Custom, Excise & Service Tax Tribunal
Siemens Ltd vs Nashik on 17 October, 2013
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
APPEAL NOS: E/1508, 1509 & 1760/2011
[Arising out of Order-in-Appeal No: AKP/NSK/150 & 151/2011 dated 30/06/2011 passed by the Commissioner of Customs & Central Excise (Appeals), Nasik; and Orders-in-Original No: 23/CEX/2011 dated 27/09/2011 passed by the Commissioner of Customs & Central Excise, Nasik.]
For approval and signature:
Honble Shri P.R. Chandrasekharan, Member (Technical)
Honble Shri Anil Choudhary, Member (Judicial)
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?
:
Yes
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
Siemens Ltd.
Appellant
Vs
Commissioner of Central Excise
Nashik
Respondent
Appearance:
Shri Naresh Thacker, Advocate for the appellant Shri Navneet, Addl. Commissioner (AR) for the respondent CORAM:
Honble Shri P.R. Chandrasekharan, Member (Technical) Honble Shri Anil Choudhary, Member (Judicial) Date of hearing: 17/10/2013 Date of decision: 20/12/2013 ORDER NO: ____________________________ Per: P.R. Chandrasekharan:
The appeals are directed against Order-in-Appeal No: AKP/NSK/150 & 151/2011 dated 30/06/2011 passed by the Commissioner of Customs & Central Excise (Appeals), Nasik; and Order-in-Original No: 23/CEX/2011 dated 27/09/2011 passed by the Commissioner of Customs & Central Excise, Nasik. As the issue involved in all these appeals is common, they are taken up together for consideration.
2. The appellant, M/s. Siemens Ltd., Nasik is a manufacturer of Programmable Logic Controllers. The appellant sought classification of the said goods as automatic data processing machines falling under CETH 84.71 of the Central Excise Tariff, or in the alternative they contended that the goods manufactured by them would be classifiable under CETH 9032. However, it is Revenues contention that the goods are classifiable under CETH 8537 and duty is payable on such goods under that heading.
2.1. This issue had come up before the Tribunal earlier and this Tribunal vide order No. A/01 & 02/2011/EB/C-II dated 29/12/2010 had remanded the case back to the Commissioner (Appeals) with the following directions:
9. The real issue to be considered is whether the product in question is classifiable under Heading 85.37 as claimed by the Revenue or under Heading 84.71 / 90.32 as claimed by the assessee. The lower appellate authority will have to address this issue keeping in view the Boards order dated 09/05/1997 and other relevant materials such as the manufacturers brochure / literature on the product, trade parlance, etc. We are of the considered view that the Hon'ble Supreme Courts recent judgment in N.I. Systems case (supra), wherein their Lordships elaborately examined the features / attributes of various equipments, including programmable process controllers and programmable logic controllers and classified the goods in question under CTH 9032 90 00, after taking into account the relevant tariff schedule provisions and HSN Explanatory Notes, would be of considerable aid to the lower appellate authority in taking correct decision.
10. Therefore, without taking any view on the rival contentions, we set aside the impugned orders and allow these appeals by way of remand with a request to the learned Commissioner (Appeals) to pass fresh orders in accordance with law and in terms of this order, after giving the assessee a reasonable opportunity of being heard. 2.2. In pursuance to the said direction, the impugned orders have been passed. The adjudicating and appellate authorities have held that the impugned goods do not measure or control parameters such as flow level, pressure, temperature or other variables of liquids or gases and hence they do not merit classification under CETH 9032 as the said entry pertains to automatic controlling and regulating instruments and apparatus. Similarly the equipment manufactured by the assessee also is not useful for automatic data processing but are used as a programmable controllers. Therefore, they merit classification under CETH 85.37. Aggrieved of the said decisions, the appellant is before us.
