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Issues: Classification of imported goods under customs tariff, entitlement to benefit under Notification No. 35-Cus./79 for sugar mill machinery parts.
In this case, the issue at hand is the classification of imported Reduction Gear Boxes for the manufacture of Sugar Mill Machinery. The lower authorities classified the gear boxes under Heading 84.63 of the Customs Tariff Act, 1975, while the petitioners argued that they should be classified under Heading 84.30(2) as part of sugar manufacturing machinery to avail the benefits of Notification No. 35-Cus./79. The petitioners contended that the gear boxes are essential for the operation of the sugar mill machinery, as they reduce the speed for the extraction of juice from sugar cane. They also highlighted a subsequent clarification by the Government stating that parts not classified under Heading 84.30(2) could still qualify for the exemption under Notification No. 35-Cus./79 if they are necessary for sugar mill machinery setup. The petitioners argued that the gear boxes should be considered part of the sugar mill machinery for the purpose of the notification, regardless of their specific classification under the Customs Tariff Act. During the personal hearing, the petitioners emphasized that the gear boxes are integral to the sugar mill machinery's operation, as indicated by the drawings showing their connection to the rollers essential for juice extraction. They argued that the gear boxes, although capable of other uses, are specifically designed for the sugar mill machinery's slow-speed operation and should be treated as part of it. The petitioners challenged the lower authorities' decision to reject their claim based on Chapter Notes and Section Notes, asserting that the crucial factor should be whether the imported goods are essential components of the sugar mill machinery. They contended that the gear boxes' connection to the rollers, which are indispensable for the sugar mill machinery, should qualify them for the benefits under Notification No. 35-Cus./79, irrespective of their classification under the Customs Tariff Act. The Government of India, after considering the submissions, focused on whether the gear boxes could be deemed part of the roller mills to qualify for the exemption under Notification No. 35-Cus./79. The Government disagreed with the lower authorities' approach of linking the entitlement to the notification's benefit with the classification under the Customs Tariff Act. They emphasized that the gear boxes play a crucial role in reducing speed and connecting the turbine output to the roller mill, essential for the sugar manufacturing process. Despite agreeing with the classification of the gear boxes under Heading 84.63, the Government held that the gear boxes should be considered part of the roller mill under Heading 84.30(2) for concessional assessment purposes. They highlighted the gear boxes' necessity for the proper functioning of the roller mill and emphasized that a gear box, as an essential component, should be included in the concessional assessment for sugar mill machinery. The Government's decision favored the petitioners, granting them the benefit of Notification No. 35-Cus./79, subject to fulfilling other procedural requirements outlined in the notification. The Government overturned the appellate order and directed the extension of the notification's benefits to the petitioners.
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