2000(11)LCX0089

IN THE CEGAT, EASTERN BENCH, KOLKATA

Smt. Archana Wadhwa, Member (J) and Dr. S.N. Busi, Member (T)

IFB INDUSTRIES LTD.

Versus

COMMISSIONER OF CUSTOMS, GOA

Order No. A-1975/CAL/2000, dated 30-11-2000 in Appeal No. C/1754/95

CASE CITED

Birla Jute Industries Ltd. v. Asstt. Collector — 1992 (57) ELT 674 (Cal.) — Referred ...... [Para 3]

DEPARTMENTAL CLARIFICATION CITED

C.B.E. & C. Circular No. 49/3/97-CX., dated 9-5-1997....................................................... [Para 3]

Advocated By :   Shri D.B. Desai, Chartered Accountant, for the Appellant.

Shri R.K. Roy, JDR, for the Respondent.

[Order per : Dr. S.N. Busi, Member (T)]. - The issue for consideration in this appeal is whether “Programmer for Washing Machine” merits classification under sub-heading 9032.89 of the Customs Tariff as claimed by M/s. IFD Industries Ltd. or under sub-heading 8537.10 as held by the Customs.

2. The appellants are manufacturer of automatic washing machines at their factory at Verna, Goa. They have imported “Programmer” for use in the manufacture of washing machines. The appellants declared its classification under 9032.89 claiming benefit of Notfn. No. 79/93-Cus., dated 28-2-1993 but the Customs sought to classify the same under sub-heading 8537.10. Pending finalisation of the matter, the goods were allowed to be cleared on provisional assessment. Thereafter, backed by a technical writ-up, the appellants submitted a detailed explanation which is reproduced below for convenience of reference :

“The Programmer imported by us is an appliance operated electrically and as programmed for 18 kinds of programmes by a specially designed cam. The cam profile is designed to give the sequential contacts which in turn makes the various devices like pump, thermostat and heating element, solenoid valve, two level pressure switch, motor etc. operative for controlling drainage of water, temperature of water, flow of water, level of water and washing, rinsing and spinning, etc.

As evident from sample and the electrical circuit submitted by us the programmer imported by us is not a numerical control panel and is not used to control the machine tools. This is an apparatus which automatically controls the non-electrical quantities through thermostat and heating element, valve, two level pressure switch, motor and it operates on receipt of electrical supplies from the switch board consisting of switches like door lock switches, on/off switch of the machine, etc. This is not a digital apparatus as it does not have light emitting diodes or integrated circuits for storage of the programmer. Hence, this item is not classifiable under Chapter Heading 85.37.

The fully automatic washing machine manufactured by us is having a complete automatic control system which is designed to bring the non-electrical quantities like temperature of water, level of water, washing, rinsing and spinning of clothes and maintain it at a desired level/value. This complete automatic control system controlled by the programmer consists of devices like two level pressure switch, heating element, thermostat, triple solenoid valve, motor, pump, etc.

When the programmer receives supply from the on/off switch of the machines and the door locks switch it sends the electrical signal to the tripple solenoid valve to allow the inflow of water. When the water reaches a desired level the two level pressure switch which is pressure sensitive gives a signal to the programmer which in turn sends a signal to the tripple solenoid valve to stop the inflow of water. It allows the heating element to heat the water and maintain the temperature of the water at a desired level through thermostat which is temperature sensitive. It gives a signal to the motor to wash, rinse or spin the clothes sequentially. Once the operations of wash, rinse and spin are over it gives a signal to the drain pump to drain the water.

All the above items put together form a complete automatic system with the programmer comparing and controlling the sequence, and quantity/value/ level of all the non-electrical quantities with respect to the programmed values, which is required for the operation of a fully automatic washing machine.

Hence, the item programmer imported by us and used in a fully automatic washing machine is an apparatus for automatically controlling the non-electrical quantities like temperature, water level, washing, rinsing and spinning of clothes and drainage of water and the operation of which depends on an electrical phenomenon varying according to the factor to be controlled. Hence, as per para A(I) of Harmonised Customs Tariff for Chapter Heading 90.32, the item programmer is classifiable under Heading 9032.89”.

