2008 (9) TMI 177 - AT - Customs

Imported optical Fibre Cables (OFC) impugned orders classified the OFCs under 900110 and denied exemption available under Notification No. 24/2005 - advice rendered by the AAR shall apply to the concerned party alone and impugned order passed relying on such ruling, is not sustainable - CCE (Adjudication) has no powers to decide the classification issue of Central Excise assessee impugned order set aside - classification dispute shall be decided de novo by the Commissioner case remanded

Summary

Issues Involved:
1. Classification of Optical Fibre Cables (OFCs) under Customs Tariff.
2. Applicability of exemption under Notification No. 24/2005-Cus.
3. Validity of penalties imposed on the assessees and their executives.
4. Jurisdiction of the Commissioner in revising classifications.

Detailed Analysis:

1. Classification of Optical Fibre Cables (OFCs):
The primary issue is the classification of OFCs imported by various telecom companies and manufactured by Tamil Nadu Telecommunications Ltd. (TNTL). The competing tariff entries are CSH 8544.70 and CSH 9001.10. According to the Commissioner, the OFCs in question fall under CSH 9001.10 because the fibers were not individually sheathed, which is a requirement under CSH 8544.70. The HSN Explanatory Notes clarify that CSH 8544.70 pertains to optical fibre cables made up of individually sheathed fibres, whereas CSH 9001.10 covers optical fibre cables with fibres not individually sheathed.

2. Applicability of Exemption under Notification No. 24/2005-Cus:
The exemption under Notification No. 24/2005-Cus was claimed by the importers on the basis that their goods fell under CSH 8544.70. However, the Commissioner denied this exemption by classifying the goods under CSH 9001.10. This denial also extended to the materials imported by TNