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whether the goods manufactured by the appellant are liable to be taxed as ‘Parts of Television Receivers’ falling under Tariff Entry 8529 of the Central Excise Tariff contained in the First Schedule to the Central Excise Tariff Act, 1985 (in short ‘the Tariff’) or as ‘Television Receivers’ under Tariff Entry 8528 of the Tariff, for the year 1989-90. -how the goods transported by them shall not be covered by the Rule, especially as a complete or finished article, ‘presented unassembled or disassembled’. The terminology of the Rule is wide enough to cover the goods transported by the appellant, and we are not convinced that the processes required to be carried out at the satellite units are so vital to the manufacture of the Television Receivers so as to render the goods transported by the appellant lacking the ‘essential character’ of Television Receivers. Rule 2(a) of the Rules for Interpretation has been couched in wide terms, and in terms of this Rule, it is our view that the goods produced by the appellant do in fact possess the essential character of Television Receivers.The appellant had also raised the plea of double-taxation; however, in our view once the question of classification of the goods transported by the appellant has been answered in the above manner, it is not open to us to grant the appellant any relief on this ground alone. Further, it is always open to the satellite units of the appellant to avail input tax credit on the duty paid by the appellant on the goods transported by them. 32. In view of the facts stated hereinabove, we are of the view that the Tribunal did not commit any error while passing the impugned order and, therefore, the appeal is dismissed with no order as to costs.


                                                     REPORTABLE

                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                       CIVIL APPEAL NO.  4427  OF 2003




M/S Salora International Ltd.                            Appellant


                                     Vs.



Commissioner of Central Excise, New Delhi          Respondent





                               J U D G M E N T



ANIL R. DAVE, J


1.    The challenge in this appeal is to an  order  dated  1st  April,  2003
passed by the Customs, Excise and Gold (Control) Appellate Tribunal  at  New
Delhi (in short ‘The  Tribunal’)  in  E/APPEAL  No.  1553/02-B  whereby  the
Tribunal has dismissed the appeal filed by the appellant herein  and  upheld
the Order-in-Appeal passed by the Commissioner (Appeals).



2.    The issue under consideration in this  appeal  is  whether  the  goods
manufactured  by  the  appellant  are  liable  to  be  taxed  as  ‘Parts  of
Television Receivers’ falling under Tariff Entry 8529 of the Central  Excise
Tariff contained in the First Schedule to the  Central  Excise  Tariff  Act,
1985 (in short ‘the Tariff’)  or  as  ‘Television  Receivers’  under  Tariff
Entry 8528 of the Tariff, for the year 1989-90.



3.          The  appellant  is  a  manufacturer  of  various  components  of
television sets.  The components are manufactured at its factory  at  Delhi.
Thereafter, the said components are assembled in the same  factory  for  the
purpose of testing of each component and for checking the  working  of  each
television  set.   Thereafter  the  television   sets   so   assembled   are
disassembled and then transported as parts to  various  satellite  units  of
the appellant company at different places. In  these  satellite  units,  the
separate components  are  re-assembled  and,  as  per  the  appellant,  some
further processes are carried out in order to make  those  sets  marketable.
The issue  is  whether  such  components,  which  are  manufactured  at  and
transported from the factory of the appellant at  Delhi  are  liable  to  be
assessed as ‘Television Receivers’ or as ‘Parts of Television Receivers’.



4.          The appellant was issued a show-cause notice dated 21.3.1990  by
the Assistant Collector, New Delhi, whereby it was asked  to  show-cause  as
to why the goods manufactured  by  the  appellant  were  not  liable  to  be
classified  under  sub-heading  8528.00  of  the   Tariff   as   ‘Television
Receivers’, rather than under Entry 8529.00, as ‘parts’  of  the  same.  The
appellant replied to the show-cause  notice  that  the  goods/components  as
transported from its factory did not possess the  essential  characteristics
of finished Television Receivers as required by Rule 2(a) of the  Rules  for
Interpretation of the Tariff (in short the ‘Rules for Interpretation’),  and
also detailed the various further processes  required  to  be  performed  on
those goods for them to be  considered  as  complete  Television  Receivers.
These contentions of the appellant  appear  to  have  been  accepted  as  no
further action was taken by the Revenue until the year 1993.



