CCE Vs. GREAVES LTD.

JUDGEMENT

(1.) THIS is an appeal filed by Revenue against Order -in -Appeal No. 126/2000 (M -III) dated 21.9.2000 passed by the Commissioner (Appeals), Chennai. The Commissioner (Appeals) by his order upheld the assessee's contention of classification of Model L 34/K 34 sprayer engines manufactured by them as parts under Chapter Sub -Heading 8424.91 as parts of power sprayer.

(2.) BRIEF facts of the case is that the respondent M/s. Greaves Ltd. are manufacturers of two models of IC Engines, namely L 34/K 34 and are used for power sprayer. The power sprayers are further used in agriculture and horticulture. Till 15.6.1999 the assessee classified the above IC engines under Chapter Sub Heading 8407.00 and were paying appropriate duty. On 15.6.1999, the assessee had filed a classification list under Rule 173B of the Central Excise Rules 1944, by classifying the above two models of IC Engines under CSH 8424.91 which attracted nil rate of duty. They filed a letter dated 21.6.1999 stating that they would be paying duty on the above mentioned IC engines "Under Protest". The department was of the view that since the IC Engines are classifiable under CSH 8407.00 and not as parts of mechanical appliances of a kind used in agriculture or horticulture under CSH 8424.91, a show cause notice dated 28.8.1999 was issued proposing re -classification of the above mentioned IC engines under CSH 8407.00 and also proposing to vacate the protest besides imposition of penalty. The lower authority after considering their reply and after hearing them, passed a detailed order (Order -in -Original No. 55 -56/99 dt. 15.10.1999) classifying the impugned items under CSH 8407.00 and also vacating the protest lodged by the assessees vide their letter dated 21.6.1999. In the meanwhile, they have also filed a claim for refund on 24.6.1999 amounting to Rs. 53,03,639/ - towards the duty paid on the IC engines for the period 31. 12.1998 to 14.3.1999. During the adjudication proceedings, the Assistant Commissioner has considered in detail all the submissions made by the assessee and recorded his detailed findings. He has recorded in his findings that according to General Notes (B) of Section XVIof HSN, the chapter headings 8402 to 8424 cover the other machines and apparatus which are classified mainly by reference to their function regardless of the field or industry in which they are used. The HSN further explains (para 8 of chapter 84.07) that the engines of this heading are suitable for very many uses e.g. in agricultural machines, pumps, compressors, etc. The contention of the assessee is that certain components like cowl, fan, governing mechanism and fuel tank are not provided to the product in question whereas they are normally provided to the conventional IC Engines. Absence of such components will not take away the L 34/K 34 model IC engines from CH 8407 to 8424.91. According to General Note IV of Section XVI of HSN an incomplete machine also is classified in the same heading as that of a complete machine and not as parts of the machine. He has reproduced the above Note in Section XVI which reads as under:

(3.) LD . Sr. Advocate appearing for the respondent argued on the same lines as contained in the grounds of appeal before the lower appellant authority. He emphasized that the internal combustion engines are used only for power sprayers for agricultural/horticultural purposes. He stressed that the heading 8424.10 in CET deals with mechanical appliances of a kind used in agriculture or horticulture and that heading 8434.91 covers parts of goods covered by sub -heading 8424.10 and that therefore the engines supplied for power sprayer used for agricultural/horticultural purposes, are parts of sprayer and hence they are rightly classifiable under CSH 8424.91 only. He also pointed out that specific entry would prevail over the generic entry and therefore there is no warrant to refer to HSN. He also pointed out that Clause (D) of Chapter 84.24 of HSN, relied upon by the original authority, only uses the word 'includes' which meant that it did not exclude IC Engines. He stated that even if they were not included they fall within the definition of motor. He contended that the concept is an engine which provided power for spraying and hence would be part of the spraying machine. He further pointed out that Chapter heading 8424.10 in the CET is different from 8424.10 in the HSN. The Central Excise Tariff heading deals with mechanical appliances of a kind in agriculture and horticulture whereas in the HSN, it refers to fire extinguishers whether or not charged. The spray guns and similar appliances are dealt with in 84.20. Ld. Sr. Advocate further drew our attention to the expert opinion obtained by them from Dr. A. Ramesh, Assistant Professor, Internal Combustion Engines Laboratory, Department of Mechanical Engineering, IIT, Chennai who vide his letter dated 7.10.1999 opined that present configuration of the engines in question tested by them (namely L 34/K 34) without its own cooling blower and fuel tank is only suitable for the power sprayer application and that this engine, as it is, cannot be used for other applications without further modification. Ld. Counsels also submitted that their competitors M/s. HMP Engineers, Surat have classified an identical product under Chapter Sub Heading 8424.91 and to prove their case before the lower authority, they produced a copy of an invoice No. 000028 dated 18.4.1999 of M/s. HMP Engineers Ltd. wherein they have clearly mentioned the Chapter sub -heading 8424.91 for similar items. The description under the heading "variety of goods" in the invoice read as 'Agricultural sprayer engines Sub heading No. 8424.91'. It was also mentioned therein as "Agricultural Sprayer Engine: Nil Tariff Rate". They submitted that without verifying the above submission, the lower authority has passed his order whereas the Commissioner (Appeals) has considered all their pleas including the case laws relied by them including the judgment rendered by the Larger Bench in the case of CC v. Modi Zerox Ltd. reported in and the judgment rendered by the Hon'ble Supreme Court in the case of CCE Bombay v. KWH Heliplastics Ltd. reported in and came to the correct conclusion that the items in question is classifiable under CSH 8424.91. Ld. Sr. counsel submitted that the Larger Bench of the Tribunal in the above mentioned case in para 5 have inter alia held that although HSN Explanatory Notes, admittedly, have a persuasive value in determining classification, yet where such classification can be determined with reference to the Rules of Interpretation to the Tariff, Chapter Note and Tariff heading in the Customs Tariff Act, 1975 itself, there will be no necessity to reply upon the HSN Notes. The ratio of this decision is also applicable to the Central Excise Tariff. Similarly, he pointed out that the Hon'ble Supreme Court also held in the above noted case that the classification of goods under particular heading depends upon description, purpose and use of the goods. He also submitted that Section Note 2(b) of Section XVI talks about the parts meant for use solely or principally with a particular kind of machine are liable to be classified under CSH 94.24, has to be classified under the same heading. Their product L 34/K 34 engines are solely or principally used in agricultural sprayers and thus they constitute part of the mechanical appliances spraying liquids or powders, and this has been further amplified under same heading "8424.10 Mechanical appliances of a kind used in agriculture or horticulture" "Parts - 8424.91 - of goods covered by sub -heading No. 8424.10". Ld. Counsels therefore pleaded that the order passed by the Commissioner (Appeals) may be upheld by rejecting the Revenue appeal.