ORDER
K.S. Venkataramani (T), Jyoti Balasundaram (J), S.L. Peeran (J) and S.D. Mohile (T), Members
1. The following issue has been referred to the larger Bench for decision :
“Whether tools falling under Chapter 82 of C.T.A., 75 are not to be classified under Chapter 98 as tools are different from parts of machines for the reasons set out in Tribunal’s decision in the case of Collector of Customs v. Silicon Electricals & Others (supra); or whether tools which are shown to be specially and specifically designed to work with a particular machine have to be classified under Chapter 98 as parts; and if so, whether such articles would be covered by exclusion at Sl. No. (xi) to the proviso to Notification 69/87.”
2. When the case was called on 9-11-1983 none appeared for the appellants. They had however furnished a written submission and had requested for the leave of absence from the personal hearing on 9-11-1993.
3. In the written submission the appellants have furnished the technical write-up in respect of the import of Circular Saw Blades (Friction Type) vide bill of entry No. 011609 dated, 13th June 1988, as directed by the Tribunal at the last hearing on 22th April, 1993.
4. They also furnished drawing No. 08-19-C-189 regarding the Tooth Profile for Flying Saw Cutter as also the Leaflet of the stores (Taiyo Engineering Inc. Japan) regarding high stage Friction Saw Blades.
5. As regards the query raised by the Hon’ble Tribunal during the previous hearing as to how the refund application was filed when the bill of entry was assessed by the Assistant Collector and why a regular appeal under Section 128 of the Customs Act was not filed before the Collector (Appeals) after obtaining a speaking order from the Assistant Collector, it has been explained that as per the long established practice at the Bombay Custom House the bills of entry were assessed by the Appraisers and were merely countersigned by the Assistant Collector and therefore such assessments have always been treated as assessments done by the Appraisers and not by the Assistant Collector and therefore the refund application of the appellant had been entertained. It has been added that the department has not raised this objection even at the first appeal stage presumably because the Ld. Collector (Appeals) was aware of the practice followed by the department.
6. As regards the Tribunal’s query as to how the goods imported by the appellant can get out of Section Note 1(k) of Section XVI which excludes articles of Chapters 82 and 83 from the purview of Chapter 84, the appellant submits that as per Section Note 1(f) of Section XV, the articles of Section XVI are excluded from Section XV and that when Section XVI and Chapter 84 falling in the said Section were seen, it includes not only the machinery but also the machinery parts as in Heading No. 84.66 and therefore the goods which are articles of Section XVI are obviously out of Section XV by virtue of Section Note 1(f) of Section XV.
7. The appellant further submits that the (Friction Type Circular Saw Blades imported by the Appellant were not a part of general use as defined in Section Note 2 of Section XV, and therefore the Circular Saw Blades imported by the Appellant would also not stand excluded from Section XVI in terms of Section Note 1(g) of Section XVI.
The appellant submits that as per the documents presented at the time of import, viz. Purchase Order of the Appellant and foreign supplier’s Invoice, Supplier’s catalogue, it has been established that the Circular Saw Blades imported by the Appellant were manufactured by the foreign supplier as per the specifications given in drawing sent by the Appellant and were therefore not supplied from the supplier’s ready stock off the shelf. The distinguishing features of the Circular Saw Blades imported by the Appellant are described in the technical write-up (Annexure-J) and are specified in the drawing annexed hereto and is marked Annexure L.
The appellant submits that as per the explanatory notes of Chapter 82 in the Harmonized Commodity Description and Coding Systems at page 1101, the Circular Saw Blades (Friction Type) are required to be and could only be utilised in the machine on account of the degree of speed with which they are required to rotate, in order to cut the pipes in continuous process and hence these have to be classified under Chapter 84.
The appellant submits that the goods imported by the appellant are not in the nature of interchangeable tools, and therefore these are not classifiable under C.T.H. 82.
The Appellant submits that as per Section Note 2(a) of Section XVI, parts of machines (not being parts of the articles of Heading 84.84, 85.44, 85.45, 85.46 & 85.47) have to be classified in Chapter 84 or 85 as the case may be.
The appellant submits that the goods imported by the Appellant are the parts of Flying Cut Off Machine falling under C.T.H. 8461.50 and are therefore correctly classified as per C.T.H. 8466.93.
