Holding

Machines for processing milk that depend on heat exchange are excluded from heading 84.34 and must be classified under the appropriate headings, and the CESTAT’s classification stands.

Summary

The appellant, HMT Ltd., a manufacturer of dairy machinery, classified its machines such as pasteurizers, chillers, pumps, separators and butter packing machines under Chapter 84.34 of the Central Excise Tariff Act, 1985. The revenue authorities issued show‑cause notices alleging mis‑classification and proposed re‑classifying the items under headings 84.19, 84.13, 84.21, 84.22 etc., levying duty and a penalty. The CESTAT upheld the revenue’s view, holding that the machines depend on the principle of heat exchange and are excluded from heading 84.34 by the HSN Explanatory Note, and dismissed the appeal. The appellant challenged this decision before the Supreme Court, contending that the Tribunal had not appreciated the chapter headings and explanatory notes. The Court examined the provisions of Chapter 84 and the HSN Explanatory Note, noting that machines for pasteurisation, chilling and related functions are expressly excluded from 84.34 and fall under other headings, and reiterated that a Tribunal’s classification order should not be interfered with unless patently wrong. Consequently, the Supreme Court affirmed the CESTAT’s classification and dismissed the appeal.

Issues considered

Whether machines such as pasteurizers, chillers, pumps, separators and butter packing machines fall within Chapter 84.34 of the Central Excise Tariff Act, 1985.
Whether the HSN Explanatory Note excludes such machines from heading 84.34 and mandates classification under other headings.
Whether the Supreme Court can interfere with the CESTAT’s classification order in the absence of a patently erroneous view.

Legislation cited

Subjects

classificationcentral excisedairy machineryHSN Explanatory NoteChapter 84heat exchangeappeal dismissed

Judgment

', MIS. HMT LTD . A
• ~
v.
COMMNR. CENTRAL EXCISE & CUSTOMS, AURANGABAD

JULY 13, 2007

[DR. ARIJIT PASAYA T AND TARUN CHATTERJEE, JJ.] B

lo,
Central Excise Tariff Act, 1985-Chap:2r heading 84.34 and H$N
Explanatory Note to the heading-Machines used for industry of milk and
milk products-Machines in the· nature of pasteurizer/chiller etc.-Excluded
from the heading-Propriety of-Held: In view of the chapter heading and
c
HSN Explanatory Note to the heading, machines for processing milk,
refi·igerating appliances and machines for wrapping or weighing the products
are excluded from the chapter heading-Central Excise Act, 1944-s. 11 A.1-
Central Excise Rules, 1944-r. 173 Q.
D
... Assessee-manufacturer classified the machines i.e. Skid mounting type
milk/cream pasteurizer S.H., chilling plant; Milk/Cream chillers, Milk/
Cream Pasteurizer, Milk/cream/ghee pumps, Milk and cream separators;
Butter Packing Machine and parts of the above machines under Chapter 84.34
of Central Excise Tariff Act, 1985. The autho.rities applied Note 2 of Chapter
heading 84 and HSN Explanatory Note excluding such items which were in E
the nature of pasteurizer/chiller from the coverage under Chapter Heading
84.34. Customs, Excise and Service Tax Appellate Tribunal (CEST A1) 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 are excluded
from coverage under Chapter heading 84.34 and the heading also excludes
''-' F
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). HSN Explanatory note also
excluded the machines for wrapping or weighing the product from Chapter'
heading 84.34. The order of authorities below was upheld. Hence the present
appeal G
Dismissing the appeal, the Court
·~
" HELD: 1. Heading 84.37 'Milking machines and dairy machinery',
covers mechanical milking machines, and other machinery, whether for farm
343 H
344 SUPREME COURT REPORTS (2007) 8 S.C.R.

A or industrial purposes, used in the treatment of milk or for covering it into
other dairy products. The majority of machines for processing milk depend
essentially on the principle of heat exchange and are therefore excluded
(heading 84.19). 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
B 84.18) (b) Cream separators, tilter-presses and other filtering or clarifying
machinery or apparatus (heading 84.21). (c) Machines for washing milk
containers, and milk bottling or canning machines (heading 84.22). Machines
which also wrap or weigh the product are excluded from the heading Butter
1
Making Machines and Cheese Making Machines (heading 84.22 and 84.23)
C and (headings 84.22 and 84.23). (Para 131 (348-A, B, C, D, E, F, GI

2. Even bare perusal of the Note No. 2 to Chapter heading 84.34 a·n_d
HSN Explanatory Notes show that the view of the CESTAT is on terra firma.
The view of the Tribunal in classification matters unless patently wrong should
not be interfered with. (Para 14) (349-A, BJ
D

-
Commissioner of Central Excise v. V. Carrier Aircraft, (2006) 6 SCALE >--
564, reliec! on.
I
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1176 of2006.

