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CASE NO.: Appeal (civil)  6102 of 2001

PETITIONER: Commissioner of Customs, New Delhi

RESPONDENT: C-Net Communication (I) Pvt. Ltd

DATE OF JUDGMENT: 26/09/2007

BENCH: Ashok Bhan & V.S. Sirpurkar

JUDGMENT: J U D G M E N T

CIVIL APPEAL NOs.6102 OF 2001

V.S. SIRPURKAR, J.

1.      Revenue has filed this appeal under Section 130 E(B) of the  Customs Act, 1962 challenging the decision of the Customs, Excise &  Gold (Control) Appellate Tribunal (hereinafter referred to as "the Tribunal").   By the impugned judgment the Tribunal allowed the appeal filed by the  assessee M/s.C-Net Communication (I) Pvt. Ltd., challenging the orders  passed by the Assessing Authority and the Confirming Order passed by  the Commissioner of Appeals.  The question which has fallen for  consideration is "whether goods, namely, Signal Decoder which is normally  used by a Cable Operator for distributing Satellite signals collected by Dish  Antenna is covered under Entry 8528 or 8529".   2.      Such collected signals, if weak, are strengthened by the Decoder  and are fed further to the customers’ television.  Normally, the signals so  collected by the feed-horn are weak and, therefore, a device called Low  Noise Block down Converter is used for the amplification of those signals.   The Decoder also converts the signals received from the Satellite by way  of Dish Antenna into useable signals.  In short, the signals are modulated  into proper frequency and with the help of channel combiners, distribution  amplifiers, channel converters and top off boxes, the signals are distributed  to the subscribers for viewing the programmes.  This apparatus is useful in  case of some of the broadcasters transmitting the Pay Channels and for  that purpose the Cable Operator connects the Decoder after the Satellite  Receiver and the Decoders perform the de-coding function only after the  reception of signals by Satellite Receiver and then feeds into the frequency  level which the Decoder can withstand.  The Revenue insists that these  Decoders are covered by Entry 8528 which reads as under: "8528. Reception apparatus for television, whether or not   incorporating radio-broadcast receivers or sound or video  recording or reproducting apparatus; video monitors and video  projectors"

3.      It was, however, the claim of the Assessee that Decoder will be  covered under Entry 8543 which is as under: "8543 \026 Electrical machines and apparatus having individual  functions, not specified or included elsewhere in this Chapter;

- Particle accelerators."

4.      The claim by the Assessee was negatived by the Assessing Officer  as also by the Commissioner (Appeals) who held that the proper Entry

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would be 8528 which we have indicated above.  The Tribunal, however,  came to a different conclusion which can be said to be an alternative  contention and held the relevant applicable Entry to be 8529.  The said  Entry 8529 is: "8529 \026 Parts suitable for use solely or principally with the  apparatus of headings 8525 to 8528."

The further Entry is 8529.10 which is: "8529.10 \026 Aerials and aerial reflectors of all kinds; parts  suitable for use therewith:

- Dish Antenna.

       8529.90 \026 Other."

The Tribunal has held that the Decoder is more or the less a part suitable  for specific purpose with the apparatus of 8528, i.e. the Reception  apparatus for television.   5.      The only question, therefore, is as to whether the proper Entry would  be Entry 8528 or Entry 8529 as held by the Tribunal. 6.      Before we proceed to consider the question in detail, we must note  that the Entry 8528 to begin with was as under: "8528 \026 Television receivers (including video projectors),  whether or not incorporating \005 radio-broadcast receivers or  sound or video recording or reproducing apparatus."

This was amended with effect from 1.1.1996 and now the Entry has  become as under: "8528. Reception apparatus for television, whether or not   incorporating radio-broadcast receivers or sound or video  recording or reproducting apparatus; video monitors and video  projectors.

8512 \026 Colour

8528.13 Black & White or other monochrome 40%

               - Video monitors.

8528.21 - Colour

8528.22 Black and White or other monochrome 40%

8528.30 Video Projectors 40%

8528.12.91      - Satellite Receivers."

