1. Claims for refund of excise duty — interpretation of the phrase component parts. (Para 1 )
Back
Next 
1999 Supreme(SC) 1296
SUPREME COURT OF INDIA
S.P. BHARUCHA AND A.P. MISRA, JJ.
Hindustan Sanitaryware and Industries Ltd. and Lakshmi Cement, Appellants
VERSUS
Collector of Customs, Calcutta, Respondent.
Civil Appeal Nos. 10744-10745 of 1995, D/- 2-11-1999.
Important Points
A spare part, when fitted into a machine to replace a defective or worn out part, becomes a component of the machine and is considered a component part for the purpose of excise duty refund.
Subject
Taxation Law - Excise Duty Refund
Act Referred
CENTRAL EXCISE ACT: S.4
Headnote
component parts - excise duty refund - The court discussed the meaning of the phrase 'component parts' in the context of claims for refund of excise duty. It held that a spare part, when fitted into a machine to replace a defective or worn out part, becomes a component of the machine and is considered a component part.
Fact of the Case:
The appeals arose in the context of claims for refund of excise duty, specifically pertaining to the meaning of the phrase 'component parts.' The Tribunal drew a distinction between component parts and spare parts, but a larger Bench of the Tribunal considered spare parts as a species of component parts.
Finding of the Court:
The court found that a spare part, when fitted into a machine to replace a defective or worn out part, becomes a component of the machine and is considered a component part. The appeals were allowed, and the order under appeal was set aside, with the appellants entitled to refunds only if permissible under the law.
Issues: The main issue was the interpretation of the phrase 'component parts' in the context of claims for refund of excise duty.
Ratio Decidendi: The court held that a spare part, when fitted into a machine to replace a defective or worn out part, becomes a component of the machine and is considered a component part. It relied on the larger Bench decision and found the distinction drawn between component parts and spare parts to be without a difference.
Final Decision: The appeals were allowed, the order under appeal was set aside, and the appellants were entitled to refunds only if permissible under the law. No order as to costs was made.
Legal Category Hierarchy
Table of Contents
2. Distinction between component parts used in initial assembly versus spare parts used for subsequent replacement of worn-out parts. (Para 1 )
3. Spare parts are replacement parts for damaged or worn-out components and thus constitute a species of the genus component part. (Para 1 , 2 )
4. A spare part fitted into a machine subsequent to its manufacture to replace a defective or worn-out part is a component part. (Para 2 )
5. Appeals allowed and order set aside — refunds granted if permissible under law. (Para 3 )
6. What is the legal relationship between component parts and spare parts?
A spare part is a replacement part used to replace a damaged or worn-out component; therefore, it is a species of the genus component part, and the distinction between the two is a distinction without a difference. (Para 1 )
7. Does a part installed after the manufacture of a machine qualify as a component part?
Yes, a spare part fitted into a machine subsequent to its manufacture to replace a defective or worn-out part becomes a component of the machine and is legally considered a component part. (Para 2 )
Judgement
JUDGMENT :- The issue that we are concerned with in these appeals arises in the context of claims for refund of excise duty. It pertains to the meaning of the phrase component parts. The Tribunal, in the impugned order, drew a distinction between component parts and spare parts, following its earlier decision in the case of Vaz Forwarding Pvt. Ltd. v. Collector of Customs. Component parts, according to it, were those which were initially used in the assembly or manufacture of a machine and spare parts were those parts which were used for the subsequent replacement therein of worn out parts. The decision in Vaz Forwarding Pvt. Ltd. and other decisions of the Tribunal were considered by a larger Bench of the Tribunal in Jindal Strips Ltd. v. Collector of Customs, Bombay, (1997) 94 ELT 234. The larger bench took the view that a spare part was a replacement part to replace a damaged or worn out component but it was, nevertheless, a component part. Component was the genus and spare was a species thereof; it was a component which was used for replacement. The larger Bench judgment found that the distinction drawn in Vaz Forwarding Pvt. Ltd. was a distinction without a difference.
2. The larger Bench decision followed decisions of this Court, and we are of the view that its view is correct. A spare part, though fitted into a machine subsequent to its manufacture, to replace a defective or worn out part becomes a component of the machine. It is a component part.
3. The appeals succeed and are allowed. The order under appeal is set aside, but the appellants shall be entitled to refunds only if permissible under the law.
4. No order as to costs.
Appeals allowed.
FOR CITATION AIR 2000 SC 3506
