1996 (5) TMI 198 - AT - Central Excise

Summary

Issues Involved:
1. Correct classification of "Rotors" and "Stators" used in the manufacture of "Monobloc P.D. Pumps."
2. Whether "Rotors" and "Stators" come into existence independently as excisable goods.

Detailed Analysis:

Issue 1: Correct Classification of "Rotors" and "Stators"

The primary question in these appeals was the classification of "Rotors" and "Stators" used in the manufacture of "Monobloc P.D. Pumps." The appellants argued that these items should be classified under Tariff Item 68, while the Collector (Appeals) classified them under Tariff Item 30D.

The Tribunal referenced the case of EL.P.EM. Industries v. Collector of Central Excise, where it was held that "Rotors" and "Stators" should be classified under the then Tariff Heading 68. The Tribunal also considered judgments from the Hon'ble Supreme Court in Sahney Paris Rhone Ltd. v. Collector of Central Excise and Paharpur Cooling Towers Pvt. Ltd. v. Collector of Central Excise. These cases supported the view that items forming part of a larger assembly, which do not come into existence independently, should be classified under a residuary tariff item.

The Tribunal noted that various circulars and trade notices issued by the department clarified that "Rotors" and "Stators" used in monobloc pumps should pay duty under Item 30A or 30D before their removal for use as component parts. However, the Tribunal concluded that since these items are not independently identifiable as electric motors, they should be classified under Tariff Item 68.

Issue 2: Independent Existence and Excisability of "Rotors" and "Stators"

There was a difference of opinion between the Judicial Member and the Vice President regarding whether "Rotors" and "Stators" come into existence independently as excisable goods.

The Judicial Member held that "Rotors" and "Stators" are classifiable under Tariff Item 68, following the earlier decision of the Tribunal in EL.P.EM. Industries. This view was supported by the fact that these items do not constitute an electric motor independently but are part of a larger assembly.

On the other hand, the Vice President observed that the manufacturing process described by the appellants showed that "Rotors" and "Stators" do not come into existence independently. Instead, they are fabricated along with the body of the monobloc pump in an integrated process. Therefore, he concluded that these items are not excisable and should not be classified under any heading.

The matter was referred to a third member due to this difference of opinion. The third member agreed with the Judicial Member, stating that the issue of non-excisability was not raised in the appeal and that the items in question should be classified under Tariff Item 68, following the earlier decision of the Tribunal.

Final Order:

In accordance with the majority opinion, the Tribunal concluded that "Rotors" and "Stators" come into existence independently as excisable goods and are classifiable under the then Tariff Item 68. The appeals were accepted, setting aside the impugned orders.