(A.K. Sikri and Rohinton Fali Nariman, JJ.)
M/s. Gajra Gears Ltd. _______________ Appellant
v.
Commnr. Customs & Central Excise ____ Respondent
Civil Appeal No. 2586-2587 of 2005, decided on May 7, 2015
The Order of the court was delivered by
Order
The appellant is having its factory at Devas M.P. and is engaged in the manufacture of motor vehicle parts and accessories, transmission shaft and gears, interchangeable tools etc.
The process of manufacturing of motor vehicles parts involves various operations. The appellant, for this purpose, also makes use of material handling equipments like hand trolley or fork lift etc. These trolleys and fork lift are placed on iron/steel or aluminum known as “3 FAG Pallets”. These pallets are manufactured by the appellant in its own factory and captively used for the aforesaid purpose.
Two issues have arisen in respect of these pallets. First relates to its classification and second issue is as to whether the appellant, in respect of the aforesaid pallets, can claim benefit of Notification No. 67/95-CE dated 16.3.1995, as amended and prevalent on the date when the dispute arose, namely, in the year 1999.
The appellant had filed its declaration claiming classification under Chapter Heading 84.31 and had also claimed benefit of the aforesaid Notification. This was denied by the adjudicating authority and the view of the adjudicating authority has been affirmed by the CESTAT in its impugned judgment dated 1.12.2004. As per the Department the goods in question are to be classified under Chapter Heading 7326.90.
We have gone through the orders of the Commissioner as well as CESTAT and we find that the classification as done by the Department of the aforesaid goods is correct. Without burdening this order with our reasons we would like to refer to the following discussion contained in the impugned decision with which we are in agreement:
“73.26 – Other articles of iron or steel 84.31 – Parts suitable for use solely or principally with the machinery of heading Nos. 8425 to 84.30.”
It is not in dispute that the impugned pallets are made of iron or steel. It is the contention of the respondents that these pallets are in the nature of material handling equipment and are specifically designed to put up in process goods for shifting or transfer and as the pallets are suitable for use solely or principally with the machinery of heading No. 84.27 (fork-lift trucks) these are to be classified under Heading 84.31. For being classified under Heading 84.31, the goods should be first a ‘part’ and secondly suitable for use solely or principally’ with the machinery of heading Nos. 84.5 to 84.30. The impugned pallets are not parts of fork-lift trucks as they are complete without these pallets. It has been held by the Tribunal in the case of Sandvik Asia Ltd. v. C.C.E., Pune, 1997 (93) E.L.T. 475 (T) that “a part is one without which the particular machinery was not operational or could not suitably discharge the function for which it has been designed”. The Tribunal in the said decision has found that inserts were not parts of the excavator as “the excavator was operational even without these inserts and they were meant only to improve the life of the teeth provided with the scoopers”. In the present matter also the fork-lift truck is operational without pallets and as such pallets are not parts of the same. If the contention of the Respondent is accepted, motor sprit will be part of a motor car as the same cannot be used without it. Once it is held that pallets are not parts of fork-lift truck, Note 2 to Section XVI is not attracted as it only provides guidance for the classification of parts and not all goods which are used or to be used with the machineries falling in Section XVI of the Tariff. The learned SDR has rightly distinguished the decision in the case of Anup Malleable Ltd. which was dealing with the classification of Pallet frame assembly which moves on rails. We, therefore, hold that the impugned pallets, being not part of fork-lift trucks, are not classifiable under Heading 84.31 of the Tariff.”
Insofar as the second question is concerned, namely, whether benefit of exemption under Notification No. 67/95 issued under the Central Excise Act, 1944 is available in respect of these pallets or not, we find that the Tribunal has held that the Notification exempts capital goods, as defined in Rule 57Q of the Central Excise Rules, 1944, manufactured in a factory of production and at the material time as per the definition of capital goods given in Rule 57Q, goods falling under the Chapter were not covered within the said definition.
