[Order per : P. Karthikeyan, Member (T) (Oral)]. - This is an appeal against the Order No. 597/2005 dated 20-9-2005 passed by the Commissioner of Customs (Appeals), upholding the classification of “Compact Media Centre” (CMC) or “K-Yan Computer Systems” under the chapter heading 85283020 of the schedule to Customs Tariff Act/Central Excise Tariff Act as ‘video projector’. M/s. Celetronix India Pvt. Ltd, Chennai, an EOU had filed a Bill of Entry for effecting clearances to DTA of what is declared as ‘‘Computer System K-Yan 103 (ILF23-K-YAN 1.3)” of a total value of Rs. 6,70,734/- @ Rs. 74,526/- per unit classifying the goods under Chapter Sub Heading (CSH) 84714191 of both Customs and Excise Tariff Acts. Before the lower appellate authority, the appellants had submitted a technical write-up along with a statement from a Professor of IIT, Mumbai and a letter conveying the opinion of the Additional Director, Ministry of Communications and Information Technology, Department of Information Technology, Government of India in support of the classification claimed. The write-up described the item as an integrated computer system, a new product, for group learning. The machine has a powerful projector attached to it for the purpose.
2. As per the user manual the product is a Compact Media Centre (also called ‘K-Yan’) with multifarious uses for classrooms, coaching classes, mini theatres, corporate offices, mini community centres, rural areas etc. The system is a multimedia unit, which can play DVDs/VCDs/Audio CDs and provides ultra large flat TV experience. It can play movies, TV channels, songs and can be used to play games. Accessories such as additional speakers can be attached to it to enhance the sound; with a web camera and broad band connection it would be a cheap Audio-Video conferencing solution for corporate offices and home uses.
3. After due process of law, the lower appellate authority decided the item to be a video projector. He found the item to be a composite machine which could be classified as computer under Customs Tariff Heading (CTH) 8471 or as a video projector under CTH 8528 or as a DVD/VCD/CD player under CTH 8521 or as a Television set under CTH 8525 etc. Therefore, the principal function of the equipment had to be identified for its correct classification. The Commissioner found that replacement of a computer screen with the data projector had synergised the product from being a mere personal computer for use by one person, to a machine capable of mass entertainment and knowledge. Yet the machine was not far removed from a computer, since that was what gave the machine its versatility. He found it difficult to classify the product in view of its multiple functions. In classifying the product, the Commissioner followed Rule 3(c) of General Interpretative Rules. He found its main functions to be computing and video projection and that the item equally merited classification as either. Therefore, Rule 3(a) and 3(b) of the Interpretative Rules were not helpful. So he resorted to Rule 3(c) and Customs Tariff Heading 8528 being the latter in the numerical order of the two options, classified the item under CTH 8528.
4. In the appeal, the appellants have submitted that the subject item was a state-of-the art multimedia computer with a data projector. DVD/VCD/CD player, CD Writer, internet and networking, a TV and an audio-system in a single compact unit. The main unit housed an LCD projector, a multimedia computer with TV tuner card and audio amplifier circuit with speakers. The said product consisted of the following :
(i) High Speed Digital Data Processor (equivalent to Pentium 4 Processor)
(ii) 120 GB Hard Disc Drive
(iii) Keyboard - wireless, multimedia keyboard for being used to type and also provide quick access to some internet browsing and multimedia functions;
(iv) Mouse - a wireless optical mouse for K-Yan
(v) Receiver - Signal receiver for the wireless keyboard and mouse.
(vi) Remote Control - for TV and for switching from TV to PC mode.
(vii) Power Cord
(viii)TV Cable Connector
(ix) USB Cable - To connect other devices.
(x) Modem Cable - To connect to a telephone line to access the internet.
(xi) Batteries - For the keyboard and remote.
(xii) CD Kit - CDs with essential software.
They had stated that Professor Kirti Trivedi of IIT, Mumbai and the Additional Director, Ministry of Communications and Information Technology, Department of Information Technology, Government of India had certified that the subject product combined the computing power of a computer with large screen display provided by an in-built projection system through the use of technology for large screen projection to a wider audience. The Additional Director had also certified that the item was an IT product falling under Heading CTH 8471.