The adjudicating authority disagreed with the explanation of the appellants. As the Indian Customs Tariff is based on the HSN, the adjudicating authority relied upon the Explanatory Note No. 2 to Heading 85.37 which reads as under :

“Programmer switchboards to control apparatus; these permit variations in the choice of operations to be followed. They are normally used in domestic electrical appliances, such as washing machines and dish washers.”

Relying on the said Explanation, the adjudicating authority vide his order dated 12-8-1994 held that the “Programmer” in question squarely falls under sub-heading 8537.10.

2.1. Being aggrieved by the said order, the appellants filed appeal before Commissioner (Appeals) and pleaded that Heading 85.37 speaks of boards, panels, consoles, desks, cabinets and other bases, equipped with two or more apparatus of Heading Nos. 85.35 or 85.36 for electric control or distribution of electricity. The appellants argued that to be classified under 85.37, a product should be assembly of board, panel etc. with two or more apparatus and it must be equipped with two or more apparatus falling under the specified heading and the same must be for electrical control or distribution of electricity. The appellants contended that the programmer in question did not satisfy the first two conditions as it was not a board/panel and it was not an assembly and as such would not merit classification under Heading 85.37, but merited to be classified under sub-heading 9032.89. Commissioner (Appeals) felt that the appellants read only half of the Heading No. 85.37. According to him, reference to the other part which reads “including those incorporating instrument or apparatus of Chapter 90, other than switching apparatus of Heading No. 85.17” was material to resolve the issue. He opined that the subject programmer gets covered by the second part of Heading 85.37. He, therefore, rejected the appeal vide his order dated 30-11-1994. Hence, the present appeal before the Tribunal.

3. Shri D.B. Desai, learned Chartered Accountant appearing for the appellants, explains that each washing machine has a control panel which is moulded out of plastic raw material and is rectangular in shape. The panel has - (a) three button press switch for half load economy, delicate wash and spin speed selector; (b) on/off switch with temperature selector knob; (c) “Programmer” with select knob; (d) indicator lamp. The “Programme” is one of the apparatus which is fitted on this panel and is pre-programmed for automatically controlling drainage of water, temperature of water, flow of water, level of water and washing, rinsing and spinning. The learned C.A. goes on to say that this apparatus automatically controls the non-electrical quantities through thermostat and heating element, valve, two level pressure switch, motor and it operates on receipt of electrical supplies from the swtich board. The programmer has got a separate identity and is a marketable commodity and is individually imported. The learned C.A. is quite emphatic in his assertion that the subject “programmer” falls under sub-heading No. 9032.89. In support of this assertion, he heavily relies upon Note No. 6 of Chapter 90 which reads as follows :

“6. Heading No. 90.32 applies to;

(a)        Instruments and apparatus for automatically controlling the flow, level, pressure or other variables of liquids or gases, or for automatically controlling temperature, whether or not their operation depends on electrical phenomenon which varies according to the factor to be automatically controlled; and

(b)        Automatic regulates of electrical qualities, and instruments or apparatus for automatically controlling non-electrical qualities the operation of which depends on an electrical phenomenon varying according to the factor to be controlled”.

