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Manoj Gupta, Manish Agarwal, Fortune Marketing Pvt. Ltd., Nirmal Kumar Meharia, Vishnu Kumar Bhandari And Supertron Electronics Pvt. Ltd. Versus CC (Import) ACC, Mumbai

2017 (4) TMI 1002 - CESTAT MUMBAI

Classification of import of external/ portable hard disk drives - concessional rate of duty (CVD) - Exemption Notification Nos. 6/2011 CE and 12/2012-CE - classifiable under declared CTH 8471 70 20 as Hard disk drives or under CTH 8471 7030 as Removable or Exchangeable Disc Drives - Extended period of limitation - Held that:- Revenue has only taken a stand of convenience to anyhow deny the benefit of exemption which is clearly available to the appellant importers, by ignoring amongst others even .....

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mporter Appellants. - C/85893/15, C/85896/15, C/85898/15, C/85316/16, C/85317/16 And C/85318/16 - A/86633-86638/17/CB - Dated:- 4-4-2017 - Mr. M.V. Ravindran, Member (Judicial) And Mr. C.J. Mathew, Member (Technical) Shri Atul Nanda, Sr. Advocate, Shri Ashish Batra, Advocate - for appellant Shri V.K. Singh, Spl. Counsel - for respondent ORDER Per M. V. Ravindran These appeals are directed against orders-in-original No.CC-RS/08/2014-15 ACC (Adj) (I) dated 28.11.2014, CC-RS/10/2014-15 ACC (Adj) (I .....

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em for the said product under Exemption Notification Nos.6/2011 CE dated 01.03.2011 (Sr. No.17) and 12/2012-CE dated 17th March 2012 (Sr. No.255), which specified tariff heading as 847170 at six digits level only and described the eligible goods only as hard disk drives? and (c) Thus, whether the demand of duty with interest by invoking extended period, and penal action taken by the Respondent Commissioner of Customs is sustainable in the eyes of law? 3. Both sides were heard at length. We have .....

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n the instant case is neither in dispute, nor is contrary to the undisputed Invoices submitted with the Bills of Entry. 4.3 Vide letters dated 5th December, 2012 (at Page 485 of the Appeal of M/s Fortune Marketing Private Limited) and 8th February, 2013 (at Page 486-487), Seagate Singapore International Headquarters Pte Ltd, Singapore, has clarified that Internal as well as External Hard Disc Drives, are Hard Disk Drives used as storage devices with the help of different interfaces. Even accordi .....

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functional or common parlance test. 4.4 It was submitted that these subject imported "drives" are machines for reading and transcribing data on to the "data media" which is "hard disk" hermetically sealed and inseparable from the drive. Thus, so far as the "data media" in the subject imported drive is concerned, it can neither be removed from the "drive", nor is the same exchangeable. 4.5 It was submitted that other drives mentioned in the CTH 8 .....

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m Drives and DVD drives respectively, for the purpose of classification and/or exemption. 4.6 The fact that the goods are external disk drives is not in dispute, but what is contended by Revenue is that since the external hard disk drive is admittedly a plug-in device, it is more appropriately classifiable as "Removable or Exchangeable Disc Drives" under CTH 8471 7030, and exemption shall not be available. 4.7 It is also that a sample of such imported external hard disk drive was also .....

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aid "data media" could be easily inserted and removed from the said "drive". The said data media was thus removable and exchangeable. The drive for such removable and exchangeable "data media" was thus "Removable or Exchangeable Disc Drives" under CTH 8471 7030, as correctly pointed out on behalf of the Appellants. 4.9 The subject imported "drive" as such can be easily disconnected from the CPU. Thus, only the subject "drive" as whole i .....

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Department of Revenue, Ministry of Finance, North Block, New Delhi. The said Office Memorandum is as under- "No.5(6)/2012-IPHW Government of India Ministry of Communications and Information Technology Department of Electronics and Information Technology (Industrial Promotion Electronics Hardware Manufacturing [IPHW] Division) ******* Electronics Niketan, 6 CGO Complex, Lodi Road, New Delhi. Dated : 5th June, 2013 OFFICE MEMORANDUM Subject: Request for clarification on classification of Eter .....

