1994 (12) TMI 156 - SC - Customs

Whether there was justification for the CEGAT to classify the article Granite Press Roll under Import Tariff Item No. 68.01/16(1) of the 1st Schedule to the Customs Tariff Act 1975 as it stood prior to its amendment on 28-2-1986 as against its classification made by the Collector (Appeals) under Import Tariff No. 84.31? Held that - When classification of imported article - the Granite Press Roll - ought to have been made under Tariff Item No. 84.31 of Chapter 84 as is held by us CEGAT has gone wholly wrong in clssifying that article under Import Tariff Item No. 68.01/16(1) of the Ist Schedule to the Customs Tariff Act 1975 particularly when that article could not have been regarded as an article of stone as such to become an excepted item under Note 2 to Section XVI read with Note 1(a) to Chapter 84 warranting its classification under Heading in Chapter 68 and according to rules governing classification of materials or substances or their parts. Since Granite Press Roll is an imported article which is classified by us as Tariff Item 84.31 of the 1st Schedule to the Customs Tariff Act 1975 as it stood prior to its amendment on 28-2-1986 the import duty payable thereon is only as provided thereunder. Appeal allowed.

Summary

Issues Involved:
1. Classification of "Granite Press Roll" under the Customs Tariff Act, 1975.
2. Justification for CEGAT's classification under Import Tariff Item No. 68.01/16(1).
3. Applicability of statutory notes and rules for classification.

Detailed Analysis:

1. Classification of "Granite Press Roll" under the Customs Tariff Act, 1975:
The primary issue is whether the "Granite Press Roll" should be classified under Import Tariff Item No. 68.01/16(1) as per CEGAT's decision or under Import Tariff Item No. 84.31 as per the Collector (Appeals). The appellant, a company with paper manufacturing units, imported the Granite Press Roll from the UK as it was not available indigenously. The Granite Press Roll is described as a component part of paper finishing machinery, made of granite, steel, and concrete.

2. Justification for CEGAT's classification under Import Tariff Item No. 68.01/16(1):
CEGAT classified the Granite Press Roll under Chapter 68, citing that it falls under "articles of stone, of plaster, of cement, of asbestos, of mica and of similar materials." CEGAT's reasoning was based on the statutory rules of classification, specifically Notes 1 and 2 in Section XVI, Note 1 in Chapter 84, and Note 1 in Chapter 85, which they believed had an overriding effect over the headings themselves. CEGAT argued that the Granite Press Roll, being a composite product of stone and steel, should be classified under the material composition heading as per Rule 2(b) and Rule 3(b) of the Customs Tariff Schedule.

3. Applicability of statutory notes and rules for classification:
The Supreme Court found that CEGAT's reliance on non-existent rules in statutory Notes 1 and 2 in Section XVI, Note 1 in Chapter 84, and Note 1 in Chapter 85 was erroneous. The Court emphasized that the correct rules for classification should be those contained in Note 2 of Section XVI under Chapter 84 or Chapter 85. According to Rule (a) of Note 2 to Section XVI, goods described in any of the Headings of Chapters 84 and 85 should be classified in their respective Headings. Rule (b) further specifies that parts suitable for use solely or principally with a particular kind of machine should be classified with that machine.

Conclusion:
The Supreme Court concluded that the Granite Press Roll, being a part of paper finishing machinery, should be classified under Heading 84.31, as it is machinery for making or finishing cellulosic pulp, paper, or paper-board. The Court held that CEGAT's classification under Chapter 68 was incorrect, as the Granite Press Roll could not be regarded as an article of stone to be classified under Chapter 68. The correct classification is under Tariff Item No. 84.31 of Chapter 84, as held by the Collector (Appeals).

Order:
The Supreme Court allowed the appeal, set aside the order of CEGAT, restored the order of the Collector (Appeals), and directed the respondents to refund the excess import duty collected on the Granite Press Roll to the appellant within one month. No order as to costs was made.