5.    Thereafter, the Collector of  Central  Excise,  exercising  his  power
under Section 35E(2) of the Central Excise and Salt  Act,  1944  vide  order
dated 18.02.1994 directed the Assistant-Collector to file an  appeal  before
the Collector, Central Excise  (Appeals)  for  setting  aside  the  approval
granted to the classification of the goods of the appellant.  The  Collector
(Appeals) by order dated 21/22.07.1994 dismissed the  appeal  filed  by  the
Department.



6.    Against the aforestated order,  the  Department  preferred  an  appeal
before the Tribunal.  The Tribunal by its order  dated  18.02.2000  remanded
the matter to the Collector (Appeals), on finding that the earlier order  of
the Collector (Appeals) was  a  non-speaking  order  and  violative  of  the
principles of natural justice. Consequently, the Collector (Appeals) in  the
remand proceedings decided the issue in favour of the Department vide  order
dated 26.06.2002. Against this, the appellant filed  an  appeal  before  the
Tribunal, wherein the order impugned herein was passed.    By  the  impugned
order, the Tribunal has accepted the contentions of the Department and  held
the goods manufactured by  the  appellant  liable  to  be  classified  under
Tariff Entry 8528 as ‘Television Receivers’ rather than under  Tariff  Entry
8529 as ‘parts’ thereof.



7.          At the outset, recourse may be  had  to  the  respective  Tariff
Entries during the relevant period:

      “8528.00 – Television Receivers (including video  monitors  and  video
      projectors), whether or not incorporating radio broadcast receivers or
      sound or video recording or reproducing apparatus.




      8529.00 – Parts suitable  for  use  solely  or  principally  with  the
      apparatus of heading Nos. 85.25 to 85.28.”




8.    Rules 1 & 2 of the Rules  for  the  Interpretation  of  Excise  Tariff
framed under Section 2 of the Act read as under:



      “1. The titles of Sections and  Chapters  are  provided  for  ease  of
      reference only; for legal purposes, classification shall be determined
      according to the terms of the headings and  any  relative  Section  or
      Chapter Notes and, provided such headings or Notes  do  not  otherwise
      require, according to the provisions hereinafter contained.




      2. (a) Any reference in a heading to goods shall be taken to include a
      reference to those goods incomplete or unfinished, provided that,  the
      incomplete or unfinished goods have the  essential  character  of  the
      complete or finished goods. It  shall  also  be  taken  to  include  a
      reference to those goods  complete  or  finished  (or  falling  to  be
      classified as complete or finished by virtue of  this  rule),  removed
      unassembled or disassembled.”




9.    Mr. Dushyant Dave, learned senior counsel appearing for the  appellant
contended that the aforestated Rules of the  Rules  for  Interpretation  may
not be taken recourse to in the  instant  case,  as  there  exists  a  clear
stipulation to the contrary in the Section  Notes  to  Section  XVI  of  the
Tariff, where the headings involved  herein  are  located.  Note  2  of  the
Section Notes to Section XVI is as follows:

       “2. Subject to Note 1 to this Section, Note 1 to Chapter 84  and  to
       Note 1 to Chapter 85, parts of machines  (not  being  parts  of  the
       articles of heading No. 84.84, 85.44, 85.45, 85.46 or 85.47) are  to
       be classified according to the following rules :




       a. parts which are goods included in any of the headings  of  Chapter
          84 or Chapter 85 (other than headings 84.85 and 85.48) are in  all
          cases to be classified in their respective headings;”




10.    He  further  submitted  that  the   classification   of   the   goods
manufactured by the appellant was not correct.  According  to  him,  as  per
the sound principle of classification  and  more  particularly  as  per  the
provisions  of  interpretative  Rule  1,  the  goods  ought  to  have   been
classified under Tariff Entry 8529 because the  appellant  had  manufactured
only parts of Television Receivers.  He submitted that  invocation  of  Rule
2(a) of the Rules for Interpretation was not justified  because  looking  to
the facts  of  the  case,  the  provisions  of  Rule  1  of  the  Rules  for
Interpretation would apply because  of  the  specific  head  for  ‘parts  of
Television Receiver’, being Tariff Head 8529.00.



