TaxTMI 
TaxTMI 
1994 (5) TMI 104
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....s demand had been made as a condition for the sale of the goods. By not including this amount, they would have evaded payment of duty to the extent of Rs. 58,52,400/-. He has held that besides they had also claimed classification of the entire machine under one heading even though each of the machine are separately invoiced and classifiable under different headings attracting higher rates of duty. Since the "value" for Import Contol purpose has the same meaning as in terms of Section 14 of the Customs Act, the importer should have produced an import licence for the full value arrived at in terms of Section 14 of the Customs Act and he has held that since the value of the licence produced by them fell short to the extent of Rs. 51,27,500/-, the goods of this value were liable for confiscation under Section 111(d) of the Customs Act. He has further held that in view of misdeclaration in respect of value and also in respect of classification of the items, the entire goods had been rendered liable for confiscation under Section 111(m) of the Customs Act. He has rejected the importer's plea that there is no misdeclaration on their part. Therefore, he has held that the entire imported go....
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....Calcination with Mixer. 2. Star Feeder 3. Calciner Gas Stack 4. Cyclone 5. Screw Conveyor 6. Calciner Gas Cooler 7. Liquid Separater 2. 1. Steam Calcination with Mixer : The ld. Collector examining the invoices and the content of the contract has observed that nowhere the term "Steam Tube Drier" has been used. He has referred to the Technical Characteristic of the Equipments (Annexure 2.2 of the contract) furnished by the importers which clearly indicated that the item under Import is a steam calciner. Therefore, the Collector has held that the contract itself says that a contract has been concluded for the purpose of design, supply and construction of a steam calcination plant for manufacture of Soda Ash (introductory portion of the contract) Article 1 and 2 of the contract which refers to "the seller sells and the buyer buys on the terms and conditions of this contract supplies and services as follows for a steam calcination plant having a capacity of 300 mts of light Soda Ash for 24 hours". Article 2 states that "the seller shall elaborate and supply the necessary basic engineering for the steam calcination plant". Therefore, the ld. Collector has observe....
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....ciner is not a drier or something which removes the moisture in sodium bicarbonate. He has held that it is a reaction vessel which facilitates the decomposition of the sodium bicarbonate on account of the heating. He has observed that under Heading 8417 all industrial and laboratory furnaces, ovens including in incinerators non-electric have been included. He has held that in the case of steam calciner, there is no dispute that heating is by means of steam or in other words this is non-electrical heating. The Explanatory Notes under this heading have indicated that these machines are used for heat treatment i.e. by roasting, calcination or decomposition of various kinds of products. The ld. Collector has held that, from this, it is clear that a heating equipment which brings about calcination or decomposition will fall under this heading. The importers have argued that steam calciner cannot be termed as furnaces or oven. The furnace or oven produces very high temperature, whereas steam calciner produces only upto 200oC. The ld. Collector has held that all furnaces and ovens designed for production of high or fairly high temperature are included here. There is no dispute that 200oC ....
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....aken a stand that this is a transmission device or a mere pipe connecting the calciner and the cyclone for the purpose of drawing out the calciner gas. Therefore, they had stated that it should be assessed alongwith the calciner as an integral part of the calciner. The ld. Collector has observed that from the technical characteristics of the equipments furnished by the importers, it is seen that calciner has stack which is for drawing the gas from the steam calciner and passing it on the cyclone. It has an expansion joint and two separate outlays. No further details have been furnished by the importers to substantiate that it is a mere pipe connecting the calciner to the cyclone. He has observed that the technical characteristics of the equipments (Annexure 1.3 to the contract) given by the importers it is noticed that the calciner gas stack serves for drawing off the gas from the steam calciner. He has observed that it is not clear as to how exactly draws off the gas. Therefore, he has held that from the description given in the documents and from the fact that it has been separately invoiced and the fact that this equipment had been packed in three packages, therefore, it is clea....
