2006 (1) TMI 131 - SC - Central Excise

Whether assembly of nozzles and nozzle holders (intermediate products) brings into existence a new product called an injector and if so, whether the department was right in classifying the said injector under sub-heading 8409.00? Held that - This matter needs to be remanded to the adjudicating authority for the following reasons. Firstly, in this case, the case of the department in the show cause notice was that nozzles and nozzle holders were intermediate products used in the coupling or assembly of injectors (final product); and that, on completion of the process of coupling a new independent product emerged, namely, an injector. How is an injector constructed and what are its components has not been decided by any of the authorities below including the Tribunal. Secondly, the decision of the Tribunal in Motor Industries Co. Limited (1987 (1) TMI 341 - CEGAT, NEW DELHI) has no application. Set aside the impugned judgment of the Tribunal dated 20-4-2000 and remit the matter to the Adjudicating Authority for de novo adjudication of the show cause notices. Civil appeals filed by the assessee stand allowed

Summary

Issues:
Classification of injectors under sub-heading 8409.00, exemption under Notification No. 217/85, determination of whether assembly of nozzles and nozzle holders brings into existence a new product called an "injector".

Classification of Injectors:
The issue in the civil appeals was whether the assembly of nozzles and nozzle holders creates a new product called an "injector" and if the department was correct in classifying the injector under sub-heading 8409.00. The appellant argued that fitting of nozzles into nozzle holders did not constitute manufacture of a new product, as the end result remained "nozzles and nozzle holders". The Tribunal held that the appellant was not entitled to exemption under Notification No. 217/85 as "nozzles and nozzle holders" were excluded from the notification. The Tribunal also distinguished a previous case, stating that the issue in that case was different from the current controversy.

Remand to Adjudicating Authority:
The matter was remanded to the Adjudicating Authority for further adjudication due to several reasons. Firstly, it was noted that the construction of an injector and its components had not been determined by any authority, including the Tribunal. Secondly, a previous decision regarding classification under the old Tariff was found to be inapplicable to the current case, as it did not address the specific issue of whether an injector emerged as a new product after the coupling process. The burden was placed on the department to prove that the assembly of nozzles and nozzle holders resulted in a saleable commodity, an injector. The appellant's claim for exemption under the notification was also subject to further examination after the determination of the assembly issue.

Conclusion:
The Supreme Court set aside the Tribunal's judgment and remitted the matter to the Adjudicating Authority for fresh adjudication of the show cause notices. The civil appeals filed by the assessee were allowed, with no order as to costs. The interconnection of issues related to manufacture, classification, and exemption under the 1985 Tariff Act was highlighted, emphasizing the need for a comprehensive examination of the assembly process and its implications on the classification and exemption of injectors.