1996(11)LCX0029

IN THE CEGAT, COURT NO. II, NEW DELHI

S/Shri S.L. Peeran, Member (J) and Shiben K. Dhar, Member (T)

KHODAY BREWING & DISTILLING INDUS. LTD.

Versus

COLLR. OF CUS., MADRAS

Order No. C/1632/96-B, dated 29-11-1996 in Appeal No. C/2372/88-B2

Cases Quoted

Western Refrigeration Pvt. Ltd. v. Collector — 1994(02)LCX0040 Eq 1995 (077) ELT 0673 (Tribunal)                  [Paras 3, 5]

Union Carbide India Ltd. v. Collector — 1996(06)LCX0108 Eq 1996 (086) ELT 0613 (Tribunal)                      [Paras 3, 5, 8]

Singh Ramakrishna Steel Ltd. v. Assistant Collector — 1993(01)LCX0015 Eq 1993 (066) ELT 0594 (Cal.)                 [Para 3]

Ponds (India) Ltd. v. Collector — 1992(10)LCX0061 Eq 1993 (063) ELT 0003 (Mad.)                                               [Para 3]

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

Guest Keen Williams Ltd. v. Collector — 1987(02)LCX0019 Eq 1987 (029) ELT 0068 (Tribunal)                               [Para 4]

Keltron Power Devices v. Collector — 1986(10)LCX0024 Eq 1987 (028) ELT 0093 (Tribunal)                                   [Para 7]

Johnson and Johnson Ltd. v. Collector — 1987(02)LCX0081 Eq 1987 (029) ELT 0428 (Tribunal)                              [Para 7]

Vivek Re-rolling Mills v. Collector — 1994(07)LCX0070 Eq 1994 (073) ELT 0660 (Tribunal)                                  [Para 7]

Krishan Kumar v. UOI — AIR 1990 SC 1782                                                                   [Para 8]

Commissioner v. Mother India Refrigeration Industries — AIR 1985 SC 1720                       [Para 9]

Bengal Immunity Co. Ltd. v. State of Bihar — AIR 1955 SC 661                                          [Para 9]

Advocated By : Shri T. Vishwanathan, Advocate, for the Appellant.

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

[Order per : S.L. Peeran, Member (J)]. - In this appeal the appellants are aggrieved with the order dated 29-4-1988 passed by the Collector (Appeals), Madras. The appellants had imported 1 No. Fully Automatic Labelling Machine Type JOWE-9/III and additional devices (especially made for special shaped bottles) and the same were assessed under Heading 84.19 of CTA. The benefit of Notification No. 47/89 was extended only to the Fully Automatic Labelling Machine and the said benefit was not extended to the Additional Device imported along with Labelling Machine. Hence, the importer filed refund claim seeking the benefit of the said Notification to One adjustable label magazine, 8 additional label magazines, 6 additional Glue Cylinder which according to the importers are part and parcel of the main machine, as they are not additional devices with machine and performing the same function as the main machine. However, by a criptic order the Assistant Collector rejected the same on the ground that the Notification covers only main machine and not to parts. He has opined that the parts are not covered by the Notification and the same are excluded from the purview of the said Notification. He has also observed that the claimant’s reference to Chapter notes in this context is not relevant.

2. The learned Collector (Appeals) held that the Notification does not cover accessories or additional adjustment. The learned Collector (Appeals) has further observed that on scrutiny of relevant documents it is seen that the basic machine is complete and self contained and had been supplied with all essential accessories for a value of DM 37,900/- (Ex Works). The other goods are additional devices, which are optional extras; they are not parts/accessories of the basic machine. The goods are adjustable label magazine, additional label magazine for shaped labels, additional glue cylinders. Therefore, he held that these goods are described as additional devices in the Invoice and other documents and they are charged separately. He held that the Notification does not refer to additional devices, attachments or accessories, therefore, the goods fall outside the scope of Customs Notification 47/84.

3. Arguing for the appellants, the learned Advocate submitted that the items which have been imported had been declared as 1 No. Fully Automatic Labelling Machine Type JOWE-9/III and Additional Devices as described in Bill of Entry. It is the Custom Appraisers, who had bifurcated One Adjustable label magazine, 8 additional label magazines, 6 additional Glue Cylinder for denying the benefit. It is his contention that these are not additional machineries, but they are parts of the same machine and they have to be adjusted and fixed along with the main machine for the same function as that of “Automatic bottle labelling machines” for which the Notification is intended. He also pointed out that Heading 84.19 refers to `machinery for labelling bottles’. The department had rightly classified the item as machinery for labelling bottles and therefore, the said description [having] been incorporated in the Notification, in which reads as “Automatic bottle labelling machine”, therefore, the benefit cannot be denied. It is his submission that these additional devices are fixed to the main machine and they perform the function of labelling various sizes and shapes of bottles and the additional machines are also “Automatic labelling machine”. Therefore, it is his contention that when the main machinery is classified under 84.19 and the additional machinery is also classified under 84.19, the benefit of Notification cannot be denied. Therefore, he relied on the judgment rendered in the case of Western Refrigeration Pvt. Ltd. v. Collector of Customs, Bombay as reported in 1995 (077) ELT 673. It is his further contention that the Larger Bench in the case of Union Carbide Ltd. v. Collector of Central Excise as reported in 1996(06)LCX0108 Eq 1996 (086) ELT 0613 (Tribunal) = 1996 (015) RLT 144 has clearly held that the Rules of Interpretation, Section notes and Chapter notes meant for classification of goods would also be applicable for interpreting the Notification in the light of Section 20 of General Clause Act and also in the light of judgments rendered by the Calcutta High Court in the case of Singh Ramakrishna Steel Ltd. v. Asstt. Collector of Central Excise as reported in 1993 (066) ELT 594 and that of Ponds (India) Ltd. v. Collector of Central Excise as reported in 1993 (063) ELT 3.

