ORDER
Jyoti Balasundaram, Member (J)
1. The issue for determination in these appeals is the proper classification of globe and gauge valves imported by the appellants whether under Heading 84.61(2) of the Customs Tariff Act, 1975 as “isolating valves” as claimed by the importers, or under Heading 84.61(1) as taps, cocks not elsewhere specified, as upheld by the Department.
2. Appeal No. 363/84-B2 covers manually operated globe valves suitable for very high pressure and temperature which are manually operated to shut-off valves for isolating various instruments. Appeal No. C/2249/86-B2 covers the main steam stop valves between the boiler and the turbine to isolate the turbine from the boiler.
3. The appellants filed Miscellaneous Application No, 123/90-B2 & 124/90-B2 for admitting additional documents as evidence on record. The documents are in the form of letters from suppliers, manufacturers, authorities and the Government or in the trade or extracts from technical literature in support of the appellant’s contention that the valves are isolating valves falling under Heading No. 84.61(2). By Misc. Order No. C/106/91-B2 dated 29-7-1991, the applications were allowed as they throw light on the trade parlance on the term “Isolating Valves” as also on the function of the valves. In paragraph 8 of the Misc. Order the Bench held that “from the reading of the Tariff Heading 84.61(2), it is apparent that ‘isolating valves’ occurring in the Tariff Heading describes the function of that valve. In other words, the valves which isolate the flow of fluids to one of the down stream equipment would be termed as an isolating valve. No restriction has been placed on a valve with reference to its design or with reference to its location so long as it perform the function of isolating an equipment in a system from the flow of liquid or gases. We are inclined to agree with the plea of the learned Consultant that Lyons’ Encyclopedia is merely giving an example of a simple isolating valve. The definition in Lyons’ Encyclopedia cannot be termed as an exhaustive definition.”
In paragraph 8.2, the Bench observed that “In view of the evidence available on record, we are of the view that the valves imported by them are isolating valves, since they have the function of isolating an equipment from the flow of fluid in the system”. The Bench referred the matters to a Larger Bench in view of the conflicting decisions namely:
1.
Sirpur Paper Mills Ltd. v. C.C., Madras -1983 (14) E.L.T. 2359
2.
ACC – Babcock Ltd. v. C.C., Madras -19.87.(29) E.L.T. 1010
3.
Hari Fertilisers Ltd. v. C. C, -1989 (42) E.L.T. 225
4.
National Rayon Corporation Ltd. v. C. C Bombay -1990 (48) E.L.T. 582
The Bench took note of the fact that the judgments at SI. No. 2, 3 & 4 have basically relied on the Lyons’ Encyclopedia and have not taken into account the wealth: of evidence which has been brought on record in the present appeals regarding “. the commercial understanding of the term ‘isolating valves’ and they also did not take into account the Tribunal’s judgment in the case of Sirpur Paper Mills Ltd. In view of the conflict, the matters were referred to the Hon’ble President for constituting the Larger Bench and the matter is, therefore, referred to us.
4. Appeal No. C/363/84-B2. The appellants entered into a contract with the West Bengal State Electricity Board for setting up of 3 x 210 MW boilers for the Thermal Power Station at Kolaghat. The appellants imported on behalf of the principal, valves for isolation of various instruments, equipments and boiler mountings in terms of the contract with Electricity Board. An order was placed on M/s. ‘Marubeni Corporation, Japan in September, 1982 and the valves were imported under home-consumption Bill of Entry claiming assessment under Heading 84.61(2) as ‘isolating valves’. The Assistant Collector did not accept the technical explanation dated 27-8-1983 submitted alongwith the Bill of Entry and called upon the appellants to substantiate the declaration on the Bill of Entry with relevant catalogues, drawings etc. which were complied with in September, 1983. During the course of personal hearing before the Collector, the appellants submitted further technical explanations and different manufacturers’ catalogues, certificates, drawings approved by the Chief Inspector of Boilers etc. The adjudicating authority ordered assessment of the valves under Heading 84.61(1) of the CTA, 1975 mainly on the ground that the description of the goods in the list attached to the invoice was made according to the instructions of the importer contained in the Purchase Order as follows:
“Each valve is to be provided with name plate giving the details of the tag number and description under the Head Name Plate inscription of attached schedule”
The Collector of Customs relied on Hopkinson’s Catalogue describing ‘isolating valves’ as non-return valve closing automatically against back flow in which it is mentioned that in the parallel valves, the flow is in either direction and is a reliable general purpose valve and therefore, the appellants’ contention that any valve which shuts off the flow completely is an isolating valve cannot be accepted. Reliance was also placed upon the Encyclopedia of Valves by Jerry Lyons’ and Carl Laskland listing out different types of isolating valves whereas the valves imported did not fall under any of the types listed therein. Being aggrieved by the Collector’s order, the appellants have filed the above appeal.
