Full Judgment
Shri M.S. Arora, the learned JDR who has appeared on behalf of the appellant, stated that appeal No. E/1852/90-B1, is a duplicate of appeal No. E/1721/90-B1 and that appeal No. E/1852/90-B1, was filed after the expiry of time and Shri M.S. Arora, the learned JDR, chooses to keep appeal No. E/1721/90-B1 alive and seeks permission of the Court for the grant of permission for the withdrawal of the appeal and stated that he has got no objection for the dismissal of the duplicate appeal, which was filed after the expiry of limitation.
2. Shri S.R. Tripathi, the learned consultant who has appeared on behalf of the respondent, does not oppose the request of the learned Junior Departmental Representative.
3. After hearing both the sides, necessary permission for the withdrawal of appeal No. E/1852/90-B1 is granted. For statistical purposes, appeal No. E/1852/90-B1 is dismissed.
4. Now coming to the merits of appeal No. E/1721/90-B1, briefly the facts of the case are that M/s. Television and Components Pvt. Ltd., Naroda, holder of Central Excise licence for television receiver sets, had filed a classification list No. 3/87-88 effective from 16th May, 1987 in form I under Rule 173B of the Central Excise Rules, 1944 for their products :- "Crown Broadcast Television Receiver sets (other than Monochrome sets) of screen size exceeding 36 CMS (value exceeding Rs. 5000.00 per set) (10) classic." In the said classification list, M/s. Television and Components Pvt.
Ltd. showed the above product to be falling under Chapter 85, Heading No. 85.28, sub-heading 8528.00. As per the duty payable on the said product the respondent showed basic excise duty at Rs. 1750.00 per set vide Notification No. 77/87-CE., dated 1st March, 1987 and additional duty at Rs. 100.00 per set as per Finance Bill 1985, and the special duty was shown to be nil vide Notification No. 91/87, dated 1st March, 1987. On verification of the pamphlet and the literature for the above referred "Classic Model TV sets" it was found that the same was equipped with "Small digital clocks" and on off timer facility was programmable on off timer facility with on screen display, on screen digital clocks. The Government of India vide its Notification No.131/87-CE, dated 29th April, 1987 amended the Notification No.68/86-CE, dated 10th February, 1986 and inserted serial No. 20A in the table annexed to the said notification to include broadcaster TV receiver sets in combination with Audio Tape recorder or radio (including Transistor sets) or clocks and to be assessed to basic duty at Rs. 2000.00 per set. In view of this, a show cause notice was issued to the respondent on 25th June, 1987 calling upon them to explain and show cause under the provisions of Rule 173B as to why the classification list No. 3/87-88 effective from 16th May, 1987 for classic model, crown brand TV set should not be classified under the newly added serial No. 20A to the said Notification No. 68/86-CE., as finally amended by Notification No. 131/87-CE., dated 29th April, 1987 and the respondents were required to pay Central Excise duty at Rs. 2000.00 per set.
In response to the said show cause notice, the respondents had filed a reply dated 21st July, 1987 wherein they had denied that the classic Model TV set could not be assessed to duty at Rs. 2000.00 per set vide Notification No. 131/87-CE., dated 29th April, 1987 and the respondents had put forth the following arguments :- "1. Prior to issue of Notification No. 131/87 the above said classic Model TV was assessed to duty as per Item No. 19 of the table to Notification No. 68/86 and since then there was no change in the product.
2. Even by issue of Notification No. 131/87 there has been no change against serial No. 19 of the table of the said Notification No. 68/86.
3. By virtue of description of the classic Model TV set as published and advertised in the pamphlet already supplied to the Department the same is not liable to be considered as satisfying the description against serial No. 20-A or 20-B of the amending Notification No. 131/87 dated 29th April, 1987.
