Bagalkot Udyog Ltd. vs Collector Of Customs, Bombay>1995(06)LCX0071

1995(06)LCX0071

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

S/Shri S.L. Peeran, Member (J) and G.R. Sharma, Member (T)

BAGALKOT UDYOG LTD.

Versus

COLLECTOR OF CUSTOMS, BOMBAY

Order No. C/217/95-B2, dated 22-6-1995 in Appeal No. C/3922/88-B2

Cases Quoted

SRF Industrial Fabrics v. Collector — 1994(05)LCX0041 Eq 1994 (073) ELT 0146 (Tribunal) [Para 12]

Hyderabad Plywood Ltd. v. Collector — 1991 (055) ELT 62 [Para 12]

Advocated By : Shri L.P. Asthana, Advocate, for the Appellants.

Shri A.K. Singhal, JDR, for the Respondent.

[Order per : G.R. Sharma, Member (T)]. - The captioned appeal filed by M/s. Bagalkot Udyog Ltd. is directed against the order of Collector of Customs (Appeals). The Collector, Customs (Appeals) in his order had held as under :

“The appellants’ representative appeared for the personal hearing on 7-8-1987 and stated that the case was heard by one officer and order was passed by the another officer of lower stage. They further stated that relevant documents were submitted to the lower authority before passing the order, therefore, requested to send the case for de novo consideration. It was for the appellants to obtain and submit all the required documents to this office.

The documents produced at the appeal stage as discussed above clearly show that the assessment done on merit is in. Accordingly I reject the appeal."

2. Briefly stated the facts of the case are that the appellants were allowed to import one number Diesel Generating set of 4000 KW rating with accessories and issued a licence accordingly. The appellants presented Bill of Entry No. 7677, dated 28-1-1984. The Customs were of the view that spare parts, accessories and auxiliary equipment for diesel engine and generator were imported separately and were, therefore, assessable on merits as per their description and assessed the goods accordingly. The appellants filed refund claim on the ground that all the spares, accessories and auxiliary equipment imported by them were assessable under Chapter Heading 85.01(1). Their refund claim was rejected on the ground that the appellants’ claim for assessment of the items imported under Chapter Heading 85.01(1) was not acceptable inasmuch as the spares, accessories and auxiliary equipment for diesel engine and generator was not assessable under Tariff Heading 85.01(1) on the ground that there was a specific Tariff Heading for diesel engine and it was 84.06 and for generator, it was 85.01(1). Against this decision of the lower authorities, the appellants filed an appeal to the Collector (Appeals). In his orders the Collector (Appeals) held that each item of the bill of entry shows a separate value; that the spares and accessories were imported separately; that in the absence of details, these items cannot be allocated to the drawing of generating set or layout plan of existing D.G. set of 4000 KW. Referring to the provisions of Accessories (Condition) Rules, 1963, the learned Collector (Appeals) held that since separate values have been shown for each item and since accessories and spares have not been imported along with the main generating set and also that their value was separately shown in separate invoice, these cannot be assessed under Heading 85.10(1) of CTA, 1975. The Collector(Appeals) also referred to the description given in the invoice No. GES-0971-MN dated 28-10-83 in which the goods have been described as one number DG set of 4000 KW with spares and accessories. The Collector (Appeals), therefore, came to the conclusion that the spares and accessories in the DG set were also imported by the appellants. The other consideration that heavily weighed with the Collector (Appeals) was that the second invoice No. GES-1023-MN, dated 30-11-1983 showed the value of each item separately and since the Accessories (Condition) Rules, 1963 specifically provide that “no separate charges for such supply, their price being included in the price of article” and since the second invoice showed the price of each individual items separately and therefore, they were not accessories.

