Customs, Excise and Gold Tribunal - Bangalore
Cce vs Wipro Information Technology Ltd. on 27 October, 1998
Equivalent citations: 1999(80)ECR839(TRI.-BANGALORE)
ORDER S.L. Peeran, Member (J)
1. This is a Revenue appeal against the order in appeal No. 85/89(B) dated 31.3.1989 passed by the Collector of Central Excise (Appeals), Chennai holding that the cable assemblies which are the subject matter of dispute for classification are classifiable under chapter heading 8473.00 and to that extent modified the order in original passed by the Asstt. Collector.
2. The Asstt. Collector in his order in original had held that with effect from 1.3.1987, the cable assemblies should be classified under heading 8554 of the CET 1985 and confirmed the differential duty involved for the period from 1.3.1987 to 29.2.1988 to the extent of Rs. 32,340.10 and for the period 1.3.1988 to 31.5.1988 Rs. 4280.65 SED and Rs. 214.05 BED. The assessee's contention before the Collector (Appeals) was cable assemblies by definition as contained in tariff heading 8544 includes cable connected with a connector. Thus, what the assessee buys from the market is a cable and what he sells is also a cable. It was urged that the tariff classification remains unchanged to heading 8544 and hence duty cannot be demanded twice under the same heading, once from the supplier and the second time from the assessee. It was also urged by the assessee that mere fixing of a connector to a cable assembly does not amount to manufacture. It was also urged that the Asstt. Collector erred in not appreciating that if a manufacture is involved on the part of the assessee then the manufactured product viz. cable assembly can no longer be in the realm of sub-heading No. 8544.00 of the CET but has to be regarded as a component part of the computer distinct from a cable. It was also contended that in such an event the Asst. Collector ought to have held that while the input is cable the finished goods is an assembly and component part of the computer different from cable and he ought to have classified the cable assembly under sub-heading 8473.00 as part of computer. It was also contended that tariff heading 8544 deals with cable and not cable assembly if cable and cable assembly are one and the same product and both belong to heading 8544.00 then, the Asst. Collector should have held that no further manufacture is involved and duty cannot be charged to them. It was also urged that if cable and cable assembly are two different goods then he ought to have held that the goods under heading 8544 covers only cables and not cable assembly. The Collector (Appeals) reproduced the finding given by the Asst. Collector in para 10 of the order in original wherein the Asst. Collector has observed that Section note 2(a) being relevant in the case the conductors with connectors are specifically covered by heading 8544 of Chapter 85. Cable assembly which is a conductor with connector has to be classified under heading 8544 which is the specific heading which covers cable and other insulated electric connectors whether or not fitted with conductors. The Asst. Collector observing the above section noted that but for Section note 2(a) of Section XVI cable assemblies would have been classified under heading 84.73 as part of computer. The Collector (Appeals) noted that a reading of heading 8544 it is seen that cable with insulated electric conductors whether or not fitted with connectors are classified under heading 8544. Similarly, optical fibre cables made up of individually sheathed fibre whether or not assembled with electric conductor fitted with connectors are also classifiable under heading 8544. He also held that in the present case it is not a cable and other insulated electric conductor which is purchased by them and fitted with connectors. They do something more. By such fitment with connectors they render such cables solely suitable for use in computers. He has held that therefore, the goods manufactured by them are not covered under tariff heading 8544 as there is no mention of cable assembly under tariff heading 8544. He has held that the assessees buy cable from the market and by connecting them with connectors render them suitable for use only for computers and no other machinery. The cable assembly sold by them is manufactured by them. Connecting the cables in a particular manner with connectors, appellants make them solely usable as part of computers and the assessees do not contend any other use for such cable assemblies. He noted that they do not sell cables with connectors but sell cable assemblies solely suitable for computers. He held that the assessees' contention that there is no manufacture is not correct. He observed that the AC's contention on the other hand that cable assemblies are specifically covered under heading 8544 is also not correct because cable assemblies with particular use as a part of computer cannot be held to be insulated cable or other insulated electric conductors fitted with connectors, but something more has come into existence i.e. a part of computer and hence he held that the alternative plea raised by assessee for classification of the goods under heading 8473 is required to be accepted.
