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TMI Blog2002 (2) TMI 1077X X X X Extracts X X X X X X X X Extracts X X X X ..... ing appropriate duty. On 15-6-99, the assessee had filed a classification list under Rule 173B of the Central Excise Rules 1944, by classifying the above two models of IC engines under CSH 8424.91 which attracted nil rate of duty. They filed a letter dated 21-6-99 stating that they would be paying duty on the above mentioned IC engines "Under Protest" The department was of the view that since the IC engines are classifiable under CSH 8407.00 and not as parts of mechanical appliances of a kind used in agriculture or horticulture under CSH 8424.91, a show cause notice dated 28-8-99 was issued proposing re-classification of the above mentioned IC engines under CSH 8407.00 and also proposing to vacate the protest besides imposition of penalty. The lower authority after considering their reply and after hearing them passed a detailed order (Order-in-Original Nos. 55-56/99, dt. 15-10-99) classifying the impugned items under CSH 8407.00 and also vacating the protest lodged by the assessees vide their letter dated 21-6-99. In the meanwhile, they have also filed a claim for refund on 24-6-99 amounting to Rs. 53,03,639/- towards the duty paid on the IC engines for the period 31-12-98 to 14-6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... complete machine but also an incomplete machine once it attains the main essential features of the complete machine. Absence of certain components to the machine will not take them away from machines and they cannot be classified as parts. Referring to HSN Interpretation notes, he has referred a citation contained in the decision of the Hon'ble Supreme Court in the case of CCE v. Woodcraft Products Ltd. reported in 1995 (77) E.L.T. 23 (SC -3 Members Bench order) wherein it has been held that as per the Statement of Objects and Reasons of Central Excise Tariff Bill "1985, new Tariff has been introduced, based on HSN to reduce classification disputes. Thus, in case of doubt, HSN is a safe guide for ascertaining true meaning of any expression used in the Act, unless there is an express different intention indicated in the Tariff itself. The lower authority has also referred to Tariff Heading 8424 of HSN whose wordings are exactly same as the wordings in Chapter Heading 8424 of CETA. Under 8424 of HSN, the appliances used for agriculture and horticulture are covered under CSH 8424.81. The Explanatory Notes to this sub-heading, to the extent it is required for determining the classifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods included in any of the headings of Chapter 84 or Chapter 85 (other than Heading Nos. 84.09, 84.31, 84.48, 84.66, 84.73, 84.85, 85.03, 85.22, 85.29, 85.38 and 85.48 are in all cases to be classified in their respective headings. (b) Other parts, if suitable for use solely or principally with a particular kind of machine, or with a number of machines of the same heading (including a machine of Heading No. 84.79 or Heading No 85.43) are to be classified with the machines of that kind or in Heading Nos. 84.09, 84.31, 84.48, 84.66, 84.73, 85.03, 85.22, 85.29, or 85.38 as appropriate. However, parts which are equally suitable for use principally with the goods of Heading Nos. 85.17 and 85.25 to 85.28 are to be classified in Heading No. 85.17. 2.2 Ld. Commissioner (Appeals) has allowed the assessee's appeal after analysing the chapter headings, as extracted above and recording his findings from paras 6.2 to 10 which are reproduced as under - "6.2 The technical write-up furnished by the appellants on sprayer engine is as follows : "Sprayer engine is 2 stroke single cylinder engine having 25 mm bore and 35 mm stroke. The cubic capacity of the sprayer engine is 34. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sified in their respective headings. Further under Note 2(b), other parts, if suitable for use solely or principally with a particular kind of machine or with a number of machines of the same heading (including a machine of Heading No. 84.79 or Heading No. 85.43) are to be classified with the machines of that kind or in Heading No. 84.09, 84.31, 84.48, 84.66, 84.73, 85.03, 85.22, 85.29 or 85.38 as appropriate. Further, Section Note 4 to Section XVI states, "where a machine (including a combination of machines) consists of individual components (whether separate or interconnected by piping, by transmission devices, by electric cables or by other devices) intended to contribute together to a clearly defined function covered by one of the headings in chapter 84 or chapter 85, then the whole falls to be classified in the heading appropriate to that function. Here, the engines for sprayers at the point of clearance clearly have design and functional characteristic which identify them as parts which are used solely in power sprayers for agriculture and horticulture. Therefore it is felt that as per Note 2(a) and 2(b) of Section XVI of the tariff, the appropriate classification for the L3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovided, then the engine will be non-functional and will seize. Further, it is also observed that unlike in a conventional engine, the L34/K34 models do not have any 'governing mechanism' to regulate the speed of the engine. Therefore, the said engines at the point of clearance clearly have design and functional characteristic which identify them as parts which are used solely in power sprayers for agricultural and horticultural purposes. 