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D. Murali

Are a Web camera and a digital camera the same or different? Here's an interesting ruling.

WEB cameras have been notoriously in the news these days, but Hi-tech Computers' case that came up before the Bangalore tax tribunal was different.

The company had imported `Typhoon Easy Cam 110K complete set' (`commonly known as Web camera') and classified the same as `computer parts and accessories' under sub-heading 8471.60, `input or output units, whether or not containing storage units in the same housing'.

An alternative classification that Hi-tech had suggested was 8473.30, as parts and accessories (other than covers, carrying cases, and the like) of machines.

However, Customs officials viewed the goods as cameras and preferred to classify them under 8525.40, a sub-head that read, `still image video cameras and other video camera recorders, digital cameras.'

Aggrieved by the taxman's view, Hi-tech approached the CESTAT (Customs, Excise and Service Tax Appellate Tribunal) to press its stand on Web cameras.

At the tribunal, the company presented a table showing nine differences between digital camera and the Web one.

Thus, unlike a Web camera, a digital camera can capture and record images, work standalone, without requiring an ADP machine (automatic data processing, that is, or more simply, the PC). "Digital camera can be connected directly to printer/TV/ digital photo-processing machines. Web camera can only be connected to ADP machine through USB port. Web camera cannot work with any other equipment or other machines of any sort."

Also, a digital camera has cables that can be connected to TV, VCR and ADP machine, but the Web camera has "a built-in cable which emanates from inside" and it cannot be separated from the unit; "this can only be connected to an ADP machine, and not to any other machine." While "many digital cameras may also function as Web camera, Web camera cannot function as digital camera under any circumstances."

Other dissimilarities highlighted by Hi-tech are that digital camera has LCD or viewfinder to preview images, has its own power supply, and uses independent storage media such as floppy, card or stick.

The company's advocate, V.M. Doiphode, argued that Web cameras are only parts "suitable for use solely or principally with the computer."

For support, he cited HSN (Harmonised System of Nomenclature) Notes that read as follows: "A unit is to be regarded as being a part of a complete digital data processing system, if it satisfies the following conditions: (a) It is of a kind solely or principally used in an automatic data processing system; (b) It is connectable to the central processing unit either directly or through one or more other units; and (c) It is able to accept or deliver data in a form (codes or signals) which can be used by the system."

For the Department, it was Shoba L. Charry who appeared at the tribunal, and she pointed out an extract from the World Customs Organisation (WCO) Committee proceedings of January 2000, relied upon by the Customs order.

What came to her aid were these lines: "In many ways, a Web camera is a bare bone version of a full version digital camera. It is not meant for mobile use. This explains the lack of an inbuilt power supply and storage. The Web camera depends on the PC for both these requirements, i.e. or power and storage. In addition, as it is meant for use in a static position, a viewfinder is not a design feature. A Web camera is usually positioned statically over a monitor of the ADP machine, directly facing the user, so that it can be used for video and audio applications, like video conferencing. In all other features or principles of working, and constituent elements the Web camera is identical to a digital camera."

What did the tribunal say, after listening to both the parties?

Dr S.L. Peeran, Judicial Member of the CESTAT, said that the findings of the WCO Committee do not support the Revenue because, "Web camera may have features of digital camera in some aspects but it is not digital camera per se." He noted that the Commissioner too had said that the item did not have "a specific function" and it worked "in conjunction with an ADP machine." Therefore, the authorities had `fallen in error in considering the item as digital camera', said Peeran.

He also cited Notification No. 76 /2004-Customs, dated July 26, 2004 and said that it "has exempted CPU and CPU with monitor, mouse, keyboard and Web camera imported separately."

An apparent oversight of `not', because quite oddly, `Explanation' given in the Notification reads: "For the purpose of this notification, `computer' shall include central processing unit (CPU) imported separately; or CPU with monitor, mouse and key board, imported together as a set; but shall not include input or output devices or accessories such as monitor, key board, mouse, modem, uninterrupted power supply system or Web camera imported separately."

To conclude, Peeran said: "We are of the considered opinion that only the digital camera which keeps in company into video camera would be classifiable under heading 8525.40 whereas the Web camera would be classifiable under Chapter 8473.30 or 84.71," ruling in favour of Hi-tech.

I wonder if technical experts will concur with tribunal's reasoning.

Be that as it may, since you now know the `nine differences' between the two cameras, let me pose a question: "What is the difference between a taxidermist and a tax collector?" Mark Twain's answer was: "The taxidermist takes only your skin."

Picture by Shaju John

Cases@TheHindu.co.in

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