Mgm Industries vs Commissioner Of Central Excise, Pune-I

(Arising out of Orders-in-Appeal No. P-I/BKS-121/2004 dated 4.10.2004 and No. P-I/342/2005 dated 14.9.2005 both passed by Commissioner of Central Excise (Appeals), Pune-I)

For approval and signature:

Honble Mr. P.K. Jain, Member (Technical) and Honble Mr. Ramesh Nair, Member (Judicial)

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1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the :

CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy : Seen of the Order?

4. Whether Order is to be circulated to the Departmental : Yes authorities?

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MGM Industries Appellant Vs. Commissioner of Central Excise, Pune-I Respondent

Appearance: None for appellant Shri N.N. Prabhudesai, Superintendent (AR), for respondent

CORAM: Honble Mr. P.K. Jain, Member (Technical) Honble Mr. Ramesh Nair, Member (Judicial)

Date of Hearing: 12.3.2015 Date of Decision: 19.3.2015

ORDER NO

Per: P.K. Jain

The appellant was issued two show cause notices, the first one covering the period from May 2002 to March 2003 and the second one for the months of April and May 2003. The first demand notice was confirmed by the original authority. The appellant filed an appeal against the said order before the Commissioner (Appeals). The Commissioner (Appeals) vide order dated 4.10.2004 dismissed the appeal of the appellant. In respect of the second show cause notice, the original authority dropped the demand. The Revenue filed an appeal before the Commissioner (Appeals) who allowed the appeal of the Revenue vide order dated 14.9.2005. Aggrieved by the above mentioned two orders of the Commissioner (Appeals), the appellant has filed two appeals before this Tribunal.

2. Brief facts of the case are that the appellant is manufacturer of control panels. These control panels are not the standard ones having general application but are exclusively manufactured for general electric and can be put to use for X-ray machines and the application is exclusive. There is no dispute between the Revenue and the appellant that the items cannot be classified under Heading 8537.00. Both the sides are of the view that their goods are covered by Heading 9022.10. The dispute is relating to the rate of duty applicable under Heading 9022.10.

3. In the Budget 2002, a 4% duty was introduced on all goods falling under Heading 90.22, w.e.f. 1.3.2002. The said Notification was amended vide Notification 26/2002-CE dated 27.4.2002 so as to change the description from all goods to all goods other than parts and accessories thereof. Similarly, another entry 223A was introduced, which prescribed nil rate of duty on parts and accessories falling under Headings 90.18, 90.19 or 9022.10. The appellants case is that the goods produced by them are parts of X-ray machine and, therefore, would be eligible to nil rate of duty under the said two entries. On the other hand, Revenues case is that the goods produced by them are apparatus and cannot be considered as parts and, therefore, they will not be entitled to the Exemption Notification.

4. None appeared on behalf of the appellant. Notices were issued which came back from the postal authorities. An attempt was thereafter made to serve the hearing notice through the jurisdictional excise officer. The jurisdictional excise officer has informed that the unit, MGM Industries, is closed and nobody is available to receive the notice of hearing. Further, nobody is available at the residential address of the proprietor of the unit. Attempts to contact the person over available telephone numbers were not also successful. Under the circumstances, the case is being taken up for decision based upon the records.

5. We have heard the learned AR who took us through the order-in-original as also the HSN Explanatory Notes and the description in the Tariff. The learned AR further submitted that the goods produced by them are apparatus in themselves and cannot be considered as part or accessory. The learned AR submitted that the scope of the term apparatus has been examined by this Tribunal in the case of Modern Malleable Ltd. vs. CCE, Calcutta-II reported in 2008 (225) ELT 460 (Tri.-Kolkata). The learned AR also submitted that the Honble Supreme Court in the case of CCE, Shillong vs. Wood Craft Products Ltd. reported in 1995 (77) ELT 23 (SC), as also in the case of CC, Bombay vs. Business Forms Ltd. reported in 2002 (142) ELT 18 (SC), has emphasized that Explanatory Notes to HSN are not only of persuasive value but entitle to the greater consideration in classifying the goods under Central Excise and Customs Tariff.

