Motor Industries Co. Ltd. Vs. Commissioner of Central Excise, Aurangabad  Insc 31 (20 January 2006)
Bhan & S.H. Kapadia Kapadia, J.
short question which arises for determination in these civil appeals filed by
the assessee under section 35-L(b) of the Central Excise Act, 1944 (hereinafter
referred to as "the Act") is whether assembly of nozzles and nozzle
holders (intermediate products) brings into existence a new product called an
"injector" and if so, whether the department was right in classifying
the said injector under sub-heading 8409.00.
is engaged in the manufacture of nozzles, nozzles holder and injectors. Vide
show- cause notice dated 3.9.1986, the department called upon the appellant to
show cause as to why duty @ 20% ad valorem on the value of nozzles and nozzle
holders should not be recovered in respect of injectors on the ground that the
appellant had produced nozzles and nozzle holders falling under tariff item
8409.00 which were captively consumed for the manufacture of injectors falling
under 8409.00 for which no declaration was made by the appellant in their
classification list. At this stage, we may point out that the matter has a chequered
history, it has been remanded several times and for the reasons mentioned
hereinafter, it is not necessary to set out the entire history of the prior
litigation. Suffice it to state that in reply to the show-cause notices, the
appellant submitted that fitting of nozzles into nozzle holders did not amount
to manufacture; that, even after such fitment, the end-result remained
"nozzles and nozzle holders";
this entire controversy stood settled by the earlier judgment of Customs,
Excise & Gold (Control) Appellant Tribunal (for short "the
tribunal") in the case between the same parties, namely, Collector of
Central Excise v. Motor Industries Co. Limited reported in 1989 (43) ELT 290;
that, nozzle and nozzle holder had no independent application as such; that,
they have to be used in the IC engine in an assembled state to create
combustion in the combustion chamber of IC engines. According to the appellant,
an injector was a fitment of nozzles into nozzle holders and that on coupling,
no new product came into existence. In reply, the appellant further stated that
non-vehicular injectors were exempted from payment of duty. In this connection,
it was submitted that non-vehicular injectors constituted parts of diesel
engine used by agriculturists and farmers and, therefore, the Government
decided to grant exemption to such non-vehicular injectors. At this stage, it
may be noted that nozzles and nozzle holders stood excluded from exemption
notification no.217/85 dated 8.10.1985. However, according to the appellant, by
Amendment Notification No.79/86 dated 10.2.1986, non-vehicular injectors were
also given the benefit of exemption, which has not been appreciated by the
department (See Written Submissions filed by the assessee before the A.C., on
running page no.145 of the paperbook of original record]. Similarly, according
to the appellant, exemption was also given by the Government to vehicular
nozzles and nozzle holders used in a factory of production vide notification
no.75/86 dated 10.8.1986 (See Written Submissions filed by the assessee before
the A.C., on running page no.142 of the paperbook of original record].
impugned judgment, the tribunal held that the assessee was not entitled to
exemption under the above notification no.217/85 as "nozzles and nozzle
holders" were specifically excluded from the purview of the said
notification; that, the issue in the case of Motor Industries Co. Limited
(supra) was only whether nozzles fitted with the nozzle holders (injectors)
were assessable under item 68 of the old Tariff though nozzles and nozzle
holders were duty paid under item 34A, hence that judgment had no application
to the controversy in hand.
matter needs to be remanded to the adjudicating authority for the following
in this case, the case of the department in the show-cause notice was that
nozzles and nozzle holders were intermediate products used in the coupling or
assembly of injectors (final product); and that, on completion of the process
of coupling a new independent product emerged, namely, an injector. How is an
injector constructed and what are its components has not been decided by any of
the authorities below including the tribunal.
the decision of the tribunal in Motor Industries Co. Limited (supra) has no
application. In that case, the question as to what is an injector was not in
issue. It was matter of classification under the old Tariff under which item
34A dealt with "parts of motor vehicle" and which parts were
specifically described to include "nozzle and nozzle holders" whereas
the residuary item was item 68 and the question was - whether fitment of nozzle
into holder would attract item 68. In the said case, it was held that even on
fitment, the product would remain "nozzle and nozzle holder" under
present case, it has been alleged by the department that nozzles and nozzle
holders were components of an injector; that, on coupling, which process
constituted manufacture, an independent product, namely, an injector emerged.
This point was not there in the earlier case, hence, Motor Industries Co.
Limited (supra) has no application to the present case. Further, the present
case arises under the 1985 Tariff Act. Chapter 84 falls in section XVI. Section
note 2, with the headings 84.07, 84.08 and 84.09 are required to be considered.
These provisions were not there in the case of Motor Industries Co. Limited
in this case, the burden was on the department to lead evidence on manufacture
and marketability. It is for the department to prove that nozzles and nozzle
holders were intermediate products which on coupling became an injector, which
was a saleable commodity in the market.
this exercise was not done because the department had erred in holding that the
issue was covered by Motor Industries Co. Limited (supra).
we may point out that the appellant has claimed exemption under the above
burden is on them to prove that they were entitled to exemption. In this
connection, we may point out that the question of exemption will arise only
after the first question on coupling or assembly is decided. Here also, we may
point out that exemption notifications as amended after 1985 Tariff Act has to
be seen. In this case, the question of manufacture, classification and
exemption are inter-connected. The application of the above assembly to
vehicular and non-vehicular user have to be examined in the light of the 1985
of HSN in that regard may also be taken.
the above reasons, we set aside the impugned judgment of the tribunal dated
20.4.2000 and remit the matter to the Adjudicating Authority for de novo
adjudication of the show-cause notices.
the above civil appeals filed by the assessee stand allowed, with no order as