2005(09)LCX0312

IN THE CESTAT, SOUTH ZONAL BENCH, BANGALORE

Dr. S.L. Peeran, Member (J) and Shri T.K. Jayaraman, Member (T)

Pepperl + Fuchs (India) Pvt. Ltd.

Versus

Commissioner of Customs, Bangalore

Final Order No. 1694/2005, dated 30-9-2005 in Appeal No. C/78/2005

Advocated By -

Shri K. Parameswamn, Advocate, for the Appellant.
Shri R.N. Vishwanath, SDR, for the Respondent.

[Order per : T.K. Jayaraman, Member (T)]. -

This is an appeal against the Order-in-Original No. 45/2004-Cus., dated 23-12-2004 passed by the Commissioner of Customs, Bangalore.


2. The appellants imported certain goods described as Proximity Sensors, Float Switches, Digital input switches, etc. The issue is as to whether the imported goods are classifiable under Heading 85.36 as contended by the appellants in the category of starting/stopping/ operative devices or under Heading 90.31 as contended by the Revenue. The second point is to be decided as to whether the impugned goods are entitled for the benefit of Notification No. 21/2002 or its predecessor notifications. The third issue is to be decided as to whether there was any justification in invoking the extended period for demanding differential duty on the imports made from 1-4-99 onwards. The adjudicating authority in the impugned order demanded differential duty of Rs. 14,78,929/- by classifying the items imported under Heading 90.31. Further the benefit of Notification No. 21/2002-Cus., dated 1-3-2002 and its predecessor notifications was denied. Differential duty of Rs. 98,81,360/- was demanded for the imports made from 1-4-99 to 19-3-2003. A penalty of Rs. 25,00,000/- under Section 112(a) of the Customs Act, 1962 was demanded. The goods valued at Rs, 13,00,285/- and Rs. 1,44,51,574/- have been confiscated without giving any option for redemption. Bank Guarantee of Rs. 10,00,000/- furnished for provisional release has been en-cashed towards the adjudication levies. The appellants strongly challenged the findings of the adjudicating authority.


3. Shri K. Parameswaran, learned Advocate appeared on behalf of the appellants and Shri R. N. Viswanath, learned SDR appeared for the Revenue.


4. The learned Advocate made the following statements :-

(i) The whole classification issue has been decided in an arbitrary and misconceived manner to somehow classify without any basis or justification, the said products under Heading 90.31 just to deny the benefit of the concessional rate available under the said Notification No. 21/2002-Cus.or any of its earlier notifications. This will become evident from records made in paragraphs 126 to 174 of the impugned Order-in-Original. The correct and proper function of the items imported and considered for classification has been set out in Para 128 of the said impugned Order-in-original itself as under :-
"From the above, the details given in the catalogue of M/s. (P + F IPL), it is clear that the sensors (sometimes they are also called 'switches') performs two functions :-
(i) it detects/senses the presence or absence of a target and
(ii) it generates an output signal depending upon the presence or absence of target."

(ii) The items Proximity Switches are even called sometime Proximity Sensors interchangeably. This is a technological development over conventional switches functioning on non-contact principles. This fact has been totally ignored and brushed aside. Non-contact switches have a detecting range which is also called sensing range within which only if an object is placed it would detect/sense but the same is totally different from measuring any range or distance or giving a proportional output like a sensing device thereof. The item only gives a switching output whenever the target comes within its detecting/sensing range and thus it cannot prima facie be considered a measuring device.

(iii) The findings recorded in Para 129 of the impugned Order-in-original is totally misconceived and nowhere in the product catalogue it is indicated that they measure the level of liquids or measures flux density, etc. No such evidence has been brought on record and hence it is a totally erroneous finding which would deserve to be rejected in toto. It is submitted that sensing range cannot be equated with measuring function or even checking function and further it gives only a switching output. This fact has been totally ignored and brushed aside.

(iv) The record of cross-examination of the three options relied upon by the department and recorded at Paragraph 132 onwards has also been erroneously considered, without appreciating the factual aspects or the technical evidences furnished by the appellant herein including even some of the text books and other material from reputed Government Institutions. In respect of opinion given by BEL, in the cross-examination, one Mr. Bhujanga Rao of commercial department appeared and he agreed that the opinion had been signed on the request of the department and that the same has been derived from technical people and further is dealing with commercial matters and cannot give any technical clarifications and hence the same should have been rejected outright. It was also explained how there was contradiction in the opinion given and also from where the details were picked out was not clarified and did not take into account the nature and function of the product and hence should have been rejected outright as it did not stand the test of cross-examination. Even the opinion given by one Shri Ravindra Bharadwaj of American Power Conversion should not have been relied upon since the factual position was clearly brought out in the cross-examination particularly while -answering the questions and his understanding is based on his assumption that all non-contact devices should be categorized as sensors and not switches and further it is also admitted by him that the product seen by him generates a signal for control circuitry to perform its function, which is nothing but either to make or break the circuit and not performing any control functions by itself. This will become evident from record of cross-examination which have been totally ignored.

