CASE NO.: Appeal (civil) 9351-52 of 1995 PETITIONER: Collector of Central Excise, Aurangabad. RESPONDENT: M/s.Motor Industries Co. Ltd. & Anr. DATE OF JUDGMENT: 31/01/2003 BENCH: N.Santosh Hegde & B.P.Singh. JUDGMENT:
J U D G M E N T
SANTOSH HEGDE,J.
These appeals arise out of a decision of the Customs, Excise
& Gold (Control) Appellate Tribunal (the tribunal), wherein the
tribunal by a majority judgment held that the respondents are
entitled to the benefit of the exemption granted under Notification
No.217/85 as amended in regard to the parts of nozzle and nozzle
holders used by them in the manufacture of an internal combustion
engine (ICE diesel oil operated).
Before the tribunal the issue arose in view of the stand taken
by the Department that the appellant is not entitled to the benefit of
the said notification because the notification in question having not
exempted nozzle and nozzle holders, the respondent cannot claim
the benefit of the said notification in respect of the parts of nozzle
and nozzle holders on the ground that they are used in the
manufacture of original equipment viz. internal combustion
engines.
The Judicial Member agreed with the view of the
Department that since the notification in question specifically
excluded the benefit of exemption to nozzle and nozzle holders,
the respondent cannot claim the said benefit in regard to the parts
of such nozzle and nozzle holders even though they are used in the
manufacture of diesel oil operated combustion engine, which the
respondent manufactures; whereas the Technical Member in his
differing order came to the conclusion that the authorities of the
Department had taken an erroneous view that parts of nozzle and
nozzle holders are equivalent to nozzle and nozzle holders
themselves. He also held that a part of nozzle and nozzle holder
would become a nozzle and nozzle holder only after a series of
process of assembling involving land, labour and capital, therefore,
parts of nozzle and nozzle holders cannot be equated with nozzle
and nozzle holders themselves, and in view of the fact that the
notification in question did not specifically exclude the parts of
nozzle and nozzle holders from the benefit of exemption, the said
learned Member held that the respondent is entitled to the benefit
of exemption. Hence, he differed from the Judicial Member.
Consequently, the issue was referred to a third Member who
framed the following points for consideration :
“Whether in the facts and circumstances of the case parts of
nozzle and nozzle holders are entitled to the benefit of notification
217/85 (as amended), as held by the Technical Member.
Or
they are not entitled to the benefit of the said notification
and matter requires to be remanded for considering the claim of
benefit of notification 216/87-CE dated 15.9.1987 and notification
112/88-CE dated 1.3.1988, as held by the Judicial Member.”
Considering the said points, the third Member agreed with
the Technical Member. While doing so, he held that parts of nozzle
and nozzle holders cannot be deemed to be nozzle and nozzle
holders which come into existence only as a result of series of
process of assembling of various parts. In coming to this
conclusion, the learned Member relied upon a judgment of this
Court in the case of Union of India v. M/s. Tarachand Gupta &
Bros. (1983 ELT 1456) wherein this Court considering the claim
of an importer who imported various parts of motorcycles in
knocked down condition, claimed the benefit of an import licence
issued to him for importing parts and accessories of motorcycles.
The contention of the revenue in that case was that in reality these
parts were only knocked down parts of the motorcycles which
could be re-assembled as motorcycle(s) after their import, hence,
they were not entitled to import such knocked down parts of a
motorcycle was rejected by this Court holding that since the
importer had imported parts and accessories of mopeds, his
imports were covered by Entry No. 295 of the Schedule to the
Import Trade Control Order and it was not permissible for the
Collector to hold that they were not covered by Entry No. 295 on
the ground that when assembled together they would constitute
other articles like a motorcycle, scooter etc. Following the said
judgment of this Court the third member agreed with the Technical
Member holding that subject to the fulfilment of other conditions
of the notification, parts of nozzle and nozzle holders are entitled
to the benefit of exemption under Notification No.217/85, as
amended. Thus, by a majority the tribunal held in favour of the
respondent.
Mr. A K Ganguli, learned senior counsel appearing for the
Department before us, contended that when the notification
specifically excludes the benefits of exemption to nozzle and
nozzle holders, it cannot be said that parts of such nozzle and
nozzle holders are not excluded by the said notification. He
contended that ultimately it is these parts which constitute the
nozzle and nozzle holders which the exemption notification had
excluded from its benefit, therefore, it cannot be said that part of a
part constituting a product, can be treated separately from the part
which is not exempted.
Whereas Mr. Joseph Vellapally, learned senior counsel
appearing for the respondent, contended that the majority Members
were justified in coming to the conclusion that nozzle and nozzle
holders are not the same as part of the said nozzle and nozzle
holders and the exemption notification not having specifically
excluded these parts, it is not open to the Department to equate the
parts as being the same as nozzle and nozzle holders. He contends
that ultimately these parts be it a part of nozzle or nozzle holders or
not would become a part of the ultimate product that is the internal
combustion engine, therefore, it would become a part of the engine
and not part of nozzle or nozzle holder on the principle “a part of a
part is a part of the whole”. That apart, learned counsel pointed out
to us that the Department itself has subsequently accepted the
verdict of the tribunal without any reservation as could be seen
from the application made to the Collector of Appeals under
Section 35E(4) of the Central Excises & Salt Act, 1944 by the
Assistant Collector concerned on 24.9.1994. Learned counsel for
the respondent pointed out that based on this application the
Collector of Central Excise & Customs (Appeals), Pune, allowed
the prayer of the said Assistant Collector and following the
judgment of this Court in the case of Kamlakshi Finance Corpn.
Ltd. [1991 (55) ELT 453 (SC)] held in favour of the respondent by
holding that parts of the nozzle and nozzle holders are eligible for
the benefit of exemption under Notification No.217/85 subject to
fulfilment of other conditions of the notification. The said order of
the Appellate Collector has become final and is being followed by
the Department till date. Learned counsel also relied upon a Board
Circular No.14/88 dated 26.5.1988 wherein it was held that in view
of the fact that the parts which go into the manufacture of
component parts that are in turn used in the manufacture of diesel
oil operated internal combustion engines, hence, would also be
entitled to exemption in terms of Notification No.217/85 subject to
fulfilment of other conditions. Therefore, in view of the above the
learned counsel for the respondent contends that the appeal of the
Department before us is an exercise in futility since the
Department has accepted the claim of the respondent knowing very
well these appeals are pending and without making those orders
subject to the judgment of this Court.
We find substantial force in the argument of the learned
counsel for the respondent. It is true that the Department has
challenged the finding of the majority members before us in these
appeals but as pointed out by the learned counsel for the
respondent, the Department itself without reference to these
appeals decided to get the order which was in its favour, set aside
by invoking the provisions of Section 34E(4) of the Act, and
having obtained such an order from the Appellate Collector, we do
not think it proper for the Department now to continue to agitate
this issue. We may make it clear that neither the application under
Section 34E(4) of the Act filed by the Assistant Collector nor the
order made therein by the Appellate Collector are made subject to
the decision of this Court. That apart, as pointed out by learned
counsel for the respondent, the Board itself by its Circular referred
to hereinabove, has held that parts of nozzle and nozzle holders are
not nozzle and nozzle holders for the purpose of the notification in
question so as to deny the benefit of exemption to those parts. We
are told that this decision of the Appellate Collector and that of the
Board are being followed by the Department without demur. In the
said view of the matter we do not think it is necessary for us to go
into the main question in regard to which there was difference of
opinion amongst the Members of the tribunal.
For the reasons stated above, these appeals fail and the same
are dismissed.