TaxTMI 
TaxTMI 
2023 (1) TMI 1443
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....tion of the model "Arjun Ultra - 1 CE" cleared by the Noticee during the period from April, 2007 to January 2011 under Chapter Sub-heading No. 8429.51.00 of the Schedule to the Central Excise Tariff Act, 1985. b] I hereby confirm the demand of Central Excise duty of Rs. 17,26,89,200 /- (BED - Rs. 16,76,59,417/- + ED Cess 33,53,189/- + S&H ED.Cess 16,76,594/-) (Rupees Seventeen Crores Twenty Six Lakh Eighty Nine Thousand and two Hundred Only) on "Arjun Ultra - 1 CE" cleared by the Noticee during the period from April, 2007 to January 2011, under the provisions of Section 11A of the Central Excise Act, 1944. c] I also order recovery of interest at appropriate rate, on the amount of duty confirmed, under Section 11AB of the Central Excise Act, 1944. d] I also impose penalty of Rs. 17,26,89,200/- upon the Noticee under the provisions of Section 11AC of the Central Excise Act, 1944. e] Since penalty under Section 11 AC of the Central Excise Act, 1944 has been imposed upon the Noticee, I refrain from imposing penalty under Rule 25 of the Central Excise Rules, 2002." 1.3 Other two orders are identically worded except for the amounts hence not reprodu....
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.... staff members of the dealer. The User Manuals for so-called tractors inter alia revealed that labour free services are offered to the customers for these FEL/FED etc., which can be availed by the attachment owner from any authorized dealer in India. They also warranted the FEL/FED etc. to the extent that the defective part will be repaired or replaced through their authorized dealer. 2.5 Thus Appellant themselves differentiate between plain "Arjun Ultra-1 605 tractor" and "Arjun Ultra-1 CE 605 model/construction equipment". Admittedly "Arjun Ultra-1 CE 605 model/construction equipment" is fitted a special axle with "Tonplus technology" wherein the cross section of the centre bar is more as compared to normal tractors. As per the appellants, the models are not interchangeable as the axle is put at the time of manufacture itself making it suitable to perform specific function. 2.6 It. therefore, they have mis declared their product Arjun Ultra-1 CE as "tractor" falling under chapter sub-heading 8701.90.90 and wrongfully claimed exemption under Notification No. 06/2006-CE dt 16.11.2006 (Sr. No. 40) instead of properly classifying them under the appropriate heading 8429.51.00 as....
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....g. ➢ The conclusion that it is covered by the exclusion clause in Para 2 of the HSN Explanatory note to heading No.8701 is without any basis. This HSN explanatory note is applicable for the classification of propelling bases fitted with or incorporating robust elements and in addition comprising of other machinery. Arjun tractor is cleared from the factory without any fitment of any machinery. Thus, aforesaid HSN explanatory note is wholly irrelevant for the purpose of determining the classification of the tractor in question. ➢ Even after the fitment of front end loaders/dozers at the dealers end, Arjun tractor cannot be excluded from Heading 8701, for the reason that these fitments are detachable and do not form an integral part of the tractor. The term 'integral mechanical unit' has already been interpreted by the following HSN and SC Judgment; o HSN notes for heading 8705 under the title 'Motor Vehicles, Chassis or lorries combined with working machines' o HSN notes for heading 8430 under the title 'Machines mounted on tractor type bases. O LMP Precision Eng, Co. Ltd. [2004 (163) ELT 290 (SC)] ....
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....994 (69) ELT 674 (T)] o Mukund Ltd. [2004 (167) ELT 177 (T)] ➢ It is a settled law that the end-use to which the product is put to, cannot determine the classification of the product, in cases where the product manufactured falls under a specific tariff heading. In the present case, there is a specific tariff heading for tractor, therefore, end use is irrelevant for the purpose of determining classification of Arjun Tractor. In any case, the end- user statements relied upon by the department pertains to the tractor after fitment of additional implements and hence, not relevant for deciding classification of Arjun tractor. o Carrier Aircon Ltd. [2006 (7) TMI 8 (SC)] o Indian Aluminium Cables Ltd. [1985 (5) TMI 54 SC] ➢ It is a settled law that payment of duty under a particular tariff item must depend upon the facts of the case and not on the advertisement gimmick of the advertiser. In any case, the advertisements relied upon by the department tractor after fitment of additional implements and hence, not relevant for deciding classification o Blue Star Ltd. [1980 (6) ELT 280 (Bom)] Leukoplast (India) Pvt. Ltd. [1985....
