Full Judgment Text
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CASE NO.:
Appeal (civil) 553-554 of 2001
PETITIONER:
M/s. North West Switchgear Limited
RESPONDENT:
Commnr. of Central Excise, New Delhi
DATE OF JUDGMENT: 14/02/2006
BENCH:
ASHOK BHAN & ARUN KUMAR
JUDGMENT:
J U D G M E N T
With
CIVIL APPEAL NO. 4382 OF 2001
BHAN, J.
This order shall dispose of the two sets of
Civil Appeals. The Civil Appeal Nos. 553-554 of
2001 filed by M/s. North West Switchgear Limited
and the Civil Appeal No. 4382 of 2001 filed by M/s.
Kesharbai Electronics Pvt. Ltd.; (for short "the
appellants"). As the point involved in both the
sets of appeal is similar, they are being disposed
of by a common order.
The Civil Appeal Nos. 553 - 554 of 2001 have
been filed by M/s. North West Switchgear Limited
under Section 35L of the Central Excise Act, 1944
(for short "the Act") against final order No.120-
121/2000-B passed by the Customs Excise & Gold
(Control) Appellate Tribunal, New Delhi in Appeal
No.E/506/95-B and E/1554/96-B dated 20.1.2000
whereby the Tribunal upheld the orders of
authorities below to drop the demands of
Rs.2,02,506.88 & Rs.93,514.38 raised on the
appellants by the respondent herein, but, held that
the ’fan regulators’ manufactured by the
appellants were classifiable under sub-heading
8414.99 as opposed to 8414.20 as an accessory of
the fans.
The Civil Appeal No.4382 of 2001 filed by M/s.
Kesharbai Electronics Pvt. Ltd., has also been
filed under Section 35L of the Act against the
final order passed by the Tribunal at Mumbai dated
16.11.2000 in Appeal No.E/1002/R/95 Mumbai, whereby
the Tribunal rejected the appeal filed by the
appellants and confirmed the classification of the
goods under sub-heading 8414.99 as classified by
the Assistant Collector of Central Excise &
Customs, Ahmednagar and confirmed by the respondent
in Appeal bearing No.A/418/1995 dated 29.9.1995.
The facts of Civil Appeal No.553-554 of 2001
are:
The appellants are engaged in the manufacture
of switches, fan regulators and distribution board
etc. falling under Chapter sub-heading No.8536.90,
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8414.20 & 8537.00 of the Central Excise Tariff Act,
1985 (hereinafter referred to as "the Tariff Act").
The appellants classified ’fan regulators’ under
sub-heading No.8414.20 of Tariff Act, which covers
electric fans, on the strength that there is no
other use of these items and these are used
principally and solely with the electric fans. The
classification list filed by the appellants for
clearing the same under sub-heading 8414.20 was
approved by the Assistant Commissioner.
The appellants were served with demand-cum-
show cause notices dated 3.12.1993 and 28.6.1994
for the period March 1993 to February 1994 to show
cause to the Deputy Commissioner of Central Excise,
Faridabad as to why the differential duty amounting
to Rs.2,02,506.88 and Rs.93,514.38 should not be
demanded and recovered under Rule 9(2) read with
Section 11A of the Act on the contention that ’fan
regulators’ are nothing but ’accessories’ of
electric fans and the same are classifiable under
sub-heading 8414.99 of the Tariff Act which
attracts duty @ 15% ad valorem instead of 10% ad
valorem already paid by the appellants resulting in
short payment of duty as aforementioned. The
appellants submitted their reply to the show-cause-
notices contending therein that they had paid the
duty correctly and there was no short levy of duty
as alleged by the show-cause-notice; that the fan
regulators are correctly classifiable along with
the fans according to the Section Notes/Chapter
Notes appended to Chapter 84 of the Tariff Act,
1985. It was also submitted that the appellants
are covered by Board Circular No.7/87 dated
24.06.1987 which was in force till the issuance of
the CBEC Circular No.192/26/96-CX dated 27.06.1996.
Authority in original in show cause notice
dated 3.12.1993 held that the fan regulators were
classifiable under the sub-heading 8414.20 as had
been contended by the assessee. It was also held
that the Board Circular No.7/87 dated 24.6.1987 was
applicable to the facts of the case. The
Commissioner of Central Excise reviewed the order
passed by the authority in original in exercise of
its powers under Section 35E(2) and directed that
an appeal be preferred accordingly and appeal was
filed. The appellants filed their memorandum of
cross objection. The learned Commissioner upheld
the order passed by the authority in original
holding that ’fan regulators’ were/are classifiable
under sub-heading 8414.20 of the Tariff Act and not
under 8414.99 and rejected the appeal. Being
aggrieved with the order passed by the Commissioner
of Appeals, the revenue preferred appeal No.
