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Nirulas Corner House Pvt. Ltd. Vs. Collector of Customs. - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1986)(6)LC147Tri(Delhi)
AppellantNirulas Corner House Pvt. Ltd.
RespondentCollector of Customs.
Excerpt:
.....(item no. 1 of the bill of entry) to additional duty (cv duty)-hereinafter called cv duty-under tariff item no. 29-a(1) of the cet and the classifica-tion for the purpose of customs duty of items 3, 4 and 5 of the bill of entry, namely, can filler, fruit feeder and ripple machine, whether they should be on merits as done by the customs or under heading 84.15(1) like continuous ice-cream freezer, as claimed by the appellants.2. the assistant collector of customs, bombay, by his order dated 12-11-81 rejected the appellants' claim for re-assessment and refund.the order was upheld in appeal by the collector of customs (appeals) bombay by his order dated 31-1-83. hence the present appeal.3. the appellants, besides the bill of entry, have filed copies of invoice, import licence and.....
Judgment:
1. The question for decision in this appeal is the liability of continuous Ice-cream freezer (Item No. 1 of the bill of entry) to additional duty (CV duty)-hereinafter called CV duty-under Tariff Item No. 29-A(1) of the CET and the classifica-tion for the purpose of customs duty of Items 3, 4 and 5 of the bill of entry, namely, Can filler, Fruit feeder and Ripple machine, whether they should be on merits as done by the Customs or under Heading 84.15(1) like continuous ice-cream freezer, as claimed by the appellants.

2. The Assistant Collector of Customs, Bombay, by his order dated 12-11-81 rejected the appellants' claim for re-assessment and refund.

The order was upheld in appeal by the Collector of Customs (Appeals) Bombay by his order dated 31-1-83. Hence the present Appeal.

3. The appellants, besides the bill of entry, have filed copies of invoice, import licence and literature with photos pertaining to the products.

4. Taking up first the question of CV duty on continuous Ice-cream Freezer, Shri M. Chandrasekharan, learned Counsel for the appellants, argued that Tariff Item 29-A(1) gave illustrations of Ice-makers, bottle coolers, display cabinets and water coolers preceded by the words 'such as'. He submitted that the goods taxable under the sub-item would be only those which had the qualities of these four illustrations. The four illustrations had only cooling qualities and no manufacturing quality, whereas the product in question had manufacturing activity and cooling part was only incidental. It would, therefore, not fall under the four illustrations set out in the sub-item and would, therefore, not be liable to CV duty. He, however, did not dispute that the item is a refrigerating appliance and is sold as ready-assembled unit. In support of his arguments Shri Chandrasekharan relied on Central Camera Co. Ltd. v. Union of India and Ors., 81 E.L.T. 344 (Bom.), Commissioner of Sales Tax v. Kwality Restaurant, 1982 Vol.45 STC 486, Vadilal Dairy Frozen Food Industries, Ahmedabad v. Union of India and Ors., 1983 E.L.T. 672 (Guj.).

5. On behalf of the respondents Shri S. C. Rohatgi, JDR, submitted that the use of words 'such as' in the sub-item only meant that the four items following the words 'such as' were only illustrative and not exhaustive. If the Freezer in question otherwise fell within the meaning of the main part of the sub-item and qualified for assessment as refrigerating appliance, then it was immaterial that it had qualities different from those of the illustrations. He maintained that the Freezer was liable to CV duty. In his arguments he relied on the meaning of appliance as given in the Oxford Dictionary, Corpus Juris Secondum Volume 6 at page 75 and Black's Law Dictionary, 5th Edition, at page 1284. He also placed an extract from Black's Law Dictionary about the meaning of 'such'. In his arguments he relied on Assistant Collector of Customs, Cochin v. Coromandel Fisheries and Anr., 1979 E.L.T. J 81 (Kerala High Court), Jalal Plastic Industries and Ors. v.Union of India and Ors., 1981 E.L.T. 653 (Guj.). He also relied on BIN notes at Heading 84.15 at page 1199.

6. For ease of reference, sub-item (1) of Tariff Item 29A is extracted below : 29A. REFRIGERATING AND AIR-CONDITIONING APPLIANCES AND MACHINERY, ALL SORTS, AND PARTS THEREOF (1) Refrigerators and other refrigerating appliances which are ordinarily sold or offered for sale as ready assembled units, such as ice makers, bottle coolers, display cabinets and water coolers.