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....er is explained in the technical characteristic of the equipment (Annexure 1.3 to the contract). He has observed that it is stated therein that the liquid separater serves for removing the liquid droplet entrained by the cooled calciner gas. The gas enters cylindrical part of the separater. The liquid is removed and the gas leaves the separater via a pipe fitted to the cover and projecting into the separater Therefore, he has held that the function of the item is to separate the liquid particles in the calciner gas. He has rejected the argument that it cannot be treated as purifying machinery for gas. He has held that it is only removing the liquid particles from the calciner gas and hence it will clearly fall under Heading 8421.39. 6. Screw Conveyor : The department has proposed classification of the item under Heading 8479.89 on the ground that the machine serves several purpose. He has noted the importer's plea that the item is for removing the Soda Ash and Sodium Carbonate from the cyclone and conveying it to the steam tube drier and its main function is conveying the solids. The importer had submitted that this is a transmission device which contribute to the principal f....
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.... scrubbing the Ammonia. Therefore, he has held that the machine has to be assessed as one machine and not separately. The ld. Collector has held that classification has to be done in terms of note 3 to Section XVI of the Tariff. He has held that in other words, its classification would be based on its principal function of the machine. He has held in the present case, there is no doubt that the principal function of machine is to remove Ammonia in the calciner gas by scrubbing. Before Ammonia is removed, calciner gas has to be cooled. The cooler parts of the machine serves this purpose. The function of the scrubber has been explained in the reply to the show cause notice as absorption of the Ammonia in the calciner gas by a solution of Sodium Chloride. The ld. Collector has held that the essential function of the cooler and gas scrubber is to remove Ammonia by means of filtering the calciner gas by a solution of Sodium Chloride. Therefore, he has held, there is no doubt that this item also will fall under filtering or purifying machinery or apparatus for liquids and gases under Heading 8421 in the light of HSN Explanatory Note appearing at page 1183. The ld. Collector has held that....
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....rt of the entire plant and was described as "process main equipment" and therefore, the said Explanatory Note, which referred to auxiliary equipment, was inapplicable. The ld. Senior advocate explained the process of manufacture of Soda Ash by solyay process, with the help of a Drawing/plan of the entire plant, technical literature, on the basis of the affidavit of two renowned experts namely : Shri C.M. Shah and Shri J.D. Adhia and the certificates issued by a German firm namely `Alexanderwerk' dt. 30-7-1990, and that of Tata Chemicals Ltd. dt. 31-7-1990. The extracts from the following literature has been relied (i) Pages 20-38 to 20-40 from a book perry's Chemical Engineer's Hand Book 6th Edition. (ii) Industrial Furnaces 5th Edition Volume I by W. Trinks & M.H. Mawhinney pages 2 to 5 & 15-16 & 75, published by John Wiley & Sons, New York, London. The relevant HSN Explanatory Notes have also been referred to buttress the arguments. 6. Ld. advocate explained the procedure of manufacture of soda ash by the process known as solvay process. It was pointed out that the last intermediate product, which comes into existence is crude wet sodium bicarbonate. The imp....
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....e the classification under Heading 84.17 is high inappropriate. The ld. Counsel submitted that the process of manufacture of soda ash by use of steam, drying separator's and scrubbers for removing carbon dioxide and ammonia, cannot be brought under the description of Heading 84.17 i.e. industrial or laboratory furnaces and ovens, including incinerators, non-electric. The department had chosen a residuary heading `other' under sub-heading 8417.80, which is not appropriate, even as per the heading of HSN Explanatory Note. The ld. Senior advocate emphasised on the basis of technical literature and affidavits, that the process carried out is treatment of material by a process involving a change of temperature i.e. by drying and hence the entire plant and machinery having a composite function would be appropriately classifiable under Heading 84.19 and is required to be placed in the residuary sub-heading 8419.39, which falls under the description of "dryers". He submitted that the main function is to obtain the dry soda ash by a process of calcination in steam tube dryer. In the equipment "cyclone" a whril wind is created by which the particles of soda ash gets dried and falls down. All....
