016 Eq 1983 (013) ELT 1566 (SC)

ii. Plasmac Machine Mfg. Co. Pvt. Ltd. v. Collector of Central Excise - 1990(11)LCX0033 Eq 1991 (051) ELT 0161 (SC)

7. Ld. SDR Shri B.K. Singh, arguing for the Revenue, submitted that on actual verification, the ld. Collector has come to the conclusion that machinery in Section II has been imported. Referring to the invoice and the catalogue, the ld. SDR pointed out that the invoice clearly indicated that Chocolate spray coating system and one wrapper infeed mechanism had also been imported. These machines fell in Section II of the catalogue. These machines as a whole produced the Chocolate Ice Cream. The ice cream mix supplied to these composite unit was in the nature of a semi-finished ice cream mix not a complete servable product. In the product forming machine, ingredients like chocolate, milk, crunch and other items were added and hence the complete chocolate ice cream emerged only in this unit. The huge quantity of ice cream formed was admittedly not in a marketable form, unless it gets enrobed in separate desired pieces and therefore, the enrober was a part of a single system. The conveyor was an essential part, as the sliced ice cream had to be conveyed to the enrober and for packing section, before the packed ones are sent to the cold storage. The freezer unit was not a mere refrigerating unit, in the conventional sense of a refrigerator, to be classified under Heading 8418. For such a product forming, the temperature has to be maintained at freezing point. Therefore, the freezing unit was an essential part of the product forming machine and all the machines had to function in a unison. Therefore, the ld. SDR argued that even in trade parlance, the description of the imported machine is `Glacier 600’ and as per the literature, Glacier 600 was for manufacture of ice creams. The invoice, letter of credit and licence clearly indicated that the goods imported were Glacier 600 and that the goods were not imported individually but as a composite and single machine. He pointed out that the appellants in their appeal memo had also admitted that the importer had sent his experts to install the unit. Thus, the machinery is a well defined machinery and in market, it was understood as a `Glacier 600 E’. The importer had themselves admitted at page 67 of paper book about these machines being “integral plant”. The ld. SDR also referred to page 571 Vol. I of Lexico Websters Dictionary and page 428 of `New Mechanical Dictionary for Technical Trades’ was also referred on the definition of the word `machine’ and `machinery’ and argued that a machine may also mean a set of machineries.

Ld. SDR submitted that `Ice Cream’ is an article of food and being manufactured as an industrial item and not a domestic one. The heading 8438 referred to all those machines which dealt with manufacture of food or drink. Thus, the description of these items shown in heading 8438 being that of food, pastry, cocoa, chocolate and ice cream being a similar item, therefore, it is but proper, that the items keeping the same company, should be placed in the same tariff entry. He also pointed out from page 1223 of HSN Explanatory Note pertaining to “(iv) Machinery for the manufacture of cocoa or chocolate”, the group included `Enrobing Machine’ also as per S. No. (10), which read

“(10) Enrobing Machines consists essentially of a conveyor belt on which biscuits, sweets or other centres are coated by passing them through sprays or molten baths of chocolate or confectionery. These machines always incorporated heating elements”.

Pointing out to this S. No. (010) under the above-noted description, ld. SDR argued that `enrober machine’ consists essentially of a conveyor belt and hence they are to be classified under Heading 8438. He pointed out that `heating elements’ were classified in respect of cocoa or chocolate, in this heading, although there is a specific heading for it. Likewise, in respect of ice-cream manufacture, the freezing equipment, should go with the main equipment for the manufacture of ice cream.

