TMI Blog2007 (9) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... lve" under separate tariff sub-heading 8481.80 and "filter" under separate tariff sub-heading 8421.00. Apart from the above three items, assessee supplied to its buyers bought-out items, namely, V. belt, motor, pulley, belt guard, gauge, gauge board, angle valve, M.S. male flange, C.A.F. Gasket, set of tools, bolts and nuts, etc. 4.On 4.9.98, show cause notice was given to M/s. FIL in which it was alleged by the Department that the assessee had evaded payment of duty on the full value of the compressors, manufactured and cleared by them, by separately invoicing clearance of bought-out items and manufactured items. At this stage, it may be noticed that the factory of the assessee is in Faridabad where the items, manufactured and cleared, consisted of compressor, fly wheel, safety valve and filter ("manufactured items", for short) whereas from their trading office in New Delhi, the bought-out items consisted of V. belt, pulley, belt guard, angle valves and other items referred to in para 3 of the show cause notice ("bought-out items", for short). According to the show cause notice, assessee had knowingly cleared manufactured items and bought-out items separately; that the value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompressors of different sizes was clear. Therefore, in the aforesaid circumstances, the show cause notice stood confirmed. 7.Aggrieved by the decision dated 31.12.99 given by the Commissioner, the assessee carried the matter in appeal to CEGAT which took the view that the compressor, cleared by the assessee, stood cleared as a "stand-alone" item and that it was not removed in an unassembled or disassembled condition and, therefore, there was no question of applying General Interpretative Rule 2(a), Part-V Section XVI of HSN; that, similarly Part-III of Section XVI of Interpretative Notes of HSN was not applicable as the compressor was cleared as a "stand-alone" item. According to the Tribunal, since parts of the compressor, namely, fly wheel, safety valve and filter as also bought-out items were classifiable under separate headings, namely, 84.83, 8481 and 84.21, the Department had erred in classifying them as "compressors". According to CEGAT, the said items were classifiable under specific headings by virtue of Note 2(a) to Section XVI of the Central Excise Tariff Act, 1985 and, therefore, the said three items could not have been classified as "compressor". However, on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.22, 85.29 or 85.38 as appropriate or, failing that, in heading No. 84.85 or 85.48." 10.We also quote hereinbelow Section Note 2 to Section XVI of the HSN which reads as below: "2. Subject to Note 1 to this Section, Note 1 to Chapter 84 and Note 1 to Chapter 85, parts of machines (not being parts of the articles of heading 84.84, 85.44, 85.45, 85.46 or 85.47) are to be classified according to the following rules: (a) Parts which are goods included in any of the headings of Chapter 84 or 85 (other than headings 84.09, 84.31, 84.48, 84.66, 84.73, 84.85, 85.03, 85.22, 85.29, 85.38 and 85.48) are in all cases to be classified in their respective headings; (b) Other parts, if suitable for use solely or principally with a particular kind of machine, or with a number of machines of the same heading (including a machine of heading 84.79 or 85.43) are to be classified with the machines of that kind or in heading 84.09, 84.31, 84.48, 84.66, 84.73, 85.03, 85.22, 85.29 or 85.38 as appropriate. However, parts which are equally suitable for use principally with the goods of headings 85.17 and 85.25 to 85.28 are to be classified in heading 85.17; (c) All other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imilar joints of heading 84.84." 12.We quote hereinbelow Part V Section XVI of HSN which reads as below:"(V) UNASSEMBLED MACHINES(See General Interpretative Rule 2 (a)) For convenience of transport many machines and apparatus are transported in an unassembled state. Although in effect the goods are then a collection of parts, they are classified as being the machine in question and not in any separate heading for part. The same applies to an incomplete machine having the features of the complete machine (see part IV), presented unassembled (see also in this connection the General Explanatory Notes to Chapters 84 and 85). However, unassembled components in excess of the number required for a complete machine or for an incomplete machine having the characteristics of a complete machine, are classified in their own appropriate heading." 13.We quote hereinbelow Part III Section XVI of the Interpretative Notes of HSN which reads as below: "(III) ACCESSORY APARATUS (See General interpretative Rules 2(a) and 3(b) and Section Notes 3 and 4) Accessory instruments and apparatus (e.g., manometers, thermometers, level gauges or other measuring or checking instruments, output cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the above items are essential parts of the compressors as discussed in paragraphs 42 to 48 supra. Thus the point raised by the notice becomes redundant."(emphasis supplied by us) 15.As rightly observed by the Tribunal, the General Interpretative Rule 2(a) has no application to the present case for two reasons. Firstly, the compressor manufactured by the assessee was removed as a "stand-alone" item. It was not cleared in an unassembled or disassembled condition. Secondly, section and chapter notes in Central Excise Tariff Act, 1985 and the Interpretative Rules do not provide guidelines for valuation of excisable goods as they decide classification of a product under different headings/sub-headings of the tariff. Lastly, under Note 2(a) to Section XVI of the Central Excise Tariff Act, 1985 as well as Note 2(a) to Section XVI of HSN read with Explanatory Note referable to Parts of a Machine in HSN clarifies that payment of duty at the appropriate rates, relevant to the respective headings alone, shall apply. In the present case, as stated above a complete compressor stood cleared under tariff Heading 84.14. Duty has been paid thereof. Similarly, safety valves were cleared by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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