TMI Blog2017 (9) TMI 921X X X X Extracts X X X X X X X X Extracts X X X X ..... in the tariff heading 84.28 - It is apparent that the heading 84.28 covers lifting machinery, handling machinery, loading or unloading machinery. The heading 84.28 gives specific examples of such machinery as lifts, escalators, conveyors, teleferics. The argument of the appellants is that the product manufactured by them, together can be considered as 'Lifting Machinery'. The idea being that the lifting machinery is a broader term and would include in its scope not only lifts but all other machineries capable of lifting. Thus if the products manufactured by them together have essential character of a lifting machinery, it would be classifiable under heading 84.28 even if it is held that it does not have essential character of 'Lift'. The fact of the case is the appellants are getting orders for lifts. The products are custom made as per the needs of each of the buyer. The appellants are manufacturing a few item and they wish to call those items collectively as 'Lifting machinery'. They have, however, not come forward with any evidence that the said items manufactured by them together constitute a machine. The role played by each such item manufactured by them in the whole schem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lation of the lifts on lump sum basis. 2. The main issue in dispute in these proceedings is if the set of parts/components manufactured and cleared by them from the factory for the purpose of installation in one or more consignments would be classifiable under Heading 84.28 as lift/lifting machinery or as parts under heading 84.31 of the Central Excise Tariff Act, 1985. The matter was earlier decided by the Tribunal in the case of BBL vide order reported in 2014 (309) ELT 129 . In the case of Otis Elevation Company (India) Ltd, the issue was decided by the order reported in 2007 (208) ELT 114 . In both the cases, the goods manufactured and cleared by the appellant from their factory in one or more consignments were held to be classifiable under Chapter heading 8431 of the Central Excise Tariff Act, 1085. Both the appellants approached Hon ble Apex Court in appeal. Hon'ble Apex Court vide order reported in 2015 (324) ELT 238 (SC) remanded the matter back to the Tribunal observing as follows: - 4. Learned counsel for the assessees had argued before both the Commissioner and the Tribunal in the two respective appeals that essentially what was ultimately so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o.8476.11 . The contrast in the language, according to them, makes it clear that the parts spoken of in the latter entry could well be parts of a machine itself, as opposed to sub-heading No.8431.00, where the parts have to be suitable for use only with the machinery that is already installed. 7. Learned counsel for the Revenue submitted that on what was argued, the decision of the authorities below as well as the Tribunal in both the appeals were absolutely correct and did not need any further review by this Court. He also stated that if this Court were to permit the assessee to turn around at this juncture and argue something new which had not been argued before the Commissioner or the Tribunal, he would be put to a disadvantage and would not be able to give any effective reply. 8. Since we are of the opinion that this is an important question that needs to be determined having reasonably wide ramifications, we would allow the assessees to raise these points on a remand made to the Tribunal in both these cases. This we do also having regard to the fact that the new pleas raised before us are questions of law which need to be answered on the same set of facts, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble Supreme Court in case of Dozco Vs. Doosan Infracore Co. Ltd. (2011 6 SCC 179), while interpreting a clause of an arbitration agreement held that a bracket cannot be allowed to control the main clause. Therefore It cannot curtail or limit the scope of terms employed outside the bracket, as is being done by the Revenue. 3.3 The Written Submissions contested the argument of revenue that the goods when installed are immovable property and are not excisable goods and that there can be no performance, by the component parts, of the function of lifting men and material unless the components that installed as immovable property in the building and therefore the components cannot be made liable to duty. It has been argued that Section Note 4 of Section XVI only requires machines consisting of individual components intended to contribute together to a clearly defined function . The said Section Note does not require the individual components or machines to be installed as contended by the Revenue. Section Note 4 does not contemplate or include an installation. It has been argued that the contention of revenue that all bricks, mortar, cement, masonry, 'struct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heading 84.28 and it is not the only kind of lifting machinery covered by heading 84.28. The machinery manufactured by the Appellant is lifting machinery. What is manufactured by the Appellants in both the cases is a combination of machines consisting of individual components. When these are cleared for the purposes of the erection of a lift, these machines/combination of machines consisting of individual components are connected to each other by wires and cables and are intended to contribute together to a clearly defined function covered by one of the headings in chapter 84, namely heading 84.28. When cleared as parts for the purposes of replacement or repair they cannot fall under heading 84.28 as they are not cleared as a combination of machines intending to contribute together to a clearly defined function. 