4. The learned DR submitted that the department has not examined the question of separate classification of these additional machines but they have classified under Heading 84.19 of the Customs Tariff. It is his contention that the principles underlying the classification of goods and more particularly Note 2(b) of Interpretative rules cannot be applied while examining the issue of granting the benefit of exemption Notification. He submitted that the items are extra optionals and not additional machineries. They are in the nature of parts, and hence the benefit of Notification had rightly been rejected. He submitted that the Section notes and Chapter notes cannot be applied for interpreting a notification. He relied on the ruling rendered in the case of Collector of Customs v. OEN India Ltd. as reported in 1989 (042) ELT 235 and Guest Keen Williams Ltd. v. Collector of Customs as reported in 1987 (029) ELT 68.

5. We have carefully considered the submissions made by both the sides and have perused the documents and the judgments cited above. It is noticed that the department has not separately classified the additional machines which are functioning along with the main machine under different headings, but they have classified the same under Heading 84.19 as “machinery for labelling bottles”. It is the contention of the appellants that these additional devices of [JOWE] 8 perform the same function of labelling bottles. We have perused the catalogue. It is clear from the catalogue that these machines are all to be fixed and attached to the main machinery, for which the benefit has been granted. The function syncronises and works in harmony with the main machine. The literature states that “the JOWE 8 and JOWE 8/F are superior products, not only due to the general appearance and design, but also because of their labelling technique. In addition, the machines are extremely sturdy and require only minimal maintenance and operation”. On perusal of the catalogue it is quite clear that the functioning of the machinery is for bottle labelling. They are automatic machines and therefore, there is no reason as to why the benefit of the Notification should be denied to them. The arguments was made by the learned Advocate that even otherwise by applying the Note 2(a) of Rules for Interpretation, the additional machines also are required to be classified under 84.19 and it has been done so accordingly. Therefore, the same cannot be bifurcated for the grant of the benefit of the Notification. We notice that the classification of the additional items have not been done on the basis of Rule 2(a) but on its own merits, on the basis of its function, “as machinery for labelling bottles”. Further argument was made that the Rules for Interpretation, Section notes and Chapter notes could be applied for interpreting Notification. In this context, the Larger Bench in the case of Union Carbide India Ltd. (supra) referred to applies more particularly in this case. The learned DR relied on the earlier judgment, wherein it has been held that Section notes and Chapter notes cannot be applied for interpreting the Notification. However, the learned Advocate contended that in the case of Western Refrigeration Pvt. Ltd., the matter had been examined and it has been held that if the description of Tariff heading and that the Notification is identical, then in such circumstances, interpretative rules, section notes and chapter notes are required to be applied also. Moreover, the classification has not been done, as we noticed, on the basis of rules of interpretation, section notes and chapter notes, but it has been done on merits. Therefore, on its clear examination of the Notification, Bill of Entry and the Catalogue of the machine, it is clear that the items are not parts, but they are machinery by its performing the function of labelling bottles. Therefore, the benefit of the Notification cannot be denied to the items in question. In that view of the matter, the impugned order is set aside and the appeal is allowed with consequential benefit, if any.

6. While agreeing as to the conclusion, I would, with respect to the ld. Member (J), prefer to tread a different, even if a lonely, path to arrive at the same destination.

7. I am unable to persuade myself to agree to the proposition that Rules of Interpretation, Section Notes, etc., can be applied for interpreting Notifications. In a series of judgment Tribunal has held that Rules of Interpretation, Section Notes and Chapter Notes are applicable only to matters relating to classification. It was held in case of M/s. Keltron Power Devices v. Collector of Customs, Cochin - 1987 (028) ELT 93, that there could be no gainsaying the proposition that whereas for classification of an article for purposes of Tariff Heading or sub-heading, resort to interpretative Rules is permissible, it is an entirely different proposition when considering benefit of a notification to specifically given articles. In case of Johnson and Johnson Ltd. v. Collector of Customs - 1987 (029) ELT 428, it was held that the Rules of Interpretation contained in the Schedule to the Customs Tariff Act, 1975, are intended for the interpretation of this Schedule meaning the various chapters headings and sub-headings therein. They are not relevant for interpreting the notification issued under Section 25 of the Customs Act, 1962. In case of Vivek Re-rolling Mills v. Collector of Central Excise, Chandigarh - 1994 (073) ELT 660, it was held that Interpretation Rules, Section Notes and Chapter Notes covering the Schedule to the Central Excise Tariff Act, 1985 are not relevant for the purposes of interpreting Notifications. Tribunal in this case relied on the case of Collector of Costoms v. OEN of India - 1989 (042) ELT 235.

