ORDER
Harish Chander, President
1. Collector of Central Excise, Kanpur has filed the above-captioned 21 appeals being aggrieved from a common order passed by the Collector of Central Excise (Appeals) disposing of 21 appeals. Since all the above-captioned appeals emerge from a common order and as such, the same are being disposed of by this common order. Briefly, the facts of the case are that the respondents are manufacturers of electric generating sets/alternators, 1C engines and parts thereof and had filed classification lists claiming assessment under Heading 85.01 for alternators/generators whereas the Revenue has assessed the same under Heading 85.11. Show Cause Notices were issued by the Revenue authorities desiring them to Show Cause as to why their product Alternator (now described as AC Generators) in the aforesaid classification list may not be classified under sub-heading 8511 of Central Excise Tariff Act, 1985 and why the aforesaid classification list filed by them should not be modified under Rule 173B(5) of Central Excise Rules, 1944 and thereby modifying the classification of their product alternator (now mentioned as AC generator) under sub-heading 8511 of Central Excise Tariff Act, 1985 and why the central excise duty at the rate of 25% should not be charged and the differential of central excise duty occurring as a result of such approval may not be demanded from them under the provisions of Section 11A of Central Excises and Salt Act, 1944. In the Show Cause Notice, it was further mentioned that sub-heading 8501 covers “Electric motors and generator (excluding generating sets)” and the alternator (now termed as AC generators) is principally used for manufacturing of generating sets once it is coupled with or used in conjunction with 1C diesel operated engine and as per the Explanatory Notes contained in the Harmonised System of Nomenclature, it appears that “Alternators” now mentioned as “AC Generators” are appropriately classifiable under sub-heading 8511 of Central Excise Tariff Act, 1985. In reply to the Show Cause Notice, the respondents pleaded that the product manufactured by them is known in the commercial parlance as “Alternators” as well as “AC Generators” and they have not renamed their product. In support of their contention, they submitted the certificates from M/s. Jakson & Co., New Delhi, M/s. K.G. Engineers, Agra, M/s. India Ice & Cold Storage, Agra, M/s. Himalaya Industries, Agra, M/s. Diwan Chand Suraj Prakash Jain, Agra and M/s. Ravi Ice & Cold Storage, Agra. Reference was also made to HSN Explanatory Notes and the respondents further pleaded that 85.01 was the proper heading. The adjudicating authority did not accept the contention of the respondents and had ordered classification under Heading 85.11 and created the demand for the differential duty. Being not satisfied with the order passed by the Assistant Collector, appeals were filed before the Collector (Appeals) and the Collector (Appeals) after hearing both the sides had held that these are Alternators/Generators and are most appropriately classifiable under Heading 85.01 and not under Heading 85.11. Being not satisfied with the order passed by the Collector (Appeals), Revenue has filed the appeals before the Tribunal. Shri K.K. Jha, the learned SDR is present on behalf of the appellant. He relied on the order passed by the Assistant Collector and pleaded that the correct classification is under Heading 85.11 and not under Heading 85.01. He referred to the classification list filed by the respondents which appear on Page 11 of the paperbook and pleaded that the period involved is after 28th February, 1993. He pleaded that the Collector (Appeals) had relied on ISI specifications and HSN Explanatory Notes and pleaded that no reliance can be placed on the same. In support of his arguments that ISI is only for quality control, he relied on the following decisions :-
(1) VETO Co. v. Collector of C. Ex., reported in 1992 (62) E.L.T. 584 (Trib.).
(2) Hicks Thermometers (India) Ltd. v. Collector of Customs, Calcutta, reported in 1987 (27) E.L.T. 453 (Trib.).
