Customs, Excise and Gold Tribunal - Delhi
Titan Watches Ltd. vs Collector Of Customs on 6 February, 1998
Equivalent citations: 1999(110)ELT834(TRI-DEL)
ORDER Lajja Ram, Member (T)
1. These are two appeals filed by M/s. Titan Watches Ltd., Bangalore, aggrieved with the two separate orders passed by the Collector of Customs, Bangalore. As common issues are involved in both the appeals, they were heard together and are being disposed of by this common order.
2. M/s. Titan Watches Ltd. were engaged in the manufacture of quartz analog wrist watches. They imported wrist watch cases with which bracelets were attached and sought their clearance as watch cases for the purposes of exemption under Notification No. 44/85-Cus., dated 28-2-1985 and Notification No. 65/87-Cus., dated 1-3-1987. These exemption notifications provided for concessional rate of Customs duty to the specified parts imported for the manufacture of quartz analog wrist watches. Among the various parts, so specified for the purposes of applying the concessional rate of Customs duty, different components for the watch case as well as the complete watch cases for quartz analog wrist watches were covered. It was alleged in the show cause notice dated 30-6-1988 that the watch cases with bracelets were not eligible for the concession under Customs Notification No. 65/87-Cus., as claimed by the importers. There were other allegations also with regard to the Import Trade Control (ITC) restrictions, valuation etc. Similar allegations were made in another show cause notice dated 10-8-1988. It was alleged that the watch case with bracelet was classifiable under Heading No. 91.14 of the Customs Tariff. The matters were adjudicated by the Collector of Customs, Bangalore, who observed that the Watch case and the bracelet were two different commodities and were classifiable for the purposes of the Customs tariff separately. He held that the goods imported were not eligible for the concessional assessment under Customs Notification No. 65/87-Cus. He under his Order-in-Original dated 7-9-1988 imposed a penalty of Rs. 50,000/- and a redemption fine of Rs. 1 lakh. He further ordered that the valuation as indicated in the show cause notice was to be adopted. In Appeal No. C/1266/89-B2 the adjudicating authority, the Collector of Customs, Bangalore, under his Order-in-Original dated 20-1-1989 confirmed the demand for duty amounting to Rs. 7,56,776.77 and imposed a penalty of Rs. 75,000/-.
3. Both the matters were heard on 22-12-1997 when Shri Ravinder Narain, Sr. Advocate, appeared for the appellant. Shri S.N. Ojha, JDR, represented the respondent/Revenue.
4. Shri Ravinder Narain, Senior Advocate, stated that the case of the appellants was that the watch case with bracelet was the complete watch case for the purpose of Serial No. 13 of the table annexed to Notification No. 65/87-Cus. The importers had acted bonafide and had claimed assessment as watch case only after their view had been confirmed by the Directorate General of Technical Development (DGTD). He referred to the exemption Notification No. 43/85-Cus., dated 28-2-1985 wherein the various components of wrist watches, parts other than those specified in the table annexed to the said Notification No. 43/85-Cus., aforesaid, attracted a further lower rate of Customs duty. It was his plea that if the watch case with bracelet was not considered as a complete watch case, then they should have been given the benefit of the said exemption Notification No. 43/85-Cus. He admitted that at no stage earlier, the importers had claimed the benefit of Notification No. 43/85-Cus., but pleaded that the benefit of exemption notification could be claimed at any stage. He referred to the Tribunal's decisions in the case of Griffon Laboratories Pvt. Ltd. v. Collector of Customs, 1989 (41) E.L.T. 613 (Tribunal), and Franco Indian Biologicals P. Ltd. v. Collector of Customs, 1993 (65) E.L.T. 110 (Tribunal).
The learned Senior Advocate also submitted that the appellants had not suppressed the facts and that in Appeal No. C/1266/89-B2 the demand was hit by time-bar. On ITC angle also, it was pleaded that no case has been made out by the Department.