5. Appeal No. E/2249/86-B2. This appeal relates to classification of a valve described in the relevant invoice as Rockwell Edward Flite Flow Globe Stop Valves with by-pass valve. The Collector of Customs (Appeals) has held that only the type of valves which are hand-operated and which are used between the packing lubricator assembly and packing box assembly to shut off fluid pressure from the lubricator assembly in the controlled valve can be termed as Isolating Valves for the purpose of classification under 84.61(2). He has also relied on the Encyclopedia of Lyons’ which is to the same effect and upon the I.S.A. Hand Book of Controlled Valves edited by J.W. Hutchurison. C/2249/86-B2 has been filed against this order of the Collector of Customs (Appeals).
6. We have heard Shri L.P. Asthana, the Ld. advocate and Shri S.K. Roy, the Ld. S.D.R. and have perused the records.
7. The importers claim for assessment of the goods as isolating valves is primarily based upon the ground that the valve design i.e. the internal flow pattern (either of gauge type or of globe type) was for positive isolation of the adjoining mounting/instrument/equipment installed down stream of the valve. The valves provide for a complete shut off of the liquid without any leakage, thereby isolating the liquid from the equipments or instruments attached to it. The valves are to be used in a fully opened or a fully closed position and, therefore, cannot be used for control of the flow of the fluid in the pipe. The plunger is flat and rests on the seat in such a way that it does not permit any liquid to seep through, and such shut-off cannot be achieved by control or regulating valves which have a conical, parabolic or needle type plunger. The valves are required for manufacture of boilers and according to the Chief Inspector of Boilers, who is one of the competent authorities recognised by the Central Boilers Board, Government of India, the valves are to be termed as isolating valves since the specific duty of an isolation valve is to stop the flow of fluid completely so that the down-stream sides of the pipelines are isolated from the source and fluid pressure comes to zero (letter of Chief Inspector of Boilers dated 16-2-1984 at page 113 of paper book 2). The importers also cited references from M/s. Rock Well International, U.K., M/s. Okano Valve Manufacturing Company, Japan and M/s. British Valve Manufacturing Association, U.K. to support their contention that the valves imported by them are isolated valves. According to the importers no valve manufacturer in the world manufactures valves having specific nomenclature ‘isolating valves’. M/s Hopkinsons Ltd. U.K. marketed non-return valves with nomenclature automatic isolating valves for installation on horizontal steam pipes where stearn delivery pipes from two or more boilers are connected to common steam main so as to allow steam to flow in one direction and these valves shut-off automatically against reverse flow/back pressure of steam to isolate other boiler/boilers. They also manufacture similar valves with non-return valves for installation on horizontal feed water delivery lines of boilers so as to allow flow of water in one direction only and these valves shut-off automatically against reverse flow/back pressure of feed water. The design of both types of valves is lift type non-return valve i.e. check valve-lift type already separately included under the Heading 84.61(2) of CTA 1975, and hence is not under dispute. The nomenclature isolating valve does not figure either in B.T.N. or in the current C.C.C.N. Heading and in these two international Tariff, valves of different designs i.e. gate, parallel slide, globe, check, ball, plug, butterfly, diaphragm etc. valves have been individually classified under different Tariff Code Nos. a valve is designated by its specific function and not by its specific location.
8. The importers submit that British Valve Manufacturers’ Association which is the national representative body of the British manufacturers of industrial valves, has provided definition of isolating valve from the Pipeline Glossary and Directory which reads as:
“A valve designed to close-in or shut-off fluid flow, usually with respect to a transmission pipeline, mainline or trunk line.”
