1996(09)LCX0281
IN THE CEGAT, COURT NO. II, NEW DELHI
Shri S.K. Bhatnagar, Vice President and Ms. Jyoti Balasundaram, Member (J)
GARWARE NYLONS LTD.
Versus
COLLECTOR OF CUSTOMS, BOMBAY
Final Order No. C/847/96-B, dated 19-9-1996 in Appeal No. C/1617/87-B2
Cases Quoted
Kores India Ltd. (HC) — Referred [Para 11]
Precision Rubber Ind. v. Collector — 1990 (049) ELT 0171 (H.C.) — Referred [Para 11]
Collector v. Durafoam Ind. — 1986(07)LCX0024 Eq 1986 (026) ELT 0341 (Tribunal) — Referred [Para 12]
Advocated By : Shri Dharawala, Advocate, for the Appellant.
Shri K.K. Jha, SDR, for the Respondent.
[Order per : S.K. Bhatnagar, Vice President]. - This is an appeal against the order of Collector (Appeals), Bombay dated 2-12-1986.
2. Ld. Counsel stated that the appellants are engaged in the manufacture of nylon yarn at Pimpri.
3. They had imported recycling equipment designed for production of nylon chips from nylon fibre/nylon waste. The machine was an integral unit comprising of SIKO PLAST Reclaim Extruder with screen changers, flat strip die, grinder and force feed device all forming altogether an integrated unit.
4. At the time of importation the department assessed the extruder under 85.59(2) but classified the other items under’ 85.59(1). It was their contention that all of them were required to be classified under 85.59(2) as they altogether form a composite machine.
A detailed writeup was also submitted. This shows how the complete unit functions from the time waste fibre/yarn is fed into it till the clean nylon chips come out in the form of strips as can be seen from the flow diagram all the components have independent and complementary functions for instance the screen changer is fitted to the outlet of the extruder barrel and cannot be used on its own. Similarly the force feed device is an essential component of the extruder and cannot be used independently. The grinder too is not just a simple standard equipment having universal application but is a special unit with an arrangement for hot air conveying and blowing shaded yarn to the inlet of the force feed unit. Therefore, as aforesaid they all form an integral part and parcel of the recycling plant.
5. The said plant was unwieldy in size and therefore, it had to be ship- ped in an unassembled condition for convenience of transport and carriage.
6. He would like to emphasise that three cases contained the components of one and the same machine namely a complete grinder plant designed for the production of nylon chips from nylon fibre waste. They did not contain individual machinery having separate or independent functions.
7. In this connection they would like to draw attention to Section Note 3 of Section XVI under which chapter 84 falls. This note shows that two or more machines fitted together to form a whole and adapted for the purposes of performance of two or more complementary or alternative functions are to be classified as a composite machine on the basis of the principal function.
8. In the order-in-appeal, the Collector (A) has emphasised that in the invoice the value of each of the individual’ item has been shown separately and referred to Section 2(ii) of the Accessories (Conditions) Rule 1963. However, it was their contention that this reference was totally extraneous to the question of determining the classification.
9. The catalogue, the flow diagram and the writeup submitted by them show that their contention was correct. It was also their submission that the Customs Tariff is based on CCCN and in the scheme of CCCN machines for making a commodity included all machines used for preliminary treatment of raw material to the machine which actually turned out the final product. For example Heading 84.31 covers machinery for making cellulosic pulp, paper and paper board and the machinery used for making pulp includes cutter, rag cluster and washers, grinding machines and streamers i.e. filters similar to screen changers in the present case. Similarly machinery for manufacture of continuous and discontinuous manmade textile fibres covered by Heading No. 84.36 consists of metering pumps, filters baths etc. Therefore, the expression machines and mechanical appliance designed for the production of a commodity used in heading 84.59(2) necessarily covers more than one component/equipment and all such components including grinding, screening and extruding parts are covered. Applying this principle the screen changer, grinder and force feed device all are required to be classified under 84.59(2).
10. Ld. DR drew attention to Order-in-Original and Order-in-Appeal. He stated that the extruder is classifiable under Heading 84.59(2) and there is no dispute about it but screen changer, grinder and force feed devices are different from the extruder; the screen changer is used for removing any physical contamination, grinder for chopping waste into shreds and the force feed is used to receive chopped unit. All these equipments have independent functions and do not produce any commodity. Therefore they merit classification under Heading 84.59(1).
