TMI Blog1997 (12) TMI 642X X X X Extracts X X X X X X X X Extracts X X X X ..... equipment (referred to hereafter as `fax machine ). In Appeal No. C/202/93-B, MZL had imported components for 400 numbers of fax machines at New Delhi. In the Bill of Entry the goods were described as fax machine complete in KD . The assessment was sought under sub-heading No. 8517.40 of the First Schedule [as substituted w.e.f. 28-2-1986 by Section 2 of the Customs Tariff (Amendment) Act, 1985, to the Customs Tariff Act, 1975 (hereinafter referred to as the `Tariff ), with the benefit of Notification No. 59/88-Cus. On examination the goods were found to be components. The Assistant Collector of Customs, New Delhi who adjudicated the matter observed that the benefit of Notification No. 59/88-Cus. was applicable to the equipment complete and not to the fax machines in completely knocked down (CKD) condition. The order passed by the Assistant Collector, Customs, New Delhi was confirmed by the Collector of Customs (Appeals), New Delhi who observed that it could not be concluded that the fax machine covered under Notification No. 59/88-Cus. included the equipment in knocked down condition. In Appeal No. 244/93-B2 another consignment was imported at Bombay. On examination the goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umber of decisions in support of his arguments (which will be discussed at appropriate places in this order). 4. In reply Shri A.K. Agarwal, SDR stated that the MXL had not imported the fax machines but had imported various parts and components for the manufacture of the fax machines. He referred to the orders-in-appeal in these matters and submitted that the eligibility or non-eligibility of any particular goods to the benefit of exemption notification had to be determined with reference to the form composition and the nature of the goods imported and the benefit of exemption could not be extended to the goods which were not otherwise covered by the description in the exemption notification. He pleaded that the rules of interpretation were not applicable to the exemption notifications which had to be construed strictly and the area of exemption could not be extended even when for classification under a particular Heading/sub-heading the rules of interpretation are made applicable. As regards the case law cited by the ld. Advocate for the appellants he submitted that the judgment had to be read as a whole and no particular sentence could be culled out to plead any particular pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g/recording machine, STD barring device, diallers and call monitors. It is noted that under this notification various type of equipment, systems sub-systems, sets, accessories etc. were described for the purposes of levying concessional rate of customs duty. The various articles had been referred to by specific names. It is seen that in certain entries there was a reference to the parts also. For example entry under Sr. No. VII - 12 read as under : TV/Radio coverage mobile vans without chessies/vehicular parts . The accessories had been referred to in a number of entries. 9. The ld. Departmental Representative had contended that the exemption notification had to be considered strictly in terms of the expressed in used and that the area of exemption could not be extended by taking recourse to the general rules of interpretation or for any material which is beyond the scope of the exemption notifications. In support of his arguments he had relied upon a number of decisions in the case of Rajasthan Spinning and Weaving Mills Ltd. v. Collector of Central Excise, Jaipur [1995 (77) E.L.T. 474 (S.C.)] the Supreme Court had held that the exemption notification had to be construed direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of his order-in-original as under : 16. The contention of the importer that the consignment was imported in Knocked Down condition for convenience in handling, packing and transport does not appear to be tenable. The degree of disassembly for such purposes will not be to such an extent in normal circumstances. Further the normal trade practice as evidenced by other imports of Facsimile Equipments do not support this submission. The very fact that the consignment is not being imported for direct stock and sale, but was intended to go to the Rampur based factory of the importer, from where it would be repacked after assembly and then despatched to individual customers shows that the complete/assembled facsimile machines have a mode of packing for convenience in handling and transportation. The ratio of the Madras High Court judgment, in the case of T.I. Cycles is related to disassembly on account of case of transport and economy of freight costs. The ratio is, for the reasons mentioned above, inapplicable in the present case. The case of Indochem Electronics was also based on similar grounds, and is similarly inapplicable. In Appeal No. C/202/93-B2 Collector of Customs (Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x machines in unassembled or disassembled condition. For the purposes of Rule 2(a) of the Rules for interpretation of the Tariff :- the goods should be incomplete or unfinished having the essential character of the complete or the finished article. or the goods should be (a) complete or finished or (b) incomplete or unfinished having the essential character of the complete or finished article, but are presented for assessment in unassembled or disassembled condition. For unassembly or disassembly the goods have to be a collection of parts. While it is a fact that for convenience of transport, many machines and apparatus are transported in an unassembled state but unassembly does not mean the individual parts. According to the Section Note 2 of Section XVI of the Tariff, parts if are such that are specifically unchanged in any particular Tariff heading are to be classified in such specific heading; other parts if suitable for use solely or principally with a particular kind of machine or with a number of machines of the same heading, they are to be classified with the machine of that kind. Even when they are so classified they do not become a machine. According to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riefly referred to above, the principles as contained in the general rules are for the classification of the goods imported. Rule 1 of the general rules provides that for legal purposes classification of the goods shall be determined according to the terms of the headings and any relevant section or chapter notes. It is only when such headings or notes do not help in determination of the classification that the provisions of the general rules will apply. It is thus clear that the terms of the headings and the relevant section and chapter notes are paramount. They are the first consideration in determining the classification. If the goods are clearly classifiable in terms of the heading read with section and chapter notes then the scope of the heading could not be extended to include the goods which otherwise might have been included by reason of the general rules. There is no dispute that the goods imported were parts and it was only by reason of the operation of the general rules that it was claimed that the description in the exemption notification should be extended to include the goods imported. We find that Section Note 2 of Section XVI specifically refer to the classification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as complete or finished article. But this Rule 2(a) is subject to Rule 1 for the purpose of classification of notes. Rule 1 states : 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. 