1987 (5) TMI 151 - AT - Customs

Summary

Issues Involved:

1. Applicability of Rule 2(a) of the Interpretative Rules.
2. Classification of imported goods under the appropriate Tariff Heading.
3. Essential character of the imported cylinder head castings.
4. Re-assessment claim under a different Tariff Heading.
5. Impact of post-importation processing on classification.

Detailed Analysis:

1. Applicability of Rule 2(a) of the Interpretative Rules:

The appellants argued that Rule 2(a) of the Interpretative Rules is inapplicable if the heading does not refer to an article, and that Interpretative Rule cannot be applied to Section Notes but only to a Tariff Heading. They contended that the goods were not identifiable parts of an internal combustion engine in the condition they were imported and required post-importation processing. The Tribunal, however, referred to the Supreme Court's decision in Khandelwal Metal & Engineering Works, which held that for classification, the Tariff Heading, Section Notes, Chapter Notes, and Interpretative Rules are to be used. The Tribunal concluded that Rule 2(a) was applicable since the imported castings had attained the essential character of parts of an Internal Combustion Piston Engine.

2. Classification of imported goods under the appropriate Tariff Heading:

The Assistant Collector of Customs assessed the imported cylinder head castings under Heading 84.06 of the First Schedule to the Customs Tariff Act, 1975. The appellants claimed reassessment under Heading 73.331/40 read with notification No. 254/76 plus additional duty under Section 3 of the C.T.A., 1975. The Tribunal upheld the classification under Heading 84.06, stating that the goods had achieved the essential character of finished components, thus justifying their assessment under this heading.

3. Essential character of the imported cylinder head castings:

The Tribunal examined whether the imported steel castings had attained the essential character of Cylinder Head Castings for internal combustion piston engines. The import documents described the goods as "Perkins diesel engine components," and the manufacturer's continuation invoice indicated a specific part number for the Cylinder Head. The Tribunal concluded that the goods had attained the essential character of cylinder heads at the time of importation. This conclusion was supported by the fact that the imported castings had the rough shape and approximate size of the finished cylinder head, and after machining, they would become Perkins Cylinder Heads and nothing else.

4. Re-assessment claim under a different Tariff Heading:

The appellants sought reassessment of the goods under Heading 73.331/40, arguing that the imported castings required significant post-importation processing. The Tribunal rejected this claim, stating that the goods had already attained the essential character of finished cylinder heads upon importation. The Tribunal emphasized that the cost of post-importation operations could not be decisive in determining the applicability of Rule 2(a) of the Interpretative Rules.

5. Impact of post-importation processing on classification:

The appellants argued that the imported castings underwent considerable post-importation operations, which accounted for 30% of the landed cost of the rough casting. The Tribunal acknowledged the operations but concluded that they did not alter the fact that the cylinder head casting had already attained the essential character of a finished cylinder head. The Tribunal referred to the Larger Bench decision in Bharat Heavy Electricals Ltd., which held that the cost of post-importation operations could vary and was not decisive in determining the applicability of Rule 2(a).

Conclusion:

The Tribunal upheld the impugned order and dismissed the appeal, confirming that the imported cylinder head castings were correctly assessed under Tariff Heading 84.06 and did not merit reassessment under Heading 73.331/40. The essential character of the goods at the time of importation and the applicability of Rule 2(a) of the Interpretative Rules were key factors in the decision.