We have been taken through the aforesaid Notification dated 67/95, as amended in the year 1996 which was in vogue in the year 1999 as well. The language of the said Notification makes it clear that it exempts the following kind of goods:
(i) Capital goods as defined in rule 57Q of the Central Excise Rules, 1944 manufactured in a factory and used within the factory of production;
(ii) goods specified in column (2) of the Table hereto annexed (hereinafter referred to as ‘inputs’) manufactured in a factory and used within the factory of production in or in relation to the manufacture of that products specified in column (3) of the said Table; from the whole of the duty of excise leviable thereon which is specified in the Schedule to the Central excise Tariff act, 1985 (5 of 1986):
Provided that nothing contained in this notification, shall apply to inputs used in or in relation to the manufacture of final products (other than those cleared to a unit in a Free Trade Zone or to a hundred per cent export-Oriented Undertaking or to a unit in an Electronic Hardware Technology Park or to a unit in Software Technology Parks or supplied to the United Nations or an International Organisation for their official use or supplied to projects funded by the United Nations or an International Organisation, on which exemption of duty is available under the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 108/95-Central Excise, dated the 28th August, 1995, which are exempt from the whole of duty of excise leviable thereon or are chargeable to ‘Nil’ rate of duty.
Explanation.-For the purposes of this notification ‘inputs’ does not include-
(i) packaging materials in respect of which any exemption to the extent of the duty of excise payable on the value of the packaging materials is being availed of for packaging any final products;
(ii) packaging materials or containers, the cost of which is not included in the assessable value of the final products under section 4 of the [Central excise Act, 1944] (1 of 1944).
S. No. | Description of inputs | Description of final products |
1. | (2) | (3) |
1. | All goods falling within the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), other than the following, namely,-
(i) goods classifiable under any heading of Chapter 24 of the Schedule to the said Act;
(ii) goods classifiable under heading Nos. 36.05 or 37.06 of the Schedule to the said Act;
(iii) goods classifiable under sub-heading Nos. 2710.11, 2710.12, 2710.13 or 2710.19 (except Natural gasoline liquid) of the Schedule to the said Act;
(iv) high speed diesel oil classifiable under heading No. 27.10 of the Schedule to the said Act. | All goods falling within the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), other than the following, namely,-
(i) goods classifiable under any heading of Chapter 24 of the Schedule to the said Act;
(ii) goods classifiable under heading No. 36.05 or 37.06 of the Schedule to the said Act;
(iii) fabrics of cotton or man made fibres falling within Chapters 52, Chapter 54 or Chapter 55 of the Schedule to the said Act;
(iv) fabrics of cotton or man made fibres falling within heading No. 58.01, 58.02, 58.06 (other than goods falling within sub-heading No. 5806.20), 60.01 or 60.02 (other than goods falling within sub-heading No. 6002.10) of the Schedule to the Act,. |
As per para (i) above, capital goods which are defined in Rule 57Q of the Rules, manufactured in a factory and used within the factory of production are exempted. We perused the definition of “capital goods” appearing in Rule 57Q which was in operation at the material time and find that the goods in question are not covered by the said definition. However, as per para (ii) those goods which are specified in Column (ii) of the Table which is appended to the said Notification and manufactured in a factory and used within the factory of production in or in relation to manufacture of final products specified in column (3) of the said table also stands exempted.
Column 2 of the table gives the description of the inputs and column 3 of the table provides the description of the final products. Under the description of inputs, all goods falling within the Schedule to the Central Excise Tariff Act, 1985 are covered except certain goods which are categorically spelt out therein. The goods of the appellant herein, namely, pallets are not covered by the excepted categories and therefore would fall in the description of the said goods. When we look into the description of the final products, as given in column 3, we find that it again mentions the goods falling within the schedule to the Central Excise Tariff Act except certain specified items. Thus, the question that arises is as to whether the goods in question, namely, pallets manufactured in the factory are used within the factory of production in or in relation to the manufacture of the final products.
It is an admitted position, as explained by the appellant itself, that these pallets which are manufactured/assembled in the factory of the appellant are in the nature of material handling equipment, to keep and carry work in progress goods from one machine to the other. Thus, the use of the pallets is for carrying out the material from one machine to the other. It cannot, therefore, be said that these goods are used in relation to the manufacture in or in relation to the manufacture of the final products. We are, therefore, of the opinion that column (2) of Notification shall also not be attracted.
For our reasons, as mentioned above, we affirm the conclusion arrived at by the authorities below.
The appeals are accordingly dismissed.
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