Customs, Excise and Gold Tribunal - Mumbai
Gestetner (India) Ltd. vs Commissioner Of Customs on 7 October, 2005
ORDER Krishna Kumar, Member (J)
1. Heard both sides. The issue relates to classification of goods declared as multi-functioning printer, copier, fax, scanner Model No. 1802 and 4502 under Heading 8471.60 as output unit of ADPM. It is seen from the catalogue of machine model 1802, the machine is described as affordable office digital document production in one compact machine which can print, copy and fax. The catalogue for machine model 4502 describes machine as (digital invention for multi functional productivity) which can print, copy, fax and scan. Thus, these machines are multi functional which function in stand alone modes as well as in conjunction with ADPM falling to be classified under Heading 8472 as office machines.
2. Both the Lower Authorities after hearing submissions of the appellant and after going through the documents, classified the aforesaid machines looking to their various features and functions under sub-heading 8472.90. The said classification is under challenge in the present appeal. The appellants want classification under Heading 8471.60. The contention of the ld. Counsel for the appellant inter alia is that according to Note 3 of Section XVI of the Customs Tariff, machines design for the purpose of performing two or more complementary or alternative functions are to be classified according to the principal function; it is not in dispute that both the models under consideration are multi function machines in that they perform printing, copying/or scanning; it is also in dispute that the copying function also involves the use of the print junction, unlike the case of a photocopier; thus the printer and copier both use the printing function of the machine; thus printing is the principal function of these machines; further, 75% to 80% of the cost of the various components that go into making of the machines are towards the print function/print engine; thus in terms of the function of the machines and also the value of the components thereof, it is established beyond doubt that the principal function is printing: once, it is admitted that the principal function is printing then by virtue of Note 5(D) to Chapter 84, the machine has to be classified under Heading 84.71.
3. Note 5(D) is reproduced as under:
Printers, keyboards, X-Y co-ordinate input devices and disk storage units which satisfy the conditions of paragraphs (B)(b) and (B)(c) above, are in all cases to be classified as units of heading 84.71.
4. Note 5(B)(b) provides that the printer should be connectable to the central processing unit and Note 5(B)(c) provides that the printer should be able to or deliver data in a form which can be used by the ADPM system; the multi function machines under consideration certainly connectable to the central processing unit of the ADPM and they can accept data from the ADPM and perform the printing function; this has been accepted in the order-in-original; in view of this, Section note 5(D) takes precedence and read with Note 3 to Section XVI, it is established beyond doubt that the multi-function machines under consideration have to be classified as output units of automatic data processing machines under Heading 8471.60. In support of his contention, the ld. Counsel for the appellant has relied on the decision of Xerox Modicorpn. Ltd. wherein the Tribunal has held that multi-functional machines are classifiable under Heading 8471. He also submitted that similar is the decision in the case of MX Software Services Ltd. wherein again the Tribunal has held that multi functional machine fall under Heading 8471.
5. The ld. DR appearing on behalf of the revenue submitted that there is no dispute on the fact that the machine is a copier which is admitted by the appellant. Besides, it is also admitted that it is a multi functional units capable of performing functions of a scanner, copier/printer and fax (optional) in stand alone mode as well in conjunction with ADPM. These machines are so equipped that even if not connected to external ADPM, they may perform their functions. In other words, these machines can work independently irrespective of the fact whether they are connected to external ADPM or not. He also submitted that such machines are generally used in the office for making large number of copies. The main machines are also capable of scanning and printing large print copies with varying speeds. Chapter note 5(B)(c) clearly states that ADPM may be in the form of system consisting of a variable number support units and with subject to para (E), each unit is to be regarded as being a part of a complete system if it meets all of the conditions mentioned in chapter note 5(c), (b). Chapter note 5 (C) states that separately presented units of ADPM ought to be classified under Heading 8471. Chapter note 5(D) refers to printing, keyboards which satisfies the condition of para (B)(b), (B)(c) of chapter note 5(B). He also contended that since the machines are primarily used in commercial use in offices and shops, they fall within the heading 8472.90.
6. After hearing both sides, perusal of the records and the case laws relied on by the ld. Counsel, we find that both the Lower Authorities have given detailed reasoning in their order classifying the machines in question under Heading 8472.90 and distinguished the cases relied on by the ld. Counsel on facts that the cases relied on by them are not applicable to the facts and circumstances of the present case because the machines involved in this case are having stand alone function print, copy, fax, scan etc. which are not present in the decisions relied on by the ld. Counsel. From the catalogue and literature of the machines produced by the appellant, it is not in dispute that the machines are multi function machines and they can work in stand mode independently without being connected to ADPM. Therefore, from the various features and functions as given in the literature, we find that the machines have correctly been classified under Heading 8472.90 by both the Lower Authorities. The literature itself shows that the machines are multi function document productivity which can print, copy, fax, scan etc. Besides, the literature also reflects that it is all in one digital office document solution, exceptional digital print quality, document server, network laser printing, network compatible, smart net monitor office in printing, powerful document management, top quality network scanning, touch screening LCD control penal, superb finishing options, software solutions, e-cabinet, fast high specification faxing etc. There is no specific entry for such a machine. Therefore, looking to these features, we have no doubt that the Lower Authorities have done the correct classification. We, therefore, upheld the order of the ld. lower authorities and dismiss the appeal filed by the appellant.
