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CX - Components of boilers cleared as parts but essential to put into operation boilers, would be classifiable under SH 8402.10 @10% and not as claimed by Revenue under SH 8402.90 @ 15%: SC

By TIOL News Service

NEW DELHI, FEB 09, 2018: REVENUE is in appeal before the Supreme Court against the CESTAT order 2017-TIOL-3596-CESTAT-MAD.

The issue is whether the essential components/parts of a boiler cleared by the assessee would attract duty under SH 8402.10 or SH 8402.90.

Heading No.
Sub Heading No.
Description of goods
Rate of duty
84.02   Steam or other vapour generating boilers (other than central heating hot water boilers capable also of producing low pressure steam); super-heated water boilers  
  8402.10 All goods other than parts
  8402.90 Parts

The adjudicating authority as well as the CESTAT held that though clearances were made and transported as components of boiler, the same were liable to be classified under sub-heading 8402.10 and not under sub-heading 8402.90.

Both the authorities relied on an expert opinion of the Technical Adviser (Boilers), Ministry of Commerce and Industry dated 12.09.2003 which mentioned -

It is a fact that the high capacity boilers cannot be transported in one lot to the site, therefore they have to be sent as individual item and sub-assemblies. Therefore, the parts which are essentially needed to construct a complete boiler may be considered under the term boiler. But the parts which are provided with the boiler to enhance the efficiency such as automation, data requisition, indicators, recorders etc. are used for ease and safe operation of boilers and cannot be considered as boiler parts.

By relying on the HSN note Part V under Section XVI, it was also concluded that such components which are essential to classify the boiler as a machine, even if transported as components, must be understood to have been transported as a complete machine. Therefore, levy of duty should be under sub-heading 8402.10 and not sub-heading 8402.90 as claimed by the Revenue.

The Supreme Court inter alia observed –

“7. ..., in the face of the opinion of the expert and the HSN note, details of which have been extracted above, we are of the view that the Primary Authority as well as the First Appellate Authority was perfectly justified in coming to the conclusion that the components of the boilers cleared as parts but essential to put into operation the boilers, would be classifiable under sub-heading 8402.10 and not as claimed by Revenue under sub-heading 8402.90. We, therefore, do not find any infirmity in the order assailed before us so as to justify taking of a view different from what has been recorded by the First Authority as well as the Appellate Authority.”

The Revenue appeal was dismissed.

(See 2018-TIOL-52-SC-CX)