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TMI Blog2018 (8) TMI 1378X X X X Extracts X X X X X X X X Extracts X X X X ..... ocation without any human intervention. Thus in the terms of the submissions made by the Appellant himself their products are quite akin to the ATM machines with a role reversal, i.e. instead of dispensing the cash these machines used for depositing cash/ cheques. Even in terms of HSN Explanatory note for headings 8471 & 8472 the classification of such machines would appropriately be classified under heading 8472. Items mentioned at Sl No 7 & 8 in table 1 namely I-Watch (Digital ATM Surveillance Solution) & Iwatch DVR (Digital Video Recording) - Held that:- the item the goods in dispute are nothing but digital cameras, which record the image of transaction being undertaken at the remote location. Once the image is recorded it is embossed with other details and then stored for retrieval and viewing either locally or through LAN/ SYSTEM. Since the prime function of these devices as explained by the Appellant is to record images, it is nothing but a digital camera and needs to be classified accordingly. Thus the classification of the said goods cannot be as Automatic Data Processing Machines under heading 8471, but would necessarily be in Chapter Heading 85258090. In view of discussio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ₹ 2,05,25,880/- (Rupees Two Crore Five Lakhs Twenty Five Thousand Eight Hundred and Eighty only) is hereby dropped, which is hit by limitaton and there is no suppression of facts on the part of M/s ISL. iii. The show cause notice F No V-Adj (Misc) 30-18/08 dated 05.03.08 which covers period from February 2007 to January 2008 demanding CE duty of ₹ 23,56,928/- (Rupees Twenty Three Lakhs Fifty Six Thousand Nine Hundred and Twenty Eight Only) is confirmed and recoverable from M/s ISL. iv. I do not impose penalty under Section 11AC of Central Excise Act, 1944 and/ or Rule 25 of Central Excise Rules, 2002 as explained supra. v. I impose interest under section 11AB of the Central Excise Act, 1944, at the appropriate rate applicable during the relevant period, The jurisdictional Assistant Commissioner, should work out the interest amount and inform the assessee within a period of one month from the date of receipt of this order. vi. I do not propose to impose any personal penalty under Rule 26 of Central Excise Rules, 2002 on Shri Rajan Kapoor, Chief Financial Officer of M/s ISL on the basis of above findings. Appellants have filed appeal challenging the classifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use notice dated 056.03.2008 and also confirmed the demand for interest in respect of the duty demanded. 2.4 Appellants have challenged the order of Commissioner on merits against the confirmation of the duty demand whereas revenue has challenged the dropping of demand on the ground of limitation. Department has also filed cross objections (E/CO/32/09-MUM) in the appeal filed by the Appellant 2.5 Since both the appeals and cross objections are directed against the same order in original they have been clubbed and heard together and taken up for disposal simultaneously. 3.0 Have heard Shri R V Shetty Advocate for the Appellant and Shri V K agarwal Additional Commissioner (Authorized Representative) for the department. 3.1 Arguing for the Appellants learned counsel referred to the technical literature in respect of the said goods and submitted that goods supplied by him were nothing but computers correctly classifiable under Chapter Heading 8471. Accordingly they have rightly availed the benefit of exemption in respect of the said goods. He also submitted that mere fact of wrong classification cannot be a ground for invoking extended period of limitation for demanding duty. He re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ription of the products and functions performed it is quite evident that the said machine/ equipments are for performing various functions which are part of ordinary banking functions such currency dispensation, cheque deposits, bill payment etc., from a remote location without any human intervention. In table 3, a comparison of competing tariff entries has been made. Table 3: Competing Tariff Entries in which classification has been claimed. 