2011(03)LCX0335

IN THE CESTAT, SOUTH ZONAL BENCH, CHENNAI

Ms. Jyoti Balasundaram, Vice-President and Dr. Chittaranjan Satapathy, Member (T)

Commissioner of Customs, Chennai

Versus

Microqual Techno Pvt. Ltd.

Final Order No. 563/2011, dated 17-3-2011 in Appeal No. C/284/2009

Cases Quoted -

ACE Microelectronics Pvt. Ltd. v. Commissioner - 2010(04)LCX0116 Eq 2010 (255) ELT 0567 (Tribunal) - Referred [Para 5]

Appraiser v. Tamil Nadu Newsprint Papers Ltd. - 1988(01)LCX0040 Eq 1988 (036) ELT 0272 (Mad.) - Referred [Para 3]

Collector v. Andhra Pradesh Paper Mills Ltd. -1993(07)LCX0057 Eq 1993 (068) ELT 0583 (Tribunal) - Referred [Paras 4,8]

Collector v. Andhra Pradesh Paper Mills Ltd. - 1996(04)LCX0221 Eq 1996 (084) ELT A053 (S.C.) - Referred [Para 4]

Collector v. Metro Tyres - 1995(08)LCX0087 Eq 1995 (080) ELT 0079 (Tribunal) - Referred [Para 3]

Commissioner v. Hari Chand Shri Gopal - 2010 (260) ELT 0003 (S.C.) - Relied on [Paras 3, 8]

Commissioner v. Max India Ltd. - 2007(03)LCX0548 Eq 2007 (211) ELT A134 (S.C.) - Referred [Para 4]

Commissioner v. Ratan Melting and Wire Industries - 2008(10)LCX0001 Eq 2008 (231) ELT 0022 (S.C.) = 2008(10)LCX0001 Eq 2008 (012) STR 0416 (S.C.) - Referred [Para 4]

HICO Products Ltd. v. Collector - 1994(04)LCX0037 Eq 1994 (071) ELT 0339 (S.C.) - Relied on [Paras 3,8]

Jain Engineering Co. v. Collector - 1987(09)LCX0020 Eq 1987 (032) ELT 0003 (S.C.) - Distinguished [Paras 4,8]

Max India Ltd. v. Commissioner - 2006(03)LCX0033 Eq 2006 (200) ELT 0245 (Tribunal) - Referred [Para 4]

Novopan India Ltd. v. Collector - 1994(09)LCX0128 Eq 1994 (073) ELT 0769 (S.C.) - Referred [Para 3]

Union of India v. Wood Papers Ltd. - 1990(04)LCX0075 Eq 1990 (047) ELT 0500 (S.C.) - Referred [Para 3]

Advocated By -

Ms. Indira Sisupal, JDR, for the Appellant.
Shri S. Sankara Vadivelu, Advocate, for the Respondent.

[Order per: Chittaranjan Satapathy, Member (T)]. -

Heard both sides.


2. The issue in dispute in this case is whether the impugned goods namely "co-axial cables" imported by the respondents are entitled to duty exemption under SL. No. 28 of the Customs Notification No. 25/2005-Cus., dated 1-3-2005. The original authority in his order dated 24-7-2006 has denied the exemption classifying the impugned goods under sub-heading 8544.20. The lower appellate authority under his order dated 31-3-2009 has allowed the exemption leading to this appeal by the department.


3. Ms. Indira Sisupal, Ld. DR appearing for the department supports the grounds of appeal and contends as under :

(a) The operating words in the opening paragraph of the Notification No. 25/2005-Cus., dated 1-3-2005, which outline the scope and coverage of the exemption, are as under :

"hereby exempts the goods of the description specified in column (3) of the Table below and falling within the heading, subheading or tariff item of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) as are specified in the corresponding entry in column (2) of the said Table "

As is well settled in the case law cited separately, the exemption condi-tions have to be strictly construed. Therefore, the following two condi-tions must be satisfied for any goods to become eligible to the exemption, viz.

i.  the goods must answer to the description specified in col. (3), and

ii.  the goods must fall within the classification specified in col. (2).

The use of the word "and" clearly means that both these conditions must be satisfied.