Ld. SDR pointed out that the Tribunal has already held in the case of Collector of Central Excise v. Gakso Refrigeration Engineers as reported in 1993 (063) ELT 568, that ice cream making machine would not fall under Heading 8418 and therefore, the claim of the appellants for classifying these machines under this heading cannot be accepted. He also submitted that Heading 84.19 would also get eliminated as only those machines would fall therein, which are for treatment of materials. He submitted that `lift’ and `handling machines’ had separate Heading 84.17 or 84.14, yet when they were part of these machineries, they were classified under Heading 84.38 as per Explanatory Note at pages 1130 & 1133. Ld. SDR referred to the following citations, wherein classification of individual machines was done alongwith main machine and submitted that the ratio of the citations would squarely apply to the facts and circumstances of this case :

i. Modern Food Industries (India) Ltd. v. Collector of Customs - 1991 (053) ELT 107

ii. Collector of Customs, Bombay v. Mazda Packaging Ltd. - 1993 (069) ELT 283

iii. Collector of Customs, Kandla v. Purety Flex Pack Ltd. - 1993 (069) ELT 293

8. Shri Asthana replying to the arguments submitted that the ratio of the ruling rendered in the case of Gakso Refrigration’s case is not applicable to the present case, as the issue pertained only to the grant of exemption of notification and per se classification of `ice cream machine’ was not considered. He further pointed out that each machine had a separate function and they were functional units by themselves and hence it required a separate classification. He also pointed out that Note 4 of Section XVI is also inapplicable, as the said note would be applied only if the machinery had a `clearly defined function covered by one of the headings in Chapter 84 or Chapter 85’ and such a situation did not arise here. He also argued that there was no evidence of trade parlance and such an inference from catalogue and invoice cannot be drawn.

9. We have carefully considered the submissions made by both the sides and have perused the entire records. The dispute before us is only in respect of the three items which are noted below :

10. The appellants along with these three machineries had also imported Product Forming Machinery and Enrober Machinery. They have not disputed their classification but they themselves have claimed the classification under sub-heading 8438.80 of the Customs Tariff Act, 1975. The department’s case is that the disputed three machineries have to be classified alongwith the other two machineries under 8438.80, as all the machines are one system working in synchronisation with each other and operated through one panel, for the manufacture of final product and therefore, they cannot be bifurcated for assessment purpose. In order to come to this conclusion, the lower authorities have relied on interpretative Rule 2(a) and Section Note 3 of Section XVI of CTA, 75. In order to come to this conclusion, the lower authorities have also referred extensively to the manual supplied alongwith the impugned goods. The invoice and other related documents are referred to by the lower authorities. The appellants’ case which can be summarised is that the three disputed machineries are not part and parcel of the main machinery and that they are only acting independently and they have, therefore, pleaded that Section Note 3 and Rule 2(a) cannot be invoked in the present case. They have also pleaded that main conveyor system under Section I is not an integral part or connected with Product Forming Machine at all. Likewise, they state that there is no tunnel and conveyor system and are not housed alongwith the Product Forming Machine and they are also not fitted together to form a whole. They do not have a common base or frame. In that view of the matter, they have pleaded that these three disputed machineries have to be assessed independently on their own merits. We have noted in great length the order of the ld. Collector, the grounds of appeal, as well as the submissions made by both the sides.

11. On a careful consideration of the pleadings and the submissions of the appellants, we are of the considered view that the appellants do not have a case on merits. The appellants had taken out a licence for importing “Integrated Plant/Machinery under para 179 of Import Policy 1988-91. They had described the machinery as ”Glacier 600-E" and they had given the details of the machinery under various headings like Product Forming, Freezing, main conveyor system, freezing tunnel, frozen product processing and handling system etc. The invoice which has been produced before us also gives a detailed description of the four sections which perform the various functions and ultimately the final product is manufactured. The question is as to whether these three set of machineries can be considered as part and parcel of the main product forming machinery, on which there is no dispute that it has to be classified under sub-heading 8438.80. As can be seen from the operational manual produced before us the final product, ice cream has not come in a fully manufactured state to the product forming and enrober machine. The main function of the product forming and enrober is to mix the chocolate and other ingredients with the ice cream mix, which has been brought to this machine through the conveyor. The final product gets manufactured in the various processes which is undertaken simultaneously in a continuous process. The entire product is manufactured through an automatic process by a `joint operation hold’ through a common panel and synchronisation system. The Collector has referred to the four sections and has also referred in detail to the manner in which the goods are manufactured in these four sections. We have also carefully gone through the manual. The general description of Glacier-600 has already been extracted from the Collector’s order. The Glacier 600 is said to be highly versatile and efficient machine that can produce exotic or ordinary ice cream slices, sticked slices, cones and sandwiches at speed upto 150 pcs. per minute. In order to produce this, the manual states that it has four major components, which are described in four sections which are already extracted above from the Collector’s order. Para 3 of the General Description in the manual states