Shri K.K. Jha, the learned SDR referred to the Tariff Headings 85.01 and 85.11 and argued that Tariff Heading 85.11 covers generators (for example; dynamos, alternators) and cut-outs of a kind used in conjunction with such engines. He argued that the word “and” in the Heading is to be read as “or”. In support of his arguments, he cited a decision of the Tribunal in the case of Electronic Devices, Bangalore v. Collector of Customs, Madras, reported in 1987 (28) E.L.T. 561 (Trib.) and laid special emphasis on the portion from the order “Here the word ‘And’ means ‘Or’.” Shri K.K. Jha pleaded that in view of the description of the Heading 85.11, the generators/alternators fall under Heading 85.11 as held by the Assistant Collector. He pleaded for the acceptance of the appeal.
2. Shri V. Sridharan, the learned Advocate who has appeared on behalf of the respondents, in reply to the arguments addressed by the learned SDR read Headings 85.01 and 85.11. He argued that the description in both the Headings is identical to the HSN Explanatory Notes and as such for advisory opinion, resort should be made to HSN Explanatory Notes. In support of his arguments, he relied on the decision of the Hon’ble Supreme Court in the case of Khandelwal Metal & Engineering Works and Anr. etc. v. Union of India and Ors., reported in 1985 (20) E.L.T. 222 (S.C.) (Para 21). He referred to HSN Explanatory Notes at Page 1335 and laid special emphasis on unnumbered Para 4. The heading covers “all electric generators including large generators for power stations; auxiliary generators used for exciting the windings of other generators; generators of various sizes and types used for supplying current for a variety of purposes (e.g. on ships, on farms not connected to an external supply, in chemical industries for electrolysis, and in diesel-electric trains)” and also referred to the top three paras from the same Page 1335. He also referred to the exclusion clause at Page 1335 of HSN Explanatory Notes with reference to (f) which describes “Generators (dynamos and alternators) used in conjunction with internal combustion engines, or for electrical lighting or signalling equipment of a kind used for cycles or motor vehicles (Headings 85.11 and 85.12 respectively)”. Shri V. Sridharan, the learned Advocate referred to Heading 85.11 of HSN Explanatory Notes at Page 1348. He argued that the perusal of the same shows that this Heading is only for internal combustion engines. He also referred to the literature on “Automotive Technology” by H.M. Sethi at Page 160. Para 9.1 on introduction shows that the electrical system in an automobile is classified as :
(1) Generation, storage and distribution system
(b) Starting system
(3) Ignition system
(4) Lighting system
(5) Accessories like wipers, horns, electric petrol pumps, cigarette lighters, etc.
Shri V. Sridharan pleaded that the order passed by the Assistant Collector is not correct. He laid special emphasis on Paras 14, 15,16,17 & 18 of the Collector (Appeals)’ order. He argued that the Collector had discussed in the order that the parts have been assessed under Heading 85.03 and if the parts are assessed under this Heading, there is no reason why the main equipment viz. generators/alternators should not be classified under Heading 85.01. He drew the attention of the Bench to Chapter Note-2 of Chapter 85 which reads “Headings Nos. 85.01 to 85.04 do not apply to goods described in Heading Nos. 85.11, 85.12, 85.40, 85.41 or 85.42”. He argued that if the generators/alternators fall under Heading 85.11, Heading 85.01 will become redundant and the Heading which is more specific has to be adopted. He also argued that Rules of Interpretative Rule 3(a) will not apply in this case. In support of his arguments, he cited the following decisions :-
(1) Rajasthan Synthetic Industries Ltd. v. Collector of Central Excise, reported in 1989 (42) E.L.T. 24 (Trib.).
(2) Track Parts Corporation v. Collector of Customs, reported in 1992 (57) E.L.T. 98 (Trib.) Para 12.4(d).
Shri V. Sridharan, the learned Advocate pleaded for the rejection of the appeals. In reply, Shri Somesh Arora, the learned JDR again referred to the HSN Explanatory Notes and referred to unnumbered Para 4 at page 1335 which reads as “Electric generators may be hand or pedal-operated, but usually they have prime movers (e.g., hydraulic turbines, steam turbines, wind engines, reciprocating steam engines, internal combustion piston engines). However, this heading only covers generators when presented without prime movers.” He pleaded for the acceptance of the appeals.
