Customs, Excise and Gold Tribunal - Delhi
Modi Xerox Ltd. vs Collector Of Customs on 12 December, 1997
Equivalent citations: 1998(103)ELT619(TRI-DEL)
ORDER Lajja Ram, Member (T)
1. These are two appeals filed by M/s. Modi Zerox Ltd. (hereinafter referred to as a 'MZL'), being aggrieved by two separate orders, one passed by the Collector of Customs (Appeals), New Delhi, and the other passed by the Collector of Customs (Appeals), Bombay. Both the sides submitted that in both these appeals to be advanced and pleaded that they be taken up for hearing together. As in both the appeals common issues are involved, they were heard together and are being disposed of by this common order.
2. The matter relates to the applicability of the exemption Notification No. 59/88-Cus., dated 1-3-1988 (as amended) ('Notification No. 59/88-Cus.' for short) which provided for the concessional rate of customs duty, among other goods, to the fascimile equipment (referred to hereafter as 'fax machine'). In Appeal No. C/202/93-B, MZL had imported components for 400 numbers of fax machines at New Delhi. In the Bill of Entry the goods were described as "fax machine complete in KD". The assessment was sought under sub-heading No. 8517.40 of the First Schedule [as substituted w.e.f. 28-2-1986 by Section 2 of the Customs Tariff (Amendment) Act, 1985, to the Customs Tariff Act, 1975 (hereinafter referred to as the 'Tariff'), with the benefit of Notification No. 59/88-Cus. On examination the goods were found to be components. The Assistant Collector of Customs, New Delhi who adjudicated the matter observed that the benefit of Notification No. 59/88-Cus. was applicable to the equipment complete and not to the fax machines in completely knocked down (CKD) condition. The order passed by the Assistant Collector, Customs, New Delhi was confirmed by the Collector of Customs (Appeals), New Delhi who observed that it could not be concluded that the fax machine covered under Notification No. 59/88-Cus. included the equipment in knocked down condition.
In Appeal No. 244/93-B2 another consignment was imported at Bombay. On examination the goods were found to be the parts and sub-assemblies of fax machines. The Assistant Collector of Customs, Bombay observed that consignment was not being imported for direct stock and sale. He held that the benefit of Notification No. 59/88-Cus. could not be extended to the component parts and sub-assemblies of the equipment even if they were imported as sets. The Collector of Customs (Appeals), Bombay observed that the goods imported were only components for assembly of the machines. On the rest of common trade parlance the Collector, Customs (Appeals), Bombay observed that the components imported were not machines and that in the international trade the fax machines are not sold in unassembled form and that the goods imported did not have an essential character of the fax machine. He also observed that appellants were going to manufacture the fax machines from the parts imported by them and the fax machines so manufactured from the parts were going to be sold. The order passed by the Assistant Collector, Customs, Bombay was confirmed.
3. Both the appeals were heard on 24-9-1997 when Shri V. Sridharan, Advocate appeared for MZL in both the appeals. He advanced common arguments for both the appeals. It was his submission that the importers had placed orders for the import of fax machines in knocked down condition and that the articles imported were in complete sets for manufacturing 400 fax machines in respect of the consignment imported at Delhi and another 400 fax machines from the articles imported at Bombay. The goods were assessed as fax machines for the purposes of classification under the Tariff and that there was no reason as to why the goods imported should not be considered as fax machine for the purposes of exemption Notification No. 59/88-Cus. He argued that the general rules for the interpretation of the Tariff schedule apply to the exemption notifications also and that for the purposes of Notification No. 59/88-Cus., the fax machines imported in CKD condition were the fax machines. It was his submission that the trade practice of identifying the machine as in fully assembled condition was not relevant in these matters as for classification the goods had been taken as the complete machine. They had imported the fax machines in CKD condition as they wanted to save on prices. The Assembly charges were not included in the invoices. He referred to a number of decisions in support of his arguments (which will be discussed at appropriate places in this order).