3.6 It has been argued that there is no dispute that parts of heading 84.28 are specifically covered by heading 84.31 and that with reference to clearance of parts, Section Note 2 (a) would apply. However in the present case, what the Appellants cleared for the purposes of a complete contract are not parts but a combination of machines intended to contribute together to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Menon was not cross-examined by the Department. The Department with whom the onus lies has also not produced any evidence other than a bald statement across the bar with nothing to substantiate it, namely, that 'all parts must be cleared together and that only the essential character of a lift would come into existence/ that without a lift cage counterweights the essential character of a lift cannot be attained'. It is submitted that Professor Menon is an independent person and his affidavit cannot be rejected on the ground that he has not considered the Lift Rules. In any event, there is nothing in the ISI specifications or the Lift Rules which contradict what has been stated by him. 3.10 It has been argued that in the schematic diagram which is annexed to the Appellants' appeal, all the parts manufactured by the Appellants cannot be shown as many of the parts are incorporated within other parts. The parts manufactured by the Appellant are not 14 but were 27 machines and/or sub-assemblies. The said affidavit also lists the various parts which go into the manufacture of these 27 machines/sub-assemblies and gives it the essential character of a lift. 3.11 It has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counterweight, the cabin, the rails, the buffer and the ropes are merely fabricated items of iron and steel, wood and aluminium. The counterweight consists of a frame in which steel bars are fed depending upon the weight and size of the cabin and the number of persons the cabin would carry. Neither is the counterweight nor lifting machinery, nor does its absence render the machinery manufactured by the Appellants as items which do not have the essential character of a life. Similarly, the cabin is fabricated in accordance with the size of the shaft and the number of persons required. The cabin can be fabricated from aluminium, wood, laminate and can even have marble and granite finishing. It is to be borne in mind that what was manufactured by the Appellants only had to have the essential character of lift. It is necessarily incomplete or unfinished and therefore does not have to have every part. If the contention is that every part must be included than the 1 st part of Rule 2 (a) of the Rules of Interpretation would be rendered nugatory. 3.13 It has been argued that Section Note 4 of section XVI also makes it clear that where the machine (including a combination of machines) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rts over a period of time each set of parts being set to the buyer separately. In paragraph 17 the Tribunal came to the conclusion that: It is therefore clear that such parts would be, classifiable as a complete machine if it can be established that the parts are removed as such, so as to constitute a complete machine, even if they are not parts removed and unassembled together. 3.15 It has been argued that this is also the view of the Tribunal in Vishwa Industrial Company Private Limited 1999 (107) E.L.T. 774 (T) and Vinar Systems Ltd 2001 (131) E.L.T. 578 (T) . It has been argued that in all these cases Rule 2 (a) was considered and in each case, it was held that though the various unassembled/ disassembled items were cleared separately and not presented together made no difference. In all these judgements the Tribunal took into consideration the practical reality of manufacturing such machines. In the present case also, no lift can be manufactured in a building at one time. A lift cannot be cleared from factory. The practical reality requires various items of machinery to be cleared to site only at the time of usage so as to prevent deterioration of the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the question that arises whether the goods, though incomplete and unfinished have character, which is sufficient to distinguish them, firstly as belonging to the genus motor vehicle, secondly as belonging to the sub-genus motor vehicles for the transport of persons 3.21 It has been argued that the machinery manufactured by the Appellants belongs to the genus of lifting machinery. Further, just like in the present case, it was contended that the goods were too incomplete to have the essential character of unassembled motor vehicles. In the present case like in the Australian case the Revenue did not support his contention by reference to any authority, but pointed to various parts which were lacking to complete the motor vehicle. This contention was rejected by the Australian Administrative Tribunal and they held at page 116 that: In interpreting the classification it may be noted, firstly, that the paragraph refers to unassembled motor vehicles. Therefore we are not concerned with goods in a driveable condition. Secondly, interpretative Rule 2 (1) (a) requires us to read the paragraph is referring to goods that are in and unfinished or incomplete state. Thirdly, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of parts so far advanced that it already has the main essential feature of the complete machine. It has been argued that all the items of machinery manufactured by the Appellants, when assembled together are an assembly of parts so far advanced that it already has the main essential features of the complete lifting machinery. If 84.28 covers lifts, then the assembly referred to in the aforesaid HSN Explanatory Note would mean the assembly of all items such as those manufactured by the Appellant at site in order to create the lift. Any other interpretation would render 84.28 totally otiose and nugatory as no lift or escalator or conveyor or teleferics can be manufactured or is manufactured in a factory. All such items are erected at site. All such items require goods to be sent to site in a piecemeal fashion. 3.25 It has been argued that there is no dispute that lifting or handling machines are based on pulleys, winches or jacking systems. However, it is not necessary that large static structural steel work should be included. In fact, it would be impossible to include such huge amounts of static structural steel work required for constructing skyscrapers. The amount of static s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nos.599 to 699 and included in this return has been assessed provisionally under Rule 9-B and the provisions of the said rules shall apply for recovery of deficiency in or refund of excess duty. Copies of the bond, bank guarantees, communication dated 16/10/2001, 17/9/2001 and 15/10/2001 and the price list were enclosed with earlier written submissions. 