“All four sections are perfectly synchronised in speed by use of a Varidyne system of synchronous motors throughout. Thus the main operator from a single control point in Section I can change speeds of the entire system as desired”.

This extract from the General Description of the manual clearly shows that the entire machinery imported by the appellant is as per the supplier’s manual and it is utilised as a single unit and that they are perfectly synchronised in speed “by use of Varidyne system of synchronous motors throughout”.

12. The ld. Counsel had argued that it is not so, but his argument is totally belied by the details given in the manual itself. Ld. Counsel had argued that Section II machineries had not been imported, but it is seen that the freezing tunnel as well as the conveyor clearly comes within Section II. This is also seen from page 3 of the Manual which deals with “Frozen product processing and handling” (Section II) it states as follows :

“Components : The basic Section II consists of the secondary conveyor, slice and sticked slice holding devices, stick enrobing and the wrapper infeed assembly. Options include a cone handling and enrobing system, slice enrobing and a drycoater.

2. Processing and handling of Frozen Products :

(a) The Section II frozen product processing system permits lifting of individual products from the main conveyor product plate for further processing as desired and then depositing the product into the infeed of an in-line wrapper. The wrapper is speed-integrated with the main drive of the Glacier 600 by means of synchronous motors and a common frequency power supply (U.S. Motors Varidyne system).

Therefore, the plea of the Counsel that Section II Machinery had not been imported is not correct. The manual at page 38 deals with Freezing Assembly. The general information about the same is extracted herein below :

“GENERAL INFORMATION : Prior to July ‘73, the Glacier 600 freezing tunnel was produced by Moore-Hanks Co., South EI Monte, California. Since then, the tunnel (as described in the following paragraphs) has been manufactured by Bally Case and Cooler, Inc., Bally, Pennsylvania. Figure 1 depicts the freezing tunnel (Item J) and the major refrigeration components, (coils - Item F: fans - Item H : and air vanes - Item I) which will be discussed in detail in Assembly 7. The tunnel provides virtually frost-free operation of the refrigeration system because of the patented design of a space of still, cold air in front of the tunnel. Special air turning vanes insure a uniform flow of air through the product freezing zone. These vanes are hinged so they may be swung toward the tunnel sides to form an access aisle all around the conveyor (Item E).”

The description of Main Conveyor as given in the manual is also extracted herein below :

“The main conveyor (Figure 1, Item E) is supported by four stainless steel shafts built into a hot dip galvanized frame which is located inside the freeze tunnel. The main conveyor sprockets are made of chrome plated steel and turn on self-aligning ball bearings in water resistant housings. An alarm-protected, spring tensioned, parallelogram linkage guided take-up mechanism prevents slack conveyor chain. Phenolic wear strips and guide rails have coefficient of thermal expansion similar to the attached metal. The conveyor follows a serpentine path (Figure 17) which permits the product to spend 9 to 14 minutes in the tunnel, depending upon production rate, where it is solidly frozen”.

From the reading of the description given in enrober from Vol. II of the manual, it is clear that the product chocolate ice cream is manufactured here with the “ice cream mix” being dipped in chocolate supply tank. The description of the enrober is also extracted herein below :

“The enrober (PM Figure 1, item 5) coats products in from bite size miniatures to large logs. The enrober covers the entire product or only the bottom and sides. A chocolate supply tank pump (Assembly 46) feeds the enrober and circulates the coating.

