Customs, Excise and Gold Tribunal - Delhi
Collector Of Central Excise vs Bpl Systems And Projects Ltd. on 26 July, 1993
Equivalent citations: 1994(69)ELT688(TRI-DEL)
ORDER G.A. Brahma Deva, Member (J)
1. These are four appeals filed by the Department against the respondents involving the similar issue and, therefore, they were heard together and are being disposed of by this common order.
2. The point to be considered in all these cases is whether PLCC Equipment (Power Line Carrier Communication Equipment) manufactured by the respondents is classifiable under Tariff Item 8517 or under T.I. 8541 or alternatively under Heading 8537.
3. The respondents filed a classification list claiming the item in question classifiable under Chapter 8541. The Assistant Collector held that the transmission apparatus such as PLC equipment using the principle of carrier current line system is classifiable under 8517:00. In appeals, Collector (Appeals) allowed the appeals accepting the contentions of the party observing that 8541 is more appropriate classification because the panels include modules which are prepared of items like diodes, transistors etc. which are mentioned under 8541. Aggrieved by the said orders the Department has come before us by way of these appeals.
4. We have heard Shri M.S. Arora, learned JDR for the Revenue and Shri J.B. Koshy, learned Advocate for the respondent.
5. The relevant tariff items, viz., 8517, 8541 and 8537 for the sake of convenience of reference are reproduced below :-
"85.17 8517.00 Electrical apparatus for line telephony or line telegraphy, in-
cluding such apparatus for carrier-
current line systems.
85.41 8541.00 Diodes, transistors and similar semi-conductor devices; photosen-
sitive, semi-conductor devices, in-
cluding photo-voltaic cells whether or not assembled in modules or made up into panels;
light emitting diodes; mounted piezo-electric crystals.
85.37 8537.00 Boards, panels (including numeri-
cal control panels), consoles, desks, cabinets and other bases, equipped with two or more apparatus of heading No. 85.35 or heading No. 85.36, for electric control or the dis-
tribution of electricity, including those incorporating instruments or apparatus of Chapter 90, other than switching apparatus of head-
ing No. 85.17".
6. Shri Arora while assailing the orders-in-appeal submitted that Collector (Appeals) has not given valid reasons for classifying the item in question under T.I. 8541 and on the other hand the conclusion arrived at by the Assistant Collector is on sound principle in classifying the same under 8517. He said that power line carrier communication equipment is basically designed for this purpose of telecommunication by using the principles of superimposing high frequency current, on the current of law frequencies normally transmitted over electrical power lines. He referred to the description given in the Catalogue produced by the respondent wherein it was described that :-
"The PSP Series 6515 Powerline Carrier System is designed to provide either single or multiplexed voice grade channels for transmission of speech and or audio tones used for functions such as telemetering supervisory control protective relaying and other information over high voltage transmission lines and insulated static lines. Its application may be extended to cables and open wire line exposed to high-voltage transmission lines".
He contended that the high voltage net work is adapted to high frequency communication system so as to permit specific inter-connection and the equipment contains all the essential modules of an apparatus for line telephony or line telegraphy and since such Heading 8517 specifically includes such apparatus for carrier current line system apart from electrical apparatus for line telephony or line telegraphy, the item is correctly classifiable under 8517. He said that 8541 refers to Diodes, transistors and similar semi-conductor devices. The item in question cannot be considered as semi-conductor and in view of the specific and inclusive nature of this type of apparatus for carrier current line system should be classified under 8517. T.I. 85.37 was neither dealt with by the Collector (Appeals) nor the item was classifiable under the said item as the T.I. 85.37 refers to different items. He referred to the decision of the Supreme Court in the case of Jain Exports (P) Ltd. and Anr. [1992 (61) E.L.T. 173 (SC)], wherein it was held that "once on analysis we reach the conclusion that 'coconut oil' of every description was covered in paragraph 5 of appendix 9, the quasi-judicial decision ceases to be relevant." He also relied upon the decision of the Tribunal in the case of Filtronics Ltd. v. Collector of Central Excise [1989 (43) E.L.T. (457)] wherein it was held that R.F. inductors, chokes, peaking coils and AM/FM transformers and MW/SW oscillator coils and antenna coils and RF/IF coils are classifiable under 85.04 and not under Heading 85.29 though Electrical transformers, static convertors and inductors are specified in T.I. 8504. Particularly he referred to the relevant portion in para 25 of the said order which reads as under :-
"There is no doubt that the electromagnetic field by which the desired changes in the frequency are brought about by the two sets of coils namely primary and secondary are by virtue of flow of the electric current in these coils. These, therefore, can be taken to be the answer to the description of the electrical transformer. In the fact of facts on record it has, therefore, to be held that the term transformer covers both the line transformers in the power lines and also those used in the transmission and reception of electromagnetic waves. The term transformer being a technical nomenclature, its meaning has necessarily to be understood in the sense in which those who are in this technical field. We, therefore, hold that all those coils manufactured by the appellants which have a primary and a secondary are covered by the term electrical transformer assessable under Tariff Heading 8504.00."