3. Shri L.P. Asthana, the learned Advocate appeared for the appellants. He submitted that pursuant to the issue of licence to the appellants, the appellants placed an order on M/s. Nissho Iwai Corporation, Tokyo that the value of the DG set complete was shown as Japanese Yen 17,80,00,000. The learned advocate submitted that a detailed list of the DG set was prepared and the complete description of the accessories and spare parts essential for the operation of the DG set were clearly indicated in the order placed with the foreign supplier; that unless all the items are assembled together with DG set would not be performing the function for which it was intended; that these spares and accessories and parts together go to constitute one DG set; that the first lot constituted diesel engine one set and generator one set; that the first consignment was valued for Japanee Yen 116,390,000 C & F Bombay; that the second shipment relating to the remaining parts of the item which together with the first lot constituted one complete DG set was made by the foreign supplier of various items including panel recommended spares, recommended maintenance spares and accessories; that the value of the consignment was Japanese Yen 6,16,10,000 C & F Bombay that these two values together formed the total value Jap. Yen 17,80,00,000 which was the value of the DG set along with spares and accessories; that the Customs assessed the diesel engine under Chapter Heading 84.06 and the generator under Chapter Heading 85.01; that the entire consignment ought to have been assessed under Chapter Heading 85.01; that as the quantum of duty payable under Chapter Heading 84.06 and Chapter Heading 85.01 was the same, the appellants did not agitate this issue. However, the importers agitated in respect of second bill of entry dated 30th Jan., 1984 when customs authorities decided to assess each item on merits . The learned counsel submitted that the entire second consignment ought to have been assessed only under Customs Tariff Chapter Heading 85.01; that by adopting this wrong method of classification of each spare and accessory on merits, the appellants were forced to pay additional customs duty of over than 11 lacs; that this amount is refundable to the appellants. The Ld. counsel submitted that entire DG set urgently required by the appellants, the appellants were forced to clear the goods received in the second lot; that in view of the above, the appellants filed a refund claim on 16th June 1984 and also submitted a certificate of an electrical engineer; that the Asstt. Collector wanted line drawings within15 days; that the appellants could not submit the line drawings within 15 days but submitted them on 1-4-1986. In the meantime the case was adjudicated by the Asstt. Collector; that against this order of Asstt. Collector, the appellants went in appeal to the Collector (Appeals); that before the Collector (Appeals) it was pleaded that the case was heard by one Asstt. Collector whereas the order has been passed by another Asstt. Collector without affording them an opportunity of being heard by the second Asstt. Collector and thus there was violation of the principles of natural justice; that in addition of the above ground, the appellants had several other grounds to urge before the Collector (Appeals); that the Collector (Appeals) stated that it was not necessary for the appellants to urge any of these grounds as the order dated 11-4-1986 passed by the Assistant Collector would have to be set aside. However, the Collector (Appeals) instead of setting aside the order and remanding the case passed his order on 6th May, 1988; that the Collector (Appeals) without going into merits of the case, rejected their appeal; that the appellants had produced all the relevant documents; that the appellants had obtained a licence; that the DG set imported by the appellants comprised of several components and parts of which together constitute a single DG set; that the parts could not be used in isolation at all; that it was only after all the parts were properly assembled together, the DG set would come into existence; that the appellants had imported a DG set and all the items including spares and accessories could have been assessed to customs duty as a diesel generating set; that Chapter 84 of Customs Tariff Act, 1975 did not cover this DG set ; that only Chapter 85 covers the imported DG set; that section note 3 to Section XVI was not correctly interpreted by the Customs; that the classification of each item on merits of the second Bill of Entry was wrong; that a composite unit namely DG set was imported by the appellants and therefore, the Asstt. Collector should have not assessed each part on merits; that the findings of the Asstt. Collector that the items were in the nature of individual spares or accessory is not correct; that one condition of the contract for the purchase of DG set was that subject goods are required for 10,000 hours; that for such functioning of the item imported constitute one single DG set. The learned counsel for the appellants submitted that impugned order may be set aside and they may be granted refund of the differential duty.

4. Shri A.K. Singhal, the learned JDR appearing for the Revenue submitted that the licence was issued for one number Diesel Generating set of 4000 kw rating with spare and accessories; that the Bill of Entry No. 5125, dated 17th December, 1983 covers the goods; that the description of the goods in the B/E reads as “one number DG set of 4000 KW rating with spares and accessories”; that the invoice dated 28th October, 1983 covering the shipment described the goods as “DG set of 4000 kw with spares and accessories - one set;” that this clearly shows that the first consignment consisted not only of DG set but that spares and accessories were also supplied. Referring to the second invoice cleared under the bill of entry No. 7677, dated 20th Jan., 1984, the ld. JDR submitted that here again, the description of the goods is one number DG set of 4000 kw rating with spares and accessories; he pointed out that the contract No. given in the invoice dated 30th November, 1983 is different from the one given in the invoice dated 28th Oct., 1983; that the appellants had not produced any copy of the contract to show that these items were only spares and accessories of the DG set. On the question of classification of the goods the ld. DR submitted that the goods were described as diesel engine and generator in the bill of entry; that as there were specific entries for these two items, the lower authorities rightly held that the diesel engine was classifiable under Chapter Heading 84.06 and generator under Heading 85.01(1). In this regard he pointed out that the Collector (Appeals) in his order held that each item incorporated in the bill of entry shows separate value; that the provisions of the Accessories (Condition) Rules, 1963 provides as under ;