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....e pleas of the appellant. He submitted that the alternate classification on merits placed by the importer is more appropriate in respect of `star feeder' conveyor calciner gas stack, cyclone, liquid separator. He pleaded that in all these cases, there is no separate function. Liquid separator also does not perform any filtering or purifying function, therefore, its alternate classification would be only under sub-heading 8419.50 and it would fall under "gas cooler" by virtue of its heat exchange process. For the classification of calciner gas cooler, the ld. Senior advocate assailed the findings of the ld. Collector, on the ground that it perrforms function of heat exchange unit and referred to the affidavit of Sh. Adhia. On merits, it would fall under sub-heading 8419.50. He submitted that it did not perform the principal function of scrubbing ammonia, as held by the ld. Collector. It did only the subsidiary function of removal of ammonia. Its principal function was of cooling by heat exchange process. Ld. senior advocate, then pointed out that the ld. collector had proceeded on the basis of separate packing & invoicing, for the purpose of classification, which is a totally errone....
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....arbonate, which is fed into it. Therefore, there is no question of examining the principal function of the calcinator plant, as that function is of the soda ash plant, which is the main plant. In that view of the matter the question of applying Note (4) of Section XVI does not arise at all. In order to support his argument, ld. SDR relied on the following extracts : (i) Pages 866 to 873 of Kirk Othmer's (3rd Edition) "Encyclopedia of Chemical Technology." (ii) Pages 177 to 182 from "Outlines of Technology" edited and revised by M. Gopala Rao & Marshell Sitting published by Affiliated East-West Press (P) Ltd. New Delhi, Madras. (iii) Extract of definition of the term "Calcination" appearing at page 484 of Van Mostrand's Scientific Encyclopedia 6th Edition and Glemn D. Considine Managing Editor published by Van Nostrand Reinhold Company New York, etc. (iv) Definition of the term "Calcination" appearing at page 449 in `The New Encyclopaedia Britannica' Vol. II 15th Edition. (v) Extract of the definition `Drying' appearing at pages 405 to 411 from McGraw Hill Encyclopedia of Science and Technology, 5th Edition. Pointing out to thes....
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....e 1133, submitted that this note is a functional note, and each machine had a defined function. All machines have not been dryer, there classification has to be done on merits. He submitted that the HSN Explanatory Note at page 1168 deals with calcinator also. Hence classification of steam calcinator with mixer under Heading 8417 under the description "Industrial or Laboratory furnaces and ovens including incinerators non-electric is appropriate". The principle of ejusdem generies has to be applied and by so applying the classification of the calcinator under Heading 8417 cannot be ruled out. Referring to the contract at page 5, ld. SDR submitted that its reading would show that the entire plant is not one unit and only steam calcinator is a separate unit. All other units were performing independent function. The main soda ash recovery is done in steam calcinator, while the recovery of carbon dioxide and ammonia in their respective equipments, are not part of solvay process plant. The gases are recovered for reuse and such a process is independent of the process of recovery of dry ash by solvay process. Referring to page 1183 of HSN Explanatory Note, ld. SDR submitted that filters ....
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....gument that the imported machinery is an independent plant and not a part of soda ash plant and the clarification by invoking Note 2 of Section XVI is inappropriate and it does not arise in the present case and it is only Note 4 which comes into play. He submitted that dryer removed moisture by a process of chemical change releasing CO2 and Ammonia and hence the information given at pages 406 to 410 regarding `Drying' in McGraw Hill clearly supported the importer's case. Referring to extract from `Outlines of Technology', the ld. counsel submitted that it is a general work and hence Perry's book should be preferred. 12. We have carefully considered the submissions made by both the sides and have perused the contract, technical literature, affidavits, Tariff Section Notes and HSN Explanatory Notes and also have perused the rulings placed before us. As can be seen from the allegations made in the show cause notice the importer has declared the goods as steam calcination plant (steam tube dryer) complete with accessories and wear-parts and they have sought the classification of the same as a complete unit under Heading 8419.00 under the main heading : "machinery, plant or l....