(b) Background of the Notification No. 25/2005-Cus., dated 1-3-2005. In the 2005 Budget, by an amending Notification No. 11/2005-Cus., dated 1-3-2005, inter alia about 32 different entries then falling at various serial numbers between SL. No. 272 to 385 of Notification No. 21/2002-Cus., which then carried non-nil effective rates of duty, were omitted, and simultaneously re-introduced as the impugned Notification No. 25/2005-Cus., dated 1-3-2005, which now provided total exemption to these items, as also (vide SL. No. 33 thereof) to goods required for the manufacture of these items. These were the remaining ITA bound tariff lines. This was explained in the JS (TRU) D.O. letter dated 28-3-2005 (available at http://www.indiabudget.nic.in/ub2005-06/cen/doistru.pdf) as under:

9. Information Technology:

9.1 Customs duty has been exempted on specified items covered under the Information Technology Agreement (ITA). With this, all 217 ITA bound items are now fully exempt from customs duty. All goods imported for the manufacture of ITA bound items have also been exempted from customs duty subject to end-use condition.

(c) For understanding the structure of the notification entries, one can usefully refer to some entries of the parent Notification No. 21/2002, which explains how the Legislature/Executive has defined the scope of exemption in the Column (2) of the notification.

TABLE

Thus it can be seen that for the purpose of de-limiting the scope of cov-erage of the exemption, the column no. (2) follows the following options :

i. The classification is irrelevant (e.g. SL. No. 281 above)

ii. The classification requirement is at chapter level (SL. No. 291 above)

iii. The classification requirement is at 4-digit level (SL. No. 301 above)

iv. The classification requirement is at 6-digit level (SL. No. 340 above)

The use of different options for different entries must by itself be taken to be deliberate. Hence, if the column (2) of the entry no. 340 above (which is exactly the same as the impugned entry no. 28 of the present notifica-tion No. 25/05) says 8544.41 and 8544.49, then it must be construed that for the impugned goods to be eligible, they must (in addition to meeting the description of column 3), be classifiable under either of these two headings. If the goods in question do not fall within either of these two headings, then the exemption cannot be allowed, even if every other condition is satisfied.

(d) The question therefore is, whether the goods in question which are coaxial cables, fall within 8544.41 or 8544.49? The answer to this is a clear No, as is very clear from the tariff entries. As the 6-digit level, coaxial cables fall under 8544.20 which is different from 8544.41/8544.49. The two are mutually exclusive. Hence, the coaxial cables, even if they meet the voltage or end-use criterion vide column (3) of the notification entry, cannot be allowed the exemption. Doing so would amount to rendering otiose the phrase in the opening para of the notification which says "and falling within the Chapter, heading or sub-heading of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) as are specified in the corresponding entry in column (2) of the said Table"

(e) The Ld. Commissioner (Appeals) is a creature of the Statute and is bound by the same. In the guise of intention-seeking, he cannot legislate or assume to himself the powers under Section 25 of the Customs Act which have been vested only in the Central Government. There is no authority to contend that only the description-based condition is important and the classification-based condition can be given a go-by. The column (2) of the Table does not exist for cosmetic or educative purposes. It is an important limb of the exemption's boundaries, as is clear by the aforesaid portion of the opening paragraph where the twin condition is very clearly worded.

(f) The Appellate order is therefore bad in law and deserves to be set aside.

