1999(01)LCX0141

IN THE CEGAT, EASTERN BENCH, CALCUTTA

Shri G.R. Sharma, Member (T) and Smt. Archana Wadhwa, Member (J)

HINDUSTAN MOTORS LTD.

Versus

COMMISSIONER OF CUSTOMS, CALCUTTA

Order Nos. A-80-81/CAL/99, dated 29-1-1999 in Appeal Nos. C/R-138/97 & C/R-172/95

Cases Quoted

Texspan v. Collector — 1989(11)LCX0001 Eq 1990 (047) ELT 0033 (Tribunal) — Referred                                                              [Para 6]

Collector v. Modi Zerox Ltd. — 1993(01)LCX0014 Eq 1993 (067) ELT 0303 (Tribunal) — Referred                                             [Para 6]

Hindustan Lever Ltd. v. Collector — 1990(02)LCX0041 Eq 1990 (049) ELT 0408 (Tribunal) — Referred                                   [Para 6]

Sun Export Corporation v. Collector — 1997(07)LCX0044 Eq 1997 (093) ELT 0641 (S.C.) — Referred                                        [Para 7]

STP Ltd. v. Collector — 1997(12)LCX0049 Eq 1998 (097) ELT 0016 (S.C.) — Referred                                                                        [Para 7]

Liberty Oil Mills (P) Ltd. v. Collector — 1994(12)LCX0072 Eq 1995 (075) ELT 0013 (S.C.) — Referred                                          [Para 8]

Nova Pan India Ltd. v. Collector — 1994(09)LCX0128 Eq 1994 (073) ELT 0769 (S.C.) — Referred                                               [Para 8]

Advocated By : Shri M.N. Biswas, Consultant, for the Appellants.

Shri S.N. Ghosh, JDR, for the Respondents.

[Order per : G.R. Sharma, Member (T)]. - The issue for determination in this appeal is whether Chain Sprocket is classifiable under Chapter sub-heading 8431.49 read with 8429.59 as claimed by the importer or under Chapter sub-heading 8483.40 as held by the Revenue.

2. The facts of the case briefly stated are that the appellants imported Chain Sprockets and claimed assessment thereof under Chapter sub-heading 8431.41 read with 8429.59. However, the Assessing Officer assessed the goods under Chapter sub-heading 8483.40. The appellants urgently required the goods and, therefore, cleared the same as assessed by the Department and filed a claim for refund of the differential duty based on classification of the goods claiming classification under sub-heading 8431.49 read with 8429.59. The claim was rejected by the Assistant Collector of Customs on the ground that Chain Sprocket is specifically covered by Chapter sub-heading 8483.40; that only toothed wheel was excluded from gears and gearings under sub-heading 8483.40; that the Explanatory Notes at page 1326 of the HSN also includes Chain Sprocket in gears and gearings. Being aggrieved by this order, the appellants filed an appeal with the Collector of Customs (Appeals) contending that in the grammatical set-up of the wordings under Heading 8483.40, the said heading is to cover gears and gearings other than toothed wheel, Chain Sprocket and other transmission elements presented separately and not gears and gearings, ‘other than’ the toothed wheel is interpreted by the Assistant Collector to exclude toothed wheels. It was also contended by the importer that if sub-heading 8483.40 includes other transmission elements also i.e. parts, then there was no occasion to prescribe a specific sub-heading 8483.90 for parts; that Explanatory notes in HSN cannot over-ride the statutory provisions of the Tariff; that the Chain Sprocket receives the rotary motion from the drive gear but does not transmit it to any other unit and it works in conjunction with the crawler chain which provides ground support to the machine. The ld. Commissioner of Customs (Appeals) held “as regards to the appellants’ contention that the goods in question are not Chain Sprockets in the event it is held that Chain Sprocket is outside the purview of Heading 8483.40. I find that the goods have already been declared in the Bill of Entry as Chain Sprocket. Therefore, the identity of the goods cannot be questioned at this stage. In that view of the matter, the appeal is rejected upholding the impugned order.”

