2000(01)LCX0162
IN THE CEGAT, COURT NO. II, NEW DELHI
S/Shri S.K. Bhatnagar, Vice President and A.C.C. Unni, Member (J)
Third Member on Reference : Shri S.S. Kang, Member (J)
Majority Order : Shri V.K. Agrawal, Member (T) and Ms. Jyoti Balasundaram, Member (J)
Cases Quoted
Collector v. Motor Industries Co. Ltd.—1991(02)LCX0043 Eq 1991 (054) ELT 0397 (Tribunal) — Followed.. [Paras 9, 12]
Randhir Shipping Co. v. Collector — 1989(03)LCX0029 Eq 1989 (041) ELT 0392 (Bom.) — Referred.................... [Para 8]
Shri Ram Pistons & Rings v. Commissioner — 1996(12)LCX0108 Eq 1997 (092) ELT 0598 (Tribunal) — Referred [Para 9]
Advocated By: S/Shri A. Hidayatullah, Sr. Advocate with M.P. Basu, Sandeep Narayan, Advocates, for the Appellant.
Shri A.K. Agarwal, SDR, for the Respondents.
[Order per : A.C.C. Unni, Member (J)]. - In these two Appeals (One by M/s. Bajaj Auto Ltd. and the other by Collector of Customs, Bombay) the order of the Collector of Customs (Appeals), Bombay dated 31-3-1993 relating to the classification of “Automative Exhaust Mission Measuring System” is involved.
2. The appellant M/s. Bajaj Auto Ltd. imported a consignment of 12 packages and claimed clearance of the goods under Customs Tariff Heading 90.27.80 read with Notification No. 243/78 (S. No. 10 is Exhaust gas analysers for measurement “Pollutants”). The Department initially disputed the classification and took the view that it would be assessable under Heading 9031.00 without benefit of Notification No. 243/78-Cus. In the adjudication proceedings in remand, the Asstt. Collector came to the conclusion that the impugned goods constitute a technically advanced instrument/apparatus for testing, checking and regulating a motor vehicle, for ascertaining the best carburettor setting by the method of analysis of exhaust gases and classified the apparatus on merits. He classified the Automative Exhaust Mission Measuring System under Heading 9031.80 and extended the benefit of Notification No. 243/78 (S. No.10) as claimed by the importer but refused the benefit of Notification No. 23/91 holding that it did not directly and entirely depend on electrical phenomenon. In Appeal the Collector (Appeals) modified the order of the Asstt. Collector by holding that the automotive Emission Analysis System would be assessable under Heading 9031 with the basic duty benefit under Notification 243/78 and also Auxiliary duty benefit under Notification 23/91.
3. In the Appeal filed by M/s. Bajaj Auto Ltd., the appellants have prayed for an order confirming that the entire consignment of 12 items as a composite unit not to be fragmented into three separate parts classifiable separately and thereby giving consequential relief and to classify the entire composite unit under Customs Tariff Heading No. 9027.10 (“Gas or Smoke analysis apparatus”) along with exemption both under Notifications 243/78 and 23/91 as claimed by them. In the Departmental Appeal, the Collector has prayed for setting aside the order passed by the Collector (Appeals) and restoration of the Assistant Collector's order in the de novo proceedings by which the Asstt. Collector had classified Automative Exhaust Mission Measuring System imported by M/s. Bajaj Auto Ltd. be classified under Heading 9031 with benefit of Notification 243/78 but without benefit of Notification 23/91. Further, the Asstt. Collector had also classified Mission Test Processor under 84.71 on merits. Spares were also classified to duty on merits.
4. We have heard Shri A. Hidayatullah, ld. Sr. Advocate for M/s. Bajaj Auto Ltd. and Shri A.K. Agarwal, ld. DR for the Collector.
5. Ld. Counsel submitted that the consignments imported by M/s. Bajaj Auto Ltd. consisted of three parts namely -
(1) A sampling unit of Model CVS 50 with its controller;
(2) Mexa 8020 Basic Model Enclosure with 9 analysis;
(3) HERT 200 a test processor and complete set with all spare parts.