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....has also taken a stand that since the Tractor has been tested and certified as a Tractor by the Central Farm Machinery Training and Testing Institute the same is a tractor. In this regard, it is observed that although the appellant has claimed that the same was tested by the said agency which certifies only farm equipment such as a tractor, it is seen that the appellant had got tested only the tractor portion of the equipment without the loader and dozer fitted to it. The test report submitted by the appellant clearly reveals that the same were not fitted when the said model was tested by the appellant. It is therefore clear that when primarily and principally the machine has been built for carrying out the activities meant for material handling rather than those undertaken by normal tractors the same cannot be called a tractor when sold in the complete form as portrayed and advertised. ➢ In this case, the end use of the machine cleared by the appellant is to do heavy-duty loading, unloading, and dozing. This machine is designed to perform the work of a bulldozer, excavator, lifter, etc and is designed for mounting such types of equipment, hence it needs to be class....
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....r 87 reads as under, "For the purposes of this chapter, "tractors" means vehicles constructed essentially for hauling or pushing another vehicle, appliance or load whether or not they contain subsidiary provision for the transport, in connection of the main use of the tractor, of tools, seeds, fertilizers or other goods." 3. As per the explanatory notes of Harmonized System of Nomenclature (HSN) in Section XVII, Chapter 87, Gen/87.01 the heading 8701 does not cover propelling bases specially designed, constructed or reinforced to form an integral part of a machine performing a function such as lifting, excavating, leveling, etc., even if the propelling base uses traction or propulsion for the execution of this function. It is also specifically excludes the propelling bases of machines, in which the propelling base, the operating controls, the working tools and their actuating equipment are specially designed for fitting together to form an integral mechanical unit, as in the case of loaders, bulldozers, motorized ploughs, etc. 4. Thus it is established that those machines of chapter 84 can be distinguished from the tractors Chapter 87 by their special construction....
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....; lifting machines and equipments such as motors, shafts in the factory etc. (The list of usage is merely illustrative and not exhaustive). As per the technical literature of M/s Mahindra & Mahindra Ltd., they have provided a special grade axle to "Arjun-Ultra 1 CE" to take a load of more than 1 ton in its Front End Loader (FEL). 8. Further the model is equipped with a 3200 cc engine and a 56 HP engine power enabling the same to perform tasks as a loader rather than an agricultural implement. The engine capacity and power are far more than the average requirement of farming and agriculture. Such machines with 56 HP engine or more are principally manufactured, marketed and used as material handling equipment. More emphasis is given on material handling than farming. 9. It is further seen that FEL manufacturing companies, such as Bull Machines Ltd., M/s Chowgule and Company, and M/s Essaey ltd., are advising their customers to purchase "Arjun Ultra-1 CE from M/s Mahindra and Mahindra which is made suitable for attaching the material handling equipments. The advertising material of these companies show "Arjun-Ultra 1 CE" in use as loader or a crane. Not a single inst....
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.... that the transaction is arranged by the noticee in the manner as admitted by Shri Khole, in his statement, which involved placement of order by noticee's Mumbai office which inter alia contained the details of the consignee to whom the equipment/implement are destined. Thereafter, the manufacturer (Vendor) cleared the Front Loader on payment of Central Excise duty and under cover of Central Excise Invoice." He has further stated that, "The manufacturer (Vendor) sends the Sale Bill/ Invoice to our Mumbai Office who accounts for the stock of the goods in their inventory. Thereafter, on receipt of advice from their Mumbai office, through e- mail, Sale Invoices are issued in the name of the concerned dealer of Mahindra & Mahindra." It is also observed that the noticee was issuing Central Excise Invoice such traded goods, admittedly, as per the directions of Head Office." It is observed that on receipt of the duplicate copy (transporters copy) of Central Excise invoice of the noticee, along with the certificate stating therein the details of their Area office (Stockyard), Invoice No. and Date, Dealers name and manufacturer (vendor) particulars, the manufacturer (vendor) clears the ....
