2010 (9) TMI 739 - AT - Customs

Confiscation - Demand - Classification - exemption from duty under Customs Notification No. 21/05 and Central Excise Notification No. 6/06 - impugned goods were assessed and cleared under the Risk Management System on the basis of declaration by appellant-importer - The country of origin certificate produced along with the imported batteries also indicated that the goods were classifiable under CTH 8507 20 00 and the goods were described as batteries supplied from China - Held that customs authorities have classified the impugned batteries under CTH 8507 20 00 which is a separate entry for the lead-acid batteries ruling out the claimed classification under CTH 8529 90 90 as parts of telephones - it is not in dispute that the impugned batteries cannot be held to be and classified as parts of IFW telephones - They weigh around 2.16 kgs each, are not and cannot be fixed inside the IFW telephones, have been separately imported, and the country of origin certificates describes them as batteries indicating HSN classification as 8507 20 00 - The appellants have also mis-declared the impugned batteries as parts of IFW telephones with a view to avail the claimed exemption instead of declaring the same as lead-acid batteries as indicated in the country of origin certificate - Decided against the assessee

Summary

Issues Involved:
1. Classification of VRLA batteries.
2. Eligibility for duty exemption under Customs Notification No. 21/05 and Central Excise Notification No. 6/06.
3. Interpretation of batteries as parts, components, or accessories of IFWT.
4. Mis-declaration and penalties imposed.

Issue-wise Detailed Analysis:

1. Classification of VRLA Batteries:
The appellants initially classified the VRLA batteries under Customs Tariff Heading (CTH) 8529 90 90, declaring them as parts of Integrated Fixed Wireless Telephones (IFWT). However, post-clearance audit by customs authorities reclassified these batteries under CTH 8507 20 00. The appellants later agreed to this reclassification but argued for duty exemption.

2. Eligibility for Duty Exemption:
The appellants claimed duty exemption under Customs Notification No. 21/05 and Central Excise Notification No. 6/06, arguing that the VRLA batteries, though not parts of IFWT for classification purposes, should be considered parts for exemption purposes. The customs authorities denied this exemption, maintaining that the batteries are not parts of IFWT.

3. Interpretation of Batteries as Parts, Components, or Accessories of IFWT:
The Tribunal analyzed whether VRLA batteries could be considered parts, components, or accessories of IFWT. It was established that:
- VRLA batteries are used in the Switch Mode Power Supply (SMPS) providing power to IFWT during power cuts, similar to the function of a UPS.
- The exemption notification does not define the terms "parts," "components," and "accessories," requiring interpretation based on the Customs Act and Customs Tariff Act.
- The Tribunal ruled that VRLA batteries, classified under CTH 8507 20 00, cannot be considered parts of IFWT under the exemption notification.
- The batteries do not improve the efficiency or effectiveness of the telephone but merely provide power, thus not qualifying as accessories.

4. Mis-declaration and Penalties Imposed:
The adjudicating Commissioner found that the appellants mis-declared the VRLA batteries as parts of IFWT to avail the duty exemption, instead of declaring them as lead-acid batteries. Consequently, orders of confiscation, redemption fines, and penalties were imposed. The Tribunal upheld these orders but reduced the redemption fine and penalty for Appeal No. C/300/08 to Rs. 13 lakhs and Rs. 6 lakhs, respectively.

Conclusion:
The Tribunal dismissed all three appeals, confirming the classification of VRLA batteries under CTH 8507 20 00 and denying the duty exemption. The orders of confiscation, fines, and penalties were upheld, with a reduction in the fine and penalty for one appeal. The judgment emphasized the proper classification and interpretation of exemption notifications in customs law.