2015 (5) TMI 629 - SC - Central Excise

Classification of hand trolley or fork lift etc. manufactured for captive consumption for use in manufacturing of Parts of motor vehicle - These trolleys and fork lift are placed on iron/steel or aluminum known as 3 FAG Pallets - Classification under heading No.84.27 or under Heading 84.31 - Held that - Fork-lift truck is operational without pallets and as such pallets are not parts of the same. If the contention of the Respondent is accepted, motor sprit will be part of a motor car as the same cannot be used without it. Once it is held that pallets are not parts of fork-lift truck, Note 2 to Section XVI is not attracted as it only provides guidance for the classification of parts and not all goods which are used or to be used with the machineries falling in Section XVI of the Tariff. - the impugned pallets, being not part of fork-lift trucks, are not classifiable under Heading 84.31 of the Tariff. - Decided against the assessee. Benefit of Notification No.67 /95-CE dated 16.3.1995 - Whether the appellant, in respect of the pallets, can claim benefit of Notification No.67 /95-CE dated 16.3.1995, as amended and prevalent on the date when the dispute arose, namely, in the year 1999 - Held that - It is an admitted position, as explained by the appellant itself, that these pallets which are manufactured/assembled in the factory of the appellant are in the nature of material handling equipment, to keep and carry work in progress goods from one machine to the other. Thus, the use of the pallets is for carrying out the material from one machine to the other. It cannot, therefore, be said that these goods are used in relation to the manufacture in or in relation to the manufacture of the final products. We are, therefore, of the opinion that column (2) of Notification shall also not be attracted. - Decided against assessee.

Summary

Issues:
1. Classification of pallets under Chapter Heading 84.31 or 73.26.
2. Eligibility of claiming benefit under Notification No.67/95-CE dated 16.3.1995.

Classification Issue Analysis:
The appellant's pallets, made of iron or steel, were used for material handling in their factory. The Department classified the pallets under Chapter Heading 7326.90, contending they were material handling equipment suitable for use with machinery under Heading 84.27. The Tribunal held that for classification under Heading 84.31, the goods must be a 'part' suitable for use with specific machinery. Referring to a precedent, it was established that pallets were not parts of the machinery as they were not essential for its operation. The Tribunal's decision was upheld, stating the pallets were not classifiable under Heading 84.31.

Benefit Claim Issue Analysis:
Regarding the benefit claim under Notification No.67/95, the Tribunal ruled that the Notification exempted capital goods as per Rule 57Q of the Central Excise Rules, 1944. The Notification also covered goods used in the manufacture of final products specified in the Table annexed. The appellant's pallets did not qualify as capital goods under Rule 57Q. Additionally, the pallets were not used in or in relation to the manufacture of final products, as they were solely for material handling within the factory. Therefore, the pallets did not fall under the exempted categories specified in the Notification. Consequently, the Tribunal's decision denying the benefit claim was upheld, and the appeals were dismissed.

In conclusion, the Supreme Court affirmed the lower authorities' decisions on both issues, upholding the classification of the pallets under Chapter Heading 7326.90 and denying the benefit claim under Notification No.67/95 due to the pallets not meeting the criteria for exemption as capital goods used in the production process.