2013 (4) TMI 27 - AT - Central Excise

Classification - Differential duty - manufacture of Centrifugal Pumps - Power driven pump - benefit of notification No. 10/2006-C.E., dated 1-3-2006 for discharge of duty liability at concessional rate of duty than the rate fixed by the tariff. - Department found that appellant is not eligible for the benefit as mentioned in the notification. Held that - Applying the ratio of judgment of Larger Bench in CHIEF ENGG. RANJIT SAGAR DAM Versus COMMISSIONER OF C. EX., JALANDHAR 2006 (1) TMI 356 - CESTAT, NEW DELHI , it can be seen that the product manufactured by the appellant is undoubtedly classificable under Chapter 84.13 which was covered by Notification No. 10/2006-C.E., dated 1-3-2006, and eligible for benefit of reduced rate of duty. The exemption has been denied to the appellant on the ground that the notification provides the exemption only when the pumps are power driven i.e. the pumps should have the motors attached to them. This requirement does not flow from the exemption notification at all. Power driven pump does not necessarily mean that the source of power for the pump should be attached to the pump. What is required is that it should be a pump driven by power, which can be an IC engine or an electric motor or some other source of power. A pump which is designed to handle the water and is power driven viz. it could be a mono block pump where the pump and electric motor are integral parts of the pump set or a pump set where the provisions are made for fitting an electric motor can be considered as power driven pumps even when the source of power is not fitted. Quite often, the customer purchases only pumps from the manufacturer independently. In such cases, a pump purchased by him does not become a non-driven power pump just because the customer bought it without a motor. - Benefit of exemption allowed - Decided in favor of assessee.

Summary

Issues Involved:

1. Eligibility for the benefit of reduced rate of Excise duty under Notification No. 10/2006-C.E., dated 1-3-2006.
2. Classification of centrifugal pumps without prime movers under the Central Excise Tariff Act, 1985.
3. Interpretation of the term "power driven pumps" in the context of the exemption notification.
4. Applicability of the principles laid down in prior judgments and circulars regarding classification and excisability of pumps.

Issue-wise Detailed Analysis:

1. Eligibility for the Benefit of Reduced Rate of Excise Duty:

The core issue was whether the appellant was eligible for the reduced rate of Excise duty under Notification No. 10/2006-C.E., specifically under Sr. No. 17. The appellant argued that the manufactured centrifugal pumps, classified under Chapter Heading 84.13, were primarily designed for handling water and thus eligible for the reduced rate of duty. The appellant cited various cases, including Beacon Weir Ltd. v. CCE and Kishore Pumps Ltd., to support their claim that the pumps should be classified under Chapter Heading 84.13, even without an attached motor.

The Tribunal concluded that the product manufactured by the appellant, whether with or without a motor, is classified under Chapter Heading 84.13. Since these pumps were primarily designed for handling water, the Tribunal held that the denial of the exemption notification was incorrect. The Tribunal referenced the Larger Bench decision in Chief Engineer Ranjit Sagar Dam, which emphasized that the exemption should not be narrowly interpreted.

2. Classification of Centrifugal Pumps Without Prime Movers:

The Department issued Show Cause Notices arguing that the centrifugal pumps should be classified under Chapter Heading 841399/8439120 and subjected to a higher duty rate of 16% because they were not "power driven pumps" without an attached motor. The appellant contested this, asserting that the pumps should remain under Chapter Heading 84.13, which pertains to pumps designed to handle water.

The Tribunal agreed with the appellant, noting that the pumps were indeed designed to handle water and that the classification under Chapter Heading 84.13 was appropriate. The Tribunal emphasized that the characteristics of the pumps remained the same regardless of whether a motor was attached.

3. Interpretation of the Term "Power Driven Pumps":

The crux of the dispute was the interpretation of "power driven pumps" in the exemption notification. The Department contended that the term implied that the pumps must have motors attached to qualify for the reduced duty rate. The appellant argued that the term should include pumps designed to be driven by power, even if the motor was not attached at the time of clearance.

The Tribunal sided with the appellant, stating that "power driven" does not necessarily mean the power source must be attached. It could be an IC engine, electric motor, or another power source. The Tribunal noted that the exemption notification did not explicitly require the motor to be attached and that the pumps were designed to handle water, meeting the criteria for the reduced duty rate.

4. Applicability of Prior Judgments and Circulars:

The appellant referred to several judgments and a CBEC Circular No. 224/58/96-CX., dated 26-6-1996, which clarified that power driven pump sets for handling water should be classified under Chapter Heading 84.13. The appellant argued that similar principles should apply in their case.

The Tribunal found these references persuasive and consistent with their interpretation. The Tribunal noted that the CBEC Circular supported the classification of power driven pump sets under Chapter Heading 84.13 and that the exemption notification should be interpreted in light of these precedents.

Conclusion:

The Tribunal concluded that the appellant was eligible for the reduced rate of Excise duty under Notification No. 10/2006-C.E., dated 1-3-2006, as the centrifugal pumps were classified under Chapter Heading 84.13 and designed for handling water. The Tribunal set aside the impugned order, holding that the denial of the exemption notification was incorrect and not in consonance with the law laid down by the Larger Bench. The Tribunal emphasized that the term "power driven pumps" should be interpreted broadly to include pumps designed to be driven by power, regardless of whether the motor was attached at the time of clearance.