TaxTMI 
TaxTMI 
2022 (3) TMI 419
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....17.03.2012. 2. The appellant is engaged in the import and trade of various electronic products, including digital still image video cameras. According to the appellant, these cameras have the primary feature to capture still image photographs under different modes (flash mode, night mode, portrait mode, etc.) and, therefore, classified as "digital cameras" under Customs Tariff Item [CTI] 8525 80 20 and not as "video camera recorders" under CTI 8525 80 30. The appellant further claims that as a secondary feature, these cameras imported by the appellant during the relevant period are also capable of recording videos of resolution equal to or higher than 800 x 600 pixels with 23 or more frames per second for a maximum period of 29 minutes 59 seconds in a single sequence. It is also the claim of the appellant that these cameras were shipped out of factory with firmware embedded in it. Firmware is provided by the manufacturer i.e. Nikon Corporation, Japan and it restricts the video length of such cameras in a single sequence to 29 minutes 59 seconds. 3. The issue involved in this appeal is whether these cameras imported by the appellant are eligible for exemption from ....
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....ith the Harmonised System of Nomenclature [HSN] amendments and the tariff entry for 'digital still image video cameras' was changed to CTI 8525 80 20, but the description remained the same. 7. A Circular dated 10.09.2007 was also issued clarifying the difference between 'digital still image video cameras' and 'video camera recorders'. It clarifies that the term 'digital still image video cameras' covers only digital cameras that have the capability of taking still images but this would also include digital cameras that take moving images for a limited period of time though they are primarily still image cameras. Such cameras would fall, it was clarified, under CTI 8525 80 20 but digital cameras that can take both still images and moving images like camcorder or video recorder falling under CTI 8525 80 30 shall not be covered under CTI 8525 80 20. 8. Thereafter, the notification dated 01.03.2005 was amended by notification dated 17.03.2012 and an 'Explanation' was inserted. The relevant portion of the notification is reproduced below: S.No. Heading, Sub-Heading or Tariff Item Description of Goods (1) (2) (3) 13. 8525 80 20 Digit....
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....of 2018, Civil Appeal No. 1875 of 2018, Civil Appeal No. 1832 of 2018, Civil Appeal No. 3213 of 2018 and Civil Appeal No. 5967 of 2018. Out of these five appeals, four appeals were allowed by the Supreme Court on 09.03.2021 for the reason that the Directorate of Revenue Intelligence Officers did not have the jurisdiction to issue the show cause notices. The remaining appeal, being Civil Appeal No. 5967 of 2018 filed by Sony India Private Limited, was de-tagged since the issue of jurisdiction of the Officers of the Directorate of Revenue Intelligence was not involved in this appeal and this appeal is pending before the Supreme Court. 13. The present appeal relates to a common speaking order dated 13.05.2016 passed by the Assistant Commissioner on the 629 Bills of Entry filed by the appellant during the period February 2015 to March 2015. The benefit of the exemption granted by notification dated 01.03.2005, as subsequently amended on 17.03.2012, was denied to the appellant. The appeal filed by the appellant before the Commissioner (Appeals) to challenge the said order passed by the Assistant Commissioner was dismissed by order dated 06.06.2019. 14. The Commissioner....
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.... a period of 30 minutes or more. This situation has wisely been examined by the Adjudicating Authority in para 4.8.10 by an example of Nikon where by simple instructions the users were advised how to remove the video recording limitations. I fully agree with the conclusion drawn by the Adjudicating Authority that the firmware restriction on the time length of video recording is an artificial restriction put by the digital camera manufacturers. Investigation revealed that after recording for more than 30 minutes there remains ample space for recording even on using even a 8 GB memory card. When there is inbuilt facility in the impugned goods to record video for 30 minute or more, which has been temporarily barred by some software, I do not find force in the contention of the Appellant. ***** 5.6 ***** I find that the capacity of storage is one of the biggest determinants of how much video can be recorded. The larger the storage capacity, the more video you can record. Once the storage capacity is full, the user has the option to stop recording or record over the oldest video recordings (overwrite setting). The utilization of maximum storage capacity is direct....
