1991 (2) TMI 287 - AT - Customs

Issues Involved:
1. Classification of the 4 Nos. of 5404 (40K) VDI Off-line keyboards.
2. Applicability of Notification No. 114/80-Cus. for customs duty exemption.
3. Interpretation of Section Notes and Chapter Notes in the Customs Tariff Act, 1975.

Detailed Analysis:

1. Classification of the 4 Nos. of 5404 (40K) VDI Off-line keyboards:
The primary dispute revolves around the classification of the 4 Nos. of 5404 (40K) VDI Off-line keyboards imported by the respondents. The Assistant Collector classified these keyboards under Heading 84.51/55(2) of the Customs Tariff Act (CTA), 1975, which pertains to data processing machines, attracting a duty of 100% ad valorem. The Assistant Collector's decision was based on the observation that the keyboards could be used for input from other sources such as word processors, computers, and wire-services, thus meeting the essential requirements of a data processing unit as per the explanatory note at page 1346 of the CCCN under Heading 84.53.

Conversely, the respondents argued that these keyboards are integral parts of the photo composing machines and should be classified under Heading 84.34, which pertains to machinery for type-setting and related activities. They emphasized that the keyboards are necessary for the functioning of the photo composing machines, especially when a large number of copies are needed, such as in newspaper editing.

2. Applicability of Notification No. 114/80-Cus. for customs duty exemption:
The Collector of Customs (Appeals) accepted the respondents' contention and classified the keyboards under Heading 84.34, thereby granting them the benefit of Notification No. 114/80-Cus., which provides a partial exemption from customs duty for "photo composing machines with keyboards" used in the printing industry. The respondents argued that the keyboards are specifically included as ancillaries of photo composing machines under the Import Policy for 1983-84 and thus should be eligible for clearance under OGL (Open General License) and the said notification.

3. Interpretation of Section Notes and Chapter Notes in the Customs Tariff Act, 1975:
The Tribunal emphasized the importance of interpreting tariff headings in light of Section Notes and Chapter Notes, as established in the case of Saurashtra Chemicals, Porbandar v. Collector of Customs, Bombay. Note 3 of Section XVI and Note 5 of Chapter 84 were particularly relevant. Note 3 of Section XVI states that composite machines should be classified based on their principal function, while Note 5 of Chapter 84 indicates that a machine used for multiple purposes should be treated as if its principal purpose were its sole purpose.

The Tribunal found that the principal purpose of the imported keyboards was to function as part of the photo composing machines, which had already been assessed under Heading 84.34. Therefore, the keyboards should also be classified under the same heading.

Conclusion:
The Tribunal concluded that the 4 Nos. of 5404 (40K) VDI Off-line keyboards should be classified under Heading 84.34 of the CTA, 1975, in alignment with the principal function of the photo composing machines. Consequently, the respondents are entitled to the benefit of Notification No. 114/80-Cus., granting them a partial exemption from customs duty. The revenue's appeal was dismissed, and the authorities were directed to give consequential effect to this order. The Tribunal specified that this decision should not be treated as a precedent for other cases.

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