4. Vide letter No. TC. CX/87/4288, dated 15th June, 1987 they have amply made it clear that the TV set classic does not contain any clock but have a contrivance to on off programming timer system which helps to on off the TV set at set time it was also explained that the said contrivance is not capable of being used as clock but shows the time when the TV set was closed when the TV set is put on operation.
5. They stated that no material is disclosed to them to hold that the contrivance contained in the TV set "classic" on-off timer facility is a clock rendering the set liable to be considered under the description of serial No. 20A of the notification and as such the notice under reference is illegal and cannot be proceeded further." The Assistant Collector did not accept the contention of the respondents. He relied on the report of the Head of Electrical Engineering Department, L.D. Engineering College, Ahmedabad. He did not accept the main contention of the respondents that their Broadcast Television Receiver set (Model Classic) in question did not contain any clock but it had got on off programming timer system which worked on off TV at set time. The respondents' contention was that TV set 'Classic' does not contain any clock but has contrivance to on-off programming timer system which helps to on off TV set at set time for simple reason that the contrivance does not show usual time but shows the time when TV set was closed and the TV set is put on operation. He was of the view that on perusal of definition of clock sub-heading No.91.07 it would be seen that time switches with clock or watch movement or with synchronous motor which did not have the character of clock like alarm clock, wall clock (Heading No. 91.05), but were mainly designed to make or break electric circuits automatically at given times, usually at times determined according to a previously determined daily or weekly programme. For being included in this category only the requirement of the device was that it must have the movement of the watch or clock type (including secondary or synchronous motor clock movements) or a synchronous motor with or without reduction gear. This head also included switches. The Assistant Collector relied on the expert's opinion and he had opined that "It was found to have a timer circuit. This circuit was capable of displaying real time in hours and minutes on the top right corner of the TV screen, if kept energised.
Over and above that, there was a provision to automatically stop the TV set at a set time which could be set in advance." The Assistant Collector had held that on off timer was nothing but an integrated circuit showing real time in hours and minutes in the TV when the TV is functioning and the time circuit functions as a watch movement which is mainly intended for watches and clocks of Heading Nos. 91.01 to 91.03, thus, there was an electrical device which functions as a clock and displays time in hours and minutes on the top right corner of the TV screen and as such, TV set (Model Classic) attracts classification falling under sub-heading 8528.00 and liable to be assessed at the rate of duty shown in column No. 4 of the table against serial No. 20A of the Notification No. 68/86, dated 10th February, 1986 as amended by Notification No. 131/87-CE., dated 29th April, 1987 and not against serial No. 19 of Notification No. 68/86, dated 10th February, 1986, as amended by Notification No. 77/87-CE., dated 1st March, 1987 so far as basic duty is concerned. Accordingly, he had held that the TV set was to be assessed at the rate of duty specified in the corresponding item in column No. 4 of the table against serial No. 20A as inserted in Notification No. 68/86, dated 10th February, 1986 by amending the same vide Notification No. 131/87-CE, dated 29th April, 1987 and not at the rate of duty as specified against serial No. 19 of the Notification No.77/87-CE, dated 1st March, 1987 as claimed vide notification classification list No. 3/87-88 filed by the respondents effective from 16th May, 1987.
5. Being aggrieved from the aforesaid order, an appeal was filed before the Collector of Central Excise (Appeals), Bombay. The Collector of Central Excise (Appeals), Bombay did not accept the reasoning of the Assistant Collector and he had held that timer system in question was not a clock within the meaning of clock given on page No. 743, Vol. 4 of Encyclopaedia Britannica and the timer system in the present case was not a machine in which a device that performs regular movements in equal intervals of time was linked to a counting mechanism that records the number of movements. He had further observed that the functioning of the timer was on and off programming. It was only incidental that when the timer was energised it displayed time, which on switching on the TV set had to be set to the time of the day or night. He had held that the timer system in question could not be called a clock and as such, a TV set in which the timer system is in-built did not attract a higher rate of duty @ Rs. 2000.00 per set but attracted duty at the rate of Rs. 1750.00 per set at the relevant time as claimed by the respondents and as prescribed against serial No. 19 of the table appended to the Notification No. 68/86, dated 10th February, 1986. He had allowed the respondents' appeal.