5. It was further submitted that projector in the system was an out put device. The projector could not function as a stand alone projector in the system. It worked only when the processing unit was on, as an out put device. It was not disputed by the lower authorities that the power supply to the projector had been directly connected to the computer power supply and power came only through the computer power supply and all other connections and inputs to the projector had been blocked and disabled from use in the design of the said product in which an internal VGA cable connected the computer CPU to the projector. No external connection to the projector was possible and external devices such as other computers, laptops, DVD players etc. could not be connected to it. It could only display internal pre-connected signals. Community viewing was not the main utility of the machine as held by the Commissioner (Appeals). He had incorrectly observed that the equipment merited classification equally under both Chapter Headings 8471 and 8528. The projector in the system was in lieu of the monitor so that more people could watch the output at the same time. The lower appellate authority had wrongly decided that the video projection was the essential character of the impugned item owing to its above said utility. Both the authorities had not disputed that the product in question was a data processing unit in the form of a system. The item was not a video projector technically or commercially. The subject being a technical matter, the Commissioner ought to have relied on the technical opinion furnished by the Professor of IIT Mumbai and the Additional Director, Directorate of Information Technology, Government of India.
6. In the instant case, Rule 3 of the Interpretative Rules for the interpretation of the Schedule to the Customs Tariff was not applicable. The Commissioner had erred in resorting to Rule 3. According to Rule 1, titles of Sections and Chapters were provided for ease of reference only; for legal purposes, classification should be determined according to the terms of the headings and any relative Section Notes or Chapter Notes, only if such headings or Notes provided such headings did not otherwise require, the subsequent provisions of Interpretative Rules had to be followed. In the subject case the equipment was classifiable under Chapter Heading 8471 by application of Chapter 1. In support of the above view, the appellants cited the decision of the Tribunal in the case of Hindustan Packaging Co. Ltd. - (Tri. - LB), wherein resort to Rule 3 was disapproved as the classification of the item involved in that case was possible in terms of relevant headings and Section/Chapter notes. It was prayed that the item may be classified as declared modifying the decision of the lower appellate authority.
7. During hearing, Ld. Counsel for the party submitted that the equipment was basically a computer with the additional facility of a lens which could project data that usually appeared on a monitor. It had a projector with in-built lens for the purpose. The equipment could not be considered to be a projector incorporating a computer, the lens being technically not an important part of the main equipment, which was a computer. The subject item was not like several machines such as a CNC machine, which carried out specific individual functions with the aid of a computer. Several machines such as cars also incorporated computers and operated with its aid. It was settled law that classification of an item under a particular entry had to be governed by the meaning attached to it by the community well versed with it or dealing with it. The Additional Director, Directorate of Information Technology, Government of India, had vide letter No. 5(8)/2005 - IPHW dated 18-8-2005, certified that the subject item was a computer and it was classifiable as a computer.
8. The Ld. JCDR argued that the item was a combination of a projector and a desktop PC. It was not a computer but a projector working with the aid of a computer and projecting the output was not a function of a computer. According to him a computer was technically a machine, which processed voluminous data and gave desired results. The impugned goods were not such machines and they were classifiable as video projectors. He added that that as per the ratio of CCE v. Fusebase Eltoto Ltd. - (S.C.), in the absence of a statutory definition of an article, its classification had to be based on understanding in common parlance and its primary function and utility. Accordingly, it was decided in that case that a projection TV set was classifiable as a video projector and not as a broadcast television receiver set. He also cited Apex Court decision in Mukesh Kumar Aggarwal & Co. v. State of Madhya Pradesh - (S.C.), wherein it was decided that in classifying goods under an entry, commercial parlance sense had to be applied and not its technical/scientific sense. The particular use to which an article could be applied in the hands of a special customer was not determinative of the nature of goods.
9. Ld. Counsel pointed out in his rejoinder that Ld. JCDR’s view that processing voluminous data alone was the hallmark of a computer was misconceived. The subject consignment was meant to be deployed for teaching children of various classes from KG to X using software containing teaching material on various subjects, which could be selected using a mouse.
