ORDER
S.K. Bhatnagar, Vice President
1. This is an appeal against the order of Collector (Appeals), Bombay dated 9-12-1986.
2. Ld. Counsel stated that the issue involved in this appeal is the classification of a set of Printing and Tubing machines and Auto Sewing Line.
The rival entries are Heading 84.59(2) (which covers, inter alia machines designed for the production of a commodity) and Heading 84.59(1) (not elsewhere specified).
3. The authorities have classified Auto Sewing Lines i.e. one machine of the above set under Heading 84.59(2) and there is no dispute about it.
But they have classified the other machine of the set namely the printing tubing machine under Heading 84.59(1) as ‘not elsewhere specified’ on the ground that it is not used for producing any “READY TO USE” commodity.
4. It was their contention that the two machines together constitute a set for manufacture of cement bags. A part of the job upto the cut tubes stage is done by the printing tubing machine and the second part namely the stitching is done by the second machine and then only the bags are ready. Therefore, both taken together are used for production of a commodity namely cement bags. Even otherwise the cut tubes made by the printing tubing machine are by themselves also sold for being stitched into bags by other users. The pamphlets describing the machines and showing their functions were produced before the lower authorities and the process of manufacture has been described in the appeal memorandum and a flow chart has also been filed by them. A perusal would show that their contentions are correct. Therefore, whichever way we may look at it the second machine is also required to be classified under the same heading namely under Heading 84.59(2). In any case there was no cause for importing the concept of ‘ready to use’ in the tariff heading. His main propositions are as under : –
5. The Heading 84.59(2) refers to machines and mechanical appliances designed for the production of a commodity. It does not say that it should be a READY TO USE commodity. Hence, introduction of the words ‘ready to use’ which is not in the Heading, and thereby denying the classification is not correct in law.
6. Heading 84.59(1) is to cover goods not elsewhere specified. This is therefore a residuary entry.
The Apex Court in the case of Indian Metals and Ferro Alloys v. CCE – 1991 (51) E.L.T. 165, clearly held that unless the department can establish that the goods in question, can by no conceivable process of reasoning, be brought under any of the specific items mentioned in the tariff, resort cannot be had to the residuary item. In this regard the Apex Court relied on the earlier decision in the case of Bharat Forge and Press Industries v. CCE – 1990 (45) E.L.T. 525.
7. Even if the machines have independent functions and are not on common base, they have to be treated as one and not to be classified as individual items. This is the ratio laid down by the Hon’ble Tribunal in the case of Milkfood Industries v. CCE – 1994 (71) E.L.T. 549 (Tribunal)
Similar view was expressed by the Tribunal in the case of Modern Food Industries (I) Ltd. v. CC – 1991 (53) E.L.T. 107. Hence, the fact that there are two machines which can independently function is not fatal to the classification when from the starting point of tube forming to the final point of stitching of bags is carried out by the set of machines.
8. In the following decisions, the scope of manufacture and production of a commodity w.r.t. Heading 84.59 has been clarified.
(a) National Small Industries v. CCE – 1988 (36) E.L.T. 367 (Tribunal) Customs Heading is only confined to whether the machine is designed for production of a commodity. The machine imported by the appellants produce a rigid board suitable for making cartons. The A.C. was not right in saying that the laminated sheet by itself cannot be considered as a commodity.
(b) Coates of India Ltd. v. CC -1990 (46) E.L.T. 424 (Tribunal)
In this case the grinding machine used for producing printing ink was held to be for a production of commodity meriting classification under 84.59(2).
(c) CC v. Dura Foam Industries P. Ltd. -1986 (26) E.L.T. 341 (Tribunal)
In this case the machine used for cutting the foam was considered as for production of a commodity meriting classification under Heading 84.59(2).
(d) Project and Development India Ltd. v. CC – 1989 (42) E.L.T. 98 (Tribunal)
In this case conversion of catalyst mass into pallets was held to be amounting to manufacture and the tablet pressing machine used in the manufacture of catalyst pallets was held to be falling under Heading 84.59(2).
9. Ld. DR drew attention to the order-in-original and stated that it shows that machines with invoice description, as given above, have been imported vide B/E in question. Assessment is sought under 84.59(2) of CTA, 1975. These machines are used in the manufacturing of Cement bags. The process of manufacturing is as follows :-
(1) Laminated PP Woven fabric is fed to the printing and tubing machine Model CTM-D3N. In this machine the following operations take place –
(a) The fabric is printed in 2/3 colours
(b) The printing is dried by heat
(c) The printed PP woven fabric along with inner lines kraft paper is fed to the stripe pasting unit where the craft paper is tripe pasted to the laminated PP woven fabric by adhesive.
(d) This stripe pasted material goes on the tubing unit where as continuous tube is formed and such tube has a overlap joint.
(e) Next, the overlap joint is welded and cooled.
(f) This weld formed tube is cut in standard length along with notch for the valve needed for filling cement.
These cut tubes are then transferred to automatic sewing line-Model FVS-1000 H, wherein the sewer bag is formed, automatically trimmed, counted and collected.
10. It is seen that the first machine, that is, printing tubing machine is an independent machine which is used for printing and tubing etc. The product of this machine is not a finished commodity, as yet. It is, at best, an intermediate product, incapable of being put to use, as it is. As such, the machine is not producing any commodity, by itself. Hence, it is proposed to assess this machine, under 84.59(1) [as against 84.59(2) claimed by the party], as a machine, having individual function, which is not elsewhere specified. The classification of the other machine, that is, Auto Sewing Line, is not disputed, as it produces a commodity, [which] could find use, as it is, without any further processing.
