2008(09)LCX0315
In the Customs, Excise & Service Tax Appellate Tribunal, Bangalore
Dr. S.L. Peeran, Member (Judicial) Shri T.K. Jayaraman, Member (Technical)
Commissioner of Customs, Bangalore
Versus
ETA Technology Ltd.
Final Order No. 1286/2008 dt. 25.9.2008 certified on 8.12.2008 in Appeal No. C/297/2008
Cases Quoted -
Shaf Broadcast Pvt. Ltd. Vs. CC (Import) 2006(11)LCX0073 Eq 2007 (078) RLT 0672 (CESTAT-Mum.) - Relied on [Paras 5, 5.3, 6]
Southern Railways Vs. CC, 1987(06)LCX0095 Eq 1989 (041) ELT 0561 (Tri.) - Referred [Para 5.3]
Sarvalakshmi Paper & Board Vs. CC, Madras 1999 (032) RLT 0152 (CEGAT) - Referred [Para 5.3]
Wipro Ltd. Vs. CC, Chennai, 2005(05)LCX0168 Eq 2005 (070) RLT 0833 (CESTAT-Ban)-Referred [Para 5.3]
4. Wipro Ltd. Vs. CCE, Bangalore 2006(11)LCX0229 Eq 2007 (079) RLT 0846 (CESTAT-Ban.) - Referred [Para 5.3]
Advocated By -
Smt. Sudha Koka, SDR for Appellant
Shri Rajesh Kumar T.R., Chartered Accountant for Respondent
Per T.K. Jayaraman :
Revenue has filed this appeal against the Order-in-Appeal No. 148/ 2007 dated 30.11.2007 passed by the Commissioner of Customs (Appeals), Bangalore.
2. Ms. Sudha Koka, the learned SDR, appeared on behalf of the appellant and Mr. Rajesh Kumar, the learned Chartered Accountant, for the Respondent.
3. We heard both sides.
4. The issue involved is the correct classification of 'Modular Workstation with 15"LCD and 9 expansion slots" imported by the respondent. They claimed classification under CH 84715000. The Department felt that the classification should be under Heading 84799090. Consequently, proceedings were initiated against the respondent. The goods were held liable for confiscation under Section 111 (00m) of the Customs Act. The Original Authority gave an option to redeem the goods on payment of Redemption Fine of Rs. 75,000/-. He also imposed a penalty of Rs. 25,000/- under Section 112 of the Customs Act and allowed clearance of goods at the applicable rate. The respondent was highly aggrieved over the impugned order. They approached the Commissioner (Appeals). The Commissioner (Appeals), after careful consideration of the issue, was of the opinion that the impugned goods merit classification under Chapter Heading 84715000 as Automatic Data Processing. Further, he classified the Monitor under Chapter Heading 8528. He has given a detailed reasoning in the impugned order. Revenue is aggrieved over the order of the Commissioner (Appeals) on the following grounds.-
"A. The Commissioner (Appeals) has erred in setting aside the OIO relying on Chapter Note 5 (A) of Chapter 84, concluding the impugned goods as Automatic Data Processor. As available in the literature of the machine, the impugned goods primarily perform the function of controlling of the machines and has several specific functions other than the data processing. It is Stated, "this workstation is integrated into the friction welding machine and is used for data acquisition and for the control and operation of the machine with reference to the process parameters. It is also used for obtaining a graphical display. Therefore, the same cannot be considered as ADP machine. The Chapter Note 5 (E) of Chapter 84 reads as "Machines incorporating or working in conjunction with an automatic data processing machine and performing a specific function other than data processing are to be classified in the headings appropriate to their respective headings or, failing that, in residual headings". Hence, the same merits classification under more appropriate Heading 84799090.
B. Further, as stated in the Technical literature of the product, the impugned item is - 'not only considered to be an integrated computing work station but can be separated and used as a LCD display and control chassis. This provides a flexible and cost saving way for users . to meet different kinds of application needs for industrial computing platform.' Therefore, the machine can be said to perform specific functions other than data processing so as to classify it as in the heading more appropriate to their respective headings or falling, in residual headings. Hence, item merits classification under CTH 8479 and cannot be held as an ADP machine.