E/Appeal No. 506/95-B before the Tribunal.
Against the show-cause-notice dated 28.6.1994
the authority in original stuck with its view in
the earlier order and held that the ’fan
regulators’ were classifiable under the sub-heading
8414.20 and not under 8414.99 and dropped the
demand. Commissioner (A) did not agree with the
order in original and taking a contrary view held
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that the goods were classifiable under sub-heading
8414.99 and not under 8414.20. The appellants
preferred appeal No. E/Appeal No. 1554/96-B against
the order of the Commissioner of Appeals before the
Tribunal. These two sets of appeals were clubbed
together and disposed of by the Tribunal by a
common order dated 20.1.2000.
In the Civil Appeal No.4382 of 2001 the
authority in original held that the goods were
classifiable under sub-heading 8414.99 and
confirmed the demand of Rs.9,87,086.86 and imposed
a penalty of Rs.75,000/- under Rule 173Q of the
Central Excise Rules, 1944 and directed the
appellants to pay these amounts immediately. In
the appeal, the Commissioner of Appeals maintained
the order in original except that the amount of
penalty was reduced to Rs.10,000/-. Being
aggrieved, the assessee filed an appeal before the
Tribunal and the Tribunal vide its order dated
25.10.2000 maintained the order passed by the
Commissioner of Appeals.
The common issue involved in both the sets of
appeals is, whether the ’fan regulators’ are
classifiable under the sub-heading 8414.20 along
with fans or under the sub-heading 8414.99 as
’parts and accessories’.
Learned counsel appearing for the appellants
contended that during the relevant period Central
Board of Excise and Customs, Circular No.7/87 dated
24.6.1987 was in operation and therefore the fan
regulators would be classifiable under the sub-
heading 8414.20 along with fans. That the
department cannot argue against the Board circular
which is binding on them. Accordingly it was
contended that the department cannot now claim that
the fan regulators were classifiable under sub-
heading 8414.99 at the relevant time. Relying upon
the sub-note (b) of Note 2 to Section XVI, it was
contended that since the ’fan regulators’ were
suitable for use solely or principally with the
electric fan the same are classifiable with the
entry relating to electric fans i.e. 8414.20. It
is also submitted by the learned counsel for the
appellants that the regulators are classifiable
under the sub-heading 8414.80 but they have not
given any reasons for this submission.
Learned Counsel appearing for the respondents
has countered both the submissions.
We do not find any force in the submission made
by the \counsel for the appellants.
To understand the issue, heading 8414 is
reproduced as under:-
8414
AIR OR VACUUM PUMPS, AIR OR OTHER
GAS COMPRESSORS AND FANS;
VENTILATING OR RECYCLING HOODS
INCORPORATING A FAN, WHETHER OR NOT
FITTED WITH FILTERS.
8414.10 Gas compressor of a kind
used in refrigerating and air
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conditioning appliances and
machinery.
40%
8414.20 Electric fans
15%
8414.80 Others
40%
Parts and Accessories
8414.91 Of goods covered by sub-
heading No.8414.10
40%
8414.99 Other
15%
Chapter heading 8414 applies to air or vacuum
pumps, air or other gas compressors and fans
ventilating or recycling hoods. Sub-heading
8414.10 applies to ’gas compressor’; sub-heading
8414.20 applies to ’electric fans’ and 8414.80 is a
residuary sub-heading being "Others" which will
apply to all other goods covered by chapter
heading, other than gas compressors and electric
fans. The ’Fan regulators’ will not be
classifiable under the sub-heading 8414.80.
There are two sub-headings under ’parts and
accessories’. Sub-heading 8414.91, is in relation
to the goods covered by the sub-heading 8414.10
whereas the sub-heading 8414.99 is a residuary
class which applies to the goods covered by other
sub-heading of chapter heading 8414.
