1996(02)LCX0072

IN THE CEGAT, SPECIAL BENCH`C’, NEW DELHI

S/Shri G.P. Agarwal, Member (J) and G.R. Sharma, Member (T)

LAKSHMI CEMENT

Versus

COLLECTOR OF CUSTOMS, NEW DELHI

Order No. 87/96-C, dated 16-2-1996 in Appeal No. C/111/93-C

Cases Quoted

Roto Inks (P) Ltd. v. Collector — 1989(12)LCX0053 Eq 1990 (047) ELT 0398 (Tribunal)                                   [Paras 3, 6]

United Glass Bottles Manufacturing Co. Ltd. v. Collector

— 1989(12)LCX0049 Eq 1990 (048) ELT 0535 (Tribunal)          [Para 3]

Advocated By : Shri M.L. Lahoty, Advocate, for the Appellant.

 Shri Sanjeev Sachdeva, SDR, for the Respondent.

[Order per : G.R. Sharma, Member (T)]. - This appeal is directed against the order-in-original No. 3/TVS/92 dated 3-11-1992. The Collector, Central Excise, in his order held :

“Further definition of plan which includes design and drawings as classified by the Hon’ble CEGAT order must have been hand drawn to accept its inclusion under 4606. So this Hon’ble CEGAT order is not applicable to the subject issue.

Now the importers reference to Chapter Note 4 last sentence deserves our attention. It states that ‘however printed picture or illustrations not bearing a text whether in the form of signature or speparate sheets fall in Heading No. 49.11.

But this note is silent about `designs with notings’ which is what the subject goods were found on examination. This does not therefore justify its classification under 4901.

Description of goods as per invoice and bill of entry clearly ascertain the classification under Heading 4911.91.

General Rules of Interpretation also justify its inclusion under 4911.91.

General Rules of Interpretation also justify its inclusion under 4911.91.

Chapter Notes 4 and 5 do not exclude the goods from 4911.91.

                ORDER

I therefore, order the subject goods to be classified under CTH No. 4911.91.

I order that the goods be released after payment of 100% duty. No penal action is contemplated as there is no proof that the party had indulged in any act or omission that may render the goods liable for confiscation."

2. The facts of the case, in brief, as set out in the memo of appeal are that the appellant has a cement division in Jay Kay Puram in the State of Rajasthan; that for carrying out certain modification/improvement at the said cement plant the appellant desired to import technical know-how from the British Technical Consultants; that the appellant entered into an agreement for the supply of the technical design specification and drawings with M/s Blue Circle Industries Ltd.; that the engineers of the said foreign consultants visited the appellant’s company studying the exact technical requirements of the appellant’s cement plant, it submitted the quotation on 15-5-1991; that on October 16, 1991 the appellant confirmed the said quotation by placing the order for the supply of items listed below:

1. Design specification for secondary firing at preheater.

2. Conceptual design and technical specifications for centralised operation control system employing distributive process control system.

3. Modern Cement Technology with design and selection techniques of latest process systems (volume IV comprising of Pollution, Environmental & Process Control Systems).

The foreign supplier drew invoice showing 49,500 pounds as the consideration of the said documents and know-how. In the Bill of Lading, the description of the consignments were given as ‘technical designs and drawings as per the invoice attached’. In the entries pertaining to the Tariff and the Customs Duty it was claimed by the appellants that the consignments are covered by Customs Tariff Heading 4906.00 and 4901.90; and further that the imported consignments were free from the charges of any auxiliary Duties vide Notification No. 23/91-Cus. (serial No. 24). The value of the total consignments thus was shown as Rs. 22,55,975/-. The appellants claimed the duty free assessment under CTH No. 4906. The goods were examined by the Customs. The goods did not contain any hand-drawn original drawings or any photographic reproductions on sensitised paper or any carbon copy or any original hand-drawn drawing, therefore, the Customs were of the view that the goods could not be assessed to duty at nil rate of duty under CTH 4906.00. The goods were found to contain 6 folders of cement technology and the folders contained design as per the description in the invoices. The Customs Authorities were of the view that the goods merit classification under heading 4911.91 at the rate of 100% plus nil (Notification No. 23/91-Cus sl. No. 24). Accordingly, a show-cause notice was issued to the importers asking them to show-cause as to why the customs duty under CTH 4911.91 should not be levied and why penalty should not be imposed on the importers for misdeclaring the goods and why the goods should not be confiscated. After careful consideration of the submissions made by the importers, the Collector held that the goods were classifiable under CTH No. 4911.91. Against this order, the appellants have filed this appeal to the Tribunal.