8. The Ld. SDR narrated the brief facts of the case. In this case Circular Saw Blades falling under Chapter 82 and which are parts of machinery falling under Heading 84.61, have been classified under Heading 98.06.
9. The appellant had filed a refund claim on the ground that the said goods were classifiable under Heading 8202.99. The claim had been rejected by the Assistant Collector Customs on the ground that the goods were parts of machines falling under Chapter 84/85 and were covered under Heading 98.06, in terms of Note 1 to Chapter 98 and were not specifically excluded in terms of Note 7 to the Chapter.
10. At the appellate stage the appellant did not dispute the classification of the goods under Chapter 98 but claim the benefit of Notification 69/87-Customs on the ground that these parts were classifiable under Heading 8461.50 and that these were therefore not excluded by Sl. No. (xi) of the Notification No. 69/87-Customs, dated 1-3-1987.
11. The Ld. SDR argued that there was no difference between the decisions of the Tribunal in the case of Voltas Ltd. v. C.C. reported at 1991 (56) E.L.T. 569 and in the case of M/s. Bhadrachalam Paper Boards Ltd. v. C.C., Madras – 1993 (64) E.L.T. 137 – issued under Final Order No. C/248-249/92-D in A. No. 2685/3009/89-D, on the one hand and in the case of Collector of Customs v. M/s. Silicon Electricals and Others in its Order Nos. 212-215/89-B2, dated 7-7-1989.
12. Considered. The short issue calling for decision is whether tools falling under Chapter 82 (Circular Saw Blades in the present case) which are parts of machinery falling under Chapter 84 and which are classifiable under Heading 98.06 are eligible to the benefit of concessional rate prescribed under Notification 69/87-Cus., dated 1-3-1987.
13. According to the referring Bench there is apparent contradiction in the decisions of the Tribunal in the case of (i) Voltas Ltd. v. C.C. (supra) and in the case of M/s. Bhadrachalam Paper Board Ltd. (supra) on the one hand and that in the case of M/s. Silicon Electricals and Others (supra).
14. In the case of Voltas, the Tribunal considered the classification of solid industrial tyres for fork-lift trucks as between the competing Heading 40.12 which covered solid tyres and 98.06 and the Tribunal held, on reading of Chapter 1 to Chapter 98 and also in terms of Rule 3(c) of the Rules of interpretation of the Tariff, that both the headings being equally deserving of consideration the latter heading is to be preferred.
15. In the case of Bhadrachalam Paper Boards the Tribunal has held that “Fly Knives” were classifiable under 98.06 as held by the department and not under Heading 8208.90 as claimed by the appellant.
16. In the present case, by applying the ratio of the Bhadrachalam Paper Boards (supra) the classification of the Saw Blades under Heading 98.06 would be prima facie justified as against the claim for classification under Chapter 82.
17. In the present impugned order, the Collector (Appeals) has found, on a perusal of the catalogue and the drawing of the machines and that of the goods imported that the Circular Saw Blades imported are designed to be used only with the cutting machine. As against this, in the order in Appeal No. S/49-184/89-CL issued on 6-2-1990 relating to similarly described Tennin Brand Circular Saw Blades (Friction Type) the Collector (Appeals) had found that the blades have been made to the appellant’s specification with reference to their drawing and were not parts of the general application nor were they available Off the Shelf nor are they ready for sale in the market and had further concluded that these blades are therefore, a part of the cutting machine falling under 8461.50 and also that the blades are not tools and as such are not classified under Chapter 82. We had therefore, allowed the benefit of Notification 69.87 (supra). It would appear also that this decision of the Collector (Appeals) has been accepted and refund has also been granted to the importer. Therefore there is an apparent contradiction in the findings of the Collector (Appeals) with reference to the similar goods imported in these two orders.
18. Vide the decision in the case of Collector of Customs v. M/s. Silicon Electricals and Others (supra) Tribunal has decided that “tools” are different from “parts of machinery” and hence there was no scope for classifying of such “tools” as “parts of machinery” and therefore, under Heading 98.06.
19. Before the larger Bench the main pleas taken by the appellants are as follows; (as seen from the written submission)
(i) It was permissible to take a new ground before the Collector (Appeals).
