1998(10)LCX0146

IN THE CEGAT, COURT NO. II, NEW DELHI

Shri S.K. Bhatnagar, Vice President and Smt. Archana Wadhwa, Member (J)

Third Member on Reference : Shri Lajja Ram, Member (T)

PRINTWELL INDUSTRIES

Versus

COMMISSIONER OF CUSTOMS, BOMBAY

Misc. Order No. 5-6/97-B & Final Order Nos. 780-81/98-B2, dated 9-10-1998 in Appeal Nos. C/1249 & 1487/87-B2

Advocated By : Shri Gopal Prasad, Advocate, for the Appellant.

Shri A.T. Usman, JDR, for the Respondent.

[Order per : Archana Wadhwa, Member (J)]. - These are two appeals filed by (i) M/s. Printwell Industries and (ii) M/s. Hindustani Art Cottage. Since the issue involved in both the cases was the same, they were heard together and are being disposed of by a common Order. The appellants are engaged in a printing industry. They imported one Vacuumatic Paper Counting Machine Model “Viscount 200" complete with standard accessories etc. Bills of Entry were filed claiming the assessment of the said Paper Counting Machine under Heading No. 84.35 of the Customs Tariff Schedule attracting duty @40% (Basic) plus 25% (Auxiliary) plus 12% (Additional) under Item 68 of the Central Excise Tariff. The Assistant Collector of Customs, Group-H, Custom House, Bombay vide his Order-in-Assessment, dated 7-2-1986 rejected the appellants’ claim under Heading 84.35 as ancillary to printing machine on the ground that the said machine does not assist or take part in the process of printing and merely counts the papers. Hence the same cannot be considered as a machine for uses ancillary to printing. Hence it cannot be classified under Heading 84.35. The Assistant Collector approved the classification of the said machine under 84.59(i).

2. On appeal against the above Order of the Assistant Collector, the Collector of Customs (Appeals), Bombay, rejected the same by holding that the Catalogue showed the application in counting and batching of labels, business terms, calendar pads, cheques, computer cards, envelopes, leaflets, pads, tickets, legal documents etc. and as such the same cannot be considered as an ancillary machine to the printing. The said Order of the lower appellate authority is impugned before us.

3. Appearing on behalf of the appellants, Shri Gopal Prasad, learned Advocate has contended that counting of paper sheets before feeding to printing machine or after the printing of the sheets was a function which was ancillary to the printing. In this connection, he drew our attention of the Bench to pages 1287 and 1288 of the Explanatory Notes to CCCN and emphasised that as per the Explanatory Notes the heading covers machines, whether or not imported separately for uses ancillary to printing exclusively designed to operate with printing machines and use during or after operations for feeding, handling or further working the sheets or rolls of papers. He also drew attention of the Bench to the examples given which he contended, were not exhaustive but only exemplary and submitted that stock or pile elevators, automatic feeders and other types used either prior to or after the actual printing, have been held to be machines for uses ancillary to printing. The appellants also submitted that the imported machines were specifically designed for use in printing industry and as such were correctly classifiable under Heading No. 84.35. Reference was also made to the catalogue of the machines wherein it was clearly mentioned that the said machines can make an important contribution to the efficiency and profitability of printers and converters, large and small.

4. Countering the arguments of the learned Advocate, Shri A.T. Usman, ld. JDR reiterated the reasoning adopted by the Assistant Collector and the Collector (Appeals). He argued that as the machine in question is not exclusively designed for use as an ancillary to printing machinery and as it is used in some other fields also as a counting machine, the same should not be classified under Heading 84.35 and the same had been rightly classified under Heading 84.59(i).

5. We have heard both sides and gone through the relevant records. We find that in the catalogue the machine has been described as “Vacuumatics Advance Counting Machine, the use of the latest micro-processor technology, and a wide range of table sizes and other options make the Vicount a valuable ally for printers everywhere in the War on Waste.” We also find from the catalogue under the Heading - `Who can benefit from improved efficiency?" - the manufacturer has written as under :-

“These days it isn’t just security and other specialist printers who have a requirement for precise quantity control. All printers can benefit from the increased efficiency offered by Vacuumatic’s VICOUNT paper counters.

Paper and production costs have soared over the past few years, and it is increasingly necessary to minimise material waste and press time spent on printing unnecessary overs or reprinting for shortages.

Consider what inadequate quantity control is doing to your business - then take a look at what the Vacuumatic VICOUNT can do to help..."

“Count the cost of printing excessive overs.

Count the cost of hand counting.

Count the cost of reprinting shortages.

Count the cost of departmental disputes.

Count the cost of dissatisfied customers.

Count the cost of shortages from the paper supplier."

