Classification of Globe and Angle Valves used in agriculture.

Case:-M/s JAIN IRRIGATION SYSTEMS LTD Vs COMMISSIONER OF CUSTOMS (IMPORT) NHAVA SHEVA

Citation:-2013-TIOL-1279-CESTAT-MUM

Brief Facts:-Briefly stated facts of the case are that the appellants filed two Bills of Entry dated 12.10.10 and 15.10.10 respectively for clearance of goods Globes/Angle Valves and Cylinder Valves for use in agriculture and/or horticulture purpose claiming the classification of the goods under Entry No.84248100 of the Second Schedule to the Customs Tariff Act, 1975. The lower adjudicating authority called the appellants to justify the classification claimed. The appellants submitted before the lower adjudicating authority that the valves imported by them are specifically designed for irrigation and therefore correctly classifiable under CTH 8424. However, the lower adjudicating authority on adjudication order classified the impugned goods under CTH 8481 8090. Aggrieved by the same, the appellants filed appeal before the Commissioner (Appeals) who in turn upheld the adjudication order.

Appellant Contention:-The contention of the appellants is that in their own case, the Commissioner of Customs (Appeals), JNCH by his order No.79/Gr. VA/2008 (JNCH) dated 24.2.08 has held that the specific use of valves was for irrigation and goods merited classification under CTH 8424 and not under 8481 meant for others. He however, observed that no justifiable grounds on merits were available on record as to why the correct and proper classification of goods could not be arrived at especially when the goods were under bond and thereby still subjected to final assessment. The contention is that the lower adjudicating authority in de-novo proceedings did not properly appreciate the facts as directed by the Ld. Comm. (Appeals) in the Order-in- Appeal while remanding the matter back to him for deciding the classification afresh on merits and classified the goods under Heading 84818090 of Customs Tariff Heading. The contention is that the Order-in-Appeal dated 30.7.09 passed by the Commissioner of Customs (Appeals) JNCH who set aside the Order-in-Original and held that doubled chambered valves for use in agricultural and horticultural purposes are classifiable under Entry No.84248100 and not under Entry No.84818090 as held by the lower adjudicating authority. This order was specifically passed in appellant's own case and was not appealed against and reached finality and has to be followed on the same appellants unreservedly. The contention is that the submission made by them before the ld. Commissioner Appeals) was not considered. They also produced extracts of HSN to submit that the goods are specifically meant for irrigation or horticulture purpose are to be classified under Head 8424 and not under 8481. In support of their contention they placed reliance on the decision in the case of Elgi Ultra Appliances Ltd. Vs CCE, Coimbatore - 2001 (134) ELT 245 (T.), CCE Vs Novapan Industries Ltd. - 2007 (209) E.L.T. 161 (S.C.) = (2007-TIOL-13-SC-CX)