The major difference brought out by the amendment was, whereas  previously 8528 was restricted to "Television Receivers", after amendment,  the said words have been omitted and have been replaced by the words  "Reception apparatus for Television". 7.      Before the Tribunal the Assessee had taken a stand that Decoder is  not a Satellite Receiver as it is used only to de-code video signals which  have been permitted in encryptic or encoded form.  According to the  Assessee the Decoder has no provision for receiving or processing any  audio signals and the Decoder also does not have an RF output for  connecting it directly to a television.  The Assessee further argued that  even without signal decoder, in case of some channels the reception of  satellite signals is not incomplete as even without the decoder the satellite  receiver can receive the clear signals like BBC, Sony, Zee, etc.  The  Assessee also relied upon Board’s Circular dated 16.11.1994, issued

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under Section 73B of the Central Excise Act in which it was clarified that  booster, amplifiers, attenuators, modulators, line splitters, channel filters,  etc., are neither integral parts of television receiver nor of antenna and  merit classification under Heading 8543.  The Assessee, therefore,  contended that this Circular was squarely applicable for determining the  classification of Decoder.  The Assessee also relied upon the decision of  Canadian International Trade Tribunal which had classified the Decoder  under Heading 8543.90 of the Canadian Customs Tariff.  It was pointed  out that even Madras Customs House has classified the System Decoder  under Sub-heading 8543.90 only.  Ultimately, the Assessee also relied on  Rule 3(a) or (b) suggesting that when goods cannot be classified by  reference to Rule 3(a) or (b), they shall be classified under the heading  which occurs last in numerical order and, therefore, the goods were  classifiable under Sub-heading 8543.90.  The decision in Manisha  Pharma Plas Co. Pvt. Ltd. vs. Union of India [1999 (112) ELT 12 (Del)]  was also referred to wherein it was held that "HSN is the High Powered  body to ascertain international practice of classification of a particular  product and its opinion and recommendation cannot just be brushed  aside."  It is needless to mention that the Tribunal did not accept the case  of the Assessee that the Decoder falls under the Entry 8543 or any sub- entries thereof but went on to hold that the applicable Entry would be 8529.   In holding so, the Tribunal returned a finding that the Decoder is not a  Satellite Receiver itself warranting classification under Sub-heading  8528.12.  The Tribunal then held the Decoder to be one of the elements of  Satellite Reception Apparatus and, therefore, held that it comes under  Heading 8529.  It observed: "The learned DR has emphasized that according to technical  literature the decoder in question has compatibility with most  existing satellite receivers.  This does not mean that it is a  reception apparatus classifiable under sub-heading 8528.12.   A decoder is an essential part of a satellite receiver and  as such will be classifiable under heading 85.29"   (Emphasis supplied).

The Tribunal also noted that the Assessee had made an alternative plea of  classifying the impugned product under Sub-heading 8529.90 and thus the  Tribunal came to the conclusion that the relevant Entry could not be under  8528 but the product should fall squarely within the Entry 8529.  Learned  counsel for the Assessee also relied upon this reasoning in the Tribunal’s  order. 8.      Learned counsel for the appellant-Revenue reiterated its argument  before the Tribunal as also the earlier two authorities and contended that  the Tribunal was in error in not noting the amendment which was brought  out on 1.1.1996.  It is argued that the scope of the Entry was enlarged  inasmuch as what was earlier restricted to Television Receivers, after the  amendment, a broad Entry was brought as "Reception Apparatus for  Television".  Learned counsel also pointed out that the Board’s Circular  was pertaining to the unamended Entry and, therefore, was not applicable  after the amendment was brought about.  It was also pointed out that the  earlier judgment by the Canadian Tribunal in the case of Canadian  Satellite Communications Inc. And The Deputy Minister of National  Revenue and Tee-com Electronics Inc was no longer applicable as the  Tribunal itself, after the amendment, had changed its view and had held  that the proper Entry covering the decoders would be 8528.  We were  taken through three judgments of the Canadian Tribunal.  The first two  judgments pertain to the Satellite Television Reception System whereas  the last judgment is in the case of encoded Receiver/decoders described  as Integrated Receivers/Decoders (IRDs).  From this the learned counsel  argued that the judgments of the first two authorities were the correct  judgments, whereas the Tribunal erred in allowing the appeal filed by the  assessee. 9.      As against this the learned counsel for the assessee also relied on  the arguments before the Tribunal and suggested that the Tribunal was  correct in accepting the alternative plea of the assessee that the correct  Entry would be 8529 as the decoders can be viewed as a part useful for a