She also relies on the following decisions :-

1. HICO Products Ltd. v. C.C.E. -1994(04)LCX0037 Eq 1994 (071) ELT 0339 (S.C.)

2. Appraiser, Madras Customs v. TN Newsprint Papers Ltd. - 1988(01)LCX0040 Eq 1988 (036) ELT 0272 (Mad.)

3. C.C.E., Chandigarh v. Metro Tyres -1995(08)LCX0087 Eq 1995 (080) ELT 0079 (Tri.)

4. Union of India v. Wood Papers Ltd. -1990(04)LCX0075 Eq 1990 (047) ELT 0500 (S.C.)

5. Novopan India Ltd. v. C.C.E., Hyderabad - 1994(09)LCX0128 Eq 1994 (073) ELT 0769 (S.C.)

6. C.C.E., New Delhi v. Hari Chand Shri Gopal - 2010 (260) ELT 0003 (S.C).


4. Shri S. Shankara Vadivelu, Ld. Advocate, appearing for the respon-dents supports the impugned Order-in-Appeal and states that the respondents had initially indicated the classification for the impugned goods under subheading 8544.49, but even at this stage they are not disputing the correct classification of the impugned goods which has been done by the original authority under sub-heading No. 8544.20. However, irrespective of the classification of the impugned goods, the respondents are entitled to the benefit of notification under the Notification No. 25/05, as the description under SL. No. 28 to the table annexed to the said notification covers the impugned goods. He draws attention of the Bench to the description under the said SL. No. which reads as under :-

"Electric conductors, for a voltage not exceeding 80V, of a kind used for telecommunications ".

He states that the impugned goods are electric conductors and they are meant to carry voltage not exceeding 80V and are also a kind used for telecommunications and hence the respondents are entitled for the exemption. In support of his claim he relies on the following decisions :-

1. M/s. Jain Engineering Co. v. C.C., Bombay -1987(09)LCX0020 Eq 1987 (032) ELT 0003 (S.C.)

2. C.C. v. M/s. AP Paper Mills Ltd. - 1993(07)LCX0057 Eq 1993 (068) ELT 0583 (Tri.)

3. C.C. v. M/s. AP Paper Mills Ltd. -1996(04)LCX0221 Eq 1996 (084) ELT A053 (S.C.)

4. Max India Ltd. v. C.C, New Delhi - 2006(03)LCX0033 Eq 2006 (200) ELT 0245 (Tri.-Del.)

5. Commissioner v. Max India Ltd. - 2007(03)LCX0548 Eq 2007 (211) ELT A134 (S.C.)

6. C.C.E., Bolpur v. Ratan Melting & Wire Industries - 2008(10)LCX0001 Eq 2008 (231) ELT 0022 (S.C.) = 2008(10)LCX0001 Eq 2008 (012) STR 0416 (S.C).


5. We have considered the arguments from both sides. We find that in a similar case of ACE Microelectronics Pvt. Ltd. v. C.C, Jaipur - 2010(04)LCX0116 Eq 2010 (255) ELT 0567 (Tri.-Del.), the orders denying exemption under the same notification were upheld by the Tribunal as the impugned cables in that case were tested and the same withstood 250V for 5 hrs. without any damage. The argument by the importers in that case that 300V indicated in the catalogue was a breakdown voltage was also found to be not correct as the department had obtained a report from the Electronics Test and Development Centre, Jaipur under the Directorate of Information Technology, Government of India, to the effect that there was no breakdown observed at 300 Volts. In this case, we find that no test has been undertaken in respect of the present consignment. The Commissioner (Appeals) has referred to test certificates No. 3262 dated 14-12-2006 and 1467 dated 24-5-2007 by the Regional Testing Centre of Ministry of Small Scale Industry vide internal page-5 of his order. He has gone by these test reports even though the same were discarded by the original authority. However, the test reports were not in respect of the present consignment and since the co-axial cables are not reserved for the small scale industry, the competence of the Regional Testing Centre of the Ministry of Small Scale Industry to test the same is not free from doubt. Ideally, the impugned goods should have been tested by an authorized testing centre of the Directorate of Information Technology under the Government of India as was done in the case of ACE Microelectronics Pvt. Ltd. (cited supra), to remove any ambiguity regarding whether or not the impugned goods have a rating below 80V. The impugned 1/2" co-axial cables have been imported from M/s. Hansen Industries Corporation, China and M/s. Jiangxi Lianghuang, China and even though these products have a very high voltage rate much above 80V (sometimes in kilovolts) as per the product specification published by these companies on the internet, in the absence of a test conducted by an authentic lab capable of testing such products, as was done in the case of ACE Microelectronics Pvt. Ltd. (supra), the Revenue is obviously handicapped.


6. Nevertheless, the customs tariff makes a clear distinction between various kinds of conductors under Heading 8544 at the level of first sub-classification (single "dash") as follows :-

8544.10 - Winding wire.

8544.20 - Co-axial cable and other co-axial electric conductors.

