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TMI Blog2010 (7) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... nd its parts. 4. On verification of the technical data (including the catalogue and the webcast of the importer), the Original Authority ("O.A.") vide its decision dated 15.11.2006 held that the subject goods were not structurally designed to function as a computer. Further, according to the O.A., in the ordinary course of trade no buyer will purchase the subject goods as computers on account of price differential between the price of the subject goods and the price of the computer. According to the O.A., the subject goods stood manufactured for a special purpose and that purpose was either measurement or control. According to the O.A., the importer, in this case, had conceded before it that a complete system performs the function of measurement whereas if one looks at the subject goods item-wise, it shows that each item performs a sub-function of data acquisition processing. On the basis of the said concession, the O.A. concluded that each imported item constituted a part of a complete Measurement System. According to the O.A., if one applies the test of common parlance then the subject goods are measuring/controlling instruments and even in trade parlance they are not known as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a PC; that PXI Controller is in turn connected with the processors, motherboard, hard drive with Windows XP, Serial Port, USB Port, Video Port, Ethernet Port, etc. According to the Tribunal, since the PXI Controller is identical in function to the normal home computer, both the items are comparable. According to the Tribunal, a PXI Controller acts as a Central Processing Unit for the entire PXI system. According to the Tribunal, a PXI Controller processes the data that enters from the external peripherals such as a mouse and a keyboard as well as from the internal peripherals such as PXI Signal Converting Modules (Cards). There is no difference between a PXI Controller and a PC. Thus, according to the Tribunal, a PXI Controller and other Controllers imported by the assessee are all ADP Machines. According to the Tribunal, all the imported Controllers carry out the functions of ADP Machines. According to the Tribunal, each and every imported Controller retains the characteristics of ADP Machine. According to the Tribunal, a PXI Controller can be used for a variety of applications ranging from advanced data acquisition to automatic manufacturing which clearly indicated that the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rogramme; (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; (b) analogue machines capable of simulating mathematical models and comprising at least: analogue elements, control elements and programming elements; (c) 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 a 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." (emphasis supplied) 10. We quote here ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amp units of heading 8539; optical fibre cables of heading 8544;" "2. Subject to Note 1 above, parts and accessories for machines, apparatus, instruments or articles of this Chapter are to be classified according to the following rules: (a) parts and accessories which are goods included in any of the headings of this Chapter or of Chapter 84, 85 or 91 (other than heading 8485, 8548 or 9033) are in all cases to be classified in their respective headings; (b) other parts and accessories, if suitable for use solely or principally with a particular kind of machine, instrument or apparatus, or with a number of machines, instruments or apparatus of the same heading (including a machine, instrument or apparatus of heading 9010, 9013 or 9031) are to be classified with the machines, instruments or apparatus of that kind; (c) all other parts and accessories are to be classified in heading 9033." 14. We quote hereinbelow CTH 9031 which refers to measuring or checking instruments, appliances and machines, not specified or included elsewhere in Chapter 90. The Department seeks to place reliance on Chapter Sub-Heading 9031 80 00, which reads as under: "Other instruments, appliances and mac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding corresponding to the function of that machine or, in the absence of a specific heading, in a residual heading, and not in heading 84.71. (2) Machines presented with an automatic data processing machine and intended to work in conjunction therewith to perform a specific function other than data processing, are to be classified as follows: The automatic data processing machine must be classified separately in heading 84.71 and the other machines in the heading corresponding to the function which they perform unless, by application of Note 4 to Section XVI or Note 3 to Chapter 90, the whole is classified in another heading of Chapter 84, Chapter 85 or of Chapter 90." 20. The most important aspect which needs to be emphasized in this case is that, according to HSN, data processing consists of handling information of all kinds, in pre-established logical sequences and for a specific purpose(s). According to HSN, ADP machines are machines which, by logically interrelated operations performed in accordance with pre-established instructions (program), furnish data which can be used as such or, in some cases, serve in turn as data for other data processing operations. The important ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in the printing or graphics industry (production of pre-press colour proofs, for example) are to be regarded as machines having a specific function classifiable in heading 84.43. Furthermore, appliances such as measuring or checking instruments adapted by the addition of devices (signal converters, for example), which enable them to be connected directly to a data processing machine, are, in particular, not to be regarded as of a kind solely or principally used in automatic data processing systems. Such appliances fall to be classified in their own appropriate heading. Digital data processing machines are put to many uses, for example, in industry, in trade, in scientific research and in public or private administrations." 