Full Judgment
2. Brief facts of the case are that the appellants made an import of T.V. parts and filed a Bill of Entry claiming the classification under Heading 85.29 of Customs Tariff. Show cause notice was issued to the appellants on the ground that the goods, in question, appeared to be in the form of components which are to be mounted on bare Printed Circuit Board (PCB), which had also been imported. The operation/process, involved is mere shouldering, thus, the imported components, along with PCBs appeared to make specific part of colour T.V. Further, all such parts taken together, appear to attain the essential characteristic of colour T.Vs. and are classifiable under Heading 85.28 of Customs Tariff. Show cause notice also proposed confiscation of goods and imposition of penalty. The adjudicating authority, after invoking the provisions of Rule 2(a) of Interpretative Rules, held that the goods, in question, are classifiable as colour T.V. The adjudicating authority ordered confiscation of goods and gave option to redeem the same on payment of redemption fine of Rs. fifteen lakh and imposed penalty of Rs. five lakh.
3. Ld. Counsel, appearing on behalf of the appellants submitted that the goods, imported, are only components/parts of the colour T.V. The following 14 parts are not imported by the appellants and are to be procured locally: 4. The submission of the Id. Counsel is that the value of the imported components is only 28 per cent of the total value of the parts used in the manufacture of a colour T.V. His submission is also that by no stretch of imagination, the components, in question, can be treated as colour T.V. either in disassembled or unassembled condition, hence, the Interpretative Rule 2(a) will not be applicable. The goods, imported, have not attained essential characteristic of complete or finished article. The appellants relied upon the decision of the Tribunal in the case of - (1) B.E. Office Automation Products & Anr. v. C.C. reported in 2000 (122) E.L.T. 908 (T) = 2001 (43) RLT 159; (2) New Century Impex v. C.C. reported in 2002 (142) E.L.T. 701 (T) = 2002 (50) 760; and (3) Larger Bench decision of the Tribunal in the case of B.H.E.L. v. C.C.reported in 1987 (28) E.L.T. 545 (T).
5. Ld. D.R., appearing on behalf of the revenue, reiterates the findings of the lower authorities and relied upon the decision of the Tribunal in the case of Universal Commercial Corporation v. C.C.reported in 1994 (69) E.L.T. 150 (T) to submit that the Tribunal held that parts of air-conditioning machines are to be classified as air-conditioning machines.
7.1 In this case, the issue is whether parts, imported by the appellants, after invoking the provisions of Rule 2(a) of General Rules of Interpretation, can be treated as colour T.Vs. The admitted facts of the case are that the appellants only imported certain parts and the parts like picture tubes, plastic cabinets, speakers, etc. are not imported by the appellants. The Interpretative Rule 2(a) provides as under: "2(a) - Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as imported the incomplete or unfinished articles has the essential character of the complete or finished article. It shall also be taken to include a reference to that article complete or finished (or falling to be classified as complete or finished by virtue of this rule), imported unassembled or disassembled." 7.2 The scope of this rule is interpreted by the Larger Bench of the Tribunal in the case of B.H.E.L. (supra) and the Tribunal held as under : "2(a) Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as imported the incomplete or unfinished article has the essential character of the complete or finished article. It shall also be taken to include a reference to that article complete or finished (or falling to be classified as complete or finished by virtue of this rule), imported unassembled or disassembled." This Bench of five members had been constituted for the purpose of evolving, if possible, any general guidelines that would govern the application of the provisions of Rule 2(a). It was in this connection that various earlier decisions were referred to. In these earlier decisions the provisions of this rule were applied to determine whether the incomplete or unfinished product imported will have to be classified under the heading under which the completed product would fall. Naturally, in applying the rule the conditions set forth in Rule 2(a) were taken into consideration in order to decide whether the said conditions were fulfilled in terms of Rule 2(a). In order to classify the incomplete or unfinished product under the heading relevant to the complete product the condition to be fulfilled would be that as imported the incomplete or unfinished articles should have the essential character of the complete article. In page 2 of Vol. 1 of CCCN Explanatory notes it has been mentioned with reference to the provisions of Rule 2(a) in the CCCN [which is the same as Rule 2(a) in the First Schedule to Import Tariff of our Customs Tariff Act] that the provisions of that rule also apply to blanks, the term "blank" being taken to mean an article, not ready for direct use, having the approximate shape or outline of the finished article or part, and which, other than in exceptional cases, can only be used for completion into the finished article or part. Therefore, in order to find out whether the incomplete article as imported has the essential character of the completed article the tests to be applied would be whether the imported article has attained the approximate shape or outline of the finished article or part and whether it can only be used for completion into the particular finished article.
