2011 (5) TMI 605 - AT - Customs

Differential duty demand - classification of top drive heavy duty drilling Rig Truck - heading No. 84.30 OR 87.05 - Held that - The cost of the drilling rig forms almost 90% of the cost of the whole product whereas the cost of the automobile chassis forms only about 10% of the cost as evidenced by the manufacturer s certificate. Though cost may not be an essential criterion in determining classification, it is certainly a relevant criterion. The essential nature of the product both in terms of function as also in terms of cost comes from the drilling rig. The automobile chassis is only for the easy transportation of the machine from place to place. Thus from a functional point of view also , the product merits classification under heading No. 84.30 rather than under heading No. 87.05. The department is not prepared or has not produced a single evidence to rebut the contention based on the details given by the experts on the subject matter. They are merely referring to the explanatory notes without verifying and proving what are the facts applicable to the present case. It is for the department to establish the case of classification of product under any particular heading which it has miserably failed in the instant case. Whereas, the appellant has done their bit to support the classification claimed by them by obtaining expert s certificate and also the manufacturer s certificate in respect of product in question - in favour of assessee.

Summary

Issues Involved:

1. Classification of top drive heavy duty drilling Rig Truck mounted.
2. Demand of differential duty.
3. Examination and technical inspection of goods.
4. Expert and manufacturer certifications.
5. Reliance on HSN explanatory notes.
6. Precedent judgments and their applicability.

Issue-wise Detailed Analysis:

1. Classification of Top Drive Heavy Duty Drilling Rig Truck Mounted:

The primary issue revolves around the correct classification of the imported top drive heavy duty drilling Rig Truck mounted, including its components. The appellant argued that the goods should be classified under heading 84.30 of the Customs tariff, while the department classified them under heading 87.05. The appellant contended that the chassis and the drilling rig are specially designed for each other, forming an integrated mechanical unit, thus meriting classification under heading 84.30.

2. Demand of Differential Duty:

The Assistant Commissioner of Customs demanded a differential duty of Rs.1,19,15,651/- based on the reclassification of the goods under heading 87.05, which attracts a higher duty rate. The appellant had initially paid duty based on the classification under heading 84.30. The demand was contested by the appellant, who argued that the initial classification was correct and supported by thorough examination and expert opinions.

3. Examination and Technical Inspection of Goods:

The appellant highlighted that the goods were examined by Customs officers at the time of importation, and the classification under heading 84.30 was accepted. Despite the appellant's request for re-examination and technical inspection by experts, the department did not undertake such an inspection. This lack of inspection was a significant point in the appellant's argument against the reclassification and subsequent duty demand.

4. Expert and Manufacturer Certifications:

The appellant provided expert opinions from the Head of the Department of Mechanical Engineering, Malaviya Regional Engineering College, and a certificate from the manufacturer. Both certifications stated that the drilling rig and the chassis are specially designed for each other, forming an integrated mechanical unit that cannot be separated and used for other purposes. These certifications were crucial in supporting the appellant's claim for classification under heading 84.30.

5. Reliance on HSN Explanatory Notes:

Both parties relied on the HSN explanatory notes to support their respective classifications. The appellant cited the notes indicating that self-propelled machines with specially designed chassis and working machines forming an integral unit should be classified under heading 84.30. The department, however, argued that the goods fit the description under heading 87.05, which includes mobile drilling derricks mounted on lorries.

6. Precedent Judgments and Their Applicability:

The appellant referenced several judgments, including CCE, Baroda Vs. LMP Precision Engineering Co. Ltd. and CC & CE, Hyderabad Vs. KLR Industries Ltd., to support their classification claim. These judgments emphasized the need for evidence to prove the integration of the chassis and the working machine. The department, on the other hand, relied on the apex Court's judgment in LMP Precision Engineering's case, which classified water well drilling rigs under heading 87.05 due to the lack of evidence of integration.

Conclusion:

The Tribunal concluded that the appellant provided sufficient evidence, including expert and manufacturer certifications, to prove that the drilling rig and the chassis are specially designed and integrated, meriting classification under heading 84.30. The department failed to provide counter-evidence or conduct a technical inspection to support their reclassification under heading 87.05. Consequently, the Tribunal allowed the appeal, sustaining the classification under heading 84.30 and negating the differential duty demand.