2018 (12) TMI 478 - AT - Central Excise

Classification of goods - rice bucket elevator - rice conveyor - the appellants were classifying these goods under heading No. 8437 as machinery used in Milling Industry where the tariff rate is nil - according to the department these goods are classifiable under heading No. 8428, as other lifting, handling, loading or unloading machinery - whether the impugned goods are classifiable under CETH 8428 or under CETH 8437 of CETA? Held that - The conveyors and elevators manufactured by the appellants are designed, specifically, for rice mills which has not been disputed by the adjudicating authority in the impugned order, wherein it has been observed by the adjudicating authority that the goods in question are basically conveyors & elevators, which are used for the transportation of the rice in a rice mill from one stage to the another. They can be horizontal as well as vertical as per the requirement of the Industry . These conveyors and elevators manufactured by the appellants specifically designed for use in rice mills are supplied alongwith the other rice mill machinery to the rice millers. These facts are not in dispute, therefore, the combination of machines and the conveyors and elevators supplied by the appellants alongwith other rice milling machinery to the rice millers is a combination of machine which ultimately perform the function of rice milling - Thus, as per Section notes the entire machinery is classifiable under heading 8437 which is for machinery used in milling industry and it is not disputed that these elevators and conveyors being manufactured by the appellants were not used for milling industry. The appellants have produced various technical opinions as well as the data from Customs and Central Excise Department wherein the importer as well as exporter of elevators and conveyors used specifically designed for rice milling have been classified under heading No. 8437 of the CETA. Revenue heavily relied on the decision of Eminence Equipments Pvt. Ltd. 2015 (7) TMI 545 - CESTAT MUMBAI to say that conveyors and elevators used for rice mills is to be classified under chapter heading No. 8428 - We have gone through the facts in the case of Eminence Equipments Pvt. Ltd. (supra) was not manufacturing the elevators and conveyors only for rice millers but were supplying the same to other industries like breweries etc., therefore, the items manufactured by Eminence Equipments Pvt. Ltd were of general nature and not for specific use to the machines of milling industry. Further, the conveyors and elevators manufactured by M/s Eminence Equipments Pvt. Ltd. did not come under the category of composite machines as they were supplying only elevators and conveyors and not combination of machines - Therefore, the facts of the present appellants are distinguishable from the facts of the case of M/s Eminence Equipments Pvt. Ltd. The conveyors and elevators specifically manufactured as the part of rice milling machinery alongwith other machinery of rice by the appellants merit classification under chapter heading No. 8437 of CETA, 1985 - appeal allowed - decided in favor of appellant.

Issues Involved:
1. Classification of "rice bucket elevator" and "rice conveyor."
2. Applicability of Chapter Heading No. 8428 vs. Chapter Heading No. 8437.
3. Reliance on HSN explanatory notes.
4. Combination of machines and specific use in rice milling industry.
5. Applicability of past tribunal and Supreme Court decisions.

Detailed Analysis:

1. Classification of "rice bucket elevator" and "rice conveyor":
The appellants are manufacturers of rice milling machinery, including "rice bucket elevator" and "rice conveyor." The dispute revolves around whether these items should be classified under Chapter Heading No. 8428 (as "other lifting, handling, loading or unloading machinery") or under Chapter Heading No. 8437 (as "machinery used in milling industry").

2. Applicability of Chapter Heading No. 8428 vs. Chapter Heading No. 8437:
The appellants classified their goods under Heading No. 8437, which attracts a nil tariff rate. The department, however, classified them under Heading No. 8428, leading to confirmed demands along with interest and penalties. The tribunal noted that the goods in question are specifically designed for rice mills and are part of a combination of machines performing the function of rice milling. Therefore, as per Section notes 3, 4, and 5 to Section 16 of the Central Excise Tariff Act, the entire machinery should be classified under Heading 8437.

3. Reliance on HSN explanatory notes:
The department relied on the HSN explanatory notes, which state that Heading 8437 does not include conveyors and elevators. The tribunal, however, emphasized that HSN explanatory notes are not law but merely guiding factors. The Central Excise Tariff Act's section notes clearly state that the said items should be classified under the main machine, which in this case is Heading 8437.

4. Combination of machines and specific use in rice milling industry:
The tribunal observed that the elevators and conveyors are specifically designed for rice mills and are supplied along with other rice milling machinery. This combination of machines ultimately performs the function of rice milling. The tribunal concluded that the entire machinery, including elevators and conveyors, should be classified under Heading 8437.

5. Applicability of past tribunal and Supreme Court decisions:
The tribunal referred to several past decisions, including those of the Hon’ble Supreme Court and other tribunals, which support the classification of specifically designed machinery under the relevant heading for the specific industry. The tribunal distinguished the present case from the case of Eminence Equipments Pvt. Ltd., noting that the latter did not manufacture a combination of machines specifically for rice mills and supplied to other industries as well.

Conclusion:
The tribunal held that the conveyors and elevators specifically manufactured as part of rice milling machinery should be classified under Chapter Heading No. 8437 of the CETA, 1985. Consequently, the demands of duty along with interest and penalties against the appellants were deemed unsustainable. The impugned orders were set aside, and the appeals were allowed with consequential relief.

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