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2017 (9) TMI 921
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....to the factory and then taken to the site for installation. After installation the lifts come in its existence as immovable property. In both the cases, the appellants entered into contract for complete installation of the lifts on lump sum basis. 2. The main issue in dispute in these proceedings is if the set of parts/components manufactured and cleared by them from the factory for the purpose of installation in one or more consignments would be classifiable under Heading 84.28 as lift/lifting machinery or as parts under heading 84.31 of the Central Excise Tariff Act, 1985. The matter was earlier decided by the Tribunal in the case of BBL vide order reported in 2014 (309) ELT 129. In the case of Otis Elevation Company (India) Ltd, the issue was decided by the order reported in 2007 (208) ELT 114. In both the cases, the goods manufactured and cleared by the appellant from their factory in one or more consignments were held to be classifiable under Chapter heading 8431 of the Central Excise Tariff Act, 1085. Both the appellants approached Hon'ble Apex Court in appeal. Hon'ble Apex Court vide order reported in 2015 (324) ELT 238 (SC) remanded the matter back to the Tribunal ob....
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....and not before. They contrasted the language of sub-heading No.8431.00 with the language of sub-heading No.8476.91, which simply states 'parts of machines of sub-Heading No.8476.11'. The contrast in the language, according to them, makes it clear that the parts spoken of in the latter entry could well be parts of a machine itself, as opposed to sub-heading No.8431.00, where the parts have to be suitable for use only with the machinery that is already installed. 7. Learned counsel for the Revenue submitted that on what was argued, the decision of the authorities below as well as the Tribunal in both the appeals were absolutely correct and did not need any further review by this Court. He also stated that if this Court were to permit the assessee to turn around at this juncture and argue something new which had not been argued before the Commissioner or the Tribunal, he would be put to a disadvantage and would not be able to give any effective reply. 8. Since we are of the opinion that this is an important question that needs to be determined having reasonably wide ramifications, we would allow the assessees to raise these points on a remand made to the Tribunal in both the....
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....isions of Section 39 of the 1940 Act or Section of the 1996 Act are the same as Section 50 of the 1996 Act." 3.2 It was argued that the Hon'ble Supreme Court in case of Dozco Vs. Doosan Infracore Co. Ltd. (2011 6 SCC 179), while interpreting a clause of an arbitration agreement held that "a bracket cannot be allowed to "control the main clause." Therefore It cannot curtail or limit the scope of terms employed outside the bracket, as is being done by the Revenue. 3.3 The Written Submissions contested the argument of revenue that the goods when installed are immovable property and are not excisable goods and that there can be no performance, by the component parts, of the function of lifting men and material unless the components that installed as immovable property in the building and therefore the components cannot be made liable to duty. It has been argued that Section Note 4 of Section XVI only requires machines consisting of individual components intended to contribute together to a clearly defined function. The said Section Note does not require the individual components or machines to be installed as contended by the Revenue. Section Note 4 does not contemplate or in....
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....all completely manufactured handling, loading or unloading machinery. Lift is an example of lifting machinery falling under heading 84.28 and it is not the only kind of lifting machinery covered by heading 84.28. The machinery manufactured by the Appellant is lifting machinery. What is manufactured by the Appellants in both the cases is a combination of machines consisting of individual components. When these are cleared for the purposes of the erection of a lift, these machines/combination of machines consisting of individual components are connected to each other by wires and cables and are intended to contribute together to a clearly defined function covered by one of the headings in chapter 84, namely heading 84.28. When cleared as parts for the purposes of replacement or repair they cannot fall under heading 84.28 as they are not cleared as a combination of machines intending to contribute together to a clearly defined function. 3.6 It has been argued that there is no dispute that parts of heading 84.28 are specifically covered by heading 84.31 and that with reference to clearance of parts, Section Note 2 (a) would apply. However in the present case, what the Appellants cle....
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....shtra Lift Rules, 1958 and the ISI Specifications are wholly irrelevant. It is pertinent to note that Professor Menon was not cross-examined by the Department. The Department with whom the onus lies has also not produced any evidence other than a bald statement across the bar with nothing to substantiate it, namely, that 'all parts must be cleared together and that only the essential character of a lift would come into existence/ that without a lift cage counterweights the essential character of a lift cannot be attained'. It is submitted that Professor Menon is an independent person and his affidavit cannot be rejected on the ground that he has not considered the Lift Rules. In any event, there is nothing in the ISI specifications or the Lift Rules which contradict what has been stated by him. 3.10 It has been argued that in the schematic diagram which is annexed to the Appellants' appeal, all the parts manufactured by the Appellants cannot be shown as many of the parts are incorporated within other parts. The parts manufactured by the Appellant are not 14 but were 27 machines and/or sub-assemblies. The said affidavit also lists the various parts which go into the m....