Though the equipment was imported in different consignments, they were in fact part of the same system and was one integral unit and could function only as a single system put together for purpose of operating. The two major parts, namely, sampling unit and data processor unit cannot be treated separately since the unit was at single integrated unit. He submitted that the lower authorities had treated sampling unit and data processing unit separately for the purpose of classification and for assessment of basic duty and auxiliary duty and for purposes of allowing benefit of Notification No. 23/91.
6. Explaining the features of the equipment imported by M/s. Bajaj Auto Ltd. (BAL), ld. Counsel submitted that it consisted of an exhaust analyzer "Horiba Mexa 8320" with a constant volume sampler (type CVS 50) and an Emission Test Processor (Type Horiba Hert 200). These were the three components which constituted the composite Exhaust Pollutant Measuring Equipment. The equipment was meant for measuring Exhaust Emission of Vehicles manufactured by Bajaj Auto Ltd. During exhaust emission tests, the exhaust pipe of the vehicle is connected to the equipment by a look (sic) proof joint. The exhaust gases generated by the test vehicle are then collected by the Sampler CVS 51. The collected sample is then fed to the exhaust analyser portion - Mexa 8320. The Mexa 8320 analysis the exhaust sample for measurement/levels of pollutants, which process involves the measurement and analysis of various pollutants/constituents in the exhaust such as Carbon monoxide, Carbon dioxide, Hydro carbons, Nitrogen oxide and Oxygen. The measurement of the quantity of pollutants is done by measuring the variation in the electrical voltage signal. The electrical voltage (which is an electrical phenomenon) varies with the quantity of the pollutants contained in the exhaust gas. The complete process is monitored by the HERT 200 which gives levels of the pollutants in terms of gms./kms, the said CVS 51, the Mexa 8320 and the Hert 200 - all put together form one exhaust gas analysis apsaratus. The apparatus is used for the analysis and measurement of pollutants contained in exhaust gases of motor vehicles manufactured by the Bajaj Auto Ltd. He referred to in detail to the catalogues/leaflets of the equipment annexed to the Memo of Appeal to explain the features of each of the components.
7. Ld. Counsel submitted that from the very beginning Bajaj Auto Ltd. had maintained that the entire equipment should be classified under Customs Tariff Heading 9027.10 with benefit of exemption notification 243/78 (S. No. 10). In the first adjudication proceedings the Asstt. Collector had classified the equipment under Heading 9031.80. When the matter was taken up in Appeal before the Collector (Appeals), the Collector (Appeals) had remanded the matter to the Asstt. Collector for considering the issue of classification of the equipment afresh. Persuant to the remand order, the Asstt. Collector by his order dated 21-10-1992 passed an order sub-dividing the equipment into various parts against which Bajaj Auto Ltd. had filed an appeal before the Collector (Appeals) and the Collector (Appeals), while accepting appellant's contention to a limited extent confirmed the order of the Asstt. Collector upholding the classification of the various parts of the equipments separately. Ld. Counsel submitted that the impugned order had, therefore, failed to appreciate the basic fact that the entire equipment functioned as one integrated unit and the components cannot be treated as separate items for purposes of classification and assessment.
8. Ld. Counsel submitted that the Collector (Appeals) in the impugned order had departed from the views expressed in the earlier order remanding the matter to the Asstt. Collector in asmuch as the Collector had erred in holding that the composite equipments are classifiable as three different parts for purposes of classification and assessment. Ld. Counsel further submitted that the Collector had wrongly referred to the HSN Notes and explanation thereto when it was clear from the specific entry in the Customs Tariff that the goods were classifiable under Heading No. 9027.10. In this connection, he submitted that reliance placed on HSN Notes was totally unwarranted when the Tariff entry was clear and unambigous. He relied on the Hon'ble Bombay High Court judgment in Randhir Shipping Co. v. Collector of Customs [1989 (041) ELT 392].
9. In support of the contention that where a machine including combination of machines consisting of individual components intended to contribute together to a clearly defined function, then the heading applicable to the composite machine should be taken at the correct heading for purposes of classification, he referred to the Tribunal decision in Collector of Customs v. Motor Industries Co. Ltd. [1991 (054) ELT 397] in which the Tribunal had quoted with approval Section Note 4 to Section XVI to the Customs Tariff Act, 1975 in a classification dispute relating to thermal analysis system. He also relied on the Tribunal decision in Shri Ram Pistons & Rings v. CC [1997 (092) ELT 598] in which the Tribunal had held that a separate licence was not required for import of computer when it is imported with Spectrometer since spectrometer incorporates a computer within the system for measuring processing and analysing the results.