3. It is contended by the Revenue in this appeal that the classification of cable assemblies under heading 8473 as adopted by the Collector (Appeals) is not correct inasmuch as the cable assembly is nothing but assembly of connectors and conductors which bring into existence "cable assembly" as called commercially. They are used in computer. Further both the inputs viz. conductors and connectors and the final product does not fall under same heading and duty is not levied for a second time. It is contended by the Revenue that the process of manufacture is within the meaning of Section 2(f) of the CEA 1944. These inputs are eligible for credit of duty paid under the MODVAT Scheme and can be utilised for payment of duty payable on computer. Hence it is stated that this cannot be termed as duty paid for the second time. Further it is stated that note 2(a) of Section XVI of the Schedule to the Central Excise (Tariff) Act is very clear. The connectors and conductors are specifically covered by heading 85.44 as cable assembly which is a specific heading and hence cable assembly cannot be classified under heading 84.73 as part of computers. Reference is also made to explanatory note under heading 85.44 of HSN which is identical to heading 85.44 of CET at pages 1403 and 1404 of the HSN which lead to the conclusion that cable assemblies are classifiable under heading 85.44 and not under heading 84.73 as part of computer. The Revenue seeks restoration of the order in original.
4. We have heard Shri S. Kannan, learned DR for the Revenue and Shri R. Ravindran, learned Counsel for the respondent.
5. Shri S. Kannan, learned DR drew our attention to the grounds of appeal and also to the assessee terming the item as "cable assembly". He submitted that its use in the computer, is not material for the purpose of classification. It has assumed the function of a cable and merely because it has been connected with a pin, therefore, that by itself, cannot become part of computer as the function of the cable to conduct electricity is not changed. He submitted that the item cannot be considered as part of computer on the ground that it conducts data as there is no such thing as conducting data. Data is conducted in the form of electricity impulse through the conductor only and what is conducted is electricity. Thus impulse gets reconverted and read as data. The item is a metal conductor in plastic which conducts electricity. There is no difference between the normal wire and the item in question except in the form of construction as the form is different due to specific usage. He illustrated the point by stating that electricity is conducted into the form of AC/DC current and because DC current is employed that by itself it does not make the item different from conductor. These conductors are equivalent to plugs; because of miniature condition in the electronic circuit, therefore these conductors are utilised. He further eleborated by stating that these items are standard items and are independently marketed products. He further clarified that conductors with sheaths or without it fall under heading 8544 and it is not specific to computer alone. It is an item generally used to a category of computers. He also pointed out to IBM conductors which are comparable ones. There is nothing like an item being manufactured to a specific computer. He pointed out from the literature that the standard pins in conductors are being used which is a general item. He submitted that the ratio of the judgement rendered in the case of Toshniwal Cables v. CCE applies to the facts of the present case. He submitted that since there is specific heading for cables and other insulated electric conductors whether or not fitted with conductors therefore it has to be classified under the description appearing under heading 8544.
6. Countering the arguments of the DR, Shri Ravindran, learned Counsel for the respondents submitted that the findings arrived at by the AC in the order-in-original, that the item is a part is not a disputed fact. He submitted that the Revenue has not produced any evidence to show that the item is not a part of general use having common use for all types of computers and are marketed generally. He submitted that the literature produced by the respondents clearly discloses that the item has been specifically designed and manufactured as a specific part of a computer and it has a specific part number with specialised conductors for use as a part and it cannot be fitted to any other computer of another make. As each of this part is manufactured as per specific design and according to that design the connecting pins are manufactured and being specific part of the computer it assumes the characteristics of a specific part which is solely and principally used as a part of computer in terms of Section 2(b) of Section XVI of the CET. The Revenue has already rejected their plea that the item has not undergone any manufacturing process and continued to remain as a conductor. Having arrived at that conclusion and held that cable assembly has undergone several processes, therefore, it is no longer the same item namely cable assembly and that after the said processes it has assumed a different part and therefore, it has to be held conclusively as a part of computer. It has also assumed a specific use and which is solely and principally as a part of a computer in terms of Section note 2(b) of Section XVI of the CET. The learned Counsel submitted that HSN note does not refer to a specific design and part used specifically as a part of a computer and therefore, HSN is not applicable to the present case. He pointed out that the item works on 5-12 Volt DC current which carries the pulse in the data and in technical sense it cannot be considered as a general conductor which carries AC current, since it carries data pulse to the computer of DC current in a particular manner suitable to a particular make of computer with specific part number. Therefore, it has to be considered only as a part of computer. He, in this regard relied upon the ratio of the judgement rendered in the case of Delton Cables v. CCE wherein coiled cord fitted with terminals and used between receiver and telephone apparatus has been considered as part of the main item in terms of the Section note 2(b) of Section XVI. He also relied upon the judgement rendered in the case of CCE v. Fibre Products wherein it has been held that compensating cables being part of heat measuring instruments which are covered by heading 90.25 of CET are classifiable under heading 90.33 and not under 85.44. The learned Counsel also referred to the technical literature which describes as to how various connector pins are required to be fixed to the computer and how each pin carries specific data signals and it is with the specific pin number with specific data signals which make the computer functional and therefore being specifically designed and solely and principally used as part of computer, it is required to be classified as such and not as a general item under heading 8544 as cable assembly.