Respondent Contention:-The contention of the department is that as per Rule 1, the classification shall be determined according to the terms of the headings and any relative section or chapter notes. Section Note 1 to Section XVI deals with the exclusion clause i.e. the goods which do not fall under Section XVI of the Customs Tariff Act, 1975 and Section Note 2 ibid deals with the classification of the parts and stipulates that subject to Note 1 to XVI, Note 1 to Chapter 84 and Note 1 to Chapter 85 which are exclusion clauses, the parts of machines are to be classified according to Rule (a), (b) and & (c). It is well settled law that rules are to be applied in seriatim. One cannot jump to Section Note 2(b) without applying rule 2(a). As per provisions contained in Section 2(a), the parts which are the goods included in any of the heading of chapter 84 or 85 are in all cases to be classified in their respective heading. There are rival headings - Heading No. 8424 and 8481, valves for pipes are covered under heading 8481 therefore by virtue of Section Note 2(a) they are appropriately classifiable under heading supra and not under heading 8424 as claimed by the appellants. Once they are specifically mentioned in any of the heading of chapter 84 or 85 they have to be classified in their specific heading irrespective of the fact whether they are part of some machine or equipment of other heading. The contention of the appellants that the valves being solely and principally used with drip irrigation system should be classified under heading 8424.90.00 in view of Section Note 2(b) is neither legal nor correct as the section notes or chapter notes are to be applied in seriatim. As per HSN explanatory Notes which stipulates parts which are classifiable under heading 8424, the rules governing classification of parts are subject to General Explanatory Notes to Section XVI. The arts falling under heading 8424 are spray nozzles, lenses and turbulent spray heads which are not of a kind described in heading 8481. The goods described under heading 8481 are those which regulate the flow and pressure of the liquids and gases. The valves are basically a kind of instrument which regulate the flow of liquid and gases, therefore, they fall under heading 8481 and they are excluded from purview of heading 8424. The contention is that in the instant case the goods are globe valve and angle valve which are used for regulating the flow of the liquid i.e. water, therefore, they appropriately classifiable as per Explanatory Notes to HSN under heading 8481. As regards reliance placed by the appellant on Order-in-Appeal dated 30.7.2009 passed by the Commissioner of Customs (Appeals), JNCH, wherein the classification of basic valve was held under CTH 8424 and reliance placed on the Supreme Court judgment in the case of Commissioner of Cen. Ex. Hyderabad vs Novapan Industries Ltd. - 2007 (209) ELT 161 (S.C.) = (2007-TIOL-13-SC-CX)wherein the apex court has held that the department having accepted the principles laid down in earlier case cannot be permitted to take a contra stand in subsequent cases, the contention of the department is that the decision of the Supreme Court of India was given in a different context where the issue involved was whether the amount of interest on receivable is deductible from the assessable value where such interest is inbuilt in the price and is not charged separately. In the instant case, the issue involved is classification of valves, therefore, the said judgment is not applicable in this case. The contention is that when two contradictory orders were there, the latter would prevail. The contention is that classification of valves whether classifiable as parts of compressor under heading 8481.90 or as a regulating apparatus under heading 8481.80 was the subject matter before this tribunal in the case of CC, Mumbai Vs Kirloskar Pneumatic Co. Ltd. - 1997 (92) ELT 365 (T) = (2002-TIOL-60-SC-CUS)wherein the tribunal has held that valves have been specifically included under heading 8481.80. Therefore, the goods merit classification under heading 8481 and not under 8424 as claimed by the appellants. The issue also cropped up in case of CC vs. Cipla Ltd. - 1998 (102) ELT 739 (Tri)wherein the issue was whether metered valves are classifiable under heading 8481 or under 9619.10 as a part of spray apparatus and the tribunal held that the goods are classifiable under heading 8481 because of their specific mention therein. The department also placed reliance on tribunal's decision in the case of Babu Textiles Industries Vs CCE - 1999 (113) ELT 489 (Tri).

Reasoning of Judgement:-The appellants have claimed classification of the goods under CTH 8424 whereas the department has classified the goods under CTH 8481. The rival headings are reproduced herein under for convenience of reference:-

Heading 8424: “Mechanical appliances (whether or not hand-operated) for projecting dispersing or spraying liquids or powders, fire extinguishers, whether or not charged, spray guns and similar appliances, steam or sand blasting machines and similar jet projecting machines.

Heading 8481: “Taps, Cocks, valves and similar appliances for pipes, boiler shells, tanks, vats or the like, including pressure-reducing valves and theremostatically controlled values.”

For classifying the goods under CTH 8481, the department has relied upon Note 2(a) to Sec. XVI of Chapter 84 which is reproduced below:

“2(a) parts which are goods included in any of the headings of Chapter 84 or 85 (other than headings 8409, 8431, 8448, 8466, 8473, 8503, 8522, 8529, 8538 and 8548) are in all cases to be classified in their respective headings”.

No doubt, the valves are specifically covered under Heading 8481. However, the goods in question are used in irrigation system. As per Notes (3e) to Chapter 8424 to HSN, the irrigation system and parts are covered under subheading 8424. The department could not produce any evidence to the contrary.