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....fely at a specified speed and levelling correctly and responding intelligently to instructions. The counterweight, the cabin, the rails, the buffer and the ropes are merely fabricated items of iron and steel, wood and aluminium. The counterweight consists of a frame in which steel bars are fed depending upon the weight and size of the cabin and the number of persons the cabin would carry. Neither is the counterweight nor lifting machinery, nor does its absence render the machinery manufactured by the Appellants as items which do not have the essential character of a life. Similarly, the cabin is fabricated in accordance with the size of the shaft and the number of persons required. The cabin can be fabricated from aluminium, wood, laminate and can even have marble and granite finishing. It is to be borne in mind that what was manufactured by the Appellants only had to have the essential character of lift. It is necessarily incomplete or unfinished and therefore does not have to have every part. If the contention is that every part must be included than the 1^st part of Rule 2 (a) of the Rules of Interpretation would be rendered nugatory. 3.13 It has been argued that Section Note....
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....quirements of the installation would also dictate the manufacture of machine in parts over a period of time each set of parts being set to the buyer separately." In paragraph 17 the Tribunal came to the conclusion that: "It is therefore clear that such parts would be, classifiable as a complete machine if it can be established that the parts are removed as such, so as to constitute a complete machine, even if they are not parts removed and unassembled together." 3.15 It has been argued that this is also the view of the Tribunal in Vishwa Industrial Company Private Limited 1999 (107) E.L.T. 774 (T) and Vinar Systems Ltd 2001 (131) E.L.T. 578 (T). It has been argued that in all these cases Rule 2 (a) was considered and in each case, it was held that though the various unassembled/ disassembled items were cleared separately and not "presented together" made no difference. In all these judgements the Tribunal took into consideration the practical reality of manufacturing such machines. In the present case also, no lift can be manufactured in a building at one time. A lift cannot be cleared from factory. The practical reality requires various items of machinery to be cleared to....
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....ods as belonging to a genus or a sub-genus, and, held that "the question that arises whether the goods, though incomplete and unfinished have character, which is sufficient to distinguish them, firstly as belonging to the genus motor vehicle, secondly as belonging to the sub-genus motor vehicles for the transport of persons..." 3.21 It has been argued that the machinery manufactured by the Appellants belongs to the genus of lifting machinery. Further, just like in the present case, it was contended that the goods were too incomplete to have the essential character of unassembled motor vehicles. In the present case like in the Australian case the Revenue did not support his contention by reference to any authority, but pointed to various parts which were lacking to complete the motor vehicle. This contention was rejected by the Australian Administrative Tribunal and they held at page 116 that: "In interpreting the classification it may be noted, firstly, that the paragraph refers to unassembled motor vehicles. Therefore we are not concerned with goods in a driveable condition. Secondly, interpretative Rule 2 (1) (a) requires us to read the paragraph is referring to goods that ....
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....plete machine must be an assembly of parts so far advanced that it already has the main essential feature of the complete machine. It has been argued that all the items of machinery manufactured by the Appellants, when assembled together are an assembly of parts so far advanced that it already has the main essential features of the complete lifting machinery. If 84.28 covers lifts, then the assembly referred to in the aforesaid HSN Explanatory Note would mean the assembly of all items such as those manufactured by the Appellant at site in order to create the lift. Any other interpretation would render 84.28 totally otiose and nugatory as no lift or escalator or conveyor or teleferics can be manufactured or is manufactured in a factory. All such items are erected at site. All such items require goods to be sent to site in a piecemeal fashion. 3.25 It has been argued that there is no dispute that lifting or handling machines are based on pulleys, winches or jacking systems. However, it is not necessary that large static structural steel work should be included. In fact, it would be impossible to include such huge amounts of static structural steel work required for constructing sk....
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....moved under gate passes GPI Nos.599 to 699 and included in this return has been assessed provisionally under Rule 9-B and the provisions of the said rules shall apply for recovery of deficiency in or refund of excess duty. Copies of the bond, bank guarantees, communication dated 16/10/2001, 17/9/2001 and 15/10/2001 and the price list were enclosed with earlier written submissions. 4 Learned senior Counsel for Otis also argued in detail and later summarized the arguments in the shape of written submissions consisting of following arguments. 4.1 The issue under the present proceedings pertains the period 01.03.1987 to 28.02.1995. It has been argued that the Appellant is engaged in the supply, erection, installation of lifts as well as repair and maintenance of lifts and for this purpose and they manufactures various components of the lifting machinery. The Appellant makes the following two types of supplies: i) Supply towards a contract for the supply, erection and installation of lifts wherein the Appellant is obligated to fulfil the intent of the contract viz. to supply, install, erect and commission a functional lift in either a residential or commercial building. (Whi....
