2012 (9) TMI 276 - SC - Central Excise

Taxability of goods manufactured - Parts of Television Receivers falling under Tariff Entry 8529 OR Television Receivers under Tariff Entry 8528 - Held that - As decided in Commissioner of Central Excise, Nagpur Vs. Simplex Mills Co. Ltd. 2005 (3) TMI 117 - SUPREME COURT OF INDIA resort must first be had only to the particular tariff entries, along with the relevant Section and Chapter Notes, to see whether a clear picture emerges. It is only in the absence of such a picture emerging, that recourse can be made to the Rules for Interpretation. In this case, the relevant Section Note is Section Note 2 to Section XVI of the Tariff wherein the clear stipulation contained to the effect that parts of goods mentioned in the Chapters specified therein, shall in all cases be classified in their respective heading - closer scrutiny of the unique facts of this case reveals that the goods of the appellant may not be said to be parts as per Section Note 2 to Section XVI of the Tariff. The appellant not only used to assemble all parts of the Television Receivers and make complete television sets, but the said Television Receivers were also operated in the manufacturing unit of the appellant and thoroughly checked and only upon it being confirmed that the Television Receivers were complete in all respects, they were disassembled and along with relevant material and individual serial numbers, sent to the various satellite units. Once the Television Receivers are assembled or are made completely finished goods, the manufacturing process is over and we are not concerned as to what happens subsequently. As it is not in dispute that complete Television was manufactured by the appellant and the time of the parts of the TV set being transported from the factory of the appellant, the parts manufactured by it are already identified as distinct units, thus the Revenue had rightly classified the goods- product as complete Television set even though it was subsequently disassembled - against assessee.

Issues Involved:
1. Classification of goods manufactured by the appellant: whether they should be taxed as 'Parts of Television Receivers' under Tariff Entry 8529 or as 'Television Receivers' under Tariff Entry 8528.
2. Applicability of Rule 2(a) of the Rules for Interpretation of the Tariff.
3. Relevance of Section Note 2 to Section XVI of the Tariff.
4. Allegation of double-taxation.

Detailed Analysis:

1. Classification of Goods:
The primary issue is whether the goods manufactured by the appellant should be classified as 'Parts of Television Receivers' under Tariff Entry 8529 or as 'Television Receivers' under Tariff Entry 8528. The appellant manufactures components of television sets, assembles them for testing, disassembles them, and then transports them to various satellite units for final assembly. The Tribunal upheld the Department's contention that the goods should be classified as 'Television Receivers' under Tariff Entry 8528.

2. Applicability of Rule 2(a) of the Rules for Interpretation:
The appellant argued that Rule 2(a) should not apply because the goods did not possess the essential characteristics of finished Television Receivers. However, the Tribunal found that the goods, being essentially/substantially complete Television Receivers in a disassembled state, should be classified as such under Rule 2(a). The Court agreed, noting that the goods produced by the appellant possess the essential character of Television Receivers, even though they are transported disassembled.

3. Relevance of Section Note 2 to Section XVI of the Tariff:
The appellant contended that Section Note 2 to Section XVI, which specifies that parts of machines should be classified in their respective headings, should apply. The Court examined this note and concluded that the goods in question, being identifiable and matched parts that have been assembled and tested as complete Television Receivers, do not qualify as 'parts' under this note. Consequently, Rule 2(a) of the Rules for Interpretation was applicable.

4. Allegation of Double-Taxation:
The appellant argued that classifying the goods as 'Television Receivers' would lead to double-taxation since the satellite units also pay excise duty on the assembled goods. The Court dismissed this argument, stating that the classification issue had been resolved in favor of the Department and that the appellant's satellite units could avail input tax credit on the duty paid.

Conclusion:
The Court upheld the Tribunal's decision, concluding that the goods manufactured by the appellant should be classified as 'Television Receivers' under Tariff Entry 8528. The appeal was dismissed with no order as to costs.

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