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ve been held up for want of clarification in this regard. 2. A Technical Committee was constituted by the Department of Electronics and Information Technology (DeitY) to give its recommendation regarding the matter. A meeting of the Technical Committee was held on 26.5.2013. The following were present in the meeting: (i) Mr. Raj Singh, CSIR-CEERI, Pilani (ii) Ms. Sunita Verma, Director, DeitY (iii) Dr. S. Chatterji, Additional Director, DeitY (iv) Ms. Asha Nangia, Additional Director, DeitY The .....

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dated 27.2.2010, there were two categories for the items in the category 8471 70 or 847330 or 8523 51 00 namely, (i) meant for fitment inside the CPU housing/laptop body only; and (ii) meant for external use with a computer or laptop as a plug-in device and the custom duty benefit was Nil in the first category and 4% in the second category. Now, in the present notification separate categorization is not there and the custom duty benefit at 6% is available to all goods covered under 8471 70 or 8 .....

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ock, New Delhi. Copy to: Shri R.P. Singh, Director (Customs), Central Board of Excise and Customs, Department of Revenue, Ministry of Finance, North Block, New Delhi. Issued by D/R Sd/- 5/6/2013" 4.11 Neither the authenticity of the said Office Memorandum is disputed at any point of time by the Department, despite being directly on the issue. 4.12 Vide letter dated 12.11.2012, the Centre for Development of Advance Computing (CDAC), a Society of the Ministry of Communications and Information .....

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Appeals) passed in favour of the importers are placed on record on the very same issue. 4.14 Vide a judgment dated 06.01.2017 in Appeal No.C/54221/2014-CU (DB), Principal Bench at Delhi has already decided this issue in favour of one of the appellants before us-Supertron Electronics Pvt. Limited, by dismissing the appeal filed by Revenue against one such Order-in-Appeal passed by Commissioner (Appeals), while holding that exemption under the same Exemption Notification 12/2012-CX dated 17.2.2012 .....

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sc drives. The Revenue considers the imported items under 84717030 whereas the impugned order by the Commissioner (Appeals) held the product under heading 84717020. The later entry is eligible for concessional CV duty. We have examined the impugned order and grounds of appeal, closely. First of all, we note that the exemption notification specified tariff heading to six digit only, 847170, which covers specifies tariff heading up both, hard disk drive and removable or exchangeable disk drives. F .....

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ne, exemption to the said item cannot be denied'. Admittedly, the imported items are hard disk drive and are meant for external use with computer or lap-top as plug-in device' They are portable hard disk drive' The contention of the Revenue that they are only removable or exchangeable disk drive, is not factually or technically correct. We have perused sample of such removal or exchangeable disk drives. They have full drive mechanism in which storage media is inserted and along with .....

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nterfere with the impugned order. 5. The appeal by Revenue is dismissed." The view taken by the co-ordinate bench is binding and only if the views taken by co-ordinate bench do not appear to be correct, matter can be referred to any larger bench. 5. In the above undisputed factual position, the above three issues mentioned in para 1 are to be decided. 6. Vide an Order dated 04.10.2016, some of these Customs Appeals namely Appeal Nos. C/85893, 85896 and 85898/2015-MUM filed by M/s Fortune Ma .....

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by Department of Electronics and Information Technology, GOI though produced before us, escaped our attention while recording the order, as also other materials like orders of first appellate authority on the same issue for subsequent periods. The said clarification of the Department of Electronics and Information Technology, GOI and other materials may throw some light as to the classification of the products in question...." The said Appellant Importer preferred Civil Appeal before the Ho .....

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ed 04.10.2016 passed by the Hon ble Tribunal in Appeal No.C/85898/15-MUM and to allow the said Appeal in terms of the prayers contained therein; Vide Order dated 13.01.2017, after perusing the relevant material and hearing the Counsel for the appellant importer, the Hon ble Supreme Court was pleased to dismiss the said Civil Appeal D. No.42407 of 2016, without disturbing the Order dated 13.12.2016 by which the earlier Order dated 04.10.2016 in these appeals was recalled and the appeals were dire .....

