1995(03)LCX0081

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

S/Shri Harish Chander, President and G.R. Sharma, Member (T)

ECOMAX AGRO SYSTEMS LTD.

Versus

COLLECTOR OF CUSTOMS, BOMBAY

Cases Quoted

Collector v. O.E.N. India Ltd. — 1987(10)LCX0061 Eq 1989 (042) ELT 0235 (Tribunal)                                                                     [Para 4]

Indian Airlines v. Collector — 1987(08)LCX0066 Eq 1988 (038) ELT 0679 (Tribunal)                                                                        [Para 4]

Hemraj Gordhandas v. H.H. Dave, Assistant Collector — 1978 (002) ELT (J 350) (S.C.)                             [Para 4]

J.K. Steel Ltd. v. UOI — 1978 (002) ELT (J 355) (S.C.)                                                                                       [Para 4]

Advocated By : Shri D.K. Subedar, Advocate with Group Captain H.V. Khatu, for the Appellants.

 Shri K.K. Jha, SDR, for the Respondent.

[Order per : G.R. Sharma, Member (T)]. - M/s. Ecomax Agro Systems Ltd. have filed this appeal bring aggrieved from the order passed by the Collector of Central Excise (Appeals). Collector Central Excise (Appeals) in his order had held :-

“In view of the foregoing, the denial of Exemption Notification No. 145/77-Cus. to the appellants appears to be correct in law. Accordingly, the view taken by the Asstt. Collector is upheld and the appeal is rejected.”

2. The Asstt. Collector in his order referred to by the Collector (Appeals) had held :-

“In view of the above facts, circumstances and analysis, I order that the para-wings and accessories covered by Bill of Entry No. 7563, dated 29-9-1993 shall be treated as parts of Powered Hang Gliders and not as parts of Aeroplanes. These para-wings and accessories should be classified and assessed accordingly without the benefit of Notification No. 145/77-Cus.”

3. Briefly stated the facts of the case are that the appellants are engaged in the business of manufacturing Powered Hang Gliders marketed as Ecomax `Kestrel Aeroplane’. The appellants got permission to manufacture powerchute in India stating “Though the word `Powerchute’ is a new terminology and has not been included in Civil Air Worthiness Requirements published by DGCA but it will be categorised with Powered Hang Gliders, as such the relevant CAR series `C’ Part VI will have to be followed.” They also referred to a certificate given by the Director of Airworthiness, Civil Aviation Deptt., Bombay certifying “this is to certify that Rotax-503 engines manufactured by M/s. Bombardier, Australia and imported by M/s. Ecomax Agro Systems Ltd. are on installation of Powerchute Kestrel. It is further certified that Powerchute is classified as aeroplane.” On the strength of this certificate and also that Kestrel Aeroplane is a new technology and has been certified in the United Kingdom by their Civil Aviation Authorities under the category of Microlith Aeroplane, the appellants pleaded that having regard to the fact that the products imported by the appellants were essential part of Kestrel Aeroplane, submitted Bill of Entry on 20-9-1993 describing the product as New Wave 350 Parawing Gliders and accessories and claimed the benefit of concessional rate of duty under Notification No. 145/77. However, the Deptt. was of the view that the benefit of exemption under Notification No. 145/77-Cus. is applicable only to aeroplane parts and not to the parts of other aircrafts such as Gliders/Hang-Gliders and as such the importers were not eligible for benefit under this Notn. In the Bill of Entry, the appellants had claimed classification of the products imported by them under Chapter Heading 8803.30. Accordingly, a show cause notice was issued to the appellants asking them to explain as to why the benefit of Notification No. 145/77 should not be denied to them.