(Pronounced in Court on _ _ _) Sd/-
(Krishna Kumar) Member (Judicial) S.S. Sekhon, Member (T)
7. I have seen and perused, with great efforts and concentration, the order prepared by ld. Member (Judicial), after the efforts of 17 months or so. It pains me and I can only blame my inability which is stopping me and persuading me to accept this labour put in by my ld. brother. I am therefore recording the following order.
8. The appellants are aggrieved by an order of the Commissioner of Customs (Appeals), who, vide the impugned order, confirmed that the imported digital printers having multi functions models No. 1802 and No. 4502 imported by Bill of Entry 253159 dt. 2-4-2002 were not classified under Heading 8471.60 as claimed but were required to be classified as other office equipment under Heading 8472.90 of the Customs Tariff.
9. I find that it is an accepted position that both models consist of
(a) digital laser printer with a high speed resolution; and
(b) a digital document scanner.
which has got the capacity to scan and instantaneously to reproduce the scanned material by a print out using the digital printer portion of the machine. Both the models have a part connectivity and capability of being connected to an external computer. The scanned documents are capable and can be stored as a computer file (in digital format) on computer so connected and in the case of model 4502 such storage in digital form can also be in the machine itself on the hard disc in it. The data so stored can be retrieved as desired. There is also a facility installed in model 4502 which with an optional modem attached can receive and send fax messages through telephone line and the computers. The machines though stand alone can be used as a printer or as a network printer connected to a computer network and inspection of the catalogue describing functions performed revealed that while fax function is optional, printing, scanning and copying functions are inbuilt.
10. The appellants rely upon the decision of the two member bench of this Tribunal in the case of Xerox Modicorp. Ltd. v. CC - , wherein the Bench considered a similar imported machine which had printing, scanning, fax and copying functions incorporated in it to be classified under Heading 8471.60 after considering that the product with its inbuilt software etc. was specially designed for connectivity to Automatic Data Processing (ADP) units through parallel port cables available in the machine would be rendering the machine essentially and principally designed as a printer for computer attachments and the same would merit classification under Heading 8471.60 as an input-output unit of a ADP machine. The Bench also upheld the argument that consideration of Chapter Note 7 to Chapter 84 of the Customs Tariff as well as Note 5 N(B) read with Note 5(B)(b) and (c) to the said Chapter and after perusing the relevant HSN Explanatory Notes as relied upon by the Advocate in that case, as also considering the expert opinion given for the classification of similar products by US authorities upheld the classification under Heading 8471.60 after perusal of the Tribunal's order on another such machine in the case of MX Software Services Ltd. v. CC, Mumbai - . No reasons have been arrived at by the lower authorities especially Commissioner (Appeals) as to why the Tribunal decisions classifying similar goods as input-output printers of a computer under Heading 8471.60 for machines having similar functions should not be classified thereunder & be taken to residual heading 8472.90 as other office machines. A perusal of the headings 8472 and 8471, 8470 and 8469 would indicate that office machines as understood in the Customs Tariff based on HSN Explanatory Notes would be classified in one of these three headings. Heading 8472 is a residuary heading and would be applicable only after the disputed entity is not covered in any one of the earlier headings. In the present case, two Benches of this Tribunal have found imported machines having similar functions to be classifiable under Heading 8471.60. The machines under import are having computer adaptability and storage, hard disc etc. with the relevant software. Therefore, they cannot be accepted to be principally designed as an ordinary printer/photocopier but are specifically designed to function as machines to work in tandem with a computer. Nobody with the commercial sense would buy a computer adapted printer and work it without utilising the additional facilities inbuilt of working it with a computer. That does not make commercial sense. In commerce, a machine has to be understood to be principally designed with the commercial sense also in mind. It is therefore found that this machine is principally designed as an input-output printer to process the digital data being generated in the office environment now a days; therefore it has to be classified under Heading 8471.60 when Heading and HSN Notes under that heading are considered. No material has been led to show any other classification arrived at by the Tribunal or any other higher appellate body contrary to classification under Heading 8471.60 for similar machines.
11. Following in judicial discipline the settled classification under Heading 8471.60 cannot be unsettled. If it is required to be unsettled and the machines are to be upheld under Heading 8472.90, then a reference was required to be made to a Larger Bench. I find no reasons made out to make such a reference. I find no reasons to differ with the classification under Heading 8471.60 and I would follow the earlier two decisions of this Tribunal and would set aside the concurrent findings of the two lower authorities which have ignored and not applied these decisions.
12. A perusal of the HSN Notes under Heading 8472 reveals that the heading is a residuary in nature and not only it should be applied as the last resort, but it covers all office machines not covered by the preceding three headings as is evident from the HSN Explanatory Notes thereunder. The types of machines illustrated in HSN Explanatory Notes under 8472 do not induce me to bring this computer control and computer defendant machine to be classified thereunder.