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....in the manual which has information regarding whether the customer is explained and educated the operation of FEL/FED, function of each part, how to attach/detach FEL/FED to the machine, maintenance schedule of FEL/FED etc. 13. The instructions are explicitly provided regarding Safety, Product overview, Specifications, Loader Detachment & Attachment, Technical details, Operating the loader, Service schedules etc. 14. Copies of Pre-delivery Inspection (PDI) Reports are provided in the manual which has columns showing the name of person who does the attachment of FEL/FED. It also shows Loader invoice No. and maintenance schedule of FEL/FED. Thus it is clear that the noticee is dealing with the sales- purchase of FEL/FED etc. in as much as the noticee places the purchase orders of these implements to their approved vendors who manufacture FEL/FED as per the designs supplied by the noticee. The implements are manufactured under the strict quality control of the noticee. These FEL/FED also bear brand name of noticee. The entire documentation of FEL/FED for whole of India is looked after by noticee's Appli Trac division located within their factory premises....
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.... by the attachment owner from any authorized Mahindra Tractor Dealer in India. Therefore it becomes clear that the noticee manufactures a loader machine as against "Tractor" as claimed by them. 22. Shri Shrikant Dube, Deputy General Manager in his statement recorded under section 14 of the Central Excise Act, 1944 on 15-02-2011; he stated that the model Arjun Ultra 1 CE is equipped with a special grade front axle which is heavy duty and used for enhancing the load bearing capacity of the front axle of these models. He categorically stated that the wording CE stands for "Construction Equipment". As explained by him the axle is peculiar wherein the cross section of the centre bar is more as compared to other models. He also explained further that all Arjun Ultra-1 CE models are equipped with Tonplus technology axle and that the normal variety like 605 cannot be changed to 605 CE as the CE model comes with special axle which is not available as spare part in the market. 23. It is observed that the noticee in their reply dtd. 26/12/2012 to the show cause notice have stated that the vehicles of model 605 DI Arjun Ultra-I is a tractor and not construction equipment. It ....
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....ting them to. In this regard it is observed that the noticee have master minded a scheme to defraud the revenue by (i) firstly clearing the impugned goods as Tractor, and carrying out modification in the axle load capacity (making it capable of handling one MT of load); (ii) by employing the services of the vendors they enrolled for manufacture and supply directly to their dealer's end, of the equipment for material handling to be fitted to the said goods, branded with their name i.e. Mahindra; so that the end customer recognizes it as a product of the noticee (iii) ensuring that the goods are advertised and known in the market as material handling equipment of Mahindra make, (iv) printed material depicting the said goods as material handling equipment rather than mere tractors, (v) training the personnel as well as the customer in handling the goods after the said equipment is fitted and ready for material handling, (vi) extending the warranty even after carrying out of the said fittings. Thus on one hand the noticee would claim the benefit of the exemption notification for tractor (for agricultural purpose) and on the other using the same as material handling equipment. The c....
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....on. In such cases the extended period has been held to be invokable. I place reliance on the decision of Fusebase Eletoro Ltd V/s CCE Meerut reported in 2000 (120) E.L.T. 488 (Tribunal). 27. The noticee has placed reliance on the decision of Dunlop India V.S UOI reported in 1983(13) ELT 1566 to argue that the goods are to be assessed on the basis of the condition at the time of presentation to the department for assessment. However in the present case the noticee has adopted a modus operandi of clearing the model Arjun Ultra Di-1 CE. Disguised as Tractor for agricultural purpose but with a clear knowledge that the same was meant for use as a dozer in view of the fact that the same was equipped with a modified axle capable of handling 1 MT load which the other model did not, and there after as per the customer's order convert the same into Loader, dozer as advertised. Hence the ratio of the aforesaid case is not applicable to the case of the noticee. In the present case the end use is very much relevant for the purpose of deciding the eligibility to exemption. 28. The noticee has cited a plethora of decision on similar lines as Dunlop referred above and I find ....