C. The learned Commissioner (Appeals) has also failed to take recognition of the Importer letter dated 6.6.2007, wherein the importer has agreed with the Department for the classification of the goods under CTH 84799090 with reference to functionality of the goods imported."
4.1 The learned Departmental Representative reiterated the stand of the Revenue.
5 .On the other hand, the learned Chartered Accountant for the Respondent made the following submissions:-
A. The classification claimed by the Department is 84799090 as "Machines and mechanical appliances having individual functions, not specified or included elsewhere in this chapter".
B. The only basis on which the classification is claimed is Chapter . Note 5 (E) of Chapter 84 which reads as "(E) Machines incorporating or working in conjunction with an automatic data processing machine and performing a specific function other than data processing are to be classified in the headings appropriate to their respective functions or, failing that, in residual headings."
C. The classification claimed by the respondent is 84715000 which reads as "Automatic data processing machines and units thereof - Processing units other than those of sub-headings 8471.41 manufacturing of or 8471.49 whether or not containing in the same housing one or two of the following types of unit storage units, input units, output units."
D. The Commissioner (Appeals) formed the conclusion that the item shall be classified under the Heading 8471 for the following reasons:-
(i) The Modular Workstation undertakes Data Processing;
(ii) The goods when imported are Data processing machines. The same will become a part of the friction welding machines only after importation and assembly into the machine.
(iii) The case-law in the case of M/s. Shaf Broadcast Pvt. Ltd. Vs. CC (Import) - 2006(11)LCX0073 Eq 2007 (078) RLT 0672 (CESTAT-Mum.)=2006(11)LCX0073 Eq 2007 (207) ELT 0554 (Tri.-Mumbai) squarely covers the issue.
5.1 It was pleaded that the order passed by the Commissioner (Appeals) is legal and proper in terms of Chapter Note 5 (A) of Chapter 84 which reads as follows:-
"5 (A): For the purposes of Heading 8471, the expression "automatic data processing machines" means machine capable of:
(i) storing the processing programme or programmes and at least the data immediately necessary for the execution of the programme;
(ii) being freely programmed in accordance with the requirements of the user;
(iii) performing arithmetical computations specified by the user; and
(iv) executing, without human intervention, a processing programme which requires them to modify their execution, by logical decision during the processing run.
(B) Automatic data processing machines may be in the form of systems consisting of a variable number of separate units.
(C) Subject to paragraphs (D) and (E), a unit is to be regarded as being part of an automatic data processing system if it meets all of the following conditions:
(i) It is of a kind solely or principally used in an automatic data processing system;
(ii) It is connectable to the central processing unit either directly or through one or more other units; and
(iii) It is able to accept or deliver data in a form (codes or signals) which can be used by the system. Separately presented units of an automatic data processing machine are to be classified in Heading 8471.
However, keyboards, X-Y co-ordinate input devices and disk storage units which satisfy the conditions of (ii) and (iii) above, are in all cases to be classified as units of Heading 8471.
(D) Heading 8471 does not cover the following when presented separately, even if they meet all of the conditions set forth in paragraph (C):
(i) printers, copying machines, facsimile machines, whether or not combined;
(ii) apparatus for the transmission or reception of voice, images or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network);
(iii) loudspeakers and microphones;
(iv) television cameras, digital cameras and video camera recorders;
(v) monitors and projectors, not incorporation television reception apparatus.
(E) Machines incorporating or working in conjunction with an automatic data processing machine and performing a specific function other than data processing are to be classified in the headings appropriate to their respective functions or, failing that, in residual headings."
5.2 There is no objection that the imported goods are fulfilling the meaning of data processing machine as set out in chapter Note above. The applicability of Chapter Note 5 (E) is applicable to cases where a machine is being imported and that has a data processing machine, then the data processing machine which partakes the characteristics of that machine. In the present import, this is not the case. What is imported is the data processing machine itself. Therefore, the classification under 8471 is appropriate.
5.3 The Revenue based the classification on the ground of the subsequent usage of the imported goods, which is going to be used in the manufacture of 'Friction Welding Machines'. It is already decided by a number of decisions of the Tribunal that the classification has to be made in the condition at the time of import and not based on the subsequent use. The following case-laws are relied on:-
(i) Southern Railways Vs. CC - 1987(06)LCX0095 Eq 1989 (041) ELT 0561 (Tribunal) classification wherein it is held that the assessment of imported goods is to be made in the condition at the time of import.
