of Customs, New Delhi Vs. C-Net Communication (I) Pvt. Ltd  Insc 978 (26
Bhan & V.S. Sirpurkar
APPEAL NOs.6102 OF 2001 V.S. SIRPURKAR, J.
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").
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
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.
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:
Reception apparatus for television, whether or not incorporating
radio-broadcast receivers or sound or video recording or reproducting
apparatus; video monitors and video projectors"
was, however, the claim of the Assessee that Decoder will be covered under
Entry 8543 which is as under:
Electrical machines and apparatus having individual functions, not specified
or included elsewhere in this Chapter; - Particle accelerators."
claim by the Assessee was negatived by the Assessing Officer as also by the
Commissioner (Appeals) who held that the proper Entry 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:
Parts suitable for use solely or principally with the apparatus of headings
8525 to 8528."
further Entry is 8529.10 which is:
Aerials and aerial reflectors of all kinds; parts suitable for use therewith:
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
only question, therefore, is as to whether the proper Entry would be Entry 8528
or Entry 8529 as held by the Tribunal.
Before we proceed to consider the question in detail, we must note that the
Entry 8528 to begin with was as under:
Television receivers (including video projectors), whether or not
incorporating radio-broadcast receivers or sound or video recording or
was amended with effect from 1.1.1996 and now the Entry has become as under:
Reception apparatus for television, whether or not incorporating
radio-broadcast receivers or sound or video recording or reproducting
apparatus; video monitors and video projectors.
8528.13 Black & White or other monochrome 40% - Video monitors.
- Colour 8528.22 Black and White or other monochrome 40% 8528.30 Video
Projectors 40% 8528.12.91 - Satellite Receivers."
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
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 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.
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:
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
decoder is an essential part of a satellite receiver and as such will be
classifiable under heading 85.29"
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.
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.
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 specific purpose, namely, to
de-code the scrambled signals received by Dish-antenna.
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.
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 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.
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:
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.
remote control operates the receiver and is used through on-screen menus."
the Tribunal considered the language of Entries 8528 and 8529 held:
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:
product is essential to the operation of another product;
product is a necessary and integral component of the other product;
product is installed in the other product; and
trade usage and practice.
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."
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
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.
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.
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.
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".
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.
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 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.
Tribunal ultimately held:
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."
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.
the backdrop of these cases it is to be seen as to whether the correct Entry
would be 8528.
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:
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.
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
User Manual which has been supplied to the court indicates that:
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
connectors for connection to a satellite receiver.
Option de-emphasis for baseband input signal;
Power on LED indicator;
De-emphasis on LED indicator;
preview programme capability;
Cable and SMA TV compatibility;
Compatibility with most existing satellite receivers.
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.
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 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"
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".
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.
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.
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.
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.
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".
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
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 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.
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:
Parts suitable for use solely or principally with the apparatus of headings
8525 to 8528."
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.
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.