They have also certified that valves of design type globe, gate, parallel slide valves etc. are isolating valves. Valves manufacturers in U.S.A. and Japan have certified that valves of design type globe, gate, parallel slide etc. are shut-off (stop) valves and hence all these valves are isolating valves. High pressure steam raising plants a redesigned and manufactured in strict accordance with Indian Boiler Regulations published by the Central Boilers Board, Government of India and installation of isolating valves to isolate steam and water connections to different mountings/sections of plant from the boilers has been indicated in the regulations. The learned Counsel at this stage refers to the confirmatory order of the West Bengal State Electricity Board for supply and installation of isolating valves (page 1 to 3 of paper book Vol. I). Various manufacturers’ catalogue in the U.K., U.S.A. and J apan show installation of isolating valves on different pipelines and the function of these valves is to isolate instruments/equipments at the down-stream side of the valves from source, and all these documents categorically establish that any design of shut -off i.e. stop valve, whether hand-operated or actuator operated or remote controlled, installed in pipelines in any industry to isolate an installation at its down-stream side from the source is an isolating valve. The appellants contend that the globe type valves are; technically termed as “isolating valves for water gauge, isolating valves for conductivity recorder, isolating valves for pressure controller” (valves to stop flow of steam and water from the boiler to water gauge and other instruments) and the valves to shut off/stop flow of steam and water from the boiler to turbine are technically termed as main steam isolating valves/main steam stop valves”. The shut-off function of an isolating valve as found in the definition as contained in Lyons & Carl L. Askland Encyclopedia of Valves is only one example of an isolating valve. But this does not mean that nowhere it is stated that only those ordinary small shut-off valves which are installed only between the lubricator (source) and packing box assembly (down-stream installation) to shut-off flow of lubricating medium from lubricator to packing box assembly are the only types of isolating valves and sophisticated costly high pressure valves installed on a high pressure boiler and flow of high pressure steam and water to their installations at down-stream side of these valves are not isolating valves. Any two-way valve which is designed to shut-off/stop-fluid flow from source to an installation at the down-stream side of the valve to isolate the installation from source is an isolating valve. The appellants referred to public notice 21/85 dated 13-9-1985 and seek to explain interpretation as contained therein is incorrect for the reasons that :
(a) an isolating valve is a self-contained unit with its own individual function and cannot be a component of another valve. (b) a control valve is assessed as valve anywhere not specified under 84.61(1) attracting a higher rate of duty; As per Customs Tariff a component of any item is assessable at the same rate as payable on the main item and when a control valve is assessed at a higher rate, the assessment of isolating valves which according to the Public Notice is a component of the control valve, at a lower rate indicates that isolating valves cannot be a component of the control valve. (c) Flow control valves are operated automatically from independent devices using control mechanism as it was either electrically or pneumatically or hydraulically or electro-hydraulically. These control valves are supplied, completely assembled with actuator, controller, etc. as applicable fitted externally. However when any of these parts are imported as spares for fitment on to the control valves these items are not assessed as components of control valves. But on merits would be assessed under separate Heading. Therefore, optionally and extremely fitted shut-off valves installed between the source of supply of lubricator and packing box assembly in a control valve cannot be a component of the control valve. (d) The design of the shut-off valve is not specified in the definition given in the Lyon's Encyclopedia of Valves and so the public notice is not correct in stating that globe, gate or any other designs of valves which do not satisfy the conditions of (a) hand operation (b) used between packing lubricator assembly and packing box assembly cannot be considered isolating valves/shut off valves can be of any of the designs mentioned above. 9. The two way shut-off valves employed in the field of application for isolating installations are termed as isolating valves and the selection of the design depends upon several factors : (i) pressure (ii) temperature (iii) pressure drop (iv) flow-co-efficient value (v) fluid to be handled (vi) accessibility for servicing. 10. Finally the appellants draw our attention to the order of the Tribunal in the case of Sirpur Paper Mills v. Collector of Customs, Madras reported in 1983 (14) E.L.T. 2359
wherein the Tribunal has held that the “ordinary meaning of a valve is a device that regulates the flow or passage or allows it in one direction only. The certificate of the manufacturers classifying these valves as isolating type of valves has to be given due weight” and submits that in the light of the Tribunal’s order definitions in the Pipeline Glossary and Directory, certificates and clarifications issued by renowned valve manufacturers in India abroad, the valves imported by them should be held to be isolating valves falling under Heading 84.61(2) C.T.A.
