1994(04)LCX0065

IN THE CEGAT, SPECIAL BENCH `D’, NEW DELHI

S/Shri K.S. Venkataramani, Member (T) and G.A. Brahma Deva, Member (J)

SHREYANS PAPER MILLS LTD.

Versus

COLLECTOR OF CUSTOMS, NEW DELHI

Order No. C/258/94-D, dated 29-4-1994 in Appeal No. C/173/92-D

CASE CITED

Bombay Chemicals v. Collector — 1990 (043) ELT 431                                                                         [Para 3]

Advocated By : Shri K.L. Rekhi, Consultant, for the Appellant.

Smt. J.M.S. Sundaram, SDR, for the Respondents.

[Order per : K.S. Venkataramani, Member (T)]. - The origin of the appeal is an order-in-assessment dt. 19-8-1991 passed by the Assistant Collector of Customs, Air Cargo Unit, New Delhi, which came to be upheld by the Collector of Customs (Appeals), New Delhi by the impugned order dt. 17-12-1991. The relevant portion of the Assistant Collector’s order is as follows :

“The items have been classified under Chapter 8439.99 r/w Notification 156/86 and 180/90 (S. No. 179). At the time of examination it was revealed that the following items have been imported :

1. Aluminium Oxide Foil Blades 22 pcs.

2. Polythylene Deckle Seals 40 pcs.

A careful perusal of the item (sample was seen by AC) and of the catalogue reveals that fact that the functional part of the item under importation by the said B/E is made of ceramic.

It is observed that the articles of ceramic are excluded from the purview of Chapter 84. It is very clear from the catalogue that the item declared as Durafoil Outsert Blade is carrying the functional part of ceramic and hence it is excluded from the purview of Chapter 84 of the Customs Tariff.

In view of the above facts, the items imported vide Bill of Entry No. 211884 dt. 07-03-1991 be correctly classified under Chapter 6914.90 of the Customs Tariff Head and the duty be paid on merits against proper import licence."

2. The order, as above, was endorsed by the Collector (Appeals) leadinng to the present appeal before the Tribunal.

3. Arguing for the appellants, Id. Consultant, Sh. K.L. Rekhi submitted posittion that the goods are parts of paper making machinery. Ld. Consultant referred to the letter dt. 10-4-1991 from appellants to the Additional Collector in this regard bringing out clearly that the outsert blades are used in the DUOFLO Unit for extracting water from paper sheet during sheet forming stage. Even if the blade part of the component is ceramic material, the total unit comprises part of paper making machine which can only be classified under Chapter 84 CTA. Reference was also made to the Supplier’s Certificate saying that only about 40% of the goods imported is of ceramic material. Ld. Consultant, further, urged that the exclusion of ceramic articles from Chapter 84 contained in Chapter Note 1(b) thereof will not apply to combination of ceramic material with high proportion of other components. He relied in this regard on HSN Explanatory Notes under Chapter 84 at p. 1137. The ld. Consultant cited the decision in the case of Bombay Chemicals v. Collector of Customs - 1990 (043) ELT 431 holding that HSN Explanatory Notes reflect international expertise in Tariff matters which govern international trade and commerce. Ld. Consultant contended that sub-heading 8439.99 CTA specifically covers the goods imported and should, therefore, be preferred. This would also follow by applying Rule 3(a) of the Rules for the Interpretation of the Tariff and it was urged that resort to the other Rules, thereunder, should be only after exhausting Rule 3(a). It was also urged that the criteria laid down in Rule 2 of Section XVI of CTA for classification of parts has not been considered by the lower authorities. The goods imported are not parts of general use like washers and have no other use except as parts of paper making machinery.

