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TMI Blog1994 (1) TMI 181X X X X Extracts X X X X X X X X Extracts X X X X ..... in the bill of entry. The Customs House also found that as per the Customs Tariff, industrial furnaces are classifiable under Heading 84.17 while convertors are separately classified under Heading 84.54 and took the view that convertors were not covered by Notification 77/90. A show cause notice was issued asking the importer to explain why benefit of Notification 77/90 should not be denied to them and also charging them with misdeclaration. The show cause notice was also for confiscation of the goods under Section 111(m) and 111(o) of the Customs Act, 1962 and for imposing penalty on the appellants. In reply, the appellants explained that the refractory bricks imported by them are meant for use for AOD furnace installed in their steel making plant. They contended that AOD furnace is very much an industrial furnace technically as well as in commercial parlance. Upon hearing them in the matter and considering their reply and submission, the Collector observed that the exemption under Notification 77/90 will be available only if it is shown that refractory bricks are of special shape or quality and also that they are for use as component parts of industrial furnace. The Collector, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ointed out that other documents, which are in the nature of textual authorities on furnaces may be taken on record for purposes of submission by the appellants. 3. Smt. Shanti Sundaram, ld. SDR had earlier pointed out this aspect regarding the filing of additional evidence by way of affidavits, which have been obtained after the adjudication of this case and passing of the impugned order and the ld. Counsel has submitted, as above, in response. The ld. Counsel urged that the dispute in this case is whether the AOD furnace is an industrial furnace and the Department chosen to distinguish the convertor from furnace to deny the exemption. It was submitted that the convertor utilises chemical energy for the purpose of melting. The ld. Counsel referred to the literature in regard to AOD furnace in a book called `Ultra Refining Processes for Speciality Steel making' A Publication of the Iron & Steel Society. In this, there is a reference to AOD furnace as a furnace. The ld. Counsel, further, referred to the book `Elements of Fuels, Furnaces and Refractory' by O.P. Gupta in which under the heading furnaces - Introduction, convertors have been listed under the heading Different Metal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce was an error. The Collector has not considered in this case the earlier practice of extending the exemption to such goods. As regards the penalty imposed on the appellants, ld. Counsel contended that the penalty was unwarranted because the appellants had not deliberately given any mis-declaration and that this fact is proved by the past practice of the Customs House itself. Therefore, the penalty on the appellants is bad in law. He relied upon the decision reported in 1993 (68) E.L.T. 156 (Tribunal) = 1993 (22) ETR 413 in the case of Mirah Dekor v. Collector of Customs, New Delhi. 4. Smt. Shanti Sunderam, ld. SDR urged that the Collector had found the convertor is not an industrial furnace and the notification granting exemption to refractory bricks, which are component parts of industrial furnace, cannot be extended to the refractory bricks which are to be used in convertors. The Collector's order has brought out a technical differentiation between two based on textual authorities. The ld. SDR submitted that the notification 77/90 grants exemption for goods, which are firstly refractory bricks of special shape and quality, which are used as component part in industrial fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inology. The ld. SDR also stated that the Customs House was within its right to change the past practice if it is found to be erroneous and relied upon the decision reported in 1992 (62) E.L.T. 727 in the case of Rawal Industries v. Collector of Customs. Here the appellants have been served with a show cause notice giving the grounds for not extending exemption to them. The ld. SDR also distinguished the Tribunal's decision in the case of Alembic Glass Industries cited by the appellants and pointed out in that case that regenerator was held to be an integral part of industrial furnace, whereas in the present case the convertor is not an integral part of industrial furnace. The ld. SDR also submitted that the notification has one more aspect that the goods under that notification should be component parts of industrial furnace. Goods, which are in the nature of replacing parts, cannot be held to be component parts and, therefore, will not be eligible for exemption for which she relied upon case law reported in 1993 (66) E.L.T. 683 in the case of Hindustan Sanitaryware & Industries Ltd. v. Collector of Customs. The ld. SDR also referred to the Collector's reasoning to say that the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4) 1. 