4. In reply Shri A.K. Agarwal, SDR stated that the MXL had not imported the fax machines but had imported various parts and components for the manufacture of the fax machines. He referred to the orders-in-appeal in these matters and submitted that the eligibility or non-eligibility of any particular goods to the benefit of exemption notification had to be determined with reference to the form composition and the nature of the goods imported and the benefit of exemption could not be extended to the goods which were not otherwise covered by the description in the exemption notification. He pleaded that the rules of interpretation were not applicable to the exemption notifications which had to be construed strictly and the area of exemption could not be extended even when for classification under a particular Heading/sub-heading the rules of interpretation are made applicable. As regards the case law cited by the ld. Advocate for the appellants he submitted that the judgment had to be read as a whole and no particular sentence could be culled out to plead any particular proposition. He also referred to a number of decisions in support of his arguments (which will be discussed at appropriate places in this order).
5. We have carefully considered the matter and have given our due thought and consideration to the arguments advanced by the ld. Advocate for MZL and the ld. SDR for the respondent/Revenue. We have also gone through the case law cited by both the sides.
6. MZL had imported from Samsung Co. Ltd., Seoul, Korea, their collaborators, parts and components of the fax machines. As per packing details different parts and components were packed in different pallets. Packing was made part-wise and not machine-wise.
7. The goods were supplied in response to the purchase orders dated 1-4-1992 and 2-4-1992. One consignment was presented for assessment at Delhi Customs and the other, although originally destined for clearance at the Inland Container Depot, New Delhi, was sought to be cleared at Bombay. The Assistant Collector of Customs in his order-in-original had observed in para 2 as under:
2. As per the terms of the purchase Order No. MX/DB/288, these goods were originally destined for clearance at the Inland Container Depot, New Delhi. An earlier similar consignment had been refused the benefit of Notification No. 59/88 by the Assistant Collector of Customs, ICD, New Delhi. The consignee firm subsequently filed an amendment application seeking customs clearance and delivery of the subject import consignment at Bombay on the grounds that the same is to be warehoused at Hyderabad in order to meet urgent requirement from southern region.
In one Bill of entry the goods were described as "fax machine complete in KD", while in the other they were described as under:
"400 sets facsimile machines as per applicants P.O. No. MX/DB/288, dated 2-4-1992 in knocked down condition" on examination the goods were found to be components for manufacturing the fax machines.
8. Under exemption Notification No. 59/88-Cus., the goods specified in the table of the said notification, and falling within Chapters 84,85 or 90 of the Tariff, when imported into India, were exempted from a part of the customs duty otherwise leviable. In the Table at Sr. No. (VI)-5, the terminals - facsimile equipment was described. Other named goods under the category of terminals were tele-printer, payphones telephone instruments, telephone answering/recording machine, STD barring device, diallers and call monitors. It is noted that under this notification various type of equipment, systems sub-systems, sets, accessories etc. were described for the purposes of levying concessional rate of customs duty. The various articles had been referred to by specific names. It is seen that in certain entries there was a reference to the parts also. For example entry under Sr. No. VII - 12 read as under : "TV/Radio coverage mobile vans without chessies/vehicular parts". The accessories had been referred to in a number of entries.
9. The ld. Departmental Representative had contended that the exemption notification had to be considered strictly in terms of the expressed in used and that the area of exemption could not be extended by taking recourse to the general rules of interpretation or for any material which is beyond the scope of the exemption notifications. In support of his arguments he had relied upon a number of decisions in the case of Rajasthan Spinning and Weaving Mills Ltd. v. Collector of Central Excise, Jaipur [1995 (77) E.L.T. 474 (S.C.)] the Supreme Court had held that the exemption notification had to be construed directly and that liberal construction which inlarges the term and scope of the notification was not permissible. The extended meaning could not be assigned to the exempted goods. In the case of Collector of Customs, Bombay v. Shibani Engineering Systems [1996 (86) E.L.T. 453 (S.C.)] it had been held by the Apex Court that the exemption notification must be read plainly as an ordinary man would read it.
10. In both the cases the goods had been imported as individual parts in no pallet parts for one or more complete fax machines were packed. The packing was not such as to show that the parts were for any specific specified fax machine in unassembled condition. There was no Model No. or Brand name under which the goods imported were to be marketed if they were marketed as such. There was also no reference as to identify the manufacturer. The appellants had a Production Engineer who had certain goods imported were for manufacturing (Assembly) of the fax machines.
