Case Law Details
Samsung India Electronics Pvt. Ltd. Vs Commissioner of Customs (CESTAT Chennai)
CESTAT Chennai held that imported LED Monitors Tiles are classifiable under Customs Tariff Heading 84285200 and hence eligible for exemption in terms of Notification No. 24/2005-Cus dated 01/03/2005. Accordingly, appeal allowed.
Facts- The appellants filed Bills of Entry for clearance of goods declared by them as ‘LED Monitor Tiles’. The appellant classified the goods under CTH 85285200 as monitors capable of directly connecting to and designed for use with Automatic Data Processing Machine of heading 8471 and claimed benefit of concessional rate of duty under Customs Notification No.24/2005 at SI.No.17. However, the department classified the goods under CTH 85285900 denying the benefit of the notification.
The issue to be decided in this appeal is the classification of goods imported by the appellant described as ‘LED Monitor Tiles’. The appellant classified the goods under CTH 85285200, whereas the department is of the view that the goods are classifiable under CTH 85285090.
Conclusion- Held that it has been conclusively proved that GDC Server with inbuilt software with huge memory of 32TB would get classified under CTH 8471 as “Automatic Data Processing Machine” and the imported LED Monitors Tiles are capable of being directly connected to Data Processing Machine i.e. GDC, Hence the LED Monitor Tiles are classifiable under CTH 84285200. Accordingly, they are eligible for the exemption granted under Notification No. 24/2005-cus dated L03.2005. Thus, the imported LED Monitors Tiles are classifiable under 84285200 which are capable of being directly connected to ADP Machine [GDC] falling under CTH 8471 and hence are eligible for exemption in terms of Notification No. 24/2005-Cus dated 01/03/2005.
FULL TEXT OF THE CESTAT CHENNAI ORDER
The issue to be decided in this appeal is the classification of goods imported by the appellant described as ‘LED Monitor Tiles’. The appellant classified the goods under CTH 85285200, whereas the department is of the view that the goods are classifiable under CTH 85285090.
2. Brief facts are that the appellants filed Bills of Entry for clearance of goods declared by them as ‘LED Monitor Tiles’. The appellant classified the goods under CTH 85285200 as monitors capable of directly connecting to and designed for use with Automatic Data Processing Machine (hereafter referred to as ADP) of heading 8471 and claimed benefit of concessional rate of duty under Customs Notification No.24/2005 at SI.No.17. The appellant vide their letter dt. 27.09.2018 explained the nature of the goods and specifically stated that the product being solely used with ADP machine, the LED Monitor tiles are classifiable under 85285200 and eligible for benefit of the notification. They stated that these items are used to create big screen for viewing cinema. The shed officers after examination of the goods gave the report that as per the description on the package these are Cinema LED Signage Board (Colour display unit). There is only one Power In and Power Out ports available on the unit and no other ports. The goods did not have any port such as RS-232C interface, DIN, D-SUB, VGA, DVI, HDMI etc., for connectivity with ADP machine. Again, according to department, though the importer vide letter dated 04.10.2018 stated that they classified the goods under CTH 85285200 as these goods were used with “GDC Server” which is an ADP machine, the importer did not explain how GDC server is to be a computer and also the classification of the same.
3. The department therefore classified the goods under CTH 85285900 denying the benefit of the notification. The appellant paid BCD @ 10% advalorem basis under protest and requested to issue a speaking order.
4. The original authority vide order dt. 03.11.2018 rejected the classification adopted by the appellant and reclassified the goods under CTI 85285900 and held that the goods are not eligible for exemption as per the Notification No.24/2005 dt. 01.03.2005. On appeal, the Commissioner (Appeals) upheld the same. Hence this appeal.
5. The Ld. Senior Counsel Sri V. Lakshmikumaran appeared and argued for the appellant. The gist of submissions are as under :
Factual backgrounds:
5.1 The Appellant is engaged in the business of import, manufacture and sale of Consumer Electronics, IT and Telecom products in India. One such product imported by the Appellant is LED Monitor Tiles (“subject goods”). The dispute involved in the present appeal relates to the appropriate classification of the subject goods and the eligibility to claim benefit under SI. No. 17 of Notification No. 24/2005-Cus. dated 01.03.2005.
5.2 The subject goods are LED monitor tiles which consist of a Frame Panel LED Bulbs and a Processor. The LED bulbs in the display panel are controlled by the said processor located inside the tile. The subject goods can be connected to Samsung’s Set Back Box (SBB) or GDC servers through which they receive the signal and provide a graphical presentation of the processed data.
5.3 In the present case, the Appellant had imported the subject goods vide Bill of Entry No. 8170951 dated 24.09.2018 and had classified the goods under CTI 8528 52 00 claiming benefit of exemption from payment of Basic Customs Duty (BCD) under SI. No. 17 of Notification No. 24/2005-Cus. dated 01.03.2005 (Exemption Notification). However, the Department was of the view that the subject goods were classifiable under CTI 8528 59 00 and were ineligible to the benefit under the Exemption Notification. Therefore, the Appellant cleared the goods by payment of duty under protest vide letter dated 27.09.2018 and requested for issuance of Speaking Order.
5.4 The Appellant vide letters dated 27.09.2018 and 04.10.2018 justified classification adopted on the following grounds:
a. The subject goods have to be connected with an Automatic Data Processing (“ADP”) machine for functioning and do not consist of reception apparatus as of television and cannot work on stand-alone basis.
b. In the present case, the subject goods will function in conjunction with GDC server and SBB which is classified as a data processing machine. Product brochures in this regard were submitted.
c. Since the subject goods can only be used with an ADP machine, these were rightly classified by appellant under CTI 8528 52 00.
THE SUBJECT GOODS ARE CLASSIFIABLE UNDER CTI 8528 52 00
6.1 At the outset, it is submitted by the Ld. Counsel that it is not in dispute that the subject goods are Monitors classifiable under Heading 8528 of the Customs Tariff. The only dispute to be decided in the present appeal is whether the subject goods are capable of directly connecting to an ADP machine and whether these are designed for use with an ADP machine. If the subject goods are capable of the above, then, it is submitted that the classification adopted by the Appellant will be the appropriate classification viz. 85285200.
6.2 In this regard, the Ld. Counsel referred to the HSN Explanatory Notes to CTH 8528. The HSN Explanatory Notes at page XVI-8528-2 state that the monitors which are capable of directly connecting to and designed for use with an ADP machine of Heading 8471 includes such monitors that are capable of accepting a signal from the Central Processing Unit of an ADP machine and provide a graphical representation of the data that it processed.
6.3 In the present case, the subject goods are connectable with an SBB. From a perusal of the Bill of Entry filed in respect of the SBB, it is seen that these are classified under Heading 8471. The classification of SBB has not been disputed by the Department. The subject goods have ports and through these ports, the subject goods can be connected to an SBB through cables which permit the transmission of analogue signals of the data to be displayed. The subject goods receive these signals and display the same for a user to view the image. Further, the SBB itself is connectable to other ADP Machines such as laptops, computers, etc. through HDMI cables.
6.4 It is also pertinent to note that the subject goods cannot function without the presence of a product such as SBB. The SBB is connected to the subject goods directly and the subject goods are thereafter connected to each other in order to form a series. The processor in the SBB ensures that despite the presence of the varied number of tiles, only a single large image is projected by monitor.
6.5 It is submitted that the Appellant had also demonstrated to the Bench the working of the subject goods with the SBB. The ports which enabled connection of the subject goods with the SBB were shown. It was also shown that the subject goods can play content directly from the SBB’s internal memory or through a pendrive connected in the USB port which was present in the SBB. Further, the SBB was also connected to a laptop through an HDMI cable and the same content was visualised in the subject goods as well.
6.6 Therefore, it is evident that the subject goods are capable of directly being connected with an ADP machine and are designed for use with an ADP machine only. Hence, the subject goods merit classification under CTI 8528 52 00.
6.7 The subject goods work in the same manner with GDC servers used in Cinema Halls for playing movies. The GDC servers are connected to the subject goods. The subject goods are connected to each other in series to form a huge screen which is visible to the audience. The owner of the cinema hall thereafter loads the respective movies on the storage which is available in the GDC servers and programs the GDC servers to play the movie. However, due to licensing restrictions, the Appellant could not produce the GDC servers before this Hon’ble Tribunal.
6.8 It is also pertinent to note that the Impugned Order has sought to deny the classification of the subject goods under CTI 8528 52 00 on the basis that the Appellant has not proved that the GDC servers are ADP machine. It is settled position of law that the burden to reclassify is on the Revenue. Though the Department dismissed the Appellant’s claim of classification, they have not brought on record any evidence to prove that the GDC servers are not ADP machines.
