Custom, Excise & Service Tax Tribunal
Fortune Marketing Private Limited vs Acc, Mumbai on 4 April, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
APPEAL NOS: C/85678, 85893, 85896 & 85898/2015
[Arising out of Order-in-Original CAO No: CC-RS/08/2014-15 ACC (Adj) (I) dated 28th November 2014 & CC-RS/10/2014-15 ACC (Adj) (I) dated 31st December 2014 passed by the Commissioner of Customs (Import), ACC, Mumbai.]
For approval and signature:
Honble Shri M V Ravindran, Member (Judicial)
Honble Shri C J Mathew, Member (Technical)
1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
:
No
2.
Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
:
No
3.
Whether Their Lordships wish to see the fair copy of the Order?
:
Seen
4.
Whether Order is to be circulated to the Departmental authorities?
:
Yes
Ingram Micro India Pvt. Ltd.
Manoj Gupta
Manish Agarwal
Fortune Marketing Private Limited
Appellants
versus
Commissioner of Customs (Import)
ACC, Mumbai
Respondent
Appearance:
Shri T. Viswanathan, Advocate for the appellants Shri V.K. Singh, Special Counsel for the respondent CORAM:
Honble Shri M V Ravindran, Member (Judicial) Honble Shri C J Mathew, Member (Technical) Date of hearing: 04/04/2016 Date of decision: 04/10/2016 ORDER NO: ____________________________ Per: C J Mathew:
Though the dispute before us is purportedly one of classification of external hard disks under heading 84717030 or 84717040 of the Schedule of the Central Excise Tariff Act, 1985, it is, in reality, linked to eligibility for concessional rate of additional duty of customs in accordance with notification no. 6/2006-CE dated 1st March 2006 and notification no. 12/2012-CE dated 17th March 2012. The two notifications, in the context of the claim for eligibility in these imports are identical at sl. no. 17 and 255 respectively except for the duty component.
2. The eligible items are those classifiable under 8471 70, 8473 30 or 8523 and are allowed for (a) microprocessor for computer, other than motherboards, (b) floppy disc drive (c) hard disc drive (d) CD-ROM drive (e) DVD Drive/DVD writer (f) flash memory and (g) combo drive. Commissioner of Customs (Import), Air Cargo Complex, Sahar, vide order-in-original no. CC-RS/08/2014-15 ACC (Adj) (I) dated 28th November 2014, denied them the exemption under this notification and, instead, allowed them the benefit of notification no.2/2008-CE dated 1st March 2008 at 10% till 16th March 2012 and at 12% thereafter. The two impugned orders adjudicated imports at Air Cargo Complex, Sahar, Air Cargo Complex, New Delhi, Air Cargo Complex, Chennai, Air Cargo Complex Kolkata and Air Cargo Complex, Bangalore. Eight show cause notices had been issued at the respective cargo complexes and the Central Board of Excise & Customs designated the Commissioner of Customs (Import), Air Cargo Complex, Sahar as the common adjudicating authority for the disputes with the two importers. The adjudicating Commissioner held that the qualification removable in the description relating to heading 84717030 of the Schedule to the Central Excise Tariff Act, 1985 is applicable to external storage devices; that hard disks, by addition of circuits/connection interfaces/enclosures, lose their character to become removable disk drives for which reliance was placed on decision of the Tribunal in Collector of Customs, Madras v. Pragati Computers [1997 (96) ELT 342 (Tribunal)]; and that whether rule 3 (a), 3 (c) or 4 of General Rules for Interpretation of Tariff are resorted to, the imported goods find best fitment in heading 84717030.
3. Relying on various texts, Learned Counsel for appellant contends that hard disk drive is a secondary storage device in automatic data processing machines or computers and that the qualifying expression removable refers to media that can be separated from the drive which the imported hard disks, albeit external, are not amenable to. It was also contended that hard disks may be internal or external just as removable hard disks may be internal or external. Further, describing the external hard disk drive, it was pointed out that external and internal devices differ only in the casing that encloses the former and that the connection to the computer distinguishes the external from the internal and not the removable from the fixed. It is also argued that the imported item is commercially known as hard disk; as the Drive is fused to the disk in the imported products, it is not amenable to classification as removable or exchangeable. Technical opinion of faculty of reputed technology institutions and that of M/s Seagate International have also been placed before us.