5. Shri S.N. Ojha, JDR, replied that a complete watch case was a case with the components of the watch case without movements. The bracelet was not a component of watch case, but a separate identifiable item. He submitted that the watch case with bracelet was not a watch case for the purposes of exemption Notification No. 65/87-Cus. As regards the benefit of Notification No. 44/85-Cus., it was pleaded that the exemption provided therein was in favour of the components and was subject to the various conditions named in the said notification. These conditions were required to be met before the import. The list of the components were required to be certified by the DGTD. In these proceedings, the DGTD certificates obtained in respect of other notifications only refer to the watch cases and not to the watch cases with bracelet. The clarification by the DGTD was only for ITC purposes and not for any exemption under the provisions of the Customs Act, 1962. The leamed JDR relied upon the Tribunal's decision in the case of M/s. Indo Swiss Time Ltd. v. CC, New Delhi, Final Order No. C/1945/97-B2, dated 20-8-1997 [1998 (98) E.L.T. 710 (Tribunal)] in Appeal No. C/48/91-B2.
6. In rejoinder, the learned Senior Advocate stated that in a way both the exemption notifications were unconditional as nothing further was required to be verified after the import. He referred to the Tribunal's decision in the case of Gujarat State Fertilizers Co. Ltd. v. Collector of Central Excise, Vadodara, 1996 (83) E.L.T. 159 (Tribunal), wherein the Tribunal had observed that if the appellants had not filed their classification list claiming the benefit of notification, then the consequence thereof could not be to deprive them of the benefit thereof while responding to the show cause notice.
7. We have carefully considered the matter. The issue for our consideration in both these appeals is, whether the product in which watch case was attached with the bracelet was eligible for the benefit of concessional rate of Customs duty as provided under exemption Notification No. 65/87-Cus., dated 1-3-1987. The watch cases attached with bracelets were not complete watches and the watch cases attached with bracelets were described.by the appellants as watch cases only. Under Notification No. 65/87-Cus., dated 1-3-1987, among others, complete watch cases were eligible for the concessional rate of duty. In the import documents, the appellants had described the goods imported as watch cases only. In the arguments before us, it was pleaded that the watch case attached with bracelet could be covered by the description 'complete watch case'.
8. A watch is composed of two main parts: the movement and the container for the movement. The assembled movement together with the dial, hands etc. is fitted in the container. The bracelet is not a part of the watch but is in the nature of an accessory.
9. The appellants were engaged in the manufacture of wrist watches. They were not engaged in the manufacture of the bracelets or other devices for fastening watches to the wrist. The DGTD had allowed import of watch cases. The importers were importing watch cases without bracelets. It is seen from the statement of Shri N.V. Narayana, Purchase Manager of the importers, that during November, 1987 a representative of their foreign suppliers, M/s. Jean Merrier, France, paid a visit to them and explained to them the features of the watch cases with integrated bracelets. Thereafter, they started importing watch cases attached with bracelets, but continued to describe the goods as watch cases only. For the purposes of the Customs tariff, watch cases were different from watch bracelets. Watch cases were classifiable under Heading No. 91.11 of the tariff, while watch bracelets were classifiable under Heading No. 91.13 of the said tariff. The watch bracelet is a device for fastening watches to the wrist. It maybe of any material, for example, precious metal, leather, plastic or textile material. The bracelets could also be decorative in character. The bracelets involved in these proceedings were for expensive watches. The watch case attached with bracelet could be called watch case with bracelet or bracelet with watch case. For expensive watches, the image of the watch rests on the bracelet also. When the appellants imported watch cases with bracelets, they did not import watch case only and the goods imported were more than the watch case. For the purpose of claiming exemption from Customs duty, it could not be said that they were watch cases only. When no exemption was available to the bracelets, the benefit of exemption could not be extended in favour of the bracelets attached to the watch case.
10. The expression used in the Notification No. 44/85-Cus. and Notification No. 65/87-Cus. was the complete watch cases for quartz analog wrist watches. Complete watch case will mean the watch case with all its parts. The parts of the watch cases, according to the Harmonized Commodity Description and Coding System (HSN) Explanatory Notes are as under :
(1) The case body i.e., the framework of the case. It may have hinges for the bottom, and in pocket-watches the case bodies have also hinges for the dome and the bezel.
(2) The pendant, welded to the case body, with the watch bow (for pocket-watches) and the bushings.
(3) The dome, the inner cover protecting the movement (does not exist in ordinary watches).
(4) The bezel, the part which holds the glass. The edge for holding the glass in place is more especially referred to as the groove.