6.9 The Impugned Order has also failed to consider that the subject goods have the following features amongst others such as displaying signals of the graphic adaptors in colour which are integrated in the processor of the ADP machine (such as SBB/ GDC server). These do not incorporate a channel sector or video tuner. They are fitted with connectors which enable connection of the subject goods with each other as well as with SBB and GDC servers.
6.10 It is also pertinent to note that the HSN Explanatory Notes itself explicitly states that the monitors of this group may be characterized have characteristics such as HDMI ports, tilt, swivel adjustments, etc.. Thus, the list of features provided therein are merely indicative. Therefore, in such circumstances, the mere fact that the goods do not contain some of the features mentioned therein cannot be conclusive to hold that the subject goods are not classifiable under CTI 8528 52 00. As long as the subject goods can display and receive signals from an ADP machine and provide a graphical representation of such data, these must remain classified under CTI 8528 52 00. In the present case, the subject goods satisfy the characteristics of monitors capable of directly connecting to and designed for use with an ADP machine of Heading 8471 as indicated in the HSN Explanatory Notes at page XVI-8528-2.
6.11 Notwithstanding the above, it is submitted that in the present case the Department has reclassified the subject goods under CTI 8528 59 00 which is a residuary entry. In this regard, the HSN Explanatory Notes at page XVI-8528-3 indicate the features which are seen in monitors other than those which are capable of directly connecting to and designed for use with an ADP machine. As per the HSN Explanatory Notes these monitors can have separate inputs for red (R), green (G) and blue (B), or be coded in accordance with a particular standard (NTSC, SECAM, PAL, D-MAC, etc.). In the present case, these features are absent in the subject goods. For the reception of coded signals, the monitor must be equipped with a decoding device covering (the separation of) the R, G and B signals. This feature is also absent in the subject goods.
6.12 It is thus submitted by the Ld. Counsel that the classification of the subject goods under CTI 8528 59 00 cannot be justified, and must fail. It is settled position of law that if the classification proposed by the Department fails, then irrespective of the fact as to whether or not the classification of the assessee is proper, the same would prevail. This position of law has been settled by the Hon’ble Apex Court in Warner Hindustan Ltd. v. CCE [1999 (113) E.L.T. 24 (SC)J.
6.13 Alternatively, the Appellant submits that the subject goods consist of Light Emitting Diodes (LEDs) which are connected to each other on a board. It is submitted that LEDs are classifiable under Heading 8541, and more specifically under CTI 8541 40 20. On perusal of the tariff for the relevant period, it is seen that the tariff rate for LEDs was free. Therefore, it is submitted that the subject goods merit classification under CTI 8541 40 20 as LEDs and no duty is payable. Hence, the Appellant is eligible for refund of duty.
6.14 In light of the above submissions, the Appellant submits that it had rightly classified the subject goods and hence, the reclassification of the subject goods under CTI 8528 59 00 ought to be set aside.
THE SBB AND GDC SERVERS ARE ADP MACHINES CLASSIFIABLE UNDER HEADING 8471 AND THE SUBJECT GOODS CAN BE DIRECTLY CONNECTED WITH THESE AND ARE DESIGNED FOR USE WITH THESE MACHINES. THEREFORE THE SUBJECT GOODS ARE CLASSIFIABLE UNDER CTI 8528 52 00.
7.1 Without prejudice to the foregoing submissions, the Appellant submits that the SBB/ GDC servers with which the subject goods are connected are themselves classifiable as ADP machines of Heading 8471. Therefore, on this ground the subject goods merit classification under CTI 8528 52 00.
7.2. As per Chapter Note 5(A) to Chapter 84, for any good to be classified as an ADP machine, it must fulfil the four conditions mentioned therein. In the present case, from a perusal of the table below, it is evident that the SBB as well as the GDC servers with which the subject goods are used are classifiable as ADP machines themselves as they satisfy all the four conditions:
| Condition No. | Functions as per Chapter Note 5A to Chapter 84 | Satisfaction of such function by SBB | Satisfaction of such unction by GDC Server |
| 5A(i) | Storing the processing program or programs and at least the data immediately necessary for the execution of the program | The SBB:
(i) has internal storage of 8GB the (ii) comes preloaded with Tizen 2.4 Operating System (pg.268 of Compilation); and (iii) Comes with other pre-loaded applications such as Microsoft and Adobe viewership license (pgs. 159 to 162 of Appeal Paper-book). |
GDC Server contains an internal storage capacity of 32TB which can store the program and the data necessary for execution of the program. (pg. 88 of Compilation)
The SX-4000 comes pre- installed with SMS 10.0 version of the IMB software (pg. 96 of Compilation). |
| SA(ii) | Being freely programmed in accordance with the requirements of the User | SBB has pre-installed software and runs on an operating system, namely, Tizen 2.4 which is an open- source operating system. Tizen can allow the user to install applications onto the system thereby enabling user to program the system, in any way as required, to help achieve the requirements of the user.
This is similar to any laptop or a computing device on which an operating system, such as Microsoft Windows, is installed. As per Tizen’s official website, it is an open-source software and is available in multiple profiles to serve different requirements. Device manufacturers can modify the software to serve their own needs or use the Tizen Common base to develop a new profile to the meet memory, processing, and power requirements of any device and quickly bring it to market. (pgs. 270 & 274 of Compilation and Source; https://docs.tizen.org/platform/get-started/open-source-project/ ) |
GDC Server consists of SX-4000 and XSP-1000.
A user can create a playlist and set cues for the operation of different movies. In fact, the users can choose what advertisement must be played during intermissions and schedule the time during which such advertisement will play. Even in the event the movies do not come with The users can also choose to update to This is similar to any laptop or a computing device on which an operating system, such as Microsoft Windows is installed. |
| 5A(iii) | Performing arithmetical computations specified by the User |
SBB has an in-built Quad Core 1Ghz CPU (pg. 268 of Compilation) which performs arithmetical computations through the Arithmetical Logical Unit (‘ALU’) present in the CPU, in order to implement the various functions of the SBB. | The GDC Server has a CPU which enables GDC Server to perform arithmetical computations specified by the User through the ALU present in the CPU in order to implement the various functions of the GDC Server.
More specifically, the XSP-1000 contains the ALU with 96kHz processing speed (pg. 88 of Compilation). Further, the SX-4000 also comes inbuilt with mother board, video card and JPEG card which contain the necessary program to start and use the GDC server. (pg.232 of Compilation) |
| 5A(iv) | Executing, without human intervention, a processing program which requires them to modify their execution, by logical decision during the processing run. | The CPU present in the SBB executes programmed instructions provided to enable the SBB to perform different functions, such as displaying images in different modes, which occurs by way logical decisions (i.e., when to display what image) during the processing run. | The CPU present in the GDC Server executes the programmed instructions provided by user, such as sequentially playing from playlist, etc. which occurs by way of logical decisions during the processing run. |
7.3 Since both SBB and GDC Servers are capable of performing the functions listed in Chapter Note 5A of Chapter 84, they correctly merit classification under Chapter Heading 8471 as ADPM. In this regard, it is pertinent to note that in similar context, the Hon’ble Tribunals in the following decisions have held that servers must be regarded as an ADP machine:
a. IBM India Pvt. Ltd. v. Commissioner of Customs, Bangalore, 2009 (244) E.L.T. 383 (Tri. – Bang.)
b. Commissioner of Cus. & C.E., Hyderabad – II v. Dell India Pvt. Ltd., 2008 (226) E.L.T. 367 (Tri. – Bang.)
7.4 Chapter Note 5 recognizes that the functions prescribed under Note 5(A) may be satisfied by a single unit/ machine. This unit/ machine may form a part of a bigger system as described under Note 5(B) which states that ADPMs may be in the form of systems consisting of a variable number of separate units.
7.5 Considering the discussions above, it is evident that SBB and GDC satisfy the four conditions mentioned under Note 5(A) and must therefore be regarded as an ADP machine classifiable under Heading 8471. Therefore, the subject goods which are capable of directly being connected to and designed for use with SBB or GDC server which are ADP machines of Heading 8471 are rightly classifiable under CTI 8528 52 00.
7.6 The authorities below have without considering these facts rendered a finding that SBB cannot be considered as an ADP machine. Further, it is submitted that the Impugned Order has also failed to understand that the GDC server consists of the XSP-1000 audio processor and the SX-4000 Standalone Integrated Media Box. As demonstrated hereinabove, the features present in the GDC servers satisfy the requirements to be classified as an ADP machine.