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specific purpose, namely, to de-code the scrambled signals received by  Dish-antenna.   10.     We have given our deep consideration to the matter and we are of  the clear view that the Tribunal erred in allowing the appeal filed by the  assessee. 11.     We must first deal with the judgments of the Canadian Tribunal,  relied upon by the parties.  The first judgment relied upon by the assessee  was dated 8th December, 1995 \026 Canadian Satellite Communications  Inc. And The Deputy Minister of National Revenue and Tee-com  Electronics Inc was the intervener in this case.  The Tribunal has held  that the decoder in issue should be classified under Tariff Item  No.8543.90.95 as part of Television Converters.  It is observed therein that  the decoders are designed for use with satellite receivers and are not of  any value or use unless inserted into the backs of satellite receivers or  attached to satellite receivers by coaxial cable.  In theory, the decoders are  optional add-ons to satellite receiver.  In practice most consumers who buy  a satellite receiver also buy a decoder module or a stand-alone decoder.   Therefore, in the Tribunal’s view a decoder is an essential part of a satellite  receiver for the customer.  The Entry which was considered was 8528 and  the same was reiterated by the Revenue.  There also the question was as  to whether the relevant Entry would be 8543.80.50 or 8529.10.10.  The  Tribunal seems to have considered the argument by the assessee that the  decoders in issue cannot be classified as part of Colour Television  Receivers since Television Receivers function without decoders.  The  Tribunal there also considered the argument that the decoders in issue are  not Television Converters nor composite goods nor functional units.  The  alternative argument raised was that if the IRD was a composite machine,  it would have to classify it in heading No.85.28 based on its principal  function as an "apparatus for television reception".   The Tribunal found  that the function which although related to the function of a "television  receiver" is distinct from that function.  A satellite receiver converts satellite  signals to signals which can be received by and viewed on a television  receiver.  Moreover, a satellite receiver can perform this conversion  function without a television receiver.  In that view the Tribunal rejected the  contention of the Revenue that the relevant Entry could be 8528 and held  that the relevant Entry would be 8543.  It must be stated that the Entries  8528, 8529 and 8543 are identical before us.  This was the judgment  which was very heavily relied upon by the assessee.  However, we must  note that the Entry 8528 underwent an amendment and as many as three  judgments came after the amendment.  Those three cases are Jonic  International Inc. And The Deputy Minister of National Revenue  (decided on September 28, 1998); C.L. Blue Systems Ltd. And The  Deputy Minister of National Revenue (decided on November 24, 1999)  and Star Choice television Network Incorporated And The  Commissioner of the Canada Customs and Revenue Agency (decided  on November 8, 2002).  It will not be necessary for us to refer to the first  two cases in detail which though are relevant, are related to the Satellite  Television Reception Systems (STRS).  In Jonic International Inc,  the  Tribunal has considered in these two cases the operation of STRS in the  following terms: "The experts agreed on the operation of the STRs.  The dish  antenna reflects microwave satellite television signals to the  LNBF.  The LNBF converts the signals from 11,000 MHz down  to 1,000 MHz.  The LNBF also amplifies the signals and sends  them through coaxial cables to the receiver.  The receiver then  converts the signals to 61-67 MHz, which is the frequency for  channel 3 on a television channel selectors, or to a video base  band that can be received by some television sets.  If the user  is a subscriber of the selected satellite television channel, a  decoder built into the receiver then descrambles the signals  so that they can be displayed to the user on the television set.   The remote control operates the receiver and is used through  on-screen menus."

