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M/s. Secure Meters Ltd. Versus Commissioner of Customs, New Delhi

2015 (5) TMI 241 - SUPREME COURT

Classification of goods - LIQUID CRYSTAL DEVICES (LCD) - Classification under Chapter Heading 9013.80 or under Chapter Heading 9028.90 - Held that:- LCDs are specifically provided in tariff item 9013. The only condition is that such LCDs should not constitute 'articles' provided more specifically in other headings. In the present case, it is also not in dispute that LCDs imported by the appellant did not constitute any such 'article' which is more specifically provided in other headings. - The o .....

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ly as parts thereof.

In accordance with Chapter Note 5, measuring or checking optical appliances, instruments and machines are excluded from this heading and fall in heading 90.31. Chapter Note 4, however, classifies certain refracting telescopes in this heading and not in heading 90.05. It should, moreover, be noted that optical instruments and appliances can fall not only in headings 90.01 to 90.12 but also in other headings of this Chapter (in particular, heading 90.15, 90.18 or 90 .....

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lay (LCD) from Hong Kong. The classification of the LCD Module is not in dispute. The dispute in the instant case relates to classification of LCDs. The appellant sought clearance of LCDs under Chapter Heading 9013.80 and claimed assessment at Nil rate (basic duty), 16% additional duty and 4% SAD. As per the appellant, since the LCDs were classifiable under Chapter Heading 9013.80, in view of Notification No. 16/2000, and particularly Entry/S.No. 304 of the table of the said Notification, the go .....

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awing and literature which were provided did not specify the purpose. 2) The Deputy Commissioner, Customs (Adjudicating Authority), thus, passed orders dated 31.08.2001 holding that LCDs were classifiable under Chapter Heading 9028.90 and not under 9013.80 as claimed by the appellant. For classifying the goods under the aforesaid category, recourse to Rule 3(c) of the General Rules for the Interpretation of the First Schedule - Import Tariff was taken by the Adjudicating Authority. The Deputy Co .....

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r as well as CESTAT resulting into dismissal of appeals filed by the appellant herein. The decision of CESTAT reveals that appellant relied upon its earlier decision in the case of CCE, Bombay v. Universal Information Commn. Equipment Ltd. 1997 (94) ELT 543 However, the Tribunal has held that the aforesaid decision is not applicable to the facts of the present case. The Tribunal has accepted the contention of the Revenue that the invoices issued by the supplier of the goods specifically mentione .....

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her headings; lasers, other than laser diodes; other optical appliances and instruments, not specified or included elsewhere in this Chapter 9013.80 Other devices, appliances and instruments; 901380.10 Liquid Crystal Devices (LCD) 9028 Gas, Liquid or electricity supply or production meters, including calibrating meters therefor 9028.90 Parts and accessories 9028.90.10 For electricity meters 5) One thing is clear. Both the tariff items under which classification is sought by the appellant as well .....

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hapter. Obviously, this Note does not concern us in the present appeal. Note 2, which is material for the purposes of this appeal, is reproduced below: 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 No.84, 85, 85.48 or 90.33) are in all cas .....

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. 7) It is not in dispute that the goods in question which are imported by the appellant are LCDs. It is also not in dispute that these devices are used in electricity supply meters. Since the LCDs are used for electronic supply meters by the appellant, the Revenue has taken the view that it would fall in tariff item No. 9028.90 as that entry specifically includes, amongst others, electricity supply meters. As LCDs are used as part of the electricity supply meters, they are held to be covered un .....

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covered by another tariff item which is 9013, it has to be classified in that entry and the factum of its use as part or accessory in the electronic energy meters would be of no consequence and, therefore, it cannot be held to be covered by tariff item 9028.90. The submission, precisely, was that whenever a particular item of goods falls in a specific tariff item, it has to be classified under the said tariff item and not in other item where it can be used as part thereof. 9) Mr. Lakshmikumaran .....

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pellant. Therefore, Note 2 would not apply in this case. She submitted that under these circumstances it is the General Rule of Interpretation that would apply and referred to Rule 3 of the said Rules and contended that if the goods are classifiable under two or more headings, on the application of Rule 2(b) of the General Rules of Interpretation, then the classification has to be in the manner stipulated in Rule 3 of the General Rules. Rules 2 and 3 are as under: 2. (a) Any reference in a headi .....

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to include a reference to mixtures or combinations of that material or substance with other materials or substances. Any reference to goods of a given material or substance shall be taken to include a reference to goods consisting wholly or partly of such material or substance. The classification of goods consisting of more than one material or substance shall be according to the principles of rule 3. 3. When by application of rule 2(b) or for any other reason, goods are, prima facie, classifia .....

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ves a more complete or precise description of the goods. (b) Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to (a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable. (c) When goods cannot be classified by reference to (a) or (b), they shall be classified under the .....

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tion of device and consider the imported parts i.e. Liquid Crystal Displays to be devices , only those liquid crystal devices/displays which do not constitute article provided for more specifically in other headings will be covered in CTH 90.13. In other words, liquid crystal devices/displays which do not specifically form part of a specific type of equipment will be classified here. General purpose LCD, for example the one displaying only 0-9 numbers, which can be attached to several devices/eq .....