The product rides on two wire belt conveyors driven by a motor in synchronization with the varidyne. The product moves through two enrobing areas and may be air stripped after each enrobing, if desired. A bottoming tray coats bottom and sides, if you want to do only those parts of the product with a coating. The enrober settings range from covering either the entire product or using only the bottomer tray. Coating, pumped from chocolate supply tank (Assembly 46), moves through the two overhead enrobing assemblies (choose one PM 37-9, -10, 11) and the bottomer assemblies (choose one PM 37-6, 37-219). After passing over the product, excess coating flows into the hot water jacketed enrober tank (37-4, 37-230). The coating then flows back into the chocolate supply tank.

The enrober wire belt conveyors elevation, for most installations is approximately 16 m (52.5 in.). The enrober has four telescoping legs for moving up and down for adjustments. Level the enrober by loosening the set screws at the bottom of the large outer portion of each leg and turning the inner screw leg in or out. The machine bottom of the leg can be fitted and adjusted with a 19 mm (3/4 in.) wrench. You have available a total of 69.85 mm (2 3/4 in.) for adjustment".

The description of Coating Hardening Conveyor appearing in Vol. II in `Assembly 38 page 14’ is also extracted herein below :

“Description :

The coating hardening conveyor (Assembly 38) carries product from the enrober (Assembly 37) through a coating hardening freezing tunnel which will either attach to the main tunnel or freestanding coating hardening tunnel (Assembly 62). On emerging from the last freezing tunnel in the process, the product is packaged".

The description of Enrober Mounted Decorator appearing in `Assembly 51 page 46’ is also extracted herein below :

“The enrober mounted decorator (Assembly 51, PM Figure 51-1, 51-2 and 51-3) places designs on the top of product as it exits the enrober and before the product enters the coating hardening conveyor.

The decorator mounts to either enrober for miniatures (Assembly 37, PM Figure 51-51B) or the enrober for large products (Assembly 53, PM Figure 51-51A). The decorator makes slight changes to accommodate their frames".

From the study of the entire manual I to IV, the invoice and the licence, it is very clear that the whole set of machines are an integrated plant/machinery. For the purpose of manufacture of the final product, the entire machinery has to work, as a system, by a common operational panel and therefore, the finding of the lower authorities that the three disputed machineries are not acting independently and separately and it cannot be classified on merit requires to be accepted.

13. This is so because of the Note 3 & 4 of Section XVI which is noted herein below :

“3. Unless the context otherwise requires, composite machines consisting of two or more machines fitted together to form a whole and other machines adopted for the purpose of performing two or more complementary or alternative functions are to be classified as if consisting only of that component or as being that machine which performs the principal function.

4. Where a machine (including a combination of machines) consists of individual components (whether separate or interconnected by piping, by transmission devices, by electric cables or by other devices) intended to contribute together to a clearly defined function covered by one of the headings in Chapter 84 or Chapter 85, then the whole falls to be classified in the heading appropriate to that function".

As can be seen from the above Notes, a composite machine consisting of two or more machines fitted together to form a whole and other machines adopted for the purpose of performing two or more complementary or alternative functions are to be classified as if consisting only of that component or as being that machine which performs the principal function. The principal function of the main machines i.e. product forming and enrober machine is for manufacturing of the final product namely various types of ice-cream and desserts. These two machines are not alone sufficient for manufacturing the final product. The other three machines are not independent, in as much as they merely convey the product, or do the preservation function, but they have a specific function in the manufacture of final product which is simultaneously performed. The freezing tunnel is not a mere refrigerating system in the general sense commonly understood, in as much as certain food and other articles are kept for the purpose of preservation. Thus the freezing tunnel in this particular case is not just meant for preservation but it performs the main function of the manufacture of ice-cream in that it freezes the ice cream to a solid condition as per the requirement. This is very essential for marketing purposes. The function of the coating and hardening tunnel is likewise similar, in that the goods while being conveyed through this tunnel is retained for 9 to 10 minutes for the purpose of rapid freezing, which is essential to make the product marketable. The conveyor system is not a conveyor, in the general sense in which it is understood. It is designed in such a way as to assist and help in the various processes of the manufacture of the final product. As can be seen from HSN Explanatory Note appearing at page 1223 in respect of enrobing machine, in Section IV which reads “Machinery for manufacture of cocoa and chocolate”. This Explanatory Note states that the enrobing machine also consists of the conveyor belt and it also states that the machine incorporates heating elements. We have already extracted earlier in the submissions of the ld. SDR on this aspect. It follows from this reading under Heading 84.38 at page 1223 of HSN Explanatory Note, that enrobing machine comprises both of conveyor belt and heating elements. Heat elements are a requirement for the purpose of manufacture of cocoa or chocolate. Likewise for ice cream manufacture, a freezer is an essential component. Therefore, by applying the same logic as given in the HSN Explanatory Notes for enrobing machine for chocolates, the conveyor system and freezing tunnel are required to go alongwith the “product forming and enrobing machine” also.