6. This makes it clear that the paper counting machine in question is a machine for counting of papers after printing and accordingly, is a machine for uses ancillary to the printing. Explanatory Notes, while giving some instances under the Heading - “Machines for uses ancillary to printing” - give reference to stock or pile elevators, automatic feeders, sheet delivery mechanism, Folders, gummers, perforators and staplers. While explaining folders, gummers, perforators and staplers, it is written that these are often used, at the delivery end of the printing machine to fold and staple or stitch printed pages. As such, if the said can be considered as a machine for uses ancillary to printing, there is no doubt that the paper counting machine which is used prior to printing as well as after the printing for counting of papers and batching of papers can safely be classified as a machine for uses ancillary to printing and can be safely put under Heading 84.35. We also note that the capacity of the machine in question is to count 2000 sheets per minute. Such a machine cannot be considered as an ordinary counting machine, but especially designed for uses in the printing industry.

7. In view of the foregoing, we hold that the Vacuumatic Paper Counting Machine imported by the appellants herein is classifiable under the Heading 84.35 on the Customs Tariff Schedule. Appeals are accordingly allowed with consequential reliefs to the appellants, if any.

[Order per : S.K. Bhatnagar, Vice President]. - I observe that a question has arisen whether the paper counting machine imported by the appellant was required to be classified under 84.35 of the Customs Tariff as a machine ancillary to printing machines.

9. In this connection I observe that HSN Heading 84.35 covers machines for uses ancillary to printing in addition to printing machines proper “Provided they are specially designed as ancillary machines to printing machines”.

10. The Explanatory Note II - “MACHINES FOR USES ANCILLARY TO PRINTING” mentions inter alia as follows :-

This group covers machines (whether or not imported separately) for uses ancillary to printing exclusively designed to operate with printing machines and used during or after the printing operation for feeding, handling or further working the sheets or rolls of paper.

These machines, which are usually separate from the printing machine itself, include :

(A) Stock or pile elevators. . . . . . . . . . . . . . .

(B) Automatic feeders, . . . . . . . . . . . . . . . . . .

(C) Sheet delivery mechanisms, . . . . . . . . . .

(D) Folders, gummers, . . . . . . . . . . . . . . . . . .

(E) Serial numbering machines, . . . . . . . . . .

(F) Bronzing machines . . . . . . . . . . . . . . . . . .

11. It does not include paper counting machine, but at the same time ld. Counsel is correct in pointing out that they are in the nature of illustrations. The type of machines mentioned in this note do not constitute the exhaustive list of ancillary machines and is apparent neither from the use of the word including in the note. At the same time it is significant that it is required to be shown that only that machines can be treated as a machine for uses ancilliary to printing which is exclusively designed to operate with the printing machines.

12. From the description and particulars of the machine explained before us, we observe that there is nothing in the material on record to show that the item in question is exclusively designed to operate with printing machines. On the contrary from the pamphlet regarding vacuumatic vicount paper counters that these are machines of general use and not designed for particular goods or industries.

13. The fact that as a result of its use, affects the cost is immaterial. What is important is that the pamphlet itself indicates as follows :-

“The Vacuumatic VICOUNT can make an important contribution to the efficiency and profitability of printers and converters, large or small.

The VICOUNT provides total counting accuracy for many different applications.

-   Book signatures

-   Business forms

-   Calendar pads

-   Cheques

-   Company and financial reports

-   Computer cards

-   Coupons

-   Envelopes

-   General stationery

-   Gift wrap

-   Labels

-   Leaflets

-   Legal documents

-   Letterheads

-   Multiple sets

-   Pads

-   Postal documents

-   Security print

-   Tickets

-   Time cards

In other words, this machine can be used wherever counting and batching of paper or articles of paper (whether printed, unprinted, about to be printed or just printed not) is involved and not merely in printing industry but in various types of organisations i.e. it can be and is put to uses other than those ancillary to printing as well. There is also nothing on record to show that it is specially designed or exclusively designed to operate with printing machinery. Hence, the product is not classifiable under 84.35 of the Customs Tariff Schedule which covers “other printing machinery; machinery for uses ancillary to printing” and has been rightly classified under 84.59(1) as machines and mechanical appliance having individual functions not falling within any other heading of this chapter as not elsewhere specified.

The orders of the lower authorities are therefore upheld and the appeals are rejected.

In view of the difference of opinion between Hon. Member (Judicial) and the Vice President, the matter is submitted to the Hon. President for reference to a third Member on the following point :-

1.  Whether the imported item is classifiable under 84.59(1) or under 84.35?

14. [Order per : Lajja Ram, Member (T)]. - The difference of opinion referred to me in these two appeals filed by M/s. Printwell Industries, Lucknow and M/s. Hindustani Art Cottage, Lucknow, is whether the imported vacuumatic vicount paper counters was classifiable under Heading No. 84.59(1) or under Heading No. 84.35 of the erstwhile Customs Tariff. The Member (Judicial) has proposed that the said imported paper counting machine was classifiable under Heading No. 84.35 as a machine for uses ancillary to printing while according to the Vice President the same was rightly classifiable under Heading No. 84.59(1) as the machine having individual functions and as not falling within any other Heading of Chapter 84 of the said Tariff.