11. MZL had submitted that they had placed orders with the suppliers as to supply fax machines in knocked down condition and that the parts imported were in sets. Completely knocked down condition means "made or construct constructed so as to be capable of being knocked down or taken apart as for transportation : in parts ready to be assembled" [see Webster's New International Dictionary Vol. II Page 1371, and also words and phrases permanent edition Vol. 23 Page 560, referred to in Para 12 of the Supreme Court decision in the case of Union of India v. Tarachand Gupta and Brothers [1983 (13) E.L.T. 1456 (S.C.)]. Such goods are generally supplied /traded in knocked down condition for which it is not convenient to transport in complete or finished condition. It is not the option of the customer but a necessity of the trade. It is not for the customer to opt that the goods be supplied in knocked down condition but a compulsion both for the supplier and the customer to so supply and to so receive, depending upon the type of nature of the goods transacted. Fax machines are not the type of goods which are normally traded or transported in knocked down condition. They are not such goods as could not be supplied/traded in complete or finished condition. They were not the type of goods which are normally transported/traded in parts.
The Adjudicating authority in Appeal No. C/244/93-B2 had observed in para 16 of his order-in-original as under:
16. The contention of the importer that the consignment was imported in Knocked Down condition for convenience in handling, packing and transport does not appear to be tenable. The degree of disassembly for such purposes will not be to such an extent in normal circumstances. Further the normal trade practice as evidenced by other imports of Facsimile Equipments do not support this submission. The very fact that the consignment is not being imported for direct stock and sale, but was intended to go to the Rampur based factory of the importer, from where it would be repacked after assembly and then despatched to individual customers shows that the complete/assembled facsimile machines have a mode of packing for convenience in handling and transportation. The ratio of the Madras High Court judgment, in the case of T.I. Cycles is related to disassembly on account of case of transport and economy of freight costs. The ratio is, for the reasons mentioned above, inapplicable in the present case. The case of Indochem Electronics was also based on similar grounds, and is similarly inapplicable.
In Appeal No. C/202/93-B2 Collector of Customs (Appeals) had observed that there was no evidence of any major puforth by the appellants that the import of the goods in question in unassembled condition was only for convenience in packing, handling and transportation. The Collector of Customs (Appeals), Bombay in Appeal No. C/244/93-B2 in Para 38 of his order-in-appeal had stated that out of the parts imported the MZL were going to manufacture the fax machines. He had observed as under :
"The appellants are going to manufacture the machine from the assembly imported by them and then they are going to sell them."
12. The appellants had claimed that the goods imported by them were fax machine in unassembled form and that by virtue of Rule 2(a) of the Rules for interpretation of the Tariff, they should be treated as fax machine for the purposes of Notification No. 59/88-Cus.
13. The general rules for the interpretation of the Tariff lay down the principles for the classification of the goods in the Tariff. The basic rules is Rule 1 which lays down that for legal purposes the classification of the goods in the Tariff shall be determined according to the terms of the headings and the relative Section Notes and Chapter Notes. Resort to the rules other than Rule 1 can only be had when the goods could not be classified in terms of such headings and the notes. If the headings or the notes do not so require, other rules, other than Rule 1, will have no application. In these proceedings the appellants had not denied that the goods imported could be classified in terms of Rule 1.
Rule 2(a) of the general rules for the interpretation of the Tariff provides that "any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished provided that as presented the incomplete or unfinished article has the essential character of the complete or finished article. It shall also be taken to include a reference to that article complete or finished (or falling to be classified as complete or finished by virtue of this rule) presented unassembled or disassembled".
The items as imported and as presented for assessment were not incomplete or unfinished fax machine. They were parts, and the process of completion or finishing of the fax machine had not been undertaken by the suppliers. It could also not be said that the goods in the form imported were complete or finished fax machines in unassembled or disassembled condition. For the purposes of Rule 2(a) of the Rules for interpretation of the Tariff:-
the goods should be incomplete or unfinished having the essential character of the complete or the finished article.
or the goods should be (a) complete or finished or (b) incomplete or unfinished having the essential character of the complete or finished article, but are presented for assessment in unassembled or disassembled condition.
For unassembly or disassembly the goods have to be a collection of parts. While it is a fact that for convenience of transport, many machines and apparatus are transported in an unassembled state but unassembly docs not mean the individual parts.