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....mmissioner (Appeals) committed an error in holding that the camera should exhaust all its maximum storage capacity at the end of the clip length. 18. Shri Ajay Jain, learned special counsel appearing for the Department with Shri Rakesh Kumar, learned authorized representative of the Department, however, supported the impugned order. In this connection, learned special counsel pointed out that all the three conditions have to be read together for deciding the eligibility for exemption and there is no good reason as to why they should be met cumulatively for a camera to be ineligible for exemption. Learned special counsel also pointed out that the reasons given by the Tribunal in the earlier proceedings for denying the exemption benefit still hold good and in any case as the third condition relating to video recording for less than 30 minutes is not satisfied and the fact that the maximum storage capacity is not exhausted in video recording of 29 minutes and 59 seconds, the cameras imported by the appellant would not be eligible for exemption from BCD under the notification. 19. The submissions advanced by the learned counsel for the appellant and the learned specia....
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.... expanded) capacity as redundant. It is obligatory to read and satisfy all the conditions of the notification without rendering any part therein as redundant. Since in the present case, the imported digital cameras are capable of recording video with minimum resolution and minimum recording speed for more than 30 minutes in a single sequence; using maximum storage capacity, such cameras will not be entitled to the benefit of notification. It is well settled that a person who claims exemption or concession, has to establish that he is entitled to that exemption or that concession. In the present case, as discussed above, the impugned goods do not fulfill all the conditions specified in the notification and hence it is an inevitable that the benefit of notification is denied to these goods. 24. Appellants have argued that regarding the Education and Secondary and Higher Education Cess denial of exemption from payment of Cess is incorrect. It may be mentioned that Exemption Notification NO. 69/2004-Cus dated 9.7.2004 and 28/2007 dated 01.03.07 exemption from Education Cess and Senior and Higher Secondary Education Cess for Digital Still image video cameras falling under Tarif....
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....fore, be apt to refer to this decision of the Supreme Court in Nadar at length. The constitutional validity of the Madras City Tenants Protection (Amendment) Act, 1994 (Act No. 2 of 1996) was assailed in several writ petitions before the Madras High Court. When the matter came up for hearing before a Division Bench of the High Court, reliance was placed by the respondents on an earlier Division Bench decision of the Madras High Court in M. Vardaraja Pillai vs. Salem Municipal Council [85 Law Weekly 760] , wherein the constitutional validity of the Madras City Tenants Protection (Amendment) Act, 1960 (Act No. 13 of 1960) was assailed. This Division Bench had upheld the validity of Act No. 13 of 1960 but against this decision, appeals by special leave were filed before the Supreme Court. The Supreme Court dismissed the appeals by an order dated September 10, 1986 and it is reproduced below :- "The Constitutional validity of Act 13 of 1960 amending the Madras City Tenants' Protection Act, 1921 is under challenge in these appeals. The State of Tamil Nadu was not made a party before the Trial Court. However, the State was impleaded as a supplemental respondent in appe....
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....only on two points, namely that in a petition involving an issue concerning the constitutional validity of any State Legislation, the State is a necessary party and in its absence the issue cannot be gone into and that a belated prayer for impleading a necessary party may be declined. The Supreme Court also observed that by no stretch of imagination can it be said that the reasoning or the law contained in the decision of the Division Bench of the Madras High Court in Pillai stood merged in the order of the Supreme Court in a sense so as to amount to a declaration of law under article 141 of the Constitution by the Supreme Court or that the order of the Supreme Court had affirmed the statement of law contained in the decision of the High Court. The Supreme Court, therefore, held that upon the dismissal of the appeals on September 10, 1986, the operative part of the order of the Division Bench stood merged in the decision of the Supreme Court, but the remaining part of the order of the Division Bench of the High Court cannot be said to have merged in the order of the Supreme Court nor did the Supreme Court make any declaration of law within the meaning of article 141 of the Constitu....
