Supreme Court - Daily Orders
M/S. Pioneer Embroideries Ltd. vs Commnr.Of Customs, Mumbai on 22 July, 2015
Bench: A.K. Sikri, Rohinton Fali Nariman
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 6341 OF 2004
M/S. PIONEER EMBROIDERIES LTD. ... Appellant
VERSUS
COMMISSIONER OF CUSTOMS, MUMBAI ... Respondent
O R D E R
The appellant/ assessee herein had purchased 12 sets of second hand embroidery machines along with essential auxiliary machines from one foreign supplier known as M/s. Texchemie, Hong Kong (hereinafter referred to as 'M/s. Texchemie' for short). These were 23-24 years old machines which were exported to M/s. Texchemie by M/s Moojin International Corporation, Korea (hereinafter referred to as 'M/s. Moojin' for short). M/s. Moojin supplied 12 Jacquard Control Device Reading System, one Reading System and one Card Pressed System. The assessee herein, thus, purchased 12 sets of second hand embroidery machines from M/s. Texchemie and 12 Jacquard Control Device Reading System from M/s. Moojin. It is not in dispute that these second hand embroidery machines were non-computerised. The second hand embroidery machines as well as Jacquard Control Device Reading System were imported together. Signature Not Verified Digitally signed by
The appellant wanted to take benefit of the Suman Wadhwa Date: 2015.08.08 13:39:56 IST Reason: concessional rate of duty in terms of Serial No. 89 of List C.A. NO.6341/ 2004 1 10 of the Notification No. 11/97-Cus dated 01.03.1997 which mentions “Computerised embroidery machine”. In these circumstances, the question which fell for consideration was as to whether the aforesaid machines imported by the assessee can be treated as computerised embroidery machines.
The Commissioner, after adjudicating the matter, held that the old machines were non-computerised and merely because the Jacquard Control Device Reading System was installed in these machines after its import into India thereby making the same as computerised machines, would not give it a character of “computerised embroidery machines” at the time of import. The Customs, Excise & Service Tax Appellate Tribunal (hereinafter referred to as 'CESTAT') has affirmed the aforesaid view of the Commissioner resulting into dismissal of the appeal filed by the appellant-assessee against the order of the Commissioner. It is this judgment of the CESTAT which is in appeal before us. The matter rests on the meaning that is to be assigned to General Interpretative Rule (GIR) 2(a), which reads as under: -
“Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as presented, the incomplete or unfinished article has the essential character of the complete or finished article. It shall also be taken to include a reference to that article complete or finished (or falling to be classified as complete or finished by virtue of this rule), presented unassembled or disassembled.” The CESTAT has held that the two articles, viz., old C.A. NO.6341/ 2004 2 mechanical embroidery machines on the one hand and the Jacquard Control Devices System on the other, were not independent and complete by themselves and were incomplete or unfinished articles. It is also found, as a fact, that the Jacquard Control Devices System were installed on the textile machines after importation and customs clearance at the premises of the appellant and only thereafter, the said machines have become computerised textile machines.
It was argued by Mr. Vikram S. Nankani, learned senior counsel appearing for the appellant, that the two sets of machines were imported with the intention to make the mechanised machines as computerised and they were presented as such and thus, the case would be covered by GIR 2(a).
This aspect has been simply dealt with by the CESTAT, in the impugned judgment, in the following words: -
“Based on these facts, it is not difficult to identify the goods for what they are. As noted in the aforecited decision of the Australian Tribunal, the classification of the goods has to be done with reference to the state or condition of the goods at the time of importation and not by reference to the purpose of the importer or of the purchaser. The Australian Tribunal further goes on to say that regard must be had to the characteristics of the goods themselves as they would present themselves to an informed observer. The learned consultant for Revenue has also emphasized the word 'as presented' in GIR 2(a). We have no doubt in our mind that as presented the goods were a collection of old and used textile embroidery machines which were yet to be computerised alongwith new Jacquard Control Devices. As such, the machines were not computerized as presented at the time of importation but they have been subsequently computerized after importation at the premises of the appellants. The classification C.A. NO.6341/ 2004 3 and essential character of the goods under import has to be determined with reference to the state or condition of the goods at the time of importation and not with reference to the purpose for which the goods have been imported or the use to which such goods are put to after importation.” We are in agreement with the aforesaid view taken by the CESTAT. A reading of the decision of the CESTAT would further demonstrate that the CESTAT was conscious of the fact that there can be a situation where a particular machine is brought in an unassembled form and in such a case, it can still be considered as computerised if the ingredients thereof are satisfied. This aspect is again dealt with in detail by the CESTAT. However, on the facts of the present case, it has come to the conclusion that even this aspect is not satisfied. In order to avoid repetition of what the CESTAT has observed, our purpose would be served by reproducing the following discussion from the judgment of the CESTAT as we are in complete agreement therewith: -
“At the time of import, the consignment is thus seen to be consisting of the 12 old and used mechanical embroidery machines along with 12 brand new Jacquard Control Devices. At no point of time before the importation, the new Jacquard Control Devices have been installed on the old mechanical embroidery machines. As such, these goods can not be called computerised embroidery machines in dis-assembled condition as declared. A plea has been made on behalf of the appellants in the course of hearing to consider the goods as computerised embroidery machines in unassembled condition. In this context we have examined the text of GIR 2(a). The first part of this rule says that any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as presented, the incomplete or finished article has the essential character of the complete or finished article. The second part of the C.A. NO.6341/ 2004 4 rule says that it shall also be taken to include a reference to that article complete or finished, presented unassembled or disassembled. We are concerned in this case with the second part of this rule. We have already ruled out the possibility of classifying the imported goods as disassembled computerized embroidery machines as there was no prior assembly or disassembly before import. Next point to be considered is whether the goods as presented can be considered as computerized embroidery machines, unassembled. The H.S. Explanatory Note to Rule 2(a) reads as follows: -
“1. The second part of Rule 2(a) provides that complete or finished articles presented unassembled or disassembled are to be classified in the same headings as the assembled article. When goods are so presented, it is usually for reasons such as requirements or convenience of packing, handling or transport.