11. The Collector (Appeals) has referred to the Accessories Rules because the invoice indicates separate value of each of these items and therefore these rules will also not be attracted for the purposes of determining the rate of duty. It was also his submission that merely because these equipments are necessary for the purpose of ultimate production of polyester chips from waste and have to work in coordination and are essential for the purpose does not mean that they could be treated as components of one machine and in this connection he would draw attention to the case of M/s. Kores India Ltd. in which the Hon’ble Allahabad High Court had made observations w.r.t. typewriter ribbons and typewriter mentioning that though it may not be possible to use the latter without the former it cannot be considered as an integral part of typewriter and they did not treat it as an essential part of the machine. Similarly the High Court of Bombay has in the case of Precision Rubber Ind. [1990 (049) ELT 171] distinguished between accessories and components.
12. The attention of the bench has been drawn to the case of CCE v. Durafoam Ind. [1996 (026) ELT 341] to show that foam cutting machines were classifiable under 84.59(2) but it has also been mentioned therein that classification is not determined by catalogue only and for the purpose of classification tariff heading 84.59(2) the purpose or use of the machine has to be necessarily gone into in view of the wording of the tariff item. It was also his submission that the Accessories (Conditions) Rules have to be considered as complimentary and not contrary to the rules of interpretation of tariff.
13. We have considered the above submissions. We observe that the appellants have in their appeal memo as well as during the course of hearing described the consignment variously.
14. At times they have described it as (1) a complete machine (for example paragraphs 6 & 7); (2) integrated unit (e.g. paragraph 6); (3) a complete machine plant (e.g. paragraphs 8 & 10); and (4) as a composite machine (e.g. paragraph 3).
15. Obviously all these words and phrases have been used by the appellants rather loosely and interchangeably to describe the imported items. However, a single machine has to be distinguished from a composite machine and a plant.
16. It is also obvious from para 5 of their memorandum that they had placed order on M/s SIKOPLAST for one Sikoplast Reclaim Extruder. This extruder is by itself a single machine (for production of a commodity) and rightly classified under 84.59(2) and there is no dispute about it.
17. Regarding the remaining three items it is evident from catalogue and flow chart that they are essential for completion of the entire process of converting nylon waste into nylon chips. It is also apparent that they have to work in coordination and are inter-dependent for completion of the process. To that extent the appellants are correct. But that by itself does not mean that the entire set thereof constitutes one single machine as a whole and the items in question cannot be considered as essential components of a single machine.
18. The next question which arises is whether they could be considered as a composite machine. The appellants have greatly emphasised this aspect and elaborated it in the grounds of appeal and during the course of hearing, and the Ld. Counsel has also emphasised this submission w.r.t. Section Note 3 of Section XVI and the scheme of Chapter 84. They are right to the extent of quoting the criteria for treating an item as a composite machine as given in the above section note as well as in CCCN/HSN. But to understand their meaning, we have to look towards the explanatory notes which mentions inter alia as follows :
“Composite machines consisting of two or more machines or appliances of different kinds, fitted together to form a whole, consecutively or simultaneously performing separate functions which are generally complementary and are described in different headings of Section XVI are also classified according to the principal function of the composite machine.
The following are examples of such composite machines: printing machines with a subsidiary machine for holding the paper (heading 84.43); a cardboard box making machine combined with an auxiliary machine for printing a name or simple design (Heading 84.41); industrial furnaces combined with lifting or handling machinery (heading 84.17 or 85.14); cigarette making machinery combined with subsidiary packaging machinery (Heading 84.78).
For the purposes 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.
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.
The bases, frames or housings may be provided with wheels so that the composite machine can be moved about as required during use provided it does not thereby acquire the character of an article (e.g. a vehicle) more specifically covered by a particular heading of the Nomenclature."
The catalogue and the flow chart produced by the appellants themselves show that the above criteria are not satisfied in the present case. Although connected with each other the items cannot be said to be fitted together to form a whole because neither they are incorporated one in the other nor mounted one on the other or mounted on a common base or frame or in a common housing.
19. This leaves us with the description of the set of items put together as an integrated unit, the components of which together act as a plant for converting the nylon waste into nylon chips and for this purpose its various components are joint or connected together to work in a coordinated way. This is acceptable. But in that case each of the items will have to be treated separately on its merits. When so treated each one of them by itself does not manufacture or produce a commodity although it plays its assigned role in the ultimate production of the commodity by the integrated plant unit.
20. In view of the above position, there is no reason to interfere with the impugned orders. The classification of the Items under 84.59(1) is confirmed and the appeal is rejected.
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Equivalent 1999 (110) ELT 577 (Tribunal)
Equivalent 1996 (017) RLT 0490 (CEGAT-B)