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TMI Blog2007 (9) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, V. belt, motor, pulley, belt guard, gauge, gauge board, angle valve, M.S. male flange, C.A.F. Gasket, set of tools, bolts and nuts, etc. 4.On 4.9.98, show cause notice was given to M/s. FIL in which it was alleged by the Department that the assessee had evaded payment of duty on the full value of the compressors, manufactured and cleared by them, by separately invoicing clearance of bought-out items and manufactured items. At this stage, it may be noticed that the factory of the assessee is in Faridabad where the items, manufactured and cleared, consisted of compressor, fly wheel, safety valve and filter ("manufactured items", for short) whereas from their trading office in New Delhi, the bought-out items consisted of V. belt, pulley, belt guard, angle valves and other items referred to in para 3 of the show cause notice ("bought-out items", for short). According to the show cause notice, assessee had knowingly cleared manufactured items and bought-out items separately; that the value of the bought-out items and manufactured items like fly wheel, safety valve and filter were includible in the assessable value of the compressor as without the said items the compress ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 31.12.99 given by the Commissioner, the assessee carried the matter in appeal to CEGAT which took the view that the compressor, cleared by the assessee, stood cleared as a "stand-alone" item and that it was not removed in an unassembled or disassembled condition and, therefore, there was no question of applying General Interpretative Rule 2(a), Part-V Section XVI of HSN; that, similarly Part-III of Section XVI of Interpretative Notes of HSN was not applicable as the compressor was cleared as a "stand-alone" item. According to the Tribunal, since parts of the compressor, namely, fly wheel, safety valve and filter as also bought-out items were classifiable under separate headings, namely, 84.83, 8481 and 84.21, the Department had erred in classifying them as "compressors". According to CEGAT, the said items were classifiable under specific headings by virtue of Note 2(a) to Section XVI of the Central Excise Tariff Act, 1985 and, therefore, the said three items could not have been classified as "compressor". However, on the question as to whether the assessee had transferred the value of the compressor to the value of the parts, the matter was remitted to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6, 84.73, 85.03, 85.22, 85.29 or 85.38 as appropriate or, failing that, in heading No. 84.85 or 85.48." 10.We also quote hereinbelow Section Note 2 to Section XVI of the HSN which reads as below: "2. Subject to Note 1 to this Section, Note 1 to Chapter 84 and Note 1 to Chapter 85, parts of machines (not being parts of the articles of heading 84.84, 85.44, 85.45, 85.46 or 85.47) are to be classified according to the following rules: (a) Parts which are goods included in any of the headings of Chapter 84 or 85 (other than headings 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 84.79 or 85.43) are to be classified with the machines of that kind or in heading 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; 84.28). (4) Taps, cocks, valves, etc. (heading 84.81). (5) Ball or roller bearings, and polished steel balls of a tolerance not exceeding 1% or 0.05 mm, whichever is less (heading 84.82). (6) Transmission shafts, cranks, bearing housings, plain shaft bearings, gears and gearing (including friction gears and gear-boxes and other speed changers), flywheels, pulleys and pulley blocks, clutches and shaft couplings (heading 84.83). (7) Gaskets and similar joints of heading 84.84." 12.We quote hereinbelow Part V Section XVI of HSN which reads as below:"(V) UNASSEMBLED MACHINES(See General Interpretative Rule 2 (a)) For convenience of transport many machines and apparatus are transported in an unassembled state. Although in effect the goods are then a collection of parts, they are classified as being the machine in question and not in any separate heading for part. The same applies to an incomplete machine having the features of the complete machine (see part IV), presented unassembled (see also in this con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... involved is different. The issue is not whether the items like fly wheel, pulley and safety valve are classifiable under SH 8414.10 or 8414.19 or in the specific sub heading where these items have been specifically mentioned. The issue here is whether M/s FIL have made correct assessment of duty and have paid appropriate duty leviable thereon on the compressors cleared by them during the period relevant to this Show Cause. The case of the Department is that since these items are essential parts of the compressors and have been supplied alongwith compressors in SKD condition, the value of such parts is includible in the assessable value of compressors. I have already come to the conclusion that the above items are essential parts of the compressors as discussed in paragraphs 42 to 48 supra. Thus the point raised by the notice becomes redundant."(emphasis supplied by us) 15.As rightly observed by the Tribunal, the General Interpretative Rule 2(a) has no application to the present case for two reasons. Firstly, the compressor manufactured by the assessee was removed as a "stand-alone" item. It was not cleared in an unassembled or disassembled condition. Secondly, section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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