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CASE NO.: Appeal (civil)  1176 of 2006

PETITIONER: M/s HMT Ltd.

RESPONDENT: Commnr. Central Excise & Customs,Aurangabad

DATE OF JUDGMENT: 13/07/2007

BENCH: Dr. ARIJIT PASAYAT & TARUN CHATTERJEE

JUDGMENT: J U D G M E N T

Dr. ARIJIT PASAYAT, J

1.      Challenge in this appeal is to the judgment of the  Customs, Excise & Service Tax Appellate Tribunal, West  Regional Bench at Mumbai (in short ’CESTAT’) which  dismissed the appeal filed by the appellant.  

2.      The background facts in a nutshell are as under: The assessee is engaged in the manufacturing of  machinery and parts thereof falling under Chapter 84 of  Central Excise Tariff Act, 1985 (in short the ’Tariff Act’).  Alleging that the assessee had mis-classified the following  products, show cause  notices were issued proposing to levy  duty of Rs.14,37,805/-. According to the revenue the relevant  products were mis-classified as under; (i)     Skid mounting type milk/cream pasteurizer S.H. 8434.10 (ii)    Chilling plant                                                  8434.10 (iii)   Milk/cream chillers                                             8434.10 (iv)    Milk/cream Pasteuriser                                  8434.10 (v)     Milk/cream/ghee pumps                                   8434.10 (vi)    Milk & cream separators                                 8434.10 (vii)   Butter Packing Machine                                  8434.10 (viii)  Parts of above machineries                                      8434.90          3.      In the show cause notices, it was proposed to classify the  goods mentioned at Sl. Nos. (i) to (iv) under Chapter Heading  8419.10 and Chapter sub-heading 8419.90 (for the parts) and  the machine at Sr. No.(v) under Chapter sub-heading 8413.19  and parts thereof as 8413.99. It was proposed to classify the  goods at Sr. No. (vi) under Chapter sub-heading No.8421.10  and parts  thereof under Chapter sub-heading No.8421.90 and  the items at Sr. No. (vii) under Chapter sub-heading 8422.80  and parts thereof under Chapter sub-heading 8422.90. All the  machines according to the show cause notice are used as Heat  Exchangers i.e. they are used for chilling, cooling and  pasteurising purpose by process involving a change in  temperature and as per the functions performed by these  goods  with respect to Chapter 84 of Explanatory Notes. It  was, therefore, proposed to classify them in the aforesaid  manner. The assessee submitted its reply and supported its  classification. After considering the show cause notices, reply  and personal hearing, the Assistant Commissioner, Central  Excise & Customs confirmed the demand and made the  following classifications. "(i) Skid mounting type milk/cream pasteurizer (ii) Chilling plant (iii) Milk Cream Chiller

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(iv) Milk Cream pasteurizer

4.      Under Chapter sub heading No.8419.10 and parts of the  above machinery under chapter sub heading No.8419.90  chargeable to duty @13% adv. (v) Milk/cream/ghee pumps under chapter sub heading  No.8413.19 and parts thereof under CSH No.8413.99  chargeable to duty @13% adv. (vi) Milk/Cream Separators under CSH No.8421.10 and  parts thereof under CSH No.8421.90 @13% adv. (vii) Butter packing machine under CSH No.8422.80 and  parts thereof under CSH No.8422.90 @ 13% adv."  

5.      All the four demands were confirmed involving a total  demand of Rs.14,37,805/- under Section 11-A of the Central  Excise Act, 1944 (in short the ’Act’). Penalty of Rs.25,000/-  was also imposed under Rule 173Q of Central Excise Rules,  1944 (in short the ’Rules’). The Commissioner (Appeals)  confirmed the demand. So far as the levy of penalty is  concerned, he set aside the penalty.  

6.      The assessee took the stand before the CESTAT that  items 1 to 7 are covered under Chapter heading 84.34 and for  Sr.No.8 under Chapter heading 8434.90.  The authorities  below applied Note No.2 of Chapter heading 84 and HSN  Explanatory Note excluding such items which are in the  nature of pasteurizer/chiller etc. from the coverage under  Chapter heading 84.34. Revenue supported the orders of the  authorities below.

