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Issues: Classification of goods under Customs Tariff Schedule - Whether "shells" are to be classified under sub-heading (3) or sub-heading (1) of Heading No. 85.18/27.
In this case, the Revision Application was filed by the Appellant under Section 131 of the Customs Act, 1962, which was transferred to the Appellate Tribunal for disposal as an appeal. The goods in question are "shells" claimed to be part of lightning arresters with a 400 KV rating. The dispute arose regarding their classification under sub-heading (1) or sub-heading (3) of Heading No. 85.18/27 of the Customs Tariff Schedule. The Appellate Collector had rejected the classification under sub-heading (3), arguing that insulators are separate from apparatus for the protection of electric circuits, thus classifying them under sub-heading (1). During the appeal, the appellants emphasized that the goods were specially designed and manufactured for use as components of 400 KV lightning arresters and were integral parts of such equipment. They argued that the shells should be considered parts of apparatus for the protection of electrical circuits and classified under sub-heading (3). The appellants presented photographs showing how the shells were assembled in a lightning arrester, highlighting their function in maintaining gaps for lightning to pass through without damaging the equipment. The Department contended that even though the goods could be considered parts of a lightning arrester, if they functioned as insulators, they should be classified as such. Referring to Section Note 2 to Section XVI of the Customs Tariff Schedule, the Department argued that parts of machines should be classified in their respective headings rather than along with the machine itself. The Department maintained that since insulators were mentioned separately in the main Heading No. 85.18/27, the correct classification for the shells was under sub-heading (1) as "insulators of any material." The Tribunal acknowledged that the goods were intended for use in high voltage lightning arresters and could be considered parts of such equipment. However, it noted that the Customs Tariff separately mentioned "insulators of any material," indicating that insulators were distinct from apparatus for the protection of electrical circuits. The Tribunal applied Interpretative Rule 1, stating that the classification of goods within a Heading should follow similar rules as between sub-headings. The Tribunal found that the shells, despite being made of special ceramic material with heat-resisting properties, primarily functioned as insulators against electricity. Additionally, the Tribunal analyzed Note 2 to Section XVI of the Customs Tariff, concluding that since the goods fell under the description of "insulators of any material" in Heading No. 85.18/27, they should be classified under sub-heading (1) as "not elsewhere specified." The Tribunal referenced the Explanatory Notes to the Customs Co-operation Council Nomenclature, noting their persuasive value in interpreting the Tariff but ultimately relied on the wording of the Customs Tariff Schedule itself. In conclusion, the Tribunal upheld the Appellate Collector's classification of the goods under sub-heading (1) of Heading No. 85.18/27, rejecting the revision application and affirming that the shells were rightly classified as "insulators" under the Customs Tariff Schedule.
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