3. Shri M.L. Lahoty, the learned Advocate appearing for the appellants submitted that the Bill of Lading indicated the description of the imported goods as the `technical design and drawings’ as per the invoice attached. The learned counsel submitted that this Tribunal in the case of Roto Ink (P) Ltd. reported in 1990 (047) ELT 398 had held that technical documents in loose leaf binders are technical manuals and brochures and not in the nature of Trade Catalogue classifiable under Heading 4901.99 of the Customs Tariff Act, 1975 and not under Heading 4911.99. The learned Counsel also referred to the decision of the Tribunal in the case of United Glass and Bottles Manufacturing Company Ltd. reported in 1990 (048) ELT 535 wherein the Tribunal had held that according to Webster’s and other Dictionaries, the term ‘plans’ includes ‘drawings’ and there is no reason why the term should not be so construed as to correspond with the true meaning. Therefore, the term `plans’ in the Notification was held to mean `plans and drawings’ as expressed in the Tariff Entry. The learned Counsel submitted that Chapter Headings 49.01 and 49.11 cover printed matters and that the scope of entries can be understood by reference to Chapter Note 4; that applying the principle of esjudum generis it can be concluded that Legislature cannot have understood industrial/technical know-how papers as falling under 4911.11 which would legitimately fall under 4901.99 or 4906.00; that Chapter Note 4 was misunderstood by the respondents; that Chapter Note 4 affirms the application of 4901.99 as the only head for classification as it states that excluding printed pictures or illustrations, which would fall under all other types of printed material would necessarily fall under Heading 49.01; that the technical/industrial know-how documents can be described as pictures or illustration; that chapter note 5 makes it further clear the difference between Chapter Heading 49.01 and 49.11; that the appellants had given complete description of the imported goods as technical design and drawings; that the word `design’ has been utilised in isolation; that the words `design and drawing’ have been defined in `Words and Phrases; Permanent Edition; that the contention of the respondent that the goods are printed and not hand-written is out of context in the present age of computer and the conventional method of making drawing by hand is rarely followed now; that the scope and ambit of the various headings/sub-headings were not properly understood by the adjudicating authority; that the residuary heading is attracted only as a last resort when the products cannot be classified under the specific heading; that the terms of Tariff clearly show that 4911.91 is a residuary heading. Summing up his arguments, the Id. counsel submitted that their case was fully covered by the decision of the Tribunal in the case of Roto Ink (P) Ltd. cited supra.

4. Shri Sanjeev Sachdeva, the learned SDR submitted that the case of Roto Ink (P) Ltd. was different from the case before us. On the question that whether the goods should be considered as trade catalogue or not. The other case that was cited and relied upon by the appellants was United Glass & Bottles Manufacturing Co. Ltd. The learned SDR submitted that in this case, the dispute was not about the classification but on the applicability of notification for Auxiliary Duty Exemption; that Chapter Note 4 of Chapter 49 states that printed picture or illustrations not bearing the text whether in the form of signatures or separate sheets fall in Heading No. 49.11. Reiterating the findings of the learned Adjudicating Authority, the Id. SDR prayed that the appeal may be rejected.

