Customs, Excise and Gold Tribunal - Delhi
Vintron Electronics P. Ltd. vs Commr. Of C. Ex. on 8 November, 2002
Equivalent citations: 2003(151)ELT589(TRI-DEL)
ORDER Krishna Kumar, Member (J)
1. This is an appeal against the order dated 10-2-2000 passed by the Commissioner of Central Excise (Appeals), New Delhi. The issue relates to classification of add on cards.
2. Briefly stated, the facts of the case are that the appellants are engaged in the manufacture of "add on cards" and cleared the same under Chapter Heading 8471.00 of Central Excise Tariff Act, 1985 at the rate of 15% ad valorem. In view of audit objection, the classification of add on cards was proposed to be 8473.00 chargeable to duty @ 20% ad valorem in view of HSN Chapter Heading 8473 which covers parts/accessories which are interchangeable parts/devices (page 1401 of HSN). It further clarifies that an assembly consisting of a number of electronic micro-circuits mounted on appropriate shaped carrier and designed as a part of a digital data processing machine storage falls under Heading 84.73. The appellants were issued two show cause notices for differential duty as under :
SCN dt. 30-12-94 for Rs. 7,51,244/- for June, 94 to August, 94. SCN dt. 25-5-95 for Rs. 15,00,335/- for Dec. 94 to 16th March, 95. The aforesaid demands were confirmed in view of the Supreme Court judgment in the case of Ballarpur Industries v. Assistant Commissioner reported in 1995 (76) E.L.T. 499 (S.C.) holding that a demand for the past period subject to limitation of Section 11A is legal. Regarding classification, the adjudicating authority relied upon the case of Indcheom Ltd. v. CCE reported in 1997 (95) E.L.T. 580 (T). The Commissioner (Appeals) has upheld the order of the adjudicating authority subject to requantification of the amount of duty due from the appellants. In view of Supreme Court decision in the case of Cotspun Ltd. reported in 1999 (113) E.L.T. 353 (S.C.). Being aggrieved, the appellant has filed the appeal on the ground that the adjudicating authority has passed the order in gross violation of the principles of natural justice, inasmuch as, he did not discuss and record findings on any of the grounds taken before him except on limitation and he also did not take cognizance of the appellants' letters dated 13-2-95, 10-11-97 and 23-7-98. The show cause notice does not . specify any tangible grounds for classification of the add on cards under Heading 84.73. The appellant has classified the product under Heading 84.71 at the behest of the Department. The duty paid under Heading 84.71 was not adjustable in duty payable under Heading 84.73 as was done in this case. The learned Commissioner did not consider that the cards in question were liable to be classified under Heading 84.71 in view of the letter dated 13-2-95 of M/s. Altos India Ltd., the Tribunal's decision reported in 1997 (89) E.L.T. 205 (T) and cards being housed units fall under Heading 84.71 considering the HSN Explanatory Notes thereunder. Shri Ram Pal Singh, learned Consultant appearing on behalf of the appellants drew our attention to their letter dated 27-7-89 at page 20 addressed to the Assistant Collector of Central Excise wherein they have written that pursuant to verbal instructions to change the classification list for add on cards from classification Heading 84.73 to 84.71, they will be submitting their revised classification list very shortly. On the query from the Bench, the learned Consultant pointed out that he has not brought the technical literature to the notice of the lower authorities. In support of his contention, he relied on Note 5 (B&C) of Section XVI Chapter 84 Notes of HSN. He also relied on the decision in the case of KSEDC reported in 2001 (131) E.L.T. 283 (T) = 2001 (43) RLT page 706 (T) particularly on Para 3 [sub-para (d)] wherein the Tribunal has concluded that gist cards and transputer cards are classifiable under Heading 84.71. He also relied on the decision in the case of Kuil Fire Works Industries reported in 1997 (95) E.L.T. 3 (S.C.) = 1997 (72) ECR 529 (S.C.), 1989 (41) E.L.T. 195, 1997 (22) RLT 330 (sic) and 1993 (66) E.L.T. 171 and contended that the change of classification has been made as per the insistence of the Department and therefore, they cannot ask the appellants to further change it without any proper justification. He also submitted that even if the demand is confirmed, the appellants are entitled for refund. In regard to his contention that duty under one heading cannot be adjusted under other headings, he relied on the following decisions :
Bright Brothers reported in 1991 (52) E.L.T. 385 (T) Indian Oil Corporation v. CCE -1991 (54) E.L.T. 110 (T) And as confirmed by the Hon'ble Apex Court by dismissal of the appeal as reported in 1991 (56) E.L.T. A216. With regard to refund of duty, he relied on the decision in the case of Sri Chakra Tyres. Further he also con tended that since the Department has not filed any appeal, the impugned order has become final against them.
3. Smt. Krishna A. Mishra, learned SDR, has appeared on behalf of the Revenue and submitted that scientifically the purpose of add on card is to enhance the capacity. With regard to the Heading 8471, she drew our attention to Note 5(A) and (B) of Chapter 84 which states as under :
"For the purposes of Heading 84.71, the expression "automatic data processing machines" means:
5(A) Digital machines, capable of (1) storing the processing programme or programmes and at least the data immediately necessary for the execution of the programme; (2) being freely programmed in accordance with the requirements of the user; (3) performing arithmetical computations specified by the user; and (4) executing, without human intervention, a processing programme which requires them to modify their execution, by logical decision during the processing run;
(a) Analogue machines capable of simulating mathematical models and comprising at least : analogue elements, control elements and programming elements;
(b) Hybrid machines consisting of either a digital machine with analogue elements or an analogue machine with digital elements.