As there is no dispute that the item is a refrigerating appliance, it is not necessary to go into the meaning of the word 'appliance' for which Shri Rohatgi has placed extracts from dictionaries. All that has to be seen is whether the cooling character of four illustrations following the words 'such as' would control the meaning of the whole sub-item.

7. In M/s. Jalal Plastic Industries case (supra) the Gujarat High Court dealing with Tariff Item 15A relating to polymerisation and co-polymerisation products following the expression 'such as' held "The enumeration in our opinion of the products which follows the expression 'such as' is, therefore, not exhaustive". In Commissioner of Sales Tax v. Kwality Restaurant- 1980 Vol. 45 STC 486, the Allahabad High Court dealing with a Notification under U. P. Sales Tax Act about illustrations following the expression 'such as' held that it was illustrative and not exhaustive. Apart from the precedents cited by the parties, there are three high authorities not cited by the parties which clinch the issue. In Bengal Nagpur Railway Co. Ltd. v. Ruttanji Ramji and Ors.-AIR 1938 PC 67, the Privy Council held that an illustration to a Section cannot have the effect of modifying the language of the Section which alone forms the enactment. This view was reiterated in Aniruddha Mitra v. Administrator General of Bengal and Ors.-AIR 1949 PC 244-wherein after referring to other decisions on the subject, the Privy Council held as follows: "It is well-settled that just as illustrations should not be read as extending the meaning of a Section, they should also not be read as restricting its operation, especially so when the effect would be to curtail a right which the plain words of the Section would confer". In Shambhunath Mehra v. State of Ajmer-AIR 1956 S.C. 404, Boss J. laid down as follows : "We recognise that an illustration does not exhaust the full content of the Section which it illustrates but equally it can neither curtail nor expand its ambit". In view of the foregoing authorities, if the Freezer is a refrigerating appliance falling under main part of the sub-item and its quality is other than that of the four illustrations, it would still merit assessment under the sub-item.

8. As for Shri Chandrasekharan's reliance on the Bombay High Court decision in the Central Camera Co. Ltd.'s case, 1981 E.L.T. 344-which was a case dealing with X-ray processing unit with a cooling unit, we do not think that this case helps the appellants. The main reasoning for the decision is to be found in paras 8 to 11 of the judgment. What weighed with the High Court was that an X-ray unit could exist without any refrigerating or cooling process when such is not the case in the case of the subject freezer. The manufacture of ice-cream is only possible through refrigeration process. It cannot be said that ice-cream unit can exist independently of refrigeration. The refrigeration only makes conversion of milk into ice-cream possible.

Therefore, the decision does not help the appellants.

9. In view of the foregoing, as to CV duty we hold that Freezer which is undisputedly a refrigerating appliance falling under main part of the sub-item could not go outside the sub-item merely because its activity is different from those of the illustrations set out in the sub-item.

10. Taking up the question of classification for the purpose of customs duty of Can-filler, Fruit feeder and Ripple machine, Shri Chandrasekharan relied on Note 3 under Section XVI of the Schedule to the Customs Tariff Act which deals with classification of composite machines and Notes 2 and 5 in Chapter 84 ibid. In this connection he also referred to Rules 2(a), 2(b) and 3(b) of the rules for the Interpretation of the Schedule to the Customs Tariff Act. He claimed that in view of these provisions the three items would merit classification like the Freezer, i.e. under Heading 84.15. On behalf of the respondents Shri S.C. Rohatgi invited out attention to Rule 1 of the Rules for Interpretation of Schedule to the Customs Tariff Act and submitted that titles of sections and chapters are provided for ease of reference only. He argued that for legal purposes classification shall be determined according to the terms of the headings and any relative Section or chapter notes. The goods in question fell under specific tariff headings and, therefore, their classification under those headings on merits was justified. He further submitted that the three items in question were machines with individual functions and it could not be said that these machines along with the Freezer Item No. 1 would constitute a composite machine. The Rules and Notes relied upon by Shri Chandrasekharan were not relevant for classification under Heading 84.15 and Customs Tariff Act for these three items. The three items could not be given the classification as for the Freezer.

11. For ease of reference the relevant provisions referred to by either of the parties are extracted below : Rules for the Interpretation of the First Schedule to the Customs Tariff Act : 1. The titles of Sections and Chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the Headings and relative Section or Chapter Notes and, provided such Headings or Notes do not otherwise require, according to the provisions hereinafter contained. The classification of goods within a Heading shall be determined by applying as between sub-headings the like rules as are applicable between Headings.