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....nt contradiction. However, in certain cases, the reasons for decision can also be said to have merged in the order of the superior court if the superior court has, while formulating its own judgment or order, either adopted or reiterated the reasoning, or recorded an express approval of the reasoning, incorporated in the judgment or order of the subordinate forum. 11. Secondly, the doctrine of merger has a limited application. In State of U.P. v. Mohammad Nooh. AIR (1958) SC 86 the Constitution Bench by its majority speaking through S.R. Das. CJ so expressed itself. "while it is true that a decree of a court of first instance may be said to merge in the decree passed on appeal there from or even in the order passed in revision, it does so only for certain purposes, namely, for the purposes of computing the period of limitation for execution of the decree". A three- Judge Bench in State of Madras v. Madurai Mills Co. Ltd., AIR (1967) SC 681 held, "the doctrine of merger is not a doctrine of rigid and universal application and it cannot be said that wherever there are two orders, one by the inferior authority and the other by a superior authority, passed in an appeal o....
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....n a conclusion of law which was neither raised nor preceded by any consideration or in other words can such conclusions be considered as declaration of law? His Lordship held that the rule of sub- silentio, is an exception to the rule of precedents. "A decision passes sub-silentio, in the technical sense that has come to be attached to that phrase, when the particular point of law involved in the decision is not perceived by the court or present to its mind." A court is not bound by an earlier decision if it was rendered 'without any argument, without reference to the crucial words of the rule and without any citation of the authority'. A decision which is not express and is not founded on reasons, nor which proceeds on consideration of the issues, cannot be deemed to be a law declared, to have a binding effect as is contemplated by Article 141. His Lordship quoted the observation from B. Shama Rao v. The Union Territory of Pondicherry, [1967] 2 SCR 650 "it is trite to say that a decision is binding not because of its conclusions but in regard to its ratio and the principles, laid down therein". His Lordship tendered an advice of wisdom -"restraint in dissenting or overruli....
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....ayer for impleading a necessary party may be declined by this Court exercising its jurisdiction under Article 136 of the Constitution if the granting of the prayer is considered by the Court neither necessary nor proper to allow at the given distance of time. By no stretch of imagination can it be said that the reasoning or view of the law contained in the decision of the Division of the High Court in M. Varadaraja Pillai 's case had stood merged in the order of this court dated 10.9.1986 in such sense as to amount to declaration of law under Article 141 by this Court or that the order of this Court had affirmed the statement of law contained in the decision of High Court. 17. We are clearly of the opinion that in spite of the dismissal of the appeals on 10.9.1986 by this Court on the ground of non-joinder of necessary party, though the operative part of the order of the Division Bench stood merged in the decision of this Court, the remaining part of the order of Division Bench of the High Court cannot be said to have merged in the order of this Court dated 10.9.1986 nor did the order of this Court make any declaration of law within the meaning of Art....
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....he impugned judgment of the High Court is set aside. All the appeals shall stand restored before the Full Bench of the High Court and shall be heard and decided in accordance with law. (emphasis supplied) 27. The aforesaid decision of the Supreme Court in Nadar was followed by the Supreme Court in Collector of Central Excise vs. Technoweld Industries [(2003) 11 SCC 798 ] and the relevant paragraph is reproduced below :- "5. Reliance was placed upon the authority of this Court in the case of S. Shanmugavel Nadar vs. State of T.N. It was submitted that all the civil appeals had been dismissed by non- speaking orders. It was submitted that it is open to this Court to consider whether or not the impugned decisions of the Tribunal are correct. There can be no dispute with this proposition. We have, therefore, heard the learned counsel at length." 28. What was decided by the Supreme Court in Canon India was that the Directorate of Revenue Intelligence Officers did not have the jurisdiction to issue the show cause notices. The Supreme Court did not examine the order of the Tribunal on merits. Learned counsel for the appellant is,....