From the Final Judgment & Order dated 21.10.2005 of the Customs,
E \
j
Excise & Service Tax Appellate Tribun~I, West Zonal Bench at Mumbai in
Appeal no. E/1417/00-Mum. ~
Ajay Mahithia, Rajesh Kumar and Kailash Chand for the Appellant.
...
F K. Radhadrishnan, P. Narasimhan and· B. Krishna Prasad for the ~
~·
. .--
Respondent. 1

l
The Judgment of the Court was delivered by f:-

DR. ARIJIT PASAYA T, J. l. Challenge in this appeal is to the judgment
I
G of the Customs, Excise & Service Tax Appellate Tribunal, West Regional ~
Bench at Mumbai (in short 'CEST AT') which dismissed the appeal filed by the
~
appellant.
t
/, -1"4.
2. The backgroynd facts in a nutshell are as under:
lt ~
H The assessee is engaged in the manufacturing of machinery and parts t:-
>--
t
l
~
HMT LID.,.. COMMNR. CENTRAL EXCISE & CUSTOMS, AURANGABAD [PASAYA T, J .] 345

thereof falling under Chapter 84 of Central Excise Tariff Act, 1985 (in short the A
'Tariff Act'). Alleging that the assessee had mis-classified the follo~ing
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 B
(ii) Chilling plant 8434.IO

(iii) Milk/cream chillers 8434.IO

(iv) Milk/cream Pasteuriser 8434.10

(v) Milk/cream/ghee pumps 8434.10 c
(vi) Milk & cream separators 8434.10

(vii) Butter Packing Machine 8434.10

(viii) Parts of above machineries 8434.90
D
3. In the show cause notices, it was proposed to classify the goods
mentioned at SI. 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 propos~d
to classify the goods at Sr. No. (vi) under Chapter sub-heading No. 842 l.10
and parts thereof under Chapter sub-heading No. 8421.90 and the items at Sr. E
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 perfonned by these goods with respect to Chapter 84 of F
Explanatory Notes. It was, therefore, proposed to classify them in the aforesaid
manner. The assessee submitted its reply and supported its classificatioh.
After considering the show cause notices, reply and personal hearing, the
Assistant Commissioner, Central Excise & Customs confirmed the demand
and made the following classifications.
G
"(i) Skid mounting type milk/cream pasteurizer

(ii) Chilling plant

(iii) Milk Cream Chiller

(iv) Milk Cream pasteurizer H
'
~
346 SUPREME COURT REPORTS (2007] 8 S.C.R.

A 4. Under Chapter sub heading No. 8419. l 0 and parts of the above "
y
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%
B 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
c 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 I 73Q of Central
Excise Rules, 1944 (in short the 'Rules'). The Commissioner (Appeals) confirmed
D 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 l 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
E 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
F exchange and they are excluded from coverage under Chapter heading 84.34 I ....
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 8.4.34).
It was further noted that HSN Explanatory note also excluded the machines
G for wrapping or weighing the product from Chapter heading 84.34.

8. The CESTA T upheld the impugned order and rejected the appeal.

,i r"
9. In support of the appeal, learned counsel for the appellant submitted i

that the authorities below have not appreciated the essence of various entries,
H the HSN Explanatory note and Chapter headings and sub-headings.

(
HMT LTD. v. COMMNR. CENTRAL EXCISE & CUSTOMS. AURANGABAD [PASAYAT, J) 34 7

I 0. Learned counsel for the revenue on the other hand supported the A
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:

"I. xxxxxxxx
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 C
classified under the appropriate heading of the former group and
not the latter.

Heading No. 84.19 does not, however, cover:-

(a)xx )0( )0(
D
(b)xx )0( )0(

(c)xx )0( )0(

(d)xx )0( )0(

E
(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 F

(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 )"
G
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 H
348 SUPREME COURT REPORTS [2007) 8 S.C.R.
..
A 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
B milk or for converting it into other dairy products.

(I) Milking machines: xx xx xx

"(II) Machines for Processing Milk ........ The majority of machines for
processing milk depend essentially on the principle of heat exchange
C 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
D 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
E 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)
F Butter making machines (I) xx .... '°'
(2) JO(

(3) JO(

(4) ..... but not including machines which also wrap or weigh the
G product (heading 84.22 and 84.23)

(B) Cheese making machines (I) xx •••• JO(

(2) ............... but not including machines which also wrap or weigh the
H product (headings 84.22 and 84.23)
HMT LTD."· COMMNR CENTRAL EXCISE & CUSTOMS, AURANGABAD [PASAYA T, J.] 349
(III) Parts: xx xx" A
14. Even on a bare perusal of the Note No. 2 to. Chapter heading 84.34
and HSN Explanatory Notes show that the view of the CESTAT is on terra
firrna. In Commissioner of 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, B
we find no merit in this appeal which is accordingly dismissed. There will be '
no order as to costs.

K.KT. Appeal dismissed. ·