22. Further, at page 1578 of HSN, it is stipulated that Chapter Heading 84.71 also covers constituent units of data processing systems. These may be in the form of units having a separate housing and designed to be connected, for example, by cables or in the form of units not having a separate housing and designed to be inserted into a machine. Display units of ADP machines provide a graphical presentation of the data processed. (See page 1579 of HSN). 23 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er nor user interfaces required to facilitate the design of a control algorithm. Historically, the process control industry has used manual operations, such as manually reading level and pressure gauges, turning valve wheels, etc. in order to operate the measurement and control field devices within a process. However, with the emergence of the microprocessor-based Distributed Control System ("DCS"), the distributed electronic process control came into existence in the process control industry. A DCS includes an analog or a digital computer, such as a Programmable Logic Controller ("PLC"), connected to numerous electronic monitoring and control devices like electronic sensors, transmitters, transducers etc. located throughout a process. The DCS computer stores and implements a centralized and complex control scheme in order to effect measurement and control of devices within the process so as to control process parameters according to the overall control scheme. According to the Department, PACs are not meant to be used as personal computers. The purpose of controllers is to control industrial processes. Thus, according to the Department, a controller by its very name performs fun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted on the basis of the catalogue and technical write-ups that each and every imported I.O. Modules is configured primarily to match with a sensor. In this connection, the Department has demonstrated by way of an illustration that one of the items imported by the assessee is Instrument Control Boards (Cards). Instrument Control Board (Card) is a stand-alone instrument. It acquires data from external sensors, but it is unable to send the data directly to a computer. Therefore, a suitable board like instrument control board is required to be placed inside the computer to allow the data to be sent directly to the computer. Similarly, another example given by the Department is concerning Data Acquisition Board. The purpose of a Data Acquisition Board is to acquire data from external sensor and convert it to digital sensors which the PC can understand. Thus I.O. Module is tailored to a specific function and is therefore a part of regulating a controlling apparatus. According to the Department, a signal converting device or I.O. unit has got to be properly aligned with the measuring or checking instrument. According to the Department, industrial process controllers and I.O. modules ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are then installed into ADPM. According to the importer, these boards/units meet the criteria mentioned in Chapter Note 5(B) as well as Explanatory Notes (I)(D)(4) & (5) which inter alia state that such boards/units when imported should be classified under CTH 8471 as units of ADPM. According to the importer, an ADPM when imported has only an operating software which cannot perform any specific function without application of software. For example, a PXI Controller is incapable of processing the digital data fed to its CPU unless a specific software is written for such processing. At the time of import no software is written or provided. It is the end-user who uses a programming language or an appropriate tool such as Lab View software to write a specific software for its own stand-alone instrument or application like thermostat, spectrum analyzer, oscilloscopes etc.. According to the importer, at the time of import, the assessee is not aware of what application the end-user may put the PXI controller to use. Moreover, a PXI controller is not dedicated to a single type of machine or operator. It is capable of being connected to multiple apparatuses simultaneously which apparatuses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... talogue and webcast) that Controllers (including embedded controllers) are not merely PCs/ADPMs, but have a specialized structure and specific functions to perform and are therefore classifiable under Chapter 90. 29. Similarly, I.O. Modules and Chassis, which are the subject matter of import in this civil appeal are meant to operate as parts of Industrial Process Control equipments like sensors. These I.O. Modules come with software tailored to their specific pre-defined functions. Therefore, one has to see the package in the holistic manner. The package as a whole - both hardware and software - constitutes one single functional unit. Accordingly, we hold that I.O. Modules and Chassis are classifiable as parts and accessories of Automatic Regulating or Controlling Instruments/Apparatus under CTH 9032.90.00. Reasons: (A) Based on Technical Material: 30. Whether a PXI Controller = PC Controller = ADPM? This is the basic issue which we need to answer in this civil appeal. 31. On examination of the technical write-up, before going into the analysis of the classification principles, we are of the view that the purpose of Controllers whether embedded or not, is to control industr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic example of the uses of a PAC would be in a large bakery with multiple ovens. The ovens must stay within a specific temperature range in order to properly bake the products; this can be accomplished by someone physically inspecting thermometers on each oven, then manually adjusting the burners on each as needed. A PAC could automate these tasks by monitoring temperature remotely, then sending instructions to the burners to either increase or decrease the heat until the temperature returns to the acceptable range. A person in an office overlooking the ovens can view all of the temperature data in real-time from their Personal Computer, which can be connected to the PAC's by serial cable, Ethernet or a wireless modem. (iii) Sensor: In the field of measurement and instrumentation, the parameter to be measured (motion, pressure, temperature, etc.) is first detected with the help of a sensor. The sensor converts the detected information into a suitable form (measurable currents and voltages) for acceptance in the later stages for decision-making. There are many types of sensors. Example: Photo electric sensor, motion detector, pressure sensors etc.. (iv) FPGA: FPGA stands for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re are eight Chapter Notes to Chapter 84. The key Chapter Notes for deciding the present Civil Appeal are Notes 5(E), and 7, which are quoted hereinabove. Chapter Note 5(E) inter alia refers to machines performing specific functions other than data processing and incorporating in it a data processing machine or it may be working in conjunction with ADPM in which event the said machines performing specific functions are to be classified in the heading appropriate to their respective functions. Under Note 7, a machine which is used for more than one purpose is, for the purpose of classification, to be treated as if its principal purpose is its sole purpose. 