Autotex Private Limited Vs Commissioner of GST & Central Excise (CESTAT Chennai)
CESTAT Chennai held that the Chick drinker, Auto feeder, and Poultry cage are rightly classifiable under CETH 84361000 and not under CETH 39269099.
Facts- The appellant is engaged in the manufacture of excisable goods namely, Auto feeder, Chick Drinker and Poultry made of plastics.
On the basis of intelligence gathered that appellant is manufacturing and clearing the goods, Auto feeder, Chick Drinker and Poultry cage without paying duty by adopting incorrect classification, investigation was initiated. It was noticed that appellants were clearing the good , namely, (1) Auto feeder (2) Chick Drinker and 3) Poultry cage under CTH 84361000 as poultry keeping machinery and had not charged any excise duty in the invoices, mentioning that the goods are ‘exempted vide notification No.111/88 dt. 01.09.1988 as amended and CSN No.8436 Nil by Tariff”. Along with such goods they also cleared various products like ‘Hose PVC, ‘Flexible Blue’, Tee Joint Nipple’ etc. without payment of duty classifying them also under CTH 84361000. The said chapter heading 8436 of Central Excise Tariff Act, 1985 is for “Other agricultural, horticultural, forestry, poultry keeping or bee keeping machinery including germination plant fitted with mechanical or thermal equipments; poultry incubators and brooders.” It appeared to the department that the products namely Chick drinker, Auto feeder and Poultry cage have no mechanical function and being made out of plastic is not classifiable under 8436 and but merits classification under 3926 (Auto feeder, Chick drinker) and 3923 (Poultry cage) of CETA 1985. The miscellaneous parts to be classified along with.
Show cause notice was issued for different periods proposing to redetermine the classification of the goods and also to demand duty along with interest and to impose penalties. After due process of law, the original authority vide impugned Order-in-Original dated 31.10.2017 redetermined the classification of the goods under 3926 and confirmed the duty along with interest and imposed penalties.
Commissioner (A) dismissed the appeal and upheld the order or original authority. Being aggrieved, the present appeal is filed.
Conclusion- Held that the Chick drinker, Auto feeder, and Poultry cage are rightly classifiable under CETH 84361000, we hold that these miscellaneous products cleared along with and corresponding to the finished products are also to be classified under CETH 84361000. We hold that the appellant is eligible for the benefit of ‘nil’ rate of duty.
FULL TEXT OF THE CESTAT CHENNAI ORDER
The issue involved in these appeals being the same they were heard together and are disposed of by this common order.
2. Brief facts are that the appellant is engaged inter alia in the manufacture of excisable goods namely, Auto feeder, Chick Drinker and Poultry made of plastics. On the basis of intelligence gathered that appellant is manufacturing and clearing the goods, Auto feeder, Chick Drinker and Poultry cage without paying duty by adopting incorrect classification, investigation was initiated. The officers of the Preventive Unit visited the premises, verified the accounts and recorded statements. It was seen that appellants were clearing the good , namely, (1) Auto feeder (2) Chick Drinker and 3) Poultry cage under CTH 84361000 as poultry keeping machinery and had not charged any excise duty in the invoices, mentioning that the goods are ‘exempted vide notification No.111/88 dt. 01.09.1988 as amended and CSN No.8436 Nil by Tariff”. Along with such goods they also cleared various products like ‘Hose PVC, ‘Flexible Blue’, Tee Joint Nipple’ etc. without payment of duty classifying them also under CTH 84361000. The said chapter heading 8436 of Central Excise Tariff Act, 1985 is for “Other agricultural, horticultural, forestry, poultry keeping or bee keeping machinery including germination plant fitted with mechanical or thermal equipments; poultry incubators and brooders.” It appeared to the department that the products namely Chick drinker, Auto feeder and Poultry cage have no mechanical function and being made out of plastic is not classifiable under 8436 and but merits classification under 3926 (Auto feeder, Chick drinker) and 3923 (Poultry cage) of CETA 1985. The miscellaneous parts to be classified along with. Show cause notice was issued for different periods proposing to redetermine the classification of the goods and also to demand duty along with interest and to impose penalties. After due process of law, the original authority vide impugned Order-in-Original dated 31.10.2017 redetermined the classification of the goods under 3926 and confirmed the duty along with interest and imposed penalties. Aggrieved by such order of the original authority, the appellant is in Appeal E/40389/2018. On similar set of facts, proceedings were initiated against the appellant which culminated in Order-in-Original dated 30.08.2018. On appeal, Commissioner (Appeals) vide OIA dt. 23.03.2020 upheld the order of original authority. Aggrieved by the order of appellate authority, the Appellant is in Appeal E/40495/2020.