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..... The affidavit states that parts cleared under the contract of supply and installation of lift must have the said items as to acquire the essential characteristic of the lifting machinery: a) Machine and Motor b) Controller c) Governor d) Safety e) Rails f) Signal Fixtures It has been argued that the Affidavit of Mr. M. Balasubramaniam has not been controverted by the Department. The Ld. counsel produced summary of their RT 12 returns to assert that they were manufacturing parts listed in the affidavit of Mr. M. Balasubramaniam. 4.5 Ld. Counsel relied on following Statutory Provisions Rule 1 of the Interpretative Rules Section Note 2 of Section XVI (as applicable during the relevant period) Section Note 4 of Section XVI Section Note 5 of Section XVI HSN Explanatory Notes - Section Note 2 4.6 Ld. Counsel argued that while classification is generally to be done on the basis of nature of the goods at the point of time of clearance, there are specific instances where either the Chapter Notes or Section Notes mandate the classification to be done on some alternate basis which is statutorily mandated. For example i. Under Section Note 2(b) of....
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....ncipal use of the product; - the principal function of the product Ld. Counsel argued that that several of the machines specified in the chapter 84 such as nuclear reactors, boilers, lifts, etc. do not emerge as a complete machine at the factory gate as these cannot be constructed within the factory and removed. Ld. Counsel argued that if each clearance of a component or a part made in respect of contracts for a supply and installation of nuclear reactor (Heading 84.01), steam generating boilers (Heading 84.02) or steam turbines (84.06) were to be treated as a clearance of parts for the purposes of classification, there would be very limited or almost no instances wherein any goods could possibly be classified under the Chapter Heading of the complete machinery. This is where the principle under Note 4 of Section XVI comes into play, which provides for the classification of individual parts and components of a machine consistent with the clearly defined function of that machine. Ld. Counsel argued that there are specific Chapter Headings for machines having clearly defined function. If the classification of such machines would directly fall under the relevant Chapter Heading,....
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....ay [2002 (141) ELT 593 (SC)] • Sarto Electro Equipments P. Ltd. Vs. CC (Import) [2015 (329) ELT 0723 (Tri.-Mum.)] 4.11 Ld. Counsel argued that the application of Section Note 4 may be analyzed in respect of the following three situations: i) Manufacture and supply of individual parts and components for repair and maintenance of existing lifts. ii) Manufacture and supply of individual parts and components for use in erection of a lift in pursuance of a contract for supply of parts and components. iii) Manufacture and supply of the parts and components for erection of a lift in pursuance of a contract for supply and erection of a lift. Ld. Counsel argued that in case of the first and second category of supply, wherein individual parts and components are supplied for repair and maintenance of existing lifts or for use in erection of a lift in pursuance of contract for supply of parts, it may be argued that the individual parts cannot contribute to the entire function of lifting. However, the third category of supply (i.e. the supply made by the Appellant in the instant case) is entirely distinct from the first two categories on the following two counts: ....
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....o be classified with machine of that kind. In the present case, the items in question are clearly suitable for use solely for goods covered by Chapter Heading 84.28 and therefore, warrant classification in Chapter Heading 84.28. Ld. Counsel argued that Section Note 2(a) prescribes that parts which are goods covered in any of the heading of Chapter 84 and Chapter 85 (other than those specified) are to be classified. as per their respective headings. However, in terms of Section Note 4, where all the parts of a machine contribute to the clearly defined function, the classification of the parts (as a whole) must be consistent with the intended function of the machine. Therefore, when it comes to the classification of parts, it is essential that the qualifying test prescribed under Section Note 4 must be applied. In such a scenario, if Section Note 2(a) is applied in preference to Section Note 4, and consequently all the parts contributing to the clearly defined function of a machine are classified as per their respective headings, Section Note 4 would be rendered otiose and redundant. Ld. Counsel relied on following case law regarding interpretation of Interpretative Rule 2(a) -....
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....the Hon'ble Tribunal was as to the ascertainment of excisability of a storage system and not that of classification. It is submitted that it is a trite law that the precedents for excisability cannot be applied for the purpose of determination of classification. 4.15 Ld. Counsel challenged the reliance placed by revenue on the Explanatory Notes in the HSN and the Maharashtra Lift Rules, 1958 to contend the parts and components manufactured and supplied by the Appellant in unassembled form do not have the essential character of lift or lifting machinery. His argument being i) The Explanatory Notes in the HSN referred by the Respondent merely illustrate certain complex lifting machine and the parts and components thereof. The said Explanatory Notes cannot be read so as to infer that parts such as cables and passenger cage are essential to all the lifting machineries. ii) Merely because certain parts have been defined under the Maharashtra Lift Rules, it cannot be said that all such parts are essential to form a lifting machinery. Instead, one must resort to the definition of lifting machinery under the National Building Code to determine the essential parts of lifting ma....
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....experts can only be countered with an affidavit of another expert. He relied on following decisions: • Larsen & Toubro Ltd. Vs. Collector of Customs, Bombay [1996 (88) ELT 176 (Tri.)] • Inter Continental (India) Vs. Union of India [2003 (154) ELT 37 (Guj.)] • Union of India Vs. Inter Continnental (India) [2008 (226) ELT 16 (SC)] Ld. counsel argued that the Department ought to have considered the affidavit at the adjudication stage or adduced reasons and evidences against the statement in the affidavit. He argued that in a situation where the expert is not cross-examined despite being offered for cross examination by the assessee, the opinion of the expert cannot ignored. Ld. counsel argued that even an officer or employee of the assessee would also be considered as an expert and the opinion given by such employee must be relied upon. Ld. Counsel relied on the decision of three member Bench of the Hon'ble Supreme Court in the case of Hindustan Ferodo Ltd. Vs. CCE [1997 (89) ELT 16 (SC)] wherein the affidavit of an employee of the assessee was held as reliable. Ld. Counsel distinguished the decision in the of Novopan India Ltd. Vs. CCE [1....