According to the Section Note 2 of Section XVI of the Tariff, parts if are such that are specifically unchanged in any particular Tariff heading are to be classified in such specific heading; other parts if suitable for use solely or principally with a particular kind of machine or with a number of machines of the same heading, they are to be classified with the machine of that kind. Even when they are so classified they do not become a machine.
According to the explanatory notes with regard to unassembled machines, in terms of general interpretation Rule 2(a) [refer harmonised commodity description and coding system (HSN) explanatory notes in Vol. 3 Section XVI Page 1132], for convenience of transport many machines and apparatus are transported in an unassembled state. Fax machines are not such type of machine which for the convenience of transport are required to be transported in an unassembled state. As we have already observed above it is not the desire of the customer but the convenience of transport which is going to determine as how the goods should be transported. When the convenience of transport so demand the goods though a collection of parts are classifiable as being the machine. In this case the individual parts were imported and not the fax machine in unassembled form.
14. For the purposes of Rule 2(a) of the general rules for the interpretation of the Tariff the articles presented unassembled or disassembled means articles the components of which are to be assembled either by means of simple fixing devices (screws, nuts, bolts etc.) or by riveting or welding, for example, provided only simple assembly operations are involved. Fax machines are a sophisticated electronic equipment and could not be manufactured/assembled by simple fixing devices. In the fax machine the documents are transmitted over long distances by wire or radio. It involves scanning, modulation, recording, synchronization, transmission, recording etc. The modems are used for translating out going data into forms suitable for transmission over telephone or radio channels. The importers Production Engineer had at the time of examination of the goods had certified that the items in exact quantities were required for manufacturing (assembly) of the fax machines. Even when assembly was made from the components it was done by the Production Engineer of the appellants.
15. In case of Koron Business Systems Ltd. v. Union of India [1992 (58) E.L.T. 48 (Bombay)], the Bombay High Court had held that assembly of components purchased from the market amounted to the process of manufacture of the photocopying machine. The High Court had observed as under :
"The items though purchased in the market are assembled while manufacturing the copiers machine and, therefore, the process of assembling amounts to manufacture".
16. As already briefly referred to above, the principles as contained in the general rules are for the classification of the goods imported. Rule 1 of the general rules provides that for legal purposes classification of the goods shall be determined according to the terms of the headings and any relevant section or chapter notes. It is only when such headings or notes do not help in determination of the classification that the provisions of the general rules will apply. It is thus clear that the terms of the headings and the relevant section and chapter notes are paramount. They are the first consideration in determining the classification. If the goods are clearly classifiable in terms of the heading read with section and chapter notes then the scope of the heading could not be extended to include the goods which otherwise might have been included by reason of the general rules. There is no dispute that the goods imported were parts and it was only by reason of the operation of the general rules that it was claimed that the description in the exemption notification should be extended to include the goods imported. We find that Section Note 2 of Section XVI specifically refer to the classification of the parts. Section Note 2 of Section XVI is extracted below:
2. Subject to Note 1 to this Section, Note 1 to Chapter 84 and to Note 1 to Chapter 85, parts of machines (not being parts of the articles of Heading No. 84.84,85.44,85.45,85.46 or 85.47) are to be classified according to the following rules:
(a) Parts which are goods included in any of the headings of Chapter 84 or 85 (other than Heading Nos. 84.09, 84.31, 84.48, 84.66, 84.73, 84.85, 85.03, 85.22, 85.29, 85.38 and 85.48) are in all cases to be classified in their respective headings.
(b) Other parts, if suitable for use solely or principally with a particular kind of machine, or with a number of machines of the same heading (including a machine or Heading No. 84.79 or 85.43) are to be classified with the machines of that kind or in Heading No. 84.09,84.31,84.48,84.66,84.73, 85.03, 85.22, 85.29 or 85.38 as appropriate. However, parts which are equally suitable for use principally with the goods of Heading Nos. 85.17 and 85.25 to 85.28 are to be classified in Heading No. 85.17;
(c) All other parts are to be classified in Heading No. 84.09,84.31,84.48,84.66, 84.73, 85.03, 85.22, 85.29 or 85.38 as appropriate or, falling that, in Heading No. 84.85 or 85.48.