10A. Shri S.K. Roy, learned S.D.R. refutes the arguments of the learned Counsel and submits that the valves imported are only globe and gauge valves which functions only as stop-valves. The importers advised the suppliers to inscribe the description as “isolating valves” on the name plates attached to the valve with the ulterior motive of the goods being assessed at lower rate of duty as earlier similar valves imported by the same importers were assessed under Heading 84.61(1) and not as isolating valves. The importers’ claim that the inscription on each valve is essential for identification of the valves during operation is not tenable as there was no need to advice the foreign suppliers and the identification could have been done by the importers after installation at the factory. The literature submitted by the importers also shows that there was no indication that they are isolating valves. The goods have a conical, parabolic or needle type of plunger and it is not that the plunger end of valve are flat and rests on the seat in such a way as to prevent any liquid seeping through, as contended by the appellants. In the catalogue No. 960 of M/s. Hopkinson Co., U.K. certain types of valves are grouped under isolating valves and these have been shown in addition to blow off isolating valves. From the catalogue it is clear that the importers’ contention that any valve which shuts off the flow, is an isolating valve is not acceptable. The McGraw Hill Encyclopedia on Science and Technology at page 328 shows that the valves commonly used in piping system are gate valves, usually operated, closed or wide opened and are seldom used for throttling. Globe valves which are frequently filled with renewable disc are adaptable to throttling operations and, therefore, it is obvious that the imported goods i.e. globe valves with lapped type disc are nothing but standard pipe line valves and not isolating valves.
10B. We have heard both sides carefully and considered the submissions. The adjudicating authority has relied upon the catalogue of M/s. Hopkinsons Ltd., U.K. who are well-known manufacturers of boiler mounting and valves indicating that they manufacture valves with nomenclature “isolating valves”. To reject the importers argument that the items imported are isolating valves the Collector has also relied upon the definition of isolating valves in the Encyclopedia of Valves by Jerry L. Lyons & Carl L. Askland wherein the definition is a hand-operated valve located between packing lubricator assembly and the packing box assembly in a control valve. It is used to shut-off fluid pressure from lubricator assembly”. The core of the importers’ argument is that a valve is designated as isolating valve not by its location but by the function it does irrespective of its design and internal fluid flow. In this case the valve is a positive shut-off valve stopping completely the flow of liquid or gas to an equipment down-stream so that the equipment is completely isolated and can be taken up for repair when necessary without affecting the system as a whole. With regard to the reliance placed by the adjudicating authority on the definition of isolating valves in the Encyclopedia of Valves we find that there is great force in the submission that the description is of a valve working under the most ordinary low pressure and, therefore, it requires to be operated by hand. The definition of isolating valve, therefore, is merely to shut-off the flow of lubricating fluid from lubricator assembly to the packing box assembly in a control valve. This definition of the shut-off function is only one example of these valves but this does not mean that only those ordinary small shut-off valves are isolating valves. The sophisticated, costly valves installed on high pressure boilers and their steam and water lines and between high pressure boilers and installations at their down-stream sides also perform the same function viz. to shut-off high pressure steam and water to the installation at down-stream sides. No restriction has been imposed in Tariff Heading 84.61(2) on a valve with reference to its design or location as long as it performs the function of isolating an equipment in a system from the flow of liquid or gases. The importers have placed on record a wealth of evidence in the form of technical definitions and certificates from competent authorities that any tight shut-off valve for any duty in any industry is an isolating valve. The valves in dispute were imported according to the order placed upon the importers by the West Bengal State Electricity Board. At page 3 of the paper book No. 1 it is seen that the order was placed for isolating valves and the purchase order placed by the importers upon M/s. Marubeni Corporation contains a clause regarding name plate which reads as follows :-
“Each valve is to be provided with a name plate giving the details of tag No. and description under the Head name plate inscription of the attached schedule.”
This itself is clear that identification of the valve as contended by the importers, in order to avoid any doubt or mis-understanding between the buyer and the seller as to the No. and type of valve and its location and application.