10. Arguing the case of the Department Shri A. K. Agarwal, ld. SDR submitted that the Asstt. Collector had in the de novo adjudication correctly held that the sampling unit (Model CVS 51) with its controllers were separately classifiable under Heading 90.31 without the benefit of Notification 243/78 and Notification No. 23/91. Likewise Automotive Exhaust Emission Analysis System (HORIBA, MEXA 8320 with 9 analysis and their controllers) were classifiable under Heading 9031 with the benefit of Notification No. 243/78 but without benefit of Notification No. 23/91. Further Emission Test Processor (HORIBA HERT 200) which is an automatic data processor was classified under Heading 84.71 on merits. Spares were also classified to duty on merits. The Collector (Appeals) had in the impugned order held that the instrument was working on electrical phenomenon and therefore, eligible for the benefit of Notification No. 23/91. Ld. DR submitted that one of the conditions of Notification No. 23/91 was that the instrument should fall under Heading 90.31 and works with electrical power. In the Automotive Emission Analysis System (Type HORIBA MEXA 8320 with 9 analysis) the electrical phenomena is created either by infrared ray detection, flame ionisation or Chemiluminescence detection, Magnetopneumatic detection and then subsequently electrical phenomena by way of Amplification, etc. Hence the Asstt. Collector while passing the order in de novo adjudication had correctly arrived at the conclusion that the equipment does not depend directly and entirely on the electrical phenomena in the way it is stipulated Notification No. 23/91. In view of this, the Automative emission Analysis System (HORIBA MEXA 8320) was correctly classifiable under Heading 90.31 with benefit of Notification No. 243/78 but without the benefit of Notification No. 23/91. Ld. DR submitted that the impugned order of the Collector of Customs (Appeals) may be set aside and the order passed by the Asstt. Collector in the de novo adjudication be restored.
11. We have considered the submissions made by both the sides and have perused the records. We find from the write up on the imported equipment submitted by M/s. Bajaj Auto Ltd. (Annexure A of their Appeal) that the Automative Emission Analysis System consists of four parts namely, analysers (MEXA series 8320), Constant Volume, Sampler (CVS 51), Caliberation gases and Emission Test Processor (HERT 200). The two competing tariff entries are 90.27.10 and 90.31.80. The entries read as under:
90.27 - Instruments and apparatus for physical or chemical analysis (for example, polarimeters, refractometers, spectrometers, gas or smoke analysis apparatus); instruments and apparatus for measuring or checking viscosity, porosity, expansion, surface tension or the like; instruments and apparatus for measuring or checking quantities of heat, sound or light (including exposure meters); microtomes.
90.31 - Measuring or checking instruments, appliances and machines, not specified or included elsewhere in this Chapter Profile Projectors.
12. The first question for decision, is whether the equipment imported by M/s. Bajaj Auto Ltd. admittedly consisting of four different parts, was an integrated instrument falling under Tariff Heading 90.27 or they could be considered as consisting of different instruments classifiable differently. From a perusal of the catalogue of HORIBA Automotive Emission Analysis Systems it appears that the suppliers have described the system as "MEXA 8020 Series offers six total exhaust analysis systems for continuous; simultaneous analysis of CO, CO2, T.HC, NO, NOx and/or O2 in the emission from gasoline fueled vehicles. All models can incorporate computer interfaces for computer controlled operation and automatic data transmission. Each system comprises an error proof flow control unit backed by electronic swivel-castered, modular sample pre-conditioner and up to 14 specified plug-in analyzer modules, all neatly packaged in a single system console........... With such a wide range of choices; one of the MEXA 8020 Series systems will be the ideal combination for your specific requirements". Further, our attention was also drawn by ld. Advocate for Bajaj Auto Ltd. to a document published by the Ministry of Surface Transport, Govt. of India, on "Test Method, Testing Equipment and Related Procedures for Testing, Type Approving and Conformity of Production (Cop) as per Motor Vehicle Rules". From a perusal of this document, it appears that testing emission levels of motor vehicles is a statutory requirement. Ld. Advocate had also invited our attention to Section Note 4 to Section XVI of Central Excise Tariff Act which he claimed squarely covered the machine imported by the appellants. He had also contended that the Tribunal decision in CC v. Motor Industries Co. Ltd. (supra) clearly applies to the facts of the present case.