7.7 It is submitted by the learned counsel that the subject goods which are capable of directly connecting to and designed for use with ADP machine are rightly classifiable under CTI 85285200.
SUBJECT GOODS ARE ELIGIBLE FOR BENEFIT UNDER SL. NO. 17 OF NOTIFICATION NO. 24/2005-CUS. DATED 01.012005.
8.1 SI. No. 17 of the Exemption Notification grants exemption from payment of BCD to goods which are classifiable under sub-heading CTSH 8528 42, 8528 52 and 8528 62. Further, as per column 3 of the Notification, the benefit is granted to all goods falling under the aforementioned subheadings ‘of a kind solely or principally used in an automatic data processing system of heading 8471’.
8.2 Therefore, in order to be eligible for the benefit under the exemption notification, any goods must satisfy the following conditions:
a. These must be classifiable under CTSH 8528 42 or 8528 52 or 8528 62;
b. These goods must be of a kind which are solely or principally used in an ADP system of CTH 8471;
8.3 The subject goods are capable of directly connecting to and designed for use with an ADP machine of Heading 8471. Therefore, the subject goods have been rightly classified by the Appellant under CTI 85285200.
8.4 The second condition to be satisfied is that these must be of a kind which are solely or principally used in ADP system of CTH 8471. In various decisions, while discussing the scope of the term ‘of a kind solely or principally’ held that the mere fact that goods also have other compatibility or additional features cannot be an impediment to hold that these are not of a kind solely or principally used with ADP machines. It was held that so long as the principal use of all such projectors with laptop and desktop computer systems is not doubted and as the sub-heading covers both ‘sole use’ as well as ‘principal use’, these would be eligible to benefit under the Notification. Reliance in this regard is placed on the following decisions:
a. Sony India Pvt. Ltd. v. CCCE, New Delhi, 2019 (370) E.L.T. 1774 (Tri. – Del.)
b. M/s. BenQ India Pvt. Ltd. v. ADG(Adjudication), New Delhi, 2022 (9) TMI 690 – CESTAT NEW DELHI
c. Acer India (P) Ltd. v. CC, 2009 (11) TMI 931 – CESTAT AHMEDABAD,
d. CCCE, Hyderabad-II v. Aveco Viscomm Private Ltd., 2010 (9) TMI 436 – CESTAT, BANGALORE,
e. CC(I), ACC, Mumbai v. Vardhaman Technology P Ltd., 2013 (8) TMI 271 – CESTAT MUMBAI
f. Epson India Pvt. Ltd. v. CC, Chennai, 2019 (366) E.L.T. 847 (Tri. – Chennai) affirmed in 2019 (366) E.L.T. A173 (S.C.).
The learned counsel prayed that the appeal may be allowed.
9. The Ld. A.R Shri Harendra Singh Pal appeared and argued for the department. The Ld. AR reiterated the findings in the impugned order. It is submitted that the authorities below have reclassified the goods under CTH 85285900 for the reason that there is no mention on the packages that these are computer monitors, and can be used with computers or ADP machines of heading 8471. The Ld. A.R prayed that the appeal may be dismissed.
10. Heard both sides and perused the records carefully. It requires to be stated that the Ld. Counsel for the appellant had brought a sample of the goods (LED Monitor Tiles) to the court premises in order to help the Bench understand, the nature and use of the goods. The Ld. AR appearing for the department was also present. These Monitor Tiles were first connected to the SBB to display picture on them. Subsequently, these were connected to Laptop by which also the picture was displayed on the LED Monitor Tiles. Having seen and understood the nature and function of the imported goods, let us proceed to examine the issue of classification on the basis of the provisions and relevant tariff headings.
11. The appellant has classified the imported goods, viz. LED Monitor Tiles under CTH 85285200 as monitors capable of directly connecting to an ADP machine falling under CTH 8471. The department has classified the goods under CTH 85285900 as these are not capable of being connected to ADP of heading 8471. At this outset we have to say that there is no dispute that the goods are Monitors falling under 8528.
11.1 It would be beneficial to have a look at the relevant Chapter Headings, HSN Explanatory Notes, Notification etc. which are noticed below :
11.1.1
11.1.2
HSN EXPLANATORY NOTES
“85.28
(A) MONITORS CAPABLE OF DIRECTLY CONNECTING TO AND DESIGNED FOR USE WITH AN AUTOMATIC DATA PROCESSING MACHINE OF HEADING 84.71
This group includes monitors which are capable of accepting a signal from the central processing unit of an automatic data processing machine and provide a graphical presentation of the data processed. These monitors are distinguishable from other types of monitors (see (B) below) and from television receivers.
The monitors of this group may be characterized by the following features :
(i) They usually display signals of graphics adaptors (monochrome or colour) which are integrated in the central processing unit of the automatic data processing machine;
(ii) They do not incorporate a channel selector or video tuner;
(iii) They are fitted with connectors characteristic of data processing systems (e.g., RS-232C interface, DIN, D-SUB, VGA, DVI, HDMI or DP (display port) connectors);
(iv) The viewable image size of these monitors does not generally exceed 76 cm (30 inches);
(v) They have a display pitch size (usually smaller than 0.3 mm) suitable for close proximity viewing:
(vi) They may have an audio circuit and built-in speakers (generally, 2 watts or less in total);
(vii) They usually have control buttons situated in the front panel;
(viii) They usually cannot be operated by a remote control;
(ix) They may incorporate tilt, swivel and height adjusting mechanisms, glare-free surfaces, flicker-free display, and other ergonomic design characteristics to facilitate prolonged periods of viewing at close proximity to the monitor;”
(x) They may utilize wireless communication protocol to display data from an automatic data processing machine of heading 84.71.
“(B) MONITORS OTHER THAN THOSE CAPABLE OF DIRECTLY CONNECTING TO AND DESICNED FOR USE WITH AN AUTOMATIC DATA PROCESSING MACHINE OF HEADING.
This group includes monitors which are capable of receiving signals when connected directly to the video camera or recorder by means of composite video, s-video or co-axial cables, so that all the radio-frequency circuits are eliminated. They are typically used by television companies or for closed-circuit television (airports. railway stations, factories, hospitals, etc. They can, moreover, have separate inputs for red (R), green (G) and blue (B), or be coded in accordance with a particular standard (NTSC, SECAM, PAL, D-MAC, etc.). For reception of coded signals, the monitor must be equipped with a decoding device covering (the separation of) the R, G and B signals. They are not fitted with connectors characteristic of data processing systems, and they do not incorporate tilt, swivel and height adjusting mechanisms, glare-free surfaces, flicker-free display, and other ergonomic design characteristics to facilitate prolonged periods of viewing at close proximity to the monitor. They do not incorporate a channel selector or video tuner.”
NOTIFICATION
“Exemption to goods of specific headings of Customs Tariff, from customs duty (ITA Bound). —
In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the following goods of the description as specified in column (3) of the Table below and falling under the heading, sub-heading or tariff-item of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) as specified in the corresponding entry in column (2) of the said Table] when imported into India, from the whole of duty of customs leviable thereon under the said First Schedule, namely :-
TABLE
| SI. No. |
Heading, sub- heading or tariff item |
Description |
| (1) | (2) | (3) |
| … | …. | |
| 17. | 8528 42, 8528 52,
8528 62 |
All goods of a kind solely or principally used in an automatic data processing system of heading 8471. |
11.2 The original authority in para 4 of the order while recording the findings has included a scanned image of the front side and back side of the ‘LED Monitor Tiles’. It is mentioned in this image that on the back side of the Monitor tiles there is only one port for Power In and another for Power Out and at there is no other ports for RS-232C, Interface, DIN, D-SUB, VGA, DVI, HDMI etc. The shed officers in their examination report dt. 01.10.2018 also have reported that there is only one power in and power out port and no other ports and therefore not capable of being used with ADP machine.
11.3 Before the Commissioner (Appeals), the appellant submitted that the LED Monitor tiles mandatorily require support of an ADP machine for its’ functioning. The choice of ADP machine would depend on the customer and his requirements. The customer may use Samsung Set Box (SSB) or may opt for any other ADP machine. The appellant while importing the Samsung SBB has classified it as ADP and falling under 8471 and the same has been accepted by department.
11.4 The Bench, having had an opportunity to see and perceive the nature of the imported goods viz. ‘LED Monitor Tiles’ and also the function of it after being connected to the Samsung SBB has to assertively say that the report of the shed officers is not complete. So also, the image of the back side of the LED Monitor Tiles included in para 4 of the findings in MO is not inclusive of all ports on the back side. ‘Picture abhi baaki half (There’s more to see by the shed officers). There are ports for connecting SBB/ADP machine which are placed in the slight groove part of the square pattern on the back side. This may not be much visible while taking a picture of the backside.
