2004 (2) TMI 446 - AT - Central Excise

Summary

Issues: Classification of parts of machinery/equipment under Chapter Headings 84 and 85 of the Central Excise Tariff Act.

In this case, the main issue revolves around the classification of thrust bearing assemblies used in P.D. pumps under the Central Excise Tariff Act. The basic principles of classification outlined in Section Note 2 of Section XVI of CETA are deemed crucial in determining the appropriate classification of such goods. Note 2 of Section XVI provides specific guidelines for classifying parts of machines, emphasizing that parts included in Chapter 84 or Chapter 85 are to be classified within their respective headings. Additionally, parts suitable for use with a particular kind of machine are to be classified accordingly.

The appellants, who are manufacturers of P.D. pumps, assemble duty paid ball/roller bearings into bearing assemblies crucial for the pumps' operation. The Commissioner initially classified these thrust bearing assemblies under Chapter Heading 84.82, pertaining to ball or roller bearings. However, the appellants argued that these assemblies should be classified under Chapter Heading 84.83, not 84.82. The Commissioner's decision was based on the integral combination of housing, thrust block, and bearing, considering it as a thrust bearing assembly classifiable under 84.82.

Upon closer examination of the chapter notes under Chapter Heading 84.82, it was revealed that machinery parts incorporating ball, roller, or needle roller bearings are not covered under this heading but classified elsewhere, such as bearing housings under 84.83. Consequently, the Commissioner's classification of bearing assemblies under 84.82 was deemed incorrect. The correct classification for bearing assemblies, as machinery parts, was found to be under Chapter Heading 84.83, not 84.82, as initially determined.

The appellants contended that the thrust bearing assemblies should be classified under Chapter Heading 84.13 for P.D. pumps, supported by various case laws. However, it was clarified that Note 2(a) of Section XVI mandates parts included in Chapter 84 to be classified within their respective headings. Despite arguments based on Note 2(b), which addresses parts suitable for specific machines, the bearing assemblies were deemed separately classifiable under Chapter Heading 84.83, not 84.13. Thus, the contention that the thrust bearing assemblies should be classified under 84.13 was rejected in favor of classification under 84.83.

Despite the classification dispute, the appellants were assured the benefit of Notification 6/2000 as long as the thrust bearing assemblies were not classified under 84.82, meant for ball/roller bearings. Consequently, the Commissioner's order classifying the thrust bearing assemblies under Chapter Heading 84.82 was set aside, leading to the dismissal of the confirmed demand and imposed penalties. Ultimately, the appeal was allowed in favor of the appellants.