37. Chapter 90 includes measuring and checking instruments and apparatus; parts and accessories thereof. In view of Section Note 1(m) of Chapter 84, quoted above, it is first to be seen whether or not PACs fall within Chapter 90. Keeping in mind the scheme of Chapter 84 and Chapter 90, we are of the view that, in the present case, the correct approach would be to examine the scope of Chapter 90 first and foremost and only then we need to examine the scope of Chapter 84. At this stage, we need to state that Chapter Note 1(h) of Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ACs/Programmable Process Controllers imported by the assessee herein are suitable for use principally with Industrial Process Control Equipment like sensors, thermostats etc. which measures temperature, process etc. Therefore, they are correctly classifiable as a part of the said machine, instrument or apparatus. Secondly, a "control system" generally refers to the control of a device, process or system by monitoring one or more of its characteristics. It ensures that output processing remains within the desired parameters over a period of time. Controllers are generally connected to other computing apparatus. The principle function of controllers is to execute control algorithm for real time monitoring and for controlling devices, processes or systems. In this connection, it may be noted that, a PAC/Programmable Process Controller ("PPC") is not by itself an automatic regulating, controlling instrument or apparatus. A PAC/PPC when imported is suitable for use mainly with an industrial process control equipment like sensors, which measures temperature, pressure etc. As such, a PAC/PPC is a part of an industrial process control equipment/system and accordingly such controllers are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , therefore, is used in a variety of industries to monitor and control distributed equipments. An I.O. Module is important from another angle also. It converts readings from sensors and provides output signals which are used for operating actuators (which make a device move or start working) via Network Interface Module. A Modular Distributed I.O. System which is also known as a Field Point provides for industrial monitoring and control applications. Thus, the Field Point System includes Analog and Digital I.O. Modules, terminal bases and network modules which connect I.O. Modules to industrial networks and software tools. Field Point Systems are ideal for use in industrial environment. Fourthly, Programmable Logic Controller ("PLC") is a control device. It is normally used in industrial control applications. It is a Programmable Microprocessor based device which is used to control assembly lines and machinery on the shop floor as well as to control many other types of mechanical, electrical and electronic equipment in a plant. A PLC is designed for real-time use in rugged industrial environments, connected to sensors and actuators. PLCs are characterized by the number of I.O. Port ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtment under CTH 9032. 43. On the question of Input-Output (I.O.) Modules and Chassis, the Tribunal has not given any finding whatsoever thereon. However, on going through the technical material and the demonstration given to us in Court, we are of the view that I.O. Modules and Chassis have also been rightly classified by the Department as parts and accessories of regulating and controlling apparatus classifiable under Chapter 90. In this connection, one needs to examine the nature and function of I.O. Modules and Chassis which we have already discussed hereinabove. To put it briefly, at the cost of repetition we may say that the primary function of I.O. Modules (Boards) is to function as a part of measuring and control System. It is for this reason that such Modules are required to be classified as parts and accessories of regulating and measuring System. For this purpose, it is necessary to examine each of the imported items apart from Controllers in order to see whether the hardware coupled with the pre-installed software gives it a definite identity and function. From the catalogue and technological write-ups we find that each and every I.O. Module imported by the assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntrollers and I.O. Modules, which are part of a functional unit, the function of which is to be judged as a whole are therefore classifiable in Chapter 90. The sentence in Chapter Note 5(E) "incorporating or working in conjunction with an ADPM" merely indicates that the overall package, which is presented before the Department, had an ADP Machine in it. In other words, what is imported is a System containing an ADPM. Our above interpretation stands to reason because if the contention of the importer herein is accepted, it would mean that every machine that contains an element of ADP would be classifiable as an ADP Machine under Chapter 84. This would completely obliterate the specific function test and the concept of functional unit. 46. For the aforestated reasons, we are of the view that the imported goods were rightly classified by the Department under Chapter 90. We are also of the view that the Department was right in classifying the I.O. Modules and Chassis as parts and accessories of Automatic Regulating or Controlling Instruments and Apparatus in terms of CTH 9032.90.00. 47. For the aforestated reasons, the impugned order of CESTAT is hereby set aside and the Civil Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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