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....age as well as Korean language and there is no reason to doubt the veracity of the said literature. Inasmuch, as the manufacturers themselves have shown the use of Butyl Acrylate as adhesive as well as textile binders, we see no reasons to take a different view". 34. The noticee has contended that the statement of the end user are not relevant for the purpose of classification of the product and that the advertisement cannot be a basis for determination of the classification. In this regard it is seen that they have also placed reliance on various decisions. However in a specific case like the present one the same is also a determining factor for classification as it relates to its main function. This view is supported by the decision of the Hon'ble CESTAT in the case of B K Products v/s CCE Patna reported in 1998 (104) E.L.T. 430 (Tribunal) in which it was held as under - 34.1 "The product is one for care of the hair, even as per the appellants' own description in advertisements as "for bright, thick, dark long hair, etc." It is a hair oil which has a pleasant, fragrant odour. Hence, it has been rightly treated as a perfumed hair oil and by virtue of Note....
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....ed in the chapter note, ibid. It is, therefore, clear that the instant machine i.e. Arjun Ultra-1 CE manufactured by the noticee is specially designed by them to form an integral part of a machine performing function such as lifting, dozing or attaching any other required FEL and the resultant goods merit classification under the subheading 8429.51.00 as "Front End Shovel Loader". 37. Further it is clear that it has an inherent feature of having arrangements for lifting more than 1 M.T. load and serves as a material handling equipment rather than tractor as claimed by the noticee. It is also clear that the noticee intends to manufacture a machine capable of handling or loading goods or materials rather than the vehicles as laid down in chapter Note 2 to chapter 87 which defines "Tractors" as vehicles constructed essentially for hauling or pushing another vehicle, appliance or load. It is also an admitted position that the noticee purchase loading equipments (Front end loaders) from their vendors which are manufactured as per the designs and specifications provided by noticee themselves. The Front End Loaders (FEL /FED) etc. are manufactured under noticee's quality cont....
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....Any reference to goods of a given material or substance shall be taken to include a reference to goods consisting wholly or partly of such material or substance. The classification of goods consisting of more than one material or substance shall be according to the principles of rule 3. 3. When by application of rule 2(b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows: (a) The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods. (b) Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to (a), shall be classified as if they consisted of....
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....ds is to be done at the time of the clearance of the goods and in the form in which they are presented for assessment. The law in this respect has been settled by the Hon'ble Supreme Court long back in case of Dunlop India [1983 (13) ELT 1566 (SC)]]where Hon'ble Apex Court observed as follows: "30. The relevant taxing event is the importing into or exporting from India. Condition of the article at the time of importing is a material factor for the purpose of classification as to under what head, duty will be leviable. The reason given by the authority that V.P. Latex when coagulated as solid rubber cannot be commercially used as an economic proposition, as even admitted by the appellants, is an extraneous consideration in dealing with the matter. We are, therefore, not required to consider the history and chemistry of synthetic rubber and V.P. Latex as a component of SBR with regard to which extensive arguments were addressed by both sides by quoting from different texts and authorities. 31. It is well established that in interpreting the meaning of words in a taxing statute, the acceptation of a particular word by the Trade and its popular meaning should commend ....
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....e and the same is cleared from the factory gate. The excise duty payable is on the basis that the manufactured product is base yarn and at that juncture it is not permissible for the department to levy excise duty on the basis that the manufactured product is textured yarn. It is not in dispute that when base yarn undergoes texturising process to bring into existence texturised yarn, then separate excise duty is leviable for the process of manufacture. In these circumstances, it is impossible to accede to the submission urged on behalf of the department that at the time of clearance of base yarn, the petitioners are liable to pay excise duty which is required to be paid after the texturised yarn comes into existence. The provisional assessment made by the department, therefore, is unsustainable." In the case of Mahindra and Mahindra Ltd. [2010 (262) ELT 366 (T)] tribunal has held as follows: "5. Factory as defined under Section 2(e) of the Act means:- "Factory" means any premises, including the precincts thereof, wherein or in any part of which excisable goods other than salt are manufactured, or wherein or in any part of which any manufacturing process c....