6.4 It is also seen that the Larger Bench of the Tribunal in the case of Collector of Customs v. Modi Xerox Ltd. reported in 1993 (67) E.L.T. 303 (T) (para 5) have inter alia held that although HSN Explanatory Notes, admittedly, have a persuasive value in determining classification, yet where such classification can be determined with reference to the Rules of Interpretation to the Tariff, Chapter Note and Tariff Heading in the Customs Tariff Act, 1975 itself, there will be no necessity to rely upon the HSN Notes. The ratio of this decision is also applicable to the Central Excise Tariff. 7. Further, the Honourable Supreme Court in their judgment dated 12-1-98 in the case of CCE, Bombay v. K.W.H. Heliplastics Ltd. reported in 1998 (97) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tute the part of the mechanical appliances spraying liquids or powders. This has been further amplified under same heading - "8424.10 Mechanical appliances of a kind used in agriculture or horticulture". Parts - 8424.91 - of goods covered by sub-heading No. 8424.10". 9. In the light of the above discussions, the end-use of the mechanical appliances is agriculture and horticulture. In order to encourage the capital input into agricultural sector, these mechanical appliances have been exempted by charging nil rate of duty. Further Section Note 2(a) of Section XVI contemplates that parts are liable to be classified under the same heading, viz. 84.24 in this case. Besides. Section Note 2(b) of Section XVI talks about parts meant for use solely or principally with a particular kind of machine are liable to be classified with the same heading as that of the machines. In this case, the machines are under CSH 8424.10 and the L34/K34 engines meant for the agricultural sprayers are liable to be classified as parts under CSH 8424.91 of goods covered by CSH 8424.10. 10. In the light of the detailed discussions as above, I hold that the impugned engines are liable to be classified u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d-use and hence design difference argument advanced by the respondent is only a mis-statement of facts. He contended that appliance for projecting/spraying fluids requires the powering mechanism which an IC Engine is for its normal function and vice versa is not necessarily so. Precisely because a powering mechanism have of necessity to be built into the above appliance for its normal function and because in this case the powering mechanism is doubted to be an IC engine, one have the necessity to go in depth to find out whether the powering mechanism which form an essential part of the appliance is an IC engine or not which the Commissioner (Appeals) had not done. For the same reason, he added that one has to delve into the contention of Assistant Commissioner that "the IC engines manufactured by the assessees and the power sprayers in which the engines are fitted are two different products for the purpose of excise duty". Ld. DR sought for setting aside the impugned order by allowing the Revenue appeal for the reasons stated above. 4. Ld. Sr. Advocate appearing for the respondent argued on the same lines as contained in the grounds of appeal before the lower appellate author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ines" sub-heading No 8424.91. It was also mentioned therein as "Agricultural Sprayer Engine : Nil Tariff Rate". They submitted that without verifying the above submission, the lower authority has passed his order whereas the Commissioner (Appeals) has considered all their pleas including the case laws relied by them including the judgment rendered by the Larger Bench in the case of CCE v. Modi Xerox Ltd. reported in 1993 (67) E.L.T. 303 (T) and the judgment rendered by the Hon'ble Supreme Court in the case of CCE, Bombay v. K.W.H. Heliplastics Ltd. reported in 1998 (97) E.L.T. 385 (S.C.) and came to the correct conclusion that the items in question is classifiable under CSH 8424.91. Ld. Sr. Counsel submitted that the Larger Bench of the Tribunal in the above mentioned case in para 5 have inter alia held that although HSN Explanatory Notes, admittedly, have a persuasive value in determining classification, yet where such classification can be determined with reference to the Rules of Interpretation to the Tariff. Chapter Note and Tariff Heading in the Customs Tariff Act, 1975 itself, there will be no necessity to rely upon the HSN Notes. The ratio of this decision is also applicable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guration of the engine in question tested by them (namely L34/K34) without its own cooling blower and fuel tank is only suitable for the power sprayer application and that this engine, as it is, cannot be used for other applications without further modifications. The Revenue has not produced any contra opinion either from the IIT, Chennai or from any other authority to counter the evidence produced by the respondent assessee before the lower adjudicating authority. Thirdly, a letter was also issued by M/s. Tamil Nadu Agro-Engineering & Service Co-operative Federation Ltd., a quasi government organisation which was also in favour of the assessee. The respondent-assessee have also produced before the lower adjudicating authority the Excise/Sales Tax Registration Certificates, Purchase orders, Sales Invoices and end-use letters from users/dealers and the Assistant Commissioner has not countered any of those evidences produced before him. Fourthly, the respondent-assessee had also submitted a technical pamphlet in which the specifications of the two models were separately given on the front page and on the reverse, a model of the spraying machine was shown fitted with Greaves L-34 mode ..... X X X X Extracts X X X X X X X X Extracts X X X X
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