(5) The bottom, which closes the watch on the opposite side from the glass. Ordinary watches have only one, while hunters have a second similar piece (the cover) which protects the glass.
Cases for wrist watches have no pendant or watch bow proper, but have lugs for attaching the wrist-straps. These lugs consist of several parts, including the bar which may be fixed or spring-operated. Some ladies' wrist-watches have no lugs but are provided with claws for attaching a cord.
It has been explained at page 1675 of the HSN Explanatory Notes that the wrist watch cases often consist of only two parts, the case body and the bottom being combined. Sometimes, the bottom and the bezel each bear one part of the dome, or the bezel and the case body are in one piece. In more highly finished types, the movement is first enclosed in a protective dome.
The watch cases and parts thereof may be of any material. They are mainly made of base metal or of precious metal, or of metal clad with precious metal, or sometimes of plastics, ivory, agate, mother-of-pearl or tortoise-shell. They may be ornamented. Bracelet is not a part of watch case, but an independent commodity. Depending upon the liking of the customer, same type of watch could be purchased with a different type of bracelet. The watch case attached with bracelet is neither a watch case nor a bracelet simplicitor. It is not a complete watch case for the purposes of Notification No. 44/85-CuSv of Notification No. 65/87-Cus.
11. The appellants had admitted that the bracelets were integrated with the watch cases. The grounds (b), (c) and (d) in Appeal No. C/1266/89-B2 are extracted below:
(b) The Collector has referred to the earlier case covered by the bills of entry No. 6459 dated 29-3-1988 (S.10/332/88 BACC) pertaining to watch case model No. 178 and held that bracelets were not in-seperably integrated with watch cases and even, and also held that, even if they are inseperably integrated with bracelet they have to be construed as different from watch cases. The Collector ought to have appreciated that in the present case the appellant have imported quartz analog watch cases relating 4 models viz., model No. 175, 176, 169 and 127, which are specifically set out on the back cover of the watches. These models of watches were shown to collector at the time of personal hearing for examination. In respect of these models the bracelets are specifically designed as an integral part of watch case and cannot be removed or interchangeably used with any other watch cases. The bracelet is specifically designed and is supplied as an integral part of watch case and as such the benefit of Notification No. 45/85 and 65/87 cannot be withdrawn.
(c) The Collector ought to have appreciated that the watch cases relating to model No. 175,176,169 and 127 cannot be used if they are not integrated with the bracelet and no other bracelet can be used along with these watch cases. Therefore, if the bracelets which are specifically designed for the respective watch cases, and which are required to be supplied as an integral part of the respective watch cases, are not supplied then the watch cases would remain incomplete and would become unusable. This is so, as no other bracelet would fit into such watch cases.
(d) The Collector ought to have appreciated that even when a bracelet is fitted and integrated with the watch case, the watch case does not lose its identity and continues to be known as a watch case. On the other hand the bracelet having been integrated with the watch case loses its identity and ceases to be a separate article known as bracelet.
Similarly, grounds (b), (c), (d) and (e) in Appeal No. C/96/89-B2 are extracted below:
(b) The Collector ought to have appreciated that in the present case, the appellant had imported quartz analog watch cases relating to the watch model No. 178 which is specifically set out on the back cover of the watch. In respect of this model, bracelets are specifically designed as an integral part of the watch case and cannot be interchangeably used with any other watch case. The bracelet is specifically designed and is supplied as an integral part of the watch case and as such the benefit of Notification No. 65/87 cannot be denied.
(c) The Collector ought to have appreciated that the watch case relating to model No. 178 cannot be used, if it is not supplied with the bracelet and no other bracelet can be used along with this watch case. Therefore, the bracelet which is specifically designed for this model of watch case, and is required to be supplied as an integral part of this watch case, is not supplied then the watch case would remain incomplete and would become unusable. This is so as no other bracelet would fit into such a watch case.
(d) The Collector ought to have appreciated that the quartz analog wrist watches are fitted with basically three types of bracelets. The leather or plastic type, the metallic interchangeable type and metallic integrated type, The last i.e., the metallic integrated type are normally used in upper-end watches. Most of the upper-end watches, which are expensive watches, are smuggled into India and are of the integrated bracelet type. Cases with integrated bracelets are not manufactured in India. But there is a strong customer preference for such watches. Watch manufacturers worldwide offer product ranges which include this type. The appellants have also imported some small quantities of such watch cases to satisfy the consumer demand, which are the subject matter of the present appeal.