The goods as imported were admittedly for use solely and principally with the fax machines. As per the Section Note 2 extracted above they are classifiable in the same heading as for the fax machines. There is no ambiguity with regard to the classification in terms of the heading read with the relevant section note and thus the general rules were not applicable. In the case of Sat Telecommunications Pvt. Ltd. v. Collector of Customs, Bombay [1997 (19) RLT 629 (Tribunal)] the Tribunal had observed that the classification had to be determined in terms of Section Notes and that Note 1 to Chapter 98 had precedence over interpretative Rule 2(a) of the general rules. Paras 8,9,10 & 11 from that decision are extracted below.
8. From the above reading, it is clear that Chapter 98 will have a precedence over the applicability of any other specific heading. It is true that by applying Interpretative Rules 2(a), the goods which are in sub-assemblies and in the nature of uncomplete or unfinished article having essential character of the complete or finished article is required to be classified as complete or finished article. But this Rule 2(a) is subject to Rule 1 for the purpose of classification of notes. Rule 1 states:
"1. The titles of Sections, Chapters and sub-chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require."
9. Thus, the classification has to be determined in terms of Section notes or Chapter notes. Therefore, Note 1 to Chapter 98 has precedence over Interpretative Rules 2(a) in the present case [See Voltas Limited v. Collector of Customs -1991 (56) E.L.T. 569].
10. Admittedly, the items are not telephone sets in the assembled sets. They are sub-assemblies in the nature of parts and such parts of Chapter 85 are clearly included in the Chapter 98 and hence the classification adopted by the learned Collector is justified and is in accordance with law.
11. As regards the applicability of the Rule 2(a) to the terms of Notification, the matter is no longer res integra. In the case of Sipani Automobiles Ltd., it has been made very clear that Interpretative Rules cannot be relied for the purpose of interpreting an exemption Notification and that an exemption Notification is required to be strictly construed according to the plain reading of words used therein. The Tribunal has examined all the case law on the subject while holding this view.
17. Both the sides have referred to the case law in support of their rival contention with regard to the applicability of the general rules, to the exemption notifications. The ld. DR had also cited a number of decisions in support of his contention that the general rules were applicable only for the classification of goods and not for extending the benefit of exemption notification. In the case of Vivek Re-rolling Mills v. Collector of Central Excise, Chandigarh [1994 (73) E.L.T. 660 (Tribunal)] the Tribunal had observed that the interpretative rules were not relevant for the purposes of interpretating notifications. In the case of Winter Misra Diamond Tools Ltd. v. Collector of Central Excise, Jaipur [1996 (83) E.L.T. 670 (Tribunal)] the Tribunal had observed that the exemption notification had to be strictly interpretated in accordance with the words of the notification there under and the intention thereof; rules for interpretation of schedule are primarily meant for interpretation of Tariff; however wordings used in notification if same as the ones used in rules or notes or headings or sub-headings then the doctrine of harmonious construction was to be applied. In the case of Nectar Beverages Pvt. Ltd. v. Union of India [1994 (70) E.L.T. 172 (Karnataka)], the Karnataka High Court had observed that the rules of interpretation are to be considered as aids to construction of statutes and not meant to control and stullify the law. In the case of Keltron Power Devices Ltd. v. Collector of Customs, Cochin [1987 (28) E.L.T. 93 (Tribunal)] it had been observed that the resort to the interpretative rules is permissible for determination of classification but not for determining eligibility to the benefit of notification. In the case of Guest Keen Williams Ltd. v. Collector of Customs, Calcutta [1987 (29) E.L.T. 68 (Tribunal)] it had been observed that the Section Notes and the rules of interpretation are explicitly intended to be for the interpretation of the Tariff and its various headings. It would not be proper to apply those notes and rules to the interpretation of the notification.
It is noticed that Rule 1 of the general rules is of general application providing that for legal purposes classification shall be determined according to the terms of the headings and any relative section or chapter notes. Exemption notifications are part of the Tariff and there could be no doubt that Rule 1 of the general rules had its application for determination of the classification even when such classification is required for the goods described in the exemption notification. Thus for the purposes of the classification of the goods in terms of the particular heading/sub-headings are described in the exemption notification the classification had to be first determined in terms of headings of the Schedule read with applicable section/chapter notes. Resort to the general rules other than Rule 1 can be had only when the classification is not possible in terms of the headings/sub-headings read with applicable section/chapter notes. In the facts and circumstances of this case we consider that the appellants had sought to classify the goods in terms of the general rules while the classification in terms of the expressed language in the exemption notification could be settled within the ambit of the heading/sub-headings read with applicable section/chapter notes, without any resort to the general rules.