11.5 After visual examination, we are convinced that the LED Monitor Tiles do have necessary port for being connected to ADP machine. The subject goods cannot function without being connected to ADP/SBB or similar device. The LED Monitor Tiles also has ports for power In and Power Out and the Tiles are connected with each other through LVDS (Low-Voltage Differential Signaling) cable. Also, the signal input from SBB (ADP machine) to LED Monitor Tiles comes through LVDS cable only. The SBB is the Control PC. Instead of being connected to SBB, the LED Monitor Tiles can also be connected to GDC server for display of movie in theaters.
11.6 The entire controversy is in regard to whether these ‘LED monitor Tiles’ are capable of being connected and used with ADP machine. The answer being in the affirmative, the goods are rightly classifiable under 85285200 as adopted by the appellant.
11.7 The Ld. Counsel has argued that the impugned goods do not have the specifications mentioned in para (B). of HSN Explanatory Notes. The brochure of the impugned product was referred to by the Ld. Counsel to substantiate his argument. Para (B) relates to monitors other than those capable of directly connected to and designed for use with an ADP. The classification resorted to by the department therefore cannot sustain.
11.8 The Tribunal in the case of M/s.BenQ India Pvt. Ltd. Vs ADG (Adjn.) New Delhi – 2022 (9) TMI 690 – CESTAT NEW DELHI had considered similar issue with regard to projectors. The goods therein were capable of being used with ADP machine and had multiple ports. The correct test would be whether their specifications and features are designed in such a way that they. are generally or primarily meant for use with ADPS. The relevant part reads as under :
“26. The Additional Director has confirmed the demand in the present case on the ground that the presence of multiple connectivity/interface options like USB-B, USB-A, 5-Video, HDMI shows that principal function of goods is not to be used with a computer and, therefore, it is not possible to ascertain the primary/principal function of projectors. Consequently, classification under CTI 8528 69 00 was found to be appropriate.
27. The addition of multiple ports in the goods will not take away the basic nature of the goods, which is to work in conjunction with ADPS. This would continue to remain the principal function of the goods. The presence of such ports is only to ensure their use with laptops and ADPS. Therefore, even post 01.07.2017, goods would be classifiable under CTI 8528 62 00 and the decisions of the Tribunal rendered for the period prior to 01.07.2017 will continue to apply to projectors imported w.e.f. 01.01.2007.
28. It is also seen that for the period prior to 01.01.2017, all good falling under CTSH 8528 41, 8528 51 or 8528 61 were unconditionally exempt from payment of BCD under Serial No. 17 of the exemption notification. Post 01.01.2017, Serial. No. 17 of the notification exempts all goods falling under CTSH 8528 42, 8528 52 or 8528 62 if they are of a kind solely or principally used in an automatic data processing machine of heading 8471. The goods imported by the appellant satisfy the description of the goods in the exemption notification for both the periods and are, therefore, eligible for exemption.”
11.9 The appellant has put forward an alternate argument that the subject goods consists of LED and therefore would merit classification under CTI 85414020. The competing classifications before the authorities below were CTI 85285200 and CTI 85285090. At the appellate stage the appellant or the department cannot resort to an alternate classification. The Tribunal in the case of Pepsico Holdings Pvt. Ltd. Vs CCE Pune III – 2019 (25) GSTL 271 (Tri.-Mumbai) followed the decision of the Hon’ble Apex Court in the case of Warner Hindustan Ltd. Vs Collector – 1999 (113) ELT 24 (SC) to hold that the classification re-determined by the department being found to be incorrect, the classification adopted by the assessee has to be sustained though not fully appropriate. Following the ratio, the request of the appellant to consider classification under CTI 85414020 is rejected.
11.10 After appreciating the facts and evidence placed before us, we hold that the imported goods are classifiable under CTH 85285200 and are eligible for the benefit of Notification No.24/2005-Cus. dated 01.03.2005.
12. In the result, the impugned order is set aside. The appeal is allowed with consequential relief, if any.
(Pronounced in court on 22.03.2024)
Per Mr. VASA SESHAGIRI RAO:
I have perused the order prepared by my learned colleague Ms. Sulekha Beevi CS, Member (Judicial). The issue in the subject appeal pertains to Classification of imported LED monitor tiles and availment of exemption Notification No. 24/2005-Customs dated 01.03.2005. As I do not concur with the views expressed in her order, I am inclined to record my divergent view in a separate order as detailed below.
2.1 The facts emerging from the appeal are that the Appellant, engaged in the business of import, manufacture and sale of consumer electronics, IT and Telecom Products in India, imported LED Monitor tiles under Bill of Entry No. 8170951 dated 24.09.2018 and classified the goads under CTH 85285200 and claimed benefit of exemption from Basic Customs Duty (BCD) under sl.no.17 of Notification Nso. 24/2005-Cus dated 01.03.2005. The subject import goods are declared as LED monitor tiles for computer which consists of a Frame Panel LED bulbs and a processor. The LED bulbs in the display panel are controlled by the said processor located inside the tile. The subject goods can be connected to Samsung Set back box (SBB) or GDC Cinema Processor (Server) through which they receive the signal and provide a graphical representation of the processed data.
2.2 The Department has entertained the view that the subject goods were classifiable under CTH 85285900 and so not eligible for the benefit of said. exemption Notification. Thereafter the Appellant cleared the goods by payment of duty under Protest and requested for issuance of a Speaking Order..
2.3 The Appellant justified their classification of the imported LED Monitor under CTH 85285200 on the following grounds:-
i. The subject goods have to be connected with an Automatic Data Processing (ADP) machine for functioning and do not consist of reception apparatus of television and cannot work on standalone basis.
ii. In the present case, the subject goods will function in conjunction with GDC Cinema Processor or Samsung SBB which is reportedly classifiable as a data processing machine and
iii. The subject goods were classified under CTH 85285200 as they can be used only with an ADP machine.
2.4 Rejecting the submissions made by the Appellant, the Adjudicating Authority issued a speaking order v✓de Order-in-Original No. 65923/2018 dated 03.11.2018, the gist of which is reproduced below:-
i. On perusal of photographs of the imported goods, it appeared that the video monitors were not fitted with connectors, characteristic of Data Processing machine. The examination report revealed that the imported goods do not have any ports for being directly connected to an ADP machine.
ii. The subject imported goods do not have features indicated in HSN explanatory notes to CTH 8528 in respect of monitor capable of being connected directly with an ADP machine and hence cannot be classified under CTH 85285200.
iii. The package described the goods as “LED Signage Boards” and therefore it is evident that the subject goods are not used with computers. Hence as per common parlance, the subject goods cannot be construed as goods meriting classification under CTH 85285200.
iv. The Appellant failed to establish that GDC Cinema Processor is an ADP machine.
2.5 Aggrieved, the Appellant challenged the said order before the Commissioner (Appeals-II) who vide Order-in-Appeal C.Cus No. 11/644/2020 dated 27.03.2020, upheld the Order-in-Original dated 0111.2018 by recording the following findings:-
i. The examination report indicates that LED Monitor tile does not have any provisions for connector port for connecting to an ADP machine.
ii. The Appellants contention that the goods are classifiable under CTH 85285200 on the basis of usage of subject goods with Samsung Back Box (SBB) classifiable under CTH 8471 is not acceptable.
iii. The Appellant failed to conclusively establish that GDC Cinema Processor is an ADP machine.
3. Aggrieved by the impugned order, the Appellant filed the present appeal before this forum.
4. Since the written and oral submissions made by the rival parties and their representatives have already been mentioned in the order of the learned Member (Judicial), I refrain from reproducing the same again. The averments shall be separately mentioned and considered in the relevant part of the discussion below. The following issues arise for decision in the appeal:-
i. Whether the single monitor tile imported by the Appellant is capable of connecting with an ADP machine?
ii. Whether GDC Cinema Processor is an ADP machine classifiable under CTH 8471?
iii. Whether the subject imports are appropriately classifiable under CTH 85414020 on the basis of presence of Light Emitting Diodes (LED) which are connected to each other on a Board?
5. I find that the impugned goods were described in the Bill of Entry and invoice as “LED Monitor Tiles (LED Monitor for Computers)” whereas in the package containing the goods, the description was mentioned as “Cinema LED Signage Board (Colour Display Unit)”. The article LED Tile is cased in an aluminium housing with dimensions of approximately 40*40*7 cm including the following components:-
– light emitting diodes (LED) mountee on a Printed Circuit Board with a pixel density of 72*72 and a brightness of 2000 cd/m2
– Connectors for power supply
– Brackets and holes for mounting several tiles together.