13. Section Note 4 to Section XVI reads as under :
"Where a machine (including a combination of machines) consists of individual components (whether separate or interconnected by piping, by transmission devices by electric cables or by other devices) intended to contribute together to a clearly defined function covered by one of the headings in Chapter 84 or Chapter 85, then the whole falls to be classified in the heading appropriate to that function.”
14. We observe that the impugned order has treated the different parts as stand alone equipments capable of independent functions. We find from the catalogue that the functions of CVS unit is the sampling of exhaust for analysis. HERT 200 controls the entire process of analysis and measurement of exhaust emission. These equipments are complimentary to each other and make a composite equipment. Classification of HERT 200 under Heading 84.71 and holding them to be computer systems as confirmed by the Collector (Appeals) does not appear to be correct. We find that the ld. Counsel's submission that the mere fact that a part of the composite equipment having facility for operation of the sampling unit cannot make the latter an independent, stand alone unit, has merit. The equipments imported by the appellants though capable of performing different functions are, therefore, entitled to be considered an integrated composite equipment. In the facts as brought to our notice we also agree that Section Note 4 to Section XVI will be squarely applicable to the imported items.
15. In view of the above analysis, we agree with the submissions made on behalf of M/s. Bajaj Auto Ltd. that the lower authorities have erred in classifying the imported item by dividing them into various parts on merits and applying the two exemption notifications on that basis. Accordingly, we set aside the impugned order and remand the matter to direct the jurisdictional Assistant Commissioner to reassess the duty liability on the basis of the imported items being classifiable as one integrated unit under Tariff Item 90.27.
16. The two Appeals are disposed of in the above terms.
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17. [Order per : S.K. Bhatnagar, Vice President, mainly supporting Member (J)]. - While agreeing with my learned Colleague regarding the classification aspect that the goods which were classifiable under Tariff Heading 90.27, I further observe that once we reach this conclusion, the exemption aspect could also be decided right here in view of the fact that there was no dispute about applicability of Notification No. 243/78 which explicitly covers such good; And insofar as the Notification No. 23/91 is concerned even though ld. DR is correct in pointing out that one has to distinguish between 'electric' or 'electronic' machine from these which are simply power operated in view of the nature of the Tariff, and the HSN provisions pointed out by him, this fact by itself does not advance the cause of the Department. Once the various sub-units are considered together as a single composite whole, classifiable under 90.27 and one of the serial number in the notification (namely 40) explicitly covers such goods, the benefit thereof, has to be simply allowed. I therefore, consider that the goods are not only classifiable under 9027.10 but also eligible to the benefit of both the notifications claimed by the importer and pleaded by ld. Counsel, I, therefore, modify the impugned order of the Collector (Appeals), I set aside his decision on classification but it is on the availability of both the notifications inasmuch the benefit was required to the extended treating the whole system as one composit unit.
18. The appeals are allowed accordingly.
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DIFFERENCE OF OPINION
19. In view of the difference of opinion between the Hon'ble Member (J) and Vice President, the matter is submitted to the Hon'ble President for referring to a Third Member on the following point :
“Whether in view of the order proposed by the Hon'ble Member (Judicial), the appeals were required to be remanded or in view of the observation and finding of the Vice President, the order of the Commissioner (Appeals) was required to be modified and appeals allowed.”
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20. [Order per : S.S. Kang, Member (J), Third Member on reference agreeing fully with Member (J)]. - The following difference of opinion between the Hon'ble Vice-President and the Hon'ble Member (J) is referred to the 3rd Member :
"Whether in view of the order proposed by the Hon'ble Member (Judicial), the appeals were required to be remanded or in view of the observation and finding of the Vice President, the order of the Commissioner (Appeals) was required to be modified and appeals allowed.”
