2015(10)LCX0117

IN THE CESTAT, WEST ZONAL BENCH, MUMBAI [COURT NO. II]

S/Shri P.S. Pruthi, Member (T) and Ramesh Nair, Member (J)

C.C. (IMPORT), MUMBAI ZONE-II

Versus

MASCHIO GASPARDO INDIA P. LTD.

Final Order Nos. A/3396-3399/2015-WZB/CB, dated 14-10-2015 in Appeal Nos. C/86545, 86631 & 86899/2014 and Cross Objection No. C/CO/91027/2015

Cases Quoted -

Saint GobainGlass India Ltd. v. Commissioner - 2014 (313) E.L.I. 680 (Tribunal) - Referred.. [Para 3]

Advocated By -

Shri Pradeep Korde, Consultant, for the Assessee.
Shri S.J. Sahu, Assistant Commissioner (AR), for the Department.

[Order per : Ramesh Nair, Member (J)]. -

These two appeals and one Cross Objection by the assessee and one appeal by the Revenue are directed against OIA No. 475(Gr. V)/2014 (JNCH)/IMP-452, dated 13-2-2014 and OIA No. 476(Gr. V)/2014 (INCH)/IMP-452, dated 13-2-2014 passed by the Commissioner of Customs (Appeals), JNCH, Sheva Mumbai-II.

2. The fact of the case is that assessee company imported parts of agricultural machinery which includes gear boxes, transmission /drive shaft and other items under Bill of Entry No. 5481, dated 13-12-2012 and Bill of Entry No. 8729556, dated 11-12-2012. The assessee in the Bill of Entry declared these various items under Chapter Heading 8432 90 90 as parts of other agricultural machineries. The adjudicating authority considered the Note 2(a) of Section XVI of Customs Tariff Act and also HSN Note to Section XVI and held that even though imported items are parts of agricultural machinery but by virtue of Section Note 2(a) of Section XVI, if individual items are classifiable under its specific Tariff Entry the same shall be classified under respective Tariff items instead of parts of agricultural machinery. Accordingly the adjudicating authority has reclassified the imported items as under Table :

The goods classifiable as parts of agricultural machinery under Chapter 8432 attracts duty rate (7.5% + 0%+2%+l%+4%) whereas on change of classification as per the Adjudicating Authority the differential duty of Rs. 8,82,133/- was found short paid and the demand of the same was confirmed.

In another proceeding related to Appeal No. C/86545/14 the Adjudicating Authority held that the goods namely transmission shaft classifiable under CTH 8483 as against assessee's claim under CTH 8432. Both the cases against original order the assessee filed appeal before the Commissioner (Appeals) who vide impugned order upheld classification as well as demand of differential duty as decided by the adjudicating authority. However he dropped the penalty and fine against the assessee. Therefore the assessee is in appeal before us and Revenue also filed an appeal against setting aside the penalty and fine.

3. Shri Pradeep Korde, Consultant for the assessee submits that all the parts are solely and principally used in the manufacture of agricultural machines and these parts cannot be used for any other purpose. He submitted various pictures of the final product and parts and shown that the final product wherein imported parts are used as agricultural equipment namely Rotavator, Tiller which is fitted on the back of the Tractor for levelling the agriculture field. There is no dispute that final product is the agricultural equipment and all these imported parts are specifically designed for manufacture/assembly of agricultural equipment, therefore it merit classification as part of agricultural machinery. He further submits that as regard the department's appeal, since the matter is highly contentious and involved grave interpretation of interpretative rules of Central Excise Tariff, suppression of fact and misdeciaration could not be invoked and therefore it is clear case of appellant's bona fide in declaring the goods as parts of agricultural machinery. The lower authorities have correctly dropped the proceedings as regard penalty and fine. Therefore the department's appeal is not maintainable. In support of his submission he relied upon the judgment of Saint Gobain Glass India Ltd. v. Commr. ofCus. (AIR), Chennai [2014 (313) ELT 0680 (Tri. - Chennai)].

