1997(10)LCX0135

IN THE CEGAT, COURT NO. II, NEW DELHI

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

COLLECTOR OF CUSTOMS, CALCUTTA

Versus

NOWRANGROY METALS PVT. LTD.

Final Order Nos. C/2074-2075/97-B2, dated 7-10-1997 in Appeal Nos. C/2797 & 2921 of 1989-B2

Cases Quoted

Tata Engineering & Locomotive Co. Ltd. v. State of Bihar — 1994(10)LCX0073 Eq 1994 (074) ELT 0193 (S.C.) — Distinguished                                                    [Paras 5, 10]

Voltas Ltd. v. Collector — 1991(02)LCX0092 Eq 1991 (056) ELT 0569 (Tribunal) — Distinguished             [Paras 5, 10]

Bharat Earthmovers v. Collector — 1984(03)LCX0005 Eq 1987 (031) ELT 112A (Tribunal) — Referred                [Para 5]

Advocated By : Shri K.K. Jha, SDR, for the Appellant.

S/Shri B.D. Ahmed and L.P. Asthana, Advocates, for the Respondent.

[Order per : Shiben K. Dhar, Member (T)]. - Both these Revenue Appeals involving common question of law and facts are being disposed of through this common order. The impugned goods are jet filters.

(A)  Appeal No. C/2797/89-B2 :

2. In this case of CC, Calcutta v. M/s. Nowrangroy Metals Pvt. Ltd., the Respondents had imported one jet air filter Model GM-942 with belt motor for their high speed double rolling flour mill. They claimed assessment under CTH 9803 read with Notification 95/87. The goods were, however, assessed by the Customs House under Chapter 8421.39 read with Notification 157/88. They filed a refund claim on the ground that this filter was essentially part of the milling machine and therefore, they should have been given benefit of Notification 68/87 or, in the alternative the goods ought to have been assessed under Chapter 9806 read with Notification 69/87 as Chapter Heading 8421.39 was covered by Notification 69/87. Collector (Appeals) held that impugned goods are part of the milling machine since without these milling machine would not be able to work. CTH 8421.39 is covered by Notification 69/87 and therefore, goods should have been assessed under Chapter 98.06 which covers all machinery parts under Chapter 84, 85, 90, etc. He, therefore, held that the goods are classifiable under Chapter Heading 9806 read with Notification 69/87.

(B) Appeal No. C 2921/89-B2 :

3. In the case of CC, Calcutta v. M/s. Nazone Foods Pvt. Ltd., the Respondents imported one air jet filter. These were originally assessed under CTH 8437.10. Customs authorities, however, subsequently felt that goods were classifiable under 8421.39 and therefore demanded differential duty amounting to Rs. 1,36,236.48. The respondents in their appeal before Collector (Appeals) contended that the goods are essentially part of flour mill machine and not air jet filter as held by the officers. The goods are classifiable under 8437.10. The Collector (Appeals) held that air jet filters are part of flour mill machine. He also held that Heading 8421.37 is covered by Notification 69/87 and therefore, the goods should have been classified under Heading 98.06. With these observations, he set aside the Order of the Asstt. Collector and allowed the appeal.

4. Arguing for the Revenue, the ld. DR submits that air jet filter is excluded from the purview of CTH 8437.10. According to HSN Notes, the article is a complete machine and such articles are excluded from the scope of CTH 8437 and are appropriately classifiable under 8421. The main function of the machine is to filter the waste from the air and only the cleaned air is let out in the open to prevent air pollution by stopping the air dust particles from mixing in the atmosphere. The filter does not operate in milling operation and therefore it is not a part of the flour milling machine as such.

5. It was argued on behalf of the Respondents that Notification 69/87 specifically indicates among other products CTH 8421.39 and Notification 132/87 does not exclude 8437 or 8421 from the purview of Chapter 9806. Even if the impugned goods are complete machine, they can still be considered as parts of another machine. Reliance in this connection was placed on the judgment of Hon’ble Supreme Court in case of Tata Engineering & Locomotive Co. Ltd. v. State of Bihar - 1994(10)LCX0073 Eq 1994 (074) ELT 0193 (SC) = 1994 (55) ECR 210 (SC) and Voltas Ltd. v. CC - 1991 (056) ELT 569 = 1991 (36) ECR 81 (T) and Bharat Earthmovers, Madras v. CCE - 1984(03)LCX0005 Eq 1987 (031) ELT 112A (Tri.) = 1984 ECR 2055 (T). Even when HSN Notes exclude such filters from the purview of milling machine, they would nevertheless remain parts of the milling machine and since such milling machines are classifiable under Chapter 84 and are not excluded under Notification 132/87, they would be classifiable under 9806.

6. We have heard both sides. The catalogue placed in appeal papers in Appeal No. C/2921/89-B2 indicates :

“The horizontal and vertical transport of the intermediate products is effected pneumatically. The material being milled is separated from the conveying air by means of a cyclone.

