Custom, Excise & Service Tax Tribunal
Varroc Engineering Pvt. Ltd. vs Cc (Import) Nhavasheva on 11 January, 2019
IN THE CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
APPEAL NO: C/586/2012
Arising out of: Order-in-Appeal No. 149-Gr.VB-/2012-JNCH-
IMP-132 dated 21/03/2012
Passed by: Commissioner of Customs(Appeal), Raigad
Appellants - Represented by:
Varroc Engineering Pvt. Ltd. Shri Prashant Patankar,
Consultant
Versus
Respondent - Represented by:
CC (Import), Nhava Sheva Shri Manoj Kumar, Assistant Commissionr (AR) Date of hearing 01/11/2018 Date of pronouncement 11/01/2019 CORAM Hon'ble Shri Ajay Sharma, Member (Judicial) Hon'ble Shri Sanjiv Srivastava, Member (Technical) ORDER NO: A/85067 / 2019 Per: Ajay Sharma The present appeal has been filed by the Appellant from the impugned order dated 21.03.2012 passed by the Commissioner of Customs (Appeals) Mumbai-II, JNCH, Sheva.
2. The issue to be decided in this appeal is whether Liquid Crystal C/586/2012 2 Devices cut to special shapes are covered under heading 9013 as claimed by the Appellant or under heading 8714 as per the department?
3. The brief facts of the matter is that the Appellant had filed a Bill of entry on 03.11.2010 for clearance of Liquid Crystal Display - LCD under CTH 90138010 and claimed benefit of notification 24/2005 ( Sr. No. SR. 29). On examination it was found by the department that the goods were complete devices used for motorcycle and therefore the benefit of notification no. 24/2005 (Sr. No. 29) and the classification under CTH 9013 was not applicable for the said item. The Appellant waived that the show cause notice and after hearing, the Adjudicating Authority vide Order-in-Original dated 09.02.2011 ordered that goods " Liquid Crystal Display" is a specific part of motorbike and therefore the claimed CTH 90138010 was rejected and it were classified under CTH 8714990 as parts of accessories of vehicle.
4. On Appeal, the learned Commissioner (Appeals) vide impugned order dated 21.03.2012, while relying upon the decision of the Tribunal in the matter of Secure Meters Ltd. vs Commissioner of Customs, New Delhi; 2004 (168) ELT 63 (Tri.- Delhi), rejected the appeal filed by the appellant. In the impugned order, the learned Commissioner has also observed that the Appellant has not produced C/586/2012 3 any drawing/design of dashboard and of its parts before the Adjudicating Authority in support of their contention that the said part is nothing more than a Liquid Crystal Device cut to required shape.
5. We have heard learned Consultant for the Appellant and Learned Authorised Representative for the Revenue and perused the record. So far as the observation of the learned Commissioner that the Appellant has not produced any drawing/design of the goods in question before the Adjudicating Authority is concerned, we find from the record that the same was very much produced before the Adjudicating Authority and the said authority in its order-in-original dated 09.02.2011 has recorded that after perusing the examination report and the catalogue, the goods are complete device specially used for motorcycle and therefore, the classification under CTH 9013 is not available. Therefore, it is factually incorrect to say that the Appellant has not produced the relevant document before the original authority in support of their contention.
6. The Appellant is a manufacturer of dashboards for motorcycles and the imported LCD is used in the manufacturing of the said dashboards. Since the Appellant claims that the LCDs fall under Chapter Heading 901380.10 and the argument of the Revenue is that these are rightly classified under Heading 871499.90, we may first take note of these Chapter Headings:
C/586/2012 4 Tariff Item Description of goods (1) (2) 9013 Liquid crystal devices not constituting articles provided for more specifically in other headings;
lasers, other than laser diodes; other optical appliances and instruments, not specifies or included elsewhere in this Chapter 9013 80 - Liquid devices, appliances and instruments 9013 8010 --- Liquid crystal devices (LCD) 8714 Parts and accessories of vehicles of heading 8711 to 8713 8714 2090 - Other 8714 99 -- Other 8714 9990 --- Other According to the ld. consultant for the Appellant, the LCDs imported by the Appellants are without electrical connections, presented in piece or cut to special shapes and consist of a liquid crystal layer sandwiched between two sheets of plastic. The same has also been explained in HSN Explanatory Notes to Heading 9013 and the relevant part of the same is extracted as under:-
"This heading includes:
(1) Liquid Crystal devices consisting of a liquid crystal layer sandwitched between two sheets or plates of glass of plastic, whether or not fitted with electrical connections, presented in the piece or cut to special shape and not constituting articles described more specifically in other headings of the Nomenclature."
C/586/2012 5
7. We have also gone through the design/photographs produced by the ld. consultant for the Appellants in support of his submission and after examining we find that the said part is nothing more than a LCD cut to required shape.