(ii) There cannot be dual classification of the goods one for the Tariff classification and another for exemption notification as decided by the Madras High Court in the case of Appraiser, Appraising Department Group (II) Madras v. Tamilnadu News Print Paper Ltd. reported at 1989 (17) E.C.C. 119 and that the proposed action of the department to deny the benefit of the exemption under Notification 69/87 on the ground that such parts were classifiable under Chapter 82 and were therefore excluded from the benefit of the said Notification vide proviso (xi) ran contrary to the said Madras High Court decision.
(iii) By virtue of Section Note 1(f) of Section XV, the articles of Section XVI are excluded from Section XV and that when the Chapter Note 1(f) to Section XV and Chapter Note 1(k) to Section XVI were read together goods falling under Section XVI would get excluded from Section XV.
20. In this case it is not disputed that but for Heading 98.06, the Circular Saw Blades would be covered by Heading 82.02.
21. It is also claimed by the appellant and it appears to be established by the technical write-up that these Saw Blades are parts of machinery falling under Heading 84.61, as had also been accepted by the Collector (Appeals) in one of the orders relating to Tennin Brand Circular Saw Blades, which are also involved in this case.
22. It is also not disputed that by virtue of being parts of machinery falling under Chapter 84, the goods are classifiable under Heading 98.06.
23. The only dispute relates to the benefit of exemption under Notification 69/87-Cus. dated 1-3-1987 by virtue of the Sl.. No. (xi) of the proviso to the said Notification which excludes the articles falling under Chapters 82 and 83 from the benefit of the said notification.
24. Now, it is well settled, that where there is an apparent conflict between the various provisions of the Tariff and the exemption Notification, as far as possible a harmonious interpretation which avoids the apparent conflict has to be adopted.
25. For this purpose it is necessary to set out the Heading 98.06 (since deleted) as existed at the material time that is in June 1988. It read “parts of machinery, equipments, appliances, instruments and articles of Chapters 84, 85,86, 89 and 90”.
26. The Chapter note 1 to Chapter 98 provided that “this Chapter is to be taken to apply to all goods which satisfy the conditions prescribed therein, even though they may be covered by a more specific Heading elsewhere in this schedule”.
27. In view of this Chapter note which has a overriding effect, the classification of the goods under 98.06 cannot be faulted and has not, in fact, been challenged. This view is also supported by the Tribunal decision in the Voltas case (supra).
28. As regards the plea that once the goods are classified under Chapter 84/Chapter 98 they ceased to be goods falling under Chapter 82, such a view would render the provisos to Notification 69/87 inoperative.
29. The main part of the Notification specifies the various sub-headings of Chapters 84 to 90 (to which the Chapter 98.06 applies). The provisos to the said Notification specify the goods excluded from the benefit of the said Notification such as parts of general use as defined in Note 2 to Section XV (Sl. No. viii) and “articles specified in Chapter 82 or 83 (Sl. No. xi).
30. Each of these exclusions is a separate entry and has to be given effect to and hence the arguments on behalf of the appellants that such Circular Saw Blades are not parts of general use and are therefore Not excluded from the said Notification, is of no avail as it would ignore the SI. No. xi of the said proviso.
31. As laid down in Maxwell on the Interpretation of Statutes Twelfth Edition under the principle “Construction ut res magis valeat guam pereat” “if the choice is between two interpretations, the narrower of which would fail to achieve the manifest purpose of the legislation, we should avoid a construction which would reduce the legislation to futility and should rather accept the bolder construction based on the view that Parliament would legislate only for the purpose of bringing about an effective result”. The above observation would apply to the Parliamentary legislation as well as to the subordinate legislation in the form of Notifications. As stated further under the same heading “in accordance with these principles, the Court should avoid interpretations which would leave any part of the provisions to be interpreted without effect.
Further, it is well settled that the burden of proof for classification is on the department but the burden of proof for claiming the exemption is on the assessee (vide Mangalore Chemicals & Fertilizers Ltd. v. Deputy Commissioner reported at 1991 (55) E.L.T. 437 (S.C.) and Hind Engineering Co., Rajkot v. Commissioner of Sales Tax reported at 1984 (17) E.L.T. 268 (Gujarat).