Air jet filters are used for the recovery of dust from the conveying air. The pneumatic passage conveyance simultaneously serves for the aspiration in the plants."

7. Page - 12 in Appeal Papers in Appeal No. C/2797/89-B2 describes the impugned goods as follows :-

Wheat Roller Flour Mills, basically divided into two sections (1) Cleaning Section, (2) Milling Section.

CLEANING SECTION

In this section, Wheat is cleaned of Impurities, water added, conditioned and stored in conditioning bins. Various machines like, Separator, Dry-stoner, Cockle Cylinder are used.

MILLING SECTION

Wheat is ground using Roller Mills, Purified using Purifiers, sieved and graded using Plansifters. Machinery are arranged vertically in multi-storied building, 3 floors or 4 floors according to the capacity of Flour Mill.

Roller Mills are in the Ist floor. Plansifters in the top floor, Wheat, after grinding in Roller Mills (1st Floor) lifted to top Floor for sieving in the Plansifters, and the system used for lifting is called “Pneumatic Transport System”. This Pneumatic Transport System has pick-ups. Pneumatic Pipelines, Pneumatic Cyclones, Airlocks, High Pressure Fan and Jet Filter.

Air with material goes into the Pipeline, gets separated in the Jet Filter and the clean air will be discharged into the atmosphere. Atmosphere, wherein the fine flour is separated and put back into the system, thus becomes part of the finished product.

In a Flour Mill, every machine has a part to play. If a Roller Mill is to grind, Plansifter is to sieve, the Jet Filter in the Pneumatic system separates Air from fine flour, in case this machine is not provided in the Milling section, 3% of product is lost into atmosphere, which is valuable food for human consumption. Unless this flour is arrested in the Jet Filter, it will create Air Pollution in and around the Flour Mill.]

for MUHLENBAU SERVICES

 Sd/-

(S.K. Ramaprasad)

FLOUR MILLING CONSULTANT

8. For the sake of clarity the competing tariff Headings are extracted below :

9. HSN Notes dealing with machines for cleaning, sorting or grading seeds and machinery used in milling industries under CTH 8437 at Page 1221 specifically indicates that Heading 8437 does not cover air filters and cyclones used to filter the dust from exhaust air issued from exhailing or operating machines and it indicates classification of such goods under Heading 8421. Such machines would be classifiable only under 8421.

10. Coming now to the alternate claim of classification under 9806 and benefit of exemption under Notification 69/87, it was strongly contended by the ld. D.R. that what is covered under Chapter 9806 are only such goods as are parts of the machinery classifiable under Chapter 84. The impugned goods are complete machine and not parts. It is true that a complete machine could also in certain circumstances function as a part of the other machine as has been held by the Hon’ble Supreme Court in case of Tata Engineering and Locomotive Co. Ltd. which was pressed into service by the ld. Advocate on behalf of the Respondents. This was a Sales Tax case where the Hon’ble Apex Court held that goods which were otherwise finished products such as batteries, tyres and tubes used in the manufacturing or processing of commercial vehicles, spare parts and other engineering products are treatable as industrial raw material. In the case of Voltas Ltd. v. Collector of Customs supra, Tribunal held that hot industrial tyres for forklift trucks are prima facie classifiable under Heading 84.20 but both Headings being equally deserving of classification, the heading occurring last has to be considered because of Interpretation Rule 3(c).

11. These cases in our view are clearly distinguishable. The write-up itself indicates that the function of the jet filter is to discharge clean air in the atmosphere and fine flour is get separated and is put back into the system.The jet filtter in the pneumatic system separates air from fine flour. It saves about 3% of the product which would be lost otherwise in the atmosphere. The tech- nical specifications placed at Page 12 of Appeal Papers of A. No. C/2797/89 indicate (that unless this flour is arrested in the jet filter, it will create air pollution in and around the flour mill). Bill will this by itself make it a part of flour mill? HSN Notes clearly indicate that such jet air filters are not to be considered as parts of the milling machine. In fact, they do not perform any function relating to milling as such. They could at best be treated as accessories to a milling machine.

12. Section Note 2(a) of Section XVI clearly indicates that parts which are goods included in any of the Headings of Chapter 84, 85 are in all cases to be classified in their respective Headings. Section Note 2(b) of Section XVI indicates that other parts usable solely or principally with a particular kind of machine or with a number of machines of the same Heading are to be classified with the machine of that kind. The position that therefore emerges is that these jet air filters are at best accessories to the milling machine and not parts of milling machine and Chapter 9806 covers only parts and not the accessories.

13. In view of this, we hold that the impugned goods are correctly classifiable under 8421. In view of this, the impugned orders are set aside and Revenue Appeals allowed.

Pronounced in open court on 7-10-1997.

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Equivalent 1999 (109) ELT 888 (Tribunal)