4 Learned senior Counsel for Otis also argued in detail and later summarized the arguments in the shape of written submissions consisting of following arguments. 4.1 The issue under the present proceedings pertains the period 01.03.1987 to 28.02.1995. It has been argued that the Appellant is engaged in the supply, erection, installation of lifts as well as repair and maintenance of lifts and for this purpose and they manufactures various components of the lifting machinery. The Appellant makes the following two types of supplies: i) Supply towards a contract for the supply, erection and installation of lifts wherein the Appellant is obligated to fulfil the intent of the contract viz. to supply, install, erect and commission a functional lift in either a residential or commercial building. (Which supplies are classified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilation III). The affidavit states that parts cleared under the contract of supply and installation of lift must have the said items as to acquire the essential characteristic of the lifting machinery: a) Machine and Motor b) Controller c) Governor d) Safety e) Rails f) Signal Fixtures It has been argued that the Affidavit of Mr. M. Balasubramaniam has not been controverted by the Department. The Ld. counsel produced summary of their RT 12 returns to assert that they were manufacturing parts listed in the affidavit of Mr. M. Balasubramaniam. 4.5 Ld. Counsel relied on following Statutory Provisions Rule 1 of the Interpretative Rules Section Note 2 of Section XVI (as applicable during the relevant period) Section Note 4 of Section XVI Section Note 5 of Section XVI HSN Explanatory Notes - Section Note 2 4.6 Ld. Counsel argued that while classification is generally to be done on the basis of nature of the goods at the point of time of clearance, there are specific instances where either the Chapter Notes or Section Notes mandate the classification to be done on some alternate basis which is statutorily man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duct; - the intended functionality of the product; - the sole or principal use of the product; - the principal function of the product Ld. Counsel argued that that several of the machines specified in the chapter 84 such as nuclear reactors, boilers, lifts, etc. do not emerge as a complete machine at the factory gate as these cannot be constructed within the factory and removed. Ld. Counsel argued that if each clearance of a component or a part made in respect of contracts for a supply and installation of nuclear reactor (Heading 84.01), steam generating boilers (Heading 84.02) or steam turbines (84.06) were to be treated as a clearance of parts for the purposes of classification, there would be very limited or almost no instances wherein any goods could possibly be classified under the Chapter Heading of the complete machinery. This is where the principle under Note 4 of Section XVI comes into play, which provides for the classification of individual parts and components of a machine consistent with the clearly defined function of that machine. Ld. Counsel argued that there are specific Chapter Headings for machines having clearly defined function. If the classi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Grasim Industries Ltd. Vs. Collector of Customs, Bombay [2002 (141) ELT 593 (SC)] Sarto Electro Equipments P. Ltd. Vs. CC (Import) [2015 (329) ELT 0723 (Tri.-Mum.)] 4.11 Ld. Counsel argued that the application of Section Note 4 may be analyzed in respect of the following three situations: i) Manufacture and supply of individual parts and components for repair and maintenance of existing lifts. ii) Manufacture and supply of individual parts and components for use in erection of a lift in pursuance of a contract for supply of parts and components. iii) Manufacture and supply of the parts and components for erection of a lift in pursuance of a contract for supply and erection of a lift. Ld. Counsel argued that in case of the first and second category of supply, wherein individual parts and components are supplied for repair and maintenance of existing lifts or for use in erection of a lift in pursuance of contract for supply of parts, it may be argued that the individual parts cannot contribute to the entire function of lifting. However, the third category of supply (i.e. the supply made by the Appellant in the instant case) is entirely distin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suitable for use solely and principally with a particular kind of machine are to be classified with machine of that kind. In the present case, the items in question are clearly suitable for use solely for goods covered by Chapter Heading 84.28 and therefore, warrant classification in Chapter Heading 84.28. Ld. Counsel argued that Section Note 2(a) prescribes that parts which are goods covered in any of the heading of Chapter 84 and Chapter 85 (other than those specified) are to be classified. as per their respective headings. However, in terms of Section Note 4, where all the parts of a machine contribute to the clearly defined function, the classification of the parts (as a whole) must be consistent with the intended function of the machine. Therefore, when it comes to the classification of parts, it is essential that the qualifying test prescribed under Section Note 4 must be applied. In such a scenario, if Section Note 2(a) is applied in preference to Section Note 4, and consequently all the parts contributing to the clearly defined function of a machine are classified as per their respective headings, Section Note 4 would be rendered otiose and redundant. Ld. Counsel relie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... done on the basis of Section Note 4. ii) Further, in the case of Nikhil Equipments (supra) the question before the Hon'ble Tribunal was as to the ascertainment of excisability of a storage system and not that of classification. It is submitted that it is a trite law that the precedents for excisability cannot be applied for the purpose of determination of classification. 