Per Justice K.K. Usha:

In this appeal at the instance of M/s. Sony India Ltd. the challenge is against the order-in-original No. KK/CC/ICD/TKD/6/99 dated 30.1.99 (issued on 1.2.99) passed by the Commissioner of Customs, Inland Container Depot, Tughlakabad, New Delhi. Under the above order the Commissioner has confirmed differential duty demand of Rs. 42,89,75,196/- under proviso to Section 28 (1) of the Customs Act, 1962, imposed a penalty of Rs. 30,19,92,183/- under Section 112 (a) read with Section 114 (a) and levied interest under Section 28AB of the Customs Act. The import of several parts of Colour Television made by the appellant for the period from April 1995 to 1997 were treated as import of complete Colour Television Set for the purpose of assessment by the Commissioner.

2. When the appeal filed by the assessee came up for hearing before a two Member Bench difference of opinion arose between the Members on the application of Rule 2 (a) of General Rules for interpretation under first schedule of Import Tariff to the imports made by the appellant. Learned Member Judicial took the view that the parts imported cannot be treated as complete colour television set (CTV) and, therefore the duty demand, confiscation penalty etc. were held unsustainable. On the other hand, the Learned Member Technical took the view that Rule 2 (a) should be applied in the present case but felt that the matter should be heard by a Larger Bench in the light of the different views taken by different Benches and also considering the importance of the issue involved. Learned Member Technical was also of the view that the issue whether the assessee is entitled to the benefit of exemption from duty in terms of Notification No. 91/89 dated 1.3.89 as amended by Notification No. 79/95-Cus. dated 31.5.95 and 36/96 dated 23.7.96 in case it is held that by applying Rule 2 (a) the imported parts are considered as complete or finished CTVs is also to be considered by the Larger Bench. Learned Member was of further view that the Larger Bench should consider the question whether the amendment brought in HSN Explanatory Notes to interpretative Rule 2 (a) in March 1997 will have retrospective effect. Thus, the following points of difference are referred for consideration of the Larger Bench:

"Whether the goods in question are components and cannot be treated as complete colour Television sets and hence the duty demand, confiscation of penalty are unsustainable as held by Ld. Member (J).

OR

Whether the issue as to the circumstances under which Rule 2 (a) of the Interpretative Rules can be applied, as to whether the benefit of Notification exempting components only will be available, if the product is considered as complete or finished article by virtue of deemed provisions of Rule 2 (a), and whether the changes effected in Explanatory Notes of HSN will have only prospective application or it will be applicable for the earlier period also, requires to be referred to a Larger Bench, as held by Ld. Member (T)".

The facts relevant for consideration of the above issues are as follows:-

3. A proposal put forward by Sony Corporation Japan to establish a wholly owned subsidiary in India for the manufacture of CTV sets and other electronic products was accepted by the Government of India under proceedings dated 31.8.94. The proposal showed Localization Plan of Components as 10%, 15% and 20% for the years 1996, 1997 and 1998 respectively. There was no proposal to utilize any parts procured locally in the year 1995. It is also made clear that accomplishment of this figure will depend on many other factors like FIPB's approval, completion of factory etc. As regards the requirement for importing 20-21" colour Cathode Ray Tube and Printed Circuit Boards (PCB) they were directed by communication dated 31.8.94 to approach the Ministry of Commerce, Office of DGFT for completion of the requisite formality for the grant of import licence as 'actual user'. Annexure 1 of the above commu