“[Rule 2] of the said Rules reads as ”accessories or and spare parts and maintenance or repairing implements for, any articles, when imported alongwith [that] article shall be chargeable at the same rate of duty as that article. If the proper officer is satisfied that in the course of trade - (1) such accessories, parts and implements are compulsorily supplied along with that article and (2) no separate [charge is made] for such supply, their price, being included in the price of the article".

The ld. JDR submitted that neither the proper officer was satisfied that such spares or accessories are compulsorily supplied nor was it found that separate charges were not collected for such items and therefore concluded that in view of the above Rules, the so-called accessories and spare parts cannot be classified as accessory and spares of the DG set. The learned JDR therefore, submitted that the lower authorities have rightly classified the diesel engine, generator and the accessories and spares on merits.

5. Heard the submissions of both sides. On careful consideration of the evidence placed on record and submissions made by both sides, we find that the issue to be decided by us can be briefly enumerated as under :

(1) whether items described in the bill of entry as diesel engine and generator could be classified as diesel generating set under Chapter Heading 85.01(1) or they were to be classified separately as diesel engine and generator under Tariff Heading 84.06 and 85.01(1) respectively.

(2) whether the goods imported subsequently could be classified as accessories and spare parts of the diesel generating set and classified under Customs Tariff Heading - 85.01(1) in spite of the fact that they were imported separately and the value of each item were shown individually in the invoices and also that no claim was made in the B/E for their classification under Heading 85.01(1).

6. The contention of the appellants was that the invoice dated 28th Oct., 1983 makes a reference to purchase order dated 1st August, 1983; that according to this purchase order, there was a composite price of Japanese Yen 178,000,000 and if the break up of the value of the purchase order is looked at it would be seen that wherein DG set was supplied at Jap. Yen 116,390,000 the spares and accessories were valued at 61,610,000 which if taken together form the composite price of Jap. Yen 178,000,000. It was further argued that what was supplied under the first invoice were the two main constituents of the DG set namely one set of diesel engine and one set of generator. The ld. Counsel for the appellants in support of his argument referred to the packing list and submitted that no accessories and spares were supplied in the first lot; that according to the purchase order, spares and accessories valued at Jap. Yen 61,610,000 were supplied separately in the second lot by the foreign supplier under their invoice dated 30th November, 1983 that a look at the packing list will show that the items were described as auxiliary equipment of diesel engine, spare parts and recommended running spare parts for 10,000 hours and recommended running maintenance parts for 10,000 hours running for operation. On scrutiny of the Order No. G/5677, dated 1st August, 1983, we find that against serial No. 3 price of the items reads as under :

“3. Price : The value of the contract is Jap. Yen 178,000,000 C & F Bombay which consists of the following terms :

Power plant equipment with design drawings and engineering documentation supervision of erection and commissioning and start-up charges, the details of which are as per Annexure `A’ & `B’ Jap Yen 178,000,000".

7. On the basis of this purchase order, we find that a composite price was quoted for the DG set. There is no indication of the break-up of price namely the price of the DG set separately and the price of accessories and spares separately. As to how the break up was arrived at and done is not explained in the documents placed before us. The crucial question is as to how to interpret the invoice. The invoice dated 28th October, 1983 under the column of description of goods reads “one number DG set with 4000 kw rating with spares and accessories one set indicating that the details are as per attached sheet”. In the sheet however, under the description of the goods, Item No. 1 reads ‘diesel engine’ and item No.2 `generator’. If these two documents are read together we find that spares and accessories were not described under this invoice. Similarly, invoice dated 30th November, 1983 shows under the description of goods as one number DG set of 4000 kw rating with spares and accessories, quantity - one unit and one lot. It has been indicated that the details are in the attached sheet. In the description of goods it has been indicated as auxiliary equipment for diesel engine, panel, accessories for panel, spare parts. Spare parts have however, been divided as recommended running spare parts for 10,000 hours operation, recommended maintenance and insurance spare parts for 10,000 hours operation and recommended spare parts for electrical equipment of 10,000 hours operation. We also observe that in the invoice, two contract numbers have been given. In the invoice dated 28th Oct., 1983 the contract number given as GES-0430-01 (2F 273) and in invoice dated 30th November, 1983, the contract number has been mentioned as GES-04030-02 (2F 273). We note that copy of these contracts was neither produced by the appellants nor was it available in the evidence on record.