4.15 Ld. Counsel challenged the reliance placed by revenue on the Explanatory Notes in the HSN and the Maharashtra Lift Rules, 1958 to contend the parts and components manufactured and supplied by the Appellant in unassembled form do not have the essential character of lift or lifting machinery. His argument being i) The Explanatory Notes in the HSN referred by the Respondent merely illustrate certain complex lifting machine and the parts and components thereof. The said Explanatory Notes cannot be read so as to infer that parts such as cables and passenger cage are essential to all the lifting machineries. ii) Merely because certain parts have been defined under the Maharashtra Lift Rules, it cannot be said that all such parts are essential to form a lifting machinery. Instead, one must res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a technical expert in the field of lifts and lifting machinery and it is a settled position in law that the affidavit and opinions of technical experts can only be countered with an affidavit of another expert. He relied on following decisions: Larsen Toubro Ltd. Vs. Collector of Customs, Bombay [1996 (88) ELT 176 (Tri.)] Inter Continental (India) Vs. Union of India [2003 (154) ELT 37 (Guj.)] Union of India Vs. Inter Continnental (India) [2008 (226) ELT 16 (SC)] Ld. counsel argued that the Department ought to have considered the affidavit at the adjudication stage or adduced reasons and evidences against the statement in the affidavit. He argued that in a situation where the expert is not cross-examined despite being offered for cross examination by the assessee, the opinion of the expert cannot ignored. Ld. counsel argued that even an officer or employee of the assessee would also be considered as an expert and the opinion given by such employee must be relied upon. Ld. Counsel relied on the decision of three member Bench of the Hon'ble Supreme Court in the case of Hindustan Ferodo Ltd. Vs. CCE [1997 (89) ELT 16 (SC)] wherein the affidavit o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ading 84.25 to 84.30 and that the language of heading 84.31 is required to be contrasted with the language of headings 8414.91, 8476.91 and 8481.91 where the heading covers of 'parts of machinery'. Since the tariff draws a clear and visible distinction between the two phrases 'with the machinery' and 'of the machinery', it is pertinent that such distinction must be applied and administered uniformly. The relevant headings have been mentioned below:- Head i ng No Sub - Head i ng No. Desc ription Of Goods 84.09 8409.00 Parts suitable for use solely or principally with the engines of heading no. 84.07 or 84.08 84.14 8414.91 -Parts and accessories - of goods covered by sub-heading no. 8414.10 84.31 8431.00 Parts suitable for use solely or principally with the machinery of heading nos. 84.25 to 84.30 84.48 8448.00 Auxiliary machinery for use with machines of heading no.84.44 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iable under heading 84.31. Ld. special counsel challenged the appellants contention that the parts and components which form part of the initial assembly of a lift would be classifiable under heading 84.28, while the said parts and components, when used as replacement and spare parts of a lift, would be classifiable under heading 84.31. Ld. special counsel submitted that parts and components, whether used for initial construction of a lift or used as replacement and spare parts for maintenance and repair of a lift would be classifiable under heading 84.31. 5.1 Ld. special counsel submitted that both the words 'with' and 'of are prepositions. According to English grammar, a preposition is a word that shows the relationship of one word in a sentence with another word. In the context of the Central Excise Tariff, both the prepositions with' and of indicate the relationship between the parts and the machinery and have been used for the same purpose. In other words, parts of the machinery and parts used with the machinery convey the same meaning. Ld. special counsel brought our attention to the Explanatory Notes of HSN on Parts under headings 84.28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HSN reflects the commercial understanding based on international trade practice. ISI standards and the Bombay Lift Rules lay down the statutory requirements. Therefore, any opinion given without considering these aspects cannot have relevance for the purpose of tariff classification. 5.5 Ld. special counsel pointed out that the perusal of schematic diagram of the lift and its components and parts manufactured and supplied by the appellant shows that out of 40 parts comprising the lift, the appellant has manufactured only 14 parts and these 14 parts have also been supplied not in a single consignment but in several consignments over a period of time. The question is whether these 14 parts can be said to have the essential character of a lift. As per the HSN explanatory notes pertaining to heading 84.28, the said heading covers lifting or handling machines usually based on pulley, winch or jacking systems and often including large proportions of static structural steel work, etc. These static structural elements (e.g. pylons specialized for teleferics, etc.) are classified in this heading when they are presented as parts of a more or less complete handling machine. The HSN expla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant nor the ropes/ cables for pulling the lift. The appellant also did not manufacture the guide rail or the counterweights which regulate the movement of the lift. Even the parts of the lift machinery manufactured by the appellant were cleared not in one consignment but were in fact cleared in several consignments. In this undisputed factual matrix, the items manufactured and supplied by the appellant do not constitute lift in an unfinished or incomplete form having the essential character of a lift. 5.7 Ld. Special counsel pointed out that invocation of General Interpretative Rules would be required only if the tariff heading and the chapter and section notes are not sufficient for the purpose of classification. He relied on the decision of Hon'ble Apex Court in Simplex Mills Co. Ltd. reported in - 2005 (181) ELT 345 (S.C.). 