11. It is not possible to agree with the party’s plea that these two machines should be assessed as a complete unit. These are two different machines, which are nowhere described as apart of a complete system, in the manufacturer’s catalogue. As a matter of fact, these are described separately in separate leaflets. Also, the invoice nowhere mentions these machines, as a system. The importers have themselves stated in their letter dated 31-7-1985, that most of the time they are selling the cuttings to various parties who get the valves formed by hand and also get it stitched in their Sewing lines, so that proper sewing of the bag cut-pieces can be done in their plant itself. This would inter alia, mean that the machines, in question, are not inseparable and are not integrated with each other. Hence, the assessment under 84.59(2), as a complete unit is ruled out.
12. As regards the assessment on merits, there is, no doubt, that the printing tubing machine is not producing any ready-to-use commodity. At best it is performing an individual function, which is not specified elsewhere. In view of this position the correct assessment for this would be 84.59(1), CTA, 1975.
13. Ld. DR also drew attention towards the order-in-appeal and stated that it has been correctly observed by the ld. Collector that while deciding whether a particular product can be considered a commodity or not in terms of the provisions of Heading 84.59(2), one has to take into consideration the end product ready for use. In this case the end product is PP Kraft paper laminated Cement bags. The printing tubing machine Model CTM-D3N performs only one function i.e. the manufacture of PP Kraft paper laminated tubing. The final end product i.e. PP Kraft paper laminated cement bags ready for use manufactured on ‘Auto Sewing Machine’.
14. On perusal of the leaflets of both the machines it is observed that these are two different machines having individual functions. They can work independently. These are not on a common base nor under a common control. These machines have separate operational controls. He would therefore request that the department’s classification may be upheld.
15. Ld. Counsel also drew attention to the flow chart showing process of manufacture of cement bags and reiterated his contentions emphasising that in view of the case law cited by them the whole unit consisting of both the machines should be classified together under one and the same heading namely 84.59(2). They would like to draw attention to the order of the A.C. Nagpur passed in April, 1986 and the classification list, a copy of which has been produced, to show that the Central Excise department has considered plastic woven fabrics laminated with paper/glued to paper and tube form and the back made therefrom under T.I. 68 and therefore their alternative prayer was that on this ground also the item in question would merit classification under 84.59(2).
16. We have considered the above submissions. We observe that both the A.C. and the ld. Collector (Appeals) have found that the two machines imported by them together are two different machines which are nowhere described as part of the complete system in the manufacturer’s catalogue. They have been described separately in separate leaflets and the invoice also does not mention them as a system. This is important. Admittedly the second machine is being used for production of tubing. Such tubings may be bought and sold in the market, and therefore considered as goods for excise purposes. But we have to see in what sense the word ‘commodity’ has been used in the heading. Apparently it has not been used as a synonym for ‘goods’ in general but only in a very specific and narrower sense. If it is interpreted to cover all goods then the very purpose of creating Heading 84.59(2) will get defeated; whereas in the form in which the heading stands,’ we are called upon to distinguish items which would fall under Heading 84.59(2) and which will not. The ld. A.C. and the ld. Collector have therefore rightly interpreted the word ‘commodity’ and taken it to mean ‘a ready to use commodity’ as distinguished from other goods which may be in the form, say for example, raw material, semi-processed or processed material or partly manufactured goods or even fully manufactured goods which have not yet become a commodity in its limited sense in which it has been apparently used in this heading. The authorities below have therefore, expressed explicitly what was implied in the heading and the Central Excise classification does not help the appellants for the purposes of assessing customs duties (other than CVD).
17. The authorities below are also correct in pointing out and the ld. DR is right in emphasising that the imported machines are two different machines having individual functions without a common base and without a common control. They can work independently and can be operated by their separate contols and each one is required to be assessed on its own merits. That they can also be used even in a complementary way does not alter this basic fact. The case law cited by the appellants does not help them because in each one of these orders the tribunal has come to conclusion on the facts of the given case that the machine was capable of being used for production of a commodity. Thus, for example in the case of Project and Development India – 1989 (42) E.L.T. 98 (Tribunal), the Tribunal found that the machine was used for production of catalyst pallets etc. and in the case of National Small Industries – 1988 (36) E.L.T. 367 (Tribunal) it was found that the machine produced a commodity called laminated boards and in the case of [Coates] India – 1990 (46) E.L.T. 424 (Tribunal) it found that it was used in production of printing ink. In the case of Dura Foam Industries (P) Ltd. – 1986 (26) E.L.T. 341 (Tribunal) the ratio which could be drawn is that the purpose of the machine or the use of the machine has to be necessarily borne in mind in view of the wordings of 84.59(2).
18. The case of M/s. [Coates] and M/s. Dura Foam have been relied upon by the ld. Counsels to emphasise their point that an item which constitutes an intermediate stage in production of the final product has also been given benefit of 84.59(2). But then the above aspects which have arisen in the context of this case namely the fact that the appellants own catalogues and pamphlets show that the printing/tubing machine which has been imported has only one function and i.e. manufacture of PP Kraft paper laminated tubing is significant and the distinction which we are making here in [respect of] the ‘commodity’ and the ‘goods’ in general and the sense in which the word ‘commodity’ has apparently been used here were not highlighted before those benches. Hence, in view of our observations and findings both on fact and the interpretation of 84.59(2), we hold that the department’s view is correct. We therefore, uphold the orders and reject the appeal.