11. The Chief Inspector of Boilers, West Bengal has clarified to the importers on 16-2-1984 that the globe type valve having lapped type disc and seat arrangement, wedge type valve and parallel type valve are used for isolating purpose and are acceptable to the Directorate of Boilers as isolating valves in terms of Regulation in Chapter VI of the Indian Boilers Regulations, 1950. The letter further clarities that all types of isolating valves are used exclusively for isolation duties and not for any control, regulation of flow of fluid and the specific duty of an isolating valve is to stop the flow of fluid completely so that the down-stream sides of the pipeline are isolated from the source and fluid pressure comes to zero. Further clarification is to the effect that the specific duties of the valve and their design parameters are essentially required to be inscribed on the name plate of the valve so that they can be used confidently for the purpose for which they are intended (page 113). This is reiterated in the letter of the Chief Engineer, West Bengal State Electricity Board, dated 16-3-1984 (page 118) which also clarifies that globe or gauge valves having lapped type disc and seat arrangement for positive tight liquid shut-off, and gate and parallel slide valve are all termed as isolating valves since they are recommended only for isolation duties and not for throttling or control of flow. At page 35 of the paper book there is a telex dated 28-8-1981 from Valve Manufacturers to their sole selling agents, M/s. Marubeni Corporation that the globe pattern valves supplied for boilers are isolating valves. At page 46 there is a certificate from M/s. Macneill & Magor Ltd., manufacturers of various types of valves that the parallel slide valves, globe valves, gate valves, Y type stop valves etc. are isolating valves. M/s. Marubeni Corporation’s letter to the importers dated 21-9-1983 (page 69) confirming that the globe, gauge and angle type valves supplied against the order dated 20-9-1982 manufactured by them are designed for positive isolation and the valves are either to be kept fully opened or fully closed and the valves are not suitable for throttling or control of flow. Regulation 281A of Indian Boiler Regulations reads that the additional requirement is for automatic boilers only and clause B of the Regulation which is relevant stipulates that the boiler shall have provision made for isolating the steam and water connection from the chambers of the boilers. Such isolating valves (emphasis supplied) shall be capable of being locked in the open position and should preferably be of the parallel slide type, if screw down stop valves are fitted, those on the water connection shall be mounted with the spindle horizontal to avoid the possibility of an air lock. At page 119 of paper book Vol. 2 is a letter from M/s. Hopkinsons, U.K. dated 29-2-1984 which clarifies that the terms isolating valves and stop valves are used in text to mean, the same thing, therefore, if a valve is required to tight shut-off as one of its duties, it can be classified as isolating valves. This would apply to parallel slide valve, globe valve and globe stop check valves. The letter mentions that any valve required to function with positive shut-off can be classified under Brussels Tariff Number Heading 84.61(2). The Pipeline Glossary and Directory published by Scientific Surveys Ltd., England defines isolating valves as “a valve designed to close-in or shut off fluid flow usually with respect to a transmission pipeline or main line or trunk line”. The importers have also filed a diagrammatic arrangement drawing from valve manufacturers M/s. Dewrance Dresser, U.K. showing installation of isolating valves to isolate flow control valves. From the evidence placed before us we agree with the contention of the importers that a positive shut-off valve is an isolating valve and the valves in dispute in these appeals perform the function of positive shut-off.
11A. Regarding the judgments cited by the learned S.D.R. in support of the Department’s case, we find that all 3 have basically relied upon the definition of isolating valves in the Lyon’s Encyclopedia. They have not taken into account the evidence that has been brought on record in this case regarding the commercial understanding of the term isolating valves. The decision of the Tribunal in the case of the same importers reported in 1987 (29) E.L.T. 1010 proceeds on the basis that the valves imported do not function as isolating valves. However, in this case as we have set out above the valves do perform the function of isolating valves. The decision in the case of
Hari Fertilizers v. Collector of Customs, reported in 1989 (42) E.L.T. 225 (Tribunal)
is also based upon the finding that the valves in that case do not perform the function of isolating valves because once the generator combustion chamber is cleared of fueling gas the valves are closed and steam and air are injected into the chamber resulting in the production of semi-water gas. Therefore, it is clear that the valves cannot be considered as isolating valves. In the case of
National Rayon Corporation Ltd. v. Collector of Customs, Bombay – Order No. 209/90-B2
dated 28-3-1990 the Tribunal rejected the claim that Hopkinsons parallel slide valves are isolating valves for want of proof that the valves were isolating valves. In the present appeals however, the importers have placed sufficient and satisfactory evidence that the valves imported by them perform the function of positive shut-off and are, therefore, rightly termed as isolating valves. Besides these 3 orders of the Tribunal do not take into account the earlier judgment of the Tribunal in the case of Sirpur Paper Mills wherein the Bench observed that “the ordinary meaning of a valve is a device that regulates the flow or passage or allows it in one direction only. The certificate of manufacturers classifying these valves as isolating type of valves has to be given due weight. The Department is laying stress on the fact that isolating valves are described as hand-operated but they have not been able to positively exclude these valves from sub-item (2) of 84.61….At the same time, there is insufficient justification for denying classification of these isolating valves.”
12. In view of the evidence available on record we are of the view that the imported valves are isolating valves as they perform the function of isolating equipment from the flow of the fluid in the system. We, therefore, set aside the impugned orders and allow the appeals with consequential relief if any due to the appellants.