ORDER
S.L. Feetan, Member (J)
1. This appeal arises from Order-in-Original No. 4/01, dated 21-5-01 by the which the Id. Commissioner has rejected the appellant’s plea for grant of exemption to silver oxide zinc storage nickel cadmium batteries which has been supplied to various Air Force stations without payment of duty by claiming benefit of exemption under Notification No. 6/2000, dated 1-3-2000 and pan materia notifications existing for earlier periods wherein parts of aircraft falling under Chapter 88 or under any other chapter of the schedule of the CET Act have been exempted other than rubber tyres and tubes for aeroplane. The Commissioner has, after so rejecting the claim, confirmed the duty raised in show cause notice by the Deputy Commissioner of Central Excise I Division, Trichy.
2. The reasoning given by the Id. Commissioner for rejecting the
grant of benefit of the notification is brought out in Paras 8 to 10 of his order
which is reproduced herein below :
“I do not agree with the above submissions of the parly. The relevant notifications exempt parts of aeroplanes or helicopters required for manufacture or servicing of aeroplanes or helicopters (other than rubber tyres and tubes for aeroplanes and in the Explanation, it has been explained that for the purposes of the exemption, parts of aeroplanes or helicopters shall include engines, engine parts, wireless transmission apparatus, wireless receivers, iron and steel washers and screws, ball and roller bearings and other parts falling within the first schedule or second schedule, as the case may be. Therefore, the main issue to be decided is whether Silver Oxide, Zinc Storage/Nickel Cadmium batteries are parts of the aeroplane or not The said notification exempts parts of aeroplanes and parts for the purposes of Section XVII are classifiable under Heading 88.03. Section Note 2 of Section XVII specially excludes electrical machinery and equipment falling under Chapter 85 as parts and parts and accessories of aeroplanes. For
ready reference. Section Note 2 reads as under:
“The expression “parts” and “parts and accessories” do not apply to the following articles, whether or not they are identifiable as for the goods of the Section:-
(a) —
(b) —–
(c) ———–
(d) ——-
(e) —–
(f) electrical machinery and equipment (Ch. 85)”
In view of the above specific provisions excluding the goods of Chapter 85 from the scope of Section XVII, the Silver Oxide, Zinc Storage/Nickel C?d-mium batteries cannot therefore, be classified as parts of aeroplane and hence not eligible for exemption under the above notifications. In this connection, I rely upon the decision of the Hon’ble Tribunal in the case of Winter Misra Diamond Tools Ltd. [1996 (83) RLT 670] wherein the Hon’ble Tribunal has held 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 heading and the sub-headings), the exemption notifications have to be strictly in–terpreted 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 or cover only one or a few and not all the items covered by heading or sub-heading or the 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.
The tariff heading, section notes and the wordings of the notifications refer to as “parts” only and no different wordings have been used therein. Therefore, the part of an aeroplane has to be interpreted as per Section Note 2(f) of Section XVII and therefore, since the goods of Chapter 85 have been excluded from the purview of Section XVII, the said batteries are not be treated as parts of aircraft and consequently they are not entitled for exemption under the relevant notifications.
The party has relied upon the decision of the CEGAT in the case of Century Textiles and Inds. Ltd. [2001 (127) E.L.T. 716]. This decision of the Hon’ble Tribunal does not appear to be applicable to the facts of this case as the wordings of the C.E. notifications and the customs notifications are not identical. The case laws cited, reported in 1989 (42) E.L.T. 235, 1989 (29) E.L.T. 68 and 1996 (88) E.L.T. 151 are not applicable to this case in view of the decision of the Hon’ble Tribunal in the case of Winter Misra Diamond Tools Ltd. (surpa). The party has submitted in defence a certificate issued by the Ministry of Defence, Directorate of Purchase to the effect that the batteries supplied by them are exclusively used as parts of various aircrafts in the Indian Air Force. This
certificate produced is of no avail to the party as the said batteries are not parts of the aircraft as discussed above.”
