SONY INDIA LTD Vs. COLLECTOR OF CUSTOMS

JUDGEMENT

(1.) THIS is an application for waiver of pre -deposit and stay of recovery of the following customs duty confirmed and penalty imposed by the Commissioner of Customs, New Delhi : -

(2.) SHRI V. Lakshmi Kumaran, learned Advocate, submitted that M/s. Sony India Ltd. had imported 94 consignments of various components of colour televisions (CTVs); that they had filed Bills of Entry claiming assessment of the components under various sub -headings of the First Schedule to the Customs Tariff Act; that the duty was accordingly paid and after manufacture, CTVs were cleared from their factory on payment of duty; that in subsequent adjudication proceedings the Commissioner has demanded differential duty holding that they had imported complete CTVs in unassembled condition in violation of EXIM policy for the period after 25 -3 -1996; that exemption under Notification Nos. 91/89 -Cus., 36/96 -Cus. and 79/95 -Cus. was not available to the goods imported by them and that extended period of limitation is invokable as they have suppressed the fact of import of CTVs in unassembled condition from the Department. He further submitted that it was alleged in the show cause notice that the applicants have imported CKD kits of CTVs and not components of CTVs and applying Rule 2(a) of the Interpretative Rules, the goods imported have to be assessed as CTVs under sub -heading 8528.12 of the Customs Tariff; that the Commissioner has categorically held in the impugned order that the items imported were not SKD or CKD kits of CTVs; that once the Commissioner held so, the show cause notice issued to the applicants has to be dropped as he cannot uphold the notice on an entirely different ground not raised in the notice. The learned Counsel emphasised that the Commissioner has clearly held that there was no violation of Exim Policy prior to 25 -3 -1996 as this was not a case of imports in SKD or CKD conditions which always presupposes that the goods were first assembled and then disassembled fully or partially for more convenient transport of the goods; that the Commissioner, however, upheld the charge of contravention of EXIM Policy 1992 -97 involving imports for the period from 25 -3 -1996 to 31 -3 -1997 as a provision analogous to Rule 2(a) was incorporated in the said EXIM Policy in the form of 'Import Licensing Note'. The learned Counsel, after referring to the description of Consumer Goods as given in para 156 and Import Licensing Note, mentioned that both descriptions are similar and if the findings in the impugned order are to the effect that imported goods are not in SKD or CKD conditions, the provisions of Import Licensing Note analogous to Rule 2(a) of Interpretative Rules will not be applicable as it refers to the classification of SKD/CKD Packs; that Rule 2(a) of Interpretative Rules cannot be made applicable to the EXIM Policy as these Rules are for interpretation of the First Schedule to the Customs Tariff Act only.

(3.) THE learned Counsel also mentioned that according to HSN Explanatory Notes to Rule 2(a), 'articles presented unassembled or disassembled' means articles the components of which are to be assembled either by means of welding, for example, provided only simple assembly operations are involved. He submitted that if assembly operations are not simple but complicated Rule 2(a) will not apply and the components have to be assembled as components only and not as finished articles; that the Tribunal applied these Explanatory Notes in the case of Space Age Engg. Projects Pvt. Ltd. v. C.C.E.,1995 (78) E.L.T. 544 (T); that the Appellate Tribunal in Modi Xerox Ltd. v. Collector of Customs, Final Order No. 2907/97 -B2, dated 12 -12 -1997 did not consider the assembly of fax machine under the supervision of Production Engineer as a simple assembly operation; that HSN Explanatory Notes are binding as held by the Apex Court in C.C.E., Shilling v. Wood Craft Products Ltd., 1995 (77) E.L.T. 23 (S.C.) and by the Larger Bench of the Tribunal in Grasim Industries Ltd. v. C.C.E., (24) RLT 598 (T); that the Commissioner has not followed the Tribunal's decision and on the other hand relied upon the judgment dated 16 -6 -1994 of the European Court in the case of Develop Dr. Eisblin GmbH & Co. and Haupt -30 llamt Stuttgart - West wherein it was held that complexity of process required for assembly of an article does not affect the application of Rule 2(a); that this judgment was delivered in the light of antidumping duty and the European Court was not considering the HSN Explanatory Notes regarding simple technic. The learned Advocate also pointed out that the European Court in its judgment has mentioned that the component parts, that is the parts which may be identified as components intended to make up the finished product, are all presented for customs clearance at the same time whereas the Commissioner in his impugned order omits the words 'at the same time'. He further submitted that HSN Explanatory Note to Interpretative Rule 2(a) were amended and word 'simple' was deleted from the explanatory note of this Rule in March, 1997. By this amendment a new para was also added which provides that "No account is to be taken in that regard of the complexity of the assembly method. However, the components shall not be subjected to any further working operation for completion into the finished state"; that this amended HSN Explanatory Notes to Rule2(a) cannot be applied retrospectively; that further as the processing was done by the appellants on the imported components, Rule 2(a) cannot be made applicable; that they had given an affidavit of Mr. Toshimi Saito, Director, to the effect that components undergo certain process or operation at the time of assembly; that the manufacturing operations undertaken by them are also mentioned in the Circular No. 44/97 -Cus., dated 30 -9 -1997 issued by the Central Board of Excise & Customs. He also contended that as per Board's Circular Rule 2(a) is applicable in cases where only assembly operations are involved and components themselves should not be subjected to any further working operation for completion into finished state; that the Circular also mentioned that after visit of the factory premises to study the process of manufacture undertaken, it would seem that the manufacturer had a large well established factory, the process involved was elaborate and require highly skilled as well as semi -skilled work force and technical know -how of high degree to complete the finished article from the components/parts; that the Circular is binding on the Revenue which cannot contend to the contrary as laid down by the Apex Court in Ranadey Micronutrients v. C.C.E., 1996 (87) E.L.T. 19 (S.C.); C.C.E. v. Usha Martin Industries, 1997 (94) E.L.T. 460 (S.C.); and British Machinery Supplies Co. v. U.O.I., 1996 (86) E.L.T. 449 (S.C.).