ORDER
V.P. Gulati, Vice President
1. The issue in the appeal relates to classification of the goods which have been described by the appellants as tackle. The lower authority has assessed the goods under tariff Heading 84.71 as against classification under Heading 84.77 (84.79) claimed by the assessee. The two competing items are reproduced below for convenience of reference :
81.71 : Automatic data processing machines and units
thereof, magnetic or optical readers, machines,
for transcribing data on to data media in codes
form and machines for processing such data, not
elsewhere specified or included.
84.79 : Machines & mechanical appliances having individual
functions, not specified or included elsewhere in
this chapter.
2. The lower authority has taken note of the description of the set and its capability as described in the literature which was produced before him and which is set out as under in the impugned order.
With regard to classification of Tackle. The material available on record is technical literature seized under Mahazar which clearly define the construction, functions and application in various fields. It is relevant to produce the said data which is as under –
TACKLE – Information Processor :
1. Is an information processor designed to store process data and give printout such data. It also transfers data into a computer.
2. Capable for data collection and processing it at the point of origin data.
3. It has a single key function and its software designed to meet customers requirement.
4. Data can be transferred to or from IBM Compatible computers directly or through modems; simply and easily without-setting parameter or using complicated commands.
5. Tackle can work with modems, EPABXS, Electronic weighing scales, Data Acquisition systems and other micro processor based equipment.
6. Tackle with option of 24 column dot matrix printer with a separate rechargeable battery.
3. He has further gone on to observe as under :
1. From the technical specifications indicated in the literature on Tackle, Tackle has a key board, Display unit, Memory with software depending on the kind of application as per the requirements of the customers.
2. From the description referred above “Tackle’ otherwise known as Hand Held Terminal is an information processor capable of storing, processing and transferring data find its application i.e. it can be used with Modems, EPABX, BAR code readers, CNC machines, Electronic weighing scales and Data acquisition systems and other micro processor based equipments.
4. He has therefore, analysed the scope of the tariff headings under chapter notes and after analysing the position in regard to the same held as under :
Chapter notes are also incorporated under Chapter 84 vide paras 5(a), 5(b) & 7 of the nature/scope of goods to be classified under Chapter sub-heading 8471.00 & 8479.00 of the Schedule to Central Excise Tariff Act, 1985. All automatic data processing machines whether digital machines, analogue machines or hybrid machines are to be classified under sub-heading 8471.00 irrespective of whether they are in the form of systems consisting of variable number of separately-housed units or units being part of the complete system. Further it is also stipulated that the unit is regarded as part of complete system subject to fulfilment of two conditions viz., (i) it is connectable by the central processing unit either directly or through one or more units; and (ii) it is specifically designed as part of a system (it must in particular unless it is a power supply unit, be able to accept or deliver data in a form of codes or signals) which can be used by the system. Such units presented separately are also classifiable in Heading No. 84.71. However by exclusion clause chapter notes also stipulate that Heading 84.71 does not cover machines incorporating or working in conjunction with an automatic data processing machine and performing a specific function, such machines are classified in the headings appropriate to their respective functions or failing that in residual headings.
Applying the criteria laid down in the chapter notes as to what constitute automatic data processing machine & parts thereof to the goods in question i.e. ‘Tackle’ by virtue of its construction, functions and other distinguishing features, the same more appropriately merits classification under chapter sub-Heading 8471.00 of the Schedule to Central Excise Tariff Act, 1985. ‘Tackle’ as understood in trade parlance as per their technical literature being an Information processor, stores, processes data and capable of transcribing such data depending on the requirements. As already admitted by the assessees themselves that it has an inbuilt facility of Display unit, memory and key board as required software as required by their customers. It is obvious that as could be seen from the parameters adopted in technical specifications in building up the said equipment, advance digital technology has been used and it comes under the purview of ‘digital machine’ as defined in Chapter notes 5(a) under Chapter 84. The assessees have vaguely argued without referring to the digital technology adopted on the product performing functions attributed to ‘digital machines’ mainly to divert to classify under different category altogether so as to gain unintended benefits. The averments made by the assessee that it has fixed programme with no secondary storage facility and user’s limitation and inability with reference to modification of the programme nevertheless alter the position of ‘Tackle’ being used for handling the information in prescribed logical sequences and for a specific purpose/purposes. While Tackle is capable of transferring data to and from IBM compatible computer directly or through modems and also can be used with printer with separate, re-chargeable battery. This the assesses have construed it to be a machine incorporating or working with Automatic Data processing machines and performing a specific function, thereby seeking the classification of Tackle under residuary heading viz., sub-heading 8479.00 referring Chapter Note 5(b) under Chapter 84.I find that there is no force in their arguments inasmuch as ‘Tackle’ itself has to be classified as Automatic Data processing machine or unit thereof under sub-heading 8471.00. When the goods can be classified in terms of section notes, chapter notes and interpretative rules which have statutory force, there is no necessity to go into the aspects as to how the goods are known in common parlance or commercial parlance. ‘Tackle’ performing essential function of storing, processing and transferring data answer to the broad description of goods under Tariff Heading 8471.00 of the Schedule to Central Excise Tariff Act, 1985 are appropriately classifiable under the said sub-heading rather than a residuary heading (8479.00).
