1992 (10) TMI 158 - AT - Central Excise

Summary

Issues Involved:
1. Eligibility of benefit of exemption under Notification 160/86, dated 1-3-1986, for "Contactors" manufactured by the respondents.
2. Classification of "Contactors" under the Central Excise Tariff Act, 1985.
3. Distinction between "Contactors" and "Switches" for the purpose of exemption under the notification.

Issue-wise Detailed Analysis:

1. Eligibility of Benefit of Exemption under Notification 160/86:

The central issue in this appeal is whether "Contactors" manufactured by the respondents qualify for the benefit of exemption under Notification 160/86, dated 1-3-1986. The Assistant Collector of Central Excise had initially approved the classification lists, granting the benefit of the notification. However, the Department appealed, arguing that the term "switches" in the notification is broad enough to encompass "contactors," which are also devices for opening and closing electrical circuits. The lower appellate authority dismissed the Department's appeal, relying on the HSN Explanatory Notes and different ISI specifications, which differentiate contactors from switches.

2. Classification of "Contactors" under the Central Excise Tariff Act, 1985:

The respondents classified their product under Heading 8536.90, which pertains to electrical apparatus for switching or protecting electrical circuits. The Department contended that "contactors" should be classified as "switches" based on their function. The learned DR cited various dictionary definitions and judgments, arguing that the primary consideration for classification should be the product's function, not trade parlance. However, the respondents argued that Heading 85.36 itself distinguishes between switches and relays, and "contactors" are recognized as distinct in the market and by technical literature.

3. Distinction between "Contactors" and "Switches":

The technical literature and dictionary definitions provided a clear distinction between "contactors" and "switches." Contactors are devices for making and breaking electrical circuits that reset automatically without mechanical or hand operation, whereas switches are mechanically operated devices. The HSN Explanatory Notes and various ISI specifications also treat them separately. The respondents provided affidavits from dealers, affirming that switches and contactors are distinct products in the market. The Supreme Court's judgments in similar cases, such as Jain Engineering and Atul Glass Industries, support the trade parlance test for classification, emphasizing how products are identified by those dealing with or using them.

Conclusion:

The Tribunal concluded that "contactors" are a different commercial commodity from "switches" based on technical literature, HSN Explanatory Notes, and trade parlance. The trade parlance test, as established by the Supreme Court, remains paramount and is satisfied in this case. Therefore, "contactors" are not excluded from the benefit of exemption under Notification 160/86. The Tribunal upheld the impugned order, granting the exemption to the respondents and rejecting the Revenue's appeal.