18. In Appeal No. C/202/93-B2 the Collector of Customs (Appeals) had come to finding that the goods imported were fax machines in CKD condition. We have already extracted Section Note 2 Under Section XVI of the Tariff. We have also observed that there was no ambiguity in the classification of the parts in terms of the relevant heading of the Tariff read with the applicable Section Note. The parts were to be classifiable in the same heading as for the fax machine; it does not mean that the parts become the fax machine. The Collector of Customs (Appeals) had further observed that the Notification No. 59/88-Cus. did not exempt parts or components and that the fax machine covered in the said notification did not include the equipment in knocked down condition. Similarly in Appeal No. C/244/93-B2 the Collector, Customs (Appeals) had held that the components imported were to be assessed under their appropriate heading of the Tariff. Paras 40 and 41 from the order-in-appeal are extracted below :
40. Shri Sridharan, Advocate, stated that, the Lower Authority, had accepted the classification of the goods, under Heading 8517.40 of the CTA, but had denied them exemption, under Notification No. 59/88. The Party's above contentions does not appear, to be correct, in light of the following excerpt, reproduced from the Order, passed by the Lower Authority:
"In light of the discussions above, I held that the benefit of Notification No. 59/88-Cus., dated 1-3-1988 cannot be extended to components, parts and sub-assemblies of Facsimile Equipment, even if imported as complete sets. The assessment should be done accordingly."
41. The Asstt. Collector, has held that, the goods are component parts and sub-assemblies, of facsimile machines, and ordered assessment, accordingly. This means that, the components imported by the Appellants, are to be assessed, under the appropriate Heading under CTA, 1975 (as amended).
19. In the case of Union of India v. Tarachand Gupta and Brothers [1983 (13) E.L.T. 1456 (S.C.)], the Supreme Court had held that the parts and accessories of motor cycles and scooters imported in CKD condition will be treated as import of parts and accessories only. In the case of Collector of Customs, Calcutta v. Mitsuny Electronic Work [1987 (30) E.L.T. 345 (Calcutta)], it was alleged by the Customs that the articles imported were complete Colour Television sets in ready-to-assemble condition. The importers had contended that they could import parts and accessories even if when put together they could make a complete television set. The Calcutta High Court observed that the importers might have purchased all the articles but that could not be a ground for withholding the goods alleging that complete Television sets had been imported. In the case of Susha Electronic Industries v. Collector of Customs [1989 (39) E.L.T. 585 (Tribunal)] it was held that the components could not by themselves constitute colour television sets.
20. The ld. Advocate had relied upon a number of decisions in support of his arguments. In the case of Khandelwal Metal and Engineering v. Union of India [1983 (12) E.L.T. 292 (Delhi)], the Delhi High Court had observed that while broadly in common parlance brass scrap and copper scrap would mean separate and distinct articles in the market, it is because of the notes in Section XV of the Tariff that brass scrap must be deemed to be covered by copper scrap. The reference in this decision is to the Section Notes. In the case of Gujarat State Fertilisers Co. v. Collector of Central Excise [1997 (91) E.L.T. 3 (S.C.)] the Supreme Court had held that the Chapter Notes of the chapters of the Central Excise Tariff Act, 1985 referred to in the notification had to be read as a part and parcel of the said notification. In this decision also reference to the chapter notes. In the case of Western Refrigeration Pvt. Ltd. v. Collector of Customs, Bombay [1995 (77) E.L.T. 673 (Tribunal)] it had been observed that when wording of the two entries was similar, then the goods satisfying the entry of a Tariff item are deemed to have also satisfied the wording of the notification. This decision also refers only to the two entries one in the Tariff and other in the notification. In the case of Naffar Chandra Jute Mills Ltd. v. Asstt. Collector, Central Excise [1993 (66) E.L.T. 574 (Calcutta)] it had been observed that the Rules 2(b) and 3(b) of the general rules of interpretation to Central Excise Tariff were not confirmed to statutory tariff schedule alone but were applicable to the exemption notification as well. As we have observed above the general rules other than Rule 1 will come into picture only when the goods are not otherwise classifiable in terms of the headings read with Section/Chapter notes. As per explanatory notes under Rule 1 of the general rules, the Tariff sets out in systematic form the goods handled in international trade. It groups those goods in sections, chapters and sub-chapters which have been given titles indicating as concisely as possible the categories or types of goods they cover. It has been explained that in many cases, however, the variety and