He contended that HSN classification and description also shows that other apparatus for carrier current line system is classifiable under sub-heading 8517.40. Further he said that T.I. 85.17 is inclusive definition and the word 'includes' is often used in interpretation clauses in order to enlarge the meaning of the words or phrases occurring in the body of the statute. When it is so used, these words and phrases must be construed as comprehending not only such things as they signify according to their nature and import but also those things which the interpretation clause declares that they shall include, relying upon the ratio of the decision in the case of Commissioner of Income Tax, Andhra Pradesh v. Taj Mahal Hotel, Secunderabad (AIR 1972 SC 168) and 'when the object of the Legislature in using wider words is clear and free of ambiguity, the rule of construction in question cannot be pressed into service', referring to the decision of the Supreme Court in the case of The State of Bombay and Ors. v. The Hospital Mazdoor Sabha and Ors. (AIR 1960 SC 168).
7. Shri J.B. Koshy while explaining the nature, description and function of the item in question with reference to technical note, diagram of the equipment and catalogue, submitted that equipment is specifically designed and manufactured for electrical control and distribution of electricity through high voltage transmission line. The equipment consists of various modules assembled on panels as made as cabinet. The modules contain diodes, transistors and other similar semi-conductor devices and made up into panels. The main function of the equipment is protection relying that means if there is a fault in the transmission line, the lines are tripped at both ends so that damage does not result to other equipments. It also does the function of telemetry as it will record generation of electrical power at the generating station and record the electrical power by receiving stations and thus ensure transmission and distribution of electrical energy. The protection relying and telemetry are above the speech frequencies. An incidental function is a supervisory control through speech between two stations to check whether lines are working. The equipment is exclusively used by the Electricity Boards and equipments are never utilised for line telephony or line telegraphy. He said that similar question came up for consideration before the Kerala Sales Tax Appellate Tribunal and Kerala High Court subsequently regarding the question whether the PLCC equipment is a sound transmitting equipment including telephone, loud speakers, spare parts thereto coming under Item 13 of the Ist. Schedule to the Kerala General Sales Tax or under Item 26. After going through the facts and evidence of expert witnesses, the Tribunal found that it is not a sound transmitting equipment. While upholding the findings Kerala High Court conclusively held that it is not an equipment like telephone or telegraph or sound transmitting equipment especially the predominant use is concerned. He drew our attention to the finding portion of the Sales Tax Appellate Tribunal with reference to the functioning of the equipment in question based upon the evidence of expert witnesses which reads as follows :-
"The Power Line Carrier Communications Equipments sold by the appellant Company have been standardised. I am one of the Members of the P.L.C. System Standardisation Committee. The appellant Company has given a description of the equipments in reply to the notice issued by the Deputy Commissioner. This reply gives a proper description from laymen's point of view. It gives a fairly good description. It is not correct to say that one cable is specifically set apart for communication among the transmitting stations. There are telephones of the P & T Department in the various sub-stations and generating stations and low despatch centre at Kalamassery. The main purpose or function of the equipment is not transmission of sound but various signals for protection of the high tension lines and electrical equipments and also for telemetering and telecontrol.
