2005(05)LCX0093

IN THE CESTAT, WEST ZONAL BENCH, MUMBAI

[CIRCUIT BENCH AT VADODARA]

Justice R.K. Abichandani, President and Shri K.C. Mamgain, Member (T)

Commissioner of Customs, Ahmedabad

Versus

Picasso Exports

Order Nos. A/829-830/2005-WZB/CB, dated 25-5-2005 in Appeal No. C/143-V/99- Mum.

Advocated By -

Shri A.K. Roy, DR, for the Appellant.
None, for the Respondent.

[Order per: Justice R.K. Abichandani, President]. -

The Revenue challenges by way of this appeal the order of the Appellate Commissioner made on 26-11-1998 by which the order-in-original made by the Additional Commissioner of Customs, Ahmedabad, on 29-9-1998, confiscating the goods in question under Section 111(d) & (m) of the Customs Act, 1962, with option to clear them on payment of appropriate duty and fine of Rs. 6,50,000/- enhancing the invoice value to US $ 0.75 per piece CIF and imposing penalty of Rs. 1,50,000/- under Section 112(a) of the said ,Act, was set aside.
2. The respondent imported 25,500 pieces of Electronic Organs (Electronic Organ Piano small size) declaring CIF value as US $ 10,200 (Rs. 4,39,895/-) @ US $ 0.40 per piece at lCD, Vadodara, and filed Bill of Entry No. 115 dated 17- 9-1998. Clearance was claimed under Heading 9207.10 without import licence as musical instruments which were freely importable in terms of Heading 9207.10 of the ITC (HS) Classifications of Export & Import items notified in the Exim Policy of the years 1997-2002.
3. The Addl. Commissioner in his order-in-original found that the goods were not "musical instruments", but they were "toy pianos" which were specifically excluded from the scope of Chapter 92 vide Chapter Note 1(c). It was noted that this was accepted by the importer who agreed that they did not understand the classification before importing these goods. Since the import licence was not obtained, it was held that the goods were liable to confiscation under Section 111(d) of the Act. It was also found that the goods were under invoiced because the like goods were imported at Mumbai at US $ 0.80 per piece CIF. Taking into consideration the difference in the quantity of the goods compared with that of the present consignment it was found that the CIF value should be US $ 0.75 per piece. The goods were, therefore, found to be liable to confiscation also under Section 111(m) of the said Act because of the misdeclaration in respect of the value of the goods. The Addl. Commissioner found that since the importer had committed various acts of commission and omission, which rendered the goods liable to confiscation, penal action was called for under Section 112(a) of the Act.
4. The Appellate Commissioner held that the reliance of the appellate authority upon importation of similar quantity of 2000 pieces for loading the value of the goods imported by the appellants was invalid since the evidence of that import was not comparable or contemporaneous. The Appellate Commissioner, in paragraph 5 of the order, observed that, on perusal of Note 1(c) to Chapter 92, it was revealed that it excluded toy instruments or apparatus and the present import was not of toy, but of the musical instruments which were covered under Chapter 92. He concluded in paragraph 8 of the order that the disputed goods were electronic organs (smaller size) which were musical instruments, falling under entry 9207.10 of the Customs Tariff Act 1975, and that the value declared by the appellant was the correct transaction value as per Section 14(1) of the said Act read with Rule 4 of the Customs Valuation Rules, 1988. He, therefore, set aside the order-in-original.
5. Chapter 92 of the Tariff Act relates to "Musical instruments; parts and accessories of such articles". Under Note 1(c) of Chapter 92, it was, inter alia, clarified that, this Chapter does not cover Toy instruments or apparatus (Heading No. 95.03). Sub-heading 92.07 specifies "Musical instruments, the sound of which is produced, or must be amplified, electrically (for example, organs, guitars accordions)", Item 92.07.10 falling under that sub-heading specifies, "Keyboard instruments, other than accordions".
5.1 Chapter 95 of the Tariff Act relates to "Toys, games and sports requisites; parts and accessories thereof". Sub-heading 95.03 covers, "Other toys; reduced-size ("scale") models and similar recreational models, working or not; puzzles of all kinds", and at 9503.50 appear "Toy musical instruments and apparatus". It is evident from this item that toy musical instruments whether working or not would be included in that item. The items of this sub-heading would also include electrically operated toys, as is clear from Item No. 95.03.10 which includes "Electric train toys'. In the Harmonized System of Nomenclature (HSN), "Toy musical instruments (pianos, trumpets, drums, gramophones, mouth organs, accordions, xylophones, musical boxes, etc.", which appeared at Item No. 11 under Heading 95.03, are included in the Tariff Heading Item 9503.50. At item 4 of the HSN relatable to sub-heading 95.03 of the Tariff Act, trains (whether or not electrical) are included. In fact, at the outset, while referring to all toys not included in Headings 95.01 and 95.02, it is mentioned in para (A) that "many of the toys of this heading are mechanically or electrically operated". It is also stated that, certain toys including musical instruments may be capable of a limited use or generally distinguishable by their size and limited capacity from the real articles.
6. It will be noticed from the ITC (HS) of the classifications of Export and Import Items of the year April, 1997 to March, 2002, Item 950350 01 that, "Toy musical instruments and apparatus" are shown as restricted Items which could not be permitted to be imported except against a licence or in accordance with the public notices issued in this behalf.
7. It is evident from the size and number of the articles imported (25,500 pcs of Electronic Organ "Piano small size") and the price at which they were imported, that they could not be regular musical instruments falling under Heading 9207.10. These were clearly toy instruments, though described as "Piano small size". They were not regular musical instruments of smaller size. In fact, the importer had accepted before the lower authority that they did not understand the classification before importing them. There was absolutely no valid reason for the Appellate Commissioner to upset the finding of the Addl. Commissioner that the goods were not musical instruments, but they were "toy pianos" which were specifically excluded from the scope of Chapter 92, by Chapter Note 1(c) and that they were covered under Item 950350 01 of the ITC (HS) Classification.
8. As regards the reasoning of the Appellate Commissioner it appears, on verification of the Bill of Entry in respect of the subject goods, that the article is defined as "Piano Small Size", while in the Bill of Entry on which reliance was placed in the order-in-original for enhancing the value, the article was described as "Toy Organs". It is, therefore, not clear whether the Toy Organ covered under the Bill of Entry on which reliance was placed by the original authority was Piano Small Size i.e. Toy Organ of the type which was imported by the appellant. It appears that no convincing evidence was placed on record to discard the transaction value of the goods imported by the appellant. The Appellate Commissioner, therefore, in our opinion, rightly accepted the invoice as evidencing, the transaction value, as per Rule 4(1) of the said Rule.
9. We, therefore, hold that the disputed goods are not electronic organs - musical instruments, classifiable under Customs Tariff Heading 9207.10 of the Customs Tariff Act, 1975, but they are "Toy Musical Instruments and Apparatus" classifiable under item 9503.50. We, therefore, restore the order of confiscation passed by the original authority and set aside the impugned order-in-appeal on that count. However, in view of the fact that the value declared by the appellant is rightly held to be the transaction value, while upholding the order-in-original except as regards the declaration of invoiced value, we order that fine in lieu of confiscation which was Rs. 6,50,000/- be reduced to Rs. 3,50,000/- (rupees three lakhs & fifty thousand only) and the penalty also be reduced from Rs. 1,50,000/- to Rs. 75,000/- (rupees seventy-five thousand only) under Section 112(a) of the Act. The appeal is accordingly partly allowed.
(Dictated & pronounced in the open Court)

Equivalent 2005 (188) ELT 0074 (Tri. - Mumbai)