1991(09)LCX0057

IN THE CEGAT, SPECIAL BENCH ‘D1’, NEW DELHI

S/Shri G.P. Agarwal, Member (J) and N.K. Bajpai, Member (T)

KUMUDAM PRINTERS (P) LTD.

Versus

COLLECTOR OF CUSTOMS

Order No. C/387/91-D, dated 19-9-1991 in Appeal No. C/802/88-D

CASE CITED

STATE OF UTTAR PRADESH v. KORES (INDIA) LTD. -

SALES TAX CASES (VOL. 39) P. 8 - 1977(1) S.C.R. 837 [PARAS 4 & 12]

Advocated By: Dr. Gauri Shankar, Senior Advocate, with Shri Manoj Arora, Advocate, for the Appellants.

Shri L. C: Chakrabarti, SDR, for the Respondents.

[Order per : N.K. Bajpai, Member (T)]. - This appeal is directed against the order of the Collector of Customs (Appeals), Madras deciding that ribbons and spare parts pack for laser comp imported in a consignment of Monotype system Phototype Setting Machine with Accessories should be assessed to duty separately on merits under the appropriate headings of the tarriff. Briefly stated, the facts are that the goods were assessed as “Phototype-setting and composing machines” under sub-heading 8442.10 of the Customs Tariff. The bill of entry does not show that a separate decla ation was made either for ribbons or for the spare parts pack but the invoice does show that Five Boxes of Ribbons for Line Printer (12 per box) were imported. Their value is shown as £ 540 @ £ 108 per box. While the Assistant Collector of Customs accepted the declaration, the department filed an appeal against his order and Collector (Appeals) held that the boxes of ribbons and spare parts pack have to be assessed on merits because :-

(a) They do not form part of the system;

(b) Separate prices have been quoted in the Proforma Invoice and as such they fall outside the scope of Accessories (Condition) Rules, 1963;

(c) Typewriter or similar ribbons are specifically covered by sub-heading 9612.10;’

(d) Spare parts have to be assessed in the light of Note (1) and (2) of Section XVI of the Customs Tariff.

2. The following grounds have been taken in the appeal before us :-

(a) A box of ribbon is a specially designed and specially manufactured article for use with the ‘Printer’ part of the type setter. The underside of the ribbon is coated with metal in the form of matrix, the presence of which makes the ribbon unsuitable for use with any other instrument except a printer or a type setter.

(b) Tariff Heading 96.12 refers to “Typewriter or similar ribbon”, What has been imported is not a mere ribbon; nor is it similar to a typewriter ribbon. It is not usable more than once; it is specially prepared with a metal base which makes it inappropriate for use anywhere other than on a printer or a phototype setter; and it is not an article of common use such as a typewriter ribbon. To compare it with a typewriter ribbon would, to cite an analogy, be to club a bullock cart and a racing car together.

(c) The spare parts pack is an item compulsorily supplied with “Monotype Systems 3000 Photo Typesetter” taking into account the immediate need for parts that may arise in the course of setting up and trial run of the initial destination. By their very nature, the parts would be specially designed ones for use with the Unit and deserve to be assessed under the same tariff heading as the main unit itself.

(d) Separate values have been furnished by the suppliers only for purposes of customs valuation in the present context of an attempt to assess the goods separately.

(e) Without prejudice to the plea for assessment of the spare parts pack as specially designed parts of the Monotype Photo Typesetter, on application of the Accessories (Condition) Rules, 1963, both the specially designed box of ribbons and the contents of the spare parts pack should be assessed at the same rate as the original equipment on the ground that the commercial invoice (as opposed to the proforma invoice) which formed the basis of the assessment by the authorities, shows all the articles invoiced together.

3. One other fact relevant for the consideration of the appeal is that the authorities had started investigation into the valuation of the goods as well as their classification after their clearance on receipt of an information in the Special Investigation Branch of the Customs House that the invoice price was a special price extended to the appellants and prior to the importation they had received a ‘proforma invoice’ in which the price was indicated as £ 95,000/- and there was an indication of ‘special discount’ of over £ 30,000/- and this proforma invoice was suppressed by the importers and the same was not produced to the customs for purposes of assessment. Although the question of valuation is not the subject matter of the appeal before us, what is significant is that the proforma invoice indicated separate values for each item including for the ‘spare parts pack’ as well as for the ‘Boxes of Ribbon’.

4. Appearing on behalf of the appellants, Dr. V. Gauri Shankar, the learned Senior Advocate, submitted that the ribbons were not similar to typewriter ribbon and by virtue of Note (2) to Section XVI of the Customs Tariff should be classified along with Photo Type Setter. As for the spare parts pack, he reiterated the grounds of appeal. He cited the decision of the Supreme Court in the case of State of Uttar Pradesh v. Kores (India) Ltd., Sales Tax Cases (Vol. 39) p. 8 = 1977 (1) SCR 837 and read out the following paragraph from that report :-

“Regarding ribbon also to which the above mentioned rule of construction equally applies, we have no manner of doubt that it is an accessory and not a part of the typewriter (unlike spool) though it may not be possible to use the latter without the former. Just as aviation petrol is not a part of the aeroplane nor diesel is a part of a bus in the same way, ribbon is not a part of the typewriter though it may not be possible to type out any matter without it.”

5. In view of the decision cited by him in the Sales Tax case, suggested Dr. Gauri Shankar, ribbons should be treated as accessories and the benefit of the Accessories (Condition) Rules, 1963 extended to them for assessment of Customs duty. He submitted that similar principle should be applied to the pack of spares imported along with the Photo Type Setter.