It appears that the article presented is for use in a modular LED video wall. It does not include a video processor. It appears that the LED Tiles, whether or not connected to other tiles, cannot display video images directly originating from a video source. It can only display signals originating from a dedicated video .processor (digitiser’) which processes the signals and divides them over the total number of tiles in the LED video walls. The tiles, when connected to the video processor have the capability to display images in a large number of colours. It is also not in dispute that each tile is capable of displaying images and are able to be connected to each other through LVDS cable. When used in conjunction with a GDC Cinema Processor, only a single large image is projected by the monitor despite the presence of varied number of tiles. The server reportedly could be capable of further connecting to an ADP machine. In their letter dated 27.09.2018, the Appellant mentioned that the subject imports do not have any other port except for Power in and Power out and this fact has been mentioned in Para 3 of the Order-in-Original dated 03.11.2018.
6. I find that, while the Appellant reasoned the entire classification issue on the basis of whether the LED monitor tiles are capable of being directly connected to an ADP machine, revenue on the other hand felt that the LED monitor tiles must first satisfy the features and parameters as per the HSN as tabulated in Para 6 of the impugned order which is extracted below for ready reference:-
“6. ———–
| S.No. | Feature | Monitors Suitable for use with ADP Machine of CTH 8471 as per HSN Explanatory Notes | Features of LED Monitor Tiles (Samsung, Onyx) |
| 1 | Viewable image size | Viewable image size of these monitors does not generally exceed 76cm( 30 inches) | Dimensions are (W*H*D) 639.8*899.8*118.9mm |
| 2 | Display Pitch size |
‘ Usually smaller than .3 mm suitable for viewing from close proximity | Pixel pitch size is 2.5 mm which is suitable for viewing from a distance |
| 3 | Connectivity
– |
Fitted with connectors characteristic of data processing systems(e.g RS-232C interface, DIN,D-SUB, VGA, DVI, HDMI or DP( display po. rt)connectors) | No such connection port is available |
| 4 | Wireless connectivity | May utilise wireless communication protocol to display data from an ADP machine | They don’t have capability to connect over wireless connection |
| 5 | Design | Incorporate tilt, swivel and height adjusting mechanisms, glare free surfaces, flicker free display and other ergonomic design characteristics to facilitate prolonged periods of viewing at close proximity to the monitor | No such facility is available in these monitors to facilitate prolonged viewing from close proximity |
| 6 | Control Buttons | Usually have control buttons situated in front panel | No control buttons located either on front or back |
Considering the glaring dissimilarities between with an ADP machine of heading 8471. a video monitor suitable for use with an ADP machine of heading 8471, I am inclined to take a view that impugned goods are not suitable for use “
7. I find that the classification of LED tile is to be determined in terms of General Rules of Interpretation to Import Tariff, relative Section and Chapter Notes especially Chapter Note 5(A) to Chapter 84 of Customs Tariff Act, 1975. Given its objective characteristics, such as the presence of the mounting brackets, the connectors and capacity to display images in a large number of colours, the LED tile is intended to be connected to other tiles and a dedicated external video processor in a LED video wall. The original video signal is processed and transferred by the video processor to the LED video wall: the Video processor divides the complete video signal over the total number of tiles. When one tile is missing or broken, the video signal is not completely displayed by the video wall. Each individual tile is therefore considered an essential part for the operation of the LED video wall as a whole. It further appears that LED Tile whether or not connected to other tiles appears to function only in combination with the video processor. All these aspects needs to be examined in detail in the light of provision of GRI, Section and Chapter Notes and with the aid of HSN Explanatory Notes.
8. Initially, at the time of import the appellant stated that the LED monitor tiles are to be connected to a GDC Cinema Processor which is a computer. It is the Appellants view that Revenue has not brought on record any evidence – to prove that the GDC Cinema Processor are not ADP machines. The impugned order had examined the claim of the Appellant at Paragraphs 9 to 13 including Pictorial representation and technical details, rulings by other Customs authorities using the HSN which have immense persuasive value and concluded that GDC Cinema Processors were other than ADP machines and could not be considered for classification under heading 8471. The impugned order specifically recorded that though the Appellant made a claim that the GDC Cinema Processors were ADP machines, but they have not explained the reasons for the same. It thus appeared that GDC Cinema Processors are an apparatus for the transmission of reception of voice, images or other data. The impugned order also discussed how the LED monitor tiles as per trade parlance and in the Appellants own website are understood as monitors, other than computer monitors.
9. I find that the description on the package of the impugned goods at the time of import in line with the provisions of Legal Meteorology (Packaged) Rules, 2011 was ‘Cinema LED Signage Board’. Imported goods i.e., LED Monitor tiles are connected to form digital displays and are used to advertise and inform moviegoers. They can be used to display movie Trailers, show times, ticket prices and other promotional materials, etc. As per the description of the GDC Cinema Processor mentioned in the written submissions of the Appellant, it appeared that the GDC Cinema Processors have limited capabilities and are useful only for display as signage boards. They are not Automated Data Processing Machines in the strict sense as understood in common parlance. Technically too they have been examined in detail in the impugned order and found to be not satisfying the criteria of ADP machines in terms of Note 5 to Chapter 84 of Customs tariff Act which is extracted below for ready reference:-
“(A) For the purpose of heading 8471, the expression “automatic data processing machine” means machine capable of :
i. Storing the processing programme or programmes and at least the data immediately necessary for the execution of the programme;
ii. Being freely programmed in accordance with the requirements of the user;
iii. Performing arithmetical computations specified by the user; and
iv. Executing, without human intervention, a processing programme . which requires them to modify their execution, by logical decision during the processing run.
(B) Automatic Data Processing (ADP) machines may be in the form of systems consisting of variable number of separate units.
(C) Subject to Paragraphs (d) and (C), a unit is regarded as being part of an ADP system if it meets all of the following conditions:-
i. it is of a kind solely or principally used in an ADP system;
ii. it is connectable to the central processing Unit either directly’ or through one or more units ; and
iii. it it is able to accept or deliver data in a form ( codes or signals) which can be used by the system. .
Separately presented units of an ADP machine are to classified in heading 8471. However, Keyboards, X-Y co-ordinate input devices and disk storage units which satisfy he conditions (ii) and (HU above , are in all cases to be classified under the heading 8471.
(d) Heading 8471 does not cover the following when presented separately , even if thy meet all the conditions set forth in Paragraph (C):
i. printers, copying machines, facsimile machines, whether or not combined;
ii. apparatus for the transmission or reception of voice, images or other data, including apparatus for communication in a wired or wireless network (such as local or wide area network);
iii. loud speakers and micro phones.
iv. Television cameras, digital cameras and video camera recorders;
v. Monitors and projectors, not incorporating television reception – apparatus.
(E) Machines incorporating or working in conjunction with the ADP machine and performing a specific function other than data processing are to be classified in the heading appropriate to their respective functions or failing that, in residual headings. ‘
10. In the oral submissions, the appellant claimed that LED monitor tiles when connected in a series can also be used in conjunction with a SBB, machine viz., LVDS cable and could further be connected to a computer. It is the Appellants contention that as per the Bill of Entry filed in respect of SBB, they have been classified under heading 8471. No discussion of such a Bill of”Entry is seen in the impugned order. Further, it was mentioned that the classification of SBB has not been disputed by the department. Whether the SBB machine was in use at the time of import of the impugned goods or imported later is also not known. If it was in use at the time the impugned goods were imported, as to why it was not disclosed before the lower authority is also not stated.
11. I find that the issue of classification of SBB is not an issue before us as it was not taken up before the Original Authority. Further in this era of self-assessment, it is the assessee who files a Bill of Entry (BE), classifies and assesses the goods and pays duty at the time of its importation. As a trade facilitation measure, as hundreds of BE’s are presented for clearance to Customs Department every day, the BE’s are machine processed as declared by the importer unless they are picked up for further manual examination based on risk parameters. To say that the BE has been approved by the Department may hence not be correct unless a positive act of approval by the proper officer after examining the product is shown by the appellant. Otherwise, they are only self-assessed BE’s which can be examined by the department when any adverse fact comes to its notice or the need arises. Further in the procedure of self-assessment, it is the appellant who has declared the classification of the imported goods under CTH 8528 5200 and has held that the goods are to be used in conjunction with an ADP machine i.e. GDC Cinema processor. It is the appellant who has at first to demonstrate the same when questioned about the classification before shifting the burden to the department. Secondly, they have also to satisfactorily show that the GDC Cinema processor is indeed an ADP machine that satisfies Chapter note 5(a) of Chapter 84 of the Customs Tariff 1985.