(ii) Sarvalakshmi Paper & Board Vs. CC, Madras - 1999 (032) RLT 0152 (CEGAT)=1999(02)LCX0182 Eq 2000 (126) ELT 0935 (T) wherein it is held that the classification of goods depends upon the condition in which they are imported and is not affected by any change made subsequent to importation. This has also been relied upon by this Bench in the case of Wipro Ltd. Vs. CC, Chennai - 2005(05)LCX0168 Eq 2005 (070) RLT 0833 (CESTAT-Ban.)=2005(05)LCX0168 Eq 2005 (189) ELT 0289 (Tri.-Bang.).
(iii) In a similar set of facts in the case of M/s. Shaf Broadcast Pvt. Ltd. Vs. CC (cited supra), the items were classified under 8471.
(iv) In the case of Wipro Ltd. Vs. CCE, Bangalore - 2006(11)LCX0229 Eq 2007 (079) RLT 0846 (CESTAT-Ban.)=2006(11)LCX0229 Eq 2007 (210) ELT 0102 (Tri.-Bang.), while the department claimed the classification of certain goods as parts of Electrical machines and apparatus having individual functions not specified elsewhere in this chapter, held that the goods are parts of data processing machine as it is more appropriate than the parts of electrical machines. The same rationale applies to this case also.
6. On a very careful consideration of the issue, we find that the items imported are actually 'Modular Workstations with 15' LCD'. The lower authorities have relied on Chapter Note 5 (E) of Chapter 84. The Commissioner (Appeals), on a careful examination, has clearly stated that the Chapter Note 5 (E) of Chapter 84 mainly deals with machines which incorporates and works in conjunction with an automatic data processing. In the present case, the imported item itself is automatic data processing machine. It is going to be used in conjunction with the welding machines. It is going to be incorporated after the import. In such case, Note 5 (E) cannot be applicable. The Commissioner (Appeals) has correctly relied on the decision in the case of M/s. Shaf Broadcast Pvt. Ltd. (cited supra) passed by the Tribunal Mumbai. In our view, the decision of the Commissioner (Appeals) is legal and proper. Similar issue was dealt with in the case relied on by the Commissioner. In the said case, i.e. M/s. Shaf Broadcast Pvt. Ltd., the Hon'ble Tribunal observed as follows:-
"13. We further find that the Commissioner's reliance on Chapter Note 5 (E) of Chapter 84 is not appropriate. It only excludes machine performing a specific function other than data processing and incorporating or working in conjunction with an automatic data processing machine are to be excluded from Heading No. 84.71. For example, the lathe machine which operates with the aid of the computer or "automatic data processing machine" cannot be classified under Heading 84.71 as a unit of automatic data processing machine since the lathe machine is performing a specific function other than data processing machine and it is incorporating or working in conjunction with an automatic data processing machine. By applying Note 5 (E) to Chapter 84, the automatic data processing machine itself cannot be excluded from Heading No. 84.71. The Commissioner has precisely done the same thing. The automatic data processing machines are presented separately. When the automatic data processing machines are presented together with the machine performing a specific function other than data processing machine and such machine with specific function is incorporating or working in conjunction with an automatic data processing machine, then the automatic data processing machine and the other machine having specific function, presented together should be classified under the Headings appropriate to the functions of that other machine. In the present case, it is an undisputed fact that the items in question are presented separately and the function of the said machines are automatic data processing. Therefore, these items are correctly classifiable under Heading No. 84.71 by application of Note 5 (A) to Chapter 84."
The said case-law is squarely applicable to the present case. Therefore, the Order -:in-Appeal is legal and proper. There is no merit in the Revenue's appeal Hence, we reject the Revenue's appeal and uphold the order of the Commissioner (appeals).
Operative pot Hon of the order pronounced in open Court on conclusion of hearing.
Equivalent 2009 (091) RLT 0281 (CESTAT-Ban.)
Equivalent 2009 (236) ELT 0097 (Tri. - Bang.)