4. Shri D.K. Subedar, Advocate alongwith Group Captain (Retd.) H.V. Khatu appeared for the appellants. The ld. Counsel submitted that the appellants had claimed classification for the said goods under Heading 8803.30 which is meant for parts of aeroplanes classifiable under Heading 88.02, and that the goods classifiable under Chapter Heading 8803.30 were eligible to the benefit of concessional rate of duty under Notification No. 145/77; that the ld. Collector did not deal with this issue of classification so also was the case with the order passed by the Asstt. Collector; that Kestrel Aeroplane in which the subject goods are to be fitted as an essential part is an aeroplane and therefore the subject goods are classifiable under Heading 8803.30 meant for parts of aeroplane; that the DGCA authorities classified the said Powerchute aeroplane under the category of Powered Hang Glider; that HSN Note at page 1443 clearly states : “Gliders are heavier than aircraft which stayed air-borne using atmospheric currents. However, gliders fitted with or designed to be fitted with an engine are classified in Heading 88.02.” On the same page of the HSN Explanatory notes it has further been stated : “Hang Gliders are usually delta wings which enable a person, suspended by a harness, to perform certain aerial manoeuvers. These wings generally consist of textile material stretched over a structure, usually of metal.” The ld. Counsel for the appellants, therefore, submitted that no plausible explanation is given in the Order-in-Appeal by the ld. Collector as to why he has not followed these HSN Explanatory notes when in cases where doubt arises HSN Explanotry notes are invariably referred to; that the Asstt. Collector admittedly classified the goods as parts of Powered Hang Gliders and once it has been admitted that the subject goods are parts of aeroplane nothing has been brought on record as to why such parts are not eligible for the benefit of Notification No. 145/77-Cus; that the definition of aeroplane and glider are given in the Aircraft Rules; that there is hardly any difference between the two definitions excepting the fact that the aircraft is power driven whereas a glider is non-power driven machine; that the ld. Collector has tried to distinguish between the working of an aeroplane and a Powered Hang Glider. However, a cursory glance at the definitions given in the Aircrafts’ Rules will show that both the aeroplane and the glider work on the same principle or Aerodynamic reactions on the surface; that the reliance on the decision of the Tribunal in the case of CC v. O.E.N. India Ltd. reported in 1989 (042) ELT 235 is totally irrelevant as the issues in the two cases are distinguishable; that the ld. Collector in his order has observed: “That parawings can, by no stretch of imagination, be considered as surfaces which remain fixed under given condition of flight.”; that this finding of the Collector is erroneous in as mcuh as the principle of working of any aeroplane and the glider is the same; that in the case of Indian Airlines v. CC, Calcutta reported in 1988 (038) ELT 679, the Hon’ble Tribunal had held : “Notification Nos. 145/77-Cus., dated 7-9-1977 and 99/81-Cus., dated 1-4-1981, neither of the two notifications place the goods covered by it under any specific head of the Customs Tariff and it appears that the law makers were conscious of the fact that the goods they are listing for exemption fell under different headings or chapters of the Customs Tariff. For example, while rubber tyres and tubes for aeroplanes must fall under Chapter 40, other parts like engines, engine parts and so on should appropriately fall in Chapter 88 or even in Chapter 84. Similarly Notification No. 99/81-Cus. lists only aeroplane spare parts and there are hundreds or thousands of different aeroplane parts, some made of rubber which would have to go under the rubber headings, electrical parts which would go under the electrical headings and others would go under the machinery heading and so on and so forth. By not writing the Chapter heading into the notifications, the exemption became possible for all kinds of aeroplane parts described under these notifications.” It was argued by the ld. Counsel for the appellants that the Hon’ble Supreme Court in the case of Hemraj Gordhandas reported in 1978 (002) ELT (J 350) had held that : “It is well established that in a taxing statute there is no room for any intendment but regard must be had to the clear meaning of the words. If the tax-payer is within the plain terms of the exemption he cannot be denied its benefit by calling in aid any supposed intention of the exempting authority. In a Court of law or Equity what the legislature intended to be done or not to be done can only be legitimately ascertained from that which it has chosen to enact either in express words or by reasonable or necessary implication”; that similarly the Apex Court in the case of J.K. Steel Ltd. reported in 1978 (002) ELT (J 355) held that “The court cannot proceed to make good deficiencies if there may be any; that Court must interpret the statute as it stands and in case of doubt in a manner favourable to the tax-payer. If there is any ambiguity of language in a fiscal statute, benefit of that ambiguity must be given to the assessee.” The ld. counsel submitted that in view of the ratio of the decisions of the Apex Court and the Tribunal, the lower authorities should have extended the benefit of Notification No. 145/77. Concluding the submissions, the ld. counsel prayed that the appeal may be allowed and the impugned order may be set aside.

