Brief of the Case
Hon’ble Supreme Court has held in the case of HCL Limited v Commissioner of Customs that Risograph is a printing machine and not a duplicating machine.
Facts of the case
In the present facts of the Case, the main issue was that of classification classification of the machines known as Risograph, that whether it is an office machine having duplicating function or is it a printing machine falling under different headings of Custom Tariff Act, 1975.
In the present case according to the Assessee, Risograph machine is a printing machine and on the other hand, the Revenue has taken the position that it is a specie of duplicating machine. Though under both the sub-headings the import duty is 65%, however, insofar as printing machinery is concerned, by virtue of Notification No. 59/94-CUS dated March 01, 1994, which includes Chapter Heading 84.43, the duty is to be calculated at the rate of 25% ad valorem. That is the precise reason behind the present lis between the parties.
Question of Law
The question which arises after discussing the facts that whether Risograph machine fit in any of the specific descriptions contained in both the sub-heading 84.43 or 84.72. Both the parties are trying to fit it in the respective residual clauses viz. “Other printing machine” or “Other” respectively. Therefore, what needs to be examined is as to whether the Risograph machine would belong to the family of ‘printing machinery’ or it belongs to the clan of ‘duplicating machine’.
Held by Hon’ble CESTAT
The Hon’ble Tribunal while giving the decision in the favour of Revenue held that the Risograph machine is in the nature of a duplicating machine, which does not qualify to be a printing machine at all after relying upon its earlier judgment in the case of Pioneer International v. Collector of Customs, Kandla 2000 (122) ELT 430.
Contention of the Assessee
The appellant before the ld. Asst. Commissioner mentioned that test of trade parlance was in favour of the appellant wherein Risograph is commercially known and understood as a digital printing machine in India as well as abroad, as evident from the declaration of the manufacturers. Further, HSN Explanatory Notes clearly support the classification of the machine under Chapter Heading 84.43 wherein it specifically provides that in addition to normal type of printing machine Chapter Heading 84.43 also cover special machines such as small office printing machines which operate by means of printing type or by offset process.
Risograph machine functions in the principles of printing machines as it uses ink drums and squeegee rollers therein to print images similar to the process of screen printing. The Appellant also submitted that Japanese Customs have classified the Risograph only under Chapter Heading 84.43 and this position is not disputed even by the Indian Customs. The scanner has been extensively used in the printing industry to transfer the image by utilising a thermal head to make masters used for printing, and hence the classification of the Risograph can only be under that Chapter Heading.
Further, it was submitted that the Tribunal in the order in Pioneer Internationa (supra) has held that the Risograph is used to reproduce copies and does not have any mechanism to print any original matter. It was submitted that inasmuch as once the master is made then from the master, by the principle using ink, which flows through the pores of the paper/plastic master, fresh prints are taken out. There is no copying principle as in a photocopying machine.
Contention of the Revenue
The ld. Counsel for the Revenue supported the orders of the lower authorities.
He submitted that the Risograph works by the process of automatic digital scanning, thermal screening duplicating systems. The principal operations involved in the Risograph printer are screening, master making and printing. The Ld. Counsel discussed the technicalities involved in running the machine and reached to the Conclusion that Risograph is nothing but a transformation of the duplicator with certain additional functions. There are no principles of offset printing or photocopying involved. It is further submitted that the principal function is that of a duplicating machine and cannot be treated as a offset printing machine.
He also submitted that the Collectors’ Conference, after examining the detailed catalogue and working of Risograph, came to the conclusion that the machine is a duplicating machine and, therefore, appropriately classifiable under Heading 84.72. The Collectors’ Conference also came to conclusion that Risograph is more appropriately classifiable under sub-heading 8472.10. Further, he contended that printing and photocopying were somewhat overlapping in the instant case. Simply because it is able to make 130 copies in one minute would not make it a printing machine, but it was only a high quality photocopy machine.
Also, he submitted that Common Parlance theory shall also apply in this case inasmuch as in the market and to the general consumers of this product, it was known as photocopying/ duplicating machine only and not as printing machine.
Held by the Hon’ble Supreme Court
The Hon’ble Apex Court observed that Chapter Heading 84.72, applies to ‘Other office machines, includes duplicating machines’. Further, it was observed that HSN Explanatory Notes to Chapter Heading 84.72 explains that the term ‘office machine’ is to be taken in a wide general sense to include all machines used in offices, shops, factories, workshops, schools, railway stations, hotels, etc., for doing ‘office work’. Small printing machines, and even duplicators using embossed plastic or metal sheet, which can also operate with stencils, and photocopying etc. are specifically excluded. If there is a small printing machine like letterpress, lithographic or offset printing machine, which does the printing work and also, at the same time, performs duplicating work with stencils or otherwise and even photocopying work, it would still be treated as a printing machine and not duplicating machine.
There are many special machines which are small office printing machines and they operate by means of printing type or by the offset process. It is also acknowledged that many times these machines are confused with duplicating machines due to their appearance as duplicating machines and similar operating principles. These are not to be treated as duplicating machines, but printing machines.
After discussing the technicalities of Risograph the Hon’ble Supreme Court held that Risograph printing process is more akin to screen printing. The screen printing process requires a stencil and a screen, with the stencil carrying the design to be printed. The principles adopted for printing in the Risograph is akin to that found in screen printing.
Further, it was observed that it is difficult to equate Risograph machine with duplicating machine. Duplicating, as opposed to photocopying, requires the preparation of a master sheet which makes duplicates on a machine. There are two main types of duplicating: stencil duplicating and spirit duplicating. Stencil duplicating is a technique which uses a master sheet on to which lettering is impressed as lines of perforations through which ink can be squeezed on to the copy paper. Spirit duplicating is a method which uses strong aniline dye. Originally the ink was transferred to a sheet of gelatin by placing the sheet of paper with the dye on it in a shallow tray. The moisture retaining qualities of gelatin kept the ink moist, and the copy was made by pressing an ordinary sheet of paper on to the gelatin. The modern process, which has replaced the aforesaid original version, was developed in the year 1923. In this process, the master is in two parts, the lower one like a sheet of carbon paper with the dye on the top side; the dye is transferred to the back of the top sheet when it is typed or written upon. This sheet is then clipped to a revolving drum, and the sheets to be printed are moistened with a volatile fluid which dissolves a thin layer of dye on the master, thus transferring it to the clean paper. In a duplicating machine, as provided for in the Customs Tariff Act, the stencil itself is made using a typewriter or stylus i.e. the stencil is created outside of the machine before the same is fed and ink directly passed through it. The HSN Explanatory Notes to Customs Tariff Heading 84.72 itself confirms this understanding wherein it is stated that duplicating machines include the stencil duplicating machines which operate with waxed paper stencils previously cut by a stylus or on a typewriter.
The Risograph machine is in the nature of a screen printing machine and not duplicating machine. It would, therefore, be covered under sub-heading 84.43 and not 84.72.
Accordingly, the Appeal was allowed.