1986 (8) TMI 345 - AT - Customs

Issues Involved:
1. Classification of imported parts for countervailing duty under Central Excise Tariff.
2. Applicability of judgments from previous cases and higher courts.
3. Predominant use of imported parts and its impact on classification.
4. Department's argument and evidence regarding the classification of parts.

Detailed Analysis:

1. Classification of Imported Parts for Countervailing Duty under Central Excise Tariff:
The primary issue in these appeals is the classification of imported parts such as pistons, piston rings, thin ball bearings, and engine-valves, collectively described as 'I.C. Engine Parts.' The appellants argue that these parts should be classified as 'Parts of Internal Combustion Diesel Engines' and not as 'parts of motor vehicles' under TI 34-A for the purpose of countervailing duty. The Customs authorities, however, have treated these parts as 'parts of motor vehicles' liable to Central Excise Duty under TI 34-A.

2. Applicability of Judgments from Previous Cases and Higher Courts:
The appellants heavily relied on a judgment from the Bombay High Court in their own case, which held that similar goods were assessable as parts of machinery under TI 72(3) of ICT read with TI 72(a), overruling the Customs authorities' original assessment under various TI 75 entries. The Division Bench of the Bombay High Court also ruled in favor of the appellants, and an appeal to the Supreme Court was dismissed at the admission stage. The appellants argue that these precedents should be followed in the present appeals.

3. Predominant Use of Imported Parts and Its Impact on Classification:
The appellants contend that the diesel engines they manufacture using the imported parts are primarily for stationary or non-vehicular uses, such as fitting in shovels, bull dozers, cranes, oil drilling rigs, compressors, etc. Only a small percentage of these engines are fitted to dumpers, which may be treated as 'motor vehicles.' Therefore, the parts imported cannot be classified under TI 34-A as parts of motor vehicles. They emphasize that the classification for basic customs duty has been accepted as 'I.C. Engine Parts' and not as 'Motor Vehicle Parts.'

4. Department's Argument and Evidence Regarding the Classification of Parts:
The Department argued that the goods were assessable under TI 72(3) as 'machinery parts' earlier due to the wording of the Proviso to TI 75(13) of the ICT, which emphasized the principal and ordinary use of the article. They also argued that under the CTA, the goods were assessed under various headings of TI 84 due to the exclusion clause in Section Note 2(e) to Sec. XVII of the CTA. The Department presented catalogues and other documents to argue that 'Bull Dozers,' 'Trailers,' and 'Loaders' operate with the help of a tractor, making the diesel engines vehicular in use.

Judgment:
The Tribunal, after considering all arguments and evidence, upheld the appellants' plea. It was noted that the Bombay High Court judgment and previous Tribunal decisions consistently ruled that the imported parts should not be classified as 'motor vehicle parts' under TI 34-A. The Tribunal found no compelling reason to deviate from these precedents. It was also highlighted that the predominant use of the engines manufactured by the appellants was non-vehicular, with only a small percentage used in vehicular applications.

The Tribunal also considered a trade notice indicating that the classification for customs duty should apply similarly for countervailing duty, supporting the appellants' argument for a uniform standard. The Tribunal concluded that the classification under TI 34-A could not be upheld, and there was no countervailing duty at the relevant time for goods falling under TI 68.

Conclusion:
The Tribunal allowed the appeals, setting aside the assessed levy of countervailing duty on the imported goods, and provided consequential relief to the appellants. The classification under TI 34-A of the CET was not upheld, aligning with the judgments of the Bombay High Court and previous Tribunal decisions.

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