1988 (2) TMI 62 - SC - Customs

Supreme Court reverses Tribunal decision on Customs duty classification, parties to bear own costs

The Supreme Court allowed the appeal, vacated the Tribunal's order, and restored the Collector's decision, directing the parties to bear their own costs. ... Whether the imported 'special purpose complex machine' has to be charged to Customs duty under Item 89.59(1) as claimed by the Revenue or under 84.45/48 ' of the Tariff Schedule as maintained by the appellant? Held that:- The machine in question is indeed a multi-purpose one and keeping its performance in view we are inclined to agree with the submission of the counsel for the appellant that the machine is a 'machine tool working on metal' and should legitimately find its way into entry 84.45/48. Once it is so identified it does not get into the residuary entry. In our view the Collector had reached the correct conclusion. Appeal allowed. Issues:1. Classification of imported 'special purpose complex machine' for Customs duty - Item 89.59(1) or 84.45/48 of the Tariff Schedule.Detailed Analysis:The appeal involved a dispute over the classification of an imported 'special purpose complex machine' for Customs duty. The Revenue claimed that the machine should be charged under Item 89.59(1), while the appellant argued it should be classified under 84.45/48 of the Tariff Schedule. The Assistant Collector initially determined that the machine did not manufacture carburetors but performed a specific function of plugging holes in carburetor bodies with lead shots. The Collector (Appeals) disagreed, stating that the machine treated metals by preparing the carburetor body for reversion, falling under the description of a machine tool in heading 84.45/48. The Tribunal ultimately ruled that the machine's primary function was plugging holes in carburetor bodies and did not amount to working metal as per the Tariff Schedule.The Tribunal's analysis emphasized that the machine's function of plugging holes in carburetor bodies did not constitute working metal under the relevant Tariff Heading. It further highlighted that the cutting and trimming operations were incidental to the main function of plugging holes and did not change the shape or form of the metal. The Tribunal considered various functions of the machine and concluded that its principal function was plugging holes in carburetor bodies, leading to the classification under Tariff Heading 84.45/48 being ruled out.The Tribunal referenced Section Note 3 in Section XVI and Chapter Note 5 of Chapter 84 of the First Schedule to the Customs Tariff Act, which stipulate that the principal function of a machine determines its classification for Customs duty purposes. Despite the appellant's argument that the machine should be classified under 84.45/48 as a machine tool working on metal, the Tribunal held that the machine did not fall under any heading of Chapter 84 of the Tariff, ultimately upholding the Collector's decision.In support of the appellant's position, counsel presented a carburetor before and after treatment by the machine, a lead shot, and a nozzle to demonstrate the drilling process carried out by the machine on the carburetor. The Tribunal agreed with the appellant's counsel that the machine was a multi-purpose one working on metal and should be classified under entry 84.45/48, thereby endorsing the Collector's conclusion and allowing the appeal while vacating the Tribunal's order.In conclusion, the Supreme Court allowed the appeal, vacated the Tribunal's order, and restored the Collector's decision, directing the parties to bear their own costs.