6. Being aggrieved from the aforesaid order, the revenue has come in appeal before the Tribunal.
7. Shri M.S. Arora, the learned JDR has appeared on behalf of the appellant. He has reiterated the facts. He stated that the assessment has been made under heading 8528.00 and the respondent has also claimed under the same heading. He stated that in the present matter the dispute is in respect of extending of the benefit of Notification No.68/86-CE., dated 10th February, 1986 as amended by Notification No.77/87-CE., dated 1st March, 1987 and further amended by Notification No. 131/87-CE., dated 29th April, 1987. Shri Arora has referred to classification list No. 3/87-88 effective from 16th May, 1987. Shri Arora argued that entry No. 20A of Notification No. 68/86 dated 10th February, 1986 was amended by Notification No. 131/87-CE., dated 29th April, 1987. He has referred to the order-in-original where on Page 1 in Para No. 3 the Assistant Collector has observed that the revenue has acted upon on the basis of the pamphlet published and advertised by the respondent and the respondent does not satisfy the description given against serial No. 20A or 20B of the amending Notification No.131/87-CE., dated 29th April, 1987. He has also referred to the opinion of the head of Electrical Engineering Department, L.D. Engineering College, Ahmedabad and in the opinion he has expressed that :- "The above said T.V. set (Model classic Sr. No. 3022) was inspected in this department it was found to have a timer circuit this circuit was capable of displaying real time in hours and minutes on the top right hand corner of the TV screen, if kept energized over and above that there was a provision to automatically stop the TV set at a set time which could be set in advance." He has referred to the findings of the Assistant Collector on internal page 5 of the order-in-original. He has observed that on off timer is nothing but an integrated circuit showing real time in hours and minutes in the TV if functioning and the time circuit functions as a watch movement which is mainly intended for watches and clocks of Heading 91.01 and 91.03 and it is electrical device which functions as a clock and displays the real time in hours and minutes on the top right corner of the TV screen and as such, TV Model classic attracts classification falling under sub-heading 8528.00 and liable to be assessed at the rate of duty shown in column No. 4 of the table against serial No. 20A of Notification No. 68/86-CE., dated 10th February, 1986 as amended by Notification No. 131/87- CE., dated 29th April, 1987 and not aginst serial No. 19 of Notification No. 68/86-CE., dated 10th February, 1986 as amended by Notification No. 77/87-CE., dated 1st March, 1987 so far as basic duty is concerned.
Shri Arora, the learned JDR has referred to HSN page 1543, Heading 91.03 which relates to clocks with watch movements, excluding clocks of Heading 91.04. Shri Arora, the learned JDR pleaded that the instrument fitted in the TV is capable of measuring and displaying time and has to be treated as a clock and falls within the purview of the Central Excise Notification No. 68/86 as amended by Notification No. 131/87 dated 29th April, 1987. Shri Arora has argued that the Collector of Central Excise (Appeals) has not stated how a clock is understood in common parlance and also argued that Encyclopaedia Britannica cannot decide the classification.
8. Shri S.R. Tripathi, the learned consultant who has appeared on behalf of the respondent, relied on the order passed by the Collector of Central Excise (Appeals) and pleaded that the timer system is a part of the TV clock and this timer system does not perform the function of the clock. He argued that time display appears after switching on the TV and vanishes after three seconds and after when the TV is switched on it will not give time. There is no battery; The clock will function only when the TV is switched on, and as soon as the TV is switched off, the time also vanishes. He also argued that even the expert opinion does not say that it is a clock and there is no balance wheel. He has referred to CCCN page 1656 which is Heading 91.05 and it reads "as time of day recording apparatus; apparatus with clock or watch movement (including secondary movement) or with synchronous motor, for measuring, recording or otherwise indicating intervals of time," and there is a proviso to the effect that they are operated by a movement of the watch or clock type. He argued that the TV set manufactured by the respondent cannot be called a TV set with a clock and the TV set manufactured by the respondent is not a clock but a TV set with timer system. He has referred to Encyclopaedia Britannica. He pleaded that there is no merit in the appeal and the appeal may be dismissed.