14. The Explanatory Note at page 1132 in respect of “(0VI) multifunction machines and composite machines (Section Note 3)” reads as follows :

“Composite machines consisting of two or more machines are appliance of different kinds, fitted together to form a whole consequently or simultaneously separate functions which are generally complementary and are described in different headings of Section XVI or also classified according to the primary function of composite machine”.

The note further gives the examples of a composite machine like printing machine with a subsidiary machine for holding the paper (Heading 84.43), a card board box making machine combined with an auxiliary machine for printing a name or sample designed (Heading 84.41), Industrial furnaces combined with lifting or handling machinery (Heading 84.17 or 85.14), cigarette making machinery combined with subsidiary packing machinery (Heading 84.78). The note further states

“For the purpose of the above provisions, machines of different kinds are taken to be fitted together to form a whole when incorporated one in the other or mounted one on the other or mounted on a common base or frame or in a common housing”

and it further states

“Assemblies of machines should not be taken to be fitted together to form a whole unless the machines are designed to be permanently attached either to each other or to a common base, frame, housing etc. This excludes assemblies which are of a temporary nature or are not normally built as a composite machine”.

Referring to the above portion of the note, the ld. Advocate vehemently argued that the entire set of machines are not mounted one on the other or mounted on a common base and thus they are required to be assessed individually. This argument is also without force. The main idea which emerges from the reading of these Explanatory Notes is that the assemblies of machines if they are designed to be permanently attached to each other, then they are required to be considered as a composite machine. It only excludes those assemblies which are of a temporary nature or are not normally built as a composite machine. However, the position is different in this case. The reading of the Manual, invoice and the licence has made it very clear that these assemblies of machines are designed to be permanently attached to each other and that they are not of a temporary nature. Therefore, the argument of the ld. Advocate that they are not fitted together to form a whole set of machines is unacceptable and requires to be rejected.

15. The ld. Counsel has attempted to show that the lifting or handling machinery are alone to be taken together only in cases of industrial furnaces and not in other cases is also not a correct proposition. In respect of industrial furnace the lifting machinery becomes a part of industrial furnaces, as molten melt cannot be handled separately. Thus, they become part and parcel of the assemblies. Likewise in the present case, the freezing tunnel and conveyor system has to go alongwith the product forming and enrober machines. Therefore, the lower authorities have rightly invoked interpretative Rule 2(00a) and Section Note 3 of Section XVI for the purpose of classifying the three disputed items alongwith the main machine namely product forming and enrober machine.

16. Our finding is strengthened by the rulings rendered in the case of Mazda Packaging Ltd. (Supra), Purety Flex Ltd. (Supra) and that of Modern Food Industries’ case (Supra). The ld. Advocate has relied on the rulings which deal with the principle that the item is required to be classified in the specific entry and not in the general entry. These rulings are distinguishable as they are not rendered in the context of Section Notes and Chapter Notes and also in the light of the HSN Explanatory Notes, which have got a persuasive value.

17. In the result, there is no merit in this appeal and the same is dismissed.

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Equivalent 1994 (71) ELT 549 (Tribunal)