ORDER
Jyoti Balasundaram, Member (J)
1. The issue for decision in this appeal which arises out of the order passed by the Collector of Customs (Appeals), Bombay is the classification of spring and channel sets for air compressors imported by the appellants herein – according to the importers the item is classifiable under sub-heading 8414.90, while the Revenue has classified it under subheading 7320.90 by application of Rule 3(b) of the General Rules of Interpretation of the Schedules, holding that a set of channel and spring derives its essential character from the spring and since, by virtue of Note 2 to Section XV of the Customs Tariff, spring is an article of general use and since by virtue of Note l(g) to Section XVI, such articles of general use are excluded from Chapter 84, the imported items fall under sub-heading 7320.90.
2. Learned Counsel, Shri L.P. Asthana, submits that the item has been imported as a set and accepted by the Department to be a set. Therefore, Interpretative Rules have been resorted to. However, since the essential character of the set is that of the valve as seen from the technical literature, the goods are required to be assessed not as a spring but as parts of compressors under subheading 8414.90. He submits that the assessment under Heading 8418.90 as part of valve is ruled out in view of the HSN Explanatory Notes to Heading 84.81. Alternatively, he submits that the classification of the goods by application of Rule 3(b) is not possible because it cannot be definitely determined as to which gives the item its essential character, whether spring or channel and, therefore, resort has to be made to Rule 3(c) in which case, the goods would be covered under Chapter 84 (later chapter) and particularly under sub-heading 8414.90 of the Schedule to the CTA. On the other hand, learned SDR contends that the literature on record shows that the set of spring and channel derives its essential character from the spring and since HSN Explanatory Notes to Heading 7320 exclude only those springs which are assembled with other articles to form identifiable parts of machinery from the scope of sub-heading 7320.90, the disputed goods are covered by sub-heading 7320.90 since springs are not mounted or assembled with channel to form an identifiable part of machinery. He reiterates the findings contained in the orders of the authorities below.
3. We have carefully considered the submissions of both sides.
4. The goods hi question are sets consisting of channels and springs and they are parts of type A channel valve (in the nature of inlet and exhaust valves) which in turn is a part of compressor. The compressor sucks the air through the inlet valve in the cylinder and discharges the air at the specific requirement of the pressure through the discharge valve. It is seen from the technical literature placed before us that a typical I-R channel valve consists of a seat, seat plate, stop plate, several sealing elements called channels (because of their shape) and channel springs which assist the channel seals to open and close to a desired timing so as to prevent slamming and extend valve life. The entire sealing area is made up of multiple sealing elements (channels) to keep these as light as possible to respond to changing pressure differential across the valve which causes it to move from close to open and back to close in conjunction with the cylinder pressure fluctuation between intake and discharge pressures. All channel valves are automatic valves, as they are automatically opened and closed by pressure. Air compressor valves are placed in the cylinder to permit one way flow of air either into or out of the cylinder. The operation of the valve is automatic. As the piston moves in the compression stroke, pressure builds up in the cylinder and when this pressure slightly exceeds the discharge pressure, it overcomes the spring tension and all the channels of the valve open. As the piston reaches the end of the compression stroke, the differential pressure across the valve reduces and spring tension closes the valve. Each channel valve is a combination of several smaller valves with its bowed leaf spring operating individually. The cushioning is effected when a small volume of air is trapped between the channel and its spring, causing the channel to float silently to a stop. This positive cushioning action, prior to the critical point of valve impact with the stop plate reduces valves breakage. This is explained in detail as under:
Valve ClosedA tight seat is formed without slamming or friction, so seat wear is at a minimum. Both channel and spring are precision-made to assure a perfect fit. An air space is formed between the bowed spring and the flat channel.
Valve openingChannel lifts straight up in the guides without flexing. Opening is even over the full length of the port, giving uniform air velocity without turbulence. Cushioning is effected by compression of the air between spring and channel.
Valve wide openAir trapped between spring and channel has been compressed, and in escaping has allowed channel to float to its stop; full opening has been attained without impact. The light pressure of the spring soon starts the closing action.
5. From the above it is seen that the channel and spring work by balancing and counter-balancing the effect of in-flowing air passing through the valve mechanism and the spring which is designed specifically to suit each channel length and can never be sold or installed as a separate entity and can only be used in a set with channel as a single component of the compressor.