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ared CTH 8471 7020. It was held that CVD shall be leviable at 10% ad-valorem by denying exemption under Notification No.06/2006-C.E. till 16.03.2012 and at 12% ad-valorem by denying exemption under Notification No.12/2012-C.E. from 17.03.2012 onwards. Several references from internet and technical literatures and various judgments are referred and relied upon in the impugned Order. After careful consideration of the records, written and oral submissions, technical literature of the manufacturers .....

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ch data, not elsewhere specified or included" Thus "drives" for reading or transcribing data on to any "data media" are appropriately covered under broad heading 8471. 9. At six digit level, CTH 8471.70 covers "Storage Units" i.e. all the "drives", for reading or transcribing data on to any data media. It is not in dispute that the imported drives are "Storage Units" covered by CTH 8471.70. 10. At eight digit level, the said CTH 8471.70 furt .....

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used in that drive. The different types of drives are thus sub-classified based on the particular type of data media suitable for that drive. Thus, CTH 8471 70 10 covers Floppy disc drive, i.e. a drive for data media floppy disc;CTH 8471 70 20 covers Hard Disc Drives, i.e. a drive for data media hard disc;CTH 8471 70 30 covers Removable or Exchangeable Disc Drives, i.e. a drive for data media Removable or Exchangeable Disc;CTH 8471 70 40 covers Magnetic tape drives, i.e. a drive for data media .....

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; is appropriately classifiable under CTH 84717090. 11. This sub-classification of different drives is evidently not on the basis of whether the drive is external, portable, removable or exchangeable, but on the basis of the data media suitable for that drive. The word 'removable' has to be read with the word disc and not with the word drive. Hence, mere fact whether a drive is for external use as plug-in device or for internal fitting in CPU, would have no impact at 8 digit level in CTH .....

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s clear distinction between Hard disc drives (84717020) and Removable or Exchangeable disc drives (84717030). As the name indicates Removable or "Exchangeable disc drives" will encompass all those devices which are used for storage of data and can be removed from automatic data processing machines routinely without dismantling and switching off the power to the machine. The Addition of circuits/connections interfaces / enclosure the hard disk drive lose their character of hard disk dri .....

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was incumbent upon the Revenue to prove that the data media/disc which goes into the imported drives is a "removable or exchangeable disc", and hence the drive imported is a removable or exchangeable disc drive. The same is not possible in view of the undisputed position already recorded in para 3 above and because the data media which is hard disk is hermetically sealed and inseparable from the drive. There is no removable or exchangeable disc which finds place inside the hard disc dr .....

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ny argument for the heading 8471 70 30 being rendered redundant. 14. We have also noticed another very important aspect. Notification No.12/2010 CE dated 27.02.2010 issued by the Central Government prescribed two different rates of exemption from duty i.e. 'Nil' and 4% for various drives of CTH 8471.70 including "Floppy disc drive", "Hard Disc drive", CD-ROM drive, DVD Drive / DVD writers, and Combo drive, depending upon whether drives were meant for fitment inside th .....

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down by the Hon ble Supreme Court in Union of India vs Garware Nylons Ltd, 1996 (87) ELT 12 (SC), the clarification issued by Seagate, can also be relied upon for construing the meaning of the expressions occurring in the Tariff Schedules in the sense it understands it normally, because it is not in dispute that Seagate not only deals in such goods but is amongst the top manufacturers of the subject goods in the world. 16. It is therefore a case where the Revenue has only taken a stand of conven .....

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18. The findings in the impugned Orders on the issue of classification are thus erroneous on facts as well as on law. Thus, first issue as to whether goods imported which are "external/ portable hard disk drives" are classifiable under declared CTH 8471 70 20 as "Hard disk drives" or under CTH 8471 7030 as "Removable or Exchangeable Disc Drives" is decided in favour of the Appellants and it is held that the imported goods are correctly classified under declared CTH .....

