Collector Of Central Excise, Mumbai v. Samyak Tools

[Order per : P.C. Jain, Member (T)]. - Short question in this appeal of Revenue is whether segments - parts of saw blades - falling under Tariff Heading 82.02 by virtue of Chapter Note 2 of Chapter 82 are entitled to the benefit of Notification 207/88-C.E.

1.2 Original authority denied the benefit of the said notification on the ground that it covers the goods strictly as described in Tariff Heading 82.02 and it does not cover parts of the goods described in the said heading.

1.3 Lower appellate authority, on appeal by respondents herein, allowed the benefit of the said Notification 207/88-C.E. to the segments relying on Bombay High Court’s judgment in the case of NIBS India v. U.O.I. [ (Bom.)] and also on Tribunal’s judgment in the case of BHEL v. Collector [ (Tribunal)] which held that when a notification uses identical expression (in relation to goods exempted thereunder) as described in a Tariff Heading, then the same meaning to the expression in the notification should be given as is given to that expression in Tariff Heading.

Hence this appeal before the Tribunal.

2.1  Learned SDR has reiterated the same ground which has been adopted by the Assistant Collector. He submits that notification exempts, inter alia, only the saw blades and not the parts thereof. Simply because, by application of a Chapter note, parts of saw blades get classified along with the saw blades, it does not mean that the ‘parts’ have been defined to mean the same thing as the complete tool (saw blade). Notification has to be construed as it stands. It does not exempt parts of goods described in the notification. Therefore, ‘parts’ (segments here) cannot be extended the benefit of Notification 207/88-C.E.

2.2 Learned Collector (Appeals), he submits, has misapplied Tribunal’s judgment in BHEL (supra). That judgment, he submits on the other hand, supports the Revenue. That judgment, he points out, declined to accept the applicability of Notification 35/79-C.E. to parts of a machine by invoking Interpretative Rule 2(a) for Central Excise Tariff stating that incomplete/unfinished goods should be treated as finished goods. It was held by the Tribunal unanimously that Interpretative Rule 2(a) would not be applicable to the notification. One of the Members (Shri S. Venkatesan, Hon’ble President) of three Members comprising the Bench of the Tribunal in that case entered an exception to the above general rule enunciated by the other two Members. Hon’ble President stated to the effect that where the expression relating to ‘goods’ under exemption is identical in both notification and Tariff Heading, then meaning given to that expression in Tariff Heading would equally apply to that expression in the notification. But despite the said exception, Hon’ble President, Shri S. Venkatesan did not disagree to the conclusion that the notification was inapplicable to the goods since the goods were in the nature of semi-finished, rough machined castings. These could not be treated as parts required for the purpose of initial setting up or for assembly or manufacture of any article falling under the headings listed therein.

2.3  He, therefore, prays for setting aside the impugned order and allowing the appeal of the Revenue.

3.1  Opposing the contention Shri S.R. Shah, learned Director of the respondent company reiterates the finding of the lower appellate authority to the effect that since the description of goods as exempted under the Notification is identical to the description in Tariff Heading 82.02, the exemption notification would also be applicable to parts of those goods as held by the Tribunal in the judgment of BHEL (supra). He also relies on Bombay High Court’s judgment in the case of NIBS India (supra).

3.2 Apart from the foregoing, he draws our attention to a recent judgment of the Tribunal in the case of Winter Misra Diamond Tools Ltd. reported in which holds as expressed by the Hon’ble President, Shri S. Venkatesan in the case of BHEL (supra). In this connection, we reproduce para 42 of the said judgment :-

“42. We have considered the above submissions. We observe that it is a settled point of law by now that whereas the Rules for Interpretation of the Schedule and the Section Notes and Chapter Notes are primarily and principally meant for the interpretation of the Tariff (including the Headings and the sub-headings), the exemption notifications have to be strictly interpreted in accordance with the words of the Notification thereunder and the intention thereof; indeed, their scope could be different from that of the heading in cases where , they may seek to cover only one or a few and not all the items covered by heading or sub-heading or conditions prescribed therein may so indicate or imply. At the same time, the doctrine of harmonious construction is also to be kept in view and wherever wordings used in the Notification are the same as the ones used in the Rules or the Notes or the Headings or sub-headings, or the scope is similar, it is open to call in aid, or take the assistance of the Interpretative Rules and/or the Section Notes or Chapter Notes and the Notification(s) has to be read in the same sense and the wordings have to be assigned the same meaning unless the context indicates otherwise or some items are expressly excluded. In the present case, the wordings used in the Notifications No. 108/88 and 207/88 are exactly the same as in the Heading 82.02. Therefore, the Chapter Note 2 could be called in aid in order to interpret and ascertain the meaning and scope of the wordings used in the notification, although, these notifications have been issued under Rule 8(1) of the Central Excise Rules and not under the Tariff Act.”

