Karamchand Thapar & Bros. (C.S) Ltd. v. Collr. Of Cus., Bombay

[Order per : S.L. Peeran, Member (J)]. - The appellant is an importer of “I.D. Card Printing/Production System with Essential Accessories & Spares”. The invoice dated 28-11-1991 stated that I.D. Card Printing/Production System comprising of :

The Importer sought their classification under Heading 8443.50 of the Customs Tariff Act read with Notification No. 59/87-Cus., dated 1-3-1987 and 109/91 dated 15-7-1991. He also claimed the clearance of imported goods against licence No. P/B/3460905/C/XX/19/B. 91 dated 15-3-1991. The Heading 84.43 covers printing machinery, machines for uses ancillary to printing and sub-heading 8443.50 reads as “other Printing Machinery”. The Officer scrutinised the Catalogue/Invoice/Packing list and on examination of goods, it was found that no machine had been imported as classifiable under the said heading. It was noted from the catalogue, Invoice and Packing list that the goods imported consist of Computers/Computer Peripherals, cameras, printers, laminates with spares and accessories, and therefore the description of the goods was found not to tally with the printing machine falling under sub-heading 8443.50 of the Central Excise Tariff Act. It was also found that the computers imported are freely programmable according to the requirement, if different software was used and therefore, the department felt that the same was correctly classifiable under Heading 84.71. The note under Chapter 5 to Chapter 84 was held to deserve attention. It was also felt by the department that there is no separate identity card printing machine alongwith the computers, but the whole system consists of only computers, its peripherals and cameras. The cameras are used for taking the photographs of the persons which is digitalised directly by a computer connected to the camera. The data collection, transmission, storage etc. is done by the computer and ultimately the card is printed in cannon colour printer. It was felt that colour printers were also the peripherals classifiable under Heading 84.71 and could not be called as printing machines under Heading 84.43. Therefore, the deptt. were of the opinion that the goods imported were assessable on merits i.e. computer and peripherals under Heading 84.71, camera under Heading 90.06 and other spares/accessories were also classifiable on merits. The Deptt. also took the view that import of computer and computer based system is covered by para 41 of the Import Policy A.M. 1990-93 and for its import, a specific import licence and no objection from Deptt. of Electronics was required before costing of the said goods. The importer had waived the issue of show cause notice and had requested for personal hearing. They had placed for consideration the original manufacturer’s literature. They had made their submissions before the Collector and pointing out to the literature they had stated that the principal function of the system is production/printing of I.D. cards. They had relied on the Note 5(A) to Chapter 84 and also on Note 5(B) and had argued that machines are classified in the heading most appropriate to their respective functions, or on failing, then in residual headings. They also relied on Section Notes 3 & 4 (Under Section XVI) and H.S.N. Notes pertaining to Heading 84.71, in support of the argument that the entire system is designed for production/printing of I.D. cards and they perform a special function and therefore, they were excluded from Heading 84.71 and being specifically mentioned in Heading 84.43 (other printing machinery) would, therefore, be classifiable under that head as provided in Rule 3(a) of the Rules for the Interpretation of the Tariff Schedule, which provides for classification under the heading with most specific description.