Ultimately, the Tribunal considered the language of Entries 8528 and 8529

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held: "The Tribunal is of the view that STRS cannot be classified in  heading No.85.29 as a part of reception apparatus for  television, even if it has functions similar to those of a cable  television converter.  While acknowledging that each case  must be determined on its own merits and that there is no  universally applicable test, the Tribunal in York Barbell,  indicated that the following criteria are relevant in determining  whether a product is a part: (1) the product is essential to the  operation of another product; (2) the product is a necessary  and integral component of the other product; (3) the product is  installed in the other product; and (4) common trade usage  and practice.  In the present appeal, none of those criteria is  fulfilled.  An STRS is not essential to the operation of a  television reception apparatus, e.g., a television set, is not a  necessary and integral component of such an apparatus and  is not installed in such an apparatus.  No evidence relating to  common trade usage and practice was submitted to support  the classification of an STRS as a part of a television  reception apparatus."

The Tribunal further held that while a Cable Television converter could be  covered under the Entry 8529.90.91, such was not the case with the  STRS.  The decision in Canadian Satellite Communications Inc. (supra)  was referred to and the Tribunal specifically held that the STRS cannot be  classified as a part in heading 8529.  Ultimately, the Tribunal came to the  conclusion that the STRS in issue is properly classified in sub-heading  8528.12 as "colour reception apparatus for television".   12.     The second decision in C.L. Blue Systems Ltd is also more or the  less on the same lines.  Here also the relevant goods were STRS and the  law laid down in Jonic International Inc (supra) was reiterated. 13.     The most important, however, is the case of Star Choice Television  Network Inc.,  which decision was given on November 8, 2002.  Here the  question, as to whether the integrated receivers/decoders (IRDs) are  properly classified under Tariff Item No.8528.12.99, fell for consideration.   While, according to the assessee, the correct Tariff Item was 8529.90.90,  the Tribunal held that the said decoder is nothing but a part of Satellite  Television Reception System (STRS).  It was further held that IRDs was  essential to the operation of the STRS and it is necessary and integral  component of STRS and STRS cannot function without it.  It was noted by  the Tribunal that IRD is attached to the STRS by a coaxial cable and is  sold along with the rest of the components and make up an STRS.   Accordingly a finding was given by the Tribunal that the goods in issue are  a part of STRSs.  The Tribunal noted the amendment brought about in  Entry 8528.12 and pointed out that the words "receiver for satellite  television" were replaced by the words "reception apparatus for television".  The argument before the Tribunal, at the instance of the assessee, was  that the goods in issue should be classified in the Entry 8529 "as the other  parts if suitable for use solely or principally with the apparatus of any  numbers 8525 to 8528". It was also alternatively argued that if the goods  are properly classified in heading No.8528, they should be classified under  Tariff Item no.8528.12.10 as incomplete or unfinished television receivers.   It was also argued before the Tribunal, at the instance of the assessee,  that IRD is only one of the components of STRS and cannot perform  satellite television reception function, described in heading 8528, on its  own and, therefore, IRD cannot be classified in Heading No.8528 and must  consequently be classified under Heading 8529.  The Tribunal then  referred to Section 10 of the Customs Tariff which directed the  classification in accordance with the General Rules for the interpretation of  the Harmonized System and the Canadian Rules.  It noted Rule which  provided that for legal purposes, classification shall be determined  according to the terms of the heading and any relative section or chapter  notes.  It also referred to Section 11 and then referred to the Jonic  International Inc and CR Blue’s cases (supra) and came to the  conclusion that IRD is the part of STRS and is essential to the operation of

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STRS.  It is a necessary and integral component of STRS and STRS  cannot function without it.  It is attached to the STRS by a coaxial cable  and is sold along with the rest of the components that make up STRS.   The Tribunal ultimately held: "The appellant submitted that the IRD is only one of the  components of an STRS and cannot perform the satellite  television reception function on its own.  While it is true that  the IRD cannot receive satellite television signals transmitted  by a satellite without the dish antenna and the LNBF, the IRD  can receive television signals transmitted by the LNBF.  This  suffices for the IRD to constitute a reception apparatus  for television. There is no requirement that a machine be  capable of receiving satellite television signals to be classified  in heading No.85.28 as a reception apparatus for television."  .(emphasis supplied)   

