Conveyors and elevators specifically manufactured as parts of rice milling machinery fall under HSN 8437

2019 ACR 383 CESTAT Chandigarh
M/S ANNAPURNA AGRONICS MACHINERY PVT LTD
Vs
CCE & ST- SONEPAT (DELHI-III)
Mr. Ashok Jindal, Member (Judicial) And Mr. Bijay Kumar, Member (Technical)
No.- Appeal No. E/61820/2018 Order No.- A/63546/2018 dated December 5th 2018

Note –

The conveyors and elevators specifically manufactured as the part of rice milling machinery along with other machinery of rice by the appellant merit classification under chapter heading No. 8437.

Present:

For Appellant (s): Shri Vikrant Kackaria, Advocate

For Respondent (s): Shri A. K. Saini, AR

ORDER

Per: Mr. Ashok Jindal

The appellant is in appeal against the impugned order wherein the demand has been confirmed against the appellant by classifying the items in question under Chapter Heading No. 8428 of the Central Excise Tariff Act, 1985.

2. The facts of the case are that the appellants are manufacture of Rice Milling Machinery and Parts thereof like “Rice Bucket Elevator (grain discharger), rice conveyor (grain feeder), paddy cleaner, paddy husker, paddy separator etc. The dispute in this case is about “rice bucket elevator” and “rice conveyor” whereas the appellants were classifying these goods under heading No. 8437 as “machinery used in Milling Industry” where the tariff rate is nil, according to the department these goods are classifiable under heading No. 8428, as “other lifting, handling, loading or unloading machinery (for example Lifts, escalators, conveyors, Teleferice)”. On this basis, by the impugned order, the commissioner, classifying the goods, in question, under heading No. 8428 has confirmed the demand against the appellant company alongwith interest thereon under Section 11AB and beside this, has imposed penalty of equal amount on them under Section 11 AC. Against this order, the appellant is before us.
3. Ld. Counsel appearing on behalf of the appellant submits that in the case of Alpsco Graintech Pvt Ltd & Ors vs. CCE & ST-Chandigarh vide final Order No. A/63373-63375/2018 this Tribunal has examined the issue and held on merit classification on the items in question under chapter heading No. 8437 of Central Excise Tariff Act, 1985. Therefore, the impugned order is to be set-aside.
4. Heard the parties.
5. Considering the fact that the identical issue came up before this Tribunal in the case of Alpsco Graintech Pvt Ltd & Ors vs. CCE & ST-Chandigarh vide final Order No. A/63373-63375/2018. This Tribunal has observed as under:-

“6. For better appreciation to decide the classification, the tariff heading No. 8428 and 8437 of Central Excise Tariff Act are extracted herein below:-

8437 Machines for cleaning, sorting and grading seed, grain Or dried leguminous vegetables machinery used in the Milling industry or for the working of cereals or dried leguminous vegetables, other than farm-type machinery

The case of the Revenue is that as per HSN Explanatory notes to Chapter Heading No. 8437, the machine used in milling industry. However, the heading does not cover conveyors and elevators. Therefore, the revenue wants to classify conveyors and elevators under heading No. 8428. On the other hand, the contention of the appellants is that as per HSN Explanatory notes itself these machines are feeders and same is covered under explanatory notes as feeder machines designed to ensure local and even flow of grain to the crushing rollers.

7. We have also seen the Section Note 3,4,5 to Section 6 of the Central Excise Tariff Act which are expected herein below:-
8. Unless the context otherwise requires, composite machines consisting of two or more machines fitted together to form a whole and other machines designed 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.
9. Where a machine (including a combination of machines) consists of individual components (whether separate or interconnected by piping, by transmission devices, by electric cables or by other devices) intended to contribute together to a clearly defined function covered by one of the headings in Chapter 84 or Chapter 85, then the whole falls to be classified in the heading appropriate to that function.
10. For the purposes of these notes, the expression “machine” means any machine, machinery, plant, equipment, apparatus or appliance cited in the headings of chapter 84 or 85.”