5. The learned Counsel for the appellants has drawn our attention to the technical opinion obtained by the appellants from Shri M.P. Srinivasan, MSc, PhD of Indian Institute of Science, Bangalore who has given the difference between computer and the tackle. These are set out under para 9 of the impugned order which is reproduced as below for convenience of reference :
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COMPUTER TACKLE
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1. Has general purpose, Has a specific function display
Alphanumeric, and graphic with just two lines of 16
display which can support characters, backed by LCD
a variety of programs, is controller IC.
but mapped to video memory.
2. Has a 'full function' key Has limited number of keys with
board, which allows user to fixed functions as specified by
freely enter his programs the user for data entry only.
and data. Printer and serial port are
actuated by two fixed commands.
3. Has a secondary storage Has no secondary storage.
services like floppy,
hard disk, etc.
4. Has an operating system Has no operating system, but
in which programs entered only a fixed program in ROM
by the user reside. as per user specification.
5. Entries by the user can Entries by the user can never
modify the execution of modify the execution of the
the program. program.
6. Accepts different No programming languages is
programming languages accepted by Tackle's.
like 'C, Pascal, Basic
or a script language.
7. Is a general purpose Is a custom built machine ordered
machine purchased as for a specified function and for
such by the user no other purpose.
and then programmed
for his use.
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He highlighted that the logical sequence of the programme in the tackle could not be changed from one to the other stored programme and the programme could not be modified and further it can only be stored for the functions for which it was programmed. He has pleaded that this is in contradistinction to the functioning of the item falling under Heading 84.71, wherein the machines covered are more versatile with the capacity to change the sequencing and functioning without human intervention etc. He has also drawn our attention to the HSN notes and the description of the digital machines. He has pleaded that it has been clearly set out at page 1297 of the HSN that machines which operate only on fixed programme i.e. programme which cannot be modified by the user are excluded even though user may be able to choose between the number of such fixed programmes. He has pleaded that since Central Excise tariff is designed on the scheme of the HSN, the goods should not be considered as digital machine as falling under Heading 84.71 by reason of what has been set out in the HSN as above.
5. The learned DR for the department has pleaded that the equipment in question has features of the digital machines and in this connection he referred us to the appellants’ catalogue as also the finding of the learned lower authority wherein he has entered elaborate discussions in this regard. He has pleaded that the item will be correctly classifiable under Heading 84.71.
6. The learned Counsel for the appellants also pleaded that longer period of limitation could not have been invoked as the appellants had bona fide believed that the goods were assessable under Heading 84.79 and they were eligible for exemption applicable to SSI units in terms of Notification No. 175/86 as amended by Notification No. 1/93 as applicable at the relevant time during the period of demand for the year 1991-92 to 1993-94.
7. We have considered the pleas made by both the sides. We observe that the learned lower authority has on the appellants’ own-showing in their product literature has held that the goods answer to the description of Digital machine falling under Heading 84.71. We observe from the catalogue that the item in question has been described as information processor and has the necessary software for the same to meet the customers requirement and therefore would be functioning with a Central processing unit. It has been claimed in the catalogue that the unit is IBM compatible and can function as a peripheral equipment for the computer and it can also work with modems, CNC machines, and data acquisition system and other microprocessor based equipment. It can also be linked to dot matrix printer Taking into consideration all these factors, and in the light of the discussions entered in the lower authority’s order reproduced above, we are of the view that the equipment in question answers to the requirement of data processing machine falling under Heading 84.71. Appellants’ reliance on the HSN in this connection is misplaced as the items which are excluded from the ambit of digital machine as mentioned by the learned Commissioner are not equipments for the computer to form part of the computer system of this versatile nature. We therefore hold that the lower authority has rightly held the goods to be assessable under Heading 84.71.
8. The next question to be considered is whether the demand can be taken to be barred by limitation and the longer period of limitation can be invoked against the appellants. We observe that the calim of the appellants is that they were under the bona fide impression that they are eligible for the benefit of SSI notifications. The lower authority has taken note of this plea of the appellants and has pointed out that while they had claimed to be eligible for the benefit of SSI exemption they had not filed any declaration for the purpose of Notification 175/86 and 1/93 which were required to be filed for claiming the benefit. There is no explanation forthcoming as to why they did not do so if they fell that they were eligible to the benefit of SSI Notifications as above. They obviously wanted to keep their manufacturing activity away from the purview of Central Excise authorities which would go to show that they were not wanting to pay duty. In the above background we hold that longer period of limitation has been rightly invoked against the appellants. We, therefore, uphold the order of the lower authority in regard to the amount of duty and also the penalty. Penalty of Rs. 10,000/- levied cannot he considered as excessive in the facts and circumstances of the case. We, therefore, uphold the same as also the duty demand. Since duty is being demanded necessary abatement if available should be allowed to the appellants while working out duty.