5.8 He also relied on the decision of Tribunal in Rajasthan Synthetic Industries Ltd. V/ s, Collector of Central Excise - 1989 (42) ELT 24 (T). 5.9 Ld. special counsel pointed out that as per the description of Heading 84.28, the said heading covers machinery for lifting, handling, loading or unloading machinery. Parts, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed as parts of CTV and not as CTV [Para 12 16]. Similarly in the case of Pioneer Embroideries Ltd. V/s. CC, Mumbai reported in 2004 (178) ELT 933 (T) , a question arose whether an embroidery machine which did not have computer attached to it could be classified as a computerized embroidery machine when these are imported separately. It was noticed that the Jacquard Control Devices which provide for the computerization were installed on the embroidery machine after importation and therefore, it was held by the Tribunal that the embroidery machine cannot be treated as a computerized embroidery machine by resorting to Rule 2(a). This decision of the Hon'ble Tribunal has been affirmed by a speaking order by the Hon'ble Supreme Court as reported in 2015 (322) ELT 602 (S.C.). Ld. special counsel pointed out that in the case of CCE, Chennai V/s. Kone Elevators India Ltd. - 2001 (139) ELT 635 (T) , the Hon'ble Tribunal has upheld the classification of component parts of lifts cleared over a period of time under Chapter Heading 84.31. This decision has been followed by the Tribunal in its subsequent decisions in the case of U.T. Ltd. V/s. CCE (Adjn.) Delhi - 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12 Ld. special counsel pointed out that in the Show cause notice as well as in the impugned order, the Department has relied upon the Board's Circular No. 16/89 dtd. 19/4/1989 to say that the goods have to be assessed in the condition in which they are cleared from the factory. Ld. special counsel argued that on a plain reading of the Circular, it is very difficult to accept the contention of the appellant that the parts and components manufactured and cleared by it from the factory over a period of time would have the essential character of Lifts. From the Circular, it is very clear that if all the parts together are removed from the factory, only then they can be regarded as Lifts in unassembled/dis-assembled condition or having the essential character of the Lifts. The Circular does not envisage that if the parts and the components of Lifts are removed from the factory over a period of time, they will have the essential character of Lifts. Therefore, the Board's Circular supports the stand of the Department to classify the parts and components of lifts under heading 84.31. 5.13 Ld. special counsel argued that the following case law cited by appellants is clearly di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e customers, the appellant was required to supply complete rolling mills and galvanizing lines. However, because of heavy weight and complex nature of the machinery, these were cleared in parts separately for the sake of convenience of transport and installation. The claim of the appellant that the goods cleared were complete machines classifiable under sub-heading 10 was accepted by the Tribunal as against the Department's classification as parts under sub-heading 90. The facts of this case have, therefore, no application to the facts of the case on hand. IV. In the case of Renault (Wholesale) Pty. Ltd. Collector of Customs certain motor vehicle parts were imported from France for assembly with some locally produced parts. The dispute was whether these parts should be classified as 'Motor Vehicles or as parts of Motor Vehicle. The importer contended that the parts though incomplete and unfinished had the essential character of motor vehicles and should be classified as such. Revenue contended that the parts lacked that essential character and should be classified as motor vehicle parts. The Tribunal held as follows On the evidence we are of the view that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .L.T. 518. The Tribunal after distinguishing the decision in Union of India v. Godrej Boyce Manufacturing Company - 1989 (44) E.L.T. 3 (Bom.) and relying on Duncan Agro Industries v. Union of India - 1989 (39) E.L.T. 511 (Del.) later affirmed by the Supreme Court, held that an adjudicating authority cannot keep the issue and confirmation of demand hanging in the air to be quantified on the finalisation of the provisional aspects of the assessments . The Tribunal held that it is perfectly in order to arrive at the quantum of duty while adjudicating a case even when the initial assessments were provisional. We are aware that this decision and the one in Duncan Agro are in the context of provisional assessments made under Central Excise Act. We have merely referred to these decisions to indicate that both in the Customs Act as well as in the Central Excise Act, action to proceed against the offending goods can be started and concluded even when the assessments were provisional . Learned special counsel argued that ratio of the above decision is applicable to the facts of this case. 6. Ld. Commissioner (AR) argued that as per the Appellants Otis Elevators Ltd (OEL), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... different customers, to their Office at Patna, in one consignment. h. Pg 390, of Contract Copies given by the Appellant, i.e. Contract no.52NF5116 for installation of Lift at Gas Turbine Project, Vadodara, show clearance under one Gate Pass of components for different contracts, to their Office at Vadodara, in one consignment. i. Pg 221-232, of Contract Copies given by the Appellant, i.e. Contract no.52NG571/72 for installation of lifts at Kolkata Airport for IAAI, shows the list of parts supplied for Installation of a new lift and duty paid under 8428. j. Pg. 579-581, of Contract Copies given by the Appellant, i.e. Contract no. i.e. 52E7751/2 at, with Surat Cotton Spg Wvg Mills at Mumbai for extension of