8.  The Rules of Interpretation which form part of Customs Tariff Act themselves mention these rules to be rules of interpretation for classification of goods. The heading of Rules of Interpretation itself indicates that these are “General Rules for Interpretation of this Schedule”. The Rules state that classification of goods in this Schedule shall be governed by the following principles. Notifications are not part of the First Schedule to the Import Tariff. Larger Bench in case of Union Carbide was, in my view, not constituted to resolve the specific point whether Chapter Notes and Rules of Interpretation can be applied to an exemption notification. The observation made therein cannot be treated as ratio decidendi of that order. The various reasons given in support of decision do not constitute the ratio of that decision. The Hon’ble Apex Court in case of Krishan Kumar v. U.O.I. and others - AIR 1990 (SC) 1782 - observed :

“18. The doctrine of precedent, that is being bound by a previous decision. is limited to the decision itself and as to what is necessarily involved in it. It does not mean that this Court is bound by the various reasons given in support of it, especially when they contain ”propositions wider than the case itself required." This was what Lord Selborne said in Caledonian Railway Co. v. Walker’s Trustees - 1882 (7) A.C. 259 and Lord Halsbury in Quinn. Leathem (1901) A.C. 495 (502). Sir Frederick Pollock has also said : “Judicial authority belongs not to the exact words used in this or that judgment, not even to all the reasons given, but any to the principles accepted and applied as necessary ground of the decision.”

19. In other words, the enunciation of the reason or principle upon which a question before a Court has been decided is alone a precedent. The ratio decidendi is the underlying principle, namely, the general reasons or the general grounds upon which the decision is based on the test or abstract from the specific peculiarities of the particular case which gives rise to the decision. The ratio decidendi has to be ascertained by an analysis of the facts of the case and the process of reasoning involving the major premise consisting of a pre-existing rule of law, either statutory or judge-made, and a minor premise consisting of the material facts of the case under immediate consideration. If it is not clear, it is not the duty of the Court to spell it out with difficulty in order to be bound by it. In the words of Halsbury, 4th Edn., Vo1. 26, para 573 :

“The concrete decision alone is binding between the parties to it but it is the abstract ratio decidendi, as ascertained on a consideration of the judgment in relation to the subject-matter of the decision, which alone has the force of law and which when it is clear it is not part of a tribunal’s duty to spell out with difficulty a ratio decidendi in order to be bound by it, and it is always dangerous to take one or two observations out of a long judgment and treat them as if they gave the ratio decidendi of the case. If more reasons than one are given by a Tribunal for its judgment, all are taken as forming the ratio decidendi.”

9. Chapter Notes create a legal fiction and it is well-known that the legal fiction is created for a specific purpose and cannot go beyond that purpose. Hon’ble Apex Court in case of Commissioner of Income Tax, Kanpur v. M/s. Mother India Refrigeration Industries - AIR 1985 (S.C.) 1720 held “...... it is well settled as has been observed by this Court in the case of M/s. Bengal Immunity Co. Ltd. v. State of Bihar - 1955 (2) S.C.R. (603) P. 650 = AIR 1955 S.C. (661) P. 681 that legal fictions are created only for some definite purpose and these must be limited to that purpose and should not be extended beyond that legitimate field”. Since Chapter Notes and Section Notes and Rules of Interpretation creating legal fictions are meant only for classification matter, these cannot be pressed into service for interpreting an exemption notification.

10. What is imported here is not a mere part or a spare part of the labelling machine. The order of Collector would have been sustainable if any of the impugned goods had been imported in quantity more than one. In that case, these could have been looked upon as parts. Here, it was contended before us that these are actually the parts of the machines carrying out different functions. The appellants manufacture liquor and the bottles are of over-size, rectangular and of different shapes and sizes. Different attachments which have been imported and are alleged to be additional, merely fit into machine when a particular type of labelling is to be resorted to in a particular type of bottle. In other words, these attachments are not additional parts of machines but the essential parts of the machine itself, and therefore, cannot be assessed to as other than machine. The position would have been different if these had been imported separately. It is on this ground, therefore, I hold that the machine is not complete without these attachments, since with their help the machine has to perform specific functions as and when required with specific type of label or a specific shape of bottle.

11. In view of this, I agree with the ld. Member (J) as to the conclusion and allow the appeal.

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Equivalent 1997 (90) ELT 336 (Tribunal)

Equivalent 1997 (018) RLT 0448 (CEGAT-B)