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TMI Blog1994 (1) TMI 156X X X X Extracts X X X X X X X X Extracts X X X X ..... describing these goods as `parts suitable for use solely or principally for electric motors falling under Heading 86.01 and the appellants had further added `for Hermetically Sealed Compressors . The Department had issued show cause notices to the individual appellants calling upon them to show cause as to why their goods namely stators and rotors should not be treated as parts of the compressors (falling under 8414.10) and therefore, classification under 8414.91 with an effective rate of duty of 40% as per the Notification No. 166/86-C.E., dt. 1-3-1986 instead of being treated as parts of electric motors (falling under Heading 85.01) and, therefore, classified under 85.03. The effective rate of duty is 20% if the stators and rotors are treated as parts of electric motors and 40% if they are treated as parts of compressors. The Assistant Collector after observing the principles of natural justice has in these impugned orders held that the stators and rotors are parts of compressors and, therefore, they are to be classified under sub-heading 8414.91 of Central Excise Tariff, 1985. He has further confirmed the differential duty in respect of the appellants for different period as n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has recorded in detail the various arguments put-forth before him and after a due consideration of all the pleadings, he has passed a detail reasoned order rejecting the appellant s contention and hence these appeals. The ld. Collector has held that the stators and rotors manufactured by the appellants do not come into the electric motor as an essential parts. On the other hand, the said items are directly sold to M/s. Kirloskar Brothers Ltd. (KBL) and there is not a single sale of these rotors and stators to a person who is engaged in the manufacture of electric motors. He has also recorded a question of fact that the stators and rotors are being used in the manufacture of compressors only and not in the manufacture of motors. He has also held that the appellants have not claimed that the rotors and stators are used by their customer to manufacture motors and it is then installed in the compressors. As regards the affidavits and testimonials produced by the appellants, the ld. Collector has observed that these materials with the stators and rotors are used as parts in the manufacture of electric motors and which are further used to drive appliances such as gas compressors, monobl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther, the said items manufactured by the appellants are specifically designed for use in the compressors manufactured by M/s. Kirloskar Brothers Ltd., therefore, they have to be classified in the heading in which the compressors are classified i.e. Heading 84.14 of Central Excise Tariff. 5. We have heard Sr. Advocate Shri Arshad Hidayatullah for the appellant and in the case of M/s. Bhagwat Engg. Enterprises, the party has requested the case to be decided on merits. Shri K.K. Dutta, ld. JDR argued by the Revenue. 6. Ld. Sr. Advocate strenuously argued this case and submitted that the appellants are manufacturing parts for Hermetic Electric Motors and that Hermetic Electric Motors are itself separate goods and therefore, the rotors and stators have to be classified as parts of the electric motors. It is his argument that in the Trade as well as in Technical Understanding, the parts manufactured by the appellants are for Hermetic Electric Motor, although the said motor might have been utilized in a sealed compressor, yet the function of the rotors and stators are that of a electric motor and not of a compressor. The compressor is designed in such a way that the common shaft is us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s well as before the Gujarat High Court was with regard to the rotors and stators are to be considered as parts of electric motors falling under Tariff Item 30A or to be classified as power pump under Tariff Item 68 which had been exempted from duty. However, the ld. Sr. Counsel argued that so long as technically and in Trade, Hermetic Electric Motors have been recognized and these rotors and stators are utilised for such a Hermetic Electric Motors, they are required to be classified as parts of electric motor only. On being pointed out to him with regard to the ruling of the Tribunal in the case of Collector of Central Excise v. Mahendra Engineering Works as reported in 1993 (67) E.L.T. 134. The ld. Sr. Advocate submitted that the ruling dealt only with the grant of exemption and not with regard to any classification dispute and further the present controversy was not before the Tribunal in that case and hence the ruling is clearly distinguishable. He submitted that Section Note 2 of Section XVI of HSN will arise only if Heading 8503 was not satisfied. Since 8503 is satisfied, the question of relying on Note 2 does not arise. He further argued that the rotors and stators are desig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... em like a sealed hermetic compressor which was not being denied by the appellants, therefore, the classification adopted by the lower authorities is unsustainable. Ld. JDR however, submitted that in the new tariff, the classification has to be on the basis of Section Note and Chapter Note which was sold in the old tariff. 8. Ld. Sr. Counsel submitted that Rs. six lakhs has been added in the duty which required to be deducted and the duty had to be reverted even if the case is held against the appellants. 