2005 (12) TMI 23 - AT - Central Excise

Central Excise Parts of sewing machine Classification Reversal of the price of exempted goods

Summary

Issues: Classification of sewing machine parts under different headings, application of Section Note 2(b) of Section XVI, determination of price for reversal under Rule 57CC (i).

Classification of Sewing Machine Parts:
The case involved the classification of parts of sewing machines under different headings for duty purposes. The respondents were manufacturing various parts of sewing machines, except the sewing head, and clearing them under duty payment at 16% under heading 8457.19. The dispute arose when proceedings were initiated to classify these parts under heading 8452.90, attracting a nil rate of duty. The original adjudicating authority ruled in favor of classifying the parts under heading 8452.90, leading to the denial of Modvat credit to their customers. The appeal contended that parts suitable for use with a particular machine should be classified with that machine. The Commissioner (Appeals) accepted this argument, emphasizing that parts solely designed for a specific category of sewing machines should be classified under the same heading as the machine, while heading 8452.90 would cover other parts not solely designed for a particular category of sewing machine.

Application of Section Note 2(b) of Section XVI:
The Commissioner (Appeals) based the classification decision on the applicability of Section Note 2(b) of Section XVI, which states that parts designed for use with a particular type of machine should be classified with that machine. The Commissioner's reasoning highlighted the changes in the tariff schedule post the 1998-99 budget, which categorized sewing machines under different sub-headings with varying duty rates. The judgment emphasized that if all parts were exempt, the machine would also be exempt, and therefore, parts solely designed for a specific category of sewing machine should be classified accordingly.

Determination of Price for Reversal under Rule 57CC (i):
Another issue in the appeal was the determination of the price for reversal under Rule 57CC (i). The Adjudicating authority required an 8% reversal on the total price charged for exempted goods, following a Board Circular. The Commissioner (Appeals) upheld this decision, noting the requirement to reverse 8% of the price of exempted goods charged by the manufacturer during a specific period. The ruling clarified the introduction of the term "total price" under relevant rules and circulars, emphasizing compliance with the provisions existing at the material time.

In conclusion, the Appellate Tribunal, CESTAT, New Delhi, rejected the Revenue's appeals, affirming the Commissioner (Appeals) decisions on the classification of sewing machine parts and the determination of price for reversal under Rule 57CC (i). The judgment underscored the application of Section Note 2(b) of Section XVI in classifying parts designed for specific sewing machine categories and upheld the correctness of the reversal amount based on the provisions applicable during the relevant period.