1998(11)LCX0020

IN THE CEGAT, WEST ZONAL BENCH, MUMBAI

S/Shri K.S. Venkataramani, Vice President and G.N. Srinivasan, Member (J)

RINI ENGINEERS

Versus

COMMISSIONER OF C. EX., PUNE

Final Order No. 4378/98-WZB/C-I, dated 23-11-1998 in Appeal No. E/1133-R/97-Bom

Cases Quoted

Chamundi Machine Tools Ltd. v. Collector — 1996(10)LCX0129 Eq 1997 (090) ELT 0235 (Tribunal) — Referred         [Para 2]

Collector v. Mahendra Engg. Works — 1993(02)LCX0024 Eq 1993 (067) ELT 0134 (Tribunal) — Referred                      [Para 2]

Advocated By : Shri Mayur Shroff, Advocate, for the Appellant.

Shri B.K. Suman, JDR, for the Respondent.

[Order per : K.S. Venkataramani, Vice President]. - The appellants manufactured Sand Filters and Screen Filters which they classified under sub-heading 8324.00 of the Central Excise Tariff Act and claimed exemption under Notification No. 46/94 applicable to mechanical appliances used in agriculture or horticulture. Show cause notice was issued to them proposing classification of the goods under sub-heading 8421.00 CETA as the filtering and purifying machinery and parts thereof, and consequentially to deny exemption under Notification No. 46/94. The Assistant Commissioner of Central Excise adjudicated the matter confirming the proposed classification and denying the exemption. The Commissioner of Central Excise (Appeals), Pune upheld the Assistant Commissioner’s order.

2.  Shri Mayur Shroff the ld. Counsel for the appellant submitted that the appellants manufacture sand filter and screen filters to be used for agricultural purposes for sprinkler irrigation system for a clean irrigation water accordingly the goods are classified under sub-heading 8424.00 chargeable to nil rate of duty under exemption Notification No. 46/94. The ld. Counsel contended that the sub-heading 8424.00 will cover not only the mechanical appliances of a kind used in the agricultural, but also the parts thereof. According to Section Note 2(b) of Section XVI CETA, these filters are exclusively and solely used in the manufacture of sprinkler irrigation system. Therefore their classification under sub-heading 8424.00, hence they are also eligible for exemption under Notification No. 46/94. The ld. Counsel relied upon a certificate, dated 18-8-1994 issued by their user customer Plastro Irrigation Systems saying that the sand filter and screen filter are components of drip and sprinkler irrigation system and that they are paying sales tax on the goods as agricultural machinery. The ld. Counsel further cited and relied upon Tribunal decision Chamundi Machine Tools Ltd. v. Collector of Central Excise, Bangalore - 1996(10)LCX0129 Eq 1997 (090) ELT 0235 (Tribunal) where it was held that shafts for machines even though having a separate Heading 84.83 CETA would still to classifiable along with the main machine falling under Heading 84.66 as parts and accessories suitable for use solely or principally with the main machine namely lathe. Reliance was also placed on Section Note IV to Section XVI of CETA which lays down that where a machine consisted of individual components to contribute together to a defined function covered under one of the headings in Chapter 84 or 85, then the whole would fall for classification in the heading appropriate to that function. Here the filters are components of irrigation system and for agricultural purposes and hence Heading 8424.00 would be attracted. The ld. Counsel further contended that the lower authorities have denied the exemption by relying only on Serial No. 20 of the Notification which covers goods falling under sub-heading 84.24 but they have ignored Serial No. 26 of the table to the same notification which covers the whole Chapter 84 and the goods described are parts of the goods specified at Serial No. 20. In such a context, the ld. Counsel relied on the ratio of the Tribunal decision in the case of Collector of Central Excise v. Mahendra Engg. Works, 1993(02)LCX0024 Eq 1993 (067) ELT 0134 (Tribunal) that so long as the goods are admittedly parts of irrigation system the exemption should be extended. However, it was pleaded that neither of the lower authorities have considered eligibility to the exemption from the point of view of Serial No. 26 of the Notification.

3.  Shri B.K. Suman the ld. JDR contended that the classification of the goods under Heading 8421.00 is clearly indicated by Section Note 2 of Section XVI CETA because these goods are in the nature of filtering or purifying machinery and apparatus for liquids and on being classified under that heading, exemption under Notification No. 46/94 does not arise which covers only goods falling under 8424.00. It was further submitted that it is well settled that exemption notification has to be strictly interpreted.

4.  We have duly considered the submissions made. The question is classification of the sand filters and screen filters manufactured by the appellant as between sub-headings 8424.00 and 8421.00 CETA. The first heading covers mechanical appliances for projecting, dispersing or spraying liquids or powders and covers fire extinguishers whether or not charged; spray guns and similar appliances. The appellants claimed that the filters that they produced are parts of sprinkler irrigation system solely used with such system and hence as per Section Note 2(b) to Section XVI CETA, the goods are classifiable under the above heading; but the department would classify the goods as falling under sub-heading 8421.00 which covers inter alia filtering or purifying machinery and apparatus for liquids or gases because the filters which is a specific heading for the goods. Serial No. 20 of the Notification No. 46/94 extends exemption to mechanical appliances used in agriculture or horticulture falling under Heading 84.24. The description of the goods manufactured by the appellant clearly shows that they are in the nature of filters. The technical literature regarding the system manufactured by the customers Plastro Irrigation Systems shows that the filtration is one of the most important processes in irrigation and its objective is to supply sufficiently clean irrigation water, and various types of filters are used, among them being screen filter and sand filter. Therefore the function of the products manufactured is that of filtering impurities from the water used for irrigation. The sub-heading 8421.00 covering filtering or purifying machinery and apparatus for liquids would clearly cover such goods. The claim that they are parts of mechanical appliances falling under sub-heading 8424.00 of the appellant does not have force and is unacceptable, because of the specific heading available for these parts, namely the filter under Heading 84.21, because Section Note 2(a) of Section XVI lays down that parts of the machine which are goods included in any of the heading of Chapters 84 & 85 in all cases to be classified in their respective headings. Therefore classification of these filters under sub-heading 8421.00 is upheld. As for the eligibility to Notification, we find that both the authorities have considered only Serial No. 20 of the table to the Notification which covers mechanical appliances of a kind used in agriculture or horticulture falling under sub-heading 8424.00. But the appellants have claimed that the goods as parts of irrigation system will also be eligible against Sr. No. 26 of the Notification, which covers parts of goods specified at Sr. Nos. 20, 22 to 25 of the Notification falling under Chapter 84. This is a much wider entry because it covers all the goods under Chapter 84 and is not confined to particular heading. The appellants have claimed that the goods do fall under Chapter 84 and are parts of irrigation system used in agriculture. This aspect is relevant for determining the eligibility to exemption of the goods in question and since both the lower authorities have not considered the claim of the appellant as noted above against Sl. No. 26 of the notification, we feel that it will be appropriate in the circumstances, to remand the matter to the Commissioner (Appeals) to consider this claim after hearing them in the matter. The appeal is accordingly remanded in the above terms.

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Equivalent 1999 (106) ELT 110 (Tribunal)