3. Arguing the case, Shri M.N. Biswas, ld. Consultant at the out set raised preliminary objection stating that ld. Commissioner (Appeals) failed to meet the requirements of law inasmuch as the authorisation issued by the Collector does not show that the Collector had applied his mind before saying that the order was illegal and improper. He submitted that the points to be looked into have not been identified.

4. On careful consideration of the submissions made by both the sides, the preliminary objection was over-ruled and the litigants were directed to proceed further in the matter.

5. Ld. Consultant submitted that in the presence of semi-colon between the specified entries under sub-heading 8483.40 grammatically indicates that each entry is a separate group or class and has to be read and understood as such; the words ‘other than’ qualified the entire description toothed wheels, chain sprockets and other transmission elements presented separately; that the first entry under sub-heading 8483.40 will mean gears and gearing but not toothed wheels, Chain Sprockets and other transmission elements; it will be a grammatical murder to truncate the above entry and say that only toothed wheels has been excluded from gears and gearing and that Chain Sprockets and other transmission elements are separate entries; that reliance on Explanatory Notes in HSN disregarding the statutory provisions in the Tariff heading is wrong; that it was a settled position in law that the Explanatory Notes in the HSN have only persuasive value and cannot be adopted when they violate the statutory provisions; that the plain meaning of the entry under sub-heading 8483.40 excludes toothed wheels, Chain Sprockets etc. from it’s purview and therefore, there was no question of taking recourse to the Explanatory Notes in the HSN; that there was no warrant for the Department to go beyond the statutory description under sub-heading 8483.40 to find out its meaning and scope from the Explanatory Notes in HSN; that Note (C) of Heading 84.83 of HSN at page 1326 relied upon by the lower authorities reads : “It also covers toothed and similar wheels for use with transmission chains” which means that toothed and similar wheels which are not used with transmission chains are not covered by Heading 84.83; that track link assembly is not treated as transmission chains for the purpose of classification; crawler chain which is a track link assembly is, therefore, not a transmission chain but a part of excavator classifiable under Heading 84.31 read with Heading 84.30.

6. Ld. Consultant referred to a lot of case law in support of his contention. He submitted that Explanatory Notes have no legal force; that they are only a wilful kid in understanding scope and meaning of heading and terms used in the schedule to the Customs Tariff Act. In support of his contention, he cited and relied upon the decision of this Tribunal in the case of Texspan v. Collector of Customs reported in [1989(11)LCX0001 Eq 1990 (047) ELT 0033 (Tribunal)]. He cited and relied upon the decision of this Tribunal in the case of Collector of Customs v. Modi Zerox Ltd. reported in 1993(01)LCX0014 Eq 1993 (067) ELT 0303 (Tribunal), in support of his contention that HSN Explanatory Notes although having a persuasive value in determining classification, but not to be taken into consideration where goods classifiable with reference to Rules of Interpretation to Tariff, Chapter Note and Tariff heading in Customs Tariff Act, 1975 itself. Ld. Consultant also submitted that while interpretating taxing statutes construction and interpretation strictly as per the ‘words’ used in the statute is necessary. He supported this contention by relying on the decision of this Tribunal in the case of Hindustan Lever Ltd. v. Collector of Central Excise reported in [1990(02)LCX0041 Eq 1990 (049) ELT 0408 (Tribunal)].

7. Ld. Consultant submitted that wherever there are two views possible, it is well settled that one favourable to the assessee in the matter of taxation has to be preferred. In support of this contention, he cited and relied upon the decision of the Hon’ble Supreme Court in the case of Sun Export Corporation v. Collector of Customs reported in [1997 (093) ELT 641]. He further submitted that if there is any doubt in the construction of any provisions of a taxing statute that doubt must be resolved in favour of the assessee. In support of this contention, he cited and relied upon the decision of the Supreme Court in the case of STP Ltd. v. Collector of Central Excise reported in [1998 (097) ELT 16]. Ld. Consultant submitted that in view of the above submissions, the Chain Sprocket imported by them is correctly classifiable under Chapter sub-heading 8431.49 read with sub-heading 8429.59 and prayed that the appeal may be allowed.