8. On examination of the bill of entry in respect of the goods received under invoice dated 28-10-1983, we find that the description of goods has been given as one number DG set of 4000 kw rating with spares and accessories diesel engine (Eng. Type 16V32G No. 203066 classifiable under Customs Tariff Heading 84.06 and generator 5,000 KVA (4000 KW) 3.3 KV 50 HZ 3 phase, 10P 600 rpm classifiable under Customs Tariff Heading, 85.01(1). Now in the column of Customs Tariff heading, the classification against diesel engine has been shown as 84.06/281/76 and against generator Customs Tariff heading has been shown as 85.01(1). It appears that customs accepted the tariff classification shown in the bill of entry and assessed the goods accordingly. In this bill of entry, there is no indication that spares and accessories were received alongwith this diesel engine and generator. This bill of entry conforms to the sheet attached to the invoice dated 28th Oct., 1983. The packing list also indicates that the spares and accessories were not received with the goods invoiced under the invoice dated 28-10-1983. We accordingly hold that reading the invoice dated 28th Oct., 1983, the attached sheet and the packing list which were presented in respect of these goods - spares and accessories did not form a part of consignment and therefore, simply the invoice reads “one number DG set of 4000 kw rating with spares and accessories cannot be read in isolation but is to be read along with the attached sheet, packing list and the bill of entry. Reading all of them together we hold that the goods covered by the invoice dated 28-10-1983 was a diesel engine and a generator without spares and accessories.

9. The second point that was very meekly agitated before us was that both the diesel engine and generator form one DG set and the same was classifiable under Customs Tariff Heading 85.01(1) and not separately for diesel engine and generator set. On this point, we ... the bill of entry shows the description of goods as diesal engine separately and generator separately and we find that there was no error committed by the lower authorities but they had rightly classified the diesel engine under Customs Tariff Heading 84.06 and generator under 85.01(1).

10. The second issue is whether the items covered by its invoice No. GES-1030-MN dated 30-11-1983 were spares and accessories of the DG set. For this purpose, we find that the import licence permitted the appellants to import one number DG set of 4000 kw rating with spares and accessories. We also observe that the purchase order was placed for one 4000 kw, Tokyo Denki generator coupled with diesel engine to run on heavy fuel oil as per the specifications and auxiliary equipments, electrical equipments and spare parts. We also find from the purchase order that the value of the order was for Japanese Yen 178,000,000 for supply of DG set of 4000 kw rating with spares and accessories. Accessories, auxiliary equipment and standard maintenance items and spares were indicated in the Annexure `A’ attached to the purchase order. From the bill of entry No. 12077, dated 30th December, 1983, we find that in the description column, the items have been described as fuel injector, impeller, start valve Cylinder [Safety] Valve etc. and against each item not only the assessable value of the individual item but also the customs tariff heading is given. From the bill of entry running into a number of pages, we do not find any change in the Customs Tariff heading showing that there was any disagreement with the department and the assessee. However, on the last page of the bill of entry, we find that in the column of description of the goods, the goods are mentioned as one DG set of 4000 kw rating with spares and accessories and under this description Torque and Wrench and Timer have been indicated, for Torque and Wrench customs tariff heading has been shown as 82.01/04 and for timer, the heading has been shown as 90.01. From this bill of entry, there is no indication whatsoever that these items were imported by the appellants as spares and accessories of the DG set and that the assessee has claimed their assessment under Customs Tariff Heading 85.01(1) as accessories and spares for DG set. On the contrary, the appellants themselves have shown the classification of each item under a different Customs Tariff heading and showing assessable value item-wise. From the description given in the description column of the bill of entry, we observe that the description does not explicitly show that they are spares and accessories nor does the claim of the appellants for classification of the imported goods under different Customs Tariff Heading supports the claim of the appellants that the imported components were accessories and spares of DG.