2. Ld. Collector was not satisfied with the said explanation given by the importer and with the claim of the classification made by the importer. He has held that the goods imported did not fall within the description of the goods covered by Heading 84.43 which essentially covers all types of printing machineries for printing repetitive designs. He has held that the importer had not imported any printing machine to be classified under sub-heading 8443.50. He has held that the goods are complete computer system and peripherals and cameras. Therefore, their classification would be appropriate under Heading 84.71 and in this context he has relied on Note 5 to Chapter 84. Ld. Collector has also observed that there is no separate identity card printing machine supplied alongwith the computers. The imported item is a whole system by itself alongwith its peripherals and cameras. The cameras are used for taking the photographs of the persons, which is digitalised directly by a computer connected to the camera. The data collection, transmission, storage etc. is done by the computer and ultimately the details are printed in cannon colour on the cards placed therein. He has held that the colour printers are also the peripherals classifiable under Heading 84.71 and in that view of the matter, he has held that Chapter 84 is not relevant, in so far as this case is concerned, as there is no printing machine imported in this case. He has held that what is imported is a complete computer system. As regards the licencing aspects of the case, the ld. Collector has held that import of computer and computer based system is governed by para 41 of the Import Policy A.M. 1990-93 whereby a specific import licence is required for the import. As there was no specific `no objection certificate’ from the Deptt. of Electronics, therefore, there was a violation of the said para 41 of A.M. 90-93 policy and its import could not be allowed as non-O.G.L. capital goods, as against EXIM scrips. In that view of the matter, the ld. Collector has held that the goods are not covered by a valid import licence, hence an offence attracting the provisions of Section 111(d) of the Customs Act, 1962 is established. In that view of the matter, he has ordered for confiscation of the goods under the said Section read with Section 3 of the Imports & Exports (Control) Act, 1947. However, he has granted redemption of the goods under Section 125 of the Customs Act, and an option to pay in lieu of confiscation a fine of Rs. 40 lakhs. He has also imposed a personal penalty of Rs. 5 lakhs under Section 112 of Customs Act, 1962. In the result, the ld. Collector has directed the assessment of the goods as computers and computer peripherals except camera and other spares/accessories, for which he has ordered the assessment on merits.

3. We have heard Shri M. Venkataraman, ld. Advocate for the appellant and Shri B.K. Singh, ld. S.D.R. for the Revenue. Ld. Counsel took us through the catalogue/literature and argued that the function of the product is to print out identity cards. He submitted that although the system worked on computer but yet the function being that of a printer, the machine has to be considered as printed machine and the classification under sub-heading 8443.50 as claimed has to be upheld. It is his submission that the goods have to be classified on the basis of commercial understanding and trade parlance. The trade goods were known as printing machine and therefore, to consider such a machinery as a computer is not appropriate. He also relied on page 1139 of H.S.N. Explanatory Notes in support of his argument. He pointed out that note 4 of Section XVI clearly indicated that where a machine including a combination of machines consists of individual components, whether separate or inter-connected by piping, by transmission, devices, by electric cable or by other devices, intended to contribute together to a clearly defined function covered by one of the headings in Chapter 84, then the whole machinery is required to be classified in the appropriate headings of that function. He submitted that by applying this note 4, all the components imported were intended to contributed together for the purpose of printing identity cards including the camera which was not separate but was linked to the main tunnel by a duct. He submitted that they were all to be classified together on the basis of defined function and in that view of the matter, the Collector’s order for classifying the goods on merits in respect of cameras, spares and components is not as per Section Note 4 of Section XVI. He submitted that the imported item is capital goods and therefore, they were not non-O.G.L. item. If it was O.G.L. item then no licence was required. The item being a printing machine, there was no need to get no objection certificate from the Deptt. of Electronics and therefore, the findings given by the Collector on the aspect of licence is also not sustainable. He submitted that the confiscation and imposing of penalty was not justified as there was no mis-declaration. In any event of the matter, he submitted that the redemption fine imposed was too excessive and it had to be set aside in view of the bona fide import made by the importer.

4. Ld. S.D.R. submitted that the goods as can be seen from the literature were computer and computer peripherals. The item was not a printing machinery and it was not so considered in the trade also. The order of the Collector is sustainable and there was no infirmity in the same. He submitted that the H.S.N. Explanatory Note had clearly classified the goods as computer and that the H.S.N. Explanatory Note had persuasive value and it required to be accepted in the present case. In this context, he relied on the rulings rendered in the following cases :

i. Collector of Customs v. Shankar Metal Trading Co. -

ii. Meteor Satellite Ltd. v. Collector of Central Excise -

iii. Akbar Badruddin Jiwani v. Collr. of Customs - (S.C.)

