2016 (11) TMI 767 - AT - Central Excise

Classification of par boiling machinery - classifiable under chapter heading 84.37 of Central Excise Tariff or under chapter heading 84.19? - Held that - When we look at the two clarifications issued by the Board dated 19.5.2010 and the subsequent clarification dated 15.5.2014, we find that initially the Board had suggested classification of the par boiling machine under 84 7 considering it as a part of rice milling machinery. However, subsequent to the decision of the Tribunal in the case of Jyoti Sales Corporation vs. CCE, Panchkula 2011 (3) TMI 1317 - CESTAT, NEW DELHI , in which the classification of such machines were made under 8419, the Board has revised its guideline and as suggested classification of such machines under 8419. In any case we are of the view that this is the classification which would be most appropriate for par boiling machines and/or driers manufactured and cleared from a factory. Admittedly heading 8419 is a heading specific to the function performed by a particular heading. The same does not refer to the industry specific machine, but is relatable to function specific m chines. If the classification is to be adopted, as contested by the assessee, on the basis of industry specific (like in the present case rice industry) then the machines which stand specifically cover d under the said heading 84.19, would get shifted to the other heading dependent upon the industry in which they are to be used, ty us making the said entry as redunt and frivolous. It is well settled principal of law that an interpretation which renders an entry otiose has to be avoided. As such, when viewed from this angle also, we get affirmed in our opinion of the par-boiling machine falling under heading 84.19. Principles of interpretation - in terms of again, the well settled principle of interpretation, an item is required to be assessed, in the form, in which the same is cleared from the manufacturers factory and not on the basis of its future use, after clearance, unless it is the requirement of the entry. As such, we note that the par-boiling machine, when examined and assessed independently satisfies all the specification of heading 84.19, thus making it compulsorily to fall under heading 84.19.

Summary

Issues Involved:
1. Classification of parboiling machinery and dryer under Central Excise Tariff headings 8419 or 8437.

Issue-wise Detailed Analysis:

1. Background and Conflict in Judicial Opinion:
The Larger Bench of CESTAT was constituted following directions from the Hon'ble Supreme Court to resolve conflicting judicial opinions from two coordinate benches of the Customs, Excise and Service Tax Appellate Tribunal. One set of decisions classified parboiling machinery and dryers under heading 8437, while another classified them under heading 8419.

2. Competing Tariff Headings:
The two competing tariff headings are:
- 8419: Machinery for the treatment of materials by processes involving a change of temperature (e.g., heating, cooking, steaming, drying).
- 8437: Machinery used in the milling industry or for working cereals or dried leguminous vegetables.

3. Process of Parboiling:
The undisputed process of parboiling involves pre-steaming, soaking, and steaming, followed by drying. This process is integral to rice milling.

4. CBEC Clarifications:
Two CBEC circulars were issued:
- Circular No. 924/14/2010-CX (19-05-2010): Initially classified parboiling machinery under heading 8437, considering it part of rice milling machinery.
- Circular No. 982/06/2014-CX (15-05-2014): Revised the classification to heading 8419, stating parboiling machinery and dryers perform functions independently of milling.

5. Submissions by Appellants:
The appellants argued that parboiling machinery is part of the rice milling process and should be classified under heading 8437. They cited previous consistent classification by Revenue and technical opinions supporting their view.

6. Submissions by Revenue:
Revenue contended that parboiling machinery and dryers should be classified under heading 8419, as they perform specific functions of soaking, steaming, and drying, independent of the milling process. They emphasized the need to classify machinery based on its function when cleared from the factory, not its ultimate use.

7. Tribunal’s Analysis:
- Function of Parboiling Machinery: The Tribunal noted that parboiling machinery performs specific functions of pre-steaming, soaking, and steaming, followed by drying. These functions align with the processes described under heading 8419.
- Exclusion of Grain Dampening Machines: The argument that parboiling machinery is akin to grain dampening machines (excluded from heading 8419) was rejected. The Tribunal found that parboiling involves more complex processes than mere dampening.
- Clarifications by CBEC: The Tribunal acknowledged the shift in CBEC's stance from classifying under 8437 to 8419, following the Tribunal's decision in the Jyoti Sales Corporation case.

8. Conclusion:
The Tribunal concluded that parboiling machinery and dryers should be classified under heading 8419. The classification is based on the specific functions these machines perform, independent of their ultimate use in the rice milling industry. The Tribunal emphasized that machinery should be classified in the form it is cleared from the factory, not based on its future use.

Order:
The Tribunal pronounced that parboiling machinery and dryers are to be classified under heading 8419 of the Central Excise Tariff, aligning with the revised CBEC circular and the Tribunal's findings.

(Order Pronounced on 27.09.2016)