11.   The learned senior  counsel  cited  the  decision  of  this  Court  in
Commissioner of Customs Vs.  M/S  Sony  India  Ltd.  [(2008)  13  SCC  145],
wherein a case involving analogous headings as those in  this  case  in  the
Schedule to the Customs Tariff Act,  the  goods  imported  by  the  assessee
therein were held  to  be  ‘parts  of  Television  Receivers’,  and  further
interpretative Rule 2(a) was held to  be  inapplicable  to  such  goods.  He
further contended that as  the  goods  transported  by  the  appellant  were
substantially in the same position and condition  as  those  transported  by
the assessee in the above case, the ratio in  the  said  decision  would  be
applicable to this case also.



12.   In the written submissions submitted on behalf of  the  appellant,  it
was stated that keeping in mind the law laid down by this Court in Union  of
India vs. Tara Chand Gupta [(1971) 1 SCC 486],  the  goods  manufactured  by
the appellant ought to have been classified under Tariff Entry  8529.00  and
an effort was made to compare the facts of the said case  with  the  present
one by submitting that  in  the  case  referred  to  hereinabove,  parts  of
scooter, in completely knocked down condition, were treated as parts of  the
scooter and not scooter itself.



13.   He further submitted that the Rule 1 of the Rules  for  Interpretation
clearly denotes that the title of Sections and  Chapters  are  provided  for
ease of reference only but for legal purposes, the classification should  be
determined according to the terms of the headings, and as the appellant  had
manufactured only parts of Television Receivers, the Revenue  ought  not  to
have classified the goods  manufactured  by  the  appellant  as  ‘Television
Receivers’ under a different head instead of as ‘parts’ of the same.



14.   In addition to these contentions, he also contended that if the  goods
manufactured by it are held to be Television  Receivers  covered  by  Tariff
Entry 8528  mentioned  above,  it  would  lead  to  double-taxation  as  the
satellite units, where such goods  are  finally  assembled  into  Television
Receivers, are in fact paying excise duty on the assembled goods  under  the
above Tariff Entry 8528.



15.   On the other hand, on  behalf  of  the  revenue,  Mr.  P.P.  Malhotra,
learned Additional Solicitor General justified  the  judgment  delivered  by
the Tribunal.  He tried to narrate the  facts  which  lead  the  Revenue  to
classify the goods manufactured by the appellant as complete television  for
the reasons, some of which are as follows:

     a. The appellant was assembling manufactured  parts  of  TV  sets  and
        operating TV sets so  as  to  check  whether  the  entire  set  was
        complete  and  operative  and  then  the   TV   sets   were   being
        disassembled;

     b.  The appellant was giving the same serial number on the chassis  as
        well as the sub assemblies of the TV sets;

     c. The matching of the said chassis and sub-assemblies was done at the
        factory of the appellant itself;

     d. The packing material and literature were supplied by the  appellant
        along with the disassembled parts.

        ….etc.



16.    He  further  contended  that  the  goods  produced  and   temporarily
assembled  by  the  appellant,  being   essentially/substantially   complete
Television Receivers in a disassembled state, would necessarily have  to  be
classified as such, owing to Rule 2(a) of the Rules for  Interpretation.  It
was a simple contention of the Revenue that  the  appellant  had  chosen  to
disassemble the television sets as parts before transporting them  in  order
to avail the lower duty payable on such parts.



 17.  We have heard the learned counsel and  considered  the  facts  of  the
case.  We have also gone through the judgments cited by the learned  counsel
and upon doing so, we are of the view that the Tribunal did not  commit  any
error while passing the impugned order.




18.   The main question that arises for consideration in this case  is  that
of  the  applicability  or  otherwise  of  Rule  2(a)  of  the   Rules   for
Interpretation to the goods of the Appellant,  and  the  effect  of  Section
Note 2 to Section XVI of the Tariff, reproduced above, on the  applicability
of such provision.