5(B) Automatic data processing machines may be in the form of systems consisting of variable number of separate units. Subject to paragraph (E) below, a unit is to be regarded as being a part of a complete system if it meets all of the following conditions :
(a) It is of a kind solely or principally used in an automatic data processing system;
(b) It is connectable to the central processing unit either directly or through one or more other units; and
(c) It is able to accept or deliver data in a form (codes or signals) which can be used by the system."
Thus she submitted that this is an additional device to enhance the capacity. Even without this, the computer is functional. The add on card is not a unit of the computer. She also contended that the add on card is nothing but an accessory as per Heading 8473. As per this Heading the term "accessories" covers only those articles which are designed to be mounted on a machine to adapt it for a particular operation, or to perform a particular service relative to the main function of the machine, or to increase its range of operations. She, therefore, contended that in view of the Note (5A) and (B) will not be applicable and the goods in question will fall under Heading 8473. She also drew our attention to the classification list filed by the appellants wherein the appellants themselves have classified the goods in question under Heading 8473.
4. In rejoinder, the learned Consultant submitted that his entire ar gument is based on HSN and the product add on card is also called as call control and adaption unit. In this regard, he drew our attention to page 87, point No. 6(a) which states that apart from these, add on card (also known as adaptors) which are controlled and adaptor units such as those to effect interconnection of central processing unit to groups of input or output unit which may comprise visual display unit, storage units and devices or channel to channel adaptors to connect two digital systems to each other. Further, he also drew our attention to page 89, point No. 10 of the comparison to the effect that the product in question is functionally independent and they are separate units.
5. We have heard the rival submissions and perused the records and the case laws cited by the learned Consultant. We have not been confronted with any documentary evidence on record to change the classification from Chapter Heading 84.73 to 84.71, as contended by the appellants, when the appellants have been classifying the item under Heading 84.73. No plausible explanation or cogent reasons have been given by them to change the classification from Heading 84.73 to 84.71. We, therefore, see no reasons to interfere with the classification done by the Department. We find no merits in the appeal and the same is accordingly dismissed.
Sd/-/ (Krishna Kumar) Member (J) Order V.K. Agrawal, Member (T)
6. While agreeing with the learned Member (Judicial) that the impugned product is classifiable under Heading 84.73 of the Schedule to the Central Excise Tariff Act, I would like to add that the issue regarding classification of "Add-on-Cards" came up for consideration by the Tribunal in the case of Indcheom Electronics Ltd. v. CCE, 1997 (95) E.L.T. 580 (T). After considering the scope of Note 5(A) and 5(B) to Chapter 84 of the Tariff as under, the Tribunal has held that Add-on-Cards cannot be considered as automatic data processing machine themselves as they are not capable of performing functions which are performed by an automatic data processing machine and these have to be linked up with certain other components to be able to perform the function as are set out thereunder:
"14. We observe that Chapter Note 5(A) and 5(B) have to be read together. Chapter Note 5(B) is only an extension of 5(A) and the scope of the automatic data processing machines has been enlarged by the provision of Chapter Note 5(B).
15. By this note, the individual units of the machines to give a de sired input or to perform a satisfied function, are put together with all the other units, and these together can be considered as 'an automatic data processing machine' for the purpose of Tariff Heading 84.71. Since we have held items in question themselves cannot be considered as automatic data processing machines, the same therefore cannot be considered so by reason of Note 5(B). Note 5(B) envisages separate units which have come into exis tence and recognized as such when connected would together constitute a data processing machine for the purpose of Tariff Heading 84.71."
7. The learned Consultant has placed reliance on the decision in the case of CCE v. KSEDC, 2001 (131) E.L.T. 283 (T) = 2001 (43) RLT 706 (CEGAT) wherein the Tribunal classified Gist Card and Transputer Cards under Heading 84.71 as the Revenue had placed no material on record to substantiate their claim. The said cards were not having independent function or they are not capable of functioning separately and on the other hand the Respondents had submitted that the said cards contained powerful micro-processors which were connected to the Central Processing Unit. It was also observed by the Tribunal that the Transputer Cards consisted of a high power micro processor and could be used for parallel application and the Gist Card similarly had a Micro Processor enabling it to receive data in one language, process and return the result, in another language to the Central Processing Unit. The Tribunal in view of these facts, came to the conclusion that the said cards were capable of processing data independently. It has also been contended by the appellants that impugned Add-on-card is also known as adapters which are classifiable under Heading 84.71 as per Explanatory Notes of H.S.N. No material has been brought by them on record to show that the Add-on-Card is nothing but 'Control and adaptor Units' mentioned in the HSN Explanatory Notes. Following the decision in the case of Indcheom Electronics Ltd., the Add-on-cards are classifiable under Heading 84.73 of the Central Excise Tariff.
Sd/-
(V.K. Agrawal) Member (T)