3. We have heard both the sides and have gone through the facts and circumstances. The products in dispute are generators/alternators. We have perused the classification lists filed by the respondents. For proper appreciation of the legal position, Headings 85.01 and 85.11 are reproduced below :-
* * * * *
A perusal of Heading 85.01 shows that it relates to Electric Motors and Generators (excluding generating sets). A perusal of the classification list filed by the respondents shows that generating sets have been separately shown by the respondents under Heading 85.02. The Revenue’s main contention for assessing generators under Heading 85.11 is that generators are used in conjunction with engines and the word “and” in the Heading should be read as “or”. In support of his arguments, Shri K.K. Jha, the learned SDR has cited the decision of the Tribunal in the case of Electronic Devices, Bangalore v. Collector of Customs, Madras, reported in 1987 (28) E.L.T. 561 (Tri.). For the proper appreciation of the product in dispute, we would like to refer to the literature on “How Things Work” Volume I by Granada, London Toronto Sydney New York 1982 edition. Relevant extract from Page 58 is reproduced below :-
“The variation of the flux can be obtained either by varying the area enclosed within the circuit (this is the principle applied in the electric generator) or by varying the magnetic field strength and thus causing changes in the density of the flux. The operating principle of the generator is illustrated in Fig. 7a. The amount of magnetic flux passing through the plane of the rotating loop of wires varies periodically from zero to its maximum value, according as the plane of the loop is parallel or perpendicular to the magnetic lines of force. An electric current which varies periodically in direction (alternating current) is thereby induced in the loop. This current is collected by means of contact rings (known as slip-rings) and flows through the external circuit (Fig. 7b). The collector may also be in the form of a so called commutator consisting of a number of separate segments (Fig. 7c, showing only two segments), whereby a (pulsating) direct current is obtained.”
“Generators are machines used for the large-scale production of electrical energy. Their operation is based on the principle of electrical induction (see also page 58), whereby a periodic flow of electricity is produced in a loop-type conductor as a result of the periodic variation of the flux of the magnetic lines of force passing through this loop. To do this, we can either cause the loop to rotate in a constant magnetic field or, alternatively, the loop can be kept stationary and the magnetic field rotated. In the former arrangement the “loop” is formed by the armature windings on the rotor which revolves between the fixed magnetic poles of the starter. In the latter arrangement the amature is stationary, and the magnetic poles (on a so-called “magnet wheel”) revolve instead; the starter consists of an iron ring with the induction coils mounted on the inside; the magnetic poles on the rotor move past the ends of these coils at a very short distance from them. (Figs. 1 and 3). In this case the current produced by the generator is taken direct from the stator, without the aid of special current collectors (brushes). For this reason this form of construction is particularly suitable for the generation of high-voltage alternating current. The sparking that occurs at high voltages (around 20,000 volts) in large generators would destroy the brushes. The relatively low output of direct current needed for producing the rotating magnetic field is fed to the rotor by means of slip-rings and carbon or copper-mesh brushes [(Fig. 3). The successive coils Fig. 1 are wound in alternate directions, which ensures that the generated current always flows in the same direction. High-duty generators are usually coupled directly – on the same shaft – to steam or water turbines. Usually, a small direct-current dynamo for producing the magnetic field is also mounted on the driving shaft (Fig. 2). In the older type of power station with reciprocating steam engines, the rotor of the generator is generally constructed as a flywheel with the magnetic pole windings round its rim. Fig. 3 shows a smaller generator which likewise operates on the principle described above (rotating magnetic field, stationary armature winding). In this case the magnet wheel is in the form of a two-part T-rotor.”
