ORDER
P.G. Chacko, Member (J)
1. The Commissioner classified “Launching Mechanism” under Heading 84.25 of the CETA Schedule and demanded duty of about Rs. 2.41 crores. The assessee wanted this item to be classified under Heading 87.05. Two other items, “Integrated Mobile Missile Launcher” and ‘P-II’ Missile Launcher”, were classified under Heading 87.05 and duty demanded accordingly. Towards this demand, the assessee has already paid Rs. 36.67 lakhs (against a demand of Rs. 44.2 lakhs). Penalties were also imposed on the assessee under Section 11AC and Rule 25. The present application seeks waiver of predeposit and stay of recovery in respect of the penalty amounts and the balance amount of duty.
2. For the present purpose, ld. Sr. Counsel submits, under instructions that the balance amount of duty (Rs. 44.2 – 36.67 = Rs. 7.54 lakhs) can be deposited as regards two of the three items. With regard to Launching Mechanism, however, ld. Counsel claims strong prima facie case and prays for waiver of predeposit and stay of recovery for the entire amount of duty and the corresponding amounts of penalty.
3. After examining the records and hearing both sides, we find that Launching Mechanism was mounted on chassis of motor vehicle. The adjudicating authority took the view that the value of the chassis should also be included in the assessable value of the “launching Mechanism” for the purpose of payment of duty. The demand of duty of Rs. 2.41 lakhs is on the differential value. It appears from the records that the launching mechanism was mounted on chassis (which was not duty- paid on account of exemption Notification) supplied by M/s. Bharat Earth Movers Limited and that the manufactured item was directly supplied to the Defence. Admittedly what the appellant did was to mount the launching mechanism on chassis. Now we shall come to the classification dispute (84.25 v. 87.05). Chapter 84 deals with “Nuclear Reactors, Boilers, Machinery and Mechanical Appliances; parts thereof.” Heading 84.25 reads thus:
Pulley tackle and hoists other than skip hoists; winches and capstans; jacks.
After reading HSN notes, ld. Commissioner found that these goods could include mobile equipments, whether propelled or not and, accordingly, held the item in question to be a mobile equipment falling under Heading 84.25. Prima facie, ld. Commissioner lost sight of the activity performed by the appellants which was nothing but mounting of Launching Mechanism on a chassis. Mounting of any equipment on chassis of a motor vehicle is a process contemplated in Chapter 87 and the same was not contemplated in Chapter 84. HSN notes cannot be relied on to redefine an activity. In our considered view, prima facie, the goods in question, “Launching Mechanism”, which was manufactured through a process of mounting specific-purpose equipment on vehicular chassis should find a place under Heading 87.05 of the CETA Schedule. In this view of the matter, we should grant waiver of predeposit and stay of recovery in respect of the duty demanded by the Commissioner on the differential value (value of chassis). It is ordered accordingly. The amount of Rs. 7.54 lakhs (Rs. Seven lacs and fiftyfour thousands only) relating to the other items in question should be deposited within a period of 4 weeks and compliance shall be reported on 20th April, 2006. In the event of compliance, there will be waiver of predeposit and stay of recovery in respect of the entire amount of penalty.
(Order dictated and pronounced in open court)