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....: "Explanation.- For the purposes of this entry, "digital still image video camera" means a digital camera not capable of recording video with minimum resolution of 800 x 600 pixels, at minimum 23 frames per second, for at least 30 minutes in a single sequence using the maximum storage (including expanded) capacity." 31. It needs to be noted that w.e.f. 30.04.2015 the aforesaid 'Explanation' was deleted and the description of the cameras, as was prior to 17.03.2012, was maintained as 'digital still image video cameras'. 32. The aforesaid 'Explanation' can best be understood by attempting to examine what types of digital cameras will not be covered by the said Explanation. As noticed above, there are two types of digital cameras. One is a digital camera which primarily takes still images but is also capable of taking moving images for a limited period of time. The other is a digital camera which primarily takes moving images without any limitation of time but is also capable of taking still images. The 'Explanation' seeks to exclude the latter type of digital cameras from exemption from BCD and includes the former type of digital cameras. Thus, digital cam....
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....re frequently presented together with a remote control. They always offer an optical zoom function during video recording. These digital video camera recorders may also have still image recording capability. Digital Cameras are excluded from these subheadings if they are not capable using the maximum storage capacity of recording in a quality of 800 X 600 pixels (or higher) at 23 frames per second (or higher) at least 30 minutes in a single sequence of video. 35. The European Union Tariff describes a 'digital camera' under 8525 80 30 as capable of still image recoding but with video-capture capability also to record sequences of video unaffected by the storage capacity but they automatically terminate the recording of video after a certain period of time. On the other hand, video camera recorders under 8525 80 91 are always capable of recording sequences of videos but they may also have still image recording capability. It also specifically mentions that digital cameras are excluded from this subheading if they are not capable using the maximum storage capacity of recording in a quality of 800 X 600 pixels (or higher) at 23 frames per second (or higher) at least 30 m....
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.... In this regard it is pertinent to state that as per the verbal communication held with Shri Yogendra Garg, Director TRU this office has taken the view that all the three conditions should be met before imposing 10% basic customs duty. In accordance with the said view this office is clearing the goods at 0% BCD if all the three conditions are not met. (copy of the letter dated 25.04.2012) to Additional Commissioner of Customs CCCU(DZ) enclosed). 3. Vide the above said letter it has also been stated that the importer has filed the claim without getting the Bills of Entry re-assessed or going to appeals. The refund claim of the party cannot be processed by this branch without re- assessment of the Bills of Entry. It is to bring to your kind notice that all the assessment related to said Bills of Entry was final and hence cannot be re-assessed by the group at this stage as the judgment of the Hon'ble Supreme Court of India in the case of Collector of Central Excise, Kanpur Vs. Flock (India) Pvt. Ltd. In view of above fact the issue may be decided by the Refund Section on merits. Yours Faithfully Sd/- ASSISTANT ,COMMISSIONER OF CUSTOMS GROUP - VA ....
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....00 pixels, (ii) at minimum 23 frames per second, (iii) for at least 30 minutes in a single sequence using the maximum storage (including) expanded capacity. 7.2 The first two conditions are satisfied by most of the imported cameras, as they are able to function at these specifications i.e. they are able to record video at a resolution higher than 800 x 600 pixels and at more than 23 frames per second. What is relevant for fulfilling this condition is that the digital camera should not be capable of recording video at or above these specifications, and all the cameras listed in table no. 6 (below) satisfy these requirements. As regards maximum storage (including expanded) capacity, it is mentioned that 53 cameras imported by M/s Nikon support 128 GB maximum expanded storage capacity, while 14 cameras supports 64 GB, 3 cameras support 32 GB and 2 cameras (Sl. Nos. 42 & 43) have only inbuilt memory of 7.3 GB (Table No. 6 below). The issue here is basically regarding the third condition as all the 72 cameras listed in Table No. 6 have the capability to record video at resolution exceeding 800X600 pixels as well as capacity to record at more than 23 frames per second. The....
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....tions one and two above; both these conditions are satisfied by the Cameras imported by the noticees. The point of dispute is regarding the third condition viz. capability to record video for at least 30 minutes in a single sequence using the maximum storage (including expanded) capacity." 41. Reference can also be made to the order 19.12.2017 passed by the Tribunal in the appeal that had been filed to challenge the aforesaid order dated 28.10.2016 and the relevant portion of the order of the Tribunal is contained in paragraph 23, which has been reproduced above. The Tribunal observed that the three conditions are required to be satisfied though it ultimately held that the restriction of video recording for less than 29 minutes and 59 seconds was an artificial restriction imposed by a firmware and so the camera could record video for 30 minutes or more. 42. The order dated 06.06.2019 passed by the Commissioner (Appeals) also holds that the all three conditions are required to be fulfilled. 43. It is seen that the digital still image video cameras imported by the appellant have the feature to click still images and record video of resolutions equal to or h....