4.Smt. Shanti Sundaram, ld. S.D.R. pointed out that the invoice and B/E description of the goods would show that these are imported in sets. Each set is an appliance and the question would be, ld. S.D.R. urged, whether these are appliances of ceramic material. The ld. S.D.R. contended that it has been found that the ceramic portion of the goods is the part which is of major importance, and, therefore, even by applying the criterion in HSN Explanatory Notes at p. 1137 cited by ld. Consultant, goods would be hit by exclusion in Chapter Note 1(b) to Chapter 84 CTA. As has been found by the Assistant Collector, the essential characters of the goods is imparted by the ceramic material, which is in accordance with Rule 3(b) of Interpretative Rules as here the goods are imported in sets. In reply, it was submitted by ld. Consultant that the goods are imported in sets only for protection in transit and convenience of transport and these are not sets of articles put up for retail sales which is referred to in Rule 3(b) and the importers here are actual users engaged in manufacture of paper and goods are not meant for retail sales.

5. The submissions made by both the parties have been carefully considered. The goods imported in this case are designed for use as component part of paper making machinery and have the function of extracting excess water from the paper sheet in the course of sheet formation. Supplier’s Catalogue for the item and the portion of the machinery where it fits in has been produced. The appellants claim its assessment under Heading 84.39 and sub-heading 8439.99 CTA, 1975 as follows :

However, the lower authorities have held that the functional portion of the goods consists of ceramic material and that as per Chapter Note 1(b) of Chapter 84 CTA “this chapter does not cover appliances or machinery (for example, pumps) or parts thereof, of ceramic material (Chapter 69)”. The Department has, therefore, classified the goods under sub-heading 6914.90 under Heading 69.14 CTA which is as follows :

In order, however, to understand the scope of the exclusion under Chapter Note 1(b) to Chapter 84 CTA, reference can usefully be made to the HSN Explanatory Notes under that Chapter as it is well settled that these do have a persuasive value though not legally binding and also having regard to the fact that CTA Chapter 84 is closely aligned to the HSN which admittedly represents expertise in classification of goods handled in international trade.

The HSN Explanatory Notes have this to say :

“Since ceramic articles and parts thereof (Chapter 69), laboratory glassware (Heading 70.17) and machinery and appliances and parts thereof, of glass (Heading 70.19 or 70.20) are excluded from this Chapter, it follows that even if a machine or mechanical appliance is covered, because of its description or nature, by a heading of this Chapter it is not to be classified therein if it has the character of an article of ceramic materials or of glass.

This applies, for example, to machines, mechanical appliances or apparatus of ceramic material or of glass, incorporating components of minor importance of other materials, such as stoppers, joints, taps, etc. clamping or tightening bands or collars or other fixing or supporting devices (stands, tripods, etc. ).

On the other hand, the following are, as a rule, to be taken to have lost the character of ceramic articles, laboratory glassware, or machinery or appliances and parts thereof, of ceramic material or of glass :

(i) Combinations of ceramic or glass components with a high proportion of components of other materials (e.g. of metal); also articles consisting of a high porportion of ceramic or glass components incorporated or permanently mounted in frames, cases or the like, of other materials.

(ii) Combinations of static components of ceramic material or glass with mechanical components such as motors, pumps, etc. of other materials (e.g. of metal).

6. So, the question to be answered here is whether the outsert blades imported in this case have lost their character of ceramic articles. The Supplier’s Certificate dated 8-4-1991 which is on record states that the goods are appropriately 40% ceramic by weight. Therefore, since the proportion of other materials in this case is of higher proportion, it will be reasonable to hold, following the criterion in HSN Explanatory Notes, that they have lost their character of an article of ceramic material, and hence fall outside the ambit of exclusion in Chapter Note 1(b) of Chapter 84 CTA, 1975. Further, since admittedly, the goods imported are to be used as parts of paper making machinery, their classification under Heading 84.39 CTA will also be in accordance with Section Note 2 of Section XVI CTA which is 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 Heading 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.

(c) All other parts are to be classified in Heading No. 84.85 or 85.48."

In the result, it is held that the outsert blades with the higher molecular weight polythelene deckle seals for the DUOFLO Unit imported by the appellants are correctly classifiable under sub-heading 8439.99 CTA. The appeal is, accordingly, allowed.

Equivalent 1994 (072) ELT 0381 (Tribunal)