3. The learned counsel for the appellant made the following submissions:
3.1. The issue involves classification of the products Programmable Logic Controllers/Programmable Process Controllers and Automatic Data Processing Machines, viz; Model Nos. Simatic S 110A/S, 100U, 135/150U; Teleperm M; Sinaut 8F; Sicomp M and Coros 2000. Simatic S 110A/S, 100U and 135/150U are programmable process controllers and are used in process automation. They are programmable automation controllers which is an advanced form of logic controllers and incorporates multiple disciplines such as logic control, process control and motion control, all on a single open platform with a single data base. Such programmable automation controllers are classifiable as Programmable Process Controllers classifiable under CETH 9032. The subject goods consist of a central processing unit, input/output modules which are either digital or analog. These modules are used to connect to digital sensors for sensing parameters like the position reached or like door open/close, valve open/close, etc. or any other signals like temperature or pressure. The output modules are used to connect the actuator for valve opening/closing or heater on/off, cylinder activation or deactivation. Similarly, the analog modules are used to connect sensors like thermocouple/RTD. The products, namely, Sinaut 8F, Sicomp M and Coros 2000 are industrial computers used for centralised monitoring and control of the processes in various production lines/plants. It is their contention that they are parts and accessories which are used in conjunction with industrial process controllers and hence in terms of Chapter Note 2(b) of Chapter 90, they have to be classified under Chapter 90.
3.2. They also rely on the decision of the honble apex Court in the case of Commissioner of Customs vs. N.I. Systems (India) Pvt. Ltd. 2010 (256) ELT 173 (SC) wherein it was held that programmable controller, whether an automated controller or process controller, is suitable mainly with industrial process control equipment like sensors and therefore ought to be classified under Chapter 90.32. It is also contended that the appellants products are used in various industries for controlling and regulating processes. In the technical report provided by Victoria Jubilee Technical Institute (VJTI), it has been stated that the appellants products are used for monitoring and controlling processes of various industries for data processing and control applications. In the impugned order also the appellate authority has observed that PLCs are performing specific function of controlling with the help of automatic data processing machines.
3.3. Teleperm ME and Sinaut 8F are process control systems for power plants. It is their contention that even though the products are multiple units, they are tailored to perform the specific function of regulating and controlling various processes in different industries and therefore, must be classified under Chapter 90.32.
3.4. Alternatively, it is pleaded that the products would merit classification under CETH 84.71 as automatic data processing machines as they essentially do processing of data and, therefore, it cannot be classified under CETH 85.37.
3.5. Reliance is also placed on the decisions of this Tribunal in the case of Larsen & Toubro Ltd. vs. Commissioner of Central Excise vide order No. A/294/2011/EB/C-II dated 06/04/2011 wherein the programmable logic controller manufactured by M/s. Larsen & Toubro Ltd. was held to be classifiable under CETH 90.32. The products manufactured by the appellant herein are also similar to those manufactured by M/s. Larsen & Toubro Ltd. and, therefore, it is contended that these products also merit classification under CETH 90.32.
4. The learned Additional Commissioner (AR) appearing for the Revenue, reiterates the findings of the lower authorities and submits as follows:
4.1. To merit classification under CETH 90.32, the equipment should consist of a measuring device, an electrical control device and a starting/stopping operative device. The goods falling under CETH 90.32 regulate the electrical quantities and automatically control non-electrical quantities, the operation of which depends on the electrical phenomenon varying according to the factor to be controlled. Such a device compares the measured value with the desired value and gives a signal and such controlling devices are meant to regulate or control attributes such as pressure, flow, temperature, etc. The equipment manufactured by the appellant does not undertake any of these activities and it is only a programmable logic controller. It only undertakes processing of data and control functions are performed by the other machines. CETH 90.32 specifically excludes from its scope programmable controllers falling under CETH 85.37. It is therefore, pleaded that the decision of the honble apex Court in the case of N.I. Systems (India) Pvt. Ltd.(supra) is not relevant. So is the case with the decision of the Tribunal in the case of Larsen & Toubro Ltd. 2011 (270) ELT 385.
4.2. As regards the contention that, alternatively the goods manufactured by the appellant should be classified under Heading 84.71, the learned AR submits that as per the expert opinion tendered by the appellant himself, the products are programmable controllers and as per HSN Explanatory Notes, programmable controllers are classified under Heading CETH 85.37. It is therefore, prayed that the appeals do not have any merits and are liable to be rejected.