number of goods classified in a Section or Chapter are such that it is impossible to cover them all or to cite them specifically in the titles. It has been further explained that the classification shall be determined according to the terms of the headings and any relative section or chapter notes. Were the headings or the chapter notes do not cover then only the other general rules will be applicable. The goods in question are clearly classifiable without recourse to any further consideration of the interpretation rules. In the case of Eagle Flask Industries v. Collector of Central Excise [1991 (53) E.L.T. 65 (Tribunal)] the Tribunal had observed that an article which was considered as an article of plastics for Tariff heading should also be considered as article of plastics for the purpose of notification. The matter related to the composite article made out of combination of plastic and non-plastic material. It was a case of mixture or combination of more that one material which contained 51-57% of plastic material. The goods were not found to be classifiable in terms of Rule 1 of the general rules. In the case of NORSK Data (I) Ltd. v. Collector of Customs [1992 (57) E.L.T. 666 (Tribunal)] the matter related to the classification of the running computer sheets which were considered as constituting a printed book for the purpose of Heading No. 49.01 and the Tribunal observed that it could also be considered as printed book for the purposes of Notification No. 139/90-Cus., dated 20-3-1990. In this judgment also the classification was between the Heading No. 49.01 of the Tariff and the notification. Similarly in the case of Shanti Lal Doshi Pvt. Ltd., Bombay v. Collector of Central Excise, Bombay [1991 (56) E.L.T. 263 (Tribunal)] the matter related to the gummed paper and its eligibility to the benefit of Notification No. 49/87-C.E., dated 1-3-1987. The matter had been remanded by the Tribunal.
21. The appellants had referred to the Ministry's Circular No. 16/88-CX. 3, dated 10-8-1988. The matter in that circular related to the classification and dutiability of composite article of plastics and non-plastic material. In these proceedings we are not concerned with any made up article but with the parts which could make an article. Even in the Tariff, parts remain parts and are not taken as the machine which is made up of such parts, although if they are solely and principally used with any particular machine, they are to be classified under the same heading/sub-heading as related to such specific machine.
22. The Collectors Tariff Conference with regard to brass scrap and the applicability of Notification No. 156/77-Cus., dated 16-7-1977 referred to common parlance test and had agreed that brass was understood as an alloy of copper and was not copper waste and scrap for the purposes of Notification No. 156/77-Cus., dated 16-7-1977 and had observed that so long as the article satisfied the condition stipulated in Notification No. 97/77-Cus., dated 25-6-1977 about classification under Heading No. 74.01 /02 of the erstwhile Customs Tariff, it was eligible to the benefit of exemption notification. The condition in the Notification No. 59/88-Cus., dated 1-3-1988 was mainly with reference to the description of the goods. In such a situation it is the description which is specific, and the eligibility had to be determined with reference to the goods described in the Table in the notification.
23. We have analysed the facts involved in both the appeals in the perspective we consider appropriate to the situation. In the interest of justice we have gone into the basic question involved. We have also dealt with the precedence of the Section Notes over the general rules and in the facts and circumstances of this case have come to a finding that the situation was entirely covered by the relevant Section Notes. We have viewed that the resort to the general rules other than Rule 1 is permissible only when the goods are not otherwise classifiable in terms of the headings read with applicable Section/Chapter Notes. This is clear from the Rule 1 of the general rules itself which is extracted below :
1. The titles of Sections, Chapters and sub-chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the following provisions:
The Collector of Customs (Appeals), Bombay in Para 44 of his order had also referred to this aspect of the matter in the following terms :
44. I have already held that the goods would have to be classified under the appropriate heading first and then only the question of exemption is to be considered. The judgments relied upon by the Appellants, in a nutshell, refer to this method only. Even in the Khandelwal's case, it was the department who argued that the Rules of Interpretation will apply to an exemption notification, when the importers contended to the contrary. Since I am following the method of classification of the goods first, under the CTA and then application of a notification to the said classified goods. I do not intend to discuss any of the judgments, of the Hon. CEGAT, Hon. High Court or Hon. Supreme Court, relied upon in this context, by the Appellants.