21. M/s. Bajaj Auto Ltd. made import of automotive exhaust mission measuring system. The system was imported in consignment of 12 packages. M/s. Bajaj Auto Ltd. claimad the classification of the system under Heading 90.27 of the Customs Tariff and claimed the benefit of Notification 243/78. The Revenue classified the system under Heading 9031.00 of the Customs Tariff with the benefit of Notification 243/78. The adjudicating authority denied the benefit of Notification No. 23/91. On appeal, filed by M/s. Bajaj Auto Ltd., the Commissionar (Appeals) upheld the classification of the system under Heading 90.31 of the Customs Tariff but allowed the basic duty benefit under Notification No. 23/91.
22. M/s. Bajaj Auto Ltd. filed the appeal before the Tribunal claiming the classification of the system under Heading 90.27 of the Customs Tariff and the revenue also filed the appeal against the order of Collector (Appeals) with the prayer that the goods, in question, are not entitled for the benefit of Notification No. 23/91.
23. The Hon'ble Vice-President and the Hon'ble Member (J), both agreed with the submissions of M/s. Bajaj Auto Ltd. and held that the goods, in question, are classifiable under Sub-heading 90.27 of the Customs Tariff. The ld. Member (Judicial), after deciding the classification under Heading 90.27 of the Customs Tariff set aside the impugned order and remanded the matter to the jurisdictional Assistant Commissioner to reassess the duty liability on the basis of the imported items after classifying as one integrated unit under tariff item 9027 of the Customs Tariff. Whereas the Hon'ble Vice-President held that as the goods were classifiable under Heading 90.27 of the Customs Tariff, these are entitled for the benefit of Notification Nos. 243/78 and 23/91.
24. Ld. Counsel appearing on behalf of the appellants, M/s. Bajaj Auto Ltd. submits that Notification No. 23/91 at Sl. No. 40 clearly covers the goods, in question. He submits that as the goods are held to be classifiable under Heading 9207 of the Customs Tariff, they are entitled for the benefit of Notification No. 23/91. He submits that there is no need to remand the matter to the adjudicating authority.
25. Ld. D.R. appearing on behalf of the Revenue submits that the Notification No. 23/91 at Sl. No. 40 includes the goods falling under heading 9027 of the Customs Tariff. He submits that the Explanation to the notification, further, provides that electrical measuring, checking and analysing or automatically controlling the instruments and apparatus means that the machine and instruments, which are covered by Heading 90.31, the operation of which depends on an electrical phenomenon which varies according to the factor to be ascertained or automatically controlled. He submits that as the goods, in question, were classifiable under Heading 90.27 of the Customs Tariff, the goods in question, are entitled for the benefit of this notification only if these goods qualify the conditions laid down in the notification. He submits that as now the goods, in question, are classified under Heading 90.27, their eligibility for the benefit of exemption notification is to be considered afresh. He, therefore, prays that the matter be remanded.
26. Heard both sides.
27. In this case, the Automative Exhaust Mission Measuring System, imported by M/s. Bajaj Auto Ltd. was held to be classifiable under Heading 90.27. Therefore, the benefit of notification is to be considered in view of the conditions laid down in the notification. Notification No. 23/91-Cus., dated 14-3-1991 at Sl. No. 40 covers the goods falling under Heading 90.27 and the Explanation 6(b) to the notification provides that the machine, appliance, instruments, or apparatus of a kind described in Heading 90.27, the operation of which depends on electrical phenomenon which varies according to the factor to be ascertained or automatically controlled. These requirements of the notification are to be gone into which require a detailed examination in respect of function of the machine, in question. Therefore, I agree with the findings of the Hon'ble Member (Judicial) that the matter be remanded to the jurisdictional Assistant Commissioner, to reassess the duty liability on the basis of imported items being classifiable as one intergrated unit under tariff Heading 90.27 of the Customs Tariff. The matter be placed before the original bench.
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MAJORITY ORDER
28. The appeals are allowed by way of remand to the jurisdictional Assistant Commissioner to reassess duty liability on the basis of imported items being classifiable as one integreted unit under Tariff Heading No. 90.27 of the Customs Tariff.
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Equivalent 2000 (125) ELT 821 (Tribunal)