13. The application of Chapter Note 5(E) as relied upon by the lower authorities cannot be applied in this case since machines in question do not perform the data processing functions only. The application of interpretative Rule 3
(c) cannot be invoked in the facts of this case since vide interpretative Rule 1 itself, the goods would get classified under Heading 8471.60 when read with Chapter Note 5 D of Chapter 84 and Note 3 of Section XVI.
14. Reliance placed by the ld. Advocate for the appellant on the US Customs Rulings would have to be considered to be more than persuasive value to classify such multi function machines under Heading 8471 and this particular machine under Heading 8471.60.
15. In view of the above, I would set aside the orders and allow the appeal.
Sd/-
(S.S. Sekhon) Member (Technical) Difference of Opinion
16. In view of the findings arrived at, this matter is required to be placed before the Hon'ble President to refer the matter to a third member to resolve the difference of opinion. The question for the said reference purpose is:
Whether, in the facts and circumstances of this case, the machines under import are to be classified under Heading 8472.90, as arrived at by ld. Member (Judicial), or whether in the facts and circumstances of the present import, the binding nature of the rulings in the two decisions cited supra would render the machines to be classified under Heading 8471.60, as de termined by Member (Technical).
I propose the matter may be heard by the Hon'ble President.
Sd/- Sd/-
(Krishna Kumar) (S.S. Sekhon)
Member (Judicial) Member (Technical)
Jyoti Balasundaram, Vice-President
17. I have heard both sides on the difference referred to me.
18. The goods in question are digital laser printer with a high speed resolution and a digital document scanner. The scanner has the capacity to scan and instantaneously to reproduce the scanned material by a print out using the digital printer portion of the machine. They have a part connectivity and capability of being connected to an external computer. There is no dispute that the machines in question can work independently of being connected to external automatic data processing machines. However, they have computer adaptability and storage, hard disc etc. with the relevant software. The Revenue seeks classification under Customs Tariff Heading 8472.90 as office machines for the reason that they do not satisfy condition of Note 5(B) to Chapter 84 which provides that "Automatic data processing machines may be in the form of systems consisting of a variable number of separate units and subject to paragraph (E) below, a unit is to be regarded as being a part of a complete system - if it is of a kind solely or principally used in an automatic data processing system. [The condition (b) and (c) of Note 5B to Chapter 84 stipulate that the unit is to be regarded as being a part of the complete system if it is connected to the CPU either directly or through one or more other units and it is able to accept or deliver data in a form which can be used by the system and there is no dispute that these two conditions are satisfied in this case.] However, as per Note 5 (D), printers, keyboards, X-Y co-ordinate input devices and disk storage units which satisfy the conditions of paragraphs (B) (b) and (c) above, are in all cases to be classified as units of heading No. 84.71 and Note 5(D) is not governed by Note 5(E) which sets out that machines performing a specific function other than data processing and incorporating or working in conjunction with an automatic data processing machine are to be classified in the headings appropriate to their respective functions or, failing that, in residual headings. Therefore, what is required to be seen for determination of the correct classification is whether the goods are either printers or keyboards or X-Y coordinate input devices or disk storage units. The contention of the appellants is that they are printers. Let me examine the correctness of this contention. The goods are multi function digital printers Model No. 1802 and 4502. Both consist of digital laser printer and digital document scanner. Both models have the capability of being connected to an external computer; the document scanned can be printed using the digital printer portion of the machine on the spot. The scanned documents can also be stored as a computer file in digital form in a separate external computer and in Model 4502, the scanned documents can be stored in digital form in the hard disc inbuilt in the machine. The scanned documents stored in digital form either in the computer or in the machine itself can be retrieved and taken as a print out. When a modem is installed in the digital printer, it can receive and send fax through a telephone line. The machines can be used as a stand-alone printer or as a network printer, connected to a computer network. The stand of the appellants that 75% to 80% of the cost of the various components is towards the print function/print engine has not been controverted. The printer and copier both use the printing function of the machine. Thus I agree with the contention of the appellants that printing is a principal function of these machines.
19. The Tribunal's decision in the case of Xerox Modicorp. Ltd. v. CC and in MX Software Services Ltd. v. CC are directly on the classification of similar imported multi function machines wherein it was held that the product with its inbuilt software etc. was specifically designed for connectivity to Automatic Data Processing units. In those cases also the multi function machines could function independently of being connected to external ADPM and the Tribunal held that such machines fell for classification under CTH 8471.60. There is no distinction between these two orders of the Tribunal and the present case, as the machines involved in all the cases including the present one are multi function machines which have connectivity and capability of being connected to an external computer and can also function in stand alone mode and in these circumstances there is no reason to differ from the earlier decisions. I, therefore, agree with the ld. Member (Technical) that the machines in question fell for classification under CTH 8471.60.
20. The file is now returned to the Referring Bench for passing the majority order.
Sd/-(Jyoti Balasundaram) Vice-President Final Order In view of the majority decision, the appeal is allowed by classifying the machines in question under Chapter Heading 8471.60 of the Customs Tariff Act, 1975.
(Pronounced on 7-10-2005)