ORDER
S.L. Peeran, Member (J)
1. This appeal arises from order-in-original dated 26-4-1993 passed by the Collector of Customs, Bombay. The appellant had imported “Wilshire Mechanical Refrigeration Post Mix-Beverage Fountain with Key Lock Facility and claimed benefit of the Cus. Notification No. 59/87 as amended by 151/92 and 154/92. The Department issued two show-cause notices dated 3-2-1993 and 31-3-1993, which was as a result of investigation and seizure of incriminating documents on search of office premises and residential premises of the Managing Director of the appellant company. The scrutiny of the Bill of Entry No. 02090, dated 8-10-1992 and Invoice No. 1111, dated 4-9-1992 and invoice No. 63043, dated 1-9-1992 revealed that the importer had imported one container No. IEAU 2605653 from Canada per S.S. Lanka Ashitha, Voy. 48 W. under Bill of Lading No. TOR 03569 BBY dated 4-9-1992. The said container was declared to contain the following :
1. 65 pcs. equipments declared as Wilshire Mechanical Refrigeration Post Mix Beverage Fountain with Key Lock Facility;
2. 1 set of Spares for the above;
3. 65 pcs. bag-in-box installation Kit-4 FV;
4. 65 pcs. set of four Flojet COa Pumps with Quick disconnect and fittings.
For the above four items, the benefit was claimed in the following manner:
Item No. 1: was claimed under the CTH Heading 8418.69 with benefit of Notification No. 59/87,151/92 and 154/92 at the rate of duty of 25% + 30% + NIL; CIF value – Rs. 24,92,843/- and Duty of Rs. 13,84,774/-.
Item No. 2 : was claimed under CTH 8418.99 with rate of duty of 65% + 45% + 40% + 15%; CIF value Rs. 16,547/- and duty of Rs. 34,527/-.
Item No. 3 : was claimed under CTH 8418.99 with rate of duty of 65% + 45% + 40% + 15%; CIF value of Rs. 3,40,121/- and duty of Rs. 7,09,718/-.
Item No. 4 was claimed under CTH 8413 with benefit of Notification No. 59/87 at rate of duty of 25% + 30% + Nil; CIF value of Rs. 2,03,420/- and duty of Rs. 1,13,000/-
The importer had paid a total duty of Rs. 22,42,019/- in respect of the above four items. The inquiry revealed that out of the 65 machines imported, 50 machines were for M/s. Voltas Ltd., Bombay and 15 machines were imported for M/s. Parle Exports Ltd., Bombay. The search authorities found these machines located at the godown of M/s. Voltas Ltd. as well as in the premises of M/s. Parle Exporters.
2. During the course of investigation, the department received an intelligence that the importer had imported an indentical consignment vide Bill of Entry No. 02048, dated 6-2-1993. The same had been filed by M/s. Rajeev Shipping Agency on behalf of the importers and had submitted an Invoice No. 6024575, dated 16-12-1992. Therefore, the investigating authorities scrutinized the Bill of Entry and they found that the importer had imported one container from Canada vide Bill of Lading dated 16th Dec., 1992. The said container was declared to contain;
“POST MIX BEVERAGE FOUNTAIN.
122 pcs. Model: CTC-40-4 Complete with accessories
Model: CTB-28-1 220 V/50 Hz
Model: CTC-20-4-C/ W Flomatic Manual Value
All the goods were claimed as refrigeration equipment classifiable under Customs Tariff Heading 8418.69 alongwith benefit of Notification No. 59/87, 151/92 and 154/92 at the rate of duty of 25% + 30% + Nil with a CIF value of Rs. 5387917/- and assessable value of Rs. 54,41,796/-.
The goods were examined in the presence of importer’s representatives and statements were recorded from the Managing Director, Purchase Manager and General Manager of Voltas Ltd., Sr. Executive (Tech.) of M/s. Parle (Exports) Ltd., Regional Technical Manager of M/s. Pepsi Foods, Controller of Purchase of M/s. Voltas Ltd. and from one Shri U.R. Pradhan. The department alleged after the entire examination and investigation, that the goods imported vide the above two Bills of Entry were soft drink/soda maker dispenser and relied on the statements recorded from the witnesses in the case. Therefore, it was alleged that the goods were classifiable under Heading 8434.80 without the benefit of the said notifications claimed by the importer.
3. The importers filed the reply to the above two show-cause notices vide their reply dated 10-2-1993 and 2-4-1993. The ld. Collector considered the replies in respect of both the show-cause notices and as the issues involved were similar, he has passed a common order in respect of both the Bills of Entries.