32. The ratio of Madras High Court decision in the case of Tamilnadu News Print Papers Ltd. reported at 1988 (17) E.C.C. 119 does not support the argument of the appellants that there can not be dual classification of the same goods for the purpose of tariff classification and for the purpose of the exemption. In that case it was held that though the goods were classifiable under 84.66 being parts of the project import, they were also covered by the term “Paper making machinery” for the purpose of availing of the benefit of Notification 61/83-Cus., 62/83-Cus., dated 1-3-1987. By applying the ratio of the said Division Bench judgment (which had set aside the single Member judge decision in the same case) the tools though classifiable under Heading 98.06 do not cease to be “tools” classifiable under Chapter 82 for the purpose of Notification 69/87-Cus., dated 1-3-1987 though, the result, in this case, is that, by virtue of Sl. No. (xi) of the proviso, such tools get excluded from the benefit of the said Notification.
33. In view of the foregoing and in the light of the various admitted facts, the goods are rightly classifiable under Heading 98.06 but are not eligible for the exemption under Notification 69/87-Cus., dated 1-3-1987.
34. We respectfully differ from the view taken by the Tribunal in the case of Silicon Electricals and Others (supra) and follow the ratio of other Tribunal decision in the case of Voltas Ltd. (supra) and in the case of Bhadrachalam Paper Boards Ltd. The appeal accordingly rejected.
S.K. Bhatnagar, Vice President
35. With due respects to Hon’ble Member (Technical), my views and orders are as follows :
36. I observe that ‘tools’ and ‘parts’ are distinct and distinguishable and are not synonymous. The Customs Tariff itself recognises this distinction.
37. In fact, parts can be that of machines, machinery and mechanical appliances, electric /electronic machinery and equipment and tools themselves. Thus for example, Chapter 82 relating to ‘tools’ etc. covers also ‘parts thereof of base metal’. As per Chapter Note 2 “Parts of base metal of the articles of this Chapter are to be classified with the articles of which they are parts, except parts separately specified as such and tool-holders for hand tools (Heading No. 84.66). However, parts of general use as defined in Note 2 to Section XV are in all cases excluded from this Chapter. Heads, blades and cutting plates for electric shavers or electric hair clippers are to be classified in Heading No. 85.10.”
38. Again in Chapter 84, various types of machine tools are included and various Headings of 84.56, 57, 58, 59, 60, 61, 62, 63, 64, 65, 67 etc. whereas 84.66 refers to ‘parts’ and ‘accessories’ suitable for use solely or principally with the machines of Heading Nos. 84.56 to 84.65. Again 84.73 covers ‘parts’ and ‘accessories’, (other than covers carrying cases and the like) suitable for use solely or principally with the machines of Heading Nos. 84.69 to 84.72. Yet again, electro mechanical tools for working in the hand, with self-contained electric motor would fall in 85.08 and their parts under 8508.90; Electromechanical domestic appliances with self-contained electric motor would fall under 85.09 and their parts under 8509.90. Besides, parts are covered under sub-headings of many other Headings.
39. This distinction is also recognised by trade and industry on one hand and the Customs Department on the other hand and is a well recognised distinction as per long-standing established practice. This has been referred to in the Tribunal’s order in the case of Vespa Tools, Pan Traders and Silicon Electricals (Order No. 212-215/89-B2) of this Tribunal. There is, however, nothing to show that tools which are specially designed to work with a particular machine have to be classified under Chapter 98.
40. The reasons for treating tools as different from parts of machines as set out in the Tribunal’s order in the Silicon Electricals case is, therefore, amply supported by the scheme of the Tariff and various entries including Headings and sub-headings cited above as illustration.
41. The McGraw Hill Dictionary- of Scientific and Technical Terms defines ‘Tools’ as any device, instrument or machine for the performance of an operation, for example, a hammer saw, lathe, twist drill, drill press, grinder, cleaner, screw driver.
42. Even, otherwise, it is commonly recognised as per the established practice that tools are articles with a blade, working edge, or working surface which comes in direct contact with the material to be worked upon and may have cutting teeth, flutes, grooves or the like and their working parts may be made of Base Metal, Metal Carbides or Cermets, Precious or Semi-Precious stones or Abrasive material and this concept has been drawn upon and incorporated in Chapter Note 1 of Chapter 82.