6. Countering the arguments of the learned counsel, Shri L.C. Chakrabarti, the learned SDR, submitted that so far as the question of classification of the subject goods is concerned, it would have to be determined in accordance with the customs law which provides a definition of the term ‘accessories’ in the Accessories (Condition) Rules, 1963 and the two principles laid down therein are that the proper officer should be satisfied that in the ordinary course of trade

(a) the accessories are compulsorily supplied along with the article, and

(b) no separate charge is made for such supply, their price being included in the price of the article.

7. Shri Chakrabarti added that the normal practice of international trade is to indicate the standard accessories in the catalogue and the period for which they would be sufficient. He submitted that no such catalogue had been furnished by the appellants in support of their claim. Further, the proforma invoice which the appellants had withheld from the customs authorities gives separate values for both the items in dispute and, in these circumstances, the second condition of the Accessories (Condition) Rules, 1963 not having been fulfilled, he saw no reason how the appeal could be allowed.

8. He, thereafter, read out the Explanatory Note to Heading 96.12 of the HSN which is reproduced below :-

“96.12 - TYPEWRITER OR SIMILAR RIBBONS, INKED OR OTHERWISE PREPARED FOR GIVING IMPRESSIONS, WHETHER OR NOT ON SPOOLS OR IN CARTRIDGES;..... ”

This heading covers:

(1) Ribbons, whether or not on spools or in cartridges, for typewriters, calculating machines, or for any other device for printing by means of such ribbons (automatic balances, tabulating machines, teleprinters etc.).

“The heading also includes inked etc., ribbons, usually having metal fixing fittings, used in barographs, thermographs etc., to print and record the movement of the recording machines needle.

“These ribbons are usually of woven textiles, but sometimes they are made of plastics or paper. To fall in the heading, they must have been inked or otherwise prepared to give impressions (e.g. impregnation of textile ribbons, or coating of plastic strip or paper with colouring matter, ink etc.)”. (emphasis supplied by SDR)

9. Shri Chakrabarti went on to say that in view of the Explanatory Note, the heading had wide coverage and submitted that the ribbons in question are used for giving an impression and were in a printing device. He therefore, contested the claim of the appellants that being ribbons specially prepared for a printer or phototype setter, they could not be classified under Heading 96.12.

10. Replying, Dr. Gauri Shankar invited attention to the letter dated 12-1-1988 from their suppliers in which the circumstances in which separate values were furnished for each item were explained and submitted that this should not mean that any of the conditions of the Accessories (Condition) Rules had been violated. He also referred to the reply of the appellants to the Show Cause Notice in which the position had been fully explained.

11. We have carefully considered the matter and the rival submissions made before us. It is an admitted fact that the proforma invoice for the goods was not placed before the customs authorities by the appellants. It fell into their hands only after they launched an investigation, on receipt of an information about the under-valuation of the goods. It is in the proforma invoice that detailed description of each item of the phototype setting machine and their values have separately been indicated. The appellants have tried to establish that values were furnished separately by their suppliers in response to a communication from them. One of the requirements of the Accessories (Condition) Rules, is that the accessories, spare parts etc., should be compulsorily supplied alongwith the article and this, as the learned SDR explained, is generally indicated in the catalogue or leaflet of the manufacturer/supplier. Dr. Gauri Shankar did place before us photocopy of a leaflet entitled ‘Lasercomp’ MKZ all languages are alike to ‘Lasercomp’. But this leaflet does not give any details of this nature. The appellants have also not placed any correspondence with their suppliers in support of their claim that the spare pack and the ribbons were compulsorily supplied with the phototype setting machine. Collector (Appeals) has extensively quoted from the proforma invoice dated 11th June, 1986 giving the break-up of values of ribbon boxes as well as the spare parts pack. Further, it is not clear how as many as five boxes of ribbons each containing 12 ribbons could be a compulsory accompaniment of the phototype setting machine. In these circumstances, the requirements of Accessories (Condition) Rules have not been fulfilled and the two items do not qualify for assessing as accessories.

12. So far as the classification of ribbons is concerned, we agree with the learned SDR that the ratio of the Supreme Court’s judgment in Kores (India) Ltd. case (supra) which is a case under the Sales Tax Act, would not apply to the present proceedings because the Customs Act has its own definition of accessories and these alone would be applicable. Moreover, the scope of Heading 96.12 (Typewriter or similar ribbons) as indicated in the Explanatory Notes of HSN, appears to be very wide and would cover ribbons for any other device for printing by means of such ribbons. The fact is that ribbons in question are no different from the typewriter ribbons in so far as their function is concerned and it is therefore, understandable that it is for this reason that they are also called ‘ribbon’, no matter whether the constituent material of which they are made out is different from the material of the typewriter ribbons. It is well settled that in the matters of classification of goods, we are to adopt the meaning given to words as they are understood in common parlance. A ribbon for a phototype setting machine and the one used in a typewriter are not known by different names and this is clear from the documents themselves; by comparing a typewriter ribbon with a ribbon for phototype setting machine, one is not clubbing a bullock cart and a racing car together, because the latter two are known by different names, even though they may have the same function of transportation. The analogy cited in the appeal, therefore, does not hold good.

13. We do not think that the argument that the ribbon in this case is specially designed for the printer would take it away from the category of ribbon just because it is different from a ribbon used in a typewriter. The fact that the former is used only once, whereas the typewriter ribbon is used more than once still does not place the two in a category different from the category of ribbons. They both continue to be ribbons even though they may be made for different purposes or of different materials and may have short or long life. Thus, after detailed consideration of the arguments taken before us, we are of the view that the prayer made in the appeal is devoid of any merit. The appeal is therefore, rejected.

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Equivalent 1992 (59) ELT 568 (Tribunal)