8. Shri S.N. Ghosh, ld. JDR appearing for the respondent - Commissioner, submits that the entry against sub-heading 8483.40 reads “gears and gearings, other than toothed wheels, Chain Sprockets and other transmission elements presented separately; ball or roller screws; gear boxes and other speed changers, including torque converters”. He submits that a plain reading of this description merely shows that the Chain Sprockets are specifically mentioned against this sub-heading and are not excluded from the coverage of Tariff sub-heading 8483.40 inasmuch as `other than’ toothed wheels precedes it and not follows it. He submits that two points become very clear from this description of goods classifiable under this entry. The first point is that Chain Sprockets are specifically mentioned and the second point is that they are not excluded but are included, specifically against this Tariff sub-heading. He referred to the Explanatory Notes at Page 1326 whereunder he submitted that under Column (C) of the Explanatory Notes, it has been stated that gears and gearing including friction gears and Chain Sprockets are covered under Heading 8483. He submitted that two things are explicit in this description of the HSN Explanatory Notes. The first thing, Chain Sprockets are specifically covered under Heading 84.83 and that the movement is transmitted to the next and so on. Ld. DR submitted that all transmission chains are covered by HSN notes at Page 1026. He referred to Board’s clarification on Tariff Heading 84.65(C) and submitted that this clarification clearly states that transmission chains are classifiable as indicated in HSN Explanatory Notes Page 1026. Ld. DR submitted that since the entry of Chain Sprockets is specific under Chapter sub-heading 8483.40, this should prevail over the general heading as part of the excavator. He submitted that whenever there is any ambiguity, the benefit of the ambiguity should go to the Revenue. In support of his contention, he cited the case reported in [1995 (075) ELT 13]. He submitted that the Apex Court further held that whenever there are two views, the benefit should go to the Revenue. In support of his contention, he cited and relied upon of the Hon’ble Supreme Court’s judgment in the case of Nova Pan reported in [1994 (073) ELT 769]. Ld. DR, therefore, submitted that in view of the above submissions, Chain Sprockets are classifiable under Chapter sub-heading 8483.40. He, therefore, prayed that the appeal may be rejected.

9. These are two appeals - one is filed by M/s. Hindustan Motors Ltd. against the impugned order and other is filed by the Commissioner of Customs, Calcutta. As the issue in both the appeals is same, they were taken up together for hearing, were heard together and are being disposed of by this common order.

10. On careful consideration of the submissions made, we find that the entire issue centred round whether semi-colon (;) used in the description of goods against Chapter sub-heading 8483.40 excludes Chain Sprockets as importer-assessee contended that the semi-colon (;) in grammatical sense deals with all the items mentioned before this whereas the Department contends that it excludes toothed wheels and not Chain Sprockets inasmuch as Chain Sprockets appeared after the words indicating exclusion and that `coma’ (‘) after on the ‘words’ other than toothed wheel makes Chain Sprockets to fall outside the exclusion clause. We have perused the description of goods against Chapter sub-heading 8483.40. We find that Chain Sprockets are specifically mentioned in the description of the goods against this entry and the plain reading of the various goods shows that Chain Sprockets are not excluded.

10.2 The second point agitated before us was whether they are meant for transmission of power. A lot of arguments were adduced by both the sides. We also have seen the xerox copy of the photograph of the Chain Sprockets. We have also perused the technical literature furnished by the importer. We note that Chain Sprocket is actually used for transmission of power as the rotary movement of the sprocket conveys power to the next one and makes it move, thus this is used for transmission of power. We have also consulted Mc Graw-Hill Dictionary of Scientific and Technical Terms (Fifth Edition). We note that sprocket chain has been defined as “A continuous chain which meshes with the teeth of sprocket and these transmits mechanical power from one sprocket to another.”