5. Heard the submissions of both sides. There are two computing entires for classification of the product. The appellants have claimed the classification of the goods either under Chapter Heading 4901.99 or 4906.00 whereas the Department has held that the goods are classifiable under Chapter Heading 49.11. For the sake of proper appreciation, let us reproduce the relevant Chapter Headings :

A reference was also made to Chapter Notes 4 & 5 of Chapter 49. Chapter Note 4 reads :

4. Heading No. 49.01 also covers :

(a) A collection of printed reproduction of, for example, works of art or drawings, with a relative text, put up with numbered pages in a form suitable for binding into one or more volumes;

(b) A pictorial supplement accompanying, and subsidiary to a bound volume; and

(c) Printed parts of books or booklets, in the form of assembled or separate sheets or signatures, constituting the whole or a part of a complete work and designed for binding.

However, printed pictures or illustrations not bearing a text, whether in the form of signatures or separate sheets, falling in Heading No. 49.11.

Chapter Note 5 reads :

5. Subject Note 3 to this Chapter, Heading No. 49.01 does not cover publications which are essentially devoted to advertising (for example, brochures, pamphlets, leaflet, trade catalogues, year books published by trade associations, tourist propaganda). Such publications are to be classified in Heading No. 49.11

Now let us examine what is the identity of the imported goods. The appellants had been stating that they had imported technical designs, drawings and specifications. The Department is contesting the above claim of the importers and says that the sample consisted of a folder (plastic) with steel clips holding loose sheets. There were written notes indicating an index but there were no serial number or paging done. However, page number of portions is given as 1 of 7. 2" of 7" etc. In general, it was observed that folder contains process control specification. On the cover of the folder, the following inscriptions were found :

Lakshmi Cement (Division of Straw Products Ltd. Conceptual design and technical specification for centralised operational control system employing a distributive process control.

Thus we find that the Lakshmi Cement case, the imported goods are technical designs, drawings which are printed and not in hand-written.

6. Before examining the case in the light of the Tariff Headings and Chapter Notes reproduced supra, let us examine what the ratio of the judgment of the Tribunal in the case of Roto Ink (P) Ltd. reported in 1990 (047) ELT 398 is. Para 4 of this judgment is reproduced below :

“4. We have carefully considered the submissions made by both the parties herein and have perused the records. Representative samples from the imported consignment was also produced before us which we have perused. We find that the Assistant Collector had found that Heading 49.01 was inapplicable only on the ground that the goods did not have the attributes of books. But he did say that goods are technical documents in loose leaf kept in binders and hence classifiable under Heading 49.11 CTA. However, Collector (Appeals) found that the goods are classifiable under Heading 49.11 not because they cannot be considered as books, but because their contents showed that they are in the nature of trade catalogue for the product imported. Therefore, it is important to go through the sample of the imported goods which has been produced before us. On a perusal thereof, we find that the material consists of printed sheets divided into various sections indexed showing the heading of each section in the index slips kept in loose leaf binders. For example, the first section bears the heading ”Quality control procedures. Oil Inks" and consists of an article entitled “Quality Conrol Inks” by one James G Smith. Another section is entitled “Colour matching procedures”. The section under heading “Fineness of grind determination” ends with a list of further reference books/publication on the subject. Another sample is entitled “Crods Inks Corporation. Red Code Book” and gives specifications of materials like various chips. Therefore, it is reasonable to conclude that what is supplied to the appellants is technical documents from their collaborators in terms of the licence agreement. In that agreement under para 4 “Transfer of know-how”, it is agreed in paras 4.2.B and C that M/s. Crods shall make available copies of all brochures and publications related to the licensed products as also copies of all technical manuals published by M/s. Crods containing information related to the licensed products. In the circumstances, it is reasonable to conclude that the material imported is not in the nature of trade catalogue. We also observe that the Collector (Appeals) in coming to his conclusion that these are trade catalogues had not considered the contents of the material in the context of the terms of the licence agreement as we have seen above. We further find that in the Explanatory Notes to Harmonised Commodity Description and Coding System (HSN) to which the Customs Tariff is aligned, under Heading 49.01(c) textual matter in the form of sheets for binding in loose binders is covered and it further says that such publications as scientific thesis published by or for industrial firms may fall in this heading. From the discussion of the nature of the material above, we find that the goods imported are technical documents in loose leaf kept in binders consisting of technical manuals and brochures published by the foreign collaborators of the appellants being supplied as part of transfer of technical know-how relating to the product in terms of the collaboration agreement. In this view of the matter, it is held that having regard to the nature of the goods, and the contents thereof, and the form in which the goods imported in the context of a collaboration agreement, classification of the goods under Heading 4901.99 is in order. The appeal is, therefore, allowed."