19.   On the question of the applicability of the Rules  for  Interpretation
vis-à-vis the Section Notes and Chapter Notes in the  Tariff  Schedule,  the
rule laid down by this Court in Commissioner of Central Excise,  Nagpur  Vs.
Simplex Mills Co. Ltd. (2005) 3 SCC 51 may be seen to be applicable in  this
case. In that decision, a three judge bench had the following to say on  the
subject:

        “The rules for the interpretation of the Schedule  to  the  Central
        Excise Tariff Act, 1985 have been framed  pursuant  to  the  powers
        under Section 2 of  that  Act.   According  to  Rule  1  titles  of
        Sections and Chapters in the Schedule  are  provided  for  ease  of
        reference only.  But for legal purposes, classification  "shall  be
        determined according to the terms of the headings and any  relevant
        section or Chapter Notes".  If neither the heading  nor  the  notes
        suffice to clarify  the  scope  of  a  heading,  then  it  must  be
        construed according to the other following provisions contained  in
        the Rules. Rule-I gives primacy to the Section  and  Chapter  Notes
        along with terms of the headings. They should be first applied.  If
        no clear picture emerges then only can one resort to the subsequent
        rules.”




20.   Therefore, as clearly specified by the above rule, resort  must  first
be had only to the  particular  tariff  entries,  along  with  the  relevant
Section and Chapter Notes, to see whether a clear  picture  emerges.  It  is
only in the absence of such a picture emerging, that recourse  can  be  made
to the Rules for Interpretation.



21.   In the matter at hand, the entire case of the Revenue is based  on  an
application of Rule 2(a) of  the  Rules  for  Interpretation  to  the  goods
produced by the appellant, however, the applicability of  this  Rule  cannot
be established  unless  the  classification  is  first  tested  against  the
relevant Section and Chapter Notes. In this case, the relevant Section  Note
is Section Note 2 to Section XVI of the Tariff,  as  reproduced  above.  The
same may be reproduced again here for the purpose of a closer examination:



        “2. Subject to Note 1 to this Section, Note 1 to Chapter 84 and  to
        Note 1 to Chapter 85, parts of machines (not  being  parts  of  the
        articles of heading 84.84, 85.44, 85.45, 85.46 or 85.47) are to  be
        classified according to the following rules :

        a. parts which are goods included in any of the headings of Chapter
           84 or 85 (other than headings 84.85 and 85.48) are in all  cases
           to be classified in their respective headings;

        b. …” [Emphasis added]




22.   As can be seen from the above,  the  clear  stipulation  contained  in
Section Note 2 is to the effect that  ‘parts’  of  goods  mentioned  in  the
Chapters specified therein, shall  in  all  cases  be  classified  in  their
respective heading. In that light, the  fundamental  enquiry  in  this  case
must be that of whether the goods produced by the appellant may be  said  to
be covered by the above Section Note.



23.   In view of the above mentioned Section Note, the question that  arises
here is whether the goods produced by the  appellant  can  be  described  as
‘parts’ under the goods included in any of the headings  of  Chapter  84  or
85.   In this respect, it is the contention of the appellant that the  goods
produced by them shall inevitably have to be considered as ‘parts’, as  they
are unable to  receive  a  picture,  which  is  said  to  be  a  fundamental
requirement for a good to be considered as a ‘Television Receiver’.  At  the
first sight, one may find force in this contention. As the test  in  Section
Note 2 is simply that of whether the goods in question are ‘parts’,  it  may
be convincingly said that as the goods  transported  by  the  appellant  are
incapable of functioning as ‘Television Receivers’, they shall  have  to  be
considered to be ‘parts’ thereof.



24.         However, on closer scrutiny of the unique facts  of  this  case,
it is our view, the goods of the appellant may not be said to be ‘parts’  as
per Section Note 2 to Section XVI of the Tariff.   The  appellant  not  only
used to assemble all parts of the Television  Receivers  and  make  complete
television sets, but the said Television Receivers  were  also  operated  in
the manufacturing unit of the appellant  and  thoroughly  checked  and  only
upon it being confirmed that the Television Receivers were complete  in  all
respects, they were  disassembled  and  along  with  relevant  material  and
individual serial numbers, sent to the various satellite  units.   Once  the
Television Receivers are assembled or are made  completely  finished  goods,
the manufacturing process is over and  we  are  not  concerned  as  to  what
happens subsequently.  Whether they are sent to the satellite units  of  the
appellant in its complete form or in a disassembled form is irrelevant.