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....gital camera' also provides that 'the cameras may also have video-capture capability to record sequences of video'. The European Union Explanatory Notes also clarify that there can be multiple sequences of video and hence, the conscious use of the phrase 'in a single sequence' in the notification dated 01.03.2005 must be given full effect. 49. The Department contends that the time limit of less than 30 minutes has been artificially inserted on video recording in a single sequence by means of breaking the clip to less than 30 minutes by a 'firmware' and the camera has ample recording time left even after recording for more than 30 minutes using even 8GB memory card. Firmware 50. In the digital still image video cameras imported by the appellant, the processing of imaging data is done as per the instructions contained in the software of the camera named as 'firmware'. Firmware is the proprietary software which works as the operating system - cum - software for the camera. The functions of the firmware can be, and not limited to, as follows: i. Color correction; ii. Over/under exposure; iii. Blurring; iv. ....
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.... "20. In the said dictionary, "Firmware" has been defined at pages 281-282 as under: "Software kept in semipermanent memory. Firmware is used in conjunction with hardware and software. It also shares the characteristics of both. Firmware is usually stored on PROMS (Programmable Read only Memory) or EPROMs (Electrical PROMS). Firmware contains software which is so constantly called upon by a computer or phone system that it is "burned" into a chip, thereby becoming firmware. The computer program is written into the PROM electrically at higher than usual voltage, causing the bits to "retain" the pattern as it is "burned in". Firmware is nonvolatile. It will not be "forgotten" when the power is shut off. Handheld calculators contain firmware with the instructions for doing their various mathematical operations. Firmware programs can be altered. An EPROM is typically erased using intense ultraviolet light." ***** 24. In the computers there exists a flash memory chip in the motherboard. The software that is essential to the starting of the computer which is the Basic Input Output Software is etched on to this memory c....
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....was unassailable. 5. The circular upon the basis of which the duty was levied having been issued in Delhi, the Delhi High Court had jurisdiction to entertain and try the appellants' writ petition. 6. Countervailing duty must be levied on goods in the state in which they are when they are imported. Section 3 of the Customs Tariff Act so mandates. The POY imported by the appellants fell in the slot of 100 deniers and above but not above 750 deniers. It was, therefore, liable to that rate of countervailing duty as was provided for in the said clause (iv) of the exemption notification. There was no warrant for the levy of countervailing duty as provided for in the said clause (iii) upon the basis that, subsequent to the process of texturising the POY that was imported would have the denierage therein stated." Using the maximum storage (including expanded) capacity 56. The words contained in the notification do not suggest that the recording of video in a single sequence is to be contingent on the exhaustion of the entire memory (including expanded memory) of the camera. The third condition on using maximum memory is an anti- abuse provision to ....
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....tion under the notification dated 01.03.2005, as amended by the notification dated 17.03.2012. 60. Learned special counsel appearing for the department however placed reliance upon the judgment of the Supreme Court in Commissioner of Cus. (Import), Mumbai vs. Dilip Kumar & Company [2018 (361) E.L.T. 577 (S.C.)] to contend that an exemption notification should be constituted strictly. 61. Learned counsel for the appellant however placed reliance upon the subsequent decision of the Supreme Court in Government of kerala & Anr. vs. Mother Superior Adoration Convent [2021 (3) TMI 93-Supreme Court] and contended that the notification dated 01.03.2005 is not a general exemption notification but is a notification which seeks to promote the trade in Information Technology products, including a digital still image video camera and the exemption has been granted pursuant to the obligation undertaken by the Government of India under the ITA. 62. In Mother Superior Adoration Convent the Supreme Court observed that there is a distinction between exemption provisions generally and exemption provisions which have a beneficial purpose. In the latter type of ca....