4. In the impugned order, the ld. Collector has upheld the importer’s claim for classification of the imported goods under Customs Tariff subheading No. 8418.69 of Customs Tariff 1985. However, the ld. Collector has held that the benefit of the Notification No. 59/87 is not available to the imported goods. The ld. Collector has held in the impugned order as follows :
“Considering the various submissions made by the importers both oral and documentry, and the documentry evidence produced by the Department, one thing becomes clear, the machine under import can make four different soft drinks depending on the flavours of syrup connected to the valve. Further, the soft drink can be carbonated and chilled before sale. When one examines the imported machine by its configuration relative functions of the components and its cost structure and the practice of classifying the goods abroad and in India in earlier cases of import, it is fairly clear that the chilling function is one of the major function of this machine. But going by the rules and interpretation of the HSN and the Tariff, I cannot consider the machine as a mere refrigeration equipment or chilling machine as it is a composite machine capable of carrying out three different functions viz. Chilling, carbonation and mixing, the soft drink before sale.
Further, I find that the importer is anxious to classify the goods under Tariff Heading 8418 not for its propriety/correctness but for claiming the benefit of Notification 59/87. This notification makes it mandatory that the benefit of Notification cannot be given unless the goods squarely falls within the ambit and scope of the words given against the relevant entry 8418, which reads as “Refrigerators and refrigeration equipment including freezing equipment (electrical and others) other than household type refrigerators. Interpretative rules of the tariff are inapplicable to determine the scope of an entry listed in a customs exemption/concessional duty notification issued under Section 25 of the Customs Act, 1962. There are a spate of court decisions and CEGAT judgments that an exemption notification has to be interpreted strictly. Nothing should be added – nothing subtracted from it. There is no scope to enlarge its coverage or to give it a liberal interpretation to bring under its purview a more versatile machine than what is specified in the Notification. Here in this case, I have already arrived at a finding that machine imported is a composite machine which has threefold functions viz., mixing a soft drink, carbonation and chilling, I definitely cannot hold that the goods as plain and simple refrigeration equipment though the principal function of the machine is refrigeration or chilling. Therefore, it would be a grave error if the goods could be considered purely as a refrigeration equipment and benefit of Sr. No. 13 of the Notification 59/87 is extended to the machine. Although the goods are classifiable under 8418 looking at the composite nature of the machines and the reasons stated above. I am unable to extend the benefit of Notification 59/87”.
In conclusion, the ld. Collector has also imposed a penalty of Rs. 2500/- for the misdeclaration of the value of spares in the first consignment. However, he has accepted the valuation regarding the first consignment given to bottlers. As regards the second consignment he has held that the valuation will be accepted only after the finalization of the scrutiny by the Special Valuation Branch of the Customs House. He has dropped the proceedings against M/s. Voltas Ltd. and M/s. Parle Exports. The importers in this appeal are contending that once Heading 8418.69 is accepted then it follows that Notification No. 59/87 cannot be denied to the imported goods on the ground that they are composite goods performing three functions viz. refrigeration, carbonation and dispensing. They submit that the process of refrigeration is mentioned under Heading 84.18 but the process of carbonation or process of dispensing is not specifically mentioned under Heading 84.18. Thus, these two functions are also not specifically mentioned in any of the headings of Chapter 84 or 85. It is submitted by them that in these circumstances going by the examples given in the explanatory notes to the HSN, the goods may merit classification more appropriately under Heading 84.79 being machines whose individual functions are not specified or included elsewhere in this chapter. They submit that if the classification of the goods under Heading 84.79 is accepted, the exemption under Notification No. 59/87 would be available ipso facto . Thus, they submit, the imported machines would come under the category of machines for production of a commodity. Alternatively, they submit that if the goods were held to be not classifiable under Heading 84.79, but only under Heading 84.18, even then the exemption under Notification No. 59/87 cannot be denied to them. It is submitted by them that the imported item being a refrigeration equipment not being denied and its activity of carbonation and dispensing being ultimately connected with the purpose of delivery of the chilled liquid, the activity being part and parcel of the refrigeration, by itself is no ground to deny the benefit available to refrigeration equipment. They submit that by this , process or by incorporating such specialised features, the equipment does not cease to be a refrigeration equipment. They submit that the refrigeration equipment falling under Heading 84.18 or under Notification No. 59/87 is used in the generic sense and all the species of the refrigeration equipment are covered under the generic entry. They submit that it is well settled law that where an entry specifies a generic entry, it covers all species in all forms. In this connection, they rely on the ruling rendered in the case of Pradhan Industries, as reported in 1992 (62) E.L.T. 756. Reliance is also placed on HSN Explanatory Notes at page 1170. They submit that the terms used in an exemption notification, unless they are specifically or differently explained in the notification itself, would have the same meaning assigned to it in the main tariff. On this principle, they rely on the provisions of Section 20 of the General Clauses Act.