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duty i.e. 'Nil' and 4% for "Hard Disk Drive" depending upon whether they were meant for fitment inside the CPU housing / laptop body or were meant for external use with a computer or laptop as a plug-in device. The sub-division of Hard Disk Drives into further two categories "internal "or "external" for the purpose of exemption was given away after 01.03.2011. This clearly shows legislative intent of uniform concessional duty for both types of Hard Disc driv .....

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under 847170 are entitled for the benefit. There is no bifurcation made to the goods falling under Sub-Headings of 84717020 or 84717090. There is no dispute that the item is Hard disk Drive, therefore, mere fact that the Hard Disk Drive have been imported in array will not disentitle them from classification under heading 847170 irrespective of its sub-heading. Therefore, the order passed by the Commissioner (A) is legal and proper. There is no merit in this appeal and the same is rejected.&quo .....

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sc drive, although external, under heading 847170 at six digits level. There can therefore be no doubt about the eligibility for concessional rate of duty under the subject Exemption Notifications irrespective of its classification at eight digits level. For proving eligibility to any Exemption Notification, an importer is only required to show that the item imported is covered by the language of the Exemption Notifications and nothing more. 21. Thus, even the second issue as to whether the appe .....

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pellants. 22. Consequently, the third issue is also decided in favour of the Appellants and the entire demand of duty with interest, and penal action taken by the Respondent Commissioner of Customs is held as illegal, erroneous and not sustainable in the eyes of law. 23. The recent judgment dated 06.01.2017 (supra) passed by the Principal Bench also covers the issues on all fours in favour of the appellants. 24. In view of the above categorical findings, the other issues raised in the appeals su .....

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h is sufficient to signify such concurrence. Inherent in concurrence is the collegiality of the decision. The judicial decision-making process, unlike that in the other two branches of government, can be described as stylised only in form; the conclusions are determined by individual perceptions and within the broad spectrum of a mutually agreed upon conclusion, the constituents may be in accord on one or more of, but not necessarily with all, the reasons that may have been argued or that may ha .....

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s Fortune Marketing Pvt Ltd pointing out errors apparent from the record in having failed to take note of some submissions made on their behalf during the original hearing. The critical ones that were claimed to have been disregarded were the opinion rendered by the Department of Electronics & Information Technology (DEIT) of the Government of India, as well as that of Centre for Development of Advance Computing (C-DAC), that disk drives of every variety should be allowed the benefit of exem .....

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f this Tribunal in the interregnum was also brought to our notice. Undoubtedly, the issue for resolution, viz., the inclusion of external hard drives imported by M/s Fortune Marketing Pvt Ltd within the description of hard disk drives in notification no.6/2011-CE dated 1st March 2011, and 12/2012-CE dated 17th March 2012, granting exemption from duties of central excise and, thereby, from additional duties of customs on import, was characterised by sufficient uncertainty and befuddlement to warr .....

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h approval. 29. Hon ble Member (Judicial) has examined the technical inputs provided by experts noted supra and has accorded pre-eminence to that expertise in determining the eligibility of the external hard drive for exemption and to sustain the litmus test of common parlancethat can serve to determine classification of an imported item. Here, I may not be in full agreement because the adduced memoranda, undoubtedly attenuating the certitude in the mind of the tax authority, is only a record of .....

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that determines eligibility for exemption. As pointed out by Learned Authorised Representative, that consummation appears to be glaringly absent in the present issue. All too often, consensus on policy formulation follows such protracted correspondence including, but not necessarily reflecting, such expert opinion. 30. In the absence of unequivocal communication setting the issue to rest, once and for all, by the Department of Revenue, it devolves upon the proper officer to determine the eligibi .....

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controverted by justifiable counter. Therefore, while holding that the expert opinion is an acceptable criteria, their viewpoint need not necessarily have to prevail over tax policy. 31. Of more consequence to the claim of the importer for exemption is the decision of the Principal Bench of the Tribunal in M/s Supertron Electronics Pvt Ltd [final order no.50134/2017-CU(DB) IN APPEAL no. C/54221/2014-CU(DB) dated 6th January 2017] on an appeal filed by Revenue. It has been pointed out by Learned .....

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