existing lift, shows the list of parts required for such extension and duty paid under 8431. k. It can be appreciated from the documents at (i) (j) above that, the components in both lists are identical. It can also be appreciated that, these components are not assembled together separately before installation. The components go one by one into the building of lift . It may also be appreciated from these two lists that, there is no lifting machinery sep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and material because of the motor/ machine unit can provide the power by which the car/ cabin with load can be hoisted up or released downwards. t. The components manufactured are cleared as parts with specific part numbers. All parts are common for both new installation or maintenance/repair/upgradation. There is no way of distinguishing them. u. Pg 23, of Contract Copies given by the Appellant, i.e. Contract no.52NG3271 to 52NG3277 is for installation of Lifts at Bhaovini Bhavan, New Delhi. Pg. 24 is a copy of the Tender floated by Bhaovini Bhawan. Pg. 25 to 88 give a list of the activities to be undertaken for installation of the lifts. Pg. 73 74 gives a list of the Indian specifications to be followed for installation of the lifts. Pg 88 to 124 is a copy of the tender filed by the Appellant on 122.11.1991. v. The said details at (q) above show that, both the customer and the Appellant have contracted for a works contract for installation of Lifts. Such Lifts have to be in accordance with the ISI specifications with respect to each activity related to installation. The components supplied are considered as parts of the Lifts. There is no contract for sale of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Unit/Motor, appear to have the function of controlling the parts which actually do the work of lifting. Some of these items/parts have the function of signaling the position of the lift cage and establishing communication between the lift cage and the various landing floors. However, the parts which actually do the work of lifting men materials for e.g. pulleys, counter weight assemblies, lift car, car doors, car guide, hoisting ropes, cables, fly wheels, spring buffers etc. are not manufactured by the Appellants. 6.2 Ld. Commissioner (AR) pointed out that Lifts when installed are immovable property. They are not goods. They are not excisable goods. There can be no Lift without installation of its parts/components. There can be no performance, by the component parts, of the function of men and material' unless these components get installed as immovable property. Hence, the question which arises is, whether installations which are admittedly goods not can be considered as goods and that too excisable goods' and classified in the Central Excise Tariff and charged to Central Excise duty by application of a Rule of interpretation to the Tariff or a Section or Chapte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stallation of lift / handling machinery/ installations are classifiable under 8431 only: i) U T. Ltd Vs CCE - 2002 (141) E.L.T. 652 (T) ii) U.T. Ltd Vs CCE - 2002 (146) E.L.T. 421 (T) iii) Larsen Toubro Ltd Vs CCE - 1998 (103) E.L.T. 222 (T) iv) Pioneer Electric Furnace Manufacturers Vs CCE - 1999 (113) E.L.T. 667 (T) v) Buckau Wolf India Ltd Vs CCE - 1997 (96) E.L.T. 172 (T) vi) Buckau Wolf India Ltd - 1997 (95) E.L.T. 118 (T) Ld. Commissioner (AR) argued that the Larger Bench of the Tribunal in the case of Jindal Strips Ltd. v. Collector of Customs, Bombay - 1997 (94) E.L.T. 234 (Tribunal) = 1997 (21) RLT 275 (CEGAT - Larger Bench) had held that the component is the genus and spare is species i.e. component which is used for replacement. It had been held that the component parts included spare parts. Ld. Commissioner (AR) argued that his decision of a Five Member Larger Bench of CESTAT in the case of Jindal Strips Ltd. v. Collector of Customs, Bombay - 1997 (94) E.L.T. 234 (T-LB) was approved by the Supreme Court in Hindustan Sanitaryware Industries Ltd Vs CC - 1999 (114) E.L.T. 778 (S.C.) 6.3 Ld. Commissioner (AR) argue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licable only when all the components which are intended to make a final product are presented at the same time for the purpose of clearance from the factory. Paras 11 12 of the afore-cited judgment of the Hon'ble Apex Court in Sony India's case may be usefully referred to and relied upon in this regard. Ld. Commissioner (AR) relied on the HSN explanatory notes in Section XVI, General, (V) UNASSEMBLED which says: For convenience of transport, many machines and apparatus are transported in an unassembled state. Although in effect the goods are mere a collection of parts, they are classified as being the machine in question and not in any separate heading for parts. The same applies to an incomplete machine having the features of the complete machine (See Part IV above), presented unassembled (see also.....). However, unassembled components in excess of a 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. Ld. Commissioner (AR) argued that it is important to note that, the incomplete unassembled machine should have the features of the complete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 635 (T) holding that parts of Lifts cleared over a period of time under a single contract are classifiable under Chapter Heading 84.31. 