9. Thus, the classification has to be determined in terms of Section notes or Chapter notes. Therefore, Note 1 to Chapter 98 has precedence over Interpretative Rules 2(a) in the present case [See Voltas Limited v. Collector of Customs - 1991 (56) E.L.T. 569]. 10. Admittedly, the items are not telephone sets in the assembled sets. They are sub-assemblies in the nature of parts and such parts of Chapter 85 are clearly included in the Chapter 98 and hence the classification adopted by the learned Collector is justified and is in accordance with law. 11. As regards the applicability of the Rule 2(a) to the terms of Notification, the matter is no longer res integra. In the case of Sipani Automobiles Ltd., it has been made very clear that Interpretative Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ification. It is noticed that Rule 1 of the general rules is of general application providing that for legal purposes classification shall be determined according to the terms of the headings and any relative section or chapter notes. Exemption notifications are part of the Tariff and there could be no doubt that Rule 1 of the general rules had its application for determination of the classification even when such classification is required for the goods described in the exemption notification. Thus for the purposes of the classification of the goods in terms of the particular heading/sub-headings are described in the exemption notification the classification had to be first determined in terms of headings of the Schedule read with applicable section/chapter notes. Resort to the general rules other than Rule 1 can be had only when the classification is not possible in terms of the headings/sub-headings read with applicable section/chapter notes. In the facts and circumstances of this case we consider that the appellants had sought to classify the goods in terms of the general rules while the classification in terms of the expressed language in the exemption notification could be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suny Electronic Works [1987 (30) E.L.T. 345 (Calcutta)], it was alleged by the Customs that the articles imported were complete Colour Television sets in ready-to-assemble condition. The importers had contended that they could import parts and accessories even if when put together they could make a complete television set. The Calcutta High Court observed that the importers might have purchased all the articles but that could not be a ground for withholding the goods alleging that complete Television sets had been imported. In the case of Susha Electronic Industries v. Collector of Customs [1989 (39) E.L.T. 585 (Tribunal)] it was held that the components could not by themselves constitute colour television sets. 20. The ld. Advocate had relied upon a number of decisions in support of his arguments. In the case of Khandelwal Metal and Engineering v. Union of India [1983 (12) E.L.T. 292 (Delhi)], the Delhi High Court had observed that while broadly in common parlance brass scrap and copper scrap would mean separate and distinct articles in the market, it is because of the notes in Section XV of the Tariff that brass scrap must be deemed to be covered by copper scrap. The reference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered as an article of plastics for Tariff heading should also be considered as article of plastics for the purpose of notification. The matter related to the composite article made out of combination of plastic and non-plastic material. It was a case of mixture or combination of more that one material which contained 51-57% of plastic material. The goods were not found to be classifiable in terms of Rule 1 of the general rules. In the case of NORSK Data (I) Ltd. v. Collector of Customs [1992 (57) E.L.T. 666 (Tribunal)] the matter related to the classification of the running computer sheets which were considered as constituting a printed book for the purpose of Heading No. 49.01 and the Tribunal observed that it could also be considered as printed book for the purposes of Notification No. 139/90-Cus., dated 20-3-1990. In this judgment also the classification was between the Heading No. 49.01 of the Tariff and the notification. Similarly in the case of Shanti Lal Doshi Pvt. Ltd., Bombay v. Collector of Central Excise, Bombay [1991 (56) E.L.T. 263 (Tribunal) = 1992 (38) ECR 397 (Tribunal)] the matter related to the gummed paper and its eligibility to the benefit of Notification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erence 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 : The Collector of Customs (Appeals), Bombay in Para 44 of his order had also referred to this aspect of the matter in the following terms : 44. I have already held that the goods would have to be classified under the appropriate heading first and then only the question of exemption is to be considered. The judgments relied upon by the Appellants, in a nutshell, refer to this method only. Even in the Khandelwal s case, it was the department who argued that the Rules of Interpretation will apply to an exemption notification, when the importers contended to the contrary. Since I am following the method of classification of the goods first, under the CTA and then application of a notification to the said classified goods. I do not intend to discuss any of the judgments, of the Hon. CEGAT, Hon. High Court or Hon. Supreme Court, relied upon in this context, by the Appellants. In these cases goods imported were parts which were sough ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticular consideration that the term `components have been used in its widest amplitude and not with particular reference to the purport of that term under Customs Tariff . I, therefore, find that the rationale of this Judgment cannot be said to be of the nature of `in rem and hence the appellant s argument fails. Similar is the position of the other case law referred to by the appellants and I find that none of the case covers specific facts or issue involved in this case. The appellants have also emphasised that Department itself had argued in case of M/s. Khandelwal case 1983 (12) E.L.T. 292 that the Rules of interpretation will apply to an exemption when the importer contends to the contrary and that this view was accepted by the Supreme Court and Delhi High Court. I find that the appellants argument on this point is misplaced in view of the simple fact that here the importer, is not contending to the contrary; the more important fact is that the facts and circumstances of that case were entirely different and one of issues decided therein was that the brass scrap imported in that case was held to fall under exemption Notification 97/77 and not under Notification No. 156/77 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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