The issue therefore is, whether the ’fan
regulators’ are classifiable under 8414.20 along
with fans or under sub-heading 8414.99 as "parts &
accessories". The appellants have placed reliance
on Board’s Circular No.7/87 dated 24.6.1997 in
which it has been clarified that the resistance
type and choke type fan regulators are classifiable
under sub-heading 8414.20 along with the fans. The
Tribunal has held that the ’fan regulators’ would
be classifiable under sub-heading 8414.20, if
cleared along with fans but if they are cleared
only as regulators (not along with fan), they would
be classifiable under sub-heading 8414.99.
According to Note 2 of Section XVI of the
Schedule to the Central Excise Tariff Act, parts
which are goods included in any of the headings of
Chapter 84 or Chapter 85 are in all cases to be
classified in their respective headings. There is
a separate entry for ’parts & accessories’ of goods
falling under chapter heading 8414 and as such the
regulators, if cleared "not along with fans", will
merit classification under the sub-heading 8414.99
being ’parts/accessories’ of the fan. This
position has been clarified by the CBEC Circular
No.192/26/96-CX dated 27.3.1996, which reads as
under:-
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"I am directed to invite your
kind attention to Circular
No.7/87-CX, dated 24.6.1987
wherein it was clarified that the
resistance type and choke type
fan regulators, are classifiable
under sub-heading 8414.20 of the
Schedule to the Central Excise
Tariff Act, 1985, along with
fans. Doubts have been expressed
regarding the classification when
the fan regulators are
manufactured and cleared
separately, not in combination
with fans. It is seen that
though the electric fans can
function without the regulators,
the regulators are needed as they
limit and control the flow of the
electricity and consequently
control the speed of electric
fans.
The matter has been examined, it
is clarified that when 2
regulators are cleared along with
fans as a whole, they are
classifiable as electric fans
under sub-heading 8414.20. When
fan regulators are cleared
separately not in combination
with fans, they are classifiable
as ’Parts and accessories of
electric fan’ under sub-heading
8414.99 of the Schedule to the
Central Excise Tariff Act, 1985."
This view also finds support from the General
Notes to Section XVI of HSN under heading
"Accessory Apparatus". The explanatory note
provides that accessory instrument e.g. regulators,
presented with machine or apparatus to which they
normally belongs are classified with that machine
or apparatus, if they are designed to measure
check, control or regulate one specific machine or
apparatus. Therefore, if fan regulators are
manufactured by a unit like the appellants and
cleared as such and not along with fan, it will be
classifiable under the sub-heading 8414.99. If the
contention of the appellants is accepted that the
regulators have to be classified under ’electric
fans’, whether sold with the fan or separately,
then no ’part or accessory’ will be covered by
heading 8414.99. In the Board’s circular No.7/87,
the Board clarified that ’fan regulators’ will not
be classified under Chapter 85 as Electrical
Resistors and their classification under sub-
heading 8414.20 along with fan would be
appropriate. The issue before the Board was not
that, when regulators were cleared as such without
fans, would be classifiable under sub-heading
8414.99 or that they would be classifiable under
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8414.20. Accordingly, the Board clarified in
Circular No.192/26/96 dated 27.3.96 that when the
regulators are cleared along with the fans as a
whole, they are classifiable under sub-heading
8414.20 but when ’fan regulators’ are cleared
separately not in combination with the fans they
are classifiable as "parts & accessories of
electrical fans" under sub-heading 8414.99 of the
Schedule to the Tariff Act. There is a separate
sub-heading of "parts and accessories" in heading
8414. The Sub-heading 8414.91 covers parts and
accessories "of goods covered by the sub-heading
8414.10" and the sub-heading 8414.99 covers parts
and accessories of "other" goods under the heading
8414 and the sub-headings 8414.20 and 8414.80.
’Fan regulators’ being accessories of ’electric
fan’ would thus be covered under the sub-heading
8414.99.
Accordingly, we do not find any merit in these
appeals and hold that the ’fan regulators’
manufactured by the assessee, which are sold as
such "without the electric fan" would be
classifiable under sub-heading 8414.99 as
accessories of fans.
The Tribunal, in Civil Appeal No.553-554 of
2001 filed by M/s. North West Switchgear Limited
, has held that differential duty cannot be
demanded from the appellants against which the
revenue has not filed any appeal.
For the reasons stated above, we do not find
any merits in Civil Appeal Nos. 553-554 of 2001 and
dismiss the same.
The order passed by the Tribunal in Civil
Appeal No.4382 of 2001 in so far as the
classification is concerned is confirmed but
keeping in view the facts and circumstances, the
penalty of Rs.10,000/- imposed on the appellants is
set aside. Costs shall follow the event.