3. The Ld. Counsel Shri Vishal Agarwal appeared and argued for the appellant. The facts and provisions of law were explained as under :
3.1 The chick drinker consists of top cone, plastic stand, bottom plate and handle. It also contains of a stand to maintain the height. The system works by using gravity (air lock mechanism) to push water into the tray. When the hens drink water from the tray, it results in the reduction of the water level, this causes the air to escape into reservoir above the drinking tray. Once the air goes into the water reservoir, water is released into the tray filling it back to set level. Once equilibrium between the water and vacuum pressure in the reservoir is achieved, no more water will leak into the tray until the water level falls again. The chick drinker comes in a variety of sizes from 0.5 litres to 50 litres.
3.2 Likewise, auto feeder consists of a feeder cone, cone extension and feeder bottom plate, feeder grill, feeder centre stack, height adjuster and feeder base nut. It is designed in such a way that the feed is filled manually from the top into the feeder cone extension. The size of the cavity is designed in such a way that the feed does not overflow from the bottom plate. As and when the bottom plate attains the feed level to the height, the feed flow will stop automatically by virtue of the air locking mechanism; as and when the feed is consumed by the poultry, the bottom plate gets refilled by gravitational force which results in the downward movement of the feed from the feeder cone to the plate.
3.3 In so far as the poultry cage is concerned, the same consists of cage top, cage bottom, cage side cover big, cage side cover small and cover-sliding cage. It is designed keeping in mind the space area required by each chick / bird, proper ventilation to avoid suffocation, prevention of injury to the birds and easy handling. The cage is specifically manufactured solely for use in the poultry industry. It is special box with doors and is used for shifting the baby chicks / poultry from the hatchery to the poultry farm, inside poultry farm during vaccination and from farm to dressing / processing unit.
3.4 The only reason assigned by the department in the adjudication order for classifying the chick drinker and auto feeder under 39269099 is that the same works merely on air locking mechanism and does not have any in built mechanism so as to classify as ‘machines’ under 84361000. According to the department, for an item to be classified under Chapter Heading (CETH) 8436, it has to be a machine which fits into the dictionary meaning and in the nature of ‘some mechanical contrivances which by themselves or in combination with one or more mechanical contrivances by the combined movement and independent operation of their respective parts generate power or evoke, modify, apply or direct natural forces with the object in each case of effecting so definite and specific a result’. Relying on the dictionary meaning the adjudicating authority has taken the view that the impugned goods do not fit into the meaning of ‘machines’. According to the department when water or feed is manually filled in the cone, all that happens is it trickles down due to gravitational force and is too simple to be called a machine that there is no systematic arrangement of several parts which move and function in the designed manner to perform any work on the supply of force to it. It does not multiply or convert the force supplied to it for any such purpose. Hence, they cannot be considered as machinery. According to the department, the Poultry Cage is a box with doors and is used for shifting or transport of the baby chicks / poultry from one place to another i.e. transportation of poultry. This does not have any mechanical function and it is a mere crate for storage and shifting of poultry, which is secondary function to the main function of poultry farming and consequently cannot be classified under CETH 8436.
4. The relevant tariff headings and HSN explanatory notes were adverted by the Ld. Counsel to argue that the impugned goods would fall under CETH 8436.
4.1 The Chapter Heading 8436 is as under :
