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Highly technical equipment cannot be differentiated into smaller parts

Hindustan Aeronaurics Ltd Vs Commissioner of Customs (CESTAT Bangalore)

It is evident by the submissions of the appellant that the impugned part is not only a mere sting or wire or rope but is part of A90B100 which consists of other units. It was not correct on the part of the department to isolate a minor part of the whole assembly and to classify the same according to the metal used in the manufacture of the same. We find that the highly technical equipment cannot be differentiated into smaller parts and cannot be classified as per the make of a smaller part in it. Moreover, we find that supplying country has classified the same under Chapter 88. We also find that irrespective of the classification, the impugned goods are eligible for exemption under Notification No.39/1996-Cus. dated 31.7.1996. When the Tribunal (supra) has held ground power unit to be part of the helicopters, there should be no doubt in classifying the impugned equipment as parts of helicopters.

FULL TEXT OF THE CESTAT ORDER

M/s. Hindustan Aeronautics Limited, the appellants, have imported, vide Bill of Entry No.942638 dated  0.11.2005, parts of helicopters for supply to Navy. Among the items imported was a ‘cargo sling’. The Departmental audit opined that the ‘cargo slings’ is more appropriately classifiable as an accessory to helicopter and cannot be part of helicopter, the ‘sling’ seems to be classified under Chapter Heading 7312.1010 and exemption under Notifications No.21/2002-Cus. and No.6/2002-CE are not applicable. A show-cause notice was issued and was confirmed by the Assistant Commissioner vide Order-in-Original No.100/2008 dated 30.8.2008. Commissioner has upheld the order of the lower authorities vide Order-in-Appeal No.47/2009 dated 12.5.2009; hence, this appeal.

2. The appellants in their grounds of appeal have submitted that the findings of the Commissioner (A) were based on the notion that the ‘cargo sling’ is only a wire rope whereas the ‘cargo sling’ imported bearing part No.A90B100 consists of electrical release control, mechanical release control, release unit, release unit support frame, etc. The sling is only a minor part of the whole assembly of the said part. They have submitted a technical literature.

2.1 They have also submitted that the show-cause notice sought to classify the impugned goods under CTH 560790 but the Order-in-Original and Order-in-Appeal have classified it under CTH 7312 1010, which is beyond the scope of show-cause notice and violates the principles of natural justice. They have cited the following case laws to show that the Department cannot travel beyond the scope of show-cause notice.

  • CC, Mumbai vs. Toyo Engineering India Ltd.: 2006 (201) ELT 513 (SC)
  • CCE vs. Nav Bharat Engineering: 2004 (163) ELT 213 (Tri.-Delhi)
  • CCE, Bombay vs. Neoluxe India: 2001 (128) ELT 298 (T)
  • Warner Hindustan Ltd. vs. CCE, Hyderabad: 1999 (113) ELt 24 (SC)

2.2 They further submitted that the ‘cargo sling’ was supplied by M/s. Indraero Siren, France who have confirmed that the said item is classified in their country under Chapter 88 and the same confirms to be a helicopter part. The copy of the e-mail was submitted to the Commissioner (A) but was ignored.

2.3 They submitted that the ‘sling’ is specifically designed for use with helicopters and its functioning is integrated with the helicopter systems. Directorate General of Civil Aviation, France and India have certified the same to be for use in helicopters. The same is also listed as part of helicopters in the parts manual of the helicopters and also in the flight manual. They submitted that even though the goods are classified under Chapter 73, exemption is available under Notification No.39/1996-Cus. which exempts goods of all chapters of the Customs Tariff and Excise Tariff. The same is certified by the competent authority to be eligible for exemption.

2.4 Tribunal in the case of Mak Controls Systems Pvt. Ltd.: 2007 (211) ELT 123 have held that equipment like compressor which is a part of the ground power unit for exclusive use with aircrafts are classified as part of aircrafts.

3. None appeared on behalf of the appellants. The learned DR has reiterated the findings of the Order-in-Original and Order-in-Appeal.

4. We have perused the records of the case and we find that the original authority has traversed beyond the scope of show-cause notice. It is evident by the submissions of the appellant that the impugned part is not only a mere sting or wire or rope but is part of A90B100 which consists of other units. It was not correct on the part of the department to isolate a minor part of the whole assembly and to classify the same according to the metal used in the manufacture of the same. We find that the highly technical equipment cannot be differentiated into smaller parts and cannot be classified as per the make of a smaller part in it. Moreover, we find that supplying country has classified the same under Chapter 88. We also find that irrespective of the classification, the impugned goods are eligible for exemption under Notification No.39/1996-Cus. dated 31.7.1996. When the Tribunal (supra) has held ground power unit to be part of the helicopters, there should be no doubt in classifying the impugned equipment as parts of helicopters. Therefore, we find that the appeal survives on all counts.

5. In view of the above, the appeal is allowed.

Source- Hindustan Aeronaurics ltd Vs Commissioner of Customs (CESTAT Bangalore); C/543/2009-DB; 05/09/2018

Categories: Custom Duty

View Comments (1)

  • iNSTANT reaction (:
    Another version of convoluted thinking by the tax gatherer; no different from the often come-across painful attempt at dissecting a composite, indivisible contract of sale, as a divisible transaction, to tax a portion as for supply of (input) goods or services ?!

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