5. After conclusion of the arguments by both the sides on 17-10-2013, both the sides were directed by the Bench to file synopsis of their submissions by 25-10-2013. In their submissions received on 31-10-2013, the appellant along with their written submissions have enclosed certain additional documents, namely, product literature of the goods involved in the impugned order, affidavit dated 31-10-2013 of Shri. Milind Kulkarni, Head Factory Automation of the appellant firm, certain technical write ups and block diagrams of the products, certificates/depositions of some of the customers of the appellants and have requested that these also be taken on record.
6. We have carefully considered the submissions made by both the sides.
6.1. We ought to consider first the admissibility of the additional documents now submitted by the appellant first. Rule 23 of the Cestat (Proedure) Rules, 1982 prescribes that no additional evidence shall be admitted by the Tribunal in the normal course, unless sufficient cause is shown and the Tribunal should be satisfied that the additional evidence is very relevant for determination of the issue on hand. The honble Apex Court laid down the principle of admitting additional evidence in the case of Shivajirao Nilengakar Patil vs. Dr. Mahesh Madhav Gosavi [1987 AIR 294] and the principle is as follows:
The basic principle of admission of additional evidence is that the person seeking admission of additional evidence should be able to establish that with the best efforts such additional evidence could not have been adduced at the first instance. Secondly the party affected by the additional evidence should have an opportunity to rebut such additional evidence. Thirdly the additional evidence was relevant for determination of the issue. If we apply the above principle to the facts of the present case, it would be clear that barring the product literature, the other documents can not be admitted as evidence at this stage. This is the second round of litigation and in the first round, the issue was considered by the adjudicating authority, first appellate authority and this Tribunal which was the second stage appellate authority. These documents were not produced before any of these authorities in the first round of litigation. In the second round of litigation also the same route/hierarchy has been followed and the appellant chose not to produce these documents before all the authorities. Neither any explanation nor any sufficient cause is forthcoming as to why the appellant could not produce any of these documents before the authorities. The Revenue also had no occasion to consider any of these documents. In these circumstances, we reject the request of the appellant to take the additional evidences on record except the product literature. As regards the product literature, the same formed part of the technical/expert opinion adduced by the appellant before the lower authorities and therefore, it is not a new evidence. Therefore, we take on record only the product literature of the goods whose classification is the subject matter of this appeal.
6.2. We have perused the product literature available on record as also those produced along with their written submissions received on 31-10-2013, the expert opinion submitted by the appellant from M/s. VJTI and also by Shri Vijay Ramchand Ansari, a chartered engineer and also from the Department of Electronics.
6.3. It will be useful at this juncture to refer to the tariff descriptions of the competing entries and they are reproduced below:
8471 Automatic data processing machines and units thereof; magnetic or optical readers, machines for transcribing data on to data media in coded form and machines for processing such data, not elsewhere specified or included. The said entry covers computers and other data processing machines, input or output units whether or not containing storage units in the same housing, printers and storage units.
6.4. Entry 85.37 as it stood at the relevant time read as follows:
8537 Boards, panels, consoles, desks, cabinets and other bases, equipped with two or more apparatus of heading 8535 or 8536, for electric control or the distribution of electricity, including those incorporating instruments or apparatus of Chapter 90, and numerical control apparatus, other than switching apparatus of Heading 8517 As per the HSN Explanatory Notes, the Heading covers numerical control panels with built-in automatic data processing machine, which are generally used to control machine tools; programmed switchboards to control apparatus and programmable controllers which are digital apparatus using a programmable memory for the storage of instructions such as logic sequencing, timing, counting and arithmetic to control through digital or analog input/output modules, various types of machines.
6.5. Heading 90.32 covers:
Automatic regulators of electrical quantities, and instruments or apparatus for automatically controlling non-electrical quantities the operation of which depends on an electrical phenomenon varying according to the factor to be controlled. The said heading specifically excludes programmable controllers of Heading 85.37.
