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2010 Supreme(SC) 577
Supreme Court of India
THE HONOURABLE CHIEF JUSTICE MR. S.H. KAPADIA, THE HONOURABLE MR. JUSTICE K.S. RADHAKRISHNAN & THE HONOURABLE MR. JUSTICE SWATANTER KUMAR
Commissioner of Customs, Bangalore
Versus
M/s. N.I. Systems (India) P. Ltd.
CIVIL APPEAL No.5394/2010 (D 4818/2010)
Decided on : 15-07-2010
For the Appellants:Gourab Banerji, ASG, K. Swami, Rajiv Nanda, B. Krishna Prasad, Advocates. For the Respondents:V. Lakshmikumaran, Badri Narayan, Sunil Kumar, Ravinder Singhania, A.M. Ranjan, K.C. Dua, Advocates.
Headnote:(a) Customs Tariff Act, 1975 – Chapter Note 90 and 84 – Section XVI includes Chapter 84 – Does not cover articles falling in Chapter 90. (Para 8)
(b) Customs Tariff Act, 1975 – Chapter Heading 90 – PACs (including embedded Controllers/Programmable Process Controllers) – Rightly classified by the Department under CTH 9032. (Para 42)
(c) Customs Tariff Act, 1975 – Chapter heading 90 – I.O. Modules (Boards) function as a part of measuring and control System – Each I.O. Module is tailored to a specific function and is therefore a part of regulating and controlling apparatus – Therefore I.O. Modules and Chassis rightly classified as parts and accessories of regulating and controlling apparatus classifiable under Chapter 90. (Para 43)
(d) Customs Tariff Act, 1975 – Chapter 84, Chapter Note 5(E) – Machine incorporating an ADPM performing a specific function other than data processing – That machine is classifiable in the heading corresponding to the function of that machine. (Para 44)
Facts of the case:
Assessee imports various products from its Holding Company and supplies the same to its customers in India. During the relevant assessment year, the assessee imported various products from their Principal. The products were computer based instrumentation products. The importer filed 64 bills of entries. The importer claimed the items to be computers and/ or parts of computers. The importer grouped the items in accordance with similar/ identical functions broadly under CTH 8471, 8473 and other headings falling under Chapter 84.
On verification of the technical data, the Original Authority vide its decision held that the subject goods were not structurally designed to function as a computer. According to the O.A., the subject goods stood manufactured for a special purpose and that purpose was either measurement or control. The O.A. concluded that each imported item constituted a part of a complete Measurement System. The embedded controllers may perform all functions of a CPU but, according to the O.A., the embedded controllers are not CPUs. In its reply to the show cause, the importer stated that they use real-time operating systems (software) and not the standard operating systems such as Microsoft Windows. Accordingly, the O.A. held that controllers are manufactured for a specific purpose and not as ADP Machines. The specific purpose being controlling/measurement as enumerated in the catalogue. In the circumstances, the O.A. has broadly classified embedded Controllers, Programmable Automation Controllers ("PACs"), Data Acquisition Boards, Digital Input Output Boards, PXI Chassis etc. under Chapter 90. The O.A. has rejected the classification sought by the importer under CTH 8471.
The importer preferred Appeal before Commissioner of Customs (Appeals) who dismissed it.
The importer preferred Customs Appeal before CESTAT. According to the Tribunal, these imported Controllers were nothing but ADP Machines.
Finding of the Court;
The imported goods were rightly classified by the Department under Chapter 90. Department was also 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.
Result:
Appeal allowed.
Judgment :-
S.H. KAPADIA, CJI.
Delay condoned.
Facts:
2. M/s. N.I. Systems (India) Private Limited (hereinafter referred to as "importer") is a 100% subsidiary of N.I. Corporation at Austin, Texas, USA.
3. Assessee imports various products from its Holding Company and supplies the same to its customers in India. During the relevant assessment year, the assessee imported various products from their Principal. The products were computer based instrumentation products. The importer filed 64 bills of entries. The importer claimed the items to be computers and/ or parts of computers. The importer grouped the items in accordance with similar/ identical functions broadly under CTH 8471, 8473 and other headings falling under Chapter 84. Broadly, the importer categorized the imported items as follows:
(i) PXI Controllers
(ii) Input/Output Modules (also known as Modem or Control/Adaptor Units)
(iii) Signal Converters.
(iv) Chassis and 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 computers. Lastly, the subject goods are costlier than ordinary computer and the trader buys them because of their enhanced capabilities for the purposes of measuring/controlling instruments. According to the O.A., the subject goods are specially designed for industrial use which is indicated by the catalogue submitted by the importer. The embedded controllers may perform all functions of a CPU but, according to the O.A., the embedded controllers are not CPUs. According to the O.A., one more concession is made by the importer. In its reply to the show cause, the importer stated that they use real-time operating systems (software) and not the standard operating systems such as Microsoft Windows. Accordingly, the O.A. held that controllers are manufactured for a specific purpose and not as ADP Machines. The specific purpose being controlling/measurement as enumerated in the catalogue. In the circumstances, the O.A. has broadly classified embedded Controllers, Programmable Automation Controllers ("PACs"), Data Acquisition Boards, Digital Input Output Boards, PXI Chassis etc. under Chapter 90. The O.A. has rejected the classification sought by the importer under CTH 8471.
5. Aggrieved by the decision of the Additional Commissioner dated 15.11.2006, the importer preferred Appeal No. 98/07-CUS(B) before Commissioner of Customs (Appeals). Vide decision dated 31.7.2007, the Commissioner (A) dismissed the appeal preferred by the importer.
6. Against decision dated 31.7.2007, the importer preferred Customs Appeal No. 678/07 before CESTAT. Vide its decision dated 29.6.2009, the Tribunal held that the main item of import was PXI Controller and other Controllers. According to the Tribunal, these imported Controllers were nothing but ADP Machines. According to the Tribunal, the importer had placed before it the sample of imported items with enormous