43. Since tools are distinct from parts of machinery, therefore 98.06 is not attracted in the instant case.
44. (I may, however, mention ‘en passant’ that the Chapter 98 deals with Project import; laboratory chemicals; passengers’ baggage; personal importations by air or port; ship stores; And Chapter Note 1 of Chapter 98 has to be seen in the context of the areas that this Chapter is intended to cover, otherwise the entire scheme of the Tariff will go hayware. In other words, 98.06 is not an omnibus heading and wherever, parts have been specifically indicated in a Heading or a sub-heading of a Chapter or mentioned in its Chapter Note, then those sub-headings and Chapter Notes have to be taken into account, except in those and only those cases where it could be shown that Chapter 98 was attracted.
45. In the above view of the matter, there is no reason to believe that there is a conflict between the Chapter and Heading 98.06 and the other provisions of the Tariff).
46. Furthermore, both interchangeable and non-interchangeable tools of the types covered under Chapter 82 are prescribed under various Headings therein. Therefore, even those tools which are specially designed to work with a particular machine(s) and parts of such tools will also be classifiable under this Chapter unless they are expressly included under any Heading of other Chapters covering tools. As for example, machine tools will fall under the Headings which specifically cover such tools and electro-mechanical tools will fall under the Headings specified for such tools.
47. In the instant case, it is noticed that the assessment was initially claimed under Heading 8202.99/8208.90/8202.31 and I observe that 8202 as it stood during the relevant period read as follows :
_____________________________________________________________________
Heading Sub-heading Description of article
No. No.
______________________________________________________________________
82.02 Hand saws, blades for saws of all kinds
(including slitting, slotting or toothless
saw blades)
8202.10 Hand saws
8202.20 Hand saw blades
Circular saw blades (including slitting or
slotting saw blades)
8202.31 With working part of steel
8202.32 With working part of other materials
8202.40 Chain saw blades
8202.91 Straight saw blades working metal
8202.99 Other.
_________________________________________________________________________
48. The appellants have described the goods as Circular Saw Blades used as a component of flying cut off machine tool in Tube-Mill Plant for cutting the pipes at pre-determined length in continuous process; And I observe that circular saw blades are specifically covered by Heading 82.02 as extracted above.
49. As evident from the Chapter Notes of Chapter 82, excluding the parts of general use other parts of tools are also covered under this Chapter, since the imported item is admittedly a part of flying cut off machine tool under C.T.H. 8461.50, it would fall under the Heading 82.02 unless it could be shown that it was part of a tool falling under other Chapters, but the latter is nobody’s case. Hence in my opinion, the goods were correctly classifiable under 82.02.
50. In the circumstances Notification 68/87 does not come into picture.
51. In the circumstances of the case, the appellants’ change in stand at this stage is not permissible in view of their own statement of facts and grounds in appeal read with their own description of the goods and their use under the Heading statement of facts which have remained unchallenged by the Department.
52. The appellant has also mentioned about the assessment under C.T.H. 8202.99 as per the precedent of the Department itself. That there was such a precedent has not been denied, but I see no reason for classification under ‘others’ when 8202.20 specifically mentions ‘circular saw blades’ and those with working parts of steel fall under 8202.31.
53. I also observe that in the case of Collector of Customs, Bombay v. Premier Mills Stores [1992 (57) E.L.T. 197], Tungsten Carbide Drills (were not considered as parts of machinery falling under Heading 84 and classifiable under 98.06, but) were considered as tools and classified on merits under Heading 82.07 and the Tribunal had relied on the judgment of the Hon’ble Supreme Court in Indo-International Industries v. Commissioner of Sales Tax, U.P. [1981 (8) E.L.T. 325 (S.C.)] and Dunlop India Ltd. v. U.O.I. [1975 Cen-Cus 150C (S.C.)] and the ratio of this order was also relevant for this case.
54. In the above circumstances, I consider that the ratio of the Silicon case was applicable and the goods were classifiable under 82.02 and the matter may, therefore, be returned to the Original Bench for following the judgment in the case of M/s. Silicon and pass final orders accordingly.