In these cases goods imported were parts which were sought to be treated as fax machines for the purposes of the exemption notification. We have considered that the individual parts meant solely for the fax machine will be classifiable with the fax machine by virtue of Section Note but were not to be treated as fax machine. In para 34 of his order the Collector, Customs (Appeals), Bombay had observed as under:
For the purpose of the classification of the impugned goods, we have to examine whether they fall in any of the four categories mentioned above and the answer is no. Therefore, in my opinion, Rule 2(a) of the General Rules, of the Interpretation, of the Schedule, would not apply to the impugned goods.
We have also taken note of the nature of the goods to be manufactured from the parts imported. In para 38 of his order-in-appeal the Collector, Customs (Appeals), Bombay had observed as under :
38. Now, the question arises, why the Appellants have imported the impugned goods in a Semi Knocked Down Condition. The reasons given by them, is that, they are for merely taking to Godown, at Hyderabad, for re-sale, there from fully built machines. In other words, the Appellants are going to manufacture the machines, from the assemblies imported by them and then they are going to sale them.
24. Of course in these proceedings no arguments were advanced with regard to the activities undertaken subsequent to the import, as how the parts were disposed of and how the goods manufactured with the parts imported were marketed.
25. In these proceedings we are concerned only with the applicability of the exemption Notification No. 59/88-Cus. In view of the above we have not discussed all the case law which was referred to by both the sides.
26. In Appeal No. C/202/93-B2 the Collector of Customs (Appeals), New Delhi had held as under:
Examining this contention, I find that the relevant Notification No. 59/88-Cus. mentions in the table therein 'Facsimile equipment (Sl. No. 5 of vi)'. The crux of the adjudication officer's argument on the one hand and the crux of the appellants argument on the other hand is the rationale of the case law being quoted by them. The appellants during the hearing have particularly referred to the Tribunals' order No. 577/84-B, dated 27-7-1984. Examining this, I find that this Judgment was of the nature of 'in personnem' in particular reference to Notification No. 208/81, and in particular consideration that "the term 'components' have been used in its widest amplitude and not with particular reference to the purport of that term under Customs Tariff". I, therefore, find that the rationale of this Judgment cannot be said to be of the nature of 'in rem' and hence the appellant's argument fails. Similar is the position of the other case law referred to by the appellants and I find that none of the case covers specific facts or issue involved in this case. The appellants have also emphasised that Department itself had argued in case of M/s. Khandelwal case 1983 (12) E.L.T. 292 that "the Rules of interpretation will apply to an exemption when the importer contends to the contrary" and that this view was accepted by the Supreme Court and Delhi High Court. I find that the appellants argument on this point is misplaced in view of the simple fact that here the importer, is not contending to the contrary; the more important fact is that the facts and circumstances of that case were entirely different and one of issues decided therein was that the brass scrap imported in that case was held to fall under exemption Notification 97/77 and not under Notification No. 156/77 on the ground that Brass scrap was not a 'master alloy' and that it was comprehended within the expression 'copper waste and scrap' in the then Heading 74.01/02. I find that nothing of that case is relevant to the present case.
In Appeal No. C/244/93-B2 the Collector of Customs (Appeals), Bombay in Para 46 of his order had held as under :
Once it is admitted that facsimile machines were normally sold as facsimile machines, in fully assembled condition, then what has been imported is in an "abnormal" condition. Reference to Rule 2(a) of the General Rules of Interpretation of CTA, 1975, cannot be solely extended to interpret the scope of an entry, in an exemption notification. The rules are for interpretation, for the purposes of classification of a commodity, under the Customs Tariff. Only after the classification of the goods is determined, the question of applicability of notification arises. Since I have already held that the impugned goods are components, for the facsimile machines, they would therefore, be appropriately classifiable under the appropriate Heading, for components, and only that notification, if any, will be applicable, which will be applicable to the components, of facsimile machines.
27. After examining the situation in the correct perspective we agree with the view that the benefit of Notification No. 59/88-Cus. was not available to the goods imported in both the case.
28. After giving our careful thought and consideration to the matter we do not find any merit in both these appeals. The appeals are rejected. Ordered accordingly.