6. it is neither the spring nor the channel which gives the item its essential character and the spring and the channel are equally important. Therefore, we have to apply Ride 3(c) of the General Rules for the Interpretation of the Schedule to the Customs Tariff which stipulates that “when goods cannot be classified by reference to (a) or (b), these shall be classified under the Heading which occurs last in numerical order among those which equally merit consideration”. Applying Ride 3(c), the goods in dispute are to be classified under Chapter 84. The two competing entries in Chapter 84 are Heading 84.14 and Heading 84.81. 84.14 covers “air or vacuum pumps, air or other gas compressors and fans….” and sub-heading 8414.90 covers parts thereof. Heading 84.81 covers taps, cocks, valves and similar appliances for pipes….including pressure reducing valves ….” and Heading 8481.90 covers parts thereof. What has, therefore, to be seen is whether the item in dispute is to be classified as a part of the valve under 8481.90 or as part of air-compressor under 8414.90. Out attention is drawn by the learned Counsel to HSN Explanatory notes to Heading 84.81 wherein it is stated that “taps, cocks, valves, etc. remain in this Heading even if specialised for use on a particular machine or apparatus …..”. However, certain machinery parts which incorporate a complete valve, or which regulate the flow of a fluid inside a machine although not forming a complete valve in themselves, are classified as parts of the relative machines, for example,”………suction or pressure valves for air or other gas compressors (84.14)”. Since pressure valves for air compressors are themselves excluded from Heading 84.81 and fall for classification under Heading 84.14, the rightful parentage for the goods in dispute which are parts of pressure valves for air compressors lies under sub-heading 8414.90.
7. In the light of the above discussion, we hold that the spring and channel sets for air compressors imported by the appellants herein are to be classified under sub-heading 8414.90 of the Schedule to the Customs Tariff Act, 1975, set aside the impugned order and allow the appeal with consequential relief, if any, due to the appellants in accordance with law.
8. Before parting, we wish to record that, independent of our decision, the Revenue has been assessing these goods under Heading 8414.90 as seen from several Bills of Entry filed by the appellants herein on 31.7.1997, after the conclusion of the hearing of the appeal, in response to the SDR’s placing on record a communication dated 10.7.1997 from the Additional Commissioner of Customs, Group 5A, Mumbai stating that currently the set of spring and channel imported by the appellants are being classified under Heading 73.20.
Separate Order Sd/- (Shiben K. Dhar) (Jyoti Balasundaram) Member (J) Member (J) Per Shri Shiben K. Dhar, Member, (T): 9. With respect to ld. Member (J), I am writing a separate order as under:
10. The appellants claimed classification of valve channel and spring imported as a set under CTH 8414.90 claiming the goods to be parts of discharge valve which, according to HSN Notes, are to be classified as parts of compressors, the appellants claimed classification of the impugned goods as parts of compressors. Assistant Collector relying on Interpretation Rule 3(b) held that the set of channel and spring would derive its special character from spring and therefore, the entire set is classifiable as a spring. No reasons whatever have been given by Assistant Collector for holding that essential character of the impugned goods is derived from springs.
11. Collector (Appeals) at internal page 3 of his order has recorded:
In the instant case, the impugned goods are to be bought in sets for retail sale and each set of channel consists of a channel and spring. It is observed from the catalogue that the impugned set of channel derives its special character from spring and not from channel. Therefore, the impugned goods merit assessment….
12. Collector (Appeals) has not indicated how exactly catalogue points out to such a conclusion. The catalogue placed at P-22 of the Appeal Papers reads:
Attached to this is also description of IR Channel Valves, relevant portion of which is reproduced below:
13. Collector (Appeals), however, has not indicated which part of the catalogue indicates that the essential character of the set is derived from a spring. It was contended before us by the Id. Advocate that function of spring is only to protect the channel and the principal function is derived only from the valve channel. Further, it appears that certificates from Chartered Engineers were also placed before the lower authorities and we find no findings have been given with reference to these certificates. Relevant extracts from the certificate given by Dr. Yashwant R. Ullal, Chartered Engineer, is reproduced below:
It is further certified that the Channel and Spring do complement in each other’s working by balancing and counter-balancing the effect of in-flowing air passing through the valve mechanism. The Spring which is designed to suit each channel length can never be used independently as a separate entity and can only be used in set as single Component of the Compressor.
Sd/-
Dr. Yeshwant R. Ullal
Chartered Engineer
Approver/Corporate Valuer
14. Certificate from Ingersoll-Rand dated July 6,1989, is reproduced below:
INGERSOLL-RAND Ingersoll-Rand (India) Ltd.
Registered Office
Muybaker House, S.K. Ahire Marg
P.O. Box 9138, Bombay 400 025
Tel. 4936765
Tlx. 011-71395/011-71674
Grams. INGERSILER
July 6, 1989.
