1984 (4) TMI 301 - AT - Customs

Summary

Issues Involved:
1. Classification of flat knitting machine Model DX 2000 under the Customs Tariff Act, 1975.
2. Appropriate heading for parts of the flat knitting machine Model DX 2000.
3. Validity of the refund claim based on re-classification of the machine and its parts.
4. Determination of whether the machine is domestic or industrial.
5. Consideration of evidence and arguments presented by both parties.
6. Relevance and weight of certificates and affidavits submitted.
7. Impact of use in cottage industry on classification.
8. Interpretation of Customs Tariff Act and related rules.

Detailed Analysis:

1. Classification of flat knitting machine Model DX 2000 under the Customs Tariff Act, 1975:

The primary issue revolves around whether the flat knitting machine Model DX 2000 is classifiable under Heading 84.37(1) as an industrial machine or under Heading 84.37(2) as a domestic machine. The respondents claimed it should be classified under Heading 84.37(1), while the appellant (Department) argued for Heading 84.37(2).

2. Appropriate heading for parts of the flat knitting machine Model DX 2000:

The parts of the knitting machine were initially assessed under Heading 84.38(2). The respondents sought re-classification under Heading 84.38(1), claiming the parts were for an industrial machine. The Assistant Collector of Customs rejected this claim, but the Collector of Customs (Appeals) later accepted it, leading to the current dispute.

3. Validity of the refund claim based on re-classification of the machine and its parts:

The respondents applied for a refund based on the re-classification of the parts under Heading 84.38(1). The Assistant Collector of Customs denied the refund, but the Collector of Customs (Appeals) allowed it, prompting the Department to issue a Show Cause Notice and subsequently appeal.

4. Determination of whether the machine is domestic or industrial:

The core of the dispute is whether the machine should be considered domestic or industrial. The Department argued that the machine was domestic based on several criteria, including construction, ease of operation, method of operation, rate of production, cost, weight, advertisement nomenclature, and actual sales to homeowners. The respondents countered that the machine was used in cottage industries and had industrial applications.

5. Consideration of evidence and arguments presented by both parties:

The Department presented various documents, including advertisements and catalogues, to support their claim. The respondents submitted affidavits, purchase orders, and certificates from various organizations to argue that the machine was used in industrial settings. Both sides referenced previous legal decisions to bolster their arguments.

6. Relevance and weight of certificates and affidavits submitted:

The Tribunal examined the certificates and affidavits provided by the respondents, including those from the Textile Commissioner and various organizations. The Tribunal found that the certificates did not conclusively prove the machine was industrial and noted that the certificates often indicated the machine was used domestically to supplement family income.

7. Impact of use in cottage industry on classification:

The Tribunal considered whether the use of the machine in cottage industries affected its classification. It concluded that even if the machine was used in cottage industries, it did not necessarily mean it was industrial. The Tribunal emphasized that the machine's domestic nature should be judged based on its use in homes, even if it contributed to family income.

8. Interpretation of Customs Tariff Act and related rules:

The Tribunal referenced the Customs Tariff Act, 1975, and the C.C.C.N. notes, which indicated that small domestic knitting machines were covered under Heading 84.37. The Tribunal also considered previous decisions, such as the Dunlop India Ltd. case, which emphasized the importance of trade acceptation and popular meaning in interpreting tax statutes.

Conclusion:

The Tribunal set aside the order of the Collector of Customs (Appeals) and restored the order of the Assistant Collector of Customs (Refund), Bombay. The appeals were allowed, concluding that the flat knitting machine Model DX 2000 was domestic and should be classified under Heading 84.37(2), with its parts under Heading 84.38(2).