(e) The Collector ought to have appreciated that once a bracelet is fitted to the watch case, it loses its identity. It is no longer considered a separate article. Once it is assembled with the watch case, it becomes just another part of the watch case and is known as watch case.
As we have observed above, the exemption was only in favour of the complete watch case. There was no exemption in favour of bracelet. The bracelet imported were for expensive watches. The bracelets were in the nature of accessory. If the exemption is extended in favour of the bracelet integrated with the watch case, then it would amount to extending the area of exemption to unauthorised goods which is not permissible under law. In the case of Collector of Customs, Bombay v. Perfect Machine Tools Co. Pvt. Ltd., 1997 (96) E.L.T. 214 (S.C.), the Hon'ble Supreme Court had held that an accessory when imported with machine was not eligible to exemption unless that accessory has expressly been included in the exemption notification. Paras 6 and 7 from that decision are extracted below :
"6. The Tribunal, in our opinion, was in error in construing the notification dated March 1,1978 to hold that since the Electronic Pitch Tester Attachment has not been expressly excluded in the said notification it must be treated to have been included therein. The said view of the Tribunal is not in consonance with the principle laid down by this Court in Novopan India Ltd., Hyderabad (supra) for construing a notification granting exemption from duty. In accordance with the said principle it must be held when an accessory to machine is imported with the machine unless the accessory has been expressly included in the exemption notification it would not be [enured] to the concessional rate of Customs duty under the notification dated March 1,1978. Having regard to the finding recorded by the Tribunal, the Electronic Pitch Tester Attachment must be held to be an accessory of the Helix Tester imported by the respondent.
7. Shri V.J. Francis, the learned Counsel for the respondent, has urged that since an attachment cannot be operated independently of the main machinery, it should be treated as a part of the machine and therefore, the benefit of the concessional rate of duty under the notification dated March 1, 1978 should be extended to the attachment. We are unable to agree. The main fact that the Electronic Pitch Tester Attachment cannot be operated independently of the main machine does not mean that it is not an accessory, and is a part of the machine. Even in the absence of the said attachment the machine can be operated. Once it is held that the Electronic Pitch Tester Attachment an accessory to the main machine, it must be held that since the notification providing for concessional rate of Customs duty has not expressly included the accessories for the purpose of grant of concessional duty, the benefit of the concessional duty would not be available in respect of such accessory. In these circumstances, we are unable to uphold the impugned judgment of the Tribunal."
12. The DGTD in their communication dated 31-8-1988 had clarified as under:
The Asst. Collector of Customs, Air Cargo Complex, Air Port, Madras-600027 Subject: Clarification regarding complete Quartz Analog Watch cases.
Dear Sir, Please find enclosed herewith a copy of letter No. PUR/DGTD/CUS-01/88, dated 17th August, 1988 received from M/s. Titan Watches Ltd. The party's letter is self explanatory. In this connection it is stated that the complete quartz analog watch case is an assembly consisting of the following components:
1. Bezel
2. Back cover
3. Bezel ring
4. Mineral glass (crystal)
5. Gaskets
6. Movement holder
7. Case pipe/stem pipe
8. Spring bars/side bars
9. Crown
10. Bracelet if it forms an integral part of watch case.
Yours faithfully, Sd/-
(R.M. BALANI) ADDL. INDUSTRIAL ADVISER We have already referred to above that the parts of watch cases include the case body, pendant, dome, bezel, bottom, lugs, bar, claws, depending upon the type of watch. The bracelet is not a part of watch case. When bracelet is fixed to the watch case, it become something more than the watch case and something more than the bracelet. For the purposes of exemption from customs duty they could not be considered as a watch case. In their clarification dated 14-1-1988 issued from file No. CLE/5(249)/86, the DGTD had clarified that the attestation of the list for the purposes of Notification No. 44/85-Cus., dated 28-2-1985, as amended, was only from the essentiality angle and that the eligibility of components for assessment of Customs notification was to be looked into by the Customs authorities. Thus, the clarification from the DGTD could not be for the purposes of eligibility or non-eligibility for the benefit of Customs exemption notification.