10. We have considered the records and submissions of both sides. The issue involved in this appeal is the correct classification of Compact Media Centre sought to be cleared to DTA under the cover of Bill of Entry. In the Bill of Entry, the appellants had sought the classification of the item under heading 84714191 of schedule to Customs Tariff Act and first schedule to Central Excise Tariff Act, 1985. On examination, the Assistant Commissioner had found the item to be not a computer system but a digital video projector which was a self-contained data projection unit primarily used for computer based presentation which would also handle additional data sources such as DVDs. The unit could also switch from personal computer mode to TV mode using a remote control. He observed that though the Compact Media Centre can also be used as a computer, its uniqueness is in the fact that it has a built in data projector for the display of the process data on a large screen which is not possible with the conventional computers. Going by the essential character of video projection, he decided that the item had to be classified as a video projector operating on a computer technically. He also felt that the trade recognized the item as a Compact Media Centre, which reflected its true functions. Before passing the order, the Assistant Commissioner had observed that the goods might be in technical/scientific sense a computer system but in the commercial parlance it is a Compact Media Centre operating on the principles of computer science technology.
11. In the impugned order, the lower appellate authority has upheld the order of the original authority. He found that the impugned machines had more than one function and had to be classified as per Note 3 of Section XVI of the Customs Tariff. He also observed that the item had multifarious functions as that of a computer, of a projector, of a TV, of a DVD/VCD/Audio CD player and also video conferencing equipment. He made the following observation in the impugned order:
‘‘The removal of the ordinary computer screen and its replacement by a data projector has synergized the product from being a mere personal computer for use by one person, to a machine capable of mass entertainment and knowledge. Yet the machine is not far removed from a computer, since that is what gives the machine its versatility.”
He found it difficult to identify the principal function of the machine. He found the two main functions of the unit to be as computer and as video projector. The item merited classification equally in both the headings. Therefore, he followed the Interpretative Rule 3(c), which provided for classifying the product under the heading which appeared last in the numerical order among the alternatives.
12. There is no dispute that the impugned item is a computer. Both the lower authorities have recognized the subject machine as a computer. The lower appellate authority found it to be not far removed from a computer and that that gave the machine its versatility. He has given a finding that the removal of the ordinary computer screen and its replacement by a data projector, had ‘synergized’ the product from being a mere personal computer for use by one person to a machine capable of mass entertainment and knowledge. However, he entertained a doubt as to whether computing was the principal function of the subject equipment. From the findings given by the Commissioner (Appeals) what is obvious is that the display device like a monitor of the subject computer system has been replaced by a data projector which enables a large audience to view the output. In our view, this finding justifies the classification of the impugned item as a computer.
13. The Commissioner had resorted to Interpretative Rule 3 and found that the item was equally classifiable as a computer and a video projector. Therefore he had applied sub-rule (b) of Rule 3 for classification of the impugned item. He found that the component of the composite machine, which gave it its essential character, would govern the classification. There is no dispute that the product is a computer, which works on software like Windows/Linux. It has a combo drive which enables its use as a DVD player/VCD player/CD player. It can also access internet and it is easy to attach a web-camera to the equipment. The only distinguishing feature of this computer system is its projector as an output device. Its presence cannot alter the classification of the machine. The projector is only a display device and replaces a conventional monitor.
14. The original authority also found the equipment to be a computer with a built in data projector for the display of the processed data on a large screen which was not possible with the ‘conventional computers’. He had also found that CMC was a digital video projector which was a self contained data projection unit primarily used for computer based presentation and could also handle additional data sources such as DVDs. The original authority also had observed that the equipment was a computer system in technical and scientific sense but was a Compact Media Centre in commercial parlance operating on the principles of computer science technology. All these findings only go to establish that the item is a multimedia computer which has been designed in tune with the state-of-the art technology. CMC has been designed by IIT Mumbai. It is a new product and it is only getting introduced to the common public. Therefore, CMC is not known to the trading community also as a computer or projector. As regards such scientific devices, the test should be as to how the people who use the same or are well versed with the same understand it. In the instant case, the Additional Director, Department of Technology, Government of India, has clarified as follows:
“From the catalogue, it is noted that K-Yan has been developed with IIT (Bombay). The product combines the computing power of a computer with large screen display provided by an inbuilt projection system to deliver powerful outcomes through the use of technology for large screen projection to a wider audience. The projection system cannot be used in isolation but replaces the functionality of a monitor”.
On a careful consideration of all the relevant facts, we are convinced that the subject equipment is a computer falling under CSH 84714191 as claimed by the appellants and not a projector. The appeal is accordingly allowed.
(Operative portion of the Order was pronounced in open Court on 15-12-2006)