8. The HSN explanatory notes to Heading 8714 specifies two conditions to be fulfilled so as to make it classified under Heading 8714, which are as under:-
"This heading covers parts and accessories of a kind used with motorcycles (including mopeds), cycles fitted with an auxiliary motor, side-cars, non-motorised cycles, or carriages for disabled persons provided the parts and accessories fulfill both the following conditions:
(i) They must not be identifiable as being suitable for use solely or principally with the above-mentioned vehicles; and
(ii) They must not be excluded by the provisions of the Notes to Section XVII (see the corresponding General Explanatory Note)."
While going though the case records we are of the view that the LCD's do not fulfill any of these two conditions. These LCDs can be used for other purposes also viz. computer monitors, television, instrument panels, video games, clocks, watches etc. and therefore those are not suitable to be used solely or principally with the articles of Chapter 87 and therefore it can't be classified under CTH 8714. Merely because they were used as parts in dashboards of motorcycle, the could not be classified under Heading 8714. It cannot be disputed C/586/2012 6 that LCDs are specifically provided in tariff item 9013. Only conditions is that such LCDs should not "constitute articles" provided more specifically in other headings. We find that the LCD imported by the Appellant did not constitute such "article" which is more specifically provided in other headings. The only reason for including the goods under Chapter Heading 8714 is that LCDs were to be used in the motorcycles. We find that tariff entry 8714 does not pertains to LCD but parts and accessories of vehicles of heading 8711 to 8713. In nowhere include LCD or the dash board of Motorcycle specifically.
9. So far as the decision of this Tribunal in the matter of Secure Meters Ltd. (Supra) is concerned, relying upon which the Commissioner has rejected the appeal of the Appellant, we have been informed that the said decision of this Tribunal was challenged before the Hon'ble Supreme Court and the Hon'ble Supreme Court vide its order dated 05.05.2015 in the matter Secure Meters Ltd. vs Commissioner of Customs, New Delhi reported in 2015 (319) ELT 565 (SC) set aside the order of the Tribunal and allowed the appeal filed by the Appellant therein and held that LCDs imported by the said Appellant were classifiable under chapter heading 9013.80. In that matter the component involved was LCD for the purpose of using the same in the manufacture of electricity supply meters (energy meters) and the Hon'ble Supreme Court has held that LCDs imported by the Appellant therein classified under Chapter Heading 9013.80 i.e. C/586/2012 7 devices, appliances and instruments and not under 9028.90 which provides for the parts and accessories of electricity meters. The Hon'ble Supreme Court while deciding the issue has also gone into the definition of LCD and observed as under:-
"14. In Bloomsbury Dictionary of 'Science for Everyone', LCD and LED (Light Emitting Diode) are described in the following manner :
"LCD AND LED The two principal methods of forming numbers and letters on instruments such as calculators and digital watches. A basic pattern of seven bars is used to form the digits 0 to 9 and several letters. To form other letters and symbols, more than seven bars are required.
In the LED (Light-Emitting Diode), the bars are made of a substance that permits an electric current to flow through in one direction only. A substance used in this way is called a diode. As the current flows, the diode gives off red, blue, yellow, or other coloured light, depending on the compound of which it is made. For example, Gallium Phosphide (GaP) emits a green glow. Electric circuits in the instrument selectively turn on the current to the bars to form the various numbers and letters.
In the LCD (Liquid Crystal Display), the bars are made of liquid crystals. These are a kind of hybrid material, not quite a liquid and not quite a solid. They can't be poured readily, as with liquids, nor are their molecules locked in place, as with true solids. But the molecules can be rotated slightly by an electric current. When no current flows, the bars are not noticeable, because they reflect light to the same extent as the rest of the display surface. But when a current flows through a bar, its molecules rotate and its ability to reflect light is reduced. That bar appears darker than the area around it and forms part of a number or letter.
You can produce a similar darkening effect, called polarization, with Polaroid sunglasses. Hold the glasses several centimeters from one eye and look through one lens at a shiny, sunlit surface. Rotate the lens and observe the darkening.
Liquid crystals can be made to order to do a particular job. For example, one kind of crystal is sensitive to slight temperature changes. It is used in thermometers where the number representing the temperature appears, then disappears, to be succeeded by a higher or lower number as the temperature changes."
C/586/2012 8 The basic pattern of digits or letters which is formed in these LCDs is as follows:
0 1 2 3 4 5 6 7 8 9 A C E F H I J L P U As is clear from the above, in the LCD the bars are made of liquid crystals which are neither liquid nor solid entirely, but a hybrid material of the two. The molecules are rotated slightly by electric current making a particular bar darker than the area around it thereby forming part of a number or letter.