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....ure of Soda Ash, through the process of drying; which takes place in the steam calcination unit. They have argued that the unit steam calcinator unit cannot be classified under residuary sub-heading `other falling under Heading 84.14 which reads : "Industrial or laboratory furnace or ovens, including incinerators non-electric". The main ground of attack for classifying this under category for furnace and ovens is that although the item may have a temperature of 200oC but it is not furnace as known in the commercial sense and it does not satisfy the features of the furnace, as understood in the technical or commercial sense, including the explanation given in HSN Explanatory Note of Heading 84.17. It is their plea that the items would become a furnace or a oven only if there is use of : (i) composition fuel (ii) refractory and (iii) burners. It is also their plea that the furnace is used for heat treatment of various kinds of products which may be placed on the fire bed, in crucibles, in retorts or a shelves. It is their plea that it is not a furnace or an oven to be classified under Heading 84.17. They have again relied on the technical literature and ....
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.... function by itself dehors of the other units, in existence. But, they all contribute together and all are the parts of main plant soda-ash plant. In the other sense, he has submitted that the parts of machines means that the independent machines when they are inter-connected by piping and transmission devices would become part of the entire plant. The ld. SDR draws support from the Note 2 and Note 5. He has emphasised that by reading these notes, the conclusion that would be arrived at is that the entire imported machinery is suitable for use solely or principally with a particular kind of machine or with a number of machines, all of that kind which are equally suitable for use principally with the goods of the machinery of the principal kind. In other sense, the ld. SDR has emphasised on the basis of the entire reading of the literature, tariff notes and HSN Explanatory Notes that the solvey process of manufacture of soda ash being a composite function and that the imported unit is merely a substitution of steam calcination unit. The machineries being suitable for use solely or principally with a kind or particular kind of machine that is the soda ash manufacturing plant, therefo....
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....ging the product emerges. From filters and calciners, the filter liquor and CO2 are taken to different two compressors and scrubber. As can be seen from pages 869 and 870, it is stated that "The carbonation of the ammoniacal brine in the carbonating towers is a complex process involving serveral mechanisms of transport of ionic reactants across gas liquid interfaces; the nucleation of a crystal phase; the growth of solid crystals kept in suspension through gas agitation; and the removal of heat of reaction. High rate of reaction is favored by high (relative temperature, high concentration of carbon dioxide throughout the tower, and intimate mixing. High conversion of chloride to bicarbonate (salt economy) is favoured by high carbon dioxide pressure and concentration and optimum cooling at the slurry exit. An exit temperature too low gives mixed ammonium and sodium bicarbonate crystals. Economical utilization of carbon dioxide is favored by a low carbon dioxide concentration in the vent gas. Close approach to equilibrium favors slow throughput, whereas best utilization of investment favors fast throughout. The industry has evolved a fairly uniform practice, achieving a salt conve....
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.... lean time kiln gases are injected near the middle of the tower and rich CO2 gas from the bicarbonate calciner is recompressed and pumped to the bottom of the tower. In the make towers, reactions 3.2.2(f)(g) and (h) take place. The towers are constructed with a series of cooling boxes and sloped baffles so that the NaHCO3 precipitate settles to the bottom and is then pumped as a magma or slurry to a rotary filter. The solids from the rotary filter are calcined at about 200oC in a calciner which may be gas-fired or be a steam- heated unit. The average daily production of a modern carbonating tower is about 100 tons as finished soda ash. The remainder of the process concerns ammonia recovery and recycle. Gases from the calciner are cooled and returned to the carbonating tower. The filtrade liquor from the pressure type rotary filter is sent to a pair of ammonia stills. In the first still, free ammonia in solution is driven off by distillation using a steam heated reboiler. The bottoms, containing combined ammonia, is fed to the lime still where reaction 3.2.2(j) releases NH3 gas and the liquor effluent contains largely CaC12 which3 must be disposed of. The product from the calc....
