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CASE NO.: Appeal (civil)  5943 of 2002

PETITIONER: Commissioner of Central Excise, Delhi

RESPONDENT: Insulation Electrical (P) Ltd.

DATE OF JUDGMENT: 27/03/2008

BENCH: ASHOK BHAN & DALVEER BHANDARI

JUDGMENT: J U D G M E N T

ASHOK BHAN,J.

       Revenue has filed this appeal under Section 35-L of the Central Excise Act, 1944 (fo r short  ’the Act’) against the judgment and final order dated 9th April, 2002 passed by the Customs,   Excise and Gold (Control) Appellate Tribunal, New Delhi (for short ’the Tribunal’) in Final  Order No.140/2002-B in Appeal No.E/2199/2001/B wherein and whereby  The Tribunal  relying upon a judgment of the High Court of Karnataka in the case of Supreme Motors v.  State of Karnataka has allowed the appeal filed by the assessee-respondent.         Facts:         Assessee-respondent (hereinafter referred to as ’the assessee’) was holding Central  Excise  Registration No.19 MOR-13 MOD-III 92 and engaged in the manufacture of Rail Assembly  front Seat (Omni), Adjuster Assembly slider seat, YF-2, Rear Back Lock Assembly and 1000  CC Rear Back Lock Assembly.  It submitted its classification list in the year 1986 under  Central Excise Tariff Act, 1985 (for short ’the tariff Act’) classifying its products  under   chapter heading 8708.00 as \023parts and accessories of motor vehicles\024  which attracted  the  15% rate of duty.  The classification list filed by the assessee was approved.         Acting on a specific information that the assessee was short paying the excise duty  by  classifying its products as motor vehicles parts and accessories, the factory premises of th e  assessee was visited by a team of officers of Central Excise MOD-III on 8.12.1998.  They  physically verified the items being manufactured by the assessee.  Statement of Shri Ashwani   Kumar, authorised signatory of the assessee was recorded under Section 14 of the Act.  In hi s  statement, he admitted that they were supplying Rail Assembly Frost Seat Adjuster and  Assembly Slider Seat to M/s. Bharat Seats Ltd. and M/s. Krishna Maruti Ltd. which were  manufacturing car seats falling under chapter heading 9401.00 and were supplying to M/s.  Maruit Udyog Limited.         From the information gathered on the inspection of the factory premises of the asses see  and the statement of Shri Ashwani Kumar, authorised signatory of the assessee, the  department came to the conclusion that the items manufactured by the assessee were  classifiable under chapter heading 9401.00 attracting central excise duty at the rate of  18 % ad  valorem and not under chapter heading 8708.00 paying less duty at the rate of 15%. Terming  that the assessee had been mis-classifying its products, two show cause notices dated 4.2.19 99  and 5.7.1999 were issued to it calling upon it to show cause as to why products manufactured   by it as parts and accessories of motor vehicles and classified under chapter heading 8708.0

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0  be not treated as parts of the seats which are classifiable under chapter heading 9401.00  attracting higher rate of duty at the rate of 18% and as to why the differential duty amount ing  to Rs.9,50,995/-  be not demanded and recovered under Rule 9(2) of the Central Excise Rules,   1944 (for short ’the Rules’) read with Section 11A of the Act.         The adjudicating authority vide its order dated 24.11.1999  held that the goods manufactured by the assessee were integral parts of seats and available  in  the market as such and confirmed the duty demand of Rs.9,50,995/- and imposed a penalty of  Rs.2,00,000/- under Rule 173Q of the Rules and also ordered to charge interest on the  differential duty of Rs.9,50,995/-.         Being aggrieved against the order of the adjudicating authority, assessee filed an a ppeal  before the Commissioner of Central Excise(Appeals).  The Commissioner(Appeals) by his  order dated 7th August, 2001 upheld the order of the adjudicating authority classifying the  goods under chapter heading 9401.00.  He, however, waived  the penalty of Rs.2,00,000/-  imposed on the assessee.           Assessee thereafter filed an appeal before the Tribunal.  Tribunal, by the impugned  order,  has set aside the orders of the authorities below holding that the products manufactured by  the assessee are classifiable under chapter heading 8708.00 as claimed by the assessee and n ot  under chapter heading 9401.00 as put forth by the revenue.  Tribunal came to the conclusion  that the items manufactured by the assessee are only adjuncts, additions to the seats for th e  better utilization of the seats for comfort and convenience of the passengers and they are n ot  essential components or parts of seats.  That the seats are complete in themselves without  these mechanisms and therefore do not merit classification as parts of seats under Chapter  9401.00.  Tribunal  relying upon a judgment of this Court in the case of Mehra Brothers v.  Joint commercial Officer reported in 1991 (51) ELT 173(SC) held that the products  manufactured by the assessee merited classification under chapter heading 8708.00 as \023par ts  and accessories of motor vehicles\024.         Hence revenue is before us.         Learned senior counsel appearing for the revenue contends that the products manufact ured  by the assessee are parts of the seats because assessee was supplying these products to M/s  Bharat Seats Limited and M/s Krishna Maruti Limited which were manufacturing seats  classifiable under chapter heading 9401.00.         Per contra, counsel appearing for the assessee contends  that the products manufactu red by  the assessee are not seats or parts of the seats as contemplated under chapter heading 9401. 00.   The seat is complete without the said products as rightly concluded by the Tribunal. With  regard to rail assembly front seat adjuster/assembly slider seat manufactured by the assesse e,  it is stated that the item is essentially in the nature of rails made out of iron and steel.   These  are to be affixed on the floor of motor vehicles.  When seats are affixed on these rails, se ats can  slide back and forth with the operation of a lever forming part of other rail assembly front  seat  adjuster. This enables the driver or the passenger, to adjust the position of the seat to su it his  comfort and convenience. It is stated that such adjustment of seat is merely to improve the  efficiency and convenience of the seat and does not form part of the seat.  That the seat is   complete and fully functional without this rail arrangement.  With regard to YE-2 rear back  lock assembly, it is stated that the function of this item is to fix the position of the rea r seat of  the car i.e. whether straight or slanting and this is also an accessory for enabling the pas senger