5. Shri K.K. Jha, ld. SDR opposing the contentions, submitted that the product imported by the appellants was undoubtedly a part of a glider; that Hang gliders are classifiable under Chapter Heading 88.01 whereas aeroplanes are classifiable under Chapter Heading 88.02; that aeroplane is a common term and understood so easily; that the Director of Airworthiness, New Delhi in his letter dated 10-3-1993 categorised the product manufactured by the appellants as Powered Hang gliders and since this certificate has been given by the Delhi Office, it must have precedence over the certificate given by the Bombay office of the Civil Aviation Department. Reiterating the findings of the lower authorities, the ld. SDR submitted that in the instant case, we are dealing with availability of the benefit under exemption notification and not with the classification of the goods and therefore total reliance on HSN Explanatory notes is irrelevant. The ld. SDR therefore submitted that it is alright that the product manufactured by the appellants might be known as an aircraft in the USA and U.K. in view of the advanced technology but no authentic literature has been furnished by the appellants to support their contention that the product manufactured by them was an aeroplane. In view of this, the ld. SDR submitted that the appeal needs outright rejection.

6. Heard the submissions of both sides and considered them. We observe that in the Aircrafts Rules, the terms `Aeroplane’ and `Glider’, have been defined. Aeroplane has been defined as “Aeroplane means a power driven heavier than air aircraft, deriving its lift in flight chiefly from aerodynamic reactions on surface which remain fixed under given conditions of flight.” Glider has also been defined as “Glider means a non-power driven heavier-than-air aircraft deriving its lift in flight chiefly from aerodynamic reactions on the surfaces which remain fixed under given conditions of flight.”

7. From the above definitions, it is clear that the lift in flight is derived by the aeroplane as well as by glider on the same pattern, as such there is no difference between the two. The Collector went into detailed examination of the working of a Hang Glider and aeroplane and came to the conclusion that “These parawings can by no stretch of imagination be considered as surfaces which remain fixed under given conditions of flight. These parawings, a man-made fabric device, remains attached to the airframe by means of lines or chords. The very means of attachment in the form of rigging lines gives this entire device considerable flexibility in operation. These parawings can easily be differentiated from the wings of the conventional aeroplanes.” As against this finding of the ld. Collector (Appeals), we find that on page 1443 of the HSN Explanatory Notes, it has been stated “Hang Gliders are usually delta wings which enable a person, suspended by a harness, to perform certain aerial manoeuvers. These wings generally consist of textile material stretched over a structure, usually of metal.” We find from the above definitions of aeroplane and glider that the lift in flight is derived from aerodynamic reactions on the surfaces which remain fixed under given conditions of flight. The ld. Collector had held that the position however in regard to the Hang Glider is different in as much as the wings are of textile material and not fixed on the fusilage of the body of the Powered Hang Glider and therefore the definition in regard to deriving its lift in flight will differ, having regard to this fact, the ld. Collector (Appeals) appears to have observed as indicated in his order.

8. However examining this finding of the Collector vis-a-vis the working of a Hang Glider as given in the catalogue, we find that in the Hang Gliders also the textile material provides surface which remains fixed under the given conditions of flight. With the advancement in technology, it is possible today to provide surfaces which remain fixed under given conditions of flight even in the case of powered hang gliders having textile material for deriving a lift.

9. Now coming to the classification of the item, we find that there are two headings, one for Hang Gliders and the other for aircraft. Hang Gliders are classifiable under Chapter Heading 88.01 whereas aircraft and aeroplane are classifiable under Chapter Heading 88.02. We also observe that the Powered Hang Gliders are not ordinary Gliders. There is no term as `Powered Hang Gliders’ in the Tariff Headings referred to above. Therefore we are persuaded to look for clarifications elsewhere. For this purpose assistance can be taken from the Harmonised System of Nomenclature Explanatory Notes and see if there is something which may be of help to us in identifying the product and deciding its classification. We find that in HSN Explanatory Notes appearing at page 1443, it has been clarified that Gliders fitted with or designed to be fitted with an engine are classifiable under Heading 88.02.