The Hon'ble Supreme Court further held as under:-
17. In Collector of Central Excise v. Delton Cables Ltd.
& Anr. - (2005) 12 SCC 284 = 2005 (181) E.L.T. 373 (S.C.) this Court has held, while interpreting Notes 2(a) and 2(b) of Chapter Heading 85, which is virtually to the same effect, that Note 2(b) would apply only if the items in question were not specifically classifiable under their respective headings. Para 4 of the said judgment, to this effect, reads as under :
"4. It is clear from a reading of the two clauses to the section note that clause (b) would only apply once it was found that the items in question were not specifically classifiable under their respective headings. As has been clearly said by the Collector (Appeals) "from the sequence of the paragraphs given under Section Note 2 it is clear that the question of switching over to Section Note 2(b) can arise only after ensuring that the parts are not covered by Section Note 2(b) [sic Section 3 Note 2(a)] which begins with the expression "other parts"
meaning thereby that the parts which are not covered by Section Note 2(a) would be considered for coverage by Section Note 2(b). One cannot therefore, directly jump over to Section Note 2(b) without exhausting the possibility of Section Note 2(a)."
18. The aforesaid view of ours gets strengthened from Part-III of Chapter Notes to Chapter 90. We may mention here that after studying the Chapter Notes, Note 2 whereof is reproduced above, there are certain guidelines provided under the caption 'General'. Part-I thereof deals with General Content and Arrangement of the Chapter; Part-II deals with Incomplete or Unfinished Machines, Apparatus, etc.; and Part-III deals with Parts and Accessories. We are reproducing here this portion in order to show how it supports the view which we have proposed to take as indicated above :
"(III) Parts and Accessories Subject to Chapter Note 1, parts or accessories identifiable as suitable for use solely or principally with the C/586/2012 9 machines, appliances, instruments or apparatus of this Chapter are classified with those machines, appliances, etc. This general rule does not, however, apply to :
(1) Parts or accessories which in themselves constitute articles falling in any particular heading of this Chapter or of Chapters 84, 85 or 91 (other than the residual Headings 84, 85, 85.48 heading 84.14; transformers, electro-
magnets, capacitors, resistors, relays, lamps or valves, etc., remain classified in Chapter 85; the optical elements of Heading 90.01 or 90.02 remain in the headings cited regardless of the instruments or apparatus to which they are to be fitted; a clock or watch movement is always classified in Chapter 91; a photographic camera falls in Heading 90.06 even if it is of a kind designed for use with another instrument (microscope, stroboscope, etc.) (2) Parts or accessories suitable for use with several categories of machines, appliances, instruments or apparatus falling in different headings of this Chapter are classified in Heading 90.33, unless they are in themselves complete instruments, etc., specified in another heading (see paragraph (1) above)."
19. This contains a general explanation to Chapter Note 2 and mentions that where parts or accessories identifiable as suitable for use solely or principally with the machines, appliances, etc., they are to be classified with those machines/appliances. However, what is important is that immediately thereafter it is clarified that this general rule would not apply in certain circumstances. Sub- para of the above takes things beyond the pale of any doubt by making it crystal clear that those parts and accessories which in themselves constitute 'article' falling in any particular heading of this Chapter, the general rule will not apply and said article would fall in that particular heading. To demonstrate this, examples which are given, eminently fit into the case at hand.
20. The aforesaid view of ours gets further cemented on going through Explanatory Notes issued by the World Customs Organization. Volume 4 of the Second Edition (1996), which covers Chapters 85-97, contains explanatory note in respect of item mentioned at 90.13, with which we are directly concerned herein. Relevant portion thereof reads as under:
"90.13 - Liquid crystal devices not constituting articles provided for more specifically in other headings : lasers, other than laser diodes; other optical appliances and instruments, not specified or included elsewhere in this chapter.
9013.10 - Telescopic sights for fitting to arms;
periscopes; telescopes designed to form
parts of machines, appliances,
instruments or apparatus of this Chapter
or Section XVI
9013.20 - Lasers, other than laser diodes
C/586/2012
10
9013.80 - Other devices, appliances and
instruments
9013.90 - Parts and accessories
In accordance with Chapter Note 5, measuring or checking optical appliances, instruments and machines are excluded from this heading and fall in Heading 90.31. Chapter Note 4, however, classifies certain refracting telescopes in this heading and not in Heading 90.05. It should, moreover, be noted that optical instruments and appliances can fall not only in Headings 90.01 to 90.12 but also in other headings of this Chapter (in particular, Headings 90.15, 90.18 or 90.27). This heading includes :
(1) Liquid crystal devices consisting of a liquid crystal layer sandwiched between two sheets or plates of glass or plastics, whether or not fitted with electrical connections, presented in the piece or cut to special shapes and not constituting articles described more specifically in other headings of the Nomenclature.
xx xx xx xx"
As per this, LCD would be covered by 'other devices' mentioned in 9013.80. That is precisely the case of the appellant.
21. The upshot of the aforesaid discussion leads to the conclusion that the view taken by the Tribunal in the impugned judgment is unsustainable in law. We, thus, allow the appeal, set aside the orders of the authorities below and hold that LCDs imported by the appellant were classifiable under Chapter Heading 9013.80."
10. Therefore, in view of the facts mentioned herein above and also in view of the law laid down by the Hon'ble Supreme Court the appeal filed by the Appellant is allowed.
(Pronounced in Court on 11/01/2019)
(Sanjiv Srivastava) (Ajay Sharma)
Member (Technical) Member (Judicial)
arch