4. Admittedly, the precedents cited on behalf of the appellant are orders of Commissioner (Appeals). It is also claimed that the eligibility to exemption under the notification is not dependent on the classification but on the description. To sustain this contention, reliance was placed on the decision of the Tribunal in Commissioner of Customs & Central Excise v. Tata Consultancy Services Ltd [2008 (221) ELT 217 (T)] which allowed the benefit of exemption to hard disk array which was not classified as 84717020 but as 847177090. Likewise, the explanatory letter from Central Board of Excise & Customs elaborating the budgetary changes of fiscal 2015 was put forward to reinforce the prevalence of description over the classification. Reliance was placed on Commissioner of Customs & Central Excise, Hyderabad II v. Tata Consultancy Services Ltd [2008 (221) ELT 217 (Tri.-Bang.)]; New Chemi Industries Ltd v. Commissioner of Central Excise [2008 (230) ELT 505 (Tri.-Ahmd.)]; Rapti Commission Agency v. State of U P & Others [(2006) 6 SCC 522]; Koya & Co Construction Pvt Ltd v. Commissioner of Central Excise, Visakhapatnam II [2013 (298) ELT 232 (Tri.-Bang.)]; Nestle India Ltd v. Collector of Central Excise, Chandigarh [2004 (178) ELT 590 (Tri.-Del.)]; Goldensun Laboratories v. Commissioner of Central Excise, Surat I [2002 (145) ELT 430 (Tri.-Mumbai)]; Commissioner of Central Excise, Mumbai III v. Narendrakumar & Co. [2008 (232) ELT 866 (Tri. Mumbai)]; Commissioner of Customs, Amritsar v. Jyoti Industries [2007 (209) ELT 180 (P&H)]; Neotric Informatique Ltd v. Commissioner of Customs (Import), Nhava Sheva [2015 (318) ELT 701 (Tri.-Mumbai)]; Devraj M. Salian v. Commissioner of Customs (I), Mumbai 2015 (316) ELT 139 (Tri.-Mumbai)]; Commissioner of Customs, Calcutta v. G.C. Jain [2011 (269) ELT 307 (S.C.)]; Union of India v. Garware Nylons Ltd [1996 (87) ELT 12 (SC); Indo-International Industries v. Commissioner of Sales Tax, U.P. [1981 (8) ELT 325 (SC)]; Northern Plastic Ltd v. Collector of Customs & Central Excise [1998 (101) ELT 549 (SC)]; Densons Pultretaknik v. Commissioner of Central Excise [2003 (155) ELT 211 (SC)]; Uniworth Textiles Ltd v. Commissioner of Central Excise, Raipur [2013 (288) ELT 161 (SC)]; Commissioner of Central Excise, Navi Mumbai v. Amar Bitumen & Allied Products Pvt. Ltd. [2006 (202) ELT 213 (SC)]; Commissioner of Customs, Bangalore v. Acer India Pvt Ltd [2007 (218) ELT 17 (SC)] and BPL Mobile Communications Ltd v. Commissioner of Customs, ACC, Mumbai [2000 (126) ELT 986 (Tribunal)].
