1998(10)LCX0017

IN THE CEGAT, SOUTH ZONAL BENCH, MADRAS

S/Shri S.L. Peeran, Member (J) and V.K. Ashtana, Member (T)

COMMISSIONER OF CUSTOMS, MADRAS

Versus

KUMUDAM PRINTERS PVT. LTD.

Order No. 2172/98, dated 20-10-1998 in Appeal No. C/2132/88-B2

Cases Quoted

Kumudam Printers Pvt. Ltd. v. Collector — 1991(09)LCX0057 Eq 1992 (059) ELT 0568 (Tribunal) — Referred              [Para 4]

Collector v. Technological Centre — 1984(11)LCX0015 Eq 1989 (044) ELT 0116 (Tribunal) — Distinguished       [Paras 5, 8]

Advocated By : Shri S. Sankaravadivelu, JDR, for the Appellant.

Shri S. Murugappan, Advocate, for the Respondent.

[Order per : S.L. Peeran, Member (J)]. - This is a Revenue appeal arising from Order-in-Appeal No. M. Cus. 2737/87, dated 25-9-1987 passed by Collector (Appeals) Madras holding that the imported consignment of “Monotype System 3000 Phototype setting Installation with Accessories” under Bill of Entry No. 1894, dated 17-7-1986 constitutes the whole and not any individual parts. He held that there is nothing like accessories and that the whole system is one compact unit. He has held that the department has unnecessarily relied upon Proforma Invoice in their reference application under Section 129D(4) of the Customs Act, which is not correct. He has held that valuation adopted by the lower authority requires to be confirmed. While doing so, learned Collector (Appeals) has held that he has inspected the equipment in the factory with the assistance of technical personnel who explained to him the functions of the different units which constitutes the system and after thorough examination of the matter, has held that merely because separate values given in the proforma invoice, it does follow that the goods are optional accessories. He has noted that apart from the Lasercomp proper, separate values of 12 items are given in the Proforma Invoice. He has noted that more over, mode of quoting prices or of invoicing alone cannot be the basis for determining classification. He has held that one has to take into consideration the functional characteristics of different units that constitute the system. He has held that in a computer system or computer based system key board is an input device, display terminal and printer are output devices. These devices fall under category of peripheral devices. Therefore, he has held that it would be inappropriate to consider the peripheral devices as accessories, for the system includes all peripheral devices that go with the system. He has noted that in the subject case, the printer is required for obtaining hard copies of the text recorded on the floppy discs through the Keyboard. A hard copy of the text is required for making corrections and other proof-reading work to make the text error-free and also to ensure that it is in the desired format. Proof-reading and making corrections can be carried on only on printed copy of the text. He has observed that even though the text will come on display screen, correcting and proof-reading work cannot be carried out on the terminal with keyboard. Therefore, he has concluded that the printer has to be considered as an essential unit of the system. The three type faces are for use with the line printer, one each for English, Devanagari and Tamil. These type faces are mounted inside the printer to facilitate printing of the text in the required language. They form parts of the printer and therefore he has held that it cannot be considered as separate Units for the purposes of assessment. The same argument holds good for line printer software programmes; these are systems software which form part of the printer. Type faces and software programmes for different languages are offered separately to enable the users to select the same for the languages they require. But they form part of the line printer and cannot be considered as independent units for the purposes of assessment. However, he has held that boxes of ribbons and spare parts pack have to be assessed on merits as they do not form part of the system. While coming to this conclusion, the Collector (Appeals) has taken note of chapter notes of Section XVI of the tariff.

2. The Revenue in this appeal contends that the item “Monotype system 3000 Phototype setting Installation” imported by importer should not have been assessed as one unit as “photocomposing machine and keyboard thereof” as Dot Matrix Line printer is only an “optional accessory”. It is contended that the function of the printer is that of a “proof reader” in an ordinary machine. Corrections can be made by taking a printout before the same is fed into the laser comp. Although it is not disputed by Revenue that it is desirable to have this for the efficient working of the system, it contends that it cannot be considered as `part of the photo composing machine’. It is contended that it is an independent unit by itself and could be utilised with any other system, wherever print-out becomes necessary. The Revenue relied on the invoice for seeking separate classification as an independent unit for this item. It is contended that printer is never considered as part of the system i.e. “Output unit” but is an independent unit which merit assessment under different Heading 8471.92 of CETA, 1985.

3. We have heard Shri S. Sankaravadivelu, learned JDR for appellants and Shri S. Murugappan, learned Advocate for the importer.

4. Learned DR reiterates the grounds taken up in the appeal memo and prays for a separate independent classification on merits with regard to the item printer and contended that the same would not get the benefit of Notification No. 114/80. He contended that it is an optional accessory and it had been invoiced separately and it had a separate function of proof-reading. He relied on the judgment of the Tribunal in the case of Kumudam Printers Pvt. Ltd. v. CC as reported in 1992 (059) ELT 568 wherein it had been held that ribbons for photostatsetting machine are required to be independently assessed and not allowed with the machine under Heading 96.12 of CET. Learned DR submits that this judgment arose from the same impugned order wherein the Collector had rejected the plea of importer for benefit of exemption with regard to ribbons and spare parts pack for laser comp imported alongwith the item in question. The Revenue’s appeal was not linked alongwith this appeal and it was independently heard and decided by tribunal at Delhi. The present appeal of Revenue was transferred to this Bench on the request of the importers as they were based at Chennai.