6.6. We have also perused the technical opinion given by the Electrical Engineering Department of VJTI dated 04/01/1995 and the products covered under the said report are:
(i) Simatic S5 110A/s,
(ii) Simatic S5 135/150U;
(iii) Simatic S5 100U;
(iv) Teleperm ME;
(v) Sicomp M;
(vi) Sinaut 8F.
On the basis of literature provided and personal inspection of the said products, M/s VJTI has opined as follows:
The first three of these, Simatic S5 110 A/S, 135/150U and 100U are PLCs (Programmable Logic Controllers). They are multiprocessor controllers intended for automation and data processing tasks in the medium and upper performance levels of automation. They provide simple and economic solutions for all automation and data processing tasks. From this opinion, it is clear that three of the six products manufactured by the appellant are programmable logic controllers. The product literature of Simatic 100U describes the product as programmable controller and as a low priced and modern replacement for contactors and relays. The literature for S5 -135/150 U describes the product as a programmable controller which simply and economically executes automation tasks of the medium and upper range performance. There are two types of central processors available for this controller, namely, S-processor for open-loop control, monitoring and reporting and R-processor for arithmetic operations, closed loop control, monitoring and reporting. These controllers perform the following tasks loop control, sequence control with Graph, digital functions, reporting systems, data exchange with communications processors and operation of signal preprocessing I/Os. Thus from the technical opinion given by VJTI and the product literature, it is obvious that these goods are not mere data processing machines falling under CETH 84.71 or automatic regulators of electrical quantities of instruments or apparatus for automatically controlling non-electrical quantities. These goods, from the nature of functions undertaken by them are controllers with built in data processing machines and based on the programme written in the memory, monitors the input status and executes the outputs. Thus, on the basis of technical literature produced and the expert opinion adduced, these are programmable logic controllers meriting classification under CETH 8537 of the Central Excise Tariff and we hold accordingly.
6.7. As regards the Teleperm ME, Sicomp M, Sinaut 8F and Coros 2000, it is seen that no expert opinion has been obtained in respect of Coros 2000. Teleperm ME, as per the technical opinion, is an automatic data acquisition and process control computer system consisting of an automation system and operator communication system. The automation system processes the data and converts into digital form as per the requirement of automation. The communication system accepts the required process status and fault information from automation system and displays to the operator which helps him in quick trouble shooting in case of fault. As per the product literature, Teleperm ME is a distributed control system capable of fulfilling all the tasks of power plant automation. Power plants equipped with Teleperm ME achieves a very high degree of efficiency and operational safety. In other words, the said machine is not only processes the data but also communicates with the operator about the faults in the system which requires trouble shooting , thus providing for automatic control of power plants. Thus it is not a mere data processing machine but is a logic controller incorporating a data processing machine. Similarly as per the product literature, Sinaut 8F is a supervisory control and data acquisition system used to monitor and control various parameters of process control from a central master station. Both the master and remotely controlled stations are equipped with Sinaut for exchange of information and control the required parameters. The remote stations acquire all the parameters of the stations through transducers, process the same and transmit the data serially to the master station. These parameters are processed at the master station and suitable action is initiated to remote stations for the desired operations. Thus these are control systems with built in automatic data processing machines which are generally used to control machines/appliances and are programmable controllers for implementing specific functions such as logic sequencing, timing, counting and arithmetic to control through digital or analog input/output modules various types of machines. Thus they answer to the description of Programmable Logic Controller falling under CETH 8537. Though the expert opinion tendered by VJTI classify these products as automatic data processing machines, the said opinion can not be accepted in view of Notes 3 and 4 to Section XVI which reads as under:
3. Unless the context otherwise requires, composite machines consisting of machines fitted together to form a whole and other machines designed for the purpose of performing two or more complementary or alternative functions are to be classified as if consisting only of that component or as being that machine which performs the principal function.
