2026 (1) TMI 776 - AT - Central Excise

LLDPE irrigation pipes and sprinklers classified as spraying/distribution appliances under Chapter 8424; exemption under Notification No.3/2005-CE allowed

Dominant issue: Whether LLDPE pipes in running length and sprinklers are classifiable under Chapter 8424 (appliances for spraying/distributing) or Chapter ... Entitlement for benefit of exemption under Sl.No.70 of the N/N. 3/2005-CE dated 24.02.2005 - failure to pay applicable duty on manufactured LLDPE pipe and sprinklers - classification of the goods - classifiable under Chapter 3917 or under Chapter 8424 of CETA, 1985 - HELD THAT:- Undisputed facts of the case are that the appellant had discharged Central Excise duty on other manufactured items of general activity viz. CPVC pipes, fittings etc. whereas not discharged duty on LLDPE pipes in running length being used in DIS claiming its classification under Chapter 8424. Evidences brought on record not disputed by Revenue also indicate that the LLDPE pipes and sprinklers cleared by the appellant are exclusively used for agricultural purposes. The issue of classification of such pipes and sprinklers has been addressed by this Tribunal in the case of ELGI Ultra Appliances Ltd. [1999 (7) TMI 422 - CEGAT, CHENNAI] which has been subsequently followed in a series of cases. It was held in the said case that 'The irrigation system basically is of these pipes and the other items referred to above, which carry out the functions of distribution and dispersing or spraying in terms of the description under Chapter 84.24 and the said sub-heading 8414.10 dealing with removable appliances of the kind used in agriculture or horticulture. Therefore, parts thereof are covered by sub-heading 8424.91. As a result, the appellants’ claim for the benefit of exemption Notification for the items falling under Heading 84.24 claiming nil rate of duty under Notification No. 56/95 dated 16-3-1995 is justified.' Thus, the LLDPE pipes cleared in running length even though not punched with holes and the sprinklers cleared by the appellant are classifiable under Chapter heading 8424 and the appellants are entitled to the benefit of Notification No.3/2005-CE dated 24.02.2005. The impugned orders are set aside - Appeal allowed. Issues: Whether LLDPE pipes cleared in running length and sprinklers used in Drip Irrigation Systems (DIS) are classifiable under Chapter 84.24 of the Central Excise Tariff Act, 1985 and hence eligible for benefit of Notification No.3/2005-CE dated 24.02.2005, instead of classification under Chapter 39.17.Analysis: The Court examined the descriptive scope of Heading 84.24, the HSN Explanatory Note on irrigation systems, and the classification rules in the General Explanatory Notes (Note 2(b) and Note 4 of Section XVI). Evidence on record showed the pipes and sprinklers were manufactured and invoiced for exclusive agricultural use in DIS and conformed to ISI specifications; invoices and marketing literature supported that the components form an underground/surface distribution network integral to an irrigation system. Applying Note 2(b) of Section XVI, parts suitable solely or principally for a particular machine/system are to be classified with that machine/system; Note 4 treats components forming a clearly defined function as a whole for classification. Prior Tribunal precedent treating such irrigation components as falling under Chapter 84.24 was followed. The revenue's reliance on exclusion of parts of general use under Note 1(g) of Section XV was found inapplicable because the specific items are not listed as parts of general use and were shown to be specific to DIS.Conclusion: The LLDPE pipes cleared in running length and the sprinklers used in DIS are classifiable under Chapter heading 8424 and the appellants are entitled to the benefit of Notification No.3/2005-CE dated 24.02.2005; the impugned orders confirming duty are set aside and the appeals are allowed.