Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise and Custom
Circular No 924/ 14/2010-CX
New Delhi, the 19 May, 2010
To,
All the Chief Commissioner of Central Excise,
All the Chief Commissioner of Customs
All the Director General
All Commissioners,
Sir,
Subject: Classification of rice parboiling machinery -reg
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.
8.0 Hindi version will follow.
Yours faithfully
(Madan Mohan)
Under Secretary (CX-4)
F.No. 167/42/ 2009-CX.4