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....ading covers of 'parts of machinery'. Since the tariff draws a clear and visible distinction between the two phrases 'with the machinery' and 'of the machinery', it is pertinent that such distinction must be applied and administered uniformly. The relevant headings have been mentioned below:- Heading No Sub- Heading No. Description Of Goods 84.09 8409.00 Parts suitable for use solely or principally with the engines of heading no. 84.07 or 84.08 84.14 8414.91 -Parts and accessories - of goods covered by sub-heading no. 8414.10 84.31 8431.00 Parts suitable for use solely or principally with the machinery of heading nos. 84.25 to 84.30 84.48 8448.00 Auxiliary machinery for use with machines of heading no.84.44, 84.45, 84.46 or 84.47 (for example, dobbies, jacquards, automatic stop motions, shuttle changing mechanisms); parts and accessories suitable for use solely_ or principally with the machines of this heading or heading no. 84.44, 84.452 84.46 or 84.47 (for example, spindles and spindle flyers, card clothing, combs, extruding nipples, shuttles, healds....
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.... lift would be classifiable under heading 84.31. 5.1 Ld. special counsel submitted that both the words 'with' and 'of' are prepositions. According to English grammar, a preposition is a word that shows the relationship of one word in a sentence with another word. In the context of the Central Excise Tariff, both the prepositions 'with' and 'of' indicate the relationship between the parts and the machinery and have been used for the same purpose. In other words, parts of the machinery and parts used with the machinery convey the same meaning. Ld. special counsel brought our attention to the Explanatory Notes of HSN on Parts under headings 84.28, 84.29 & 84.30 respectively at wherein the expression used is 'parts of the machines of this heading are classified in heading 84.31'. 5.2 Ld. special counsel argued that as per Section Note 2(a), the parts which are specifically included in any particular heading are to be classified in that specific heading. In the present case, as the parts suitable for use solely or principally with the machinery described in heading No.84.28 were specifically covered by heading No. 84.31, they were classifiable under such sp....
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....s have also been supplied not in a single consignment but in several consignments over a period of time. The question is whether these 14 parts can be said to have the essential character of a lift. As per the HSN explanatory notes pertaining to heading 84.28, the said heading covers lifting or handling machines usually based on pulley, winch or jacking systems and often including large proportions of static structural steel work, etc. These static structural elements (e.g. pylons specialized for teleferics, etc.) are classified in this heading when they are presented as parts of a more or less complete handling machine. The HSN explanatory note further states that "lifts are usually operated by winch cable, or by rams worked by water, air or oil. They are used for raising or lowering a passenger cage or gods platform between vertical guide bars, and are generally fitted with counter-balance weights. The control, stopping, safety, etc. equipment, whether or not electrical, is also classified in this heading provided it is presented with the lift itself. The heading also includes manually operated lifts". 5.6 Ld. special counsel argued that from the HSN explanatory notes it is cl....
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....on of General Interpretative Rules would be required only if the tariff heading and the chapter and section notes are not sufficient for the purpose of classification. He relied on the decision of Hon'ble Apex Court in Simplex Mills Co. Ltd. reported in - 2005 (181) ELT 345 (S.C.). 5.8 He also relied on the decision of Tribunal in Rajasthan Synthetic Industries Ltd. V/ s, Collector of Central Excise - 1989 (42) ELT 24 (T). 5.9 Ld. special counsel pointed out that as per the description of Heading 84.28, the said heading covers machinery for lifting, handling, loading or unloading machinery. Parts, which are suitable for use solely or principally with the above machinery, are classified under Heading 84.31. Thus from the tariff description itself, it is clear that parts of lift machinery are classifiable under CETH 84.31 and hence there is no need to invoke any other rule for the purpose of classification. 5.10 Ld. special counsel argued that assuming without admitting that Rule 1 does not apply, then we need to see whether Rule 2(a) of the Interpretative Rules is applicable to the facts of the case as contended by the appellant. The said Rule reads as follows: "Any ....