13. The learned DR had relied upon the Tribunal's decision in the case of M/s. Indo Swiss Time Ltd. v. CC, New Delhi, Final Order No. C/1945/97-B2, dated 20-8-1997 [1998 (98) E.L.T. 710 (Tribunal)] in A. No. C/48/91-B2. In that appeal, the matter related to the eligibility of the goods imported to the benefit of exemption Notification No. 44/85-Cus., dated 28-2-1985. The goods imported had been described in the bill of entry as quartz cases, but on examination they were found to be watch cases with inbuilt straps for watches. After examining the matter in detail, the Tribunal came to a decision that the goods imported were not covered within the description of complete watch cases for quartz analog wrist watches. Paras 5 to 10 from that decision are extracted below :
"5. The issue for our consideration is whether the quartz cases with integrated straps as described in the invoice dated 17-1-1986 at Exhibit 1 in the paper book were covered by the description against Serial No. 14 of the table annexed to the Notification No. 44/85-Cus. The description against Serial No. 14 reads as under:
"Complete watch cases for quartz analog wrist watches."
It is seen from the description in the exemption notification that only watch case is covered by the benefit for concessional rate of duty under that notification. Shri N. Khanna, Advocate, had pleaded that this description in the exemption notification should be read as to include the case with integrated strap. We find that the straps as such were separately classifiable under Chapter 91. While the watch case was classifiable under Heading No. 91.11, the straps were classifiable under Heading No. 91.13. If the argument that the watch case with strap should be classifiable as watch case is accepted, then it could also be argued that the watch strap with watch case should be classified as watch strap. After going through the relevant tariff entries, we find that the goods in question the watch case with integrated strap was not a watch case simplicitor. It was more than a watch case and it was more than a watch scrap. In the exemption notification, we do not find any mention of the watch strap.
6. The learned Advocate had referred to the case law in support of his plea that the classification under residuary entry should be resorted to only when it is not possible to classify the goods in any other specific heading. We find that in the scheme of the Tariff under Chapter 91, different specified products have been specifically included in various sub-headings upto 91.13 and the other clock or watch parts have been made classifiable under Heading No. 91.14. We consider that when the goods cannot be classified in any of the specified heading, it is inevitable that their classification under the residuary entry is considered. He had also submitted that under the interpretative Rules 3-b, the goods should be classified on the basis of the essential character. According to him, the essential character in this integrated watch case and strap is given by the watch case. We consider that the interpretative rules will come into picture only when it is not possible to classify the goods in the expressed language of the relevant tariff entries.
7. He also submitted that the recommendation of the Chief Controller of Import and Export was binding on the Customs authorities. The clarification given by the Deputy Chief Controller of Import and Export is extracted below:
M/s. Indo Swiss Time Ltd.
A-23, New Office Complex Defence Colony NEW DELHI-110024 SUBJECT : Clarification for the import of Integrated Bangle/Bracelet type watch case in one piece.
Dear Sir, Please refer to your letter No. IST/90/039, dated .25-4-1990 the above subject.
It is clarified that the subject item i.e., integrated Bangle/Bracelet type watch case in one piece is covered by the entry at Sl. No. 509(ii) of Appendix 3 Part A of the Import & Export Policy, 1988-91 (Volume I) valid upto 31-3-1990.
We find that the items in the clarification had been referred to as Integrated Bangle/Bracelet type watch case in one piece. Further the clarification is dated 6th August, 1990 in response to the imported letter No. IST/90/039, dated 25-4-1990. The goods had been imported under bill of entry dated 28-1-1986. The goods had been cleared out of Customs charge. The goods were in the nature of parts. The clarification after more than four years without any reference to the goods in ques-tion cannot be binding on the Customs authorities when the matter had already been adjudicated, appealed against and also re-adjusted on 19-4-1990 after the matter was remanded by the first appellate authority.
8. The Departmental Representative had referred to the Explanatory Notes to the Carbonized Commodity Description and Coding System (ESN) wherein at page 1550 the scope of Heading No. 91.11 had been explained. The scope of Heading No. 91.11 had been explained as the cases for the watches with or without cases presented without movement. The parts of the various cases have been referred to as the case body, pendant, dome, bezel and the bottom We do not find any reference to the integrated watch scrap in the parts of the watch case. It has been further referred that the wrist watch cases consist of only two parts; the case body and the bottom being combined.