3. Arguing for the appellant’s Id. Counsel Shri V. Sridharan and J. Sankararaman contended that the notification in question clearly exempts parts of aeroplanes or helicopters required for manufacture of servicing of aeroplane and helicopter (other than tyres and tubes for aeroplanes falling under any chapter in terms of SI. No. 254 of Notification No. 6/2000, dated 1-3-2000 clearly indicates that all parts of aeroplanes falling under any chapter of the first or second schedule of the tariff would get exempted. He points out that the appellants were supplying goods to the Indian Air Force in terms of specific contract and the contract is at Page 68 of the paper book. He points out to the certificate issued by the Air Force Authorities. The certificate also indicated that it was manufactured in terms of specific drawing, specific part numbers and had undergone various tests in terms of the approval order placed by Govt. of India, Ministry of Defence, Research and Development Organisation, Directorate of Aeronautics, Bangalore by their Order No. GRE (A/O/HAL BC/456/1/PC. 23, dated 13-1-89 which is at Pages 12 to 22 of the paper book. He also referred to the appendix to the said papers which shows the various test results of the item which is at Pages 23 to 41 of the paper book. He referred the certificate of approval of the item for use in the aircraft as the battery issued by the Chief Executive (Airworthiness of Ministry of Defence) at Pages 42 to 58 of the paper book. He contended that the various certificates issued to show that the item is a part of aircraft has not been contravened by the Commissioner in the order but has proceeded extraneously to reject the benefit of exemption for the reasons given in the order. He rebutted that Chapter Note 2(f) of the Section XVII cannot be applied for interpreting the notification which granted benefit to parts of aircraft falling under any chapter of the schedule of the tariff. He also submitted that the judgment relied by the Commissioner in the order is not applicable to the notification which is wide in terms and which gives exemption to all parts of any chapter. The judgment rendered in the case of Winter Misra Diamond Tools Ltd. as reported in 1996 (83) E.L.T. 670 dealt with a point wherein the notification had extracted the entire chapter heading of the tariff and in that circumstances the Tribunal had laid down that where the notification extracts the wordings of the tariff in toto in such circumstances the chapter note and section note can be read to interpret the notification. He submits that the Commissioner has erred in not reading the judgment at all and has mis-applied the judgment to the present notification which was wider in scope and granted benefit to all the parts of the aircraft under any chapter. He submitted that the Commissioner’s ruling that only parts of the aircraft falling under Chapter 88.03 would be eligible will not be correct. The Chapter 88.03 itself carried NIL rate of duty. It would not be logical in that circumstances for the legislature to pass a separate notification exempting parts of aircraft under any chapter heading when Chapter 88 carried NIL rate of duty. A clear reading of the notification indicates that any part used in aeroplane or helicopter falling under any other chapter of the tariff would get the benefit and not restricted to Chapter Heading 88.03 of the tariff. He contended that the pari materia notifications under Customs tariff issued by the Govt. under Customs Notification No. 11/97-Cus having identical wording came up for interpretation for granting benefit of the notification to the same
battery used in the aircraft and the Tribunal held that the benefit of notification is available to the battery used in the aircraft as in the case of Century Textiles and Industries Ltd. as reported in 2001 (127) E.L.T. 718. He submitted that the pan materia notification will have to be read and applied to another notification using same words as held by Larger Bench judgment in the case of Sri Ram Rayon as reported in 1987 (30) E.L.T. 850. He also pointed out that the Tribunal in the case of Century Textiles and Industries had applied the Larger Bench judgment of the Tribunal rendered in the case of Indian Airlines, Calcutta v. CC as reported in 1988 (38) E.L.T. 679 wherein aeroplane tyres were held to be parts of aeroplane and held to be exempted under part materia notification under Customs Act that is Notification No. 280/76-Cus., dated 2-8-76 and 99/81-Cus, dated 1-4-81. He submitted that both these judgments clearly applies to the facts of the case and hence the appeal is required to be allowed.