7. On consideration of the submissions made and on perusal of the technical literature, it is clear that the item has been specifically designed with a specific part number. Pins are attached to the cables and the design fit into the computer system and each of the pin conduct one particular type of signal to the computer and this is the most distinguishing feature and in view of the specialised cable assembly which makes the item a part of the computer system. The respondents have given a detailed technical literature with specific drawing and specific pin numbers which gets attached to the particular P.C. end of a computer. Having been designed to a particular computer and being not freely available in the market and being a specific item for each specific computer, therefore, the item cannot be considered as general purpose one, as the item has assumed a speciality, which is distinguishable. Therefore the other general purpose cable and other insulated electric conductors whether or not fitted with conductors are for classification under heading 8544. The learned DR stressed the fact that the heading reads "whether or not fitted with conductors" is sufficient for classifying the item under heading 8544 by virtue of Section note 2(a) is not acceptable for the reason that conductor is not a general purpose conductor or a generalised switch assembly or a socket, which is standard one. The connector in the present case is fixed with specialised pins which are very minute and each cable has an assembly of pins of more than 25 in number and each of these pin carries a particular signal. It has a pin number and each one carries one type of data signal. The details as noted in the technical literature are reproduced hereunder:
Pin No. Signal I/O 1. Shield (Sh) 2. Transmit data/TXD) 0 3. Receive Data (RXD) 1 4. Request to Send (RTS) 0 5. Clear to send (CTS) 1 6. Data Set Ready (DSR) 1 7. Signal Ground (GND) - 8. Carrier Detect (CD) 1 20. Data Terminal Ready (DTR) 0 22. Ring Indicator (RI) 1
Thus as can be seen from the literature Macro Handbook Volume-I produced by the respondents for use of the pins, each type of conductor has got 5 pins of each type describing the type of signal it conveys. A detailed reading of the literature which runs into several pages indicates that the. conductors which are used with specialised pins cannot be considered as a general purpose connector used as an ordinary cable assembly for the purpose of classification under heading 8544 in terms of note 2(a) and hence note 2(a) gets excluded for classification of the present item. Item in question is admittedly considered by the lower authorities as a part, as it has assumed a different item and is being subject to excise duty. Therefore, note 2(b) of Section XVI applies to this case and thus the item having assumed the characteristics of a part which is solely and principally used for a particular type of a computer, therefore, in terms of note 2(b) of Section. XVI, the classification adopted by the Collector (Appeals) under heading 8473 as a part of computer is required to be confirmed. It is also seen that similar view has been expressed in respect of coiled cord fitted with terminals and used between receiver and telephone apparatus as in the case of Delton Cables Ltd. (supra) by invoking Section Note 2(b) of Section XVI. Likewise similar view has been expressed in the case of CCE v. Fibre Products (supra) where compensating cables being parts of heat measuring instruments were held to be classifiable under heading 90.33 and the prayer of the Revenue for classification of (them) as cable under 8544 has been rejected.
8. We have also perused the HSN explanatory note and we notice that it does not deal with the type of a cable with specialised pin carrying specific data signals to the computer as part to be classified as a general purpose cable under heading 8544. Therefore, classification under heading 8544 is not justified in the present case. In fact on a reading of HSN explanatory note appearing at page 1411 and 1412 under heading 84.73, it is clear that the heading covers accessories suitable for use solely or principally with machinery under heading 84.69 to 84.72. As the item is solely and principally used with computer as part of computer its classification adopted by Collector (Appeals) under heading 8473.00 as a part of computer is fully justified.
9. The learned DR relied upon the judgement in the case of Toshniiual (supra) which deals with compensating cables also known as thermocouple extension wires used as conductors and temperature control equipment which has been held to be classifiable under 85.44 as it was manufactured in terms of ISI specification and it is a general purpose item used for the purpose of temperature measurement and also used in any industry having furnace whose temperature is controlled by electricity. The item being general purpose item and not specifically or principally used as part or manufactured by specific design, therefore its classification has been rightly held to be under heading 85.44 of the GET, which is not the position in the present case and hence the item in question has been correctly classified under heading 84.73. In this view of the matter, there is no merit in the appeal and hence the appeal is rejected.
(Pronounced in Open Court on 27.10.1998).