Full Judgment
2. We have heard Advocate for the assessee and four of its officers and employees. Rajeev Mital, is absent and unrepresented. We have perused the appeals papers and heard the Departmental Representative.
3. The assessee manufactures video cassette housing for video cassettes. The order of the Collector demands of duty on both video cassette housing and video cassette i.e. housing complete with magnetic tape, in this case unrecorded. Advocate for the appellant does not dispute the duty demanded on the video cassette complete. He contends that video cassette housing is correctly classifiable under Heading 39.23 of the Tariff and not, as determined by the Collector under Heading 85.23, and consequently it is entitled to the benefit of Entry No. 38 of Notification 132/86 up to 1-3-1988 and thereafter Entry 39 of Notification 53/88.
4. On this question, the Collector has refused to accept the assessee's plea that such video cassette housings were supports for the tapes and correctly classifiable as an article of packing or conveyance of the tapes under Heading 39.23. He found that the goods were solely used for packing video magnetic tape and has no other use. They were therefore parts of video cassette tapes and hence classifiable under Heading 85.23. He found supports for the conclusion from Note 1(c) to Section XVI. The Departmental Representative supports this conclusion by reference to Note 2(b) of Section XVI.5. Note 2(b) of Section XVI refers to classification of machines classifiable in that section. It cannot seriously be contended that video cassette is a machine classifiable in that section. It is not a machine, machinery, plant, equipment, apparatus or appliance. There is a more serious objection to the classification. The Explanation Notes to the Harmonised System for Heading 39.23 specifically included in that heading spools, cops, bobbins and similar supports including video and audio cassette without magnetic tape. The contents of Note 2(c) to Section XVI which refers to spools, cops, bobbins and similar supports obviously must take into its ambit video and audio cassette included in such supports in the notes to Heading 39.23. The active or the significant component in a video cassette is a magnetic tape on which images or sound or both are recorded. The housing is provided to protect and provide support for their use and safe transport. They are rightly classifiable under Heading 39.23 as articles of plastic.
6. It would then follow that the benefit of notification would be available subject to the condition being fulfilled. The conditions are that either the goods are made out of specified duty paid raw material or they are produced out of plastic scrap. Advocate for the appellant contends that he will be able to demonstrate before the Commissioner the compliance with the condition and therefore the eligibility to the notification.
7. If this is done, it is contended the duty liability will be reduced from Rs 11.92 lakhs now demanded to Rs. 1.48 lakhs. It would then follow that the liability to penalty, if any would have to be redetermined taking into the value of the goods and the duty paid thereon. This would be more appropriately done by the Commissioner because this .is contingent upon the liability to exemption to be determined.
8. It is also contended before us that the Commissioner, in determining the amount of penalty on each of the employees, has not appreciated the extent of involvement of each of them in the evasion of duty by clandestine removal of goods. The impugned order does not devote more than two sentences to the penalties imposable on the officers of the company. These sentences say that they contravened the provisions of Rule 209A and that therefore they are liable to penalty. The finding with regard to Rajeev Mital is also similarly sketchy saying that he is responsible for direct and undeniable part played in the evasion. The liability of a person to penalty and determination of quantum of that penalty requires greater consideration than meted out in this case. The Commissioner shall therefore also give reasoned finding on their liability to penalty, if any, and where necessary the quantum thereon.
9. Accordingly, we allow the appeal to the extent that the goods are classifiable under Heading 39.23. The matter is now remanded to the Commissioner to determine the eligibility of goods to the notification and thereafter work out duty payable and consequently the penalty, if any, imposable on the other appellants. The Commissioner shall, after considering the material that the appellant may produce before him within two months, pass orders on these aspects according to law.