12. The appellant has demonstrated live what is purported to be the impugned product along with its operating system. The purpose was to broadly explain the details of the LED Monitor Tiles, while making their submissions. The facts recorded during the examination of the goods as mentioned in the order in Original dated 3.11.2018 which have not been controverted by the Appellant could not be improved upon during the oral presentation. In this regard reference is invited to findings mentioned at Para 4 of the Order-in-Original dated 3.11.2018 and the graphical representation of the imported LED Monitor tile. It is essential not to allow this process to introduce factual issues that have not been taken up before the Original Authority, or to fill in factual gaps in their stand. For example, though the issue before the Original Authority related to the use of the LED Monitor Tiles in conjunction with GCD server, the demonstration made before us was by using SBB machine. Technical details of the SBB machine was discussed and was an important part of the demonstration. This SBB machine has not been an issue before the lower authority. Secondly while the goods imported were LED tiles alone, the demonstration was made not of a LED Monitor Tile alone but of a complete system with the help of a technically qualified person. As mentioned earlier the goods imported were only LED Monitor Tiles without any other accessories and the classification is also sought to be made of LED Monitor Tiles only.
13. While the goods were described as “LED Monitor Tile(LED Monitor for Computer)” for computer in the Bill of Entry, the appellant now states that the SBB works in conjunction with LED Monitor Tiles fitted on a board in Cinema Halls for playing movies. As discussed above GDC Cinema Processors have limited capabilities and can only be used in conjunction with ‘Cinema LED signage board (colour display unit)’ made up of LED Monitor Tiles that display movie trailers, show times, ticket prices, and other promotional materials etc., and not for showing movies. It is perhaps for this reason” that recourse has been made to a SBB machine. The original description of the goods being ‘computer monitors’ appears to have been abandoned.
14. It is to be stated that what is sought to be classified are goods declared as LED Monitor Tiles in the BE and invoice as of August 2018. LED walls intended for outdoor viewing comprise several modules made of tiles. Each tile contains red, green and blue LED’s. They also have a video processor and a signal processor, allowing signal inputs and scaling of images and video to be displayed on the LED wall. A LED tile, whether connected to other tiles, that does not include a video processor appears to be classifiable as a Monitor part. This is because the tile cannot display video.
15. Constant and rapid changes in the IT field keep changing the design and use of goods. Later day changes cannot help in the classification of the impugned goods. Later imports have to be assessed on their own merit, if there is a change in the nature, design, use eta, of the goods. It is for this reason that it is essential for the displayed goods to have been shown to be the very same goods as were imported and in use at that relevant time and not their later version. Every import / assessment is an independent cause of action. This principle ensures that tax liabilities are determined fairly and accurately for each import, taking into account the specific features of the imported goods. Goods imported in 2018 cannot be understood for classification in conjunction with machines that were brought into use much later. Signage boards being declared as computer monitors and then over time being changed as cinematic display screens in conjunction with different goods is not permissible, much less when the new facts have not been tested by the Original Authority.
16. All these new factual controversies arising after issue of the impugned order has made a huge change in the submissions altering the entire scope of their arguments and would involve in depth examination into the facts. These issues may even require to be tested with the preliminary declaration of the impugned goods by the Original Authority. Having led the department to believe that the impugned goods were only computer monitors, they now subtly seek to change this factual foundation to include its use as a cinema screen and seek a classification decision accordingly.
17. An Internet search shows that the Samsung Set Back Box (SBB) is specifically designed to be an external ATSC TV tuner for select Samsung displays. It is a convenient and affordable way to add Over-the-Air (OTA) TV capabilities to the Samsung display. While this open-source information may be contested by the appellant it also shows the dangers of allowing the introduction of fresh facts at the second appeal stage, which have not been examined by the Original Authority.
18. After going through the technical literature and pictures of the imported LED monitor tiles and given its objective characteristics and due to the presence of the mounting brackets, the connectors arid the capacity to display images in a larger number of colours, the LED tile is intended to be connected to other tiles and a dedicated external video processor in a LED wall of 85285900. The intended use of these LED monitor tiles is mainly for sport or entertainment events or signage. The original video signal is processed and transferred by the video processor to the LED video wall. The video processor divides the complete video signal over the total number of tiles. So, it appears each video tile is to be considered as an essential part for the operation of the LED video wall as a whole. As such, by application of Note 2(a) to Section XVI, the classification of LED tile, whether or pot connected to other tiles appears to be excluded under CTH 8528 as a monitor or under CTH 8531 as a video signalling apparatus. As the LED monitor tile whether or not connected to other tiles can only function in combination with the video processor, it is required to be examined whether the imported goods are to be classified under CTH 85299092 as other parts for apparatus of CTH 8528.
18. The appellant states that the GDC Cinema Processor is an ADP machine falling under CTH 8471 and that it is the department that has not discharged its burden to prove it otherwise. This does not appear to be correct. The impugned order has examined the technical specifications of the imported goods and analysed them in the context of its use with a GDC Cinema Processor in detail, with respect to specifications and parameters provided in the HSN explanatory notes. The analysis concluded that the impugned goods were not suitable for use with ADP machines of heading 8471. In fact the GDC Cinema Processor i.e. XSP-1000 Cinema Server claimed by the appellant to be aft ADP machine was found in the impugned order not to contain any technical specifications to show that it was freely programmable in accordance to the requirements of the user, nor was it capable of arithmetic computation nor did it have its own storage option for execution of the processing programme. The monitors themselves also were not having characteristics associated with data processing system and did not have any capability for directly being connected with an ADP machine of CTH 8471, as discussed at Para 4 of the impugned order which is reproduced below:-
“The shed officers in their examination report dated 01.10.2018 have reported that it cannot be ascertained from visual inspection whether these items can be connected to any computer. or can process or display TV broadcast signal. Also, these are cinema LED signage Board ( Colour Display Unit) as per the description on the packages and there is only one Power in and one Power out ports are available on the unit and there is not other port. From the above, it can be seen that the goods did not have any port such as RS.232C interface. DIN, D-SUB, VGA, DVI, HDMI, etc. for connectivity with any ADP machine. Also, the importer vide their letter dated 04.10.2018, stated that they classified the goods under 85285200 since the goods are used with “GDC Cinema Processor” which is an ADP machine.”
20. As such, revenue has hence discharged its burden. The appellant has cited Tribunal judgments to state that servers are ADP machines. The Appellant relied on the ratio of the decisions in Benq India Pvt. Ltd. versus Additional Director General (Adjudication), New Delhi following the earlier Division bench decisions of the Tribunal in ACER India (P) Ltd. (2009(11) TMI 931-Tri-Ahm.), etc., which are found to be with respect to the classification of imported data projectors which cannot be applied to the facts of the present case in view of the discussions above. It is to be stated that the nomenclature used to describe a machine is not decisive of the nature of the machine. Moreover there is no precedent on facts as each machine has to be examined for its specificity with the tariff.
21. On an academic plane it is to be stated that the burden of proof, brought up by the appellant, in this era of self-assessment is a complex and evolving issue. It is the assessee who files a Bill of Entry (For short ‘BE’), °classifies and assesses the goods and pays duty at the time of its importation, in a legal environment facilitating trust-based compliance. To say that the BE has been approved by Revenue may hence not be correct unless a positive act of approval by the proper officer after examining the product is shown by the appellant. Otherwise, they are only self-assessed BE’s.
22. In the impugned case, it is the appellant who has declared the classification and self-assessed the imported goods under CTH 8528 5200 and has held that the goods are to be used in conjunction with an ADP machine i.e., a GDC sever. The facts are within the knowledge of the appellant as to what prompted them to make the classification and self-assess the goods. When the department expresses a doubt or raises a question on the classification or duty exemption claim sought, the initial burden is on the appellant who has to demonstrate the reasons for his decision. If he does so the burden shifts to the department, otherwise it would lead to an impossible situation where EXIM trade would be able to make classification choices which suit them best and ask the department to prove the contrary. Secondly, having made an assertion they have also to prima facie show that the GDC Cinema Processor are indeed ADP machines that satisfy Chapter Note 5(A) of Chapter 84 of the Customs Tariff 1985, as the technical specifications and capabilities of the impugned goods are in the special knowledge of the appellant/assessee. The legal principle involved is one who asserts must prove. This burden shifts from time to time having regard to the evidence adduced by the parties to the dispute and the inferences that could be drawn from fact or law by either of the parties.
23. The appellant –has further sought as an alternate argument to classify the impugned goods having Light Emitting Diodes under CTH 8541 4020. Considering that there has been a huge shift in facts and law made by the appellant from that made before the Original Authority as discussed above, the whole issue, including the correctness of the declaration made may need to be looked into afresh.