6.6 Ld. Commissioner (AR) argued that the Appellant's contention that Board's Circular No.16/89, dated 19-4-1989 regarding the classification of lifts requires classification of goods under 84.28 is not correct. For proper appreciation, he relied on Para 2 of the Circular which is reproduced below: 2. Where parts or components of lifts are brought together at site, it cannot be viewed as manufacture of lift in unassembled/ disassembled condition since the process of purchasing and transportation is not a process of manufacture. Accordingly, it was decided that : (i) Duty would be chargeable on parts and components leaving the factory in the condition in which they are removed. Thus, if together they can be regarded as lifts in unassembled/disassembled condition or having the essential character of lifts, they would be assessed under heading 84.28, otherwise such parts and components would be assessed under heading 84.31. (ii) . From the Circular, it appears that if all the parts together are removed from the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re classified in the same heading as those machines or apparatus subject, of course, to the exclusions mentioned in Part (I) above. Separate headings are, however, provided for : (A) Parts of the engines of heading 84.07 or 84.08 (heading 84.09 ). (B) Parts of the machinery of headings 84.25 to 84.30 (heading 84.31 ). (C) Parts of the textile machines of headings 84.44 to 84.47 (heading 84.48 ). (D) Parts of the machine-tools of headings 84.56 to 84.65 (heading 84.66 ). (E) Parts of the office machines of headings 84.69 to 84.72 (heading 84.73 ). (F) Parts of the machines of heading 85.01 or 85.02 (heading 85.03 ). (G) Parts of apparatus of headings 85.19 to 85.21 (heading 85.22 ). (H) Parts of apparatus of headings 85.25 to 85.28 (heading 85.29 ). (IJ) Parts of apparatus of heading 85.35 , 85.36 or 85.37 (heading 85.38 ). Ld. Commissioner (AR) argued that the above rules does not apply to parts which in themselves constitute an article covered by a heading of this Section (otherthan headings 84.85 and 85.48); these are in all cases classified in their own appropriate heading even i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , such parts are classified in the appropriate materials Chapter Machinery parts remain classified in this Section whether or not finished ready for use, However, rough forgings of iron or steel are classified in heading 72.07 . Ld. Commissioner (AR) argued that the above Note indicates that the terms 'Parts of' and 'Parts suitable for use solelyor principally with' are used interchangeably in the HSN and hence in the CETA. Ld. Commissioner (AR) argued that when, a Chapter heading covers parts of machines of a group of headings, the term suitable for use solely or principally with machinery of heading Is used. Ld. Commissioner (AR) pointed out that the HSN Explanatory notes to each Heading from 8425 to 8428, individually and specifically, state that Parts of each of these Headings are classifiable under 8431. Ld. Commissioner (AR) relied on Section Note 2(b) to Section XVI which says, '(b)Other parts, if suitable for use solely or principally with a particular kind of machine, or with a number of machines bf the same heading (including a machine of heading 84.79 or 85.43) are to be classified with the machines of that kind. However, parts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re something is (location); (2) where something is going (direction); (3) when something happens (time); and (4) relationship between a noun or a pronoun and another word in the sentence. In the context of the tariff, both the prepositions with and 'of indicate the relationship between the parts and the machinery and have been used for the same purpose. In other words parts of the machinery and parts used with the machinery convey the same meaning. Different prepositions have been used only for the reason that simple grammar requires it. Ld. Commissioner (AR) argued that a similar issue came up for consideration before the Hon'ble Bombay High Court in the context of usage of different prepositions in DhirajlalValjiKotak v. RamachandraJanglajiGujar [AIR 1970 Bom 290] and the following paragraph from the said decision is quite revealing : Lastly, some emphasis was put by the counsel on the preposition for preceding the words human consumption in the definition of sale . The counsel contrasted it with the prepositions used in other clause for instance whether by wholesale or retail in contrast to for human consumption . We do not think that anything turns u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hines essential to the performance of the function specific to the functional unit as a whole, and thus excludes machines or appliances fulfilling auxiliary functions and which do not contribute to the function of the whole. The following are examples of functional units of this type within the meaning of Note 4 to this Section : (1) Refrigerating equipment consisting of components which are not fitted together to form a whole and are interconnected by means of piping through which the coolant circulates (heading 84.18 ). (2) --- (3) --- (12) Burglar alarms, comprising, e.g., an infra-red lamp, a photoelectric cell and a bell (heading 85.31 ). It should be noted that component parts not complying with the terms of Note 4 to Section XVI fall in their own appropriate headings. Ld. Commissioner (AR) argued that from the words employed, it is clear that all the individual components should contribute together and then the whole of the components would fall under the appropriate heading. The said note nowhere states that if individual components are cleared or presented separately, they would fall under the heading appropriate to the machinery. Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... haker conveyors and tables; safety stopping mechanisms for lifts, skip-hoists, etc. Ld. Commissioner (AR) argued that from the HSN explanatory notes it is clear that the primary components of a lift are - (1) winch and cable, (2) passenger cage or goods platform, (3) vertical guide bars, (4) counterbalance weights, and (5) control, stopping and safety equipment. Ld. Commissioner (AR) argued that from the schematic diagram submitted, it is clear that the appellant does not manufacture winch and cable, passenger cage or goods platform, vertical guide bars and counter balance weights. Ld. Commissioner (AR) argued that what the appellant has supplied comes under the category of control, stopping and safety equipment consisting of electric motor, brake assembly, hoisting motor and machine unit, speed governor and controller. In addition, main limit switch, car guide shoe, weighted pulley for speed governor, shaft information assembly, car push button box, position indicator and landing push button box have been supplied over a period of time. Ld. Commissioner (AR) argued that these various elements which have been manufactured and supplied do not provide the essential character of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chanism. Therefore, the goods supplied by the appellant can be considered only as parts suitable for use solely or principally with the lift machinery, meriting classification under CETH 84.31. 