2005(07)LCX0056

IN THE CESTAT, PRINCIPAL BENCH, NEW DELHI

[COURT NO. I]

S/Shri C.N.B. Nair, Member (T) and P.S. Bajaj, Member (J)

Ellora Time Limited

Versus

Commissioner of Customs, Kandla

Final Order No. 746/2005-Cus.(PB), dated 19-7-2005 in Appeal No. C/130/2004-A

Cases Quoted -

Sony India Ltd. v. Commissioner - 2002(05)LCX0063 Eq 2002 (143) ELT 0411 (Tribunal- LB) - Referred [Para 5]
Universal Commercial Corporation v. Collector-I994 (069) ELT 0150 (Tribunal) - Referred [Para 6]

Advocated By -

Shri B.L. Narasimhan, Advocate, for the Appellant.
Shri Randhir Singh, DR, for the Respondent.

[Order per: C.N.B. Nair, Member (T)]. -

The appellant M/s. Ellora Time Limited is a manufacturer, inter alia of telephone. The appellant had also excise licence as a manufacturer of telephone.
2. In August 1995, the appellant imported at Kandla Port two consignments and sought their customs clearance as part of telephone. The invoice dated July 28, 1995 which covered the import, described the goods as "Materials for corded telephone for model No. TH-956". The import comprised 15,000 pieces each of different parts of telephone instruments. The parts were themselves grouped under 11 headings like plastic moulded, adhestive cushion, pressure pad, receiver / transmitter, switches capacitor / dies, diod etc. The consignments were packed in 386 cartons. The only parts which were not included in the consignments are "Main PCB & Dial side PCB" (remarks in the invoice). While the appellant claimed classification of the items under Tariff heading for parts, the Customs took the view that the correct classification is as telephone instrument itself under heading No. 8517.10 of the Customs Tariff and 8517.00 of the Central Excise Tariff. In adjudication, Commissioner of Customs upheld the view that the consignments should be treated as "telephone instrument". The Commissioner relied on Rule 2(a) of General Rules for the interpretation of Customs Tariff Schedule concluding that import was of incomplete or unfinished telephone instrument. The present appeal challanges that finding.
3. The contention of the appellant is that it had manufactured printed circuit board (PCB) in India and manufactured telephone instruments in India by assembling the imported components and the domestically manufactured printed circuit boards. It is being submitted that it is clear from the invoice, packing and other relevant aspects of the transaction that the goods were being bought and sold as parts only and not as telephone instruments, incomplete or unfinished telephone instrument. Learned Counsel has also pointed out that each part was being valued separately and billed accordingly in the invoice. Much case law has also been cited by both sides.
4. Upon the correct scope of Rule 2(a), the submission of the learned Counsel is that HSN Explanatory Note states the correct scope. According to those Notes, the Rule applies to cases where complete or finished articles are presented unassembled or disassembled and items are imported so for the purpose of convenience of handling or transport. The note further states that for the purpose of this rule, the article means the components which are to be assembled either by means of simple fixing devices or by reverting or welding, provided only simple assembly operations are involved. It is the learned Counsel's contention that the parts in question have not been bought and sold or presented as incomplete or unassembled telephones. Similarly, packing in 386 cartons has not been made for the purpose of convenience of packing, handling or transport. Instead, each part has been packed separately. Learned Counsel has also pointed out that assembly is also not a simple process. The appellant has to manufacture PCBs through a very scientific and engineering process and assemble telephone sets with those PCBs and imported parts by using machinery.
5. Particular reliance has been placed by the learned Counsel on the decision of the Larger Bench of this Tribunal in the case of Sony India Ltd. v. C.C., New Delhi - 2002 (143) ELT 411, wherein the Tribunal held that, even though appellant was importing all the components required for assembly and manufacture of television sets, the import of components cannot be considered as import of television sets.
6. The submission of the learned SDR is that the consignment essentially constitutes 15,000 telephone instruments. These instruments are unassembled and incomplete inasmuch as PCBs alone have not been imported. Learned DR also relied on the decision of this Tribunal in the case of Universal Commercial Corpn. v. C.C., Delhi -1994 (69) ELT150.
7. The question that has been raised is whether present is a case of import of telephone instruments, complete or unassembled. Unquestionably, incomplete it is as PCBs are absent. Unassembled too, as parts have not been assembled into phones. Further, there can be no doubt that the consignment is presented as parts only inasmuch as each part is priced and packed separately. The transaction between the parties is clearly as parts for telephone instruments. It is also clear that these individual parts are incapable of being assembled into a phone by a simple process. Apart from the fact that the PCB has to be either manufactured or procured and added, the assembly of parts into instruments requires engineering skills and use of machinery as explained by the appellant. Thus, the requirement of the rule that the article is presented in unassembled condition for the reason of convenience of packing, transport etc. is not satisfied. The requirement that the assembly work must be simple is also not satisfied in the present case.
8. In the above facts and circumstances, we are of the view that

2(a) is not attracted to the present case and the Commissioner was in error in applying that Rule. The imported parts were required to be classified as such and not as telephone sets. Accordingly, the impugned order is set aside and the appeal is allowed with consequential relief, if any, to the appellant.
(Dictated and pronounced in open Court)

Equivalent 2005 (188) ELT 0491 (Tri. - Del.)

Equivalent 2005 (071) RLT 0137 (CESTAT- Del.)