TaxTMI 
TaxTMI 
2026 (9) TMI 564
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....re marketed and sold under the brand name "WEIR /WARMAN" and used for hoisting liquids and ores and thereafter mechanically transporting them through pipe lines. Parent company was manufacturing GEHO Pumps and Appellant provide after sales service to the customer by maintaining pumps and providing spare parts as and when required by the customer. In the present case, Appellant imported various parts of GEHO slurry pumps including impeller, different types of liners, seals, bushes, pins, etc. These goods are specifically designed to handle liquids contaminated with solid form of sludges, slurry and muds particularly where abrasive or aggressive materials are involved. Further the Appellant is also manufacturing slurry pumps and exporting them along with parts outside the country and also availing duty draw back benefit. The Appellant is also earning MEIS script on export and utilize the same while paying duty on their import. During audit for the period from 2018-19, 2020-21, it is alleged that by adopting the classification as made by the Appellant at the time of import, appellant have failed to pay Basic Customs Duty (BCD) as applicable and accordingly show cause notice (SCN) date....
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....egarding classification is prima facie unsustainable. Learned Sr. Counsel further submits that imported goods are of 3(three) specific types: a) Pins and Bolts, b) Diaphragm, c) Items such as valves, seals, bush, gasket, liner, etc. Appellant has classified the said goods under Customs Tariff Heading (CTH) 8413 which covers pumps for liquid whether or not fitted with a measuring device, Chapter Heading 8474 which covers machinery used for sorting, screening, separating, washing, crushing earth, stone, ores, etc., and Chapter heading 8481 which covers taps, valves and similar appliances including pressure reducing valves. The products have been classified based on their functionality. Learned Sr. Counsel further submits that the General Rules of Interpretation ('GRI') lay down the principles that govern the classification of goods in the particular nomenclature. Rule 1 of the GRI states that classification shall be determined according to the terms of the headings and its Section or Chapter Notes. Section XVI of the Explanatory Notes to HSN categorizes classifies machinery and mechanical appliances and parts of such articles. The same is reproduced below: GENERAL ....
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....ipally used in pumps and valves. The said products do not perform any individual functions on their own. The said parts can only be used with the main equipment i.e., the GEHO Pump. It cannot function unless used in the GEHO pump and are completely incorporated into the pump at the time of manufacture. The Department has failed to adduce any evidence to indicate that the said parts can be used with any other pump, or any other equipment. Thus, the parts which are solely used with a kind of machine shall be classified with the said machine. 8. Learned Sr. Counsel also draws our attention to the certificate dated 24.10.2024 specifying that the goods are imported for use in mine sector and as parts of main equipment and used exclusively in the product supplied by the Appellant. Learned Sr. Counsel further submits that in the absence of any allegation or finding regarding dual use of the goods imported by the Appellant, there is no reason or justification to deny that it is not exclusive used in the machinery imported /manufactured by the Appellant. 9. Learned Sr. Counsel also draws our attention to the supporting documents furnished by the supplier including the BTI (Decis....
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....f 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 8479 or 8543) are to be classified with the machines of that kind or in heading 8409, 8431, 8448, 8466, 8473, 8503, 8522, 8529 or 8538 as appropriate. However, parts which are equally suitable for use principally with the goods of headings 8517 and 8525 to 8528 are to be classified in heading 8517, and parts which are suitable for use solely or principally with the goods of heading 8524 are to be classified in heading 8529; (c) all other parts are to be classified in heading 8409, 8431, 8448, 8466, 8473, 8503, 8522, 8529 or 8538 as or, failing that, in heading 8487 or 8548. 10.1 Learned Sr. Counsel further submits that the issue was considered by the Hon'ble Supreme Court in the matter of G.S. Auto International Ltd. Vs. Collector of C.Ex.,- [2003 (152) ELT 3(SC)] and held that; "24. Section XVII deals with Vehicles, Aircraft, Vessels and Associated Transport Equipment. Note 2 says that the expression "parts" in Note 2 to Section XV, of base metal (Section XV), or similar goods of plast....
