2024 (3) TMI 7 - AT - Central Excise

Revenue fails to prove independent function of conveyors and elevators in rice milling classification dispute

CESTAT Hyderabad allowed appellant's appeal challenging classification of manufactured items. Revenue sought to reclassify goods based solely on company ... Seeking to change the classification of the items manufactured and cleared by the appellants - reliance placed on the statement of Director of the Appellant company & Incharge of production related matters - HELD THAT:- It is found that other than the statement of Shri Purandar Reddy, Department has not taken any steps to obtain technical opinion of experts in respect of the impugned goods. The fact that the goods are manufactured by the appellants are but for the rice mill industry, as submitted by the appellants. Revenue could not show even a single example of such independent function of the items manufactured and cleared. The Tribunal had an occasion to go into the classification of the impugned goods in the case of Alpsco Gaintech Pvt Ltd [2018 (12) TMI 478 - CESTAT CHANDIGARH], which was affirmed by the Hon’ble Apex Court. Tribunal held that Admittedly, in this case, these conveyors and elevators are specifically used for rice milling industry as the part of the composite machinery of rice milling, therefore, having merit classification under chapter heading No. 8437. The Tribunal in the case of Moped Assembly [2000 (12) TMI 408 - CEGAT, CHENNAI], held that sheet metal components for use exclusively in rice milling industry are classifiable under heading 8437 of CETA. The demands confirmed in the impugned order are not sustainable. When the demands are not sustainable, interest and penalty also do not survive - The impugned order set aside - appeal allowed. Issues Involved:1. Classification of machinery and parts under Central Excise Tariff.2. Justification of duty demand and invocation of the extended period.3. Reliance on CBEC circulars and HSN explanatory notes.4. Applicability of case law and precedents.Summary:1. Classification of Machinery and Parts:The Appellants, manufacturers of various types of grain and rice milling machinery, were subject to an investigation by the Anti-evasion section. The Revenue classified the machinery under different headings of the Central Excise Tariff Act, 1985, such as 84199090 for parts of parboiling machinery and 84283200 for bucket elevators. The Appellants contested this classification, arguing that their machinery should be classified under heading 8437, which pertains to machinery used in the milling industry. The Tribunal found that the Revenue relied heavily on the statement of Shri Purandar Reddy and did not obtain technical opinions from experts. The Tribunal noted that the machinery manufactured by the Appellants was specifically designed for the rice mill industry, and the Revenue could not demonstrate any independent function of the items outside this industry.2. Justification of Duty Demand and Invocation of Extended Period:Two Show Cause Notices were issued to the Appellants, demanding duty amounts of Rs. 2,86,21,289/- and Rs. 25,81,412/- along with interest and penalty. The Appellants argued that the confirmation of duty was contrary to law and evidence, and the invocation of the extended period was not justified. The Tribunal found that the demands confirmed in the impugned order were not sustainable, as the classification proposed by the Revenue was incorrect.3. Reliance on CBEC Circulars and HSN Explanatory Notes:The Revenue relied on CBEC Circular No. 982/06/2014-CX and HSN explanatory notes for classification purposes. The Tribunal observed that the explanatory notes to HSN are not law but only guiding factors for classification. The Tribunal emphasized that the Central Excise Tariff Act's section notes clearly indicate that machinery designed for a specific function should be classified under the appropriate heading for that function. Therefore, the reliance on the explanatory notes to change the classification was unwarranted.4. Applicability of Case Law and Precedents:The Appellants cited the case of Alpsco Graintec Pvt Ltd vs. Commissioner of Central Excise & Service Tax, Chandigarh-II, which was affirmed by the Hon'ble Supreme Court. The Tribunal also referred to the case of Moped Assembly vs. Commissioner of Central Excise, Madras, where it was held that sheet metal components for use exclusively in the rice milling industry are classifiable under heading 8437. The Tribunal found that the facts of the present case were similar to these precedents, and thus, the machinery in question should be classified under heading 8437.Conclusion:The Tribunal set aside the impugned order and allowed the appeal, concluding that the demands for duty, interest, and penalty were not sustainable. The Appellants were entitled to consequential relief as per law.