5. We have heard Shri V. Lakshmi Kumaran, ld. Advocate for the appellant and Shri B.K. Singh/Id. SDR for the Revenue.
6. Shri V. Lakshmi Kumaran arguing on the above grounds submitted that the equipment is not a household type refrigerator. He submitted that the main function of the equipment is chilling and pointed out to the product literature and submitted that the carbonation and mixing of soft drink has to be done before the soft drink is served through automatic outlets which are five in number. Therefore, he submitted that the function being refrigeration and the classification having been accepted as a refrigeration equipment, the description in S. No. 13 of the notification is fully satisfied. He submitted that the ground taken by the ld. Collector that there are two other functions of mixing of soft drinks and carbonation, which disentitle the grant of benefit is totally unacceptable proposition. Such type of findings in other similar cases coming up before the Tribunal has not been accepted. In this connection, he submitted that the application of Section Notes and Chapter Notes for classifying the goods should also be adopted for interpreting the entries in S. No. 13 of the said notification. In this context, he relied on the rulings rendered in the case of Eagle Flask Industries Pvt. Ltd. v. Collector of Central Excise as reported in 1991 (53) E.L.T. 65 (Tribunal)
2. Norsk Data (India) Ltd. v. Collector of Customs -1992 (57) E.L.T 666
3. Khandelwal Metal & Engg. v. Union of India and Ors. -1983 (12) E.L.T. 292 which is confirmed by SC as reported in 1985 (20) E.L.T. 222. (Para 26)
4. Laxmi Narayan Ram Niwas v. Collr. of Cus. and Ors. -1987 (32) E.L.T. 12
5. Collector of Customs v. Gemini Overseas Ltd. -1993 (63) E.L.T. 574 (Tri.)
6. Ganges Soap Works and Anr. v. Union of India and Ors. – 1992 (43) ECR. 707 (AIL).
7. Ld. SDR Shri B.K. Singh submitted that the main function of the machine is not chilling although the ld. Collector had held so. Therefore, he submitted that the classification has to be correctly decided by the Tribunal, although the Revenue had not controverted the claim of the importer. He submitted that the machine is to produce a beverage by mixing and carbonation. He submitted that a beverage can be prepared even without chilling.
He submitted that the notification would apply only to a refrigerator simplicitor and not to a composite machine as held by the ld. Collector. He further submitted that HSN Explanatory Notes cannot be considered for interpreting a notification and in this context, he relied on the ruling rendered in the case of Collector of Central Excise v. Madhu Chemicals -1986 (23) E.L.T. 166 (Tri.).
2. Collector of Customs v. O.E.N. India Ltd. -1989 (42) E.L.T. 235 (Tribunal)
3. Bombay Chemicals Pvt. Ltd. v. Collector of Central Excise – 1990 (49) E.L.T. 431 (Tribunal)
8. We have considered the submissions made by both the sides and have perused the records and the citations referred to before us. Misc. application for raising additional grounds is also taken on record. There is no dispute with regard to the classification of the equipment. The Tariff Entry 8418.69 of Custom Tariff 1975 is reproduced hereinbelow :-
"84.18 REFRIGERATORS, FREEZERS
AND OTHER REFRIGERATING
OR FREEZING EQUIPMENT,
ELECTRIC OR OTHER: HEAT
PUMPS OTHER THAN AIR CON
DITIONING MACHINES OF
HEADING NO. 84.15
8418.50 - Other refrigerating or freezing
chests, cabinets, display counters,
show-cases and similar refrigerat
ing or freezing furniture.
- Other refrigerating or freezing
- equipment; heat pumps.