9. As in the present case, the scrap had been integrated when the case, we consider that they were not covered within the description of complete watch cases for quartz analog wrist watches to which alone the benefit of conces-sional rate of duty was available.
10. The point had already been made by the learned Advocate that the notifiacation should be interpreted liberally. We find that as there is no ambiguity in the description, there is no question of giving any expanded or restricted meaning; it had as was read out. As it refers to the complete watch cases, we do not consider a case integrated with the scrap was covered within this description."
14. At the time of the arguments before us, the learned senior Advocate appearing for the appellants made an alternative plea that in case it is held that the appellants were not eligible for the benefit of exemption Notification \No.65/87-Cus., then they should be held eligible for a larger benefit under Notifi-cation No. 43/85-Cus. The extent of benefit under Notification No.-43/85-Cus. was more than the benefit under Notification No. 65/87-Cus. We find that under show cause notice dated 30-6-1988 in Appeal No. C/96/89-B2 the alligation as contained in para 10 was that the watch cases with bracelets were not eligible for the concession under customs Notification No. 65/87-Cus. as claimed by the importers. The adjudicating authority had only discussed the applicability of the said Notification No. 65/87-Cus. Similarly, in Appeal No. C/1266/89-B2 the benefit of Notification No. 44/85-Cus., dated 28-2-1985 and Notification No. 65/87-Cus. had been claimed by the importers. However, in the interest of justice, we have examined the applicability of Notification No. 43/85-Cus. to the goods involved in these proceedings. We have taken into consideration the submissions made by both the sides in this regard.
15. At the cost of repetition, it is seen that the goods imported were described in the import documents as watch cases, while on examination they were found to be watch cases attached to the bracelets or it could also be said that they were found to be bracelets attached to the watch cases.The watch case was a part and component of wrist watch, while the bracelet was not a part or component of wrist watch. The bracelet was in the nature of an accessory. The manufacture of wrist watch was complete as and when the assembled watch movements together with dial, hands etc. were fitted in the container or the case. The bracelet is an ornamental band or chain worn around the wrist. Costly watches are fitted with such ornamental bracelets for fastening watches to the wrist. Watch chains were not classifiable under Chapter 91 of the customs tariff; however watch straps, watch bands and watch bracelets were covered by sub-heading No. 91.13 of the tariff.
16. Notification No. 43/85-Cus. provided concessional rate of duty to the components of quartz analog wrist watches. What was exempted under that notification was the components of wrist watches for the manufacture of wrist watches. The bracelet does not contribute to the manufacture of watch. It is not a constituent part of the watch. The goods imported were the bracelet attached to the watch case. In the grounds of appeal in grounds (b) & (c) of Appeal No. C/1266/89-B2 and in grounds (b), (c) & (d) in Appeal No. C/96/ 89-B2 it has been described by the appellants that the bracelets were specifically designed as an integral part of watch case and could not be removed or interchangeably used with any other watch cases. As the bracelets could not be separated from the case and both had to be taken together, the product in the form imported and in the form presented for assessment could not be considered as a component of wrist watch for the manufacture of wrist watch.
17. Thus, for the purposes of exemption as well as valuation, the integrated product bracelet attached with watch case or watch case attached with bracelet could not be separated.
18. Further, the DGTD had allowed only the import of watch cases, but the importers had imported watch cases fixed with bracelets. There was no reference to Notification No. 43/85-Cus. In the certificate by DGTD the parts allowed to be imported had been referred to as "appearance parts". The fastening device could not be considered as an appearance part. No declaration of such import had been given to the DGTD or the Customs prior to or at the time of import. Any subsequent clarification of DGTD will have no bearing on the interpretation of the exemption notification issued under Sub-section (1) of Section 25 of the Customs Act, 1962.
19. The allegations with regard to the ITC Policy, valuation etc. had been discussed by the adjudicating authority and we do not find any ground to justify any interference with the view taken by the adjudicating authority. In the facts and circumstances of the case, we consider that the amount of fine and penalty imposed in both the matters is reasonable and does not call for any interference.
20. As a result, both the appeals are rejected.