5. Learned Advocate pointed out that the judgment cited arose from the same impugned order and the Tribunal had confirmed that portion of the Collector (Appeals) order which had rejected the relief claimed by importer in respect of ribbons and spare parts for laser comp imported in the consignment on the ground that they are required to be separately assessed as they are not parts of the main machine and that on the ground that ribbons had a separate heading for assessment purposes. He pointed out that so far as assessment of the printer and other items alongwith machine is concerned, the Collector (Appeals) had examined technical literature and also examined the machine and had satisfied himself that they form part and parcel of the main machine. He submitted that Section Notes 3, 4 & 5 of Section XVI clearly relevant but where the composite machines consisting of two or more machines fitted together to form a whole and other machines adapted for the purpose of performing two or more complementary or alternative functions, they are to be classified as if consisting only of that component or as being that machine which performs the principal function. He submits that in terms of this section notes, the main printer has to go alongwith the machine as it complements its work and as technically noted by Collector (Appeals) it cannot be bifurcated from the main machine. He also relied on the judgment in the case of CC v. Technological Centre as reported in 1984(11)LCX0015 Eq 1989 (044) ELT 0116 (Tribunal) where in a similar circumstance, it was held that even imported parts are eligible for benefit of notification as the main equipment satisfies the condition of compulsory supply and no separate charges are given under Accessories (Condition) Rules, 1963.

6. On a careful consideration of the submissions, we are of the considered opinion that the Collector (Appeals) has gone in great detail into the working of the main equipment itself and the various parts and has held that the printer is not an accessory but it is essential for the functioning of the main machine. The finding is based on the literature as well as of his personal inspection assisted by the Technical Personnel. This is a finding of fact which is not disputed by Revenue with any separate independent evidence to show that printer is not performing the functions alongwith main item as held by the Commissioner. The Revenue is seeking a separate classification on this printer under sub-heading 8471.92 of CETA, 1985 which refers to “input or output units whether or not presented with the rest of a system and whether or not containing storage units in the same housing”. This is under main Heading “OTHERS”. The Heading 84.71 refers to “Automatic data processing machines and units thereof; magnetic or optical readers, machines for transcribing data on to data media in coded form and machines for processing such data, not elsewhere specified or included”. While the lower authorities in the present case have assessed entire machine under importation alongwith printers under Heading 8442.10 as `photostatsetting and composing machine’. On careful reading of the following Section Notes 3, 4 & 5 of Section XVI which are noted below :

3. Unless the context otherwise requires, composite machines consisting of two or more machines fitted together to form a whole and other machines adapted 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.

5. For the purposes of these Notes, the expression “machine” means any machine, machinery, plant, equipment, apparatus or appliance cited in the headings of Chapter 84 or 85.

It is clear that printer in terms of above notes requires to be classified alongwith principles machine and in this case, the principle machine is a photostatsetting and composing machine. The printer does not have an independent function of an automatic data processing machine and units thereof and its classification sought by Revenue under sub-heading 8471.91 as `digital processing units, whether or not presented with the rest of a system, is not appropriate Heading for the purpose of classification. Their contention that it had been separately shown in the proforma invoice is not correct proposition as Collector (Appeals) has clearly held that Revenue is not disputing the invoice.

7. The Assistant Collector in his order has also noted from the invoice that the goods comprise Monotype Laser comp Mark-2 High Speed Phototype setter with system software and Founts and System 272 Terminal with software printer and additional keyboard (for Devanagari). He has noticed from the catalogue produced that typesetting unit together with terminals form photocomposing system. He has noted that system 272 printer is an option but for system 3000 the printer is a standard item. He has noted the telex received from the supplier to this effect and the clarification given by the supplier’s representative in India with regard to printer being a standard item for System 3000 under import. All these material evidence goes to show that the item in question is required to be assessed alongwith the main machine under sub-heading 8442.10 read with notification in question and a printer cannot be separately classified as a data processing unit under sub-heading 8471.91.

8. We also note the judgment rendered in the case of CC v. Technological Centre as reported in 1984(11)LCX0015 Eq 1989 (044) ELT 0116 (Tribunal), wherein the Tribunal has clearly held that parts imported would also be eligible for exemption when the main item is covered under the terms of the notification. Learned DR relied on appellant’s own case regarding non-grant of benefit to ribbons, which is distinguishable as ribbons are held to be not parts of the main item and it has independent heading for classification and hence the citation referred to by learned DR is not applicable to the facts of the present case. In that view of the matter, there is no merit in this appeal and the same is rejected.

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Equivalent 1999 (106) ELT 106 (Tribunal)

Equivalent 1999 (030) RLT 0677