6. We have considered the submissions made by the appellant in the appeal as also the impugned order and the submissions made by the learned AR. We find that typically in a medical X-ray, there are number of independent apparatus which are put together and work as a system. In fact the appellant themselves have given the diagram as under:-

It would be seen from the above diagram that there are number of independent apparatus which work in synchronization for the end objective. It is somewhat similar to a case of computer which may have a monitor, CPU, keyboard and printer, all of which are independent apparatus and work together.

6.1 We find that the 4-digit level in the HSN and in the Central Excise Tariff is exactly same. Further in the Central Excise Tariff, further division at 6-digit level is based upon whether such apparatus are for medical, surgical, dental or veterinary use or otherwise, while in the case of HSN at the 6-digit level, are also similar. However, it further distinguishes between X-rays and alpha, beta or gamma radiations. A perusal of the HSN Explanatory Notes indicates that it has specifically listed X-ray control panels and desks in clause (E) of (III) Group, which reads as under:-

X-ray control panels and desks. These incorporate devices for controlling the exposure time and voltage, and often also include a dosimeter forming an integral part of the apparatus. It should be noted that this heading is restricted to panels and desks which are specified for use with X-ray apparatus.

6.2 We further find that parts and accessories are separately listed thereafter in the HSN Explanatory Notes and examples are also listed. Thus, under the HSN Explanatory Notes, X-ray control panels and desks are not considered as parts and accessories.

6.3 We also note that this Tribunal in the case of Modern Malleable Ltd. (supra), in para 7.5, has observed as under:-

7.5?It is an established rule of Classification that once the goods satisfy the basic characteristics then its shape etc. would be immaterial as held in Paharpur Cooling Towers Pvt. Ltd. v. Collector - 1995 (77) E.L.T. 18 (S.C.). For a particular good to qualify as apparatus it should necessarily to serve a specific purpose and should have a specific function. Flow, regulation and control of power are normally done by switches control panels etc. and those are functions at the secondary stage of power transmission while transmission is primary and possible even without these apparatus through the transmission line. Voltage is regulated through converters serving specific purpose for which these are all called apparatus. Honble Supreme Court in the case of CC v. C - Net Communications (I) (P) Ltd. - 2007 (216) E.L.T. 337 held that the word apparatus would certainly mean the compound instrument or chain of series of instrument designed to carry out specific function or for a particular use (in para 17). It follows that apparatus are normally instruments or equipments enhancing, reducing or controlling certain function of a principal system and does specific function or serve specific purpose. Conductors do not belong to such category being principal goods building the system itself. However Conductors belong to the parentage of electrical goods falling under Chapter 85 of Section XVI without being classifiable by its content and matter it contains, under Section XV of Central Excise Tariff Act, 1985. Most particularly section Note 1(f) of Section XV of the said Act. excludes articles of Section XVI which are machinery, mechanical appliance and electrical goods. Thus technical or dictionary meaning is of no assistance when the usage and market parlance are a better guide to understand the nature and characteristics of conductors for the purpose of classification [See : CCE v. Krishna Carbon Paper Co. - 1988 (37) E.L.T. 480 (S.C.)].

7. Keeping in view the details given in the Explanatory Notes as also the scheme of X-ray system as also the Honble Supreme Courts observation relating to HSN Explanatory Notes, we have no hesitation in holding that the control panels are apparatus in themselves and cannot be considered as parts or accessories. Undoubtedly, these apparatus are based on the use of X-ray and are for medical purpose. These would be classified under Heading 9022.10, but since these are not parts or accessories, the same will not be entitled to the benefit of nil rate of duty.

8. Accordingly the appeals filed by the appellant are dismissed.

(Pronounced in Court on 19.3.2015)

(Ramesh Nair) Member (Judicial) (P.K. Jain) Member (Technical)

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