10. On examination of the Chapter Headings provided in the HSN as also the Chapter Heading provided in the Schedule to the Customs Tariff Act, 1975, we observe that Chapter Heading 88.01 of HSN is pari materia to Chapter Heading 88.01 of the Schedule to the CTA, 1975. Similarly Chapter Heading 88.02 of the HSN is pari materia to the Chapter Heading 88.02 of the CTA, 1975. In view of this, we are persuaded to believe that Powered Hang Gliders shall be classifiable under Chapter Heading 88.02 of the Customs Tariff Act, 1975.

11. We also observe that in Chapter Heading 88.01 of both HSN and Schedule to Customs Tariff Act, 1975, Gliders and Hang Gliders have not been treated as one item but two different items. Even if we consider them as different items then also the HSN notes on page 1443 shall be squarely applicable to Powered Hang Gliders in so far as their classification under Chapter Heading 88.02 of the Schedule to the Customs Tariff Act, 1975 is concerned.

12. On page 1445 of the Explanatory notes of HSN it has been clarified that Heading 88.03 covers parts of goods falling in Heading 88.01 or 88.02 provided the parts fulfil both the following conditions :-

(a) They must be identifiable as being suitable for use solely or particularly with the goods of the above mentioned headings; and

(b) They must not be excluded by the provisions of the notes to Section XVII.

Again under the Heading, parts of the aircraft including Gliders and kites wings and their components have been indicated as covered under that Heading. Examining the goods namely Powerchute, we find that Powerchutes have the essential character of wings and therefore they can be classified in the category of wings and shall qualify for classification as parts of goods of Heading No. 88.01 or 88.02. Having held so, let us examine what is the requirement of Notification No. 145/77-Cus., dated 9-9-1977. For proper appreciation of the requirement, the relevant notification is reproduced :

“In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962), and in supersession of the notification of the Government of India in the Deptt. of Revenue and Banking, No. 301-Customs, dated 2nd August, 1976, the Central Govt., being satisfied that it is necessary in the public interest to do so, hereby exempts -

(a) aeroplanes,

(b) aeroplane parts,

(c) aeroplane engines,

(d) aeroplane engine parts, and

(e) rubber tyres and tubes used exclusively for aeroplanes.

when imported into India, from so much of that portion of the duty of customs leviable thereon which is specified in the said First Schedule to the Customs Tariff Act, 1975 (51 of 1975), as is in excess of 3 per cent ad valorem."

This notification clearly covers aeroplane parts. As we have already held that Powered Hang Gliders shall be classifiable under Customs Tariff Heading 88.02 and parts thereof shall be classifiable under Heading 88.03. Notification No. 145/77-Cus. covers only aeroplanes, aeroplane parts, aeroplane engines, aeroplane engine parts and rubber tyres and tubes used exclusively for aeroplanes. Powered Hang Gliders by virtue of the HSN Explanatory Notes become classifiable under Chapter Heading 88.02 and their parts shall be classifiable under Chapter Heading 88.03. But having regard to the use of the specific terms under the notification, all parts including parts of Powered Hang Gliders shall not become eligible to the benefit under the Notification unless they conform to the description of the goods specified in the notification. The Hon’ble Supreme Court in a number of cases has held that if there is any doubt in the interpretation of any entry in a notification providing for concessional rate of duty then the benefit of doubt must be extended to the Revenue. Having regard to this aspect, we find that Powerchute imported by the applicant shall not be entitled to the concessional rate of duty under Notification No. 145/77-Cus., dated 9-7-1977.

13. Having regard to the above findings, we hold that the benefit is not admissible to the powerchute imported by the appellants. In this view of the matter the appeal is rejected.

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Equivalent 1995 (77) ELT 688 (Tribunal)