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....hine by resorting to Rule 2(a). This decision of the Hon'ble Tribunal has been affirmed by a speaking order by the Hon'ble Supreme Court as reported in 2015 (322) ELT 602 (S.C.). Ld. special counsel pointed out that in the case of CCE, Chennai V/s. Kone Elevators India Ltd. - 2001 (139) ELT 635 (T), the Hon'ble Tribunal has upheld the classification of component parts of lifts cleared over a period of time under Chapter Heading 84.31. This decision has been followed by the Tribunal in its subsequent decisions in the case of U.T. Ltd. V/s. CCE (Adjn.) Delhi - 2002 (141) ELT 652 (T) and U.T. Ltd. V/s. CCE, Meerut - 2002 (146) ELT 421 (T). It is, therefore, submitted that the decision in Kone Elevators is a good law and that it has attained its finality. Therefore, there is no good reason for its reference to the Larger Bench, as suggested by the Id. Sr. Counsel. Ld. special counsel argued that in light of the above decisions, it is clear that application of Rule 2(a) will arise, when the parts comprising of a machine are supplied/ presented together. If they are cleared over a period of time or are not presented together, they cannot be considered as constituting the enti....
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....e factory, only then they can be regarded as Lifts in unassembled/dis-assembled condition or having the essential character of the Lifts. The Circular does not envisage that if the parts and the components of Lifts are removed from the factory over a period of time, they will have the essential character of Lifts. Therefore, the Board's Circular supports the stand of the Department to classify the parts and components of lifts under heading 84.31. 5.13 Ld. special counsel argued that the following case law cited by appellants is clearly distinguishable on facts on following grounds: i) In the case of Vinar Systems Ltd. V/s. CCE, Calcutta-II - 2001 (131) ELT 578 (T), the appellant was engaged in the manufacture of Conveyors and Material Handling Equipments. As it was impossible and impracticable to clear these heavy machineries in a fully finished form, the same were cleared in SKD or CKD condition. There was, however, no dispute that the parts cleared from the appellant's factory would constitute complete Material Handling Equipments. Therefore, it was rightly held by the Tribunal that Conveyors and Material Handling Equipments cleared in SKD or CKD condition are clas....
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....icle parts were imported from France for assembly with some locally produced parts. The dispute was whether these parts should be classified as 'Motor Vehicles' or as parts of Motor Vehicle. The importer contended that the parts though incomplete and unfinished had the essential character of motor vehicles and should be classified as such. Revenue contended that the parts lacked that essential character and should be classified as motor vehicle parts. The Tribunal held as follows "On the evidence we are of the view that the subject goods had the essential character of motor vehicles for the transport of persons, goods or materials of a kind operated by self-contained power, albeit unassembled motor vehicles. We are of the view that the type and quantity of work required to be done in Australia to the imported goods to form motor vehicles was consistent with the identity of the goods being unassembled motor vehicles, though unfinished vehicles. Indeed, no evidence was put to the contrary. Rather, the evidence was that the goods were regarded commercially as "CKD" motor vehicles. We are of the view that, looked at collectively, the goods were sufficiently committed to as....
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....Agro are in the context of provisional assessments made under Central Excise Act. We have merely referred to these decisions to indicate that both in the Customs Act as well as in the Central Excise Act, action to proceed against the offending goods can be started and concluded even when the assessments were provisional......". Learned special counsel argued that ratio of the above decision is applicable to the facts of this case. 6. Ld. Commissioner (AR) argued that as per the Appellants Otis Elevators Ltd (OEL), own admission, they had manufactured only some components of Lifts, which were cleared to the site of installation over a period of time and then complete lift was erected on site by using these manufactured items together with other bought out components and parts, such as, guide rails, wire ropes, cage, collapsible gates, etc. Ld. Commissioner (AR) argued that para K-1, K-2, L-3, O and V of the Appeal as well as scrutiny of the various Contracts for installation of lifts, submitted by the Appellant show that: a. Some components of lifts are manufactured by them and cleared to their own Offices in different cities/ towns. b. The components for one contract, f....
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....& Wvg Mills at Mumbai for extension of existing lift, shows the list of parts required for such extension and duty paid under 8431. k. It can be appreciated from the documents at (i) & (j) above that, the components in both lists are identical. It can also be appreciated that, these components are not assembled together separately before installation. The components go one by one into the building of 'lift'. It may also be appreciated from these two lists that, there is no 'lifting machinery' separately identifiable in these two lists. l. They have combined Contracts for Installation of new Lift and for Maintenance/ Repair/Upgradation of existing lifts. For the purpose of their business Installation and Maintenance/ Repair/Upgradation require the same components and technical expertise. m. Pg 423, of Contract Copies given by the Appellant, i.e. Contract no.52SE4417/A35E4417 with GNVFC, at Pg 441 speaks of Repair of existing Lift and at Pg 442 speaks of installation of new Lift. At Pg 442, it offers 3 alternatives i.e. for supply of only labour or only materials or both labour and materials. This one Contract relates to different lifts and for Repair of one and Installation....
