1986 (8) TMI 346 - AT - Customs

Summary

Issues Involved:
1. Classification of imported parts for customs duty.
2. Classification of imported parts for countervailing duty under Central Excise Tariff.
3. Applicability of prior judgments and trade notices on the classification issue.

Detailed Analysis:

1. Classification of Imported Parts for Customs Duty:
The appellants, M/s. Kirloskar Cummins Ltd., imported various parts such as pistons, piston rings, thin ball bearings, and engine-valves, all described as 'I.C. Engine Parts'. The imports occurred from 1972 to 1977, with the majority assessed under T.I. 72(3) of the erstwhile Indian Customs Tariff (ICT). Post-2-8-76 imports were assessed under T.I. 34.06 or other related entries following the Customs Tariff Act, 1975. The appellants argued that these parts should be classified as 'Parts of Internal Combustion Diesel Engines' for customs duty, which was accepted by the customs authorities.

2. Classification of Imported Parts for Countervailing Duty under Central Excise Tariff:
The primary controversy was the classification of these parts under the Central Excise Tariff for countervailing duty. The Customs authorities insisted on treating the imported parts as 'parts of motor vehicles' liable to Central Excise Duty under TI 34-A. The appellants contended that the parts were for stationary or non-vehicular uses, and only a small percentage were used in dumpers, which could be considered motor vehicles. They argued that the parts should not be classified under TI 34-A as motor vehicle parts, especially when they were assessed under the customs tariff as 'I.C. Engine Parts'.

3. Applicability of Prior Judgments and Trade Notices on the Classification Issue:
The appellants relied on a Bombay High Court judgment in their favor, which classified similar goods as parts of machinery under TI 72(3) of ICT, rejecting the classification as motor vehicle parts. This judgment was upheld by a Division Bench and the Supreme Court. The appellants also cited several Tribunal orders supporting their classification, asserting that these decisions were not challenged by the Department in higher courts.

During the hearing, the Department, represented by Shri J. Gopinath, acknowledged the Bombay High Court judgment and the series of Tribunal judgments but defended their stance by interpreting the tariff entries and the application of the goods. Gopinath argued that the parts should be classified as motor vehicle parts under TI 34A, citing the usage of the engines in vehicles like dumpers and tractors.

The appellants countered by emphasizing the predominant use of the engines in non-vehicular applications, supported by a Supreme Court judgment that the predominant use determines the classification. They also referred to a Trade Notice indicating that the classification for customs duty should align with the classification for countervailing duty.

Conclusion:
The Tribunal, after careful consideration, upheld the appellants' classification of the imported parts as 'I.C. Engine Components' and not as motor vehicle parts under TI 34-A. The Tribunal relied on the consistent judgments of the Bombay High Court and the Tribunal itself, which were not challenged successfully by the Department. The Tribunal found no compelling reason to deviate from these precedents, noting that the predominant use of the engines was non-vehicular. Consequently, the assessed levy of countervailing duty under TI 34-A was set aside, and the appeals were allowed with consequential relief.