Customs, Excise and Gold Tribunal - Mumbai
Commissioner Of Customs vs Western India Shipyard Ltd. on 11 March, 2003
Equivalent citations: 2003(162)ELT666(TRI-MUMBAI)
ORDER Gowri Shankar, Member (T)
1. The question for consideration in this appeal is the eligibility to exemption contained in notification 211/83 and the liability to confiscation under Clause (d) of Section 111 of the Act of goods described as data processing machines that the respondent imported. Notice issued to it proposed to deny the benefit of the exemption and to confiscate them on the ground that they were personal computers of a value of less than Rs. 1 lakh each the import of which was prohibited. Adjudicating upon the notice, the Commissioner held the goods eligible for free importation and entitled to the benefit of the exemption. Hence this appeal by the department.
2. The department's appeal has two contentions. The first is that what was imported was 55 personal computers, each of a value less than Rs. 1 lakh. As the policy stood at the time when the goods were imported in October 1995, personal computers of value less than Rs. 1.5 lakhs required an import licence. The second ground is that the goods in any case are not capital goods, which are exempted from duty in the notification.
3. The departmental representative emphasises what the appeal says, on the ground that what was imported was 55 computers, each of them valued at Rs. 36,200/-. Counsel for the respondent takes us through the list of items which were imported. He points out that the goods imported consisted of 40 processors in a box without a hard disk and 15, each containing a processor and a hard disk. He concedes, in reply to a question by us, that it is possible for each of these 15 to be a data processing system on its own. They contain material required for receipt, storage and processing of data, to the minimum extent specified in Explanatory Notes to heading 84.71 in the Harmonised System of Nomenclature. As to the others, however, he contends that each of them, without being fitted wit a device such as a hard disk for storage of data cannot function as a data processing machine. These have been particularly imported to function it part of the Local Area Network (LAN). They will be used as "dumb terminals", only in order to make use of data by doubling it on a monitor having it printed on a printer which is stored and processed by a server to which they are connected.
4. It is difficult not to consider each of the 15 machines consisting of a hard disk and a processor not to be a personal computer within the meaning of the import policy. That term is not defined, but is generally understood to comprise a processor with a device for storage and a memory which is used to process data, such data may be available to be used by means of a peripheral device such as a monitor or a printer. Each of these machines was capable of being so used. We therefore do not think that they can be called anything other than personal computers. The value of each of these machines is less than Rs. 30,000/-. They are therefore been hit by the bar contained in the policy as to importability.
5. The other machines however cannot in our opinion be considered as personal computers. None of them by itself can carry out the function of a personal computer of performing arithmetical or logical calculations and storing data required for this purpose in a memory either in the form of Random Accessible Memory (RAM) or a hard disk. It is no answer to say that by being fitted wit a hard disk memory, they may become computer. We are concerned with the goods in the form in which they are imported. The goods were imported for use in a large shipyard covering, we are told, 20,000 square metres and having a large number of work stations. The goods were imported along with five servers, each of which consists of a processor and a hard disk. The processing and storage of data would have taken place in these five servers, such data being accessed by any of the operators of the so called dump terminals. A computer can either be a standard computer, a desktop or a laptop or one which is part of a network, either a local area network or a wide area network. A local area network is generally a group of computers in a localised area and generally for exclusive use for particular office or an organisation. The components of a LAN are workstations, server, network, interfacing and communication chart. Each of the terminals would be a workstation. The server would provide the data, software and hardware on the LAN. The whole is connected by means of cables and LAN card. The goods in our opinion rightly form part of a LAN. It would be simplistic to call each of them a personal computer.
6. The provisions of the policy, prohibiting import of personal computers of a value in excess of Rs. 1.5 lakhs would not apply to elements of a LAN, totally valued at much higher freight. We are therefore satisfied that except for the 15 computers that were separately imported, the goods were permitted to be imported. These 15 computers would be liable to confiscation.
7. The other question that is to be addressed whether the goods, the elements of the LAN, would be capital goods or not for the purposes of the exemption notification. The appeal contends that these goods are in the nature of office machines, therefore, would not be capital goods. This proceeds on the basis tat heading 84.72 in the tariff refers to other office machine, data processing machines in heading 84.71 are nothing other than office machine. The Explanatory Note to the Harmonised System of Nomenclature that heading 84.72 covers "all office machines not covered by the preceding three headings or more specifically by any other heading of the Nomenclature." It may be true that for the purposes of classification in the Customs tariff the goods perhaps may be considered as office machines. It has however to be kept in mind that heading 84.72 explains that the term "office machines" would be taken in a wide general sense to include all machines used in offices, shops, factories, workshops etc. It is a matter of common knowledge that data processing machines are used in an infinite variety of applications. Many of them are not related to "office work" except in the very loose sense that storage and processing of data in other use. We are however concerned with the definition of capital goods. The notification does not refer to any particular heading in the tariff but exempts "capital goods and spares thereof, raw materials, components, materials handling equipment and consumables" are used when imported into India for repair of ocean going vessel." The classification of goods in a particular heading therefore is not, strictly speaking, relevant to consider their eligibility to the notification.
8. The department's appeal relies upon the definition of the term "capital goods" contained in the Central Excise rules to mean that the machinery equipment, spares, accessories which manufacture final product to bring about a substantial change especially in a chemical composition. Although not stated, this is a more or less repetition of definition of capital goods under Rule 57Q of the Central Excise Rules. It must be kept in mind that the liberal interpretation of this provision of the larger bench of the Tribunal in Jawahar Mills v. CCE 2000 (90) ECR 38 to include within its ambit machines etc. which by themselves directly to bring about change in substance or use produces any commodity or those without which the commodity in question can be produced such a electrical cables, welding rod etc. has been approved by the Supreme Court on merits (CCE v. Jawahar Mills Ltd. 2001 (132) ELT 3). In addition, the definition of the term capital goods in the import policy, is very widely covering machinery, equipment or accessories required for manufacture or production either directly or indirectly of goods of rendering services also is relevant. We have to keep in mind that we are concerned with the imported goods and it would be more appropriate to refer to the definition in the import policy. Applying that definition, we find it difficult to find that the goods are capital goods.
9. Further the notification exempts capital goods and their spares, raw materials, components, material handling equipment and consumer goods from duty. Clearly therefore the intention exempt from duty is virtually everything used in the repair of ocean going vessels. We therefore find insufficient ground to interfere with the Commissioner (Appeals)'s finding in this regard. It would therefore follow that the benefit of the exemption and the eligibility to the import would not be available in respect of 15 personal computers whose value, as worked out from the relevant bills of entry, comes to Rs. 7.18 lakhs approximately, 13 of this were imported in terms of bill of entry IF No. 46/19-12/1995 valued at Rs. 6,14,214/-. These goods are liable to duty and to confiscation. Having regard to the fact that the importer is an actual user of the goods and they were required to pay the redemption find of Rs. 1.50 lakhs.
10. Appeal allowed in part.