8418.69 - Other"
It is noticed from the above Heading that the Heading 84.18 is a combined heading which includes refrigerators, freezers and other refrigerating and freezing equipment. The present imported item has been placed under “other refrigerating or freezing equipment”. The Notification No. 59/87-Cus., dt. 1-3-1987 as amended, grants benefit as per the terms of the notification, to the goods falling under Chapter 84 or 85 and those specified in the goods falling under Chapter 84 or 85 and those specified in the table annexed to the said notification. The importer is claiming benefit under S. No. 13 of the table of the notification which reads hereinbelow :-
“13. 84.18 Refrigerators and refrigerating equipment including freezing equipment (electrical and others) other than household type refrigerator”
The description of this heading is identical to the heading in the Tariff Heading. It is not disputed that the equipment is a refrigerating equipment and performs the function of freezing and chilling. The function of refrigerator is to freeze and chill the liquids or articles kept in the refrigerator. S. No. 13 clearly excludes household type refrigerator. The present item is not a household refrigerator and therefore, it falls in the broad heading of the description of the S. No. 13. The only question before us is as to whether the benefit can be denied on the ground that the equipment is a composite one performing two other functions of mixing the soft drinks and carbonation. On going through the product literature, it is very clear that the equipment is a single unit performing the function of refrigeration and automatic service of a required quantity of soft drink through the outlets. The freezing takes place in “Bag-in-Box” only after the mixing of different soft drinks and carbonation. The process of mixing and carbonation is a function which occurs inside the refrigerating unit. The term “refrigerating equipment including freezing equipment’ is a composite entry, is identically worded in the S. No. 13 of the notification when goods satisfy the entry of a tariff then it is deemed to have also satisfied the wordings of the notification, especially when the wordings are like worded. This is the well laid down proposition in the rulings of the Tribunal in the cases cited by the Id. Advocate. We are not applying HSN Notes while interpreting the terms of S. No. 13 of the notification; although HSN Explanatory Notes have persuasive value while classifying the goods in particular tariff entry. It is true that the notification entry cannot be read in such a way as to make the entry flexible to grant benefit to an equipment which does not fall within the description of the notification. However, this is not the situation here. The goods is accepted as refrigerating equipment. The soft drink which gets chilled requires to be mixed and carbonated before service through automatic outlets. Therefore, the function performed by the equipment is not an altogether separate and different function not connected to a refrigeration equipment. Therefore, the reason advanced by the ld. Collector that the machine cannot be considered as a mere refrigeration equipment or a chilling machine, but it is a composite machine capable of carrying out other different functions viz. carbonation and mixing the soft drink is not a convincing reason to deny the benefit. The product literature discloses that the machine is for dispensing refrigerated beverage. The beverage cannot be dispensed unless it is mixed, carbonated and chilled. Therefore, the process of carbonation and mixing is not an ancillary function of the equipment but a process akin and part & parcel of the refrigeration. The equipment being a refrigerating equipment, which is not denied, and the description in S. No. 13 of the Notification being identically worded as that of the tariff entry, the benefit cannot be denied to the imported machine. The case laws relied by the ld. Advocate are also supportive of our findings.
9. In the case of Eagle Flask Industries Pvt. Ltd. v. Collector of Central Excise (supra) it has been held in para 9 as :
“However, we fail to see how an article which is considered as an article of plastics for the Tariff Heading should not be so considered for the purpose of the notification because the notification also talks of articles of plastic falling under the specified headings. We, therefore, hold that the goods are eligible for exemption in terms of S. No. 38 of Notification No. 132/86, dated 1-3-1986 upto 1-3-1988 and S. No. 39 of Notification No. 53/88, dated 1-3-1988 from 1-3-1988. Incidentally, we observe that the Board’s circular is also on the same lines. We allow the appeal”.
On the question of reference to notes in Section 15 of the First Schedule to Tariff Act, to a exemption notification issued under Section 25 of the Customs Act, the Hon’ble Delhi High Court in the case of Khandelwal Metal & Engg. v. Union of India and Ors. (supra) has held in paras 16 & 17 of the judgment as follows :-
* * * * * * *
Elaborating and confirming the above principle, the Hon'ble Supreme Court in the same case [reported in 1985 (20) E.L.T. 222 (SC)] on appeal held in paras 26 to 30 as follows :-
* * * * * * *
The above principle has been rightly applied in the case of Norsk Data (India) Ltd. (Supra) has held in para 6 as follows :-
* * * * * * *
The Hon’ble Calcutta High Court also held likewise in the case of Laxmi Narayan Ram Nivas (Supra) and in Naffar Chandra Jute Mills Ltd’s case (Supra). Similar principles have also been applied by Hon’ble Allahabad High Court in the case of Gangas Soap Works Pvt. Ltd. and Anr. v. Union of India and Ors. (supra).
As can be seen from the ratios of the above judgments, for interpreting the wordings in the notification, the understanding of the relevant tariff entry and its rules has also been applied. Therefore, the ld. Collector’s understanding that the wordings of the notification even when akin with the wordings with the Tariff entry, should be understood independently, is without substance.
10. The ld. SDR has relied on Bombay Chemicals (P) Ltd. (supra) wherein, it has been held that HSN Explanatory Notes are not binding but are of persuasive value, being reflective of international wisdom and experience in tariff matters, which this was also earlier stated in the case of Madhu Chemicals (supra) International Trade & Commerce. But these rulings are clearly distinguishable, as we are not applying HSN Explanatory Notes for interpreting the wordings in the notification, but are only reiterating the well laid proposition, that for interpreting the wordings of a notification, the tariff entry tinder-standings and rules governing its application do also apply. Therefore, the ruling of Collector of Customs v. OEN India Ltd. (supra) is not applicable to the present case, as the said judgment of the Tribunal has not considered the ruling of the Hon’ble Supreme Court rendered in the case of Khandehval (supra). However, this ruling of OEN India Ltd. does not have any binding effect at all.
11. In the result, the appellants succeed in this appeal, with consequential relief, if any.