4. Where a machine (including a combination of machines) consists of individual components (whether separate or interconnected by piping, by transmission devices, by electrical cables or by other devices) intended to contribute together to a clearly defined function covered by one of the headings in Chapter 84 or Chapter 85, then the whole falls to be classified in the heading appropriate to that function. From the product literature, it is obvious that the principal function of these machines are control of machines and not computation of data. Automatic processing of data is with a view to perform the control function. Therefore, as per Section Notes 3 and 4 cited above, the product is a Programmable Logic Controller meriting classification under CETH 8537. The other expert opinion do not throw much light on the functional capability of the equipment and hence cannot be given much weightage.
6.8. As regards Sicomp M and Coros 2000, they are powerful processing systems for a wide variety of applications and these are hard disk based multiuser system. These equipments consist of interface processors, memory controllers and several interfaces for connecting external peripherals. They control and manage process I/O image, cyclically update plant flow diagrams, short-term archiving of curve values, on-line management functions and co-ordination functions between several terminals. They are designed to be used in conjunction with programmable control systems of the SIMATIC family discussed above. Thus they are not mere data processing systems but undertake control/management functions in industrial automation. Thus they are an integral part of the programmable controllers.
6.9. In the book Programmable Controllers Theory and Implementation by L.A. Bryan and E.A. Bryan (2nd Edition published by Industrial Text Company Publication, USA), Programmable Logic Controllers are described as solid-state members of computer family using integrated circuits instead of electromechanical devices to implement control functions and are capable of storing instructions, such as sequencing, timing, counting, arithmetic, data manipulation, and communication to control industrial machines and processes. Technological advances have brought about changes in the system architecture of PLCs both hardware and software and some of the hardware enhancements include > Faster scan times using advanced microprocessor and electronic technology;
> replacement of significant number of relays;
> high density input/output (I/O) systems;
> intelligent microprocessor based I/O interfaces providing distributed processing;
> mechanical design improvements;
> special interfaces providing for direct connection to the controller; and > improved operator interface techniques and system documentation.
Similar developments have taken place in software development also. These developments have made PLCs capable of communicating with other control systems, providing production reports, scheduling production, and diagnosing their own failures and those of the machines or processes. PLCs have been successfully implemented in every segment of the industry, including steel mills, paper plants, food-processing plants, chemical plants and power plants. PLCs perform a great variety of control tasks, from repetitive ON/OFF control of simple machines to sophisticated manufacturing and process control. The HSN Explanatory notes on CETH 8537 also states that goods of this heading vary from small switchboards to complex control panels for machine tools, rolling mills, power stations, radio stations, etc. Thus the technical literature on the subject as also the HSN explanatory notes clearly support the classification of the goods discussed above under CETH 8537 as Programmable Logic Controllers.
6.10. The Central Board of Excise & Customs had issued a 37B order vide order No. 49/3/97-Cx dated 09/05/1997 clearly pointing out differences between a programmable logic controller and programmable process controller. The said 37B order is reproduced below:
2. Representations have been received from trade pointing out that programmable logic controller and programmable process controllers such as process control equipment/distributed control systems are two different types of controls classifiable under different headings of central excise tariff i.e. heading 85.37 and heading 90.32 respectively. The following specific differences have been pointed out between two types of controllers.
Programmable Logic Controller Programmable Process controller These are for controlling various types of machines These are for controlling various types of processes Operations depends on set of pre-determined operations Operations depend on factor to be controlled Operations based on desired sequence of operations Operation operates basically by continuously monitoring and maintain the variable to be controlled such as pressure, flow, temperature, level etc. with/at pre-determined level No regulatory function Regulatory function by continuously monitoring the desired value with actual value and bringing variable to be controlled to the desirable value Conventionally it is relay based panel for electric control with timer and switches Regulating apparatus for process control for continuous process governing Relay based panel has been upgraded to programmable controller commonly known as programmable logic controller by using micro processor for storing and doing sequence of operations Micro processors are used for doing complex storing and algorithms primarily for controlling. These are commonly known as controllers, e.g. digital distributed control system, distributed control system.