10.3 Arguments were adduced by the importer that if Chapter sub-heading 8483.40 includes parts, then there was no necessity of providing a separate Chapter sub-heading for parts under Entry 8483.90. The Department contended that parts which are not specifically mentioned elsewhere will be covered by Chapter sub-heading 8483.90. In the instant case, it was argued that Chain Sprockets are specifically covered by Chapter sub-heading 8483.40, therefore, Chapter sub-heading 8483.90 will not cover Chain Sprockets inasmuch as a specific entry shall prevail over the general entry. It was contended that Chapter sub-heading 8483.40 was specific about a Chain Sprocket whereas Chapter sub-heading 8483.90 was a residuary entry.

10.4 It was also contended that Explanatory Notes to HSN includes toothed wheels for use with transmission chain within Heading 84.83, but crawler chain is not a transmission chain and hence Chain Sprocket being used with crawler would not fall under Heading 84.83 but fall under Heading 8431.49. Chapter sub-heading 8431.49 is again a residuary entry for parts suitable for use solely or principally with the machines of Heading Nos. 8425-8430. We have perused these headings, we find that the Chain Sprockets in the instant case are for the hydraulic excavator. The basic question to be examined in regard to this Chapter sub-heading is whether Chain Sprocket is specified in any of the entry of this chapter and if so whether that specific mention of the description of the goods against that particular entry will be sub-servient to the general Chapter sub-heading 8431.49. Examining the contention of the importer in this light, we find Chapter sub-heading 8483.40 is specific for Chain Sprocket and, therefore, it will prevail over general Chapter sub-heading 8431.49.

10.5 Another argument that was emphatically pressed before us was that whether HSN Explanatory notes can over-rule the Tariff entry, it was argued by the importer that the Explanatory notes of HSN have a persuasive value and they are not binding. We have examined this condition, we find that Chapter sub-heading 8483.40 includes Chain Sprocket. Therefore, the Explanatory notes do not prevail over the Tariff description but only support the Tariff description. The case law was cited by the importer on this aspect. We have seen the case law. We also note that the Apex Court in the case of M/s. Wood Crafts held that since new Central Excise Tariff is based on HSN Explanatory notes to HSN are important instrument for examining the classification of a particular product. Needless to say, that the statutory entry under sub-heading 8483.40 of the CETA, 1985 corresponds to entry under sub-heading 8483.40 of the HSN. Looked at from this view point, we hold that HSN will be binding for interpretating the Chapter sub-heading 8483.40 of CETA, 1985.

10.6 Reference was made to compendium of classification opinions. Track link assembly specifically designed for bulldozer is classifiable under the erstwhile Heading 8423 and in the Heading 8431 read with Heading 8430. It was contended that track link assembly is not treated as transmission chain for the purpose of classification and since crawler chain which is a track link assembly is, therefore, not a transmission chain but a part of excavator classifiable under Heading 8431 read with Heading 8430. We have examined this contention of the importer in detail. We note that Chain Sprocket is specifically mentioned in Chapter sub-heading 8483.40, therefore, looking to some other entries for the same becomes irrelevant, Only in case of doubt, we have to look elsewhere when there is no specific description of the goods. In the instant case, since there is a specific entry in the Tariff itself, there is no need of going elsewhere for classifying the product.

10.7 In view of the above findings and discussions, we hold that Chain Sprocket imported by M/s. Hindustan Motors Ltd., will be classifiable under Chapter sub-heading 8483.40. The two appeals are disposed of in the above manner.

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Equivalent 1999 (114) ELT 302 (Tribunal)

Equivalent 1999 (031) RLT 0853