69.02 Refractory bricks of special shape or quality for use as component parts of industrial furnace 40% ad valorem 2. Omitted" 6. The crux of the department's case is that convertors are separately classified under heading distinctly from furnaces and covered by tariff sub-heading 8454.10. Industrial furnaces are classifiable under Heading 8417 separately. In view of the above, according to the department, convertors are not covered by Notification 77/90 which would be applicable only to refractory bricks for industrial furnaces. The appellants, on the other hand, have produced and relied upon several technical authorities to show that convertors are understood as industrial furnaces in the steel making industry. On examining this contention, it is found that in one of the books `Elements of Fuels, Furnaces and Refractory' by O.P. Gupta in the Chapter entitled Furnaces - Introduction, it has been stated as follows : "A furnace is a device in which the chemical energy of fuel or electrical energy is converted into heat which is then used to raise the temperature of materials, called the burden or stock, placed within it for that purpose. Furnaces o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It has been stated therein that in this regard a duplex process had been evolved in steel melting. In these processes, the electric furnace is relegated to a melting function while refining (decarburisation) was moved to an extra furnace vessel. Essentially two new processes were developed vacuum decarburization (VOD) and argon-oxygen decarburization (AOD). It is, further, stated therein that in the AOD, process, molten metal prepared in a supplying furnace and is transferred to the argon-oxygen unit for decarburization and further refining. It goes on to say that in the AOD refining process frees the arc furnace to do what it does best i.e. rapidly and efficiently melt scrap, while the refining and finishing part of the heat is done in a separate vessel. From the above, also, it is evident that in the steel making industry, the convertor is considered as a category of furnace for steel making which comes into play at the refining part of the steel making process. Therefore, on the basis of the textual authorities, the claim of the appellants that convertors are a type of industrial furnace, as understood in the metallurgical industry, has a lot of substance and has to be accepted. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are component parts of industrial furnace. The Tribunal held that parts initially used for the assembly or manufacture of the machine would be called component parts whereas the same parts imported for subsequent replacement has to be considered as spare parts only and not component part. Para 5 of the Tribunal's decision in the case of Hindustan Sanitaryware and Industries Ltd. v. Collector of Central Excise reported in 1993 (66) E.L.T. 683 is reproduced below wherein the Tribunal had followed a similar conclusion arrived at another previous decision in the case of Vaz Forwarding Pvt. Ltd. v. Collector of Customs - 1989 (43) E.L.T. 358 : "We have considered the submissions. For ready reference the said Notifications may be extracted as below : Notification No. 242-Cus., dated 2-8-1976 - Exemption to refractory bricks of special shape or quality for use as component parts of industrial furnaces. - In exercise of the powers conferred by sub-section (1) of Section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts refractory bricks of special shape or quality for use as component ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tory bricks of special shape or quality for use as component parts of industrial furnaces. [Notification No. 112/87-Cus., dated 1-3-1987]." From a reading of the said Notifications, it is clear that, these Notifications exempt refractory bricks of special shape or quality for use as component parts of industrial furnaces. The word "Component Parts" used in these Notifications cannot be ignored. If it was the intention of the Notification to exempt parts used for initial assembly as well as parts imported later for replacement, the Notification should not have used the word `Component' and should have really mentioned "Parts". In other words, the use of word "Component" is indicative that the same parts when initially used in the assembly or manufacture of the machine would be called "Component Parts" whereas the same parts imported for subsequent replacement of its part of initial assembly has to be considered as "Spare Parts". This was the view taken by this Tribunal in the case of Vaz Forwarding Pvt. Ltd. v. Collector of Customs, supra. We do not find any reason to take a different view after having considered the submissions made by the learned Counsel for the appellants. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ggested by the Tariff Conference. 8. In this case, however, the departmental authorities have not considered this aspect of the exemption notification and as submitted by the ld. Counsel before us the appellants were also not put on notice to meet this aspect of the case. However, since it is a question of correct assessment of the imported goods to duty, it will be in the interest of justice that the lower authorities should examine this aspect of the notification with reference to the imported goods and giving their finding thereon. The Tribunal also cannot at this stage go into this aspect as it involved factual verification of the situation in the appellants' case also in the absence of any finding thereon by the lower authorities as they had not adverted to this aspect at all in the adjudication proceedings. Therefore, on this aspect of the matter it will be appropriate to remand the case to the Collector of Customs, Bombay to give a finding thereon after giving the appellants an opportunity to put-forth their case in this regard with such evidence they may lead in the matter in accordance with law and after giving them an opportunity of hearing. As regards the penalty o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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