6.9.1 Ld. Commissioner (AR) argued that from the technical literature down loaded from the web site of the Department of Mechanical Engineering, University of Hong Kong, it is seen that the major lift components are (i) Prime mover (Electric Machine or Hydraulic Pump), (ii) lift car (car frame, the car itself), (iii) counterweight (if used), (iv) guide rails, (v) entrances/doors, (vi) safety gear and over speed governor, (vii) buffers (energy accumulation, energy dissipation), (viii) roping systems (compensating ropes, traction systems), (ix) car and landing fixtures (buttons, indicators and switches). Ld. Commissioner (AR) argued that the items mentioned in the web site is entirely in tune with the HSN explanatory notes and the ISI specifications. Out of these, only the prime mover, safety gear and over speed governor, car and landing fixtures have been manufactured and provided by the appellant. The remaining essential components such as lift car, counter weight, guide rail, entranc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the parts manufactured by them have the essential character of a lift though it is incomplete. Ld. Commissioner (AR) argued that the said Affidavit does not take into account the HSN explanatory notes which clearly spells out what are the essential components of a lift nor does it consider the ISI standards which deal with the subject matter. The said Affidavit also does not consider the Maharashtra/Bombay Lift Rules and the specifications given therein. In other words, the said expert opinion does not consider the commercial understanding as to what constitutes a lift nor does it consider the statutory requirements/ definitions of a lift. Ld. Commissioner (AR) argued that HSN reflects the commercial understanding based on international trade practice and ISI standards and the Bombay Lift Rules lay down the statutory requirements. Ld Commissioner (AR) argued that any opinion which does not consider these aspects, cannot have relevance for the purpose of tariff classification. Tariff classification is based on commercial understanding/trade parlance coupled with the statutory definitions/requirements. In view of the above, the said expert opinion cannot be relied upon for the purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has the essential character. It is a fact on record that the various parts and components of the lift manufactured by the appellant did not constitute the complete lift and several essential components were missing. The parts were also not cleared together but were cleared over a period of time. Ld. Commissioner (AR) argued that as presented, they did not constitute an incomplete or unfinished lifts having the essential character. Excise duty liability arises at the time of removal of the goods from the factory and the goods have to be assessed to duty in the form in which they have been cleared. What happens subsequent to clearance from the factory is of no consequence. 7. We have considered the rival arguments. The primary issue that needs to be decided is if the goods cleared by the appellant are classifiable under Heading 84.28 of the CEAT or heading 84.31. The matter was earlier decided by Tribunal in the case of BBL vide order reported in 2014 (309) ELT 129 and in the case of Otis Elevation Company (India) Ltd, by the order reported in 2007 (208) ELT 114. Both the appellants approached Hon'ble Apex Court in appeal. Hon'ble Apex Court vide order reporte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28.00, would only refer to parts that were used after a complete lift was already set up and not before. They contrasted the language of sub-heading No.8431.00 with the language of sub-heading No.8476.91, which simply states 'parts of machines of sub-Heading No.8476.11'. The contrast 'in the language, according to them, makes it clear that the parts spoken of in the latter entry could well be parts of a machine itself, as opposed to sub-heading No.8431.00, where the parts have to be suitable for use only with the machinery that is already installed. 7. Learned counsel for the Revenue submitted that on what was argued, the decision of the authorities below as well as the Tribunal in both the appeals were absolutely correct and did not need any further review by this Court. He also stated that if this Court were to permit the assessee to turn around at this juncture and argue something new which had not been argued before the Commissioner or the Tribunal, he would be put to a disadvantage and would not be able to give any effective reply. 8. Since we are of the opinion that this is an important question that needs to be determined having reasonably wide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellants is that the product manufactured by them, together can be considered as 'Lifting Machinery'. The idea being that the lifting machinery is a broader term and would include in its scope not only lifts but all other machineries capable of lifting. Thus if the products manufactured by them together have essential character of a lifting machinery, it would be classifiable under heading 84.28 even if it is held that it does not have essential character of 'Lift'. The fact of the case is the appellants are getting orders for lifts. The products are custom made as per the needs of each of the buyer. The appellants are manufacturing a few item and they wish to call those items collectively as 'Lifting machinery'. They have, however, not come forward with any evidence that the said items manufactured by them together constitute a machine. 7.2 The appellants seek to classify the set of items manufactured by them in their factory as 'Lifting Machinery'. Before other issues are examined it is necessary to examine if these items can be called Lifting Machinery . To be classified as Lifting Machinery the product should be 'Machinery' first ..... X X X X Extracts X X X X X X X X Extracts X X X X
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