8471 AUTOMATIC DATA PROCESSING MACHINES AND UNITS THEREOF; MAGNETIC OR OPTICAL READERS, MACHINES FOR TRANSCRIBING DATA ON TO DATA MEDIA IN CODED FORM AND MACHINES FOR PROCESSING SUCH DATA, NOT ELSEWHERE SPECIFIED OR INCLUDED 847130 - Portable digital automatic data processing machines, weighing not more than 10 kg. Consisting of at least a central processing unit, a keyboard and a display: 84713010 --- Personal computer 84713090 --- Other - Other automatic data processing machines: 847141 -- Comprising in the same housing at least a central processing unit and an input and output unit, whether or not combined: 84714110 --- Micro computer 84714120 --- Large or main frame computer 84714190 --- Other 84714900 -- Prese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -- Other 852560 - Transmission apparatus incorporating reception apparatus: --- Two way radio communication equipment: 85256011 ---- Walkie talkie set 85256012 ---- Marine radio communication equipment 85256013 ---- Amateur radio equipment 85256019 ---- Other --- Other: 85256091 ---- VSAT Terminals 85256092 ---- Other satellite communication equipment 85256099 ---- Other 852580 - Television cameras, digital cameras and video camera recorders: 85258010 - Television Cameras 85258020 --- Digital cameras 85258030 --- Video cameras recorders 85258090 -- Other 6.0 For purpose of making the Classification, in terms of First Schedule to Central Excise Tariff Act, 1985, General Rules of Interpretation of tariff reproduced below lay down the guiding principle. 1. The titles of Sections, Chapters and Sub-Chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the following provisions. 2. (a) Any reference in a heading to an article shall be ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt cases, gun cases, drawing instrument cases, necklace cases and similar containers, specially shaped or fitted to contain a specific article or set of articles, suitable for long-term use and presented with the articles for which they are intended, shall be classified with such articles when of a kind normally sold therewith. This rule does not, however, apply to containers which give the whole its essential character; (b) subject to the provisions of (a) above, packing materials and packing containers presented with the goods therein shall be classified with the goods if they are of a kind normally used for packing such goods. However, this provision does not apply when such packing materials or packing containers are clearly suitable for repetitive use. 6. For legal purposes, the classification of goods in the sub-headings of a heading shall be determined according to the terms of those sub-headings and any related sub-heading Notes and, mutatis mutandis, to the above rules, on the understanding that only sub-headings at the same level are comparable. For the purposes of this rule the relative Section and Chapter Notes also apply, unless the context otherwise requires. 7. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icrophones; (iv) television cameras, digital cameras and video camera recorders; (v) monitors and projectors, not incorporating television reception apparatus. (E) Machines incorporating or working in conjunction with an automatic data processing machines and performing a specific function other than data processing are to be classified in the headings appropriate to their respective functions or, failing that, in residual headings. 8.0 From the above Chapter Note, specifically "E" it is crystal clear that machines incorporating or working in conjunction with automatic data processing machines and performing a specific function other than data processing are to be classified in the headings appropriate to their respective functions or failing in residual headings. Appellant has submitted that their products are independently working machines capable of collecting and collating data on its own (Automatic), through input devices such as MICR reader, cameras, key board, mouse etc which are housed in the same housing and storing the same in to a data base resident in the machine for future requirement and/or for immediately for necessary execution of program/ applications. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the following criteria set out in Note 5(C) to this Chapter: i. It is of a kind solely or principally used in an automatic data processing system; ii. It is connectable to the central processing unit either directly or through one or more other units; and iii. It is able to accept or deliver data in a form (codes or signals) which can be used buy the system. (c) It is not excluded by the provisions of Notes 5(D) and (E) to this chapter 8472 The heading includes interalia: (1) Duplicating Machines …… (2) Addressing Machines ……. (3) Ticket issuing machines (other than those incorporating a calculating device (heading 84.70) and coin operated machines (heading 84.74)) …. (4) Coin Sorting or coin counting machines (including bank note counting and paying out machines) This heading covers such machines whether or not they are fitted with a device for wrapping the coins or banknotes or in some cases for printing the amount on the wrapping. Coin-count machines operating by weighing fall in heading 84.23 or heading 90.16. (5) Automatic banknote dispensers operating in conjunction with an automatic data processing machine, whether onli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it will send an error message to Central Location Indicating a problem. * All images are encrypted with