Bombay High Court
Wipro Products Ltd. vs Union Of India And Others on 3 July, 1986
Equivalent citations: 1986(9)ECC331, 1986(25)ELT485(BOM)
JUDGMENT
1. Wipro Products Limited, the petitioner, is a Company registered under the Companies Act and is a manufacturer of micro processor based systems/mini computers. In order to develop and manufacture these articles the petitioner needs to import designs and drawings and for which permission has been given. The petitioner company placed an order for supply of designs and drawings with Centinel Computer Corporation, United States of America on February 17, 1981. The foreign supplier agreed to supply the drawings and designs on diskettes. The goods were imported by the representative of the petitioner Company by air and reached Bombay Air Port on January 4, 1981. The petitioner filed a Bill of Entry and classified the goods under Tariff Item No. 49.04/06 and requested that the goods should be passed free of payment of any duty.
The Collector of Customs by order dated February 6, 1981 held that the Tariff Item No. 49.04/06 is not applicable. The petitioner carried an appeal to the Central Board of Excise and Customs and by order dated March 28, 1981 the proceedings were remitted back to the Collector for deciding the classification. The Collector of Customs on remand, by order dated May 30, 1981 held that Tariff Item 49.04/06 was not applicable but Tariff Item No. 84.51/55(2) attracted for levying duty on the diskettes. The petitioner paid the duty amounting to Rs. 6,17,124.22 under protest and thereafter filed an appeal before the Central Board of Excise and Customs. The appeal ended in dismissal by order dated March 30, 1982 and that has given rise to filing of the present petition.
2. The short question which falls for determination is whether the diskettes on which designs and drawings are embossed are liable to payment do duty under Tariff Item 49.04/06 or Tariff Item No. 84.51/55. Tariff Item No. 49.04/06 reads as under :
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Heading Sub-heading No. and description Standard rate No. of article of duty
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49.04/06 Music, printed or in manuscript, Free whether or not bound or illustrated;
maps and charts of all kinds (including atlases and printed globes);
plans and drawings, for industrial, architectural, engineering, commercial or similar purposes, whether original or reproductions on sensitised paper;
manuscripts and type-scripts.
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Tariff Item No. 84.51/55, which is under Chapter 84 dealing with 'machinery mechanical appliances etc.' reads as under :
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Heading Sub-heading No. and description Standard rate No. of article of duty
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84.51/55 Typewriters, other than typewriters incorporating calculating mechanisms;
cheque-writing machines; calculating machines; accounting machines, cash registers, postage-franking machines, ticket issuing machines and similar machines, incorporating a calculating device, automatic data processing machines and units thereof; magnetic and optical readers, machines for transcribing data on to data media in coded form and machines for processing such data, not elsewhere specified or included; other office machines (for example, hectograph or stencil duplicating machines, addressing machines, coin-sorting machines, coin-counting and wrapping machines, pencil sharpening machines, perforating and stapling machines); parts and accessories (other than covers, carrying cases and the like) suitable for use solely or principally with the above machines;
(1) Not elsewhere specified 100%
(2) Automatic data processing machines 60%
and units thereof; magnetic and
optical readers, machines for
transcribing data on the data
media in coded form and machines
for processing such data, not
elsewhere specified or included;
parts and accessories suitable
for use solely or principally
with the machines falling
within this sub-heading.
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3. Shri Kantawala, learned counsel appearing on behalf of the petitioner, submitted that in the present days of advancement of technology designs and drawings supplied for manufacture of computer system are not supplied in manuscript form but are generally supplied either on microfilms or stored on computer magnetic diskettes. The diskettes are also known as 'Floppy Diskettes', and the book "Computers and Common-Sense" by Roger Hunt and John Sheeley describes 'floppy disc' as follows :
"The floppy disc is a comparatively new storage device which has yet to be developed fully. It is a small random access disk which, like all secondary storage devices, can be used both for input and output operations. Information is held on a flexible disk, encased in a cartridge about 8 inches square. The cartridge is readily loaded into, and unloaded from, a drive unit. It is a low-cost device particularly suited to supporting mini computer systems. Its storage capacity is small compared with other conventional disk devices but impressive for its size. Typically, the floppy disk has about 70 tracks on which information is stored, giving a capacity of between 2,50,000 to 5,00,000 characters (equivalent to 3,000 to 6,000 fully punched cards)".
Shri Kantawala urged that bare perusal of Tariff Entry No. 49.04/06 would indicate that plans and drawings for industrial, architectural engineering, commercial or similar purposes, whether original or reproductions on sensitised paper do not attract any duty. The learned council urged, and in my judgment with considerable merit, that plans and drawings supplied on diskettes would fall under Tariff Item No. 49.04/06 and the Department was clearly wrong in levying duty by reference to Tariff Item No. 84.51/55.
Shri Rege, learned council appearing on behalf of the Department, strenuously urged that plans and designs on diskettes imported by the petitioner should be treated as automatic data processing machines and units thereof or magnetic and optical readers or machines for transcribing data onto data media in coded form and should be brought under Tariff Item No. 84.51/55. It is impossible to accede to such submission. Tariff Item No. 84.51/55 refers to machinery or mechanical appliances and diskettes by no stretch of imagination can be said to be machines or mechanical appliances. Shri Rege relying upon the order passed by the Collector submitted that the diskettes and designs being used in automatic data processing machines and being a storage medium for small computers is an accessory for a computer and therefore assessable under Heading 84.51/55 of the Customs Tariff Item. The submission is wholly misconceived and cannot be accepted. The diskettes are used on a machine so that the plans and designs are exhibited on the screen but that cannot lead to the conclusion that it is a part of the machine or the accessory of the machine. The expression 'part of the accessory of the machine' connotes that but for that part the machine would not function and the diskettes cannot be considered to be such a part. The diskettes are like the cassettes which are used in a video cassette recorder for obtaining an image on the screen and by no stretch of imagination it could be even suggested that such cassettes are part or accessories of the video cassette recorder. The appellate authority has merely confirmed the order of the Collector without assigning any additional reason. In my judgment, the classification made by the two authorities below is entirely erroneous and cannot be sustained. The claim of the petitioner that the diskettes should have been classified under Tariff Item No. 49.04/06 is correct.
4. Accordingly, petition succeeds and the rule is made absolute in terms of prayer (b), but the petitioners are not entitled to claim any interest from the respondents, and the claim of interest is rejected. The amount shall be refunded within a period of four weeks from to-day. In the circumstances of the case, there will be no order as to costs.