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Bharat Heavy Electricals Ltd. Vs. Collector of Customs - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1983)LC154DTri(Delhi)
AppellantBharat Heavy Electricals Ltd.
RespondentCollector of Customs
Excerpt:
.....the question whether such post-importation processes which may have to be performed before the goods imported can be fitted or attached are such as to change their essential character, or are of such a minor nature that they can be ignored for the purpose of classification, is one which depends on the facts of each case. in the present case, having regard to the composition of the goods, the use for which they were intended and to which they have been put, the description in the invoice, and the relatively minor alteration effected by the post-importation process, i.e., machining, the tribunal considers that this machining can be ignored and would not vitiate the classification of the goods as "parts" within the meaning of the notification. in the result, the tribunal allows the.....
Judgment:
1. The goods which are the subject matter of these proceedings are described as "Forged Stubs". They are stated to be required for fixing the boilers manufactured by the appellants. It is stated that the tubes leading from the boilers would, in turn, be attached to these "stubs".

The goods are made of an alloy of steel, and it has been stated that this is an alloy specially chosen for use where high pressures are met with.

2. The appellants are claiming the benefit of the conecssional rate of duty, in terms of Notification No. 350-Cus., dt. 2-8-1976, which refers to "parts required for the purpose of the initial setting up, or for the assembly or manufacture, or any article falling under...". The Schedule to the said Notification lists several Headings of the Customs Tariff Schedule. Any part required for the initial setting up, or for the assembly or manufacture of any article falling under these Readings is eligible for the concessional rate of duty, subject to fulfilment of certain other conditions set out in the Notification.

3. Boilers, which fall under Heading No. 84.01/02 of the Customs Tariff Schedule, are among the Headings listed in the aforesaid Notification.

There is no dispute that the boilers manufactured by the appellants fall within this Tariff Heading. There is also no dispute on the point that the stubs imported, after undergoing some processing (to which reference will be made below) were intended to be used, and were in fact used, for the assembly or manufacture of the boilers manufactured by the appellants. In short, except for the question whether the goods were "parts" within the meaning of the Notification, there is no dispute that the conditions set out in the Notification were satisfied.

4. The goods were assessed under Heading 73.33/40 of the Customs Tariff Schedule, namely, "Other articles of iron and steel", without extending to them the benefit of the exemption Notification. The party's refund claim in this regard was rejected as unsubstantiated. Their appeal was also rejected, the reason given by the Appellate Collector of Customs being that Heading No. 73.33/40 was not one of those listed in the Schedule to the aforesaid Notification.

5. On a plain reading of the Notification, it is clear that it is not material under what heading the subject goods are classifiable on merits, if they satisfy the conditions laid down in the Notification.

This has been conceded by the Senior Departmental Representative, Shri N.V. Raghavan Iyer. However, Shri Iyer argued that the goods were not "parts" within the meaning of the Notification. While not disputing that the goods were intended for the manufacture of boilers by the appellants, he argued that, on the basis of the appellants' own representation, and drawings and other literature placed by them before the Tribunal, it was clear that the goods would not be used in the condition in which they were imported, and therefore could not be claimed as "parts" at the time of importation.

6. The Tribunal finds that the goods as imported were in the shape of regular hollow cylinders of steel. In order to enable a boiler pipe to be connected on one side, one end of this cylinder has, as explained by the appellants, to undergo some machining so that the outer diameter is substantially reduced. Thus, a tapered shape is imparted to one end of the stub. It is the appellants' argument that this machining is essentially to enable the pipe to be, connected to the stub. It is also argued by them that the machining is a minor process which does not change the essential character of the finished article. In support of this they have referred to the invoice, in which the goods are described as "boiler components". Their representatives also urged that the stubs are made of a special alloy steel, in order to withstand high pressures in the boiler.

7. Having regard to the position as set out above, the only point for decision is whether the goods as imported are "parts" within the meaning of Notification No. 350-Cus., dt. 2-8-1976. The Tribunal observes that goods have no doubt to be classified with reference to their condition at the time of importation At the same time, it is obvious that any part of a machine or plant has to be fitted or joined to other parts, and this may involve welding, soldering, fitting with bolts and nuts, etc. It may also be necessary to carry out certain processes such as polishing, drilling or machining. The question whether such post-importation processes which may have to be performed before the goods imported can be fitted or attached are such as to change their essential character, or are of such a minor nature that they can be ignored for the purpose of classification, is one which depends on the facts of each case. In the present case, having regard to the composition of the goods, the use for which they were intended and to which they have been put, the description in the invoice, and the relatively minor alteration effected by the post-importation process, i.e., machining, the Tribunal considers that this machining can be ignored and would not vitiate the Classification of the goods as "parts" within the meaning of the Notification. In the result, the Tribunal allows the appeal and directs that consequential refund of duty be granted to the Appellants by the Customs authorities at Madras within 2 months from the date of communication of this order.


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