7. We have carefully considered the submissions made by both sides and have perused the records. We find that the representative sample was shown to the Adjudicating Authority who after examining the sample observed that the sample consisted of folder (plastic) with steel clips holding loose sheets. There were written notes indicating an index. But there were no serial numbers of paging done. In general it was observed that the folder contains process control specification. We, therefore, observe that this distinguished the present case from the case of Roto Ink (P) Ltd. We also observe that in the case of Roto Ink (P) Ltd., the goods were described as technical documents whereas in the present case, the goods were not technical documents. We also observe that in Lakshmi Cement case, design and drawing have been imported; that in the case of Roto Ink, the Tribunal had to consider whether the imported goods were trade catalogues or not; that there was no dispute about classification of the goods whereas in the present case, the dispute is about classification of the goods. On comparison of the items imported in the present case, we find that the goods were in the form of a folder containing process control specification. On examination of the goods, they were not found to contain any hand-written original drawing or any photographic reproduction on sensitised paper or any carbon copy or any original hand-drawn drawing. Now reading the Tariff Heading 4906.00, we find that the imported goods do not fall under Chapter Heading 4906.00, therefore, the only two competing entries now remain are Chapter Heading 49.01 or Chapter Heading 49.11. We observe that the Adjudicating Authority relied upon Chapter Note 4 reading “However, printed pictures or illustrations not bearing a text whether in the form of signatures or separate sheets, fall in Heading No. 49.11.”. The Collector held that the goods were written notes indicating an index and process control specification therefore, the imported goods cannot be classified under Chapter Heading 49.01. We observe that the Customs Tariff is fully aligned to HSN Explanatory Notes. Under heading 49.01 which is pari materia to Customs Tariff Heading 49.01 indicate that this heading covers textual matter in the form of sheets for binding in loose-leaf binders. We find that while confirming the quotation for placing the order, the appellants had listed the items as under:

(a) design specification for secondary firing.

(b) conceptual design and technical specifications for centralised operations control system employing distributive process control system.

(c) Modern Cement Technology with design and selective technique of latest power systems etc.

Therefore, it is reasonable to conclude that what is supplied to the appellants is design specification and process control design and technique of latest power system. In the circumstances, it is reasonable to conclude that the material imported is not in the nature of other printed matters including printed pictures, photographs. We also observe that Tariff Heading 49.11 is a residuary heading indicating that the goods not appropriate for classification in a specific heading fall under a residuary heading. We find that the imported goods in terms of clarification given in the HSN are liable to classification under Customs Tariff Heading 49.01. Under the heading 49.01(C), it has been mentioned that “On the other hand, such publications as scientific theses published by or for industrial firms and those publications merely describing trends or progress or activity in a particular branch of commerce or industry but not having direct or indirect publicity value may fall in this heading. ”Admittedly, the documents do not have direct or indirect publicity value, they are scientific theses published by or for industrial firms. From the discussion of the nature of the material above namely, the Tariff Entries, Chapter Notes, case-law and the goods actually found on examination first by the Appraisers and then subsequently by the Adjudicating Authority, we find that the goods imported are technical documents in loose leaf kept in folder consisting of specifications process control system designing and designing of latest of technique of process system prepared by foreign suppliers being supplied to the Indian firm with a view to carry out modifications, improvements and import of technical know-how. In this view of the matter, we hold that having regard to the nature of the goods and the contents thereof, the classification of the goods should be under 4901.99. The appeal is accordingly allowed.

_______

Equivalent 1996 (84) ELT 271 (Tribunal)