2. This Rule also applies to incomplete or unfinished articles presented unassembled or disassembled provided that they are to be treated as complete or finished articles by virtue of the first part of this Rule.
3. For the purposes of this Rule, “articles presented unassembled or disassembled” means articles the components of which are to be assembled either by means of fixing devices (screws, nuts, bolts, etc.) or by riveting or welding, for example, provided only assembly operations are involved.
No account is to be taken in that regard of the complexity of the assembly method.
However, the components shall not be subjected to any further working operation for completion into the finished state.
Unassembled components of an article which are in excess of the number required for that article when complete are to be classified separately.
4. Cases covered by this Rule are cited in the General Explanatory Notes to Sections or Chapters (e.g. Section XVI and Chapters 44, 86, 87 and 89).
C.A. NO.6341/ 2004 5
5. In view of the scope of the headings of Sections I to VI, this part of the Rule does not normally apply to goods of these Sections.” The General Explanatory Note to Section XVI reads as under: -
“For convenience of transport many machines and apparatus are transported in an unassembled state. Although in effect the goods are then a collection of parts, they are classified as being the machine in question and not in any separate heading for parts. The same applies to an incomplete machine having the features of the complete machine, presented unassembled (see also in this connection the General Explanatory Notes to Chapters 84 and 85). However, unassembled components in excess of the number required for a complete machine or for an incomplete machine having the characteristics of a complete machine, are classified in their own appropriate heading.” A perusal of GIR 2(a) and the related Explanatory Notes makes it clear that when a complete or finished article is presented unassembled, the same has to be classified in the heading as applicable to the assembled article. It also further indicates that the article must be complete or finished but presentation in unassembled condition is only for reasons such as requirements or convenience of packing, handling or transport. It is also clear that articles presented unassembled or disassembled means articles the components of which are to be assembled either by means of fixing devices (screws, nuts, bolts, etc.) or by riveting or welding and further that the components shall not be subjected to any further working operation for completion into the finished state.” We, thus, do not find any merit in this appeal which is, accordingly, dismissed.
........................, J.
[ A.K. SIKRI ] ........................, J.
New Delhi; [ ROHINTON FALI NARIMAN ]
July 22, 2015.
C.A. NO.6341/ 2004 6
ITEM NO.104 COURT NO.12 SECTION III
S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS
Civil Appeal No. 6341/2004
M/S. PIONEER EMBROIDERIES LTD. Appellant(s)
VERSUS
COMMNR.OF CUSTOMS, MUMBAI Respondent(s)
(With office report)
Date : 22/07/2015 This appeal was called on for hearing today.
CORAM :
HON'BLE MR. JUSTICE A.K. SIKRI HON'BLE MR. JUSTICE ROHINTON FALI NARIMAN For Appellant(s) Mr. Vikram S. Nankani, Sr. Adv.
Mr. Alok Yadav, Adv.
Mr. Udit Jain, Adv.
Mr. Somnath Shukla, Adv.
Ms. Bina Gupta, Adv.
For Respondent(s) Mr. A. K. Sanghi, Sr. Adv.
Mr. Arijit Prasad, Adv.
Ms. Binu Tamta, Adv.
Mr. B. Krishna Prasad, Adv.
UPON hearing the counsel the Court made the following O R D E R The appeal is dismissed in terms of the signed order.
(Nidhi Ahuja) (Suman Jain)
COURT MASTER COURT MASTER
[Signed order is placed on the file.] C.A. NO.6341/ 2004 7