Rice Parboiling Machinery
Classified under Heading 8437
[CBEC Circular No. 924 dated 19th May 2010]
Subject: Classification
of rice parboiling machinery.
It has been brought to the notice of the Board that
classification of Rice parboiling machinery is being disputed in certain
jurisdictions. Two tariff headings under consideration for its classification
are 8419 or 8437. It has been represented by the Rice Mill Machinery
Manufacturers Association that the practice so far followed by the department
was not to charge excise duty for many years but suddenly it has been sought to
charge duty on these machines by proposing classification under heading 8419.
The matter has been examined by the Board.
2. Paddy processing plant consists of sections
with functions like parboiling, drying, rice milling and polishing
. Parboiling plants and drier plants are used for steaming and drying
paddy and also for reducing the moisture content in the paddy. The processed
paddy is then sent to subsequent sections where husking, hauling, milling and
polishing are undertaken. Briefly, parboiling process involves three stages,
namely, pre-steaming, soaking and steaming. In the first stage, clean raw paddy
is steamed for 3 to 5 minutes. In the second stage, pre-steamed paddy is soaked
in water tanks for about 4-5 hours. In the last stage, the soaked paddy is
passed through steaming process for 3-5 minutes. Subsequently, steamed rice are dried in a dryer. The dryer is also supplied alongwith parboiling rice machinery. It has been mentioned
by the Association that 100% of parboil plant and equipment are
used only in rice mill industry and that the parboiling process is exclusive to
paddy. It has also been contended by the Association that parboiling units are
integral part of rice mill. Subsequent to the parboiling process, the further
process of dehusking and drying is carried out in the
same unit. Therefore, parboiling rice machinery is an integral part of rice
mill plant. Thus it has been argued by the Association that these machines
merit classification under heading 8419 because of following main grounds:
i. Rice parboiling machineries are used only in rice mill
plant.
ii. These are integral part of rice processing plant and
these cannot function in isolation. Therefore, function of Rice parboiling
machinery/ drying unit is complementary to other function of rice processing
plant.
3. On the other hand, in support of classifying
it under tariff heading 8419, it has been argued that Parboiling and drier
plants perform the function of steaming and drying which are independent of
milling and these occur before milling process. Therefore it has been viewed
that parboiling and drier plant are not essential and
integral part of rice mill and therefore it would merit classification under
heading 8419. It has also been opened that machinery performing specific
functions like steaming or drying are specifically covered by heading 8419.
Further, reference has also been made to Chapter Note 2 to Chapter 84 to
justify the classification under heading 8419.
4.1 On examination
of the issue, the Board observes that the General rules for interpretation of
Central Excise Tariff provide that “for legal purposes,
classification shall be determined according to the terms of the headings and
any relative Section or Chapter Notes and, provided such headings or Notes do
not otherwise require”. Therefore the classification of these goods should
be determined in terms of the headings read with the relevant section and
chapter notes. Section Note 3 & 4 to Section XVI and chapter Note 2 to
Chapter 84 are relevant for present issue and these are reproduced below:
Section Note 3 and 4 to
Section XVI
“3. Unless the context otherwise requires, composite machines
consisting of two or more machines fitted together to form a whole and other
machines designed for the purpose of performing two or more complementary or
alternative functions are to be classified as if consisting only of that
component or as being that machine which performs the principal function.
4. Where a machine (including a combination of machines) consists of
individual components (whether separate or interconnected by piping, by
transmission devices, by electric cables or by other devices) intended to
contribute together to a clearly defined function covered by one of the
headings in Chapter 84 or Chapter 85, then the whole falls to be classified in
the heading appropriate to that function.”
Chapter Note 2 to Chapter
84:
“Subject to the operation
of Note 3 to Section XVI and subject to Note 9 to this Chapter, a machine or
appliance which answers to a description in one or more of the headings 8401 to
8424, or heading 8486 and at the same time to a description in one or other of
the headings 8425 to 8480 is to be classified under the appropriate heading of
the headings 8401 to 8424 or under the heading 8486, as the case may be, and
not under the headings 8425 to 8480.
Heading 8419 does not,
however, cover :
(a) germination plant, incubators or brooders
(heading 8436);
(b) grain dampening machines (heading
8437);
(c) ....
(d) ...
(e) ...”
4.2 Parboiling machinery, drier plant and rice mill in conjunction form
the paddy processing. Thus such a plant can be considered as composite machines
fitted together to perform the function of rice milling which is the principal
function of such a combination. Thus in terms of the Section Note 3 & 4
even if one of the component/ machinery is performing complementary functions,
the classification of such component/ machinery will be governed by the
principal function being performed, and that in this case is rice milling.
4.3 Chapter Note 2 provides that if a machine can be classified based
on description under heading 8419 and also under 8437, in that case it should
be classified under 8419 only. Therefore, it would be seen that as per Chapter
Note 2, the parboiling machine merit classification under heading 8419 but as
per Section Note 3 and 4, the machinery merit classification under heading
8437. The Board observes that this controversy has been perceived by the HSN
and at pages 1235 it has been mentioned that Chapter Note 2 which is known as
rule of precedence for heading 8401 to 84.24 applies only to machines
considered as whole. Composite machines or multifunction machines are required
to be classified in accordance with Note 3 and Note 4 of Section XVI. As per
this clarification available in the HSN, the parboiling machine and dryers
which are part of composite machine (rice mill) would be correctly classified
in terms of Section Notes 3 and 4 and therefore, the correct classification
should be under heading 8437. Further, grain dampening machine has been
excluded from the purview of heading 8419 and placed under heading 8437. One of
the functions of Rice parboiling machinery is soaking of grain, which is in
nature of dampening; hence this also support the
classification of parboiling machinery under heading 8437.
5.0 Therefore, Board is of the view that Rice
parboiling machinery and drier which are essentially for use in conjunction
with the rice mill will merit classification under heading 8437.
6.0 Trade & industry as well as field formations
may please be informed suitably.
7.0 Receipt
of this order may please be acknowledged.
F.No. 167/42/ 2009-CX.4