On going through the above provisions, we find that the conveyors and elevators manufactured by the appellants are designed, specifically, for rice mills which has not been disputed by the adjudicating authority in the impugned order, wherein it has been observed by the adjudicating authority that “the goods in question are basically conveyors & elevators, which are used for the transportation of the rice in a rice mill from one stage to the another. They can be horizontal as well as vertical as per the requirement of the Industry”. These conveyors and elevators manufactured by the appellants specifically designed for use in rice mills are supplied alongwith the other rice mill machinery to the rice millers. These facts are not in dispute, therefore, the combination of machines and the conveyors and elevators supplied by the appellants alongwith other rice milling machinery to the rice millers is a combination of machine which ultimately perform the function of rice milling. Thus, as per Section notes the entire machinery is classifiable under heading 8437 which is for machinery used in milling industry and it is not disputed that these elevators and conveyors being manufactured by the appellants were not used for milling industry. The Central Excise Tariff is clear with respect to this aspect that the said machines if supplied as a combination of machines would be covered under the main heading 8437, therefore, the reliance on the explanatory note to HSN is not warranted as the HSN explanatory note is not a law but are they are only guiding factor for classification when the section note to the Central Excise Tariff is clear on the aspect wherein it has been clarified that the said items are to be classified under the main machine. Therefore, the department cannot place reliance upon the explanatory notes to change the classification of the said items.

7. We further take a note of the fact that in the case of Commissioner of Central Excise, Kanpur vs. Rationale Iron & Steel Co. (supra), this Tribunal has categorically observed that explanatory notes have no force of law and they are only for guidance whereas the findings of the Ld. Commissioner (Appeals) is on the basis of Central Excise Tariff Act, 1985 enacted by Indian Parliament. Therefore, it was held that the ground raised by the Revenue is not sustainable. Admittedly, in the case in hand, the revenue is heavily relied on the HSN explanatory note to Section 16 of the Central Excise Tariff Act to say that the conveyors and elevators are classifiable under heading No. 8428 is not applicable to the facts of the present case. We further take a note of the fact that explanatory note itself classifying feeder machines designed to ensure local and even flow of grain to the crushing rollers as classifiable under chapter heading No. 8437. The main function of the machines, these conveyors and elevators is take the grain from one machine and if the same in other machine alongwith its machines. Therefore, it is clear that elevators and conveyors are in industry of grain feeder and perform the function of feeding grains in various machines used in rice mill. In these set of observations, the merit classification of the conveyors and elevators used in specifically designed for rice milling are classifiable under chapter heading No. 8437. We further take a note of the fact that in the case of Moped Assembly (supra) this Tribunal has observed that sheet metal components for use exclusively in rice milling industry classifiable under chapter heading No. 8437. Admittedly, in this case, these conveyors and elevators are specifically used for rice milling industry as the part of the composite machinery of rice milling, therefore, having merit classification under chapter heading No. 8437.
8. We have also gone through the decision of the Hon’ble Apex Court in the case of G. S. Auto International Ltd. (supra) wherein the Hon’ble Apex Court observed as if the items specifically made for specific machine would be classifiable as part of the said machine and not under the general heading. Admittedly, in the case in hand, the conveyors and elevators are for specific use of rice milling industry and nowhere else, in that circumstances, the same merits classification as per the rice milling machinery under tariff heading No. 8437.
9. The Ld. AR heavily relied on the decision of Eminence Equipments Pvt. Ltd. (supra) to say that conveyors and elevators used for rice mills is to be classified under chapter heading No. 8428. We have gone through the facts in the case of Eminence Equipments Pvt. Ltd. (supra) was not manufacturing the elevators and conveyors only for rice millers but were supplying the same to other industries like breweries etc., therefore, the items manufactured by Eminence Equipments Pvt. Ltd (supra) were of general nature and not for specific use to the machines of milling industry. Further, the conveyors and elevators manufactured by M/s Eminence Equipments Pvt. Ltd. (supra) did not come under the category of composite machines as they were supplying only elevators and conveyors and not combination of machines. Therefore, the facts of the present appellants are distinguishable from the facts of the case of M/s Eminence Equipments Pvt. Ltd (supra). Moreover, in the case of Eminence Equipments Pvt Ltd. (supra) this Tribunal has not considered the chapter note 3, 4 and 5 of Section 16 of Central Excise Tariff Act, 1985. Therefore, on that account also the decision of the said case is not applicable in the present case.
10. Moreover, the appellants have produced various technical opinions as well as the data from Customs and Central Excise Department wherein the importer as well as exporter of elevators and conveyors used specifically designed for rice milling have been classified under heading No. 8437 of the CETA. Therefore, we hold that the decision in the case of Eminence Equipments Pvt Ltd. (supra) is not applicable to the facts of the present case.”
11. In view of the above, we hold that the conveyors and elevators specifically manufactured as the part of rice milling machinery alongwith other machinery of rice by the appellant merit classification under chapter heading No. 8437 of CETA, 1985. The impugned order deserves no merit hence set-aside. Consequently, the demand of duty against the appellant alongwith interest is not sustainable. Consequently, no penalty is imposable on the appellant.
12. In result, the impugned order is set-aside and the appeal is allowed with consequential relief, if any.

(Dictated & pronounced in the Court)