TO WHOMSOEVER IT MAY CONCERN
This is to confirm that the Set of Channel consists of a Channel, Spring and also a Wear Strip wherever applicable. A set of the above items jointly forms a component which is part of the Compressor Channel Valve which in turn forms an internal part of the Compressor.
We further confirm that the spring is an integral part of the Channel and it can never be used separately in any other applications.
The Channel and Spring complement in each other’s working by balancing and counter-balancing the effect of in-flowing air passing through the valve mechanism. Further, the spring is designed specifically to suit each channel length and can never be sold or installed as a separate entity but must be installed in Set.
For Ingersoll-Rand (India) Ltd.
Sd/-
(N.D. Kapadia)
Manager-Technology.
15. These certificates, however, only indicate that spring is an integral part of channel and the two complement each other’s functioning. Whether essential character is derived from spring or channel does not come out from these certificates. During hearing before us, however, the Ld. Advocate placed on record letter dated 26.6.1997 from Ingersoll-Rand which indicates that channel valves can work without any spring and often times even after a spring has broken and that spring only assists the valve in opening and closing to a pre-designed valve timing that is necessary to achieve maximum efficiency. A spring by itself would not perform the sealing action required of a valve. Catalogue on Continuous-Duty Air Compressors from Ingersoll-Rand was also presented in the Court on 17.7.1997. In addition, the Ld. Advocate also produced some extracts from literature on compressor valves. This was additional evidence which was not gone into by Assistant Collector or Commissioner (Appeals). While the Chartered Engineer, whose certificates were produced before the authorities below certify that spring and valve complement each other’s function, the appellants through the evidence now produced contended that the spring is placed only for protection of valve and its function is to return the valve to its seat. The appellants have also filed extracts from publication.
THE INGERSOLL-RAND COMPANY COMPRESSOR VALVE STORY K.H. White April 30, 1965 March 4, 1971 (Rev.)
16. The appellants had produced certificates from Chartered Engineers before lower authorities which, however, only indicated that valves and springs complement each other’s function. The literature produced at that time also did not clearly indicate that essential character of the impugned goods is derived only from valves. The appellants have now submitted letters from the manufacturers as well as other evidence to substantiate their contention. The question, therefore, arises whether the Tribunal can at this stage evaluate this evidence to arrive at a decision as to whether it is the spring or the channel valve which gives the set of springs and channel valves the essential character.
17. Admittedly the appellants did not place this evidence before the Collector (Appeals). Hon’ble Apex Court in case of Commissioner of Customs, Calcutta v. Hannman Trading Corporation held Tribunal was not correct in admitting fresh evidence and then deciding the case on merits on that basis. The relevant extract from the judgment of the Hon’ble Apex Court is reproduced below:
5. There is no controversy that the respondents did not avail of the opportunity before the authorities to adduce any evidence and it was only before the Tribunal that material was produced by the respondents/sole proprietor challenging confiscation and penalty. In the facts and circumstances of the case, we are satisfied that the course adopted by the Tribunal of permitting respondents to adduce evidence before it for the first time and then in proceeding to decide the case on merits on that basis was not correct. If the Tribunal was of the view that a fresh opportunity was required to be given to the respondents to adduce evidence and show cause in response to the notice given to the respondents, the appropriate course for adoption was to remit the matter to the Commissioner of Customs, Calcutta. For this reason alone, (he Tribunal’s order must be set aside.
18. I am, therefore, of the view that the matter pertaining to essential character of the impugned goods has to be considered by lower authorities by evaluating the fresh evidence now produced.
19. In view of this, I remand the matter to Commissioner (Appeals) for de novo decision after considering the fresh evidence produced by the appellants and after observing Principles of Natural Justice.
Sd/-
Shiben K. Dhar)
Member (T)
20. The following difference of opinion is framed for reference by the Hon’ble President to a third Member
Whether Spring and Channel sets for air compressors imported by the appellants herein are classifiable under sub-heading 8414.90 of the Schedule to the CTA 1975 and the impugned order is required to be set aside and the appeal allowed with consequential relief, as proposed by the learned Member (Judicial)
or
The issue regarding the essential character of the impugned goods has to be considered by the lower authorities and the matter requires to be remanded for this purpose, as proposed by the learned Member (Technical).
Sd/- Sd/- (Shiben K. Dhar) (Jyoti Balasundaram) Member (T) Member (J) Dt. 21.1.1998 Dt. 20.1.1998