11. In the invoice No. GES-0113-MN, dated 30th November, 1983, we find that in the description of goods it has been recorded “one number DG set of 4000 kw rating with spares and accessories and quantity has been shown as one unit and one lot. It has also been stated that the details as per the attached sheet with the invoice, however there is no reference that these are accessories or spares for DG set supplied under invoice No. GES-0974-MN dated [28th October, 1983]. In these invoices, the assessable value of the items imported has been shown separately for each item.

12. On examination of all the documents and the submissions made before us, we find no doubt that the import licence was issued for import of diesel generating set of 4000 kw rating with spares and accessories. We also observe that the order placed by the Indian Importers with the foreign supplier was one DG set with spares and accessories. We also observe that the composite price was supplied for the whole transaction. However, from the bill of entry filed by the appellants, we find that no claim was made in the bill of entry that they were spares and accessories of the DG set already received and cleared. On a scrutiny of invoice also, we do not see any reference to the effect that spares and accessories were supplied as such for diesel generating set already supplied under an earlier invoice. On the contrary from the attached sheet with the invoice, we find that the unit price of each item has been shown separately. We also observe that in the bill of entry the classification of the individual items has been indicated in the column of customs tariff heading and there is no claim whatsoever that these spares and accessories should have been assessed as such under the Tariff Heading 85.01(1). In the case of SRF Industrial Fabrics v. Collector of Central Excise reported in 1994 (073) ELT 146, this Tribunal had held that in the classification list claiming classification of particular items if approved by the department then the assessee cannot be said to be aggrieved and therefore, the appeal filed by the assessee cannot be maintainable. This Tribunal under similar circumstances in the case of Hyderabad Plywood Ltd. v. Collector reported in 1991 (055) ELT 62 had held that when the classification claimed by the assessee is approved by the Asstt. Collector, the assessee cannot be said to be aggrieved, therefore, the appeal is not maintain- able. In the absence of any reference that these were spares and accessories and in view of the fact that separate classification under customs tariff heading for individual items was indicated in the bill of entry coupled with fact that in the attached sheet to the invoice, the unit price of individual items were indicated separately and in view of the facts and law cited (supra) we do not see any evidence on record to co-relate the imported goods with each other. In such cir- cumstances, we are inclined to agree with the Asstt. Collector that the classifi- cation of items imported under invoice No. GES-1023-MN, dated 30th November, 1983 and cleared from the customs under the bill of entry No. 12077, dated 30th December, 1983 are classifiable on merits and hold accordingly.

13. The appellants also emphasised on the point that the Collector (Appeals) while hearing the appellants gave an impression that since the order passed by the Asstt. Collector was not valid and was to be set aside and the case remanded for de novo adjudication and the Collector (Appeals) while passing the order instead of remanding the case, passed final order against the appellants without considering merits of the case. From the order passed by the Collector (Appeals) and therefore, the order needs to be set aside. We find that the Collector (Appeals) in the last but one para of his order mentioned “They further stated that the relevant documents were submitted to the lower authorities before passing the order, therefore requested to send the case for de novo consideration” On this contention of the appellants, the Collector held “It was for the appellants to obtain and submit all the required documents to this office”. From these observations of the Collector (Appeals), we do not see that the Collector [had] given any impression that he had a mind to remand the case. He therefore, found no merits in the contention of the appellants that the case should be sent for de novo [consideration].

14. From the order of the Collector (Appeals), we find that the Collector (Appeals) had examined the case on merits read with the provisions of the Accessories (Condition) Rules, 1963. He has also examined the case of the appellants with reference to the bill of entry and commented on it. In view of this, we do not see any reason as to why the order of the Collector (Appeals) should be considered as an invalid order having regard to the facts that the Collector (Appeals) had examined the case after taking into consideration the evidence produced before him on the point of fact and the relevant ........ of the Accessories on the point of law. We do not see any force in the arguments pleaded before us that the Collector had not complied with the impression given to them.

15. From the above discussion, we find both on facts and law and considering merits of the case that the assessment in the Bill of Entry No. 12077, dated 30th November, 1983 is valid, justified and correct in law and we hold accordingly.

16. Having regard to the above evidence we uphold the impugned order and reject the appeal.

Equivalent 1995 (79) ELT 689 (Tribunal)