(v) The cross-examination of one Mr. V. Nagaraj of SKF Bearings makes it clear that the function of a proximity sensor is to detect the presence of a metal object and change the output status of the sensor which is used in the control sequence of the machine to which it is connected. The function is that it gives the signal to a machine so that a machine can be activated or deactivated or a sequence of operation. In spite of these facts having been accepted, still it is held that it does not perform any switching operation and cannot get classified under Heading 85.36 with any basis or material to substantiate such conclusions, particularly when Heading 90.31 only relates to measuring or checking devices thereof. Accordingly, the inferences drawn from the cross-examination have been recorded in a totally misconceived manner in the impugned adjudication order. All the technical material and evidences/opinions furnished by the appellant herein have also been just like that brushed aside and ignored without even bothering to look into the aspects involved thereto. It is in this context, it will be useful to refer to the evidences annexed at Pages 422 to 491 of the Paper Book No. III including the book on Industrial Controls published by Hong Kong University. These have been ignored totally as would become evident from findings recorded from Paras 146 to 149 of the impugned Order-in-Original thereof.

(vi) All the case laws relied upon in the impugned Order-in-original are clearly distinguishable and cannot form the basis at all since the function of the items imported has been considered as essentially and primarily sensing of a target and generating a signal on that basis and thus would fall under sensor as indicated under Heading 90.31. Even otherwise, reliance has been placed on a Tariff advice said to have been communicated vide Board's letter dated 14-10-2003 which was never relied upon and has been issued after the show cause notice and thus any reliance placed on the same is totally opposed to all known principles of law and hence could not have been relied upon particularly when the appellant herein had not been given any opportunity to counter the same. This will become all the more relevant for denying the benefit of exemption of the said Notification No. 21/2002-Cus. therein.

(vii) HSN Explanatory Note relevant for Heading 85.36 as relied upon in Para 17 of the show cause notice itself has been clearly ignored in toto and further even the Explanatory Note relating to chapter 90.32 which provides for classification of starting, stopping or operating devices have all been ignored in toto. On the contrary, erroneous reliance is placed on HSN Explanatory Notes relevant for Heading 90.31 merely because it uses the words sensors therein without giving the full picture therein and hence the findings recorded in this regard in Paragraphs 155 to 159 would deserve to be rejected in toto as grossly misconceived and arbitrary. Similarly even the reliance placed on the case laws as recorded in the said Para 156 is also totally erroneous and will not be relevant to the matter involved herein.

(viii) In any case, there is no dispute that the products imported had contact rating less than 5 amps at a voltage not exceeding 250 Volts AC DC and the plus or minus tolerance given has been read out of context thereto. Further even the clarification given by the Managing Director in a subsequent communication has also been totally ignored. Thus the whole classification made of the said items under Heading 90.31 for disallowing the benefit of Notification No. 21/2002-Cus., cannot be sustained as the same has been prima facie made without understanding the fundamental difference between proximity switch of various types and a sensing device which has been explained in details thereto.

(ix) Invoking extended period cannot be justified at all as there has been no wilful misstatement or giving any wrong description and thus the reason given in Paragraphs 164 to 168 of the impugned Order-in-Original does not justify the invoking of extended period at all. The aspects pertaining to not invoking the extended period has been clearly set out in Paragraphs 8 to 12 of the Grounds of Appeal herein from which it will become evident that the item imported called interchangeably as proximity switch or proximity sensor does not in any way justify the invoking of extended period particularly when the whole details were available with the department including for allowing the exemption under the said Notification No. 21/2002-Cus. and also the technical details and thus no portion of the statement of the Managing Director could have been read out of context in any manner thereto. In fact, the technical details and all data were available with the department. Above all, there is definitely a doubt even in the mind of the department regarding the correct classification and in fact even the Tariff advice has been issued only much later on 14-10-2003, which date is much after the issue of the show cause notice itself, which has been issued on 10-9-2003 itself. This itself will establish that there cannot be any wilful misdeclaration justifying the invoking of extended period of limitation as per Section 28 of the Customs Act, 1962 thereof. For this reason alone, the show cause notice issued by invoking the extended period cannot be sustained at all.