The matter has been re-examined by the Board in consultation with the Dept. of Electronics. Their opinion is reproduced below:-
(i) The programmable controllers covered under heading 85.37: They perform specific functions such as logic instruments timing etc. to control various types of machines in a plant.
(ii) The automatic regulating or controlling instruments and apparatus under heading No. 90.32: They may be considered as industrial process control systems satisfying criteria mentioned in No. 90.32. These are primarily used for controlling/maintaining the flow, level, pressure or variables of liquids or gases or for automatically controlling temperature of a process (may be refinery, steel, chemical industry) at the present level. They can perform functions both sequence logic and different control strategies like Proportional-integral-differential (PID) control and other forms of control.
4. It is observed that opinion of the Dept. of Electronics is also in conformity with the Explanatory Notes of HSN.
5. Now therefore, in exercise of the powers conferred under section 37B of the Central Excise Act, 1944 and in supersession of the Boards order dated 6-8-96 referred to above, and for the purpose of ensuring uniformity in the classification of the goods in question, Board hereby orders that programmable logic controller as described in para 2 and other similar forms will be classifiable under heading No. 85.37 of the Central Excise Tariff and programmable process controllers as described in para 2 and other similar forms will be classifiable under heading No. 90.32 of the Central Excise Tariff. 6.11. From the above clarifications it is seen that to qualify as programmable process controller, continuous monitoring of the various parameters such as pressure, flow and temperature level etc. has to be done and comparison should be made of the parameters of the desired value with the actual value and the machine should be capable of bringing the variables to the desired value. None of the machines in the present case undertake these functions nor do they have a measuring device to measure any of these parameters. As per the HSN Explanatory Notes, to fall under heading 9032, the equipment should consist of a measuring device (sensing device, resistance probe, thermocouple, etc.) which determines the actual value of the variable to be controlled and converts it into a proportional electrical signal, an electrical control device which compares the measured value with the desired value and a starting or stopping or operating device (contacts, switches or circuit breakers, relay switches). From the technical literature, it is seen that the impugned goods do not satisfy the criteria laid down. Therefore, they do not merit classification under Heading CETH 90.32.
6.12. The appellant has relied on the decision of the honble Apex court in the case of N.I. Systems (India) P Ltd. The said case dealt with import of a system consisting of PXI controllers, Input/Output Modules (Modem or Control/Adaptor units), Signal converters, and chassis and its parts. Examination of the technical literature of the product revealed that PXI controller was designed for measurement and automation applications and was a system in itself consisting of chassis, system controller and peripheral modules. It consisted of Programmable Automation Controller, Sensor and Field Programmable Gate Array and it was found to be a regulating and controlling apparatus. Based on the technical literature on the equipment, the Apex Court held that Programmable Automation Controllers, whether embedded or otherwise, were in essence Programmable Process controllers. In the case of the facts before us, as per the technical opinion obtained by the appellant, while 3 items are Programmable Logic Controllers ( that is, Simatic 110A/S, 100U and 135/150 U), the other three, namely, Teleperm ME, Sicomp M and Sinaut 8 are automatic data processing machines. Thus the technical opinion relied upon by the appellant itself does not support their case for classification under CETH 9032. For the same reason, the reliance placed on this Tribunals decision in the Larsen & Toubro case also fails.
7. To sum up, we hold as follows:
(i) The programmable logic controllers manufactured by the appellant do not fall under CETH heading 90.32 as programmable process controllers nor do they fall under CETH 84.71 as automatic data processing machines;
(ii) All the seven products under consideration, Simatic S5 110A/s, Simatic S-5 135/150U, Simatic S-5 100U, Teleperm ME, Sinaut 8F, Sicomp M and Coros 2000 merit classification under CETH 85.37 as programmable logic controllers.
(iii) The duty demands confirmed classifying the products under CETH 85.37 are sustainable in law along with interest thereon in accordance with law.
(iv) Since the matter relates to a classification dispute, imposition of penalty is not warranted.
(Pronounced in Court on 20/12/2013) (Anil Choudhary) Member (Judicial) (P.R. Chandrasekharan) Member (Technical) */as 2