4. Shri S.J. Sahu, Id. Asstt. Commissioner (AR) appearing for the Revenue reiterates the findings of the impugned order as regard the confirmation of demand. He further submits that even though it is accepted that the parts imported by importer is exclusively for use as parts of agricultural machinery but by virtue of Note 2(a) of Section XVI as well as Note 2 of Section XV, if the parts are having independent tariff entry such as gear box, transmission shaft etc., the same shall merit classification under the respective head, irrespective of the facts that parts are used for a specific machinery- He also submits that as per Section XV, Note 2 the parts of general use as defined in the said note shall merit classification in the respective heads. In view of this clear statutory provision the parts imported by assessee have been correctly classified in various chapters and accordingly demand was rightly confirmed. He further submits that as regard Revenue's appeal, despite clear statutory provisions for classification of goods as provided in Sections XV and XVI, the assessee wrongly declared classification therefore there is clear mala fide on the part of the assessee with intention to evade customs duty.

5. We have carefully considered the submissions made by both the sides.


6. There is no dispute that parts imported by the assessee are meant for assembling of agricultural equipment. However even though the parts are solely and principally used for assembling of agricultural equipment but certain parts which have placed in their respective tariff entry would merit classification in the respective head only. In this regard relevant Section Note is reproduced below : -

"Section XV - Note 2 : Throughout this Schedule, the expression 'parts of General use' means :

(a) Articles of headings 7307, 7312, 7315, 7317 or 7318 and similar articles of other base metal;

(b) Springs and leaves for springs, of base metal, other than clock or
watch springs (heading 9114); and


(c) Articles of headings 8301, 8302, 8308, 8310 and frames and mirrors, of
base metal, of heading 8306.

In Chapters 73 to 76 and 78 to 82 (but not in heading 7315) references to parts of goods do not include references to parts of general use as defined above.

Subject to the preceding paragraph and to Note 1 to Chapter 83, the articles of Chapter 82 or 83 are excluded from Chapters 72 to 76 and 78 to
81.

Section XVI - Note 2 : Subject to Note 1 to this Section, Note 1 to Chapter 84 and to Note 1 to Chapter 85, parts or machines (not being parts of the articles of heading 8484, 8544, 8545, S546 or 8547) are to be classified according to the following rules :

(a) parts which are goods included in any of the headings of Chapter 84 or 85 (other than heading 8409, 8431, 8448, 8466, 8473, 8487, 8503,8522, 8529, 8538 and 8548) are in all cases to be classified in their respective headings." From the above two Section Notes, it is clear that if any of the part are either having independent entry in Chapter 84 or 85 or if the goods of Chapter 73 are of general use covered under chapter Heading 7307, 7312, 7315, 7317 or 7318 these parts will not be classified as part of equipment where it is going to be assembled, however the same will be classified in their respective tariff heads. We find that the assessee have made their submission mainly on the ground that all the parts imported by them are designed as parts of agricultural machinery and use in the said agricultural machinery i.e. Rotavator, Tiller and therefore they claim that all the parts merit classification as parts of agricultural machinery. We do not agree with the assessee for the reason, even though the parts are solely meant for agricultural machinery but by virtue of notes of Section XV and XVI, since some of the parts are having independent entry in Customs Tariff, it will merit classification under the specific entries such as Gear Box, Transmission Shaft etc. We are, therefore, of the considered view that those parts shall be correctly classified in its respective Tariff entries. However, the appellant have not disputed the different Chapter Headings wherein the classification was held by Adjudicating Authority. Therefore considering the chapter heading as correct in the adjudication order, we find that out of all 32 items, only following three items namely, Bar Connection, Square Pipe and Mechanical Ram mentioned at Sr. Nos. 6, 7 and 20 respectively are falling under CTH 7308 and 7320 therefore considering the Note 2 of Section XV these items are not of general use, therefore it will be properly classified as parts of agricultural machinery under Chapter Heading 8432, therefore demand of these three items are not sustainable find requires to be dropped. As regard the department's appeal, we find that the Id. Commissioner (Appeals) applied judicious mind while dropping the penalty and find the reason that issue involved is highly debatable and contentious and interpretation of various Section Notes of Customs Tariff. It is also observed that there is no dispute that parts imported by rhe assessee are exclusively meant for manufacture of agricultural machinery therefore the assesee's bona fide belief that goods imported by them are classifiable as parts of agricultural machinery is not under doubt. We therefore do not find any infirmity in the order of Commissioner (Appeals) in setting aside penalty and fine, we therefore upheld the same. Revenue's appeal is dismissed. The assessee's appeals are partly allowed in the above terms. CO is also disposed of.

(Order pronounced in Court on 14-10-2015)

Equivalent 2016 (332) ELT 0153 (Tri. - Mumbai)