1987 (5) TMI 184 - AT - Central Excise

Summary

Issues Involved:
1. Classification of the "Trainer" under Central Excise Tariff Item (TI) 33DD or TI 68.
2. Validity of the show cause notice issued by the Central Government.
3. Weight of expert opinion from the Department of Electronics.
4. Functional capabilities of the "Trainer" as a computer.
5. Trade and common understanding of the term "computer."

Detailed Analysis:

1. Classification of the "Trainer" under Central Excise Tariff Item (TI) 33DD or TI 68:

The primary issue was whether the "Trainer" should be classified under TI 33DD, which covers "Computers (including central processing units and peripheral devices), all sorts," or under TI 68. The Department argued for TI 33DD, citing the inclusive nature of the term "all sorts" and referencing past judgments to support their stance. The manufacturer contended that the "Trainer" was merely a training device and not a functional computer, emphasizing its inability to perform actual computational tasks or provide output, which are essential characteristics of a computer.

2. Validity of the show cause notice issued by the Central Government:

The manufacturer argued that the show cause notice issued under Section 36(2) was defective as it did not provide reasons for setting aside the Appellate Collector's order or clearly define why the "Trainer" should be regarded as a computer. The Tribunal did not delve deeply into this issue, focusing instead on the substantive question of classification.

3. Weight of expert opinion from the Department of Electronics:

The Department of Electronics had issued two letters recommending classification under TI 68. The Department's representative dismissed these opinions, arguing they lacked detailed reasoning and were not authoritative. However, the Tribunal noted that the Department could have sought further clarification but did not, thus the expert opinions could not be ignored and carried significant weight.

4. Functional capabilities of the "Trainer" as a computer:

The Tribunal examined whether the "Trainer" could perform the basic functions of a computer, such as arithmetic and logic operations, and provide output. The "Trainer" was found to have most components of a computer but lacked the ability to deliver results or solve practical problems, which are fundamental to the definition of a computer. The Tribunal used analogies to illustrate that despite having similar components, the "Trainer" could not be considered a computer due to its inability to provide output.

5. Trade and common understanding of the term "computer":

The Tribunal emphasized that for an item to be classified under a specific tariff entry, it must align with the trade and common understanding of the term. The "Trainer," despite being referred to as a "computer" in the manufacturer's brochure, did not meet the general or trade understanding of a computer. The Tribunal concluded that the "Trainer" was not a computer as understood by the trade or the general public.

Conclusion:

The Tribunal decided that the "Trainer" was classifiable under TI 68 and not under TI 33DD. The decision was based on the lack of essential computer functions, the weight of expert opinion, and the common understanding of what constitutes a computer. The penalty imposed was set aside, and the appeals were disposed of accordingly, with consequential reliefs to follow.