For speech, if necessary, there can be an attachment. It is not like an ordinary telephone. Here we are making use of high frequency carriers. Actually, the name "Power Line" is used only because the carrier system is used over the high tension power line. Normally if we want to communicate sound, a normal telephone has to be used. This phone can be attached to this carrier system. Ordinary telephones made use of low frequency. But in the power line system, high frequency is used. The equipment can handle other inputs also like teleprotecrion, telemetering and telecontrol. In ordinary telephone, there are equipment to convert sound waves into electrical impulses and reconvert electrical impulses into sound waves. In the case of P.L.C., the electrical impulses, so converted, are used to modify high frequency carrier lines which are transmitted over the power lines. So, the P.L.C. equipments are such that they do not handle the sound wave directly. That is the main difference. I can give a clear example of a power lines equipment, namely the line trap or wave trap. This is inserted directly into the high tension line and carriers of the high tension power. So, the stand that separate conductor is used is not correct. This equipment is used only by the Electricity Board. It is used to control the power system by monitoring the various parameters at the Central Load Despatch Stations. So, it is actually a control equipment so far as the power system is concerned. Speech is only an ancillary aspect. It is used only if the station is not approachable. It is a minor subsidiary function."
He said that on seeing the nature and function of the PLCC equipment it will not come under 8517 as claimed by the Department. To come under 8517 it would be an electrical apparatus for line telephony or line telegraphy including such apparatus for carrier current line system. Hence, it should be an electrical apparatus for line telephony and line telegraphy or similar apparatus. The word including such apparatus refers to similar electrical apparatus for line telephony or line telegraphy and the main function should be transmission of speech from one point to another and it is purely an electrical apparatus. The harmonious commodity coding system for 8517, 8537, 8541 and 8543 referred to other apparatus means only such apparatus like telephonic or telegraphic apparatus. He drew our attention to the explanation of Special Apparatus for Carrier-Current Line System in Section XVI under Heading 85.17/18 under H.S.N. reads as under :-
"This system, used in both telephony and telegraphy, is based on the modulation of an optical source or of an electrical frequency by impulses representing speech, messages or other data. The apparatus of this group consists, in the transmitting section, of oscillators, modulators etc., and in the receiving station, of filters, demodulators etc. This group includes combined modulatorsdemodulators (modems)."
He contended that since equipment consists of various modules which contain diodes, transistors and other similar semi-conductor devices and made up into panels, and is classifiable under 8541 as Tariff Item 8541 refers to diodes. Chapter Note 5 of Chapter 85 specifically states that for the classification of the articles defined in this Note, Heading Nos. 8541 and 8542 shall take precedence over any other heading in the Schedule which might cover them by reference to, in particular, their functions. Alternatively he argued that if the item in question cannot be classifiable under 8541, it can be classifiable only under Heading 8537 since 8537 specifically covers boards, panels etc. used for electric control or the distribution of electricity other than switching apparatus of Heading 8517. It is not correct to say that issue with reference to classification under Tariff Item 8537 was not there before the authorities below, inasmuch as it was there from the beginning as it was raised in reply to the show cause notice and also raised before the Collector (Appeals). Since the PLCC equipment consists of various electronic components mounted on printed circuit boards and predominant and general use of this PLCC's panel is for electric control and distribution of electricity used by the Electricity Boards in high voltage transmission line. It is classifiable under 8537 and since other than switching apparatus of Heading No. 8517 is classifiable under Heading 8537. He said that to understand the scope of Tariff Item 8537, Item 8535 is relevant which reads as under :-
"85.35 8535.00 Electrical apparatus for switching or protecting electrical circuits, or for making connections to or in electrical circuits (for example, switches, fuses, lightning arresters, voltage limiters, surge suppressors, plugs, junction boxes), for a voltage exceeding 1,000 volts."
He contended that primary function of the article should be taken into consideration while deciding the issue of classification, relying upon the ratio of the decision of the Supreme Court in the case of Atul Glass v. Collector of Central Excise, reported in 1986 (25) E.L.T. 473 and the decisions of the Tribunals in the cases of Collector of C. Excise v. Modern Roofings Ltd., reported in 1990 (45) E.L.T. 174 and Meteor Satellite Ltd. v. Collector of C. Excise [1990 (45) E.L.T. 697].