7.       CESTAT found that as per HSN Explanatory Note to  Chapter heading 84.34 the machines for processing milk  depend on the principle of heat exchange and they are  excluded from coverage under Chapter heading 84.34  and the  heading also excludes refrigerating appliance (whether or not  specifically designed for cooling or keeping milk and milk  cooling vats incorporating evaporator of the refrigerating unit  from Chapter heading 84.34). It was further noted that HSN  Explanatory note also excluded the machines for wrapping or  weighing the product from Chapter heading 84.34.  

8.      The CESTAT upheld the impugned order and rejected the  appeal.  

9.      In support of the appeal, learned counsel for the  appellant submitted that the authorities below have not  appreciated the essence of various entries, the HSN  Explanatory note and Chapter headings and sub-headings.  

10.     Learned counsel for the revenue on the other hand  supported the impugned judgment of the Tribunal.  

11.     Chapter 84 deals with Nuclear Reactors, boilers,   machinery and mechanical appliances and parts thereof. The  relevant portion of the Chapter reads as follows: "1.  xx         xx              xx                      xx 2. Subject to the operation of Note 3 to Section XVI,  a machine or appliance which answers to a  description in one or more of the heading Nos.  84.01 to 84.24 and at the same time to a  description in one or other of the heading Nos.84.25  to 84.80 is to be classified under the appropriate  heading of the former group and not the latter.   Heading No.84.19 does not, however, cover:-

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(a) xx                  xx              xx (b)xx                           xx              xx ) xx                            xx              xx (d)xx                           xx              xx (e) Machinery or plant, designed for mechanical  operation in which a change of temperature, even if  necessary is subsidiary.  Heading No.84.22 does not cover:- (a)     Sewing machines for closing bags or  similar containers (heading No.84.52); or  (b)     Office machinery of heading No.84.72 Heading No.84.24 does not cover: Ink jet printing machines (heading No.84.43 or  84.71)"

12.     The Explanatory Notes also need to be noted. The  relevant portion reads as follows: "84.34 Milking machines and dairy machinery. 8434.10- Milking machines 8434.20- Dairy machinery 8434.90- Parts  13.     This heading covers mechanical milking machines, and  other machinery, whether for farm or industrial purposes,  used in the treatment of milk or for converting it into other  dairy products. (I) Milking machines: xx                xx                      xx   "(II) Machines for Processing Milk \005\005..The  majority of machines for processing milk depend  essentially on the principle of  heat exchange and  are therefore excluded (heading 84.19) e.g.  apparatus for pasteurization, stassanisation or  sterilization;  apparatus for condensing or drying  milk; milk coolers. The heading further excludes: (a)     Refrigerating appliances (whether or not  specially designed for cooling or keeping  milk) and milk-cooling vats, incorporating  an evaporator of a refrigerating unit  (heading 84.18) (b)     Cream separators, filter-presses and  other filtering or clarifying machinery or  apparatus (heading 84.21). (Simple filter  funnels and milk strainers are, however,  classified according to the constituent  material). (c)     Machines for washing milk containers,  and milk bottling or canning machines  (heading 84.22) (III) Machinery for converting milk into other  dairy products: (A) Butter making machines (1) xx                xx (2)     xx                      xx                      xx              xx (3)     xx                      xx                      xx              xx (4) \005..but not including machines which also wrap  or weigh the product (heading 84.22 and 84.23) (B) Cheese making machines (1) xx               xx      xx (2)\005\005\005\005\005but not including machines which also  wrap or weigh the product (headings 84.22 and  84.23)   (III)  Parts:           xx              xx"        

14.     Even on a bare perusal of the Note No. 2 to Chapter  heading 84.34 and HSN Explanatory Notes shows that the  view of the CESTAT is on terra firma. In Commissioner of

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Central Excise v. V. Carrier Aircraft (2006 (6) SCALE 564) it  was held that the view of the Tribunal in classification matters  unless patently wrong should not be interfered with. Above  being the position, we find no merit in this appeal which is  accordingly dismissed. There will be no order as to costs.