8544.30 - Ignition wiring sets and other wiring sets of a kind used in vehicles, aircraft or ships.

8544.40 - Other electric conductors, for a voltage not exceeding 80V.

8544.50 - Other electric conductors, for a voltage exceeding 80V but not exceeding 1000V.

8544.60 - Other electric conductors, for a voltage exceeding 1000V.

8544.70 - Optical fibre cables.

For some of these separate sub-headings at the single "dash" level, there are further sub-divisions at the double "dash" level. The exemption Notification No. 25/05, under SL. No. 28 to the Table annexed, exempts "electric conductors" classifiable under 8544.41 and 8644.49 which are at the double "dash" level falling within the sub-heading No. 8544.40 at the single "dash" level. In view of the fact that the co-axial cables are classified under 8544.20, an entirely different subheading, the same obviously falls outside the exempted category of items under the said SL. No. 28. In fact, in the entire notification, goods falling under heading 8544 are specified under two SL. Nos. only : SL. No. 28 covers goods classified under 8544.41 and 8544.49, and SL. No. 29 covers goods classified under 8544.50. SL. No. 33 covers goods falling under any chapter irrespective of their classification provided they are used in the manufacture of goods falling under SL. Nos. 1 to 32.


7. In fact, sub-headings 8544.40, 8544.50 and 8544.60 cover "other elec-tric conductors". In other words, these sub-headings would cover such conductors which are other than those described previously under the preceding subheadings such as 8544.10, 8544.20 and 8544.30, i.e., conductors other than winding wire, co-axial cable, and ignition wiring sets would be covered under the latter sub-headings the coverage being limited to "other electric conductors". Since the impugned notification specifies sub-headings 8544.41 and 8544.49 under SL. No. 28 and 8544.51 under SL. No. 29, co-axial cables not being covered by these sub-headings stand excluded from the coverage of the said notification. The structure of the notification including specified items classified under specified sub-headings of the tariff, namely 8544.41 and 8544.49 clearly keeps the co-axial cables classified under the Heading 8544.20 out of the scope of the exempted notification. As the intention of the Government has been brought out in the clear language of the notification, no aids to interpretation are required in this case.


8. The Id DR has cited the decision of the Hon'ble Supreme Court in the case of HICO Products Ltd. (supra). We find that in the said case, the Hon'ble Supreme Court, took note of the fact that the exemption notification used the expression "and falling under item No " and held that those goods are exempted from payment of excise duty because of the language of the notification pointing it to a particular item and not universally. It also said that it is the clarity of the language which covers the issue, not involving any purposive approach. Applying the ratio of HICO Products Ltd. (supra) to the present case, it becomes clear that all electrical conductors of a kind described under column (3) against SL. No. 28 do not merit exemption. Only the "other conductors" which fall for classification within the sub-heading numbers specified under column (2) would merit exemption. In another decision cited by the Ld. DR in the case of Hari Chand Shri Gopal (supra), the Hon'ble Supreme Court has held that a person who claims exemption has to establish that he is entitled to that exemption and that a provision providing for an exemption has to be construed strictly. It also says that if the exemption is subject to any conditions, the conditions have to be complied with. The present notification clearly requires the goods to fall under particular classification and also to conform to the description given, respectively under columns (2) and (3) of the Table annexed to the notification, before exemption can be allowed. The respondents having not satisfied the condition relating to the required classification under column (2) of the notification, the impugned goods cannot be allowed the exemption under the said Notification No. 25/05. The decision of the Hon'ble Supreme Court in the case of M/s. Jain Engineering (supra) cited by the Ld. Counsel, relates to parts of IC engines and the context in which the said decision was rendered is quite different from the present case where the exemption notification clearly keeps out the impugned co-axial cables from the purview of the exemption notification. The other decisions cited by the Ld. Counsel, can have no application to the present case in view of the Hon'ble Supreme Court's detailed judgment in the case of HICO Products Ltd. (supra).


9. In the result, we set aside the impugned order passed by the lower appellate authority and restore the order passed by the original authority. The departmental appeal is allowed in the above terms.

(Operative part of the Order was pronounced in the open Court on 17-3-2011)

Equivalent 2011 (274) ELT 0289 (Tri. - Chennai)