8. We have carefully considered the submissions made by both sides and perused the records including technical write up filed by the respondent. To a query from the Bench whether the item in question is electric goods or an electronic equipment, it was urged on behalf of the department that these two terms are synonymous and no distinction has been made in Chapter 85 and the item should be classified as per the description given in the Tariff entry. Since PLCC is a communication equipment for transmitting signals and not for protecting the electrical circuits. This should be classified under 8517 as 8517 refers to including such operators for carrier current line system. The respondent's counsel maintained that PLCC equipment is an electronic equipment involving signal processing at very low current level, but, however, said that without going into that controversy, the main function of the item should be taken into consideration and, accordingly, it should be classifiable either under 8541 or under 8537 but not under 8517. We find that Chapter Heading starts with electrical machinery and equipments and parts thereof without mentioning electronic in the heading but the term electronic also used in the sub-headings and in the explanation notes to the Chapter 85. On going through the technical literature with reference to powerline communication carrier and Electronics Information and Planning Volume 16, No. 7 April 1989 published by Department of Electronics, we find that electronic devices make use of components like Transistors, Diodes, Integrated Circuits etc. in addition to Resistors, Capacitors, Inductors, Transformers and Relays. Electrical Circuits use only the latter group for their functioning. Electronic devices are lower power Devices. Electrical Devices are high powered. Electronic devices make use of vacuum tubes (Valves) or semi-conductors and Insulators. Some devices are Electrical and at the same time Electronic in the sense that the power part will be electrically operated. We find that the Kerala Sales Tax Appellate Tribunal and the High Court of Kerala have classified PLCCs as electrical goods in the absence of any definition of electrical goods in the Kerala General Sales Tax Act, 1963. But for us to classify PLCC it is not very relevant whether it is electric or electronic in view of the submissions made by both sides with reference to facts and relevant tariff entry. On going through the nature and description and in view of the finding of Kerala Sales Tax Appellate Tribunal, it is clear that the main function of the equipment is transmission of various signals and it cannot be said to be a sound transmitting equipment. We also take note of the observation made by the Kerala Sales Tax Tribunal that telephone is not part of the system and it has to be attached for sending transmission. By taking into consideration the predominant and general use of the PLCC panel is for electric control and only the distribution of electricity used by Electricity Board in high voltage transmission line, we are of the view that it cannot be called as an electrical apparatus for line telephony or line telegraphy or similar apparatus. The word including under Tariff Entry 8517 refers to First Part and such apparatus which means that only similar electrical apparatus that is used in line telephony or line telegraphy. Since the system is not for telephonic or telegraphic use, it cannot be classified under 8517 as it was rightly argued by the respondent's counsel. When once we come to the conclusion that this item cannot be classified under 8517, the next question arises whether the item is classifiable under 8541 or under 8537. When once the item is ruled out under 8517 further classification of the item either under 8537 or 8541 is not of much significance since there is no duty difference as rate of duty is one and the same under both the tariff entries. However, taking into consideration the nature and functional character of the item as predominant and general use is for electric control and distribution of electricity in high voltage transmission and in view of the description given in Tariff Entry 8537, it is more appropriately classifiable under Heading 8537.
9. In the view we have taken, all the four appeals are disposed of in the above terms. The Cross objections filed by the respondent are also disposed of accordingly.
Sd/-
(G.A. Brahma Deva) Member (J) 9-9-1992 I agree with learned Member 0udicial).
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(Jyoti Balasundaram) Member (J) 23-7-1993 S.K. Bhatnagar, Vice President With due respects to Hon'ble Judicial Member my views and orders in the matter are as follows :
10. I have perused the technical material including the extracts from Electronics Information and Planning Volume 16, No. 7, April 1989 published by Department of Electronics and Chapter 12, Power-line Carrier Application of Electrical Transmission and Distribution Reference Book by Central Station Engineers. The McGraw Hill Dictionary of Scientific and Technical Terms I find that PLCC are classified under line communication equipment. Further, in the introduction to Power-line Carrier Application, it is mentioned that "At first, carrier was used for voice communication only, but its applications subsequently expanded to include a vide variety of functions such as protective relaying, telemetering, supervisory control, and others. Today, carrier is indispensable to the operation of most power systems. Power-line carrier offers rapid and dependable communication for inter-office business and for load despatching. Carrier channels are used for the remote supervision and control of many important substations and for automatic load control of numerous large generating units."
11. Similarly, the word "Electronics" means "pertaining to electron devices or to circuits or systems utilising electron devices, including electron tubes magnetic amplifiers, transistors and order devices that do the work of electron tubes."