(x) In addition, all the clearances have been made right from 1-4-99 onwards as per the assessed bill of entries and even, erroneously the product was classified for about one year prior to 1-4-99 under Heading 90.31, which was later corrected and the department did not raise any objection even for claiming the said classification in the light of the evidences produced of assessed bill of entries which have been ignored and brushed aside in toto. This itself would be sufficient to establish that the extended period cannot be invoked at all for any reason whatsoever and hence for this ground alone the major portion of the demand would deserve to be dropped on limitation/time bar and it is accordingly prayed by the appellant herein :


5. The learned SDR reiterated the points in the Order-in-Original.


6. We have gone through the records of the case carefully. The adjudicating authority has given a very detailed finding with regard to the function of the proximity sensor imported by the appellants. The function of the proximity sensor is to detect the presence of the metal object and change the output status of sensor which is used in the control sequence of the machine to which it is to be connected. The function is that it gives a signal to the machine so that the machine can be activated or de-activated or a sequence of operations is carried out. The proximity switches are non-contact switches. The heading 85.36 of the Indian Customs Tariff reads as follows :-
"Electrical apparatus for switching or protecting electrical circuits, or for making connections to or in electrical circuits (For example, switches, relays, fuses, surge suppressors, plugs, sockets, lamp holders, junction boxes), for a voltage not exceeding 1,000 volts."

Further HSN Explanatory Note reads as follows -
"APPARATUS FOR SWITCHING ELECTRICAL CIRCUITS
These apparatus consist essentially of devices for making or breaking one or more circuits in which they are connected, or for switching from one circuit to another; they may be known as single pole, double pole, triple pole, etc., according to the number of switch circuits incorporated. This group also includes changeover switches and relays.
(A) The switches of this heading include small switches for use in radio apparatus, electrical instruments, etc., switches of a kind used in domestic electrical wiring {e.g., tumbler switches, lever operated switches, rotary switches, pendent switches, push button switches) and switches for industrial application {such as, limit switches, cam switches, micro-switches and proximity switches).
Switches operated by the opening or closing of a door and automatic thermo-electric switches (starters) for starting fluorescent lamps are classified here."

A reading of Customs Tariff Heading 85.36 and the Explanatory Note indicate that the Proximity Switches are covered under Heading 85.36. Proximity switches incorporate sensor for switching action. They are different from conventional switches in the sense that they are non-contact switches. The adjudicating authority has not considered the HSN Explanatory Note indicated above, according to which the proximity switches should be classified under Tariff Heading 85.36. After going through the records of the case, we are convinced that the impugned goods perform switching function. Customs Tariff Heading 90.31 reads as follows :-
"Measuring or checking instruments, appliances and machines, not specified or included'elsewhere in this chapter; profile projectors."

HSN Explanatory Note under Heading 90.31 did not indicate that the proximity switches would be covered under that heading. We also do not find any reason for ignoring the HSN Explanatory Note which states that proximity switches would be covered under Heading 85.36. Even though proximity switches make use of sensors, a proximity switch is not identical with the proximity sensor. In one of the website of ELDEC Corporation, the difference is brought out as under :-
"Proximity switches are self contained devices that combine the sensing element with the signal conditioning electronics. Proximity sensors only include the sensing element and require remotely located electronics to function."

As regards the benefit of exemption Notification No. 21/2002-Cus., dated 1-3-2002, the relevant entry is as follows :-
List 26 (See S. No. 244 of the Table) states that :-
"(3) Switches with contact rating less than 5 amperes at voltage not exceeding 250 Volts AC or DC."

This available records indicate that the impugned goods are not meant for a rating of more than 5 Amperes at voltage exceeding 250 Volts AC or DC. Moreover similar goods have been imported earlier and were cleared after classifying under Heading 85.36 of the Customs Tariff. There is nothing to show that there has been any wilful misdeclaration and suppression of facts. Hence the longer period cannot be invoked. Even though prior to 1-3-94, the goods were classified under Heading 90.31, the appellants later corrected the classification to Heading 85.36 and the Department did not raise any objection. Hence the extended period cannot be invoked. In view of the above observations, we are of the view that the impugned items which are proximity switches are rightly classifiable under Heading 85.36 as indicated in the HSN Explanatory Note. They are also entitled for the benefit of Notification No. 21/2002-Cus. Hence the Order-in-Original has no merit. We allow the appeal with consequential relief.

(Pronounced in the open Court on 30-9-2005).

Equivalent 2006 (197) ELT 0420 (Tri. - Bang.)