9. Shri M.S. Arora, the learned JDR in reply argued that the TV will not function as a TV unless it is switched on and watch movement is not necessary. He has referred to HSN page 1548, Heading 91.08 pertaining to watch movements, complete and assembled. Shri Arora has pleaded for the acceptance of the appeal.
10. We have heard both the sides and have gone through the facts and circumstances of the case. The issue involved in the present appeals is whether the TV having an inbuilt system on-off programming timer system could be assessed to duty at the rate of Rs. 2000.00 per set prescribed against serial No. 20A of Notification No. 68/86 dated 10th February, 1986 amended by Notification No. 131/87 dated 29th April, 1987 or at a rate of Rs. 1750.00 per set prescribed against serial No. 19(ii) of the table appended to the said Notification No. 68/86 dated 10th February, 1986. The respondent had claimed the rate of duty of Rs. 1750.00 per set on the TV set of the value exceeding Rs. 5000.00 per set as against the rate of Rs. 2000.00 per set in spite of the fact that the TV set manufactured by the respondent and which was the subject matter of dispute contained inbuilt system of on-off programming timer system. We have examined it at length. We have also looked into the expert opinion of L.D. Engineering College, Ahmedabad. The expert opinion simply reveals the function of the system, but does not reveal that the said system is a clock. The timer system in question is not composed of two main parts, viz. movement and the container as per definition of the clock given in Chapter 91 of the HSN. There is no dispute of the classification of the TV set under Chapter 85. The articles of Chapter 85 which are not yet assembled together or with other components into watch or clock movements or into articles suitable for use solely or principally as parts of such movements (Chapter 85) are not covered under Chapter 91 as per Chapter Note l(g) appended thereto, and we are of the view that in the matter before us no clock comes into existence in an identifiable form as such and as such it cannot be said to be a clock which is specifically enumerated in Chapter 91. Nowhere in the heading or sub-heading of Chapter 91 it is described that the timer system in question could be considered to be a clock. Chapter 85 under which the TV set is classifiable also does not contain anything to say that the timer system inbuilt in a TV set would be considered as a clock. It is also a fact that the timer system can be set in motion only when the TV is operated. In other words, if TV set is not operated, the timer system does not perform the function of a clock showing the time of a day, and the timer system cannot be separated from the TV set for the purpose of function as a clock independently.
Encyclopaedia Britannica page 743 Volume 4 deals with clocks, watches and sundials. Collector of Central Excise (Appeals) has also discussed the same. Relevant para is reproduced below :- "I also find substance in the contention of the learned advocate that the timer system in question is not a clock within the meaning of clock given on page No. 743, Volume 4 of Encyclopaedia Britannica, relied upon by him, since the timer system in question in the present case is not a machine in which a device that performs regular movements in equal intervals of time is linked to a counting mechanism that records the number of movements. In short, as per the said Encyclopaedia, the timer system is not a clock which is made on the principle given therein. Even otherwise, the function of the timer is On and Off programming. It is only incidental that when the timer is energised it displays time, which on switching on the TV set has to be set to the time of the day or night." In most of the electronic or electrical gadgets clock as timer is fitted and by no stretch of imagination the electrical or electronic gadget can be treated as a clock. In view of this above discussion, we do not find any infirmity in the order passed by the Collector of Central Excise (Appeals). We uphold his findings and hold that the TV set in which the timer system is inbuilt falls at serial No. 19 of the table appended to Notification No. 68/86 dated 10th February, 1986 as amended from time to time. Accordingly, we do not find any merit in the revenue's appeals. The same are dismissed.