12. It is also well known that many modern electrical machinery/ equipment etc. are these days equipped with electronic devices which could be used for operating them or regulating or controlling the system and the most modern power line carrier systems are also electronically operated and controlled. The presence of such electronic devices as a part of the system does not necessarily change the character of the machinery/equipment or the system as a whole.
13. In the Central Excise Tariff, the title of Chapter 85 indicates that it covers electrical machinery and equipment and parts thereof. The word electrical has apparently been used in a generic sense here and a reading of the Chapter notes and the headings of this Chapter together brings it out that the word electrical has been used here to include;
(a) Electronic machinery/equipment and parts thereof; as also
(b) Non-electronic electrical machinery and equipment and parts there- of; and
(c) A combination of the above two.
14. The Chapter Note 5 relating to the Heading 85.41 and 85.42 refers specifically to (a "Diodes, transistors and similar semi-conductor devices the operation of which depends on variations in resistivity on the application of an electric field;
(b) "Electronic integrated circuits and microassemblies" are:
(i) Monolithic integrated circuits in which the circuit elements (diodes, transistors, resistors, capacitors, interconnections, etc.) are created in the mass (essentially) and on the surface of a semi-conductor material (doped silicon, for example) and are inseparably associated;
(ii) Hybrid integrated circuits in which passive elements (resistors, capacitors, interconnections, etc.), obtained by thin or thick-film technology and active elements (diodes, transistors, monolithic integrated circuits, etc.), obtained by semi-conductor technology are combined to all intents and purposes indivisibly, on a single insulating substrate (glass, ceramic, etc.). These circuits may also include discrete components;
(iii) Microassemblies of the moulded module, micromodule or similar types, consisting of discrete, active or both active and passive components which are combined and interconnected."
And mentions that "For the classification of the articles defined in this Note, Heading Nos. 85.41 and 85.42 shall take precedence over any other heading in the Schedule which might cover them by reference to, in particular, their function.
6. Records, tapes and other media of Heading No. 85.23 or 85.24 remain classified in those headings, whether or not they are cleared with the apparatus for which they are intended."
15. Whereas, 85.35, 85.36,85.37 and 85.41 read as follows:
"85.35: Electrical apparatus for switching or protecting electrical circuits or for making connections to or in electrical circuits (for example, switches, fuses, lightning arresters, voltage limiters, surge suppressors, plugs, junction boxes), for a voltage exceeding 1,000 volts.
85.36: Electrical apparatus for switching or protecting electrical circuits, or for making connections to or in electrical circuits (for example, switches, relays, fuses, surge suppressors, plugs sockets, landholders, junction boxes), for a voltage not exceeding 1,000 volts.
85.37 : Boards, panels (including numerical control panels), consoles, desks, cabinets and other bases, equipped with two or more apparatus of heading No. 85.35 or heading No. 85.36, for electric control or the distribution of electricity, including those incorporating instruments or apparatus of Chapter 90, other than switching apparatus of heading No. 85.17.
85.41: Diodes, transistors and similar semi-conductor devices; photosensitive semi-conductor devices, including photo-voltaic cells whether or not assembled in modules or made up into panels; light emitting diodes; mounted piezo-electric crystals."
16. Whereas Heading 85.17 covers "Electrical apparatus for line telephony or line telegraphy, including such apparatus for carrier-current line systems."
The use of the words including such apparatus for carrier current line system is significant. It shows that apart from an electrical apparatus for line telephony or line telegraphy, apparatus for carrier current line systems is also included under this Heading and in view of the generic use of the word electrical it would include such apparatus which incorporated some electronic devices as well. I, therefore, hold that the items in question are electrical devices which constitute an integral part of a carrier current line system.
17. The fact that these days carrier current line system could be used for more than one purpose does not affect this basic position.
18. The Headings 85.35, 85.36, 85.37 get excluded in the face of a specific mention of such systems in 85.17.
19. The Heading 85.41 covers the electronic devices mentioned therein as they are whether or not assembled or made up into panels but once they are integrated into a carrier current line system, then they become part thereof and hence are required to be classified under Heading 85.17 and the Chapter Note 5 does not come to their rescue.
20. In view of the above position, I find that learned DR's detailed technical and legal exposition is correct. I therefore, accept the Department's appeals and dismiss the cross-objections.
ORDER In view of the majority opinion, it is held that the item is classifiable under Heading 8537. Appeals and Cross objections are disposed of accordingly.