Full Judgment Text
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CASE NO.:
Appeal (civil) 4391-4392 of 2000
PETITIONER:
M/s Motor Industries Co. Ltd.
RESPONDENT:
Commissioner of Central Excise,Aurangabad.
DATE OF JUDGMENT: 20/01/2006
BENCH:
ASHOK BHAN & S.H. KAPADIA
JUDGMENT:
J U D G M E N T
KAPADIA, J.
The short question which arises for
determination in these civil appeals filed by the
assessee under section 35-L(b) of the Central Excise
Act, 1944 (hereinafter referred to as "the Act") is \026
whether assembly of nozzles and nozzle holders
(intermediate products) brings into existence a new
product called an "injector" and if so, whether the
department was right in classifying the said injector
under sub-heading 8409.00.
Appellant is engaged in the manufacture of
nozzles, nozzles holder and injectors. Vide show-
cause notice dated 3.9.1986, the department called
upon the appellant to show cause as to why duty @
20% ad valorem on the value of nozzles and nozzle
holders should not be recovered in respect of
injectors on the ground that the appellant had
produced nozzles and nozzle holders falling under
tariff item 8409.00 which were captively consumed
for the manufacture of injectors falling under
8409.00 for which no declaration was made by the
appellant in their classification list. At this stage,
we may point out that the matter has a chequered
history, it has been remanded several times and for
the reasons mentioned hereinafter, it is not
necessary to set out the entire history of the prior
litigation. Suffice it to state that in reply to the
show-cause notices, the appellant submitted that
fitting of nozzles into nozzle holders did not amount
to manufacture; that, even after such fitment, the
end-result remained "nozzles and nozzle holders";
that, this entire controversy stood settled by the
earlier judgment of Customs, Excise & Gold
(Control) Appellant Tribunal (for short "the
tribunal") in the case between the same parties,
namely, Collector of Central Excise v. Motor
Industries Co. Limited reported in 1989 (43) ELT
290; that, nozzle and nozzle holder had no
independent application as such; that, they have to
be used in the IC engine in an assembled state to
create combustion in the combustion chamber of IC
engines. According to the appellant, an injector
was a fitment of nozzles into nozzle holders and
that on coupling, no new product came into
existence. In reply, the appellant further stated
that non-vehicular injectors were exempted from
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payment of duty. In this connection, it was
submitted that non-vehicular injectors constituted
parts of diesel engine used by agriculturists and
farmers and, therefore, the Government decided to
grant exemption to such non-vehicular injectors. At
this stage, it may be noted that nozzles and nozzle
holders stood excluded from exemption notification
no.217/85 dated 8.10.1985. However, according to
the appellant, by Amendment Notification No.79/86
dated 10.2.1986, non-vehicular injectors were also
given the benefit of exemption, which has not been
appreciated by the department (See Written
Submissions filed by the assessee before the A.C.,
on running page no.145 of the paperbook of original
record]. Similarly, according to the appellant,
exemption was also given by the Government to
vehicular nozzles and nozzle holders used in a
factory of production vide notification no.75/86
dated 10.8.1986 (See Written Submissions filed by
the assessee before the A.C., on running page
no.142 of the paperbook of original record].
By the impugned judgment, the tribunal held
that the assessee was not entitled to exemption
under the above notification no.217/85 as "nozzles
and nozzle holders" were specifically excluded from
the purview of the said notification; that, the issue
in the case of Motor Industries Co. Limited
(supra) was only whether nozzles fitted with the
nozzle holders (injectors) were assessable under
item 68 of the old Tariff though nozzles and nozzle
holders were duty paid under item 34A, hence that
judgment had no application to the controversy in
hand.
This matter needs to be remanded to the
adjudicating authority for the following reasons.
Firstly, in this case, the case of the department in
the show-cause notice was that nozzles and nozzle
holders were intermediate products used in the
coupling or assembly of injectors (final product);
and that, on completion of the process of coupling a
new independent product emerged, namely, an
injector. How is an injector constructed and what
are its components has not been decided by any of
the authorities below including the tribunal.
Secondly, the decision of the tribunal in Motor
Industries Co. Limited (supra) has no application.
In that case, the question as to what is an injector
was not in issue. It was matter of classification
under the old Tariff under which item 34A dealt
with "parts of motor vehicle" and which parts were
specifically described to include "nozzle and nozzle
holders" whereas the residuary item was item 68
and the question was - whether fitment of nozzle
into holder would attract item 68. In the said case,
it was held that even on fitment, the product would
remain "nozzle and nozzle holder" under item 34A.
In the present case, it has been alleged by the
department that nozzles and nozzle holders were
components of an injector; that, on coupling, which
process constituted manufacture, an independent
product, namely, an injector emerged. This point
was not there in the earlier case, hence, Motor
Industries Co. Limited (supra) has no application
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to the present case. Further, the present case
arises under the 1985 Tariff Act. Chapter 84 falls
in section XVI. Section note 2, with the headings
84.07, 84.08 and 84.09 are required to be
considered. These provisions were not there in the
case of Motor Industries Co. Limited (supra).
Thirdly, in this case, the burden was on the
department to lead evidence on manufacture and
marketability. It is for the department to prove that
nozzles and nozzle holders were intermediate
products which on coupling became an injector,
which was a saleable commodity in the market.
Earlier this exercise was not done because the
department had erred in holding that the issue was
covered by Motor Industries Co. Limited (supra).
Lastly, we may point out that the appellant has
claimed exemption under the above notification.
The burden is on them to prove that they were
entitled to exemption. In this connection, we may
point out that the question of exemption will arise
only after the first question on coupling or assembly
is decided. Here also, we may point out that
exemption notifications as amended after 1985
Tariff Act has to be seen. In this case, the question
of manufacture, classification and exemption are
inter-connected. The application of the above
assembly to vehicular and non-vehicular user have
to be examined in the light of the 1985 Tariff Act.
Assistance of HSN in that regard may also be taken.
For the above reasons, we set aside the
impugned judgment of the tribunal dated 20.4.2000
and remit the matter to the Adjudicating Authority
for de novo adjudication of the show-cause notices.
Accordingly, the above civil appeals filed by the
assessee stand allowed, with no order as to costs.