15. Shri Gopal Prasad, Advocate, appearing for the appellants submitted that the machine imported was usable in printing where the printing machine had no counting mechanism. The machine could handle large volume of paper and was useful to the printers in printing the exact number of required copies. He referred to the pages 1287-88 of the Customs Cooperation Council Nomenclature (CCCN) Explanatory Notes - Volume 3 (Second Edition - 1966) and page 112 of the Import & Export Policy, AM 1985-88, Volume I, and submitted that it was a machine designed to operate with printing machine.

16. Shri S.N. Ojha, JDR, replied that under Heading No. 84.35 machinery for uses ancillary to printing was covered, and that the reference was to the printing machine and not to the printing industry as a whole. He submitted that the learned Vice President had observed that the machine imported was not specially designed as ancillary machine to the printing machine. As regards the Import Policy, he submitted that only automatic sheet counting and tab inserting equipment was mentioned and that in the machine in dispute there was no tab inserting mechanism. He relied upon the following decisions :

(i) Rollatainers Ltd. v. U.O.I. - 1994(07)LCX0059 Eq 1994 (072) ELT 0793 (SC); and

(ii) CC, Bombay v. Larsen & Toubro Ltd., - 1996(08)LCX0029 Eq 1996 (087) ELT 0715 (Tribunal).

17. I have carefully considered the matter. The machine - vacuumatic vicount paper counters - was for counting and batching paper. It was a machine for different applications and for different applications there was a choice of different tables. The specific purpose for which the counted and batched paper was to be used depended upon the requirements of the user. The paper to be counted and batched could be printed or unprinted, plain, embossed, hand-written or typed. The machine had a suction blade, and a wiper pin with orbit mechanism. It used micro-processor technology. It was said to be useful for the manufacturers of pads, business forms, envelopes, gift wrap, stationery etc.

18. The scope of machines for uses ancillary to printing had been explained in CCCN Explanatory Notes as those machines which were specially designed as ancillary machines to printing machines. Only if exclusively designed to operate with printing machines and used during or after the printing operation for feeding, handling or further working the sheets or rolls of paper, they were classifiable under Heading No. 84.35. The relevant Explanatory Notes are extracted below :-

84.35 - Other printing machinery; machines for uses ancillary to printing.

This heading covers all machines used for printing by means of the type, printing blocks, plates or cylinders of the previous heading, excluding therefore :

(a) Special machinery for the decorative printing of fabrics, wallpapers, etc., which print a repetitive design, repetitive words or overall colour by means of a plate or a cylinder (Heading 84.40).

(b) Office hectograph of stencil duplicating machines, addressing machines and other office machines of Heading 84.51 to 84.54.

(c) Photocopying and thermo-copying apparatus (e.g., for the production of blue prints, plans, etc., or for the reproduction of documents, picture postcards, etc.) (Chapter 90).

In addition to printing machines proper, the heading also includes ancillary machinery (whether or not imported separately) such as feeders and folding machines, etc., provided they are specially designed as ancillary machines to printing machines.

Counting and batching of the paper could not be considered as a part of printing operation. The counting and batching had no nexus with printing. There was no linkage between the counting of the sheets and the printing of the sheets.

19. In Invoice No. 9616, dated 3-7-1985 by the suppliers, Sulby Vacuumatic Division, London, the supplier had shown the classification of the machine, under CCCN Heading (also known as BTN Heading) as Heading No. 84.59 which covers machines and mechanical appliance having individual functions not falling within any other heading of Chapter 84. Further, according to this invoice for import control purposes, the goods were covered by the import licence No. OGL-Appendix 1, Part B, Item 12(19) P. 105/104 while the appellants had referred to the Item No. 18 of appendix No. 1, Part B, of the Import & Export Policy Control, 1985 - March, 1988, Volume I. It covers automatic sheet counting and tab inserting equipment. In the machine imported, there is no tab inserting mechanism. The role of the machine was over after counting and batching and the use of such counted and batched paper could differ from user to user.

20. I agree with the learned Vice President that the machine in question was correctly classifiable under Heading No. 84.59(1) of the erstwhile Customs Tariff.

MAJORITY OPINION

In view of the majority opinion machine in question is liable to be classified and assessed under Heading 84.59(1). Accordingly, the appeals are rejected.

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Equivalent 1999 (107) ELT 252 (Tribunal)