4. Ld. Advocate also relied on the judgment rendered in the case of Jay Shree Electricals as reported in 1993 (63) E.L.T. 492 wherein the battery has been held to be essential for the working of clock and not as an accessory. He submitted that this judgment has been approved by the Larger Bench judgment in the case of CC v. Lipi Data Systems as reported in 1995 (80) E.L.T. 542.
5. Ld. DR filed a written submission as sent by the Commissioner in this case and reiterated all the submissions made by the Commissioner in the written submission. He submitted that only those parts which are specified in the notification and falling under Chapter Heading 88.03 will be eligible for the benefit. He reiterated the Commissioner’s finding that the item is covered under 2(f) of the Chapter XVII which excludes parts of electrical machinery and equipment falling under Chapter 85 since the item has been classified under Chapter Heading 85.07 of GET. Therefore, they do not fall under Chapter 88 and hence in terms of Chapter Note 2(f) of Section XVII the benefit cannot be extended. The Commissioner’s reliance on Winter Misra Diamond Tools Ltd. (supra) applies to the facts of the case. He further submits that the Tribunal in the case of Titan Watches v. CC as reported in 1999 (108) E.L.T. 643 held that power cells are not components of watches falling under Chapter 91 of the tariff and denied the benefit on the ground that power cells fall under Chapter 85.03 and notification granted benefit to components of watches falling under Chapter 91. Likewise he relied on the judgment of Standard Batteries v. CC as reported in 2000 (119) E.L.T. 675 wherein electric storage batteries were held to be not assemblies or sub-assemblies of mother vehicles and he prayed for confirmation of the demand.
6. On a careful consideration of the submissions made by both the sides and on perusal of the entire records, we notice that the appellants have produced enormous evidence to show that the item is used as a part of aircraft. The appellants are manufacturing special storage batteries for the aircraft manufactured by the defence. The documents in the paper book clearly demonstrates that the silver oxide zinc battery manufactured was in terms of specified design and specification and had undergone various tests for the purpose of approval for use as a part of aircraft. The certificate issued by the Govt. of India, Ministry of Defence and various tests carried out are annexed to the paper book from Pages 11 to 152 of the paper book. All these materials
include the certificates issued by the defence experts and the scientists attached to the defence that the item is used exclusively as a part of MIG aircraft in the Air Force which has not been contravened by producing rebuttal evidence by the Revenue. In order to claim the benefit of notification the initial burden is on the assessee to discharge the same. They came within the ambit of the notification in the present case. The appellant with uncontra-vened evidence have discharged their burden that the item is a part of aircraft and used exclusively as part of MIG aircraft in the Air Force. They have produced the entire test results as well as the various stages of tests, it has undergone for the purpose of use as a part of aircraft. The documents issued by the Ministry of Defence clearly shows that the battery has been designed and developed to meet the governing specification and the details of the specification and various tests have been brought out in the enormous documents produced by the appellant. Therefore, there is no doubt in the matter that the item is exclusively used as part of the aircraft and that the Revenue has not challenged the veracity, correctness and authenticity of the documents. Therefore, the burden has now shifted on the Revenue to show that the impugned goods do not fall within the ambit of the notification. This burden has not been discharged by Revenue and therefore the Revenue’s case falls on the ground.