a unique watermarking technology thus making it admissible as supportive in the court. From the submissions made by the Appellant in the said letter it is quite evident that the item the goods in dispute are nothing but digital cameras, which record the image of transaction being undertaken at the remote location. Once the image is recorded it is embossed with other details and then stored for retrieval and viewing either locally or through LAN/ SYSTEM. Since the prime function of these devices as explained by the Appellant is to record images, it is nothing but a digital camera and needs to be classified accordingly. Thus the classification of the said goods cannot be as Automatic Data Processing Machines under heading 8471, but would necessarily be in Chapter Heading 85258090. 12. Central Board of Excise and Customs has also vide its circular dated 11.07.2002 & 23.01.2004 in respect of similar products clarified as follows: Circular No 41/2002-Cus dated 11.07.2002 "I am directed to invite your attention to the subject mentioned above and to say that a doubt has been raise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of the specific products listed in table 1, same is clearly distinguishable. Appellant has also cited the decision of High Court and Supreme Court in the matter. High Court had dismissed the appeal filed by the department on the ground of mantainablity and Supreme Court on the ground of Delay. Hence even in that case it could not be said that decision has been approved on merits by the High Court or Supreme Court. ii. Gestner (India) Ltd Vs Commissioner of Customs Mumbai [2006 (17) ELT 498 (T-Mum). The items in dispute in the said decision are Printer/ Scanner - Multi-Function digital printers, which are clearly distinguishable from the products in present case. Even when the chapter note 5(C) clearly excluded the said printer/ scanners etc from the purview of the Chapter Heading 8471, the logic behind the order contrary to express provision in law cannot be appreciated. However the facts in present case are clearly distinguishable and hence the said decision would not be applicable. iii. Microland Ltd Vs Commissioner of Customs, Chennai [2006 (200) ELT 169 (T-Chennai)]. This decision is stay order and not the final order disposing the appeal. Further the product under cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to Deputy Commissioner of Central Excise Division K II, Mumbai IV, which was acknowledged by the divisions office, wherein they have declared the products manufacture d by them, the costing of the products, along with its components, functions etc. The Deputy Commissioner after going through the declaration and proper verification has issued registration on 17.10.2003 classifying the DPM's under chapter sub heading No 84714190. M/s ISL continued paying duty as per statutory changes nearly for four years and during this period no objection was raised by the department. Even during the period in question the Govt. has granted exemption to the products falling under chapter heading no 8471 and accordingly M/s ISL has surrendered their registration and again got registered with CE authority for same products as per the changes made in the budget on CE duty leviable on the products manufactured by M/s ISL. It is further seen that M/.s ISL have not declared the description of the products through oversight due to change in format, for the period from February 2007 to January 2008 and for the remaining period they have given the description of the products manufactured and cleared by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore issue of the show cause notice. I therefore, hold that since M/s ISL, paid CE duty as directed by the department, before issue of the show cause notice, no penalty is imposable under section 11AC or Rule 25 of the Central Excise Rules, 2002." 17. The letter dated 11th September 2003, referred to by the adjudicating authority is reproduced below in verbatim. From the perusal of the said letter it is quite evident that adjudicating authority is correct in making the observations to the effect that party had disclosed all the information in respect of the goods manufactured by them to the departments as early as in 2003. There can be no dispute in respect of the disclosure made by them. There can be error in claiming the classification of the products under 8471. Once they had disclosed the entire information about their products onus was on the department to determine the correct classification and determine the duty liability. In this case department has failed to discharge it function for determining the correct classification at the appropriate time and demand the duty. For the said failure to determine the correct classification department can subsequently not resort to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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