In the matter before us, the product in dispute is generator/alternator of high voltage. The Revenue’s main thrust is that it has to be coupled with internal combustion engine. We have perused the HSN Explanatory Notes. Para 1 of Heading 85.11 of HSN Explanatory Notes shows that the Heading covers “Electrical ignition or starting equipment of a kind used for spark-ignition or compression-ignition internal combustion engines (for example, ignition magnetos, magneto-dynamos, ignition coils, sparking plugs and glow plugs, starter motors); generators (for example, dynamos, alternators) and cut-outs of a kind used in conjunction with such engines”. This argument of the learned Departmental Representative does not hold good since Para ‘G’ describes Generators (dynamos and alternators) as “These are driven by the engine, and serve to charge the batteries and to supply current to the lighting, signalling, heating and other electrical equipment of motor vehicles, aircraft, etc. Alternators are used with a rectifier.” We have also looked into Chapter Note 2 of Chapter 85. The same is reproduced below :-
“Headings Nos. 85.01 to 85.04 do not apply to goods described in Heading Nos. 85.11,85.12,85.40,85.41 or 85.42.
However, metal tank mercury arc rectifiers remain classified in Heading No. 85.04.”
The Collector (Appeals) in his order has referred to the assessing of the parts of the generator under Heading 85.03 and Department has also accepted the same. Once the Department chooses to assess parts under Heading 85.03 and for the purpose of assessing the main product, the Department is resorting to a different heading. We are not in agreement with the arguments addressed by the Departmental Representative that the same should be assessed under Heading 85.11. HSN Explanatory Notes are not binding on us but they do have specific value as held by the Hon’ble Supreme Court in the case of Khandelwal Metal & Engineering Works and Anr. etc. v. Union of India and Ors., reported in 1985 (20) E.L.T. 222 (S.C.). Para 21 from the said judgment is reproduced below :-
“21. Moves to unify tariff classification stem at least from the early days of the League of Nations. In Brussels in 1950, the Customs Cooperation Council was formed by a convention signed by 13 governments of the European Customs Union Study Group. The CCC studies customs matters with a view towards simplifying and unifying them and has prepared the “Brussels Tariff Nomenclature” complete with principles of interpretation and an advisory process for settling disputes over the nomenclature. (See pp. 238-239, Section 10.7 of ‘World Trade and the Law of Gatt’ by John H. Jackson, Ed. 1969).
According to Brussels Tariff Nomenclature,
“Master alloys are generally in the form of small blocks or cakes divided for easy breaking, brittle sticks, or pellets, and have the appearance of crude foundry products.”
In Henderson’s ‘Metallurgical Dictionary’ (page 206) ‘Master alloy’ is treated synonymously with ‘Foundry alloy’ and ‘Hardener’. At page 163 of the book the following statement occurs :-
“Hardener (preliminary alloy; foundry alloy; master alloy; rich alloy)
An alloy, rich in one or more alloying elements, that is indeed to the melt, this procedure permitting closer composition control than is possible with the addition of pure metals; an alloy designed to facilitate adding to a base metal, to make a complete composition, those additive elements that, due to refractoriness or susceptibility to exidation, do not, as pure metals, readily alloy with the base metal.”
At page 142 of the book, Foundry alloy which is equated with Master alloy is described as “an alloy of specific composition as, for example, a ferro-alloy, used for making cupola, ladle, or furnace additions.””
The description in Heading 85.01 of HSN Explanatory Notes is “Electric motors and generators (excluding generating sets)”. The learned Departmental Representative had laid heavy reliance on unnumbered Para 4 at Page 1335 of HSN Explanatory Notes (HSN Notes already reproduced on pages 7 to 12). In view of the above discussion, we are of the view that the products in dispute which are high voltage generators/alternators and the functioning of the same has already been reproduced above. Keeping in view Chapter Note 2 of Chapter 85, we are of the view that the appropriate classification would be under Heading 85.01. In view of the above discussion, we do not find any merit in the Revenue’s appeals. The above captioned 21 appeals are dismissed.