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Issues: Classification of imported goods under Customs Tariff Heading 9806, applicability of Note 7 to Chapter 98, interpretation of Interpretative Rule 2(a) for classification, benefit of Notification No. 172/77 for telephone sets.
The judgment concerns an appeal against the Order-in-Original by the Collector of Customs, Bombay, regarding the classification of imported goods described as "Telephone Instruments in SKD form." The Collector classified the goods as 'parts' under Customs Tariff Heading 9806, excluding cables from the heading based on Note 7 to Chapter 98. The appellant contended that the items should be assessed under Heading 8517.10 as complete telephone sets, seeking the benefit of Notification No. 172/77. The Collector determined classification based on the form of import, considering the items as parts of machinery. The appellant argued that the goods in SKD condition should be assessed as full instruments under Rule 2(a) for classification as telephone sets [Para 1]. The appellants challenged the Collector's decision, claiming that the assembly of the imported sub-assembly is not a simple process but part of a phased manufacturing process, making them classifiable as telephone sets under Chapter Heading 8517.10. They argued that Rule 2(a) should apply, and the benefit of Notification No. 172/77 should not be denied. Cables' classification was not disputed [Para 2]. The Advocate for the appellants argued that Rule 2(a) should be applied for classification, and goods in sub-assemblies should be classified as telephone sets under Heading 8517.10, attracting the benefit of Notification No. 172/77. Citing precedents, the Advocate emphasized the application of Rule 2(a) for classification and benefit determination. The Revenue contended that Note 1 to Chapter 98 takes precedence over specific headings, and Rule 2(a) cannot be applied in this case [Para 4]. The Tribunal analyzed whether Interpretative Rule 2(a) supersedes Note 1 to Chapter 98 for classification purposes. Note 1 gives Chapter 98 precedence over specific headings, while Rule 2(a) classifies uncomplete articles as complete. The Tribunal held that Note 1 prevails over Rule 2(a) for classification, citing legal principles and case law. As the goods were sub-assemblies of parts from Chapter 85, the Collector's classification was deemed lawful [Para 7-10]. Regarding the applicability of Rule 2(a) to the notification terms, the Tribunal referenced precedents to establish that Interpretative Rules cannot interpret an exemption notification. The notification's plain reading must be followed, and in this case, the goods did not fall under the notification's scope. The Tribunal upheld the Collector's decision to deny the notification's benefit, as the imported items were parts and not complete articles under Chapter 85.17 [Para 11-12].
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