5. Learned Special Counsel took us through the investigations undertaken by the Directorate of Revenue Intelligence and also the grounds on which the adjudicating authority returned his finding of classification. He relied upon the decisions of the Honble Supreme Court in Commissioner of Customs, Chennai v. Hewlett Packard India Sales (P) Ltd [2007 (215) ELT 484 (SC); Commissioner of Central Excise, Aurangabad v. Bajaj Auto Ltd [2010 (260) ELT 17 (SC)]; Commissioner of Central Excise, New Delhi v. Connaught Plaza Restaurant (P) Ltd [2012 (286) ELT 321 (SC)]; of the Honble High Court of Gujarat in Swati Menthol & Allied Chem Ltd v. Jt. Dir., DRI [2014 (304) ELT 21 (Guj.)] and of this Tribunal in Mangalore Refinery & Petrochemicals Ltd. v. Commissioner of Customs, Mangalore; Hitachi Home & Life Solution Ltd v. Commissioner of Customs (Import), Nhava Sheva [2012 (285) ELT 504 (Tri.-Mumbai)]; Samsung India Electronics Ltd v. Commissioner of Customs, New Delhi [2014 (307) ELT 160 (Tri.-Del.)]; Commissioner of Customs, Chennai v. Hewlett Packard India Sales (P) Ltd [2007 (215) ELT 484 (SC)]; Nestle India Ltd v. Commissioner of Central Excise, Goa [2008 (227) ELT 631 (Tri.-Mumbai) and Steag Encotec India Pvt Ltd v. Commissioner of Customs (Airport), Mumbai [2010 (250) ELT 287 (Tri.-Mumbai)].
6. Both Revenue and assessee champion their respective classifications to deny or avail the exemption available in the notification supra. This, according to us, is not an appropriate justification for the rival contentions. Lower effective rate of duty is policy-determined and could well stand reversed according to alteration in priority of the government of the day. The classification within the Schedule to the Tariff should appeal by its consistency which is a consummation arising from compliance with the rules of interpretation and uninfluenced by technical opinion or the revenue-driven motives.
7. The relevant exemption notification specifies the products that are entitled to the privileges of the notification. In addition, the relevant entries do incorporate the classification upto the sixth digit in relation to goods falling in chapter 84. Entry 847170 is for storage units which, in computer technology, are many and varied; these are appropriately distinguished among seven types and a residuary heading. Disc drives are of five varieties, viz., floppy disc, hard disc, removable or exchangeable disc, compact disc and digital video disc. Of these, four are specifically described as eligible for exemption; apparently, there is some specific logic for exclusion of removable or exchangeable disc drive. In resolving the dispute, we do not have to concern ourselves with the other products that do not intrude into this matter.
8. We do not have any definition within the tariff to fall back on. We are also bereft of any ruling in a decision of the Tribunal, High Courts or the Honble Supreme Court. We are not favoured by any assistance from the decision in re Tata Consultancy Services Ltd dealing, as it does, with the convergence of disk array with hard disc drive; it must be noted that, unlike in the present dispute between two specific entries, one of the rival entries had not the pretence of specificity.
9. The Central Excise Tariff of 1985 is aligned to the Customs Tariff adopted in this country in 1975 and that compilation prides itself on its generality. The entries are intended for comprehension of the ordinary person of business and not dependent on erudition in matters technological. It is part and parcel of the statutes of the country enacted by a sovereign legislature representing the citizenry of the country. All statutes are premised on the awareness of the citizenry that such laws exist; it cannot be so premised if technical expertise has, necessarily, to be resorted to for interpretation. To put it succinctly, it is the trade parlance that should determine the proximity to a description if the meaning of the description is not adequately clear. We, therefore, prefer to discard the opinions of technical experts furnished by the appellant.
10. The contention of the appellant that the description in the exemption notification should prevail over the classification numerals, though superficially appealing, is not tenable. Entitlement to the exemption notification follows the primary step of ascertaining the tariff entry. In crossing this hurdle, the most apt description is identified and the classification digits, thereafter, become the standard of identity. The applicability of any notification, being a consequential action, revolves around the classification with the description to further narrow the range. Therefore, products falling under 847170, being the first qualification, will also have to pass the muster of the second, i.e. the description, which may or may not replicate the entry in the tariff itself. That is a natural corollary of exemption notifications being instruments for implementation of policies of the government.
