2009 (6) TMI 908 - AT - Central Excise

Summary

Issues Involved:
1. Construction of Injectors.
2. Classification under Central Excise Tariff Act (CETA, 1985).
3. Manufacture and marketability of Nozzle and Nozzle Holders.
4. Availability of exemption under various Notifications.

Detailed Analysis:

1. Construction of Injectors:
The appellants argued that Injectors are manufactured in a continuous process and that Nozzle Holders do not exist as separate commodities before the Injectors are made. The lower authorities, however, determined that Nozzle Holders are intermediate products used in the assembly of Injectors. They relied on statements from company employees and a Chartered Engineer's certificate, which outlined the manufacturing process of Injectors and Nozzle Holders. The Tribunal found that while the Nozzle Holder does not emerge before the Injector, it is identifiable and cleared separately with duty paid.

2. Classification under Central Excise Tariff Act (CETA, 1985):
The Commissioner (Appeals) classified Nozzle and Nozzle Holders under Chapter Heading 84.09 as parts of internal combustion engines, applicable irrespective of their use in vehicular or non-vehicular applications. This classification was accepted and not contested by the appellants.

3. Manufacture and Marketability of Nozzle and Nozzle Holders:
The appellants contended that Nozzle Holders are not independently manufactured but emerge only after Injectors are assembled and tested. They argued that Nozzles used for captive consumption are not marketable as they do not undergo the Korex dipping process, which is essential for marketability. The Tribunal agreed, noting that the burden of proving marketability was on the Department, which it failed to discharge. The Nozzle used in the manufacture of Injectors in its captively consumed form is not marketable.

4. Availability of Exemption under Various Notifications:
- Notification No. 217/85-C.E., dated 8-10-1985: The appellants claimed exemption for Nozzles and Nozzle Holders used in the manufacture of Injectors. The lower authorities denied this, stating that Chapter X Procedure does not equate to remission of duty and that the specific exclusion of Nozzles and Nozzle Holders in the notification applied. The Tribunal, however, referred to a Board Circular clarifying that parts used in the manufacture of component parts for diesel engines are also exempt, thus granting the exemption to Nozzles and Nozzle Holders used in Injectors.
- Notification No. 75/86-C.E., dated 10-2-1986: The Tribunal found that Nozzles and Nozzle Holders, even when coupled to form Injectors, are entitled to exemption as original equipment parts in the manufacture of internal combustion engines, as clarified by a Trade Notice from the Hyderabad Collectorate. The Commissioner (Appeals) had erroneously dismissed this notice due to jurisdictional issues, which the Tribunal overruled.

Conclusion:
The Tribunal concluded that:
1. There is no independent manufacture of Nozzle Holders in the construction of Injectors.
2. The classification under CETA, 1985, was not contested and thus accepted.
3. The Nozzle used in the manufacture of Injectors is not marketable in its captively consumed form.
4. Nozzles and Nozzle Holders are entitled to exemption under Notifications 217/85-C.E. and 75/86-C.E.

The appeals were allowed with consequential relief.