TaxTMI 
TaxTMI 
2022 (3) TMI 419
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....gaged 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 BCD under serial no. 13 of the notification d....
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....iff 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 Digital still image video cameras. Explanation.- For the purposes of this entry, "digital still image ....
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....llowed 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 (Appeals) noted that the camera imported by the appellant could record videos at a resolution of more than 800 x 600 pixels at more than 23 frames per second but it could not record a v....
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.... 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 directly linked to the period of recording. Once the optimum level of period of recording is achieved it gives understanding that the capacity of storage of such recording has been exhausted. Vice versa if the storage capacity is exhaus....
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....ized 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 special counsel for the Department have been considered. 20. Broadly, two issues arise for consideration namely: (i) Preliminary Issue: Whether the order dated 19.12.2017 passed by the Tribunal, as a part of previous round of litigation, can be relied for the....
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....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 Tariff Item 8525 8020. It is seen that these exemptions were continued even for the period under dispute. It was not amended simultaneously with Notification No. 25/2005 which was amended on 17.3.2012 when explanation was inserted. So we are of the view that same exemption was continued as far as Cess is concerne....
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....liance 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 appeal as per orders of the High Court. When the appellants lost the appeal, they sought leave to appeals to this Court. The State of Tamil Nadu was not made a party in the said leave petition. In the S.L.P. before this Court also the State of Tamil Nadu was not made a party. A challenge to the constitutional validity of the Act cannot be consider....
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.... 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 Constitution, either expressly or by the necessary implication. The Supreme Court further made it clear that since neither the merits of the order of the High Court nor the reasons recorded therein nor the law laid down therein had been gone into in the earlier order, the statement of law contained in the Division Bench judgment of the High Court in Pillai ....
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....e 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 or revision, there is a fusion or merger of two order irrespective of the subject-matter of the appellate or revisional order and the scope of the appeal or revision contemplated by the particular statute. The application of the doctrine depends on the nature of the appellate or revisional order in each case and the scope of the statutory provisions conferring the....
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....oint 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 overruling is for sake of stability and uniformity but rigidity beyond reasonable limits is inimical to the growth of law." M/s. Rup Diamonds and Ors. v. Union of India and Ors., AIR (1989) SC 674 is an authority for the proposition that apart altogether from the merits of the grounds for rejection, the mere rejection by a superior forum, resulting in refusal of exercise of i....
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.... 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 Article 141 of the Constitution either expressly or by necessary implication. The statement of law as contained in the Division Bench decision of the High Court in M. Varadaraja Pillai's case would therefore continue to remain the decision of the High Court, binding as a precedent on subsequent benches of coordinate or lesser strength but open to reconsideration by any bench of the same High Court with a ....
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.... "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, therefore, in view of the aforesaid decision of the Supreme Court in Nadar that was followed in Technoweld Industries not justified in submitting that the reasoning given in earlier decision of the Tribunal for denying the benefit of exemption from BCD to the appellant has been wiped out because of the decision of the Supreme Court in Canon India. In fact, Civil Appeal No. 5967 of 2017 filed by Sony India is still pending disposal in which the c....
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....as 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 cameras that will be ineligible for availing the exemption from BCD are those digital camera that are: (i) capable of recoding video at a resolution equal to or greater than 800 x 600 pixels; (ii) capable of recording video at a speed equal to or greater than 23 frames per second; and (iii) capable of recoding video in a single sequence for period greater than 30 minutes by using the maximum storage (including expanded) capacity. 33. W....
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.... '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 minutes in a single sequence of video. This means that digital cameras specified in 8525 80 30 are excluded. 36. It is, therefore, clear that what is contained in the 'Explanation' to CTI 8525 80 20 is what is excluded from 'video camera recorders' as contained in the aforesaid European Union Explanatory Notes for 8525 80 91. Thus, it is safe to assume that the 'Explanation' in CTI 8525 80 20 basically seeks to exclude 'video camera recorders'. 37. The fact that all the three conditions contained in th....