11. That the common understanding of the commercial world is the key to determination of the classification has been laid down by the Honble Supreme Court in Union of India v. Garware Nylons Ltd [1996 (87) ELT 12 (SC)] and Indo-International Industries v. Commissioner of Sales Tax, UP [1981 (8) ELT 325 (SC)].
12. It is deducible from general literature, including some of the rudimentary works placed before us, that hard disk, as storage, and the drive are used interchangeably in the trade. The hard disk contains the media and the mechanism for identifying the location of data that is to be sent for processing by the computer. The drive and the media invariably exist in the fixed as well as the removable hard disk. This is particularly so in a hard disk drive which is essential for the computer to perform its assigned tasks. The floppy disc driven computers barely lasted a short period of the 1980s. Floppy discs were removable and hence did not require distinguishing from the drive which was in the machine. Likewise, the media of DVD drives or compact discs are distinct from the drive within the machine and these are optionals in the modern computer. However, the hard disk drive at least, the primary one is not an optional as the operating system that enables the computer to start functioning, and to engage with other software, resides in the hard disc. Necessarily, this essential hard disc remains within the casing that houses the main processor and memory. All other hard discs, and other storage media, are options to provide greater operating flexibility. The distinction between removable or exchangeable disc drive and the hard disc drive is the presence of the operating system on the latter storage facility. Even to access the data on the portable hard disc, the operating system on the fixed hard disc is necessary. Therefore, the disc drive, even if designated within the computer environment as a hard disc drive, will be a removable or exchangeable disc drive if it is external to the the housing of the computer and does not carry the operating system to enable its use without resort to the internal hard disc. It is not the claim of the appellant that the hard discs imported by them can be attached through an interface with the computer and is capable of functioning on a computer that does not have an internal disc drive.
13. Apparently, the imported disc drives are not pre-loaded with the operating system as to enable usage with any computer that does not have an internal hard disk. Moreover, such portable disc drives are marketed as capable of being used as an external storage of any computer system irrespective of its operating system. That flexibility will, of itself, render its classifiable as a removable hard disc that is distinguished from the fixed internal hard disc.
14. Without doubt, these portable hard disc drives have been imported at different places and at different times; it is also not in dispute that these have been allowed clearance on these occasions. It is the contention of the appellants that these have been examined before clearance and that, with the declaration of portability in the bills of entry, the assessing officers should have re-classified the goods if they had firm grounds for doing so. It is claimed that, in the context of a dispute over interpretation, the bona fides of their declaration is beyond doubt. It is also their contention that the dispute could have been raked up by Revenue at any time since 2008 and that their acquiescence with the classification precludes resort to the extended period of limitation in recovery of differential duty.
15. Under Customs Act, 1962 each import is assessed on its own merits and upon the contents of the declaration in the bill of entry. An assessee is an assessee merely for the limited period that the goods are with the custodian pending clearance for home consumption. No importer can claim to be a permanent assessee for all the goods imported by them. Most often, declarations of the assesses are accepted and, in the last decade or so, allowed clearance with a cursory examination except in the few cases where it is so warranted otherwise. Therefore, there is neither a bar on querying the declared classification at any time nor can it be a valid defence that acceptance of declaration in a past import is an acknowledgement of declaration having been true and correct.
16. It is not uncommon for importers to align description of imported goods, not with the tariff entries, but with descriptions in exemption notification and continuing with that description until the misdeclaration is unearthed. The differential duty is adequate motive for suppression of facts relevant to assessment. The notice issued to appellant alleges that, in the bills of entry, the description did not bring on record that these drives were portable; no justifiable counter to this allegation has been furnished before the adjudicating authority. The plea of limitation raised before us is, therefore, not tenable. The individuals are equally responsible for the evasion of duty.
17. Consequently, the imports of the appellants are liable to be classified under 84717030 and not 84717020 of the Schedule to the Central Excise Tariff Act, 1985. Their appeals fail and are dismissed. The appeals of the individuals are also dismissed.
(Pronounced in Court 04/10/2016) (M V Ravindran) Member (Judicial) (C J Mathew) Member (Technical) */as 11 13