In short the Canadian Tribunal has held Entry 8528 to be the proper Entry  to cover the IRD or, as the case may be, the decoder. 14.     On the backdrop of these cases it is to be seen as to whether the  correct Entry would be 8528. 15.     While the appeal was being heard, this Court had directed the  respondents to file technical/product literature for the proper adjudication of  the matter.  The respondents accordingly have filed such literature.  A  "decoder", as per the Dictionary of Computer, W.R. Spencer, is an  electronic device that is capable of accepting decoded data at its input and  generating unencoded data at its output.  The decoding process employed  may conform to an agreed standard or be user-defined.  The outputs of  these devices are capable of directly driving external equipment such as  LCD or LED-type displays.  As per the information obtained from Wikipedia  which is a free encyclopedia, the "decoder" is described as under: "A decoder is a device which does the reverse of an encoder,  undoing the encoding so that the original information can be  retrieved.  The same method used to encode is usually just  reversed in order to decode. In digital electronics this would mean that a decoder is a  multiple-input, multiple-output logic circuit that converts coded  inputs into coded outputs, where the input and output codes  are different, e.g., n-to-2n , BCD decoders."

The User Manual which has been supplied to the court indicates that: "This decoder enables normal viewing of satellite programmes  broadcast using the STARCrypt system of encryption.  When  used in conjunction with the correct viewing card these  broadcasts are descrambled.  The decoder incorporates the  following features: *       Phono connectors for connection to a satellite receiver. *       Option de-emphasis for baseband input signal; *       Power on LED indicator; *       De-emphasis on LED indicator; *       Pay preview programme capability; *       Cable and SMA TV compatibility; *       Compatibility with most existing satellite receivers. From the User’s Manual it is apparent that the decoder is an equipment  which is required to be connected to the power supply by way of a cord.   The said cord is terminated at one end with a connector to be inserted into  the power input socket on the rear panel of the apparatus.  This decoder is  required to be connected with the help of cords to the satellite receiver.  All  this is connected to the Television set.  In short it is only when the  connections between the decoder satellite receiver and the Television  have been made that the subscriber would be able to view the programme  if he has the valid card for the same.  The functioning of the decoder,  therefore, clearly indicates that it is essential for receiving the decoded  signals and the subscriber can view the programmes either of the pay  channels or meant for the cable subscribers with the aid of the decoder.  In  case the decoder is not connected to the Television and to the satellite