Inviting specific attention to the said Note 6(a), the learned C.A. argues that the “programmer” fits into the categories of the goods specified therein and it merits classification under sub-heading 9032.89. Assailing orders of the lower authorities, the learned C.A. points out that Heading 85.37 and the Explanatory Note 2 thereunder refer to boards, panels (including numerical controlled panels), desks and cabinets and other bases equipped with two or more apparatus under heading 85.35 or 85.36 for electric control or distribution of electricity including those incorporating instruments and apparatus of Chapter 90 other than switching apparatus of Heading 85.37. According to him, there are three cumulative requirements of an item to fall under Heading 85.37 and they are - (i) it must be an assembly of board, panel etc.; (ii) it must be equipped with two or more apparatus falling under the specified heading; (iii) the same must be for electrical control or distribution of electricity. The programmer, submits the learned C.A., does not satisfy the first two conditions. Being an independent apparatus, the programmer goes outside the scope of Heading 85.37 but correctly classifiable under sub-heading 9032.89. The learned C.A. has drawn our attention to the Order No. 49/3/97-CX. (F. No. 154/8/94-CX. 4), dated 9-5-1997 of the Central Board of Excise and Customs, New Delhi issued under Section 37B of the Central Excise Act, 1944 in which “programmable logic controller” and “programmable process controller” have been classified under Headings 85.37 and 90.32 of the Central Excise Tariff, respectively. The said order is based on the advice of the Department of Electronics which is reproduced below :

“(i) The programmable controllers covered under Heading 85.37 :- They perform specific functions such as logic instruments timing etc. to control various types of machines in a plant.

(ii) The automatic regulating or controlling instruments and apparatus under the Heading 90.32:- They may be considered as industrial process control systems satisfying criteria mentioned in H. No. 90.32. These are primarily used for controlling/maintaining the flow, level, pressure or other variables of liquids or gases, or for automatically controlling temperature of a process (may be refinery, steel, chemical industry) at the present level. They can perform functions both sequence logic and different control strategies like Proportional -Differential (PID) Control and other forms of control”.

The learned C.A. submits that the Board found the said opinion to be in conformity with the Explanatory Notes of the H.S.N. He, therefore, argues that the “programmer” merits to be classified under Heading 90.32 and not under 85.37. He submits that the Board’s instruction and Circular are binding on the officers. In this connection, he refers to the judgment of Hon’ble High Court of Calcutta in Birla Jute Industries Ltd. v. Asstt. Collector of Central Excise reported in 1992 (57) ELT 674 (Cal.).

4. Shri R.K. Roy, learned JDR, appearing for the Revenue, reiterates the reasoning contained in the order impugned and counters the arguments of the learned C.A.

5. After hearing the arguments advanced from both sides and on a careful perusal of the relevant tariff entries referred to above, we find force in the arguments advanced on behalf of the appellants. We agree with the appellants that to classify an item under Heading 85.37 it should satisfy the three requirements referred to by the learned C.A. The programmer, as rightly argued by the learned C.A., is not an assembly of board, panel, etc., and it is not equipped with two or more apparatus falling under the Heading 85.35 or 85.36. Despite this fact, Commissioner (Appeals), relying on the second part of the Tariff Heading 85.37, classified the programmer under that heading. The said heading is reproduced below for ready reference :

“85.37 : Boards, panels (including numerical control panels), consoles, desks, cabinets and other bases, equipped with two or more apparatus of Heading No. 85.35 or 85.36, for electric control or the distribution of electricity, including those incorporating instruments or apparatus of Chapter 90, other than switching apparatus of Heading No. 85.37.”

While relying on the second part of the said tariff entry, Commissioner (Appeals) has ignored the following note under HSN 85.37 which reads : “This heading does not cover automatic controlling apparatus of Heading 90.32.” We observe that there is no dispute about the programmer being an automatic controlling apparatus and it squarely fits into a category of apparatus mentioned in Note No. 6(a) under Heading No. 90.32 which is reproduced in para 3 supra. As the programmer being an automatic controlling apparatus falling under Heading 90.32 and the same having been explicitly excluded from the Heading 85.37, we are of the view that the correct classification of the programmer shall be Heading 90.32 and sub-heading 9032.89. The Board’s order cited by the learned C.A. lends support to the above view. In this view of the matter, we set aside the impugned order with consequential relief to the appellants.

6. In the result the appeal is allowed with consequential relief to the appellants.

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Equivalent 2000(11)LCX0089 Eq 2001 (131) ELT 0213 (Tri. - Kolkata)

Equivalent 2001 (042) RLT 0300