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TMI Blog2001 (9) TMI 164X X X X Extracts X X X X X X X X Extracts X X X X ..... and accordingly they were issued a show cause notice dated 4-9-98 in which it is alleged that they supplied the aforestated parts/accessories to the customers under separate packing lists and invoices raised by their office at Kirti Nagar along with compressor, the value of which is not included in the value of the compressor. It is stated that M/s. FIL have under-valued the compressor and over-valued the accessories which were supplied separately either in the same packing or subsequently to the same customers. It is alleged that they have contravened the provisions of Section 4 of the Central Excise Act, 1944 read with Rule 173C(1) of the Central Excise Rules, 1944 and also the provisions of Rules 9, 173B, 173F and 173G. They have consequently been called upon to show cause why a differential duty amounting to Rs. 4,46,19,392.65 in respect of the compressors cleared by them during the period from August, 1993 to March, 1998 should not be recovered from them under Rule 9(2) read with Section 11A(1) and why a penalty should not be imposed on them under Section 11AC of the Central Excise Act, 1944. Shri S.D. Gandotra, General Manager (Admn.) of M/s. FIL is called upon to show cause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring to the technical literature, the Commissioner in his order has observed that a compressor is a device for increasing the pressure of a gas by mechanically decreasing its volume. An accessory is defined as an object or device that is not essential itself but that adds to the beauty, convenience or effectiveness of something else. Relying on the judgment of the Kerala High Court in Deputy Commissioner v. Union Carbide - 38 STC 198, it is observed that the distinction between accessory and part is drawn as - "A thing is a part of the other only if the other is incomplete without it. A thing is an accessory of the other only if the thing is not essential for the other but only adds to its convenience of effectiveness". While examining each of the above items, the Commissioner has observed that Drive set (Flywheel, Motor Pulley, and V. Belt) is used for connecting motor to the shaft of the compressor so that when motor runs the rotation is transmitted to the shaft. It is stated that drive set is specifically designed for each model of the compressor. The Belt Guard is mainly used as a safety for preventing accidental injury to the person attending to the units and also to prevent a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en supplied along with them in SKD condition, the value of such parts is includible in the assessable value of compressors. It is also held that these items are essential parts of the compressors. It is common ground for both the sides that only three components viz. flywheel, safety valve and filter are manufactured within the factory of the appellants. All other parts/ accessories are bought out from the market and supplied with the compressor. These bought out items are already duty paid at the appropriate rates. The flywheel, safety valve and filter are also cleared on payment of duty at the rates applicable to the items under headings 8483.00, 8481.00 and 8421.00 respectively. Therefore, even if these items whether manufactured within the factory or purchased from the market and are fully compatible with and are also essential parts for the function of a compressor - by itself would not merit them to be classifiable under the same heading as that of the compressor. It is not the case of the department that all the items are first brought into the factory, assembled and tested as compressors, then dismantled and supplied to the buyers. The evidence gathered is only to the effec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner of Customs, New Delhi - 2001 (132) E.L.T. 161 (Tri-Delhi). The para 9 of this decision is extracted below :- "9. The Appellate Tribunal in the case of Shivaji Works Ltd. v. C.C.E., Aurangabad -1994 (69) E.L.T. 674 (T), relied upon by the learned Advocate for the Appellants, has held that "Rule 2(a) does not permit us to conclude that when an article squarely falls under a particular tariff heading, it can be made to fall under another heading by invoking the concept of essential character. This is against the plain reading of Rule 2(a)". As the components as imported by the Appellants are classifiable under specific headings by virtue of Note 2 to Section XVI of the Tariff, they cannot be classified differently. This was also the view of the Appellate Tribunal in CCE, Bangalore v. B.P.L. Sanyo Ltd., 1999 (111) E.L.T. 290 wherein it was held that "when deck is clearly classifiable under Heading 85.22, therefore, in terms of Interpretative Rules, we cannot proceed to apply Rule 2(a) of the said Rules." Similar views were expressed in the case of C.C.E., Bombay-I v. Crescent Metal Processing Works - 1999 (111) E.L.T. 841 (T). As the Appellants have imported components, these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under lower rate of duty i.e. 10%, 20% and 15% under sub-heading Nos. 8483.00, 8481.80 and 8421.00 instead of 30% ad valorem which was leviable on the parts and accessories of compressors falling under heading 8414.10 which were classifiable under heading 8414.91 and here the Commissioner is observing that it is not an issue on classification. 6.The next point for consideration is the allegation that the appellants had under-valued the compressors and over-valued the accessories which were supplied separately either in the same packing or subsequently to the same buyers. It is alleged that cost of accessories for different sizes of the compressors has been ranging from Rs. 8000/- to Rs. 15,000/- whereas, M/s. FIL has charged Rs. 26,000/- to Rs. 1,00,000/- for these bought out accessories supplied under packing list and invoices separately. It is further alleged that as per the cost statement for the year 1993-94 collected on 26-8-98, the cost of compressor is higher than the assessable value of the compressors cleared during the years 1993-94 and 94-95. It is stated in the Show Cause Notice that the difference in cost to the assessable value has been worked out in respect of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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