Ld. S.D.R. pointed out that Heading 84.43 did not cover all types of printing equipments. There are similar items such as duplicator machines/photo copying machines which were not falling thereunder. The item computer print-out was for printing out the identity card alongwith photograph and is not a printing machinery, but a computer itself, as the entire system worked on the principal computer and therefore, the classification adopted by the Department is fully justified. He submitted that the printer attached to the computer is only an output of the computer and it required to be classified alongwith the computer, as per Note 4 of Section XVI. He also relied on the notes appearing at page 99 of H.S.N. Explanatory Notes. He also placed reliance on the ruling rendered in the case of CCE v. Sunray Computers Pvt. Ltd., .

5. We have carefully considered the submissions made by both the sides and have also perused the records. The description of the goods in the invoice clearly indicates that the item imported is computer base I.D. Card printing/production system. The entire process of printing I.D. Card is based on the computer system. The working of the card printing system is based on digitalised system. The production literature states

“In the data collection station, all personal information is registered and stored directly in the computer system. Whether this information is gathered on your own premises or at Orell Fussli, our specially designed programme insures full protection of all data”.

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(v) Therefore, from a reading of the catalogue, literature and H.S.N. Explanatory Notes, it clearly establishes that the item imported is a computer and not a printing machine. The appellants also admit that the item is based on computer system. The ld. Collector has referred to the term of printing and printing press as defined in New Mechanical Dictionary written by Mr. Audel and D.B. Taraporewala Sons & Co. Pvt. Ltd. to arrive at the conclusion that the item is not a printing machinery. The same is reproduced herein below :

(vi) The Explanatory Notes to H.S.N. on page 1238 also lays down that the type of printing machines are covered under Heading 84.43. The said extract is noted herein below :

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(vii) Therefore, for the purpose of classification of computers under Heading 84.71, the Chapter Note 5(A) to Chapter 84 is required to be seen. As per this para, “Automatic data processing machines” are defined and the same is noted herein below :

“(a) Digital machines, capable of (1) storing the processing programme or programmes and at least the data immediately necessary for the execution of the programme; (2) being freely programmed in accordance with the requirements of the user; (3) performing arithmetical computations specified by the user; and (4) executing without human intervention, a processing programme which requires them to modify their execution; by logical decision during the processing run;

(b) Analogue machines capable of simulating mathematical models and comprising at least : analogue elements; control elements, and programming elements;

(c) Hybrid machines consisting of either a digital machine with analogue elements or an analogue machine with digital elements".

A combined reading of the entire material including the above H.S.N. Explanatory Note makes it very clear that the item is a computer and therefore, it is required to be classified under Heading 84.71.

Further, even as per note 4 of Section XVI, the classification of all the items of computers, peripherals, accessories, camera, and print-out has to be classified under the same heading. The note 4 to Section XVI reads as follows :

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The item being a computer, the camera and the accessories and spares, go to perform the main defined function. The same are connected by transmission piping, devices and cables. Therefore, the Collector’s order that camera and other spares/accessories are required to be classified on merits is not sustainable. The classification under Heading 84.71 adopted by the Deptt. is upheld and it is ordered that the camera and spares, accessories are also to be classified under the same heading in terms of Note 4 Section XVI.

6. As regards the charge of violation of Section 111(d) is concerned, the import of computers and computer system is governed by para 41 of the import policy 90-93 whereby a specific import licence is required for the import of the goods in question, besides a specific no-objection certificate from the Deptt. of Electronics is required. In view of the matter, the order passed under Section 111(d) of the Customs Act, 1962 read with Section 3 of the Imports & Exports (Control) Act, 1947 is sustainable. However, as there was no mis-declaration of the case, the imposition of personal penalty of Rs. 5 lakhs is excessive and the same is reduced to one lakh. As regards the confiscation fine, it is to be seen that the importer has imported the same for their own use and there is no profit element in such an import, the imposition of Rs. 40 lakhs of fine as against the value of Rs. 48 lakhs also appears to be very excessive. In the facts and circumstances of the case, the redemption fine is reduced to Rs. 5 lakhs. The appeal is thus disposed of in the above terms.