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.... appeal is as to whether the value addition made to the base vehicle viz. 'the Jeep' in question, by way of bullet proofing, has to be added while arriving at transaction value for the purpose of excise duty. We may mention that in the normal course, the Jeeps are manufactured by the respondent/assessee without any such bullet proofing. However, there was a specific requirement of the Police Department in various States for supply of Jeeps with bullet proofing system, the Jeeps were supplied to them after getting the same bullet proofing. However, the admitted facts are that as far as clearance of these Jeeps from the factory of the respondent/assessee is concerned, they were cleared without any bullet proofing. It is only after clearance that the Jeeps were sent to get the processing of bullet proofing carried out by job workers outside the factory premises. The Tribunal has, thus, rightly held that in such circumstances, the cost of bullet proofing could not be added to arrive at the transaction value. The order of the Tribunal does not warrant any interference." In case of Aura Solar Products Pvt Ltd. [2021 (44) GSTL 82 (T)] following has been held: "4.3 From t....
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....on of one of the two lamps being supplied in the package in the form in which it is sold. 4.6 From the findings as recorded by the adjudicating authority in order-in-original and the technical opinion given by the IIT Professor, the only conclusion that can be arrived is that the goods in the form and manner in which they are cleared for sale to consumers are nothing but "Solar Power Generating System" or "Solar Photovoltaic Lantern" and the exemption claimed by the appellants in respect of same under Sl. No. 237 of Notification No. 6/2002-C.E. as amended (Sl. No. 18 of List 9) as claimed by them is admissible to the whole package. The vivisection of the package to classify a part of such package and deny exemption in respect of one lamp out of the (sic) is neither justified nor having any basis in law. Hence we do not find any merits in the order of the authorities below." 4.5 Before we undertake any discussion on the subject the we would like to reproduce the tariff entries of Chapter 84 & 87: 8429 Self Propelled bulldozers, angledozers, graders, levelers, scrapers, mechanical shovels, excavators, shovel loaders, tamping machines and road rollers....
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....he basis of the attachments provided by the dealers at the instance of the customer. 4.7 It is settled position in law that HSN Explanatory Notes provide necessary assistance for determining the classification of the goods. In case of Uni Products India Pvt Ltd. [2020 (372) ELT 465 (SC)] Hon'ble Supreme Court held as follows: "25. ..... Revenue's argument is that the Explanatory Notes have persuasive value only. But the level or quality of such persuasive value is very strong, as observed in the judgments of this Court to which we have already referred. Moreover, the Commissioner himself has referred to the Explanatory Notes in the order-in-original while dealing with the respondent's stand. Thus, we see no reason as to why we should make a departure from the general trend of taking assistance of these Explanatory Notes to resolve entry related dispute. ....." In case of Gujarat Perstorp Electronics Ltd. [2005 (186) ELT 532 (SC)], Hon'ble Supreme Court held as follows: "54. The matter could be looked at from another angle also. As noted earlier, HSN has dealt with the point and as per Explanatory Note, it would fall under Chapter Heading 49.01. If it i....
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.... (b) Machines mounted on tractors or motor vehicles proper to Chapter 87. (1) Machines mounted on tractor type bases. Certain working parts of the machines of this heading may be mounted on tractors which are constructed essentially for hauling or pushing another vehicle, appliance or load but, like agricultural tractors, are fitted with simple devices for operating the working tools. Such working tools are subsidiary equipment for occasional work. In general, they are relatively light and can be mounted or changed at the working site by the user himself. In such cases, the working tools remain in this heading provided they constitute machines of this heading, or in heading 84.31 if they are parts of those machines, even if presented with the tractor (whether or not mounted thereon), while the tractor with its operating equipment is classified separately in heading 87.01. On the other hand, this heading covers self-propelled machines in which the propelling base, the operating controls, the working tools and their actuating equipment are specially designed for fitting together to form an integral mechanical unit. This applies, for example, to a propellin....