7. Ld. Commissioner instead of countering all these propositions of law and instead of discharging the Revenue’s burden to rebut the documentary evidence has plainly stated that he does not agree with the submissions of the party. We are constraint to observe that the Id. Commissioner has not applied the rudimentary and fundamental principles pertaining to interpretation of a notification. It is very clear from the record that the Id. Commissioner has erred in not going through the notification which exempts parts of aircraft falling under any chapter of the tariff. The notification from the time of its inception clearly granted benefit of exemption to parts of aircraft. The Chapter 88 of the tariff pertains to aircraft, spacecraft and parts thereof. The present tariff, from 1996-97, carries NIL rate of duty and therefore the need to issue specific notification for parts of aircraft falling under any chapter clearly indicates that parts falling in chapter other than Chapter 88 was required to be exempted from duty. The Commissioner in the impugned order has denied the benefit on the plea that the item falls within the Note 2(f) of Section Note XVII and thus they do not fall under Chapter 88. There is no dispute that the item is classified under Heading 85.07 of the tariff. But the notification is a blanket notification granting benefit to parts of aeroplane or helicopter required for manufacture or servicing of aeroplane or helicopter other than rubber tyres and tubes for aeroplane falling under any chapter in terms of Notification No. 6/96. Subsequent Notification No. 8/96 merely modified to mention Chapter 88 or any other chapter. The explanation mentions “for the purposes of this entry, parts of aeroplanes or helicopters shall include engines, engine parts, wireless transmission apparatus, wireless receivers, iron and steel washers and screws, ball and roller bearings and other parts falling within the said schedule”. From the reading of the above explanation, it is clear that there are various items which are not classified in the tariff as “parts” but have other specific heading. Therefore, the basis of the reasoning adopted by the Commissioner that only parts of Chapter 88 gets exempted is totally unfounded and based on his own sur-
mise and not in keeping with the reading of the notification. This is very unfortunate. Furthermore pari materia notifications having same wordings under the customs notification grants benefit and the Tribunal has given a categorical finding that all parts of aircraft are entitled to the benefit as rendered in the case of Indian Airlines (supra) which judgment clearly settled the issue. The Id. Commissioner by not following the Larger Bench judgment of the Tribunal has in our humble opinion committed judicial indiscipline. Further, we notice that in the case of Century Textiles and Industries (supra) the customs Notification No. 11/97-Cus had the same wording and the Tribunal in the case of Century Textiles and Industries have clearly held that the benefit of notification is required to be extended to battery specially designed for use in aircraft. This judgment clearly applies squarely to the facts of the case and they are required to be applied and benefit granted. Further, in the case of Jayshree Industries (supra) the Tribunal has clearly held that battery is essential for the working of clock and it cannot be considered as an accessory. This has been approved by the Larger Bench in the case of CC v. Lipi Data Systems. Therefore, there is not doubt in our mind that the battery specially designed for the aircraft and certified by the Ministry of Defence and tested for its use exclusively as part of the aircraft is covered within the ambit of the notification and that the issue is also covered by the Larger Bench judgment of the Tribunal rendered in the case of Indian Airlines (supra) and CC v. Lipi Data Systems (supra). The issue is also covered by the judgment of the Tribunal rendered in the case of Century Textiles and Industries, Further, we notice that the judgment cited by the DR in the case of Titan Watches and Standard Battery is totally inapplicable. DR has not applied his mind while citing this citation. The reason being that in the case of Titan Watches the notification granted benefit to component parts of watches falling under Chapter 91. The power cells were classified under Chapter 85.03 and hence the benefit was denied. In the case of Standard Batteries the electric storage batteries were held to be not assemblies and sub-assemblies of mother vehicle. Both the citations have no relevancy at all. Further, the Commissioner’s emphasis that the judgment of the Winter Misra Diamond Tools Ltd. lays down the proposition that section note and chapter note are required to be applied is totally mis-reading of the judgment. Ld. Commissioner has not applied his mind to see the ratio laid down therein. The section note and chapter note would apply to interpret the notification only when the entire chapter heading has been extracted in toto in an exemption notification. In the present case the notification is very wide in its sense, granting benefit to parts of aircraft and helicopter falling under any chapter heading of the first or second schedule of the tariff. Therefore, the judgment of Winter Misra is not at all applicable for denying the benefit to the exemption of the notification.
8. In that view of the matter for the reasons stated above the impugned order is set aside and appeal allowed.