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heading is to make it a part of a specific articles as in present case. There can be an argument whether being part of a specific goods can make LCD more specifically covered in that heading as part of the specified equipment as compared to CTH 90.13, but there can be no doubt that such situation certainly makes it classifiable in other heading (e.g. CTH 9029.90 in present case). And when any good is classifiable in two or more headings, then as per Rule 3(c) of General Rules for Interpretation .....

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les itself, which reads as under: Classification of goods in this Schedule shall be governed by the following principles: 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: xx xx xx It is manifest from the reading of th .....

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a is reproduced below: 11. The Rules for the Interpretation of the Schedule to the Central Excise Tariff Act, 1985 have been framed pursuant to the powers under Section 2 of that Act. According to Rule 1 titles of sections and chapters in the Schedule are provided for ease of reference only. But for legal purposes, classification shall be determined according to the terms of the headings and any relevant section or chapter notes . If neither the heading nor the notes suffice to clarify the scope .....

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material or substance shall be according to the principles contained in Rule 3. Therefore when goods are prima facie, classifiable under two or more headings, classification shall be effected according to sub-rules (a), (b) and (c) of Rule 3 and in that order. The sub-rules are quoted: 3. (a) The heading which provides the most specific description shall be preferred to heading providing a more general description. However, when two or more headings each refer to part only of the materials or su .....

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es them their essential character, insofar as this criterion is applicable. (c) When goods cannot be classified by reference to (a) or (b), they shall be classified under the heading which occurs last in the numerical order among those which equally merit consideration. Before we advert to this core issue, let us understand what constitutes LCDs and its functions, with adequate clarity. 14) In Bloomsbury Dictionary of 'Science for Everyone', LCD and LED (light emitting diode) are describ .....

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he current flows, the diode gives off red, blue, yellow, or other coloured light, depending on the compound of which it is made. For example, gallium phosphide (GaP) emits a green glow. Electric circuits in the instrument selectively turn on the current to the bars to form the various numbers and letters. In the LCD (liquid crystal display), the bars are made of liquid crystals. These are a kind of hybrid material, not quite a liquid and not quite a solid. They can't be poured readily, as wi .....

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g effect, called polarization, with Polaroid sunglasses. Hold the glasses several centimeters from one eye and look through one lens at a shiny, sunlit surface. Rotate the lens and observe the darkening. Liquid crystals can be made to order to do a particular job. For example, one kind of crystal is sensitive to slight temperature changes. It is used in thermometers where the number representing the temperature appears, then disappears, to be succeeded by a higher or lower number as the temperat .....

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question, we revert to the tariff entries. It cannot be disputed that LCDs are specifically provided in tariff item 9013. The only condition is that such LCDs should not constitute 'articles' provided more specifically in other headings. In the present case, it is also not in dispute that LCDs imported by the appellant did not constitute any such 'article' which is more specifically provided in other headings. On the contrary, the Revenue wants to include in the same Chapter, i. .....

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tes becomes important since LCDs are used in the electricity supply meters only as parts thereof. Note 2(a) stipulates that parts and accessories which are goods included in the heading of the said Chapter, i.e. Chapter 90, are to be classified in their respective headings. Going by the plain reading of Note 2(a) it is clear that LCDs, which are goods and are used as parts in the final product mentioned in Chapter 90, namely, electricity supply meters, are to be classified in its respective head .....

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which Note 2(a) is inapplicable. Once we find that in the present case Note 2(a) squarely applies, the irresistible conclusion is that the goods will be classified in tariff item 9013, which is the specific heading for these goods. 17) In Collector of Central Excise v. Delton Cables Ltd. & Anr. (2005) 12 SCC 284, this Court has held, while interpreting Notes 2(a) and 2(b) of Chapter Heading 85, which is virtually to the same effect, that Note 2(b) would apply only if the items in question w .....

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over to Section Note 2(b) can arise only after ensuring that the parts are not covered by Section Note 2(b) [sic Section Note 2(a)] which begins with the expression other parts meaning thereby that the parts which are not covered by Section Note 2(a) would be considered for coverage by Section Note 2(b). One cannot therefore directly jump over to Section Note 2(b) without exhausting the possibility of Section Note 2(a). 18) The aforesaid view of ours gets strengthened from Part-III of Chapter N .....

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ated above: (III) PARTS AND ACCESSORIES Subject to Chapter Note 1, parts or accessories identifiable as suitable for use solely or principally with the machines, appliances, instruments or apparatus of this Chapter are classified with those machines, appliances, etc. This general rule does not, however, apply to: (1) Parts or accessories which in themselves constitute articles falling in any particular heading of this Chapter or of Chapter 84, 85 or 91 (other than the residual heading 84, 85, 85 .....

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s or accessories suitable for use with several categories of machines, appliances, instruments or apparatus falling in different headings of this Chapter are classified in heading 90.33, unless they are in themselves complete instruments, etc., specified in another heading (see paragraph (1) above). 19) This contains a general explanation to Chapter Note 2 and mentions that where parts or accessories identifiable as suitable for use solely or principally with the machines, appliances, etc., they .....

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ing. To demonstrate this, examples which are given, eminently fit into the case at hand. 20) The aforesaid view of ours gets further cemented on going through Explanatory Notes issued by the World Customs Organization. Volume 4 of the Second Edition (1996), which covers Chapters 85-97, contains explanatory note in respect of item mentioned at 90.13, with which we are directly concerned herein. Relevant portion thereof reads as under: 90.13 - LIQUID CRYSTAL DEVICES NOT CONSTITUTING ARTICLES PROVI .....

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