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....e followed for installation of the lifts. Pg 88 to 124 is a copy of the tender filed by the Appellant on 122.11.1991. v. The said details at (q) above show that, both the customer and the Appellant have contracted for a works contract for installation of Lifts. Such Lifts have to be in accordance with the ISI specifications with respect to each activity related to installation. The components supplied are considered as parts of the Lifts. There is no contract for sale of any Lifting Machinery. There is no identification in the entire contract of any such machinery. Nor is there any stage in the execution of the Contract where any such 'lifting machinery' is assembled and tested without installation and affixation to the earth. w. The Appellant has filed Classification Lists and Price Lists/Valuation Annexures for components cleared under CETH 8428 and 8431. They have not filed these CLs/PLs/Annexures Contract wise. In these CLS/Pls/Annexures, they have not described any lifting machinery. For e.g.: -In the CL w.e.f 1.3.1994, for goods classified under CETH 8428, they have given description of 1077 parts with Part Number, but, there is no description of any & 'lifting....
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.... parts/components. There can be no performance, by the component parts, of the function of men and material' unless these components get installed as immovable property. Hence, the question which arises is, whether installations which are admittedly 'goods' not can be considered as 'goods' and that too 'excisable goods' and classified in the Central Excise Tariff and charged to Central Excise duty by application of a Rule of interpretation to the Tariff or a Section or Chapter note in the Tariff. Ld. Commissioner (AR) relied on the following decisions:- i) CCE Vs Alois Gutenberg Machines Pvt Ltd. - 2016 (336) E.L.T. 309 (T) ii) UOI Vs Delhi Cloth & General Mills Co. Ltd. - 1977 (1) E.L.T.(J199(SC) iv) Mittal Engg Works Pvt Ltd. Vs CCE - 1996 (88) E.L.T. 622 (S.C.) v) Quality Steel Tubes Vs CCE - 1995 (75) E.L.T. 17 (S.C.) vi) Triveni Engg & Indus Ltd. Vs CCE - 2000 (120) ELT 273 (SC) vii) T.T.G Industries Ltd Vs CCE - 2004 (164) ELT 501 (SC) Ld. Commissioner (AR) argued that there can be no 'Lift' without its installation. Hence, there can be no set of components/assemblies/items which can be considered to have the 'essential character' of lift'....
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....t. It had been held that the component parts included spare parts. Ld. Commissioner (AR) argued that his decision of a Five Member Larger Bench of CESTAT in the case of Jindal Strips Ltd. v. Collector of Customs, Bombay - 1997 (94) E.L.T. 234 (T-LB) was approved by the Supreme Court in Hindustan Sanitaryware & Industries Ltd Vs CC - 1999 (114) E.L.T. 778 (S.C.) 6.3 Ld. Commissioner (AR) argued that in the case of CC, New Delhi v. Sony India Ltd. - 2008 (231) E.L.T. 385 (S.C.), while interpreting Rule 2(a) of the Interpretative Rules of the Customs Tariff which is analogous to Rule 2(a) of the Interpretative Rules of the Central Excise Tariff, the Hon'ble Apex Court has held that the Rule must apply as a whole, Dissection of the Rule is not possible. Ld. Commissioner (AR) pointed out that as per their Affidavit, OEL clears parts of 6 components viz, (i)Machine & Motor, (ii) Controller, (iii) Governor (iv) Rails (v) Signal Fixtures (vi) Safety. The bought out items which are used together with the manufactured items for construction of the lift in the case of OEL are - (i) Fly Wheel, (ii) Card Road Panels, (iii) Apron of Car, (iv) landing Door Panels, (v) Spring Buffer, (vi....
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....ssembled (see also.....). However, unassembled components in excess of a number required for a complete machine or for an incomplete machine having the characteristics of a complete machine, are classified in their own appropriate heading." Ld. Commissioner (AR) argued that it is important to note that, the incomplete & unassembled machine should have the 'features of the complete machine'. Ld. Commissioner (AR) submitted that, as per this Note, all parts which comprise a machine, together, in unassembled condition are classifiable under the heading in which a complete machine is classified and not to some parts manufactured leaving the bought-out items. Ld. Commissioner (AR) argued that it has been the consistent view of the Tribunal that the goods have to be assessed and classified in the condition in which they are cleared from the factory. In this connection, reliance is also placed on the decision of the Tribunal in the case of Wesman Engg Co Ltd Vs CCE - 2002 (150) E.L.T. 644 (T). 6.5 Ld. Commissioner (AR) argued that from the affidavit of Shri M. Balasubramanian, General Manager it is seen that it only states that the items manufactured by the appellant are essenti....
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....re removed. Thus, if together they can be regarded as lifts in unassembled/disassembled condition or having the essential character of lifts, they would be assessed under heading 84.28, otherwise such parts and components would be assessed under heading 84.31. (ii) .........." From the Circular, it appears that if all the parts together are removed from the factory, only then they can be regarded as lifts in un æ assembled/dis-assembled condition or having the essential character of the lifts. The Circular does not envisage that if the parts and the components of lifts are removed from the factory over a period of time, they will have the essential character of lifts. Therefore, the Board's Circular is not relevant for the present purpose. The goods manufactured by the appellant are rightly classifiable under Chapter heading 8431.00. 6.7 Ld. Commissioner (AR) argued that the argument put forth by the appellant is that CETH 84.31 covers "parts suitable for use solely or principally with the machinery of Headings 84.25 to 84.30" and the word 'with' used indicates that the lift machinery is already in existence and the parts to be used with that ....