25.   Looking to the facts of the case, it is not in dispute  that  complete
Television was manufactured by the appellant and therefore, in our  opinion,
the  Revenue  had  rightly  classified  the  goods-  product   as   complete
Television set even though it was subsequently disassembled.



26.   It is seen from the material on record, that at the time of the  parts
of the TV set being transported from  the  factory  of  the  appellant,  the
parts manufactured by it are already identified as  distinct  units.  As  it
can be  seen  from  the  affidavit  of  the  Revenue,  which  has  not  been
controverted by the appellant, the parts manufactured by it are matched  and
numbered within the factory itself, and also assembled together  to  receive
pictures for the purpose of testing and quality control. The consequence  of
this  is  that  the  goods  assembled  at  the  satellite  units  would   be
identifiably the same as those assembled together by the  appellant  in  its
factory for the purpose of testing, as all such parts are  already  numbered
and  matched.  This  element  of  identifiability  shall  take   the   goods
manufactured by the appellant away from being  classified  as  ‘parts’,  and
they will be classified as identifiable Television Receivers. The fact  that
the packing material for the products is also manufactured  and  transported
by the appellant further lends credence to this conclusion.



27.   The facts in the case of Sony India Ltd. (supra) may be  distinguished
in this respect. In that case, the assessee had imported different parts  of
television sets in 94 different consignments. The said parts  were  imported
separately in bulk, and thereafter, the process of matching,  numbering  and
assembling was  carried  out  once  they  were  in  the  possession  of  the
assessee. Therefore, it may be seen that what the assessee had  imported  in
that case were merely various parts which could not yet  be  identified  and
distinguished  as  individual  Television  Receivers  such  as   the   parts
transported by the appellant in this case. The said decision is,  therefore,
distinguishable on facts.



28.   For  further  clarification,  it  may  also  be  stated  that  if  the
appellant had been in the practice of simply manufacturing and  transporting
parts of Television Receivers  in  bulk,  while  leaving  the  matching  and
numbering functions to be done at the satellite units, then  it  could  have
availed the benefit of Section Note 2, because in such a case,  there  would
not have been any production of identifiable television sets such as in  the
present case.



29.   Once the question of applicability of Section Note 2  to  Section  XVI
of the Tariff is answered in the above manner, i.e. in the  negative,  there
may be seen to be no bar to the application of  Rule  2  of  the  Rules  for
Interpretation to the goods transported by the appellant. Consequently,  the
only question that remains is with respect to whether such goods shall  fall
foul of the said Rule.



30.   In this regard, despite the attempts of  the  appellant  to  establish
otherwise, we are unable to see how the goods transported by them shall  not
be covered by the Rule,  especially  as  a  complete  or  finished  article,
‘presented unassembled or disassembled’. The  terminology  of  the  Rule  is
wide enough to cover the goods transported by the appellant, and we are  not
convinced that the processes required to be carried  out  at  the  satellite
units are so vital to the manufacture of the Television Receivers so  as  to
render the  goods  transported  by  the  appellant  lacking  the  ‘essential
character’  of  Television  Receivers.  Rule   2(a)   of   the   Rules   for
Interpretation has been couched in wide terms, and in terms  of  this  Rule,
it is our view that the goods produced by the appellant do in  fact  possess
the essential character of Television Receivers.



31.   The appellant had also raised the plea  of  double-taxation;  however,
in our view once the question of classification of the goods transported  by
the appellant has been answered in the above manner, it is not  open  to  us
to grant the appellant any relief on  this  ground  alone.  Further,  it  is
always open to the satellite units of  the  appellant  to  avail  input  tax
credit on the duty paid by the appellant on the goods transported by them.



32.    In view of the facts stated hereinabove, we are of the view that  the
Tribunal did not commit any error while  passing  the  impugned  order  and,
therefore, the appeal is dismissed with no order as to costs.



                                  …….………………………J

                                  (D.K. JAIN)







                                  ……….……………………J

                                  (ANIL R. DAVE)




NEW DELHI

SEPTEMBER 07,  2012