1998 (7) TMI 281 - AT - Customs

Summary

Issues Involved:
1. Classification of imported spare parts for turbines.
2. Eligibility for refund of excess customs duty.

Issue-Wise Detailed Analysis:

1. Classification of Imported Spare Parts for Turbines:

The appellants, manufacturers of paper, imported spare parts for turbines used in their factory to generate electricity. The spare parts included piston valves, sleeves spring holders, screws, and a gland carrier ring. The primary contention was the classification of these parts under the appropriate Customs Tariff headings.

- Piston Valves: The appellants argued for classification under Chapter Heading 84.03, claiming these were parts of turbines. However, the Assistant Collector and the Tribunal classified them under Heading 84.61(2), aligning with the Tribunal's ruling in the Kerala State Electricity Board case, which classified valves under Heading 84.61(2). The rate of duty for both headings being 40%, the Tribunal accepted the classification under 84.61(2) with consequential relief for the appellants.

- Sleeves Spring Holders: The department classified these under Heading 73.33/40(1) as "other articles of iron and steel." The appellants contended that these were tailor-made parts for turbines and should be classified under Heading 84.03. The Tribunal found merit in the appellants' argument, noting that these items were specifically designed for turbines and not general-purpose articles. Therefore, by applying Note 2 of Section XVI, the Tribunal upheld the classification under Heading 84.03.

- Screws: Initially classified under Heading 73.32 by the department, the appellants argued that these screws were specially manufactured for turbines. The Tribunal agreed, noting that these screws should be classified under Heading 84.03, as they were designed specifically for use in turbines.

2. Eligibility for Refund of Excess Customs Duty:

The appellants sought a refund of excess customs duty amounting to Rs. 45,519.53, arguing that the parts should be classified under Heading 84.03, which would result in a lower duty.

- Assistant Collector's Decision: The Assistant Collector rejected the refund claim, stating that the items were invoiced separately and lacked a manufacturer's catalogue to support reclassification.

- Collector's Decision: The Collector upheld the Assistant Collector's decision, noting the absence of authentic evidence to show that the goods constituted sub-assemblies.

- Tribunal's Decision: The Tribunal found that the items were specifically designed and manufactured for turbines based on the drawings provided by the appellants. It concluded that the classification under Heading 84.03 was appropriate for these items, thus accepting the appellants' claim for a refund.

Separate Judgments Delivered:

- Member (J): Agreed with the appellants' classification under Heading 84.03 and allowed the appeal.

- Vice President: Disagreed, stating that neither Heading 84.03 nor 84.61 was appropriate and suggested reclassification under Heading 84.81 for steam turbines, with a remand for verification of facts.

Majority Decision:

- Final Ruling: The matter was referred to a third member due to a difference of opinion. The third member, acknowledging the new evidence presented, refrained from giving an opinion and suggested reconsideration by the original bench. Eventually, the majority opinion led to the setting aside of the impugned orders and a remand to the Assistant Commissioner for de novo consideration, with a directive to complete the process within three months. This decision was based on the need for thorough verification of facts and reclassification accordingly.