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....    *Enclosed zerox copies of the illustration and description of Steam Tube Dryer and fuel fired calciner on Page 20.38 to 20.41 from Perry's Chemical Engineers' Hand Book, Sixth Edition, clearly show the distinction between the steam tube dryer and fuel fired calciner. 1.5  Before the Steam Dryer was invented some fifty years back, the drying of crude wet sodium bicarbonate to dry soda ash used to take place in (a) closed pans called Thallan pans fitted in furnaces which are fired with fuel, (b) Rotary shells (called calciners) fitted in fuel fired furnaces.     Since these dryers in those days were called calciners, the name calciner has gravitated loosely and wrongly for the steam Tube Dryer. Calcining operation refers to the old lime process of reducing. limestone (CaCO3) to quick lime (CaO) by burning or roasting. Burning or roasting of any description does not take place in a Steam Tube Dryer. 2.   From the above facts, available authoritative data, observations and experience, I have absolutely no hesitation in certifying that the Steam Tube Dryer is merely a simple Dryer to reform/dry crude wet sodium bicarbonate t....
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....ried by a process of drying and during this process, a chemical reaction occurs by which CO2 and ammonia are released. As CO2 and ammonia cannot be made to suffer by loss, the same is purified and taken back for the manufacturing process again for utilisation. Therefore, it cannot be said that the emergence of soda ash in the steam calcination plant and cyclone are the only independent separate individual unit or plant, and it is here alone that soda-ash is manufactured. Therefore, the finding given by the ld. Collector that the soda ash is recovered and manufactured only in the steam calcination plant is totally against the technical literature, affidavits and the commercial understanding. 16. After having understood the process of manufacture and having come to the conclusion that the manufacture of soda ash by solvey process is a complex process of manufacture commencing from brine preparation and that there is generation of ammonia from kiln, which is fed through steel condensor to the drying absorber. Therefore, it is seen that there are a series of machineries inter-connected to carry out the various processes and ultimately the wet soda-ash comes to steam calciners, ....
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.... the purpose of these Notes, the expression "machine" means any machine, machinery, plant, equipment, apparatus, or appliance cited in the headings of Chapter 84 or 85." If these two notes are taken into consideration, it follows that the imported machinery is a part of the plant. By reading Note 2, which states that parts of machines are to be classified according to the rules indicated therein. In this case Note 2(a) will not be applicable. It is Note 2(b) which comes into play. Note 2(b) stated that : "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 No 84.79 or 85.43) are to be classified with the machines of that kind. It also stated that parts which are equally suitable for use principally with the goods of Heading Nos. 85.17 and 85.25 to 85.28 are to be classified in Heading 85.17." Therefore, the parts of machine i.e. the entire steam calcination plant including its accessories which have been imported are nothing but parts of the main plant i.e. soda-ash plant. They all are suitable for use solely or principally with the particular kind of machine or ....
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....function and that is the manufacture of soda-ash. As both the sides submitted that this question has not been gone into, we therefore, think that in the interest of justice, the matter is required to be remanded for reconsideration under this heading. We therefore, set-aside the impugned order and remand the case to the Collector to readjudicate and classify the imported items in the heading under which soda-ash plant falls. We are of the opinion that Heading 8479.89 is the heading under which soda-ash plant will be classifiable. This aspect is required to be examined and both sides be given an opportunity to make their submission before the adjudicating authority. We are of the very clear opinion that the classification adopted in the present case is not proper one for the reasons given by us supra. 17. As regards the question of valuation, the submission made by the ld. SDR is that matter is sub-judice in view of challenge of Rule 9 before the Gujarat High Court. We observe that we are not estopped from going into the question of valuation. However, ld. Sr. Advocate has submitted that on this aspect, their detail submissions have not been considered and that the departmen....