3.3  Learned Director for the respondents further submits that the goods involved in the case of Winter Misra Diamond Tools Ltd. (supra) are similar to the goods involved in the present case and the notification is the same as in the present case i.e. Notification No. 207/88.

3.4  He further submits that Notification No. 207/88 involved in the present matter has been further amended in 1991 by Notification No. 63/91, dated 25-7-1991, by which all goods falling under Tariff sub-heading 8202.00 have been exempted, thus, making the position clear beyond doubt. It is, therefore, the contention of the learned Director that the said Notification No. 63/91, dated 25-7-1991 be treated as a clarificatory notification and should be given retrospective effect.

4.1  We have carefully considered the pleas advanced from both sides. We observe that the judgment of Tribunal in the case of BHEL (supra), lays down a proposition that the Section Notes and the Rules of Interpretation are explicitly intended to be for the interpretation of the Tariff and its various Headings and that it would not, therefore, be proper to apply those Notes and Rules to the interpretation of a Notification [See para 9]. An exception, however, was introduced by the learned Honourable President, as a Member of that Bench, relied upon by the lower appellate authority in the impugned order. That observation of the Honourable President in the case of BHEL in our view cannot be taken as a ratio of the Tribunal’s judgment in BHEL.

4.2 In any case, the exception introduced by the learned Honourable President that the expression occurring in Notification relating to some goods, if that expression is identical to the one given in Tariff sub-heading, then the meaning attributed to the expression in Tariff Heading should determine the scope of that expression in the Notification is applicable where the nature and character of goods have been defined or given a certain meaning in Tariff Heading/sub-heading by virtue of Chapter Notes/Section Notes or Interpretative Rules. In the present case we observe that “parts” have not been equated or defined as being equivalent to the goods described in Tariff sub-heading 8202.00 by virtue of Chapter Note 2 of Chapter 82. Chapter Note 2 ibid merely provides a formula for determination of the classification of `parts’ of base metal of the articles falling under Chapter 82. It does not mean that parts of base metal of the articles falling under this Chapter have been equated with the articles of this Chapter. The Tariff sub-heading does not read “including all parts”, nor does Note 2 of Chapter 82 indicate that parts of the articles under this Chapter would be included within the scope of articles of this Chapter. In our view the words have been chosen very carefully by the learned President (Shri S. Venkatesan) when he says -

“Where an exemption Notification uses the very expression which occurs in the Tariff Heading to which it relates, there would be a strong case for giving the same meaning to the expression in the Notification as it carries in the Tariff Heading”. [Emphasis supplied]

As stated above, there is no hint either in the Tariff sub-heading 8202.00 or Chapter Note 2 that parts of articles under Chapter 82 have the same meaning as the articles themselves.

4.3 Parts involved herein are separately recognisable as tradeable commodities and they have, therefore, to be assessed in their own right separately.

4.4 Reliance placed by the learned Director on Winter Misra Diamond Tolls’s case also does not help the respondents. The judgment of the Tribunal in Winter Misra Diamond Tolls’ case does not discuss the citations made by the opposing parties in that case regarding applicability or non-applicability of Section Notes, Chapter Notes or Interpretative Rules of the Tariff to a notification. We are, therefore, of the view that the said case would not be a proper authority for the principle, as contended by the respondents.

4.5 Notification 207/88 admittedly does not specifically include the parts within the scope of the Exemption Notification. In our view, therefore, the benefit of the said Notification cannot be extended to the imported goods.

4.6 Reliance placed by the learned Director for the respondent firm on the subsequent Notification 63/91, dated 25-7-1991 cannot be given a retrospective effect. It cannot be treated as a clarificatory Notification because the segments without the aid of Notification 63/91, dated 25-7-1991 would not be included within the scope of Notification No. 207/88-C.E., as held above. In our view Notification 63/91, dated 25-7-1991 clearly reflects a change in the policy of Government regarding the exemption on goods and would, therefore, be effective only from the said date 25-7-1991.

4.7 Reliance placed by the learned Director for the respondent firm, Shri Shah on Bombay High Court’s judgment in NIBS India (supra) is also not relevant to the controversy here. We observe that Bombay High Court’s judgment turned on the point that when the Revenue had taken the classification of the goods at the time of assessment under a particular Heading it could not change it when application for refund was filed by the appellant and on the basis of the said classification, an exemption relevant to that classification was ignored while charging the additional duty of Customs.

5.1 In view of the foregoing discussion, we set aside the impugned order and allow the appeal of the Revenue in so far as the benefit of Notification 207/88-C.E. to the segments is concerned.

EDITOR’S COMMENTS

It is submitted that this decision of the Tribunal is contrary to the Supreme Court decision in the case of Prestige Engg. (I) Ltd. v. Collector - (S.C.) - wherein it was held that expressions defined in the Act should be understood in the same sense if used in the Rules and notifications issued under the said Act. Further in the case of Gujarat State Fertilizers Co. - (S.C.), it was held that Chapter Notes of the Tariff Chapter referred to in the notification have to be read as part and parcel of the said notification.