24. The imported LED tiles have been described in the Bill of Entry as ‘LED Monitor Tiles for Computer’ whereas on the packages of these tiles ‘Computer Signage Boards’, was mentioned. Whether the imported product under consideration is classifiable under CTH 85285200 as contended by the appellant or under CTH 85285900 as classified by the Department needs to be examined in detail afresh. Further, with regard to the contention of the appellant that GDC Cinema Processor is an ADP machine, I find though GDP Cinema Processor may be having some of the features and characteristics of an ADP Machine, there is no conclusive proof to substantiate the same as lot of technicalities are involved with regard to the products and the varying usage of the imported product is subject to detailed examination. Whether the technical parameters of the GDP Cinema Processor conform to the provisions of Note 5A to Chapter 84 of Customs Tariff Act, 1975 requires–in depth consideration. The appellant’s alternative plea for classification under CTH 85414020 as ‘Light Emitting Diodes (electro-luminescent)’ also needs to be looked into by the Lower Adjudicating Authority.
25. In view of the discussions above and the reasoning cited in Paragraphs 16 and 24 above, I consider it appropriate to remand the matter to the Original Adjudicating Authority for fresh consideration in strict compliance to the principles of natural justice.
(VASA SESHAGIRI RAO)
MEMBER (TECHNICAL)
In view of the difference of opinion between the Members, the following questions are framed for resolution:-
POINTS OF DIFFERENCE:
i. Whether the ‘LED Monitor Tiles’ imported by the Appellant merits classification under CTH 85285200 of Customs Tariff Act, 1975, and Whether impugned goods are eligible for exemption under Notification No. 24/2005-Customs dated 01.03.2005, as held by Member (Judicial).
(OR)
ii. Whether the LED Monitor Tiles are not classifiable under CTH 85285200 and require to reconsider the issue of classification and eligibility of exemption for which the matter requires to be remanded to Adjudicating Authority as held by Member (Technical).
(Pronounced in court on 22.03.2024)
In the present case, there is a Difference of Opinion between the Hon’ble Members and the same has been referred to me as the 3rd Member reference Bench by framing the following questions to be resolved:-
(a) Whether the ‘LED Monitor Tiles’ imported by the Appellant merits classification under CTH 85285200 of Customs Tariff Act, 1975, and whether impugned goods are eligible for exemption under Notification No. 24/2005-Customs dated 01.03.2005, as held by Member (Judicial).
Or
(b) Whether the LED Monitor Tiles are not classifiable under CTH 85285200 and require to re-consider the issue of classification and eligibility of exemption for which the matter requires to be remanded to Adjudicating Authority as held by Member (Technical).
2. The matter was posted for Virtual Hearing on 6th June 2024. The Learned Senior Counsel, Mr. V. Lakshmikumaran appeared on behalf of the Appellant and Mr. Harendra Singh Pal, Asst. Commissioner (AR) has appeared on behalf of the Revenue. Even before the Division Bench which had passed the Interim Order No. 40002/2024 dated 22/03/2024, they had represented the Appellant and the Respondent respectively.
3. The issue to be resolved in this case would be to arrive at the correct classification of the imported goods. As per the Appellant, the imported goods ‘LED Monitor Tiles’ are classifiable under CTH 85285200 as monitors capable of directly connecting to Automatic Data Processing Machine (ADP) which falls under CTH 8471. In such a case, the Appellant would be eligible to claim the benefit of concessional rate of duty in terms of Notification No. 24/2005-Cus dated 01/03/2005. On the other hand, the Department has classified the goods under CTH 85285900. For the goods classified under this CTH, no beneficial Notification is in existence. As could be seen from the points of difference noted above, Member (Judicial) has held that the goods in question ‘LED Monitor Tiles’ merits classification No. CTH 85285200 and has held that the goods are eligible for exemption under Notification No. 24/2005-Cus dated 01/03/2005. The Hon’ble Member (Technical) has held that the classification to be adopted is required to be re-considered by the Adjudicating Authority who should also go into the aspect of eligibility of exemption towards imported goods.
4. The Learned Senior Counsel submits that ‘LED Monitor Tiles’ are of a certain size which are all connected with each other to make them as a big screen. The multiple numbers of LED Tiles enjoined together make a very big screen which is used by various cinema theatres to screen their movies. While each of the LED Monitors has only inward and outward electrical connections, as also observed by the Customs authorities while inspecting the imported goods but they have failed to note that the last LED Monitor which is fitted at the end would also have multiple ports to get connected with the Automatic Data Processing Machine. Only when the ADP is connected by way of various ports, the actual screening of the movie, video and audio visuals could get reflected in the LED Monitors. He submits that GDC (being the brand of the company which supplied the large ADP for screening the movies) is an Automatic Data Processing Machine. In order to be classified as ADP, four conditions have been specified under Chapter Note 5 (A) of Chapter 84. If these conditions are fulfilled, then the machine would be termed as ADP. Taking me through the Table under Para 7.2 of the Interim Order, he submits that it gets clarified as to how the GDC Server fully meets the four conditions specified under Chapter Note 5(A) of the Chapter 84. It is submitted that GDC Server contains internal storage capacity of 32 TB. This GDC Server also consists of SX-4000 and XSP-1000 software. The GDC Server with the help of the software can perform multiple functions like creating the playlist, setting times for interval between the scenes, setting time for local advertisements, scheduling of the main movie and advertisements etc. All these are pre-programmed in the GDC when the movie is screened in the LED Monitor Tiles in the big screen. Thus, he submits that essentially, the Appellant has proved that the LED Monitor Tiles are being used alongwith/solely with the Automatic Data Processing System i.e. GDC server. Under the Notification No. 24/2005-Cus dated 1/03/2005, the exemption is granted for goods falling under CTH Headings 852842, 852852 and 852862 when such goods are ‘solely’ or ‘principally’ used in an ADP System of the CTH 8471. In his case, the Monitor Tiles are ‘solely’ used in the ADP system.
5. In view of the details discussed above, he submits that the GDC Machine is ADP and the imported goods ‘LED Monitor Tiles’ fall under the category of CTH 85285200 which are capable of directly connecting to Automatic Data Processing Machine of CTH 8471. Accordingly, they have correctly classified the imported goods under CTH ‘85285200’ and they have correctly claimed the benefit of exemption Notification No. 24/2005-Cus dated 01/03/2005. He further submits that the lower authorities have not properly gone through the brochures and appreciated the other documentary evidence submitted by the Appellant clearly showing that the GDC Machine is capable of undertaking all the functions attributable to ADP and all the conditions/functions specified under Chapter Note 5(A) of Chapter 84 of CTA are fully met. He submits that the lower authorities have compared the GDC with SX-4000 server with “Sony LMT-300 Digital Cinema Media Block” and have relied on US Customs Ruling No. HQ H092260 dated 20/03/2010, wherein the product in question was held as classifiable under CTH 8521. This CTH has been relied upon to hold that the GDC system SX-4000 is not an ADP Machine falling under CTH 8471. He submits that this comparison is not proper. The technology, particularly that of electronic and software technology, is changing very fast on a day to day basis and hence the classification adopted based on the product manufactured in 2010 cannot be compared with the product of latest technology manufactured in 2018. Further the Department has not adduced any documentary evidence to the effect that Sony LMT-300 Digital Cinema Media Block is equivalent to the GDC system. The Learned Counsel also takes me through to the Examination Report of the Customs officials dated 01/10/2015 wherein they have recorded that there is only ‘power in’ and ‘power out’ cables available in the unit and there are no other ports. Therefore, in the absence of other ports, a conclusion was drawn that the LED Monitors cannot be connected to any ADP. He submits that factually this is erroneous as has been clarified by the appellants to the authorities. While all the LED Tiles would have only input and output electrical wires so as to be connected with each other, only the last tile will have the necessary port which can be connected with the GDC (ADP). This fact has been ignored.
6. The Learned Counsel submits that a practical demonstration of functionality of LED Tiles has been presented before the Division Bench wherein even the Learned Authorized Representative of Revenue attending this Hearing was also present. In that demonstration, it was shown that the LED has the required ports to be connected to the ADP. Since GDC is a very large unit which is basically used in the cinema theatres, the same could not be brought for demonstration purpose at the Tribunal’s premises. Therefore, they had brought STB/SBB (Set Top Box) which is like a miniature GDC, capable of being used to screen the video images along with audio (movies) in the imported LED Monitors. He takes a stand that the imported LED Monitors have proper ports and practical demonstration has been given before the Tribunal towards their functionality by getting them connected with STB (Set Top Box) ports. Hence, his submission is to the effect that it is clearly proved that the imported goods LED Monitor Tiles would fall under CTH 85285200 which can be ‘solely’ or ‘principally’ used with the ADP System (in the present case the GDC System) falling under CTH 8471. Therefore, there is no need to remand the issue once again to the lower authority for any further verification so as to arrive at the correct classification of the product.