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....drag shovels, etc.) or, to increase the working range, on a cable or by means of a hydraulic jack suspended from the jib (draglines). In long range excavators (slackline draglines), the bucket is operated on a cable running between two movable structures some distance apart. (G) Multi-bucket excavators in which the digging buckets are fitted on endless chains or on rotating wheels. These machines often incorporate conveyors for discharging the excavated soil, and they are mounted on wheeled or track-laying chassis. Special models are designed for digging or cleaning out trenches, drainage channels, ditches for use in open-cast (open- pit) mines, etc. (H) Self-propelled shovel loaders. These are wheeled or crawler machines with front-mounted bucket which pick-up material through motion of the machine, transport and discharge it. Some" shovel-loaders" are able to dig into the soil. This is achieved as the bucket, when in the horizontal position, is capable of being lowered below the level of the wheels or tracks. (IJ) Loader-transporters used in mines. .... This heading also covers self-propelled shovel loaders having an articulated arm wi....
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....of a general purpose power take-off. They are not usually fitted with a seat and the steering is effected by means of two handles. Some types, however, also have a one- or two-wheeled rear carriage with a seat for the driver. Similar pedestrian controlled tractors are also used for industrial purposes. The heading includes tractors fitted with winches (e.g.. as used for hauling out bogged-down vehicles; for up-rooting and hauling trees; or for the remote haulage of agricultural implements). The heading further includes straddle-type' tractors (stilt tractors) used, for example, in vineyards and forestry plantations. The heading also excludes motor breakdown lorries equipped with cranes. lifting tackle, winches, (heading 87.05). TRACTORS FITTED WITH OTHER MACHINERY It should be noted that agricultural machines designed for fitting to tractors as interchangeable equipment (ploughs, harrows, hoes, etc.) remain classified in their respective headings even if mounted on the tractor at the time of presentation. The tractive unit in such cases is separately classified in this heading. Tractors and industrial working tools ....
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....nverter; balancing counterweight; longer tracks to increase stability of the base; special frame for rear mounted engine, etc. 4.9 Revenue do not dispute the preposition as stated in the para 4.7 above but have sought to refer to the certain portions of explanatory notes, which would suit their purpose. However in terms of HSN Explanatory Notes reproduced above we are of the view that even the heavy duty tractors for constructional engineering work will be classified under the heading 8701 only and not under the heading 8429 as determined by the revenue. In case of LMP Precision Engineering Co Ltd. [2004 (163) ELT 290 (SC)] Hon'ble Apex Court has held as follows: "15. Besides the Tariff Headings in the HSN specifically include "mobile drilling derricks" under Tariff Heading 8705.20. A derrick has been defined in the Concise Oxford Dictionary (7th Edition) at page 258 as a : "contrivance for moving or hoisting heavy weights, kind of crane with adjustable arm pivoted at foot to central post, deck, or floor; framework over oil-well or similar boring". Therefore mobile oil rigs such as those manufactured by the respondent would fall within Chapter 87 and not 84 of the HSN. ....
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....are concerned is referred to under Part VIII, namely "mobile machinery". In this Part it is said that reference should be made not only to the explanatory note to the Headings for the machines under Chapter 84.25, 84.28, 84.29 and 84.30 but also to the explanatory notes to the chapters and headings of Sec. XVII. That Section includes Chapter 87. We have already noted that the Tariff Heading 8705.20 clearly includes machines of the kind manufactured by the respondent and the Tribunal erred in holding to the contrary." 4.10 In view of the above decision of the Hon'ble Apex Court and the HSN Explanatory notes we have no doubt that the impugned goods in the form and manner as cleared are tractors classifiable under heading 8701. Now we take look at the entries of the exemption notification No 06/2006-CE dated 16.11.2006, which is reproduced below: 40 8701 All goods (except road tractors for semi trailers of engine capacity more than 1800 cc) Nil - From the perusal of the above entry it is quite evident that all goods classifiable under heading 8701 are exempt from payment of duty, except for the road tractors for semi trailers of engine capacity more than 180....