We find that the words "essential character" have been used in Rule 2(a). These words are again to be found in Rule 3(b) also. In Vol. 1 of the CCCN Explanatory Notes in dealing with this Rule 3(b) of the CCCN [which is the same as our Rule 3(b)] it has been observed that the factor which determines, essential character will vary as between different kinds of goods and may be determined by the nature of the material or components, its bulk, quantity, weight or value or by the role of a constituent material in relation to the use of the goods. No doubt Rule 3(b) dealt with mixture and composite goods and it was in that context that the words "essential character" had been construed in the manner mentioned above. But we feel that the test of essential character as mentioned in the CCCN under Rule 3(b) would also be very relevant in construing the said words in Rule 2(a) also.
It, therefore, appears that in order to apply the provisions of Rule 2(a) it has to be seen (1) whether the imported product had attained the approximate shape or outline of the finished article; (2) whether the said imported article can only be used for completion into the finished article and (3) these would have to be determined with reference to the nature of the material, its bulk, quantity, weight or value. This very enumeration would therefore establish that no general principles can be laid down as to how and in what circumstances Rule 2(a) could be pressed into service for assessment of the imported unfinished article. In each case the factors enumerated above would have to be taken into consideration individually, and then collectively, to determine whether the imported article had attained the approximate shape or outline of the finished article and could be used only for completion into the finished article.
8. Further, we find that the Tribunal in the case of B.E. Office Automation Products (supra) held that where 75-80% parts of photocopier, were imported, these were to be assessed as parts of photocopier and not as photocopier and the Tribunal, further, held as under : "On perusal of records and analysis of the submissions made by both sides it is clear that the goods under import were only parts of photocopying machines. According to the expert opinions relied upon by the Customs authorities themselves both the consignments together constituted only 75 to 80% of the parts required for manufacture of photocopiers. The remaining parts are to be locally procured for manufacture. In these circumstances, we are unable to uphold the finding in the impugned order that, the goods under import are to be treated as photocopiers, particularly so in view of the finding in the impugned order itself that the imports cannot be clubbed. When the imports are not clubbed the main frame amounts to 55-60% of the photocopier. Such a case is not a case of import of a machine contemplated in Rule 2(a) of Interpretative Rules. This issue remains covered in favour of the appellants under the order of the Calcutta High Court in the case of HCL. Therefore, the appeals have to succeed on this issue."New Century Impex v. C.C. reported in - 2002 (142) E.L.T. 701 (T) = 2002 (50) RLT 760.
10. In the present case, admitted facts are that picture tubes, plastic cabinets, speakers and some other parts were not imported by the appellants. A television is for electric transmission of visual scenes and images and the picture tube is specially designed for reproduction of T.V. images. We find that without the picture tubes, cabinets and speakers, the imported goods are not in a position to attain the essential characteristic or outline of colour T.V. Further, the value of the parts imported is 28 per cent of the total value of parts used in manufacture of a colour T.V.11. Revenue relied upon the decision of the Tribunal in the case of Universal Commercial Corporation (supra). In this case, the import of condensing unit was made and the Tribunal held that besides the compressor fan, motor driven fan and condenser coil were also imported and the revenue proved the fact by producing technical material that the refrigerating cycle is complete. Hence, in these circumstances, the Tribunal had come to the conclusion that it is a complete air-conditioning machine. The facts of the present case are different.
In the present case, the admitted position is that without picture tube, the electric transmission of visual scenes and images is not possible. Therefore, the essential character as provided under Rule 2(a) of the Interpretative Rules of a colour T.V. has not attained. In view of above discussion, the impugned order is set aside and the appeal is allowed.