This Tribunal in the case of Elgi Ultra Appliances Ltd. vs. CCE, Coimbatore supra held as under:-

“ 8. The supportive arguments for the appellants is also a reading of explanatory note to HSN under Chapter 84.24 which deals with irrigation system. The said note deals with irrigation system which reads as follows :

“(E) IRRIGATION SYSTEMS

These irrigation systems, consisting of various components linked together usually include :

(i) a control station (mesh filters, fertiliser injectors, metering valves, non-return valves, pressure regulators, pressure gauges, air vents, etc.);
(ii) an underground network (distribution lines and branch lines which carry the water from the control station to the irrigation zone); and
(iii) a surface network (dripper lines incorporating the drippers).

Such systems are classified in this heading as functional units within the meaning of Note 4 to Section XVI (see the General Explanatory Note to that Section).

This heading also covers:

(1) Machines for coating various objects (for example, cups cartons, boxes) by spraying with paraffin wax or molten wax.

(2) Electrostatic painting apparatus consisting of a spray gun connected to a paint container by a flexible tube carrying paint, and also connected to a high-tension generator by an electric cable. The electrostatic field created between the object to be painted and the gun attracts the paint particles sprayed by compressed air to that object and prevents dispersion.

(3) Industrial robots specially designed for projecting, dispersing or spraying liquids or powders.

PARTS

Subject to the general provisions regarding the classification of parts (see the General Explanatory Note to Section XVI), the heading includes parts for the appliances and machines of this heading. Parts falling in this heading thus include, inter alia, reservoirs for sprayers, spray nozzles lances and turbulent sprayer heads not of a kind described in heading 84.81.”

On a careful reading of the above note, it is seen that an underground net work (distribution lines and branch lines which carry the water from the control station to the irrigation zone) and also surface net work (dripper lines incorporating the drippers) constitute irrigation system and the above note also emphasises that such system are classifiable under heading 84.24 as functional units within the meaning of Note 4 to Section XVI. The parts thereof are also brought under this Section and the parts as are referred to above include reservoirs for sprayers, spray nozzles, lances and turbulent sprayer heads, to form the irrigation system as they carry out functions of the ground net work for distribution of water and surface net work. The irrigation system basically is of these pipes and the other items referred to above, which carry out the functions of distribution and dispersing or spraying in terms of the description under Chapter 84.24 and the said sub-heading 8414.10 dealing with removable appliances of the kind used in agriculture or horticulture. Therefore, parts thereof are covered by subheading 8424.91. As a result, the appellants' claim for the benefit of exemption Notification for the items falling under Heading 84.24 claiming nil rate of duty under Notification No. 56/95 dated 16-3-1995 is justified.

The above decision was approved by the Supreme Court as reported in 2000 (120) ELT A 119 (S.C.).

The ld. Commissioner (Appeals) (Order in Appeal dated 3.5.1990) in the appellants' own case held that valves for use in agriculture and or horticulture are classifiable under heading 8424 and the department did not challenge the same and accepted the order. Therefore, the order reached finality. In the case of Novapan Industries Ltd. supra the Supreme Court while relying upon the decision in the case of Birla Corporation Ltd. vs. Commissioner (2005(186) ELT 266 (S.C.),Jayaswals Neco Ltd. -2006 (1956) ELT 142 (S.C.) held that it is a settled law that the department having accepted the principles laid down in earlier case cannot be permitted to take a contra stand in subsequent cases. We also find that the case law relied upon the Ld. A.R., does not relate to parts used in agriculture and or horticulture purposes.

Accordingly, the product merits classification under heading 8424 and consequently the appeal filed by the appellant is allowed.

Decision:-Appeal allowed.

Comment:-The gist of this case is that when department has accepted classification of the product in the appellant’s own case earlier, it cannot challenge the classification later on as it is not permitted to take a stand contrary to that already taken by it.

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PJ/Case Law/2013-14/1858

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