2(a) Any reference in a heading to an Article shall be taken to include a reference to that Article incomplete or unfinished, provided that, as imported, the incomplete or unfinished Article has the essential character of the complete or fabricated Article. It shall also be taken to include a reference to that Article complete or finished (or falling to be classified as complete or finished by virtue of this Rule), imported unassembled or disassembled.

2(b) Any reference in a heading to a material or substance shall be taken to include a reference to mixtures or combinations of that material or substance with other materials or substances. Any reference to goods of a given material or substance shall be taken to include a reference to goods consisting wholly or partly of such material or substance. The classification of goods consisting of more than one material or substance shall be according to the principles contained in Rule 3.

3. When for any reason, goods are, prima facie, classifiable under two or more Headings, classification shall be effected as follows: (b) Mixtures and composite goods which consist of different material or are made up of different components and which cannot be classified by reference to (a) shall be classified as if they consisted of the material or component which gives the goods their essential character, in so far as this criterion is applicable.

3. Unless the Headings otherwise require, composite machines consisting of two or more machines fitted together to form a whole and other machines adapted for the purpose of performing two or more complementary or alternative functions are to be classified as if consisting only of that component or as being that machine which performs the principal function.

Notes 2 and 5 in Chapter 84 of the First Schedule to the Customs Tariff Act.

2. Subject to the operation of Notes 3 and 4 to Section XVI, a machine or appliance which answers to a description in one or more of the Heading Nos. 84.01/02 to 84.21 and at the same time to a description in one or other of the Heading Nos. 84.22 to 84.60, is to be classified under the former Heading and not the latter.

Heading No. 84.17 is, however, to be taken not to apply to : (d) machinery for the heat-treatment of textile yarns, fabrics or made up textile articles (Heading No. 84.40) ; or (e) machinery or plant, designed for a mechanical operation, in which a change of temperature, (even if necessary) is subsidiary.

(a) sewing machine for closing bags or similar containers (Heading No. 84.41);or 5. A machine which is used for more than one purpose is, for the purposes of classification, to be treated as if its principal purpose were its sole purpose.

12. Reference to Rules 2(a), 2(b) and 3(b) of the Rules for Interpretation by the appellants for their claim to classification under Heading 84.15 in respect of three items does not strictly appear helpful to the appellants; nor do Notes 2 and 5 to Chapter 84. It is significant that plea relating to these rules was not raised before the Appellate Collector. As for the appellants' reliance on Note 3 to Section XVI which is extracted above, on which appellants have strongly relied for their claim under Heading 84.15, we have on record a leaflet from the manufacturers Mark bearing title Mark Accessories. This leaflet states that the manufacturers can also supply a wide choice of up-to-date accessories for improving manufacturing facilities and upgrading hygienic standards. In this leaflet, Can-filler, Ripple machine and Fruit feeder are shown as accessories. The leaflet would show that the three items are independent machines with independent functions. It would appear that Item No. 1 i.e. continuous Ice-cream freezer could function even without these three machines. These machines might at best improve the performance of the freezer but the documents would show that the three items definitely are independent machines with independent functions. It cannot be said that the freezer with these three items constitutes a composite machine. Appellants could not, therefore, relying on Note 3 to Section XVI, rightly claim classification as for the freezer under Heading 84.15. Appellants' reliance on Note 5 to Chapter 84 which only says that a machine which is used for more than one purposes is to be classified treating the principal purpose as sole purpose does not appear helpful to the appellants because it is not shown how the three items have more than one purpose. Reference to Note 2 extracted above also is not strictly relevant for the case. It has not been disputed that the three items have been assessed on merits according to the Heading applicable.

Therefore, looking to Rule 1 of the Rules of Interpretation of the First Schedule to the Customs Tariff Act, the assessment of the items on merits would appear legal and justified. It may be mentioned that apart from claiming assessment under Heading 84.15(1) like the Freezer itself, the appellants have not urged classification in respect of the three items under any other Heading of the Customs Tariff Act, nor has it been urged that the assessment made on merits is wrong. This observation has become necessary in view of the observation made by the Collector of Customs (Appeals) that two of the items could have fallen under Heading 84.59(2). Considering the foregoing, we do not enter into the question whether the assessment of the three items on merits otherwise than under Heading 84.15(1) is correct or not.

13. As a result of aforesaid discussion, we hold that the three items do not merit classification under Heading 84.15(1). As a result, appeal fails and is dismissed.


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