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.... Appeal Nos. 5701-5705 of 2001) and the order impugned in the third appeal (Civil Appeal No. 5711 of 1999) are confirmed and accordingly, the appeals filed by the Revenue are dismissed with costs." 11. Learned Sr. Counsel further submit that the issue was also considered in the matter of Westinghouse Saxby Farmer Vs. CCE, Calcutta - 2021 (376) ELT 14 (SC); where classification of the 'relays' are considered and it is held that even though essentially relays are electrical equipment, they may also form part of the railway signal equipment and held that since the relays manufactured by the Appellant are used only as part of Railway signalling equipment would fall under Tariff Item 86 as claimed by the Appellant and while interpreting the issue, it is held that; 26. Rule 1 of these Rules makes it clear that "the titles of Sections, Chapters and Sub-Chapters are provided for ease of reference only and that for legal purposes, classification shall be determined according to the terms of the Headings and any relative Section or Chapter Notes and provided such headings or Notes do not otherwise require, according to the provisions of the rules that follow". ....
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....e 3 speaks about "goods". 30. In the case on hand, the claim of the assessee was that the relays manufactured by them were part of the railway signalling equipment. But all the Authorities were of the unanimous view that this product is referable to goods of a specific description in Chapter sub-heading 8536.90 and that, therefore, General Rule 3(a) will apply. 31. But in invoking General Rule 3(a), the Authorities have omitted to take note of 2 things. They are : (i) that as laid down by this Court in Commissioner of Central Excise v. Simplex Mills Co. Ltd. [(2005) 3 SCC 51 = 2005 (181) E.L.T. 345 (S.C.)] the General Rules of Interpretation will come into play, as mandated in Rule 1 itself, only when no clear picture emerges from the terms of the Headings and the relevant section or chapter notes; and (ii) that in any case, Rule 3 of the General Rules can be invoked only when a particular goods is classifiable under two or more Headings, either by application of Rule 2(b) or for any other reason. Once the authorities have concluded that by virtue of Note 2(f) of Section XVII, 'relays' manufactured by the appellant are not even classifiable under Chapter Headi....
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....nd Customs Tariff Heading (CTH) 7318 1500, respectively which comprises of articles of iron and steel. The classification proposed by the Respondent under Chapter 73 falls under the ambit of Section XV. As per Section XV, any parts of general use which comprises of iron, steel or any of its alloys as per Section Note 5 shall be classifiable under Chapter 73. The term "parts of general use" refers to general parts which is interchangeable and can be used in a variety of machines. In Appellant's case the GEHO piston pump is specifically designed to handle liquids contaminated with solids, form of sludge, slurry and mud, particularly where abrasive or aggressive materials are involved. A diaphragm separates the pump liquid from the clean propelling liquid. The pumped liquid has no contact with the moving parts, such as the piston, the piston rod or the cylinder liner. This enables the use of low-wear components to pump solids containing liquid or slurry at high pressure. The said parts are configured and manufactured to work only with the GEHO pump, the said diaphragm and valves, gaskets, among others, cannot be used in any other machine. The same are solely and principally used with ....
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.... of headings 83.01, 83.02, 83.08, 83.10 and frames and mirrors, of base metal, of heading 83.06. In Chapters 73 to 76 and 78 to 82 (but not in heading 73.15) references to parts of goods do not include references to parts of general use as defined above. Subject to the preceding paragraph and to Note 1 to Chapter 83, the articles of Chapter 82 or 83 are excluded from Chapters 72 to 76 and 78 to 81. 15. Learned AR relied on the judgment of Hon'ble Supreme Court in the matter of Secure Meters Ltd Vs. CC Customs 2015 (319) ELT 565 (SC) where the Hon'ble Supreme Court held that:- "19. This contains a general explanation to Chapter Note 2 and mentions that where parts or accessories identifiable as suitable for use solely or principally with the machines, appliances, etc., they are to be classified with those machines /appliances. However, what is important is that immediately thereafter it is clarified that this general rule would not apply in certain circumstances. Sub-para of the above takes things beyond the pale of any doubt by making it crystal clear that those parts and accessories which in themselves constitute 'article' falling in any particular he....