9. E/Appeal No. 4143/92-B1 - The applicants have sought their case to be decided on merits. The appellants are manufacturers of Wound Stators of various sizes and specifications and the department has given show cause notice to them to explain as to why the said item should not be classified as being parts of gas compressors under sub-heading 8414.91, in view of Note 2 of Section XVI. The department has further stated that these parts are suitable for use solely and principally of various types of gas compressors falling under chapter sub-heading No. 8414.10. The appellants have contested this heading and have claimed that they are to be classified under sub-heading 8503.00 as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r appellant. 10. We have carefully considered the submissions made by ld. Sr. Advocate as well as Shri K.K. Dutta, ld. JDR. The admitted facts in this case are that these rotors and stators are not being used in a separate electric motor which is of a general type. The case of the appellants are that these items are specially designed and manufactured to be used in a Hermetic Sealed Compressors. However, it is their contention that it cannot be considered as parts of HSC as they perform the function of electric motor. However, they do admit that the common prime-mover used for the compressor of these two parts. It is their contention that merely because a common prime-mover is used that by itself and also by the fact that it is placed in a sealed compressor, does not make it a part of a Hermetically Sealed Compressor. They have taken a plea that hermetic motors are electric motors of a different kind and that they are understood as such in the Trade as well as in the technical sense. The Deptt. has, however, come to the conclusion that these are parts of compressors which go into the air-conditioners and as they are specifically designed and used solely and principally in the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t relied upon to determine the classification of the items before us. The certificate issued by the Principal Govt. College of Engineering, Karad is also identically worded and there is no mention about the items in question being specifically used solely as a part in a sealed compressor. Therefore, the persons who have given the certificate and the affidavits, have not examined the issue in the light of the controversy but have simply given the certificate and the affidavit in like worded to suit the appellant s need. Therefore, the affidavits and certificate are of not much use for us for determining the controversy. The ld. Sr. Advocate has placed before us the extract from Understanding and Servicing Fractional Horsepower Motors by Kennard C. Graham. The page 86 describes Hermetic Motors : These motors are built for hermetically sealed refrigeration units. Stator, rotor and compressor are sealed in an airtight case. The compressor is coupled directly to the rotor shaft, within the case. Under these conditions, it is best to employ an external starting relay, Fig. 6. Its operation is easily understood. During starting action, current flowing in the main winding is much hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two types that are in popular use : the reciprocating compressor and the rotary compressor. Hermetic Reciprocating Compressors Hermetic and open-type compressors are similar. The main difference is that the electric motor of the hermetic compressor is encased in the crank case or within a sealed housing containing the compressor. With such a design, the compressor is driven directly by the motor, revolves at motor speed, and requires no shaft seal. Single cylinder models are available for small units while two-cylinder ones are used for larger units. The three basic designs for hermetic compressors are illustrated. The compressor body itself serves as the casing. The crankcase is extended to hold the motor. Since this type of unit is bolted together and may easily be taken apart and reassembled, it is known as a serviceable hermetic unit. The compressor and motor are enclosed in a steel casing (dome or hat). The stationary field (stator) of the motor may be pressed into half the dome. The compressor is secured on this stator. This unit is usually mounted on springs or rubber mounts which dampen or absorb vibration. The section shows a motor and compressor assembly moun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd design of Hermetic Sealed Compressor is specific and these two items have become identifiable and specific parts of hermetic sealed compressors, therefore their classification as parts to be solely and principally used alongwith hermetic sealed compressor has to be accepted. The Revenue is correct in applying Note 2(b) of Section XVI of the CET 85 in the present case. The ld. Counsel has relied on two unreported judgments and the one which has been approved by the Gujarat High Court in the case of Windel Submersible Pvt. Ltd. In this case, the question was with regard to the classification of parts of electric motor within Tariff Item 30D or electric motors falling under Tariff Item 30A. The tariff has completely changed with introduction of Chapter Notes and Section Notes. The tariff change has made all the difference for the purpose of classification. The dispute being of a different nature, the rulings cited before us are clearly distinguishable. The present controversy is with regard to parts of hermetically sealed compressors or as parts of electric motor which was not in existence in the cited cases. The appellants have clearly admitted that these rotors and stators are s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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