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to fix the seat in the most comfortable and convenient position.  It is contended that lock  assembly does not form a part of the car seat at all and the seat is complete without the lo ck  assembly.          Counsel for the parties have been heard.         From the pleadings of the parties as well as the statements made before us, the poin t which  can be culled out for adjudication is as to whether \023the products manufactured by the ass essee  are the integral parts of the seats, as put forth by the department and classifiable under  chapter heading 9401.00 or the same are parts and accessories of motor vehicles, as claimed  by  the assessee and classifiable under chapter heading 8708.00.         Before coming to a conclusion, it would be appropriate to look at the two rival entr ies  falling under chapter Headings 8708 and 9401 of the Act. The same are reproduced below for  convenience of discussion:

Heading No.    Sub-heading No.   Description of      Rate of                                     goods                 duty   

87.08           8708.00 \023Parts and accessories    15&                                 of the motor vehicles                                    of heading Nos.87.01 to                                 87.05

94.01           9401.00 \023Seats[other than those   18%                                         of heading No.94.02],                                 whether or not convertible                                 into beds and parts thereof.                                          From the bare reading of the two sub-headings, reproduced above, it is clear that Ch apter  Heading 8708.00 covers parts and accessories of motor vehicles and this chapter heading is  wide enough in its scope so as to cover all accessories of motor vehicles whereas Chapter  heading 9401.00 covers all type of seats and parts thereof.          This is an admitted position that the assessee was supplying the products manufactur ed by  it directly to M/s Maruti Udyog Limited which manufactures cars and not seats.  M/s Maruti  Udyog Limited has given a specific part number to the goods in question and issued purchase  orders in the name of the assessee.  However, later on, only invoicing pattern was changed f or  some goods wherein the assessee received purchase orders directly from M/s Maruti Udyog  Limited but invoices were raised to M/s Krishna Maruti Udyog Limited and M/s Bharat Seats  Limited just for the sake of convenience and economy. The payment for the same was received  directly from M/s Maruti Udyog Limited.  Merely supplying the material through M/s Bharat  Seats Limited and M/s Krishna Maruti Limited which are manufacturing seats classifiable  under chapter heading 9401.00 does not lead to the conclusion that the products in question  fall under chapter heading 9401.00.          In Mehra Brothers(supra), this court observed in para 6 as  follows:

\0236.  In Supreme Motors v. State of Karnataka case(supra), the  Karnataka High Court has taken different view.  It held that the car  seat covers, at best could make the seat more comfortable, but do not  serve as aids to the vehicle as a whole, and therefore, they must fall  outside the ambit of Entry 73 of the Second Schedule to the Karnataka  Sales Tax Act, 1957 and was not exigible to sales tax at 13 per cent.   Undoubtedly this ratio would help the appellant.  The learned judges  laid emphasis thus:--

\023Every part is useful to the car for its effective operation.  Likewise  should be the aid of other accessories in order to fall within the said  entry.  The accessory to a part which has no convenience of  effectiveness to the entire car as such cannot in our opinion fall within  Entry 73\024.

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       To the same effect are the judgments of this Court in the case of Pragati Silicons P vt. Ltd.  v. Commissioner of Central Excise, Delhi reported in 2007 (211) ELT 534(SC) and Annapurna  Carbon Industries Co. v. State of Andhra Pradesh (1976) 2 SCC 273.         After considering in detail, the difference between the ’accessories’ and ’parts’, t his Court  in the case of Pragati Silicons(supra) came to the conclusion that ’accessory’ is something  supplementary or subordinate in nature and need not be essential for the actual functioning  of  the product.         Chapter 9401 covers all types of seats and not only the seats of a car and a seat is  complete  even without the rail assembly front seat, adjuster/assembly slider seat and rear back lock  assembly. They are not essential parts of the seat. Chapter heading 9401 covers only the par ts  of seats and not accessories to the seats.  A ’part’ is an essential component of the whole  without which the whole cannot function.         We agree with the view taken by the Tribunal that the products manufactured by the  assessee cannot be the ’parts’ of seats, as claimed by the revenue.         Chapter heading 8708 covers both the ’parts’  as well as ’accessories’.  The items  manufactured by the assessee are only adjuncts. These are to be affixed on the floor of moto r  vehicles.  When seats are affixed on these rails, seats can slide back and forth with the  operation of a lever forming part of other rail assembly front seat adjuster. This enables t he  driver or the passenger, to adjust the position of the seat to suit his comfort and convenie nce.  These are merely to improve the efficiency and convenience of the seat and does not form par t  of the seat.  The sears are complete in themselves without these mechanisms and therefore it   cannot be held that the parts manufactured by the assessee merit classification under chapte r  9401.  Rather the same would be accessories to the motor vehicle as  claimed by the assessee   and would merit classification under chapter heading 8708, because they are fitted in the  motor car for adjustment of the seats for the convenience and comfort of the passangers.  Th e  Rail Assembly front seat (Omni), Adjuster/assembly slider seat, YE-2 rear back lock assembly   and 1000cc rear back lock assembly being manufactured by the assessee can at best be termed  as accessories to the motor vehicle for better convenience of the passangers/drivers travell ing  in the car.         For the reasons stated above, we do not find any merit in the appeal filed by the re venue  and dismiss the same with no order as to costs.