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....ry 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 Copy to: M/s Sony India Pvt. Ltd., A-31, Mohan Co-operative Industrial Estate, Mathura Road, New Delhi-110044" 38. After referring to the 'Explanation', the letter proceeds to state that a doubt had arisen as to whether all the three conditions are required to be fulfilled cumulatively for applicability of the notification or even in those cases where any one of the three conditions is met. The letter states that the Director TRU intimated that all the three conditions should be met for a camera to be called a 'video camera recorder' for the purpose of imposing 10% BCD. Thus, as all the three....
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....torage (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 third condition prescribes a restriction of time limit of 30 minutes for recording a sequence using maximum storage (including expanded) capacity of the camera. A harmonious reading of the third condition indicates that to avail the exemption, the recording time of "at least 30 minutes in a single sequence" is not to be read in isolation but alongwith the expression and the requirement that follow it i.e. "using the maximum storage (including expanded) capacity". It is relevant to mention that the expression used in the notification is neither "using storage capacity" nor "using storage (including expanded) capacity", but the notification has used "using m....
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....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 higher than 800 x 600 pixels with 23 or more frames per second, but they can record videos only for a maximum period of 29 minutes and 59 seconds in a single sequence. Thus, they do not fulfill the third condition that requires that the length of a video in a single sequence shall be for a period greater than 30 minutes. If this be so, the cameras imported by the appellant would not fulfill all the three conditions and, therefore, would be eligible for BCD exemption under the notification 01.03.2005, as amended on 17.03.2012. 44. As stated above, the Commissioner (Appeals) examined at length the third condition contained in the notification and held that the cameras imported by the appellant satisfied the third....
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....pellant, 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. Red eye reduction; and v. Limiting the video recording length to a maximum of 29 minutes and 59 seconds in a single sequence. 51. The firmware is stored in the non-volatile memory of the digital still image video cameras and cannot be modified by any user. A firmware is intrinsic to the functioning of a digital device as it contains the basic set of programming code which enables a user to interact with the hardware of the device. The firmware is separate from a software application which can be loaded onto an electronic device for enhancement of its functions. Infact, firmware is the basic set of programming code without which the interface between the user and the device would not be possible. Hence, the firmware is essentially stored in the non-accessible memory of ....
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....ous 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 chip. This Basic Input Output Software which is etched or burnt into the Electrically Erasable Programmable Read Only Memory (EEPROM) is called firmware. The firmware provides for interactions with the microprocessor to enable it to access the operating software contained in the hard disc. 25. As the general practice in the computer industry, the value of the firmware etched on to the EEPROM is always included in the assessable value of the computers." 54. In this view of the matter, the Commissioner (Appeals) was not justified in holding that firmware is an artificial restriction that can subsequently be altered. The order dated 13.05.2016 passed by the Assistant Commissioner specifically refers to a website where a hacker is providing instructions to be followed for removing the video length restriction. This activity....
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.... 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 ensure that unscrupulous importers do not enhance the memory capacity of the imported goods post clearance and provide video recording capabilities in a single clip of 30 minutes or more. The Commissioner (Appeals) has failed to differentiate between 'using' maximum storage capacity and 'utilizing/exhausting' the maximum storage capacity. In fact, the reason given by the Commissioner (Appeals) results in addition of another condition in the Explanation requiring a camera to exhaust its maximum storage capacity while determining the maximum clip length. If the intent was to extend the benefit of the exemption notification to those cameras whose recording capabilities get exhausted in less than 30 minutes due to lack of memory, the use of the phrase "in a single sequence" would not be necessary and will lose its significance. 57. This apart, it would not be reasonable to....
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.... 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 cases, if there is any ambiguity, the provision should be construed in favour of what is exempted. The relevant observations are: "22. A recent 5-Judge Bench judgment was cited by Shri Gupta in Commr. of Customs v. Dilip Kumar & Co. (2018) 9 SCC 1. The 5-Judge Bench was set up as a 3-Judge Bench in Sun Export Corporation v. Collector of Customs 1997 (6) SCC 564 was doubted, as the said judgment ruled that an ambiguity in a tax exemption provision must be interpreted so as to favour the assessee claiming the benefit of such exemption. This Court after dealing with a number of judgments relating to exemption provisions in tax statutes, ultimately concluded as follows: "66. To sum up, we answer the reference holding as under: 66.1. Exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the par....