7. He relies on the case law of Godrej Sara Lee Limited Vs. ETO-2023 (384) ELT 8 (SC) wherein the Hon’ble Supreme Court has held that the issue should be decided by the forum which is hearing the case rather than the forum remanding the matter to the lower authority when the issue is pending for a long time. Relying on this case law, he submits that in the present case, the goods in question were imported in 2018 and the classification is pending for last 6 years and hence the ratio laid down by the Hon’ble Supreme Court would be squarely applicable. Therefore, even on this count, he prays that the matter may be decided at the Tribunal level itself without having any need to remand the matter to the Adjudicating Authority.
8. The Learned AR reiterates the submissions taken up by him before the Division Bench. He submits that the lower authorities have given detailed findings to the effect that on physical verification, no Ports were found in the LED Tiles and no effort was made by the Appellant to demonstrate that GDC was capable of taking up the functions of ADP. Accordingly, he prays that the matter may be remanded to the Adjudicating Authority for proper inspection of the goods in question along with the documentary evidence placed by the Appellant, as has been held by the Hon’ble Member (Tech).
9. On a specific query raised during the present Hearing on the Learned AR as to whether the ports were available in the LED Tile and as to whether the same was connected to the SBB box at the time of demonstration, he admits that ports were available. However, he makes a point that the LED Tiles brought for demonstration pertain to the LED Monitor Tiles manufactured in 2022/2023 whereas the goods under the dispute LED Monitor Tiles were imported in 2018. Hence, with the present LED Monitor Tiles having Ports cannot be automatically taken to mean that even in those LED Monitor Tiles imported in 2018, such ports were available. Because of this, he supports a view taken by Member (Technical) to remand the matter to the Adjudicating Authority.
10. On another query raised to the Learned AR as to what kind of documentary evidence, Revenue had towards their claim that “Sony LMT-300 Digital Cinema Media Block” is equivalent to the GDC System SX-4000, he submitted that as per the records available, no documents for such comparison were readily available in their files.
11. Heard both sides and perused the Appeal papers and other documentary evidence placed by both sides.
12. Admittedly, the goods imported are in the nature of monitors falling under the category of CTH 8528. The dispute is as to whether the product will fall under the classification of CTH 85285200 as claimed by the Appellant or would fall under CTH 85285900, as held by the Revenue.
13. On going through the CTH, it is observed that CTH 85284200, 85285200 and 85286200 all pertain to the Monitors which are capable of connecting for use with Automatic Data Processing Machine of Heading CTH 8471. Further, it is noted that in respect of the three categories of ‘monitors’ which are capable of either being used ‘solely’ or ‘principally’ used in Automatic Data Processing system of heading CTH 8471, exemption has been granted under Notification No. 24/2005-Gus dated 01/03/2005. On the other hand, monitors and projectors which are not capable of getting connected to ADP, they do not get the benefit of exemption under Notification No. 24/2005-Cus. The Revenue has classified the goods falling under CTH ‘85285900’ on the ground that LED monitor tiles cannot be connected to ADP. In order to make the goods fall under this classification, the Revenue will have to come with an evidence that the LED Monitors Tiles are not capable of being connected to or designed for use with an Automatic Data Processing Machine of heading CTH 8471.
14. In the present case, it is inconceivable that the imported Monitors will have no ports to get connected. If all the Tiles had only input and output electrical wires without any ports as per the observations of the Shed officers in their Examination Report dated 01/10/2018, the LED Monitors could have absolutely no usage whatsoever. As per the demonstration given by the Appellant before the Division Bench, it is undisputed that the end LED Monitor Tile had necessary ports for connectivity and the same were connected to SBB (Miniature GDC).
15. So far as the points made by the Learned AR during the present Hearing about the ports not likely to be available in the monitors imported in 2018, it is again inconceivable that anyone will import the goods which are not capable of being used at all. Agreed that technology is changing on a daily basis, probably at that time there would have been two or three ports and the presently ports would have increased to 5 or 7. Also the type of ports may have changed like it has changed in the charging ports of mobile phone now. Therefore, it cannot be accepted that the imported goods had no ports and hence they were not capable of being connected to the ADP Machine.
16. Coming to the classification of GDC as Data Processing Unit, it is seen that multiple functions are being carried by the GDC Server which actually helps the movie to be screened, advertisements to be displayed, intervals to be monitored with video and audio properly being beamed in the screen. Having a huge memory of 32 TB along with these facilities, would prove that GDC is ADP only, meeting all the requirements under Chapter Note 5(A) to Chapter 84. The Revenue’s stand that US Customs Ruling No. HQ H092260 dated 20/03/2010 in respect of “Sony LMT 300” Digital Cinema Media Block is classified under CTH 8521 and therefore even the GDC System SX-4000 would be classifiable under 8521 has no documentary evidence to back up. Further many changes have been taking place in electronic and IT Industry in a fast and furious manner. Comparing a 2010 year product with a product manufactured in the year 2018, that too when they are of different brands with different configurations, does not in any way help the Department in arriving at their conclusion towards the CTH classification of the GDC (ADP) under CTH 8521. In the absence of any corroborative evidence, this would amount to presumption about the classification. Hence the classification attributed to GDC under CTH 8521, is without any merits and is required to be set aside. I do so.
17. Another point to be noted from the CTH is that in case of 8528 42 00, 8528 52 00 and 8528 62 00, this classification is to be applied just if they (the monitors) are ‘capable of directly connecting to’ and are designed for use with an “automatic data processing machine of heading 8471”. The CTH under these Headings speaks of monitor being capable of being compatible with ADP of 8471. The existence of ports in the monitor itself would make them capable of getting connected to ADP. On the other hand, there is no such description in respect of CTH 8528 59 00. The availability of ports in the LED Monitor Tiles have been shown and proved during the demonstration before the Division Bench and is not disputed before me. Therefore, I hold that the LED Monitor Tiles are capable of being properly connected to ADP.
18. From the orders passed by the lower authorities, it is seen that the Shed Officers have not carried out their Examination Reports on 01/10/2018 to properly examine the existence of ports by checking all the LED Machines Tiles.
19. I hold that it has been conclusively proved that GDC Server with inbuilt software with huge memory of 32TB would get classified under CTH 8471 as “Automatic Data Processing Machine” and the imported LED Monitors Tiles are capable of being directly connected to Data Processing Machine i.e. GDC, Hence the LED Monitor Tiles are classifiable under CTH 84285200. Accordingly, they are eligible for the exemption granted under Notification No. 24/2005-cus dated L03.2005.
20. I hold that the imported LED Monitors Tiles are classifiable under 84285200 which are capable of being directly connected to ADP Machine [GDC] falling under CTH 8471 and hence are eligible for exemption in terms of Notification No. 24/2005-Cus dated 01/03/2005.
21. Viewing this case from another angle so long as the LED Monitor Tiles are capable of being used ‘solely’ or ‘principally’ in an ADP machine, the exemption under Notification No. 24/2005-Cus dated 01/03/2005 cannot be denied. In this case when the LED Monitor Tiles have been connected to SBB/STP at the time of demonstration, it would clarify the LED Monitor Tiles are ‘kind of goods’ ‘solely’ or ‘principally’ used in an automatic data processing system. Since there is no denial that SBB/STB itself is not an ADP, it would meet the requirement of the conditions specified under the exemption Notification No. 24/2005-Cus dated 01.03.2005. In such a case, even the question as to whether GDC is to be viewed as ADP or not itself gets rendered infructuous. It is another matter that as per the above detailed discussions, I have come to a conclusion that GDC is ADP system only.
22. In view of the foregoing, I do not find any reason to remand the issue to the Adjudicating Authority for coming to a conclusion about the CTH of LED Monitor Tiles and the applicability of exemption Notification for the imported goods. Hence, I hold that there is no necessity to remand the issue to the Adjudicating Authority.
23. The reference is answered and the difference of opinion stands resolved on the above terms. The papers may be put up before the Division Bench for deciding and releasing the Final Order.
(Order was pronounced in the open court on 08.07.2024)
(R. Muralidhar)
Member (Judicial)
MAJORITY ORDER
As per the majority decision, the impugned order is set aside. The appeal is allowed with consequential relief, if any.
(dictated and pronounced in the open court on 18.07.2024)
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