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receiver, then it will not be possible for the subscriber to view any  programme which is aired by the Cable TV or which is meant as a pay  channel.  In short, before making a full use of Television, the signals which  are received by the dish-antenna are passed through the decoder which  does the function of decoding the encoded signals so that the viewer can  watch them.  Under such circumstances it is clear that it become  "reception apparatus for television".  It may be that even without the  decoder the television may work but in order to enjoy the television in a  more meaningful manner, as also for its complete utilization the decoder is  required.  It may not be fitting into the description of "television receiver"  but it certainly is an apparatus which works for receiving the signals for  television.  In our view, therefore, when we compare unamended and the  amended Entries, it is clear that the amended Entry has widened the  scope of the earlier Entry and what was earlier "television receiver" has  now become "reception apparatus for television".  If this is so, in our  opinion, the amended Entry under 8528 would aptly apply to the decoder  which is one of the "apparatus for receiving the signals for television".   In our opinion the true test is not as to whether the television could still  work without the decoder, but the true test is as to the function that the  decoder achieves in the user of the television.  It is clear to our mind that  decoder with which we are concerned passes the signals which have been  received from satellite after decoding them into television so as to enable  the viewer to have intelligible signals which, at times, would be available  only by way of pay channels or which would be available if viewer is a  subscriber to the Cable TV.  Again that is not the only function of the  decoder.  At number of times the signals which are received from the  satellite are weak and, therefore, would not reach the television intelligibly  for the viewer, the decoder strengthens these signals.  This leaves us with  no doubt that decoder can be aptly described as a "reception apparatus for  television".  It is an apparatus which helps the television to receive  intelligible signals for the viewer. 16.     As per Stroud’s Judicial Dictionary the term "apparatus" includes the  distribution board of an electrical installation.  It must be considered when  current is passing through and not when it is in its inanimate state.  This  meaning has been assigned to it in Waddell’s Curator Bonis v.  Alexander Lindsay Ltd. [1960 SLT 189 (OH)].  This would indicate that  the terms "apparatus" has been interpreted as something which is inclusive  of some other appliance.  This is clearly an indicator to the fact that the  amendment was brought in with an idea to include a unit like the Decoder.   This term was absent at the pre-amended stage and its inclusion in Entry  8528 clearly indicates the intent of the Legislature that the scope of the  Entry was to be broadened and widened so as to include a signal unit like  decoder.  Unfortunately all this has escaped the attention of the Tribunal. 17.     Learned counsel for the respondent strongly argued that the  decoder in question is not a satellite receiver and is merely connected  between the satellite receiver and the modulator.  In case where the  satellite signals are encoded or scrambled condition and the decoder is  used only for the purpose of decoding the encoded/scrambled signals and  that the signals decoder is nothing but one of the device connected after  the satellite receiver and is used to convert the scrambled signals into  unscrambled signals.  Thus, the decoder is not a "satellite receiver".  There  can be no quarrel with this argument regarding the function of the decoder.   However, what we are at pains to point out is the effect of amendment  which has undoubtedly widened the scope of the Entry 8528.  The  argument put forward by the respondent would have been a sound  argument had the Entry 8528 been restricted to "television receivers".   However, now the Entry is not restricted to "television receivers" and has  been widened into "reception apparatus for television".  The thrust is on the  word "reception apparatus", as against the thrust on the word "receiver" in  the unamended Entry.  In our opinion, the word "apparatus" would certainly  mean the compound instrument or chain of series of instruments designed  to carry out specific function or for a particular use. 18.     We must, at this stage, take stock of the arguments by the  respondents regarding the Board’s Circular dated 16.11.1994 which has  also been relied upon by the Tribunal.  In our opinion the said circular

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cannot be made applicable to the present Entry.  We must at once point  out that the Entry has undergone a change so as to include the "reception  apparatus".  In our opinion the reliance on the circular is, therefore, not  called for in the wake of the amended wording of Entry 8528. 19.     It was further argued that the relevant Entry should be 8529 as has  been held by the Tribunal.  We have seen the Tribunal’s order.  The  Tribunal has dealt with Entry 8529 in an extremely sketchy manner.  All  that the Tribunal justifies in holding the relevant Entry to be 8529 is that a  decoder is an essential part of the satellite receiver and as such would be  classifiable under that Entry.  We do not think that such would be the  correct approach.  A decoder cannot be held as part of the television,  though it can be a "reception apparatus for television".  Entry 8529 reads  as under: "8529 \026 Parts suitable for use solely or principally with the  apparatus of headings 8525 to 8528." In our view in order to make this Entry applicable, the decoders would  have to be viewed as part of television.  It is not a part of the television for  the simple reason that it is an independent instrument itself though it is one  of the apparatus for reception of coded signals and decoding the same for  the user of the subscriber.  Decoder is not a built in part, nor is the decoder  essential to the operation of television.  Further it is not integral component  of the television nor it is treated as part of the television in the common  usage and practice.  We, therefore, accept the interpretation given by the  Canadian Tribunal in Jonic International Inc (supra).  The only reason  given by the Tribunal that it is an essential part of the satellite receiver and,  therefore, it would be classifiable under Heading 8529 does not appear to  be correct for the above reasons. 20.     We have already extensively quoted from the Canadian decision.  In  our considered opinion the last three decisions and more particularly, the  decision in the case of Star Choice Television Network Inc. (supra)   would be apposite decision in the present matter.  In view of this we  proceed to set aside the order of the Tribunal and restore that of the  Commissioner of Appeals.  However, in the circumstances of the case,  there will be no order as to costs.