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....ng 85.38). Ld. Commissioner (AR) argued that the above rules does not apply to parts which in themselves constitute an article covered by a heading of this Section (otherthan headings 84.85 and 85.48); these are in all cases classified in their own appropriate heading even if specially designed to work as part of a specific machine. This applies in particular to : (1) Pumps and compressors (headings 84.13 and 84.14). (2) Filtering machinery and apparatus of heading 84.21). (3) Lifting and handling machinery (heading 84.25, 84.26 or 84.28). (4) Taps, cocks, valves, etc. (heading 84.81). (5) Ball or roller bearings, and polished steel balls of a tolerance not exceeding 1 % or 0.05 mm, whichever is less (heading 84.82). (6) Transmission shafts, cranks, bearing housings, plain shaft bearings, gears and gearing (including friction gears and gear-boxes and other speed changers), flywheels, pulleys and pulley blocks, clutches and shaft couplings (heading 84.83). (7) Gaskets and similar joints of heading 84.84. (8) Electric motors of heading 85.01. (9) Electrical transformers and other machines and apparatus of heading 85.04. (10) Electric heating resistors....
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....mber of machines bf the same heading (including a machine of heading 84.79 or 85.43) are to be classified with the machines of that kind. However, parts which are equally suitable for use principally with the goods of headings 85.17 and 85.25 to 85.28 are to be classified in heading 85.17;' The same phrase is used as in CETH 8431. This clearly shows that, the Tariff uses the words 'parts of' and 'parts suitable for use solely or principally with' interchangeably. Ld. Commissioner (AR) argued that the Hon Supreme Court had considered Note 2 to Chapter 90 of the Customs Tariff, in the case of Secure Meters Vs CC - 2015 (319) E.L.T. 565 (S.C.). This Note has the same wording as Note 2 to Section XVI. The Apex Court held that, LCDs which were admittedly parts of electricity meters, were classifiable under heading 90138010 as LCDs and not under heading 90289010 as parts of electricity meters. The ratio is that, if goods are specifically included in any Chapter heading they shall be classified therein only. Whether the goods are described in the said heading as 'Parts' or as 'Parts suitable for use solely or principally with machinery of heading'. Ld. Commissioner (AR) arg....
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....clause for instance "whether by wholesale or retail" in contrast to "for human consumption". We do not think that anything turns upon this distinction because the preposition "for" although it no doubt indicates "for the purpose of", is not used in contradistinction with the preposition "by" in the earlier clause but because the requirements of simple grammar necessitate the use of that preposition. In the earlier clause, viz., "whether for cash or on credit or by way of exchange", similarly three prepositions are used "for", "on" and "by" because simple grammar requires it. No greater meaning therefore can be attached to the different prepositions used preceding the different clauses." Ld. Commissioner (AR) argued that the ratio of the above decision squarely applies to the facts of this case. The use of the preposition 'with' was due to the requirement of grammar and nothing else. According to the Shorter Oxford Dictionary, one of the meanings of the word "with" (which accords here with the context) is "part of the same whole". In other words, the phrases "parts of machinery" and "parts suitable for use with the machinery" convey the same meaning. 6.7 Ld. Commissioner (....
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....ed or presented separately, they would fall under the heading appropriate to the machinery. Section Note 2(a) dealing with the classification of parts specifically excludes from its scope parts falling under Heading 8431.Explanatory Note to Section Note 2 makes it clear that "Parts suitable for use solely or principally with the machinery of Heading No.84.25 to 84.30" have to be classified under Heading 8431 and nowhere else. Note 5 does not deal with classification of parts at all. Ld. Commissioner (AR) argued that the contention of the Appellants that as per Notes 2, 4 and 5 of Section XVI, parts of lifts are classifiable under Heading 8428 is without any basis. 6.8 Ld. Commissioner (AR) relied on schematic diagram of the lift and its components and the various parts manufactured by the appellant. From the diagram he pointed out that out of the 40 parts comprising the lift, the appellant has manufactured only some parts an these parts and these parts have not been supplied in a single consignment but in several consignments over a period of time. He relied on HSN explanatory notes pertaining to 84.28 to assert that the said heading covers lifting or handling machines usually b....
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.... which have been manufactured and supplied do not provide the essential character of a lift. A lift should at least, have passenger cage or goods platform, counter weight assembly, hoisting ropes, winch and cable mechanism for movement of the lift. It also does not have the vertical guide bars, which guides the movement of the lift. It also does not have the counter-balance weights which facilitate the stopping of a lift. Ld. Commissioner (AR) argued that as per the HSN explanatory notes, the control, stopping, safety, etc. equipment (whether or not electrical) is classifiable in Heading 84.28, provided it is presented with the lift itself. In other words, if these equipment are not presented with the lift, they will not merit classification under CETH 84.28 but under the heading appropriate to them. In the facts of the case before us, it is clear that the various control, stopping and safety equipment were not presented with the lift at all. Ld. Commissioner (AR) argued that from the affidavit filed by the Appellant it is apparent that the lift car/cage was not manufactured by the appellant nor the ropes/cables for pulling the lift or the guide rail or the counterweights which reg....
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....aining essential components such as lift car, counter weight, guide rail, entrances/ doors, roping systems and buffers have not been manufactured by the appellant. When bulk of the components have not been manufactured and supplied, it cannot be said that the goods supplied have the essential character of a lift. They can only be parts and components of the lift. 6.9.2 Ld. Commissioner (AR) argued that the installation of a lift is governed by various rules and regulations and the various components of the lift have to satisfy the specifications prescribed in the Indian Standards. The Maharashtra Lifts Act, 1939 is primary. The Maharashtra/Bombay Lift Rules, 1958 itself prescribes Standards for landing gates and doors, locking devices, lift cars, lift car frame, counter weights, car guides, buffers, suspension ropes, emergency safety devices, over speed governors, lift machines, controllers, sheaves and drums and so on. Many of these parts comprising a lift, which are essential for the functioning of the lift and for which standards have been laid down, have not been manufactured and supplied by the Appellant. Therefore, from the Maharashtra/Bombay Lift Rules, 1958, itself, it c....
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....of the above, the said expert opinion cannot be relied upon for the purpose of tariff classification. 6.12 Ld. Commissioner (AR) argued that the appellant contends that Rule 2(a) of the General Interpretative Rules would apply to the facts of the case. Invocation of General Interpretative Rules would be required only if the tariff heading and the chapter and section notes are not sufficient for the purpose of classification, In Simplex Mills Co. Ltd. case 2005 (181) E.L.T. 345 (S.C.), the Hon'ble Apex Court laid down the principle as follows :- "11. The rules for the interpretation of the Schedule to the Central Excise Tariff Act, 1985 have been framed pursuant to the powers under Section 2 of that Act. According to Rule 1 titles of Sections and Chapters in the Schedule are provided for ease of reference only. But for legal purposes, classification "shall be determined accordingly to the terms of the headings and any relevant section or chapter Notes". If neither the heading nor the notes suffice to clarify the scope of a heading, then it must be construed according to the other following provisions contained in the Rules. Rule 1 gives primacy to the Section and Chapter N....
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.... in appeal. Hon'ble Apex Court vide order reported in 2015 (324) ELT 238 (SC) remanded the matter back to the Tribunal observing as follows: 4. Learned counsel for the assessees had argued before both the Commissioner and the Tribunal in the two respective appeals that essentially what was ultimately sold was a complete lift and as a complete lift was immovable property, since all the components were fixed in the premises of the customer, it would not be classified as such in an excise tariff, which deals only with goods. However, the very fact that the expression "lifts" occurs in sub-heading No.8428.00 would necessarily mean that it is not immovable property that is sought to be taxed under the Central Excise Tariff but the price of components which make-up the ultimate lift and that being so, it should fall within sub-heading No.8428.00 and not 8431.00. 5. What has been held by both the Commissioner and the Tribunal in the two judgments which are under appeal before us is essentially that since the appellants-assessees do not, in fact, manufacture every single component that goes into a lift, neither Note No.4 of Section 16 nor interpretative Note 2(a) would apply, sin....
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....ing reasonably wide ramifications, we would allow the assessees to raise these points on a remand made to the Tribunal in both these cases. This we do also having regard to the fact that the new pleas raised before us are questions of law which need to be answered on the same set of facts, and no new or additional facts need to be pleaded in order that the assessees make out their case. This being the case, we, therefore, set aside both the Tribunals judgments in the two appeals before us and remand these cases for a fresh hearing before the Tribunal allowing both sides to take up all points which arise on the facts of these appeals. Both the appeals are disposed of accordingly. It is seen that the remand has been made for consideration of an argument which was not taken before any of the lower authorities. The same was taken up for the first time in the Hon Supreme Court. The new argument has been summarized in para 6 of the decision of the Hon Apex court. It is seen that the matter has been remanded for consideration of defense of the appellants that the goods cleared by them have been tested only with reference to the product 'LIFT' but not with reference to the descr....
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....osition is clear from the manner in which the appellants are themselves assessing the spare parts cleared by them. They are themselves classifying individual items manufactures by them under heading 84031 as parts of Lifting machinery. It is only when they are clearing a set of items manufactured by them against a common order of installation of lift that they wish to classify the same as 'Lifting Machinery' of 'Lift'. 7.3 To constitute a 'machinery' it should be possible for all the items manufactured by them to work together to perform a function. In simple words, they should be able to work together towards a common function. The schematic diagram of the lift given by both the appellants shows location of the items manufactured by them and also the location of the various other bought out items used in assembly of a lift. The schematic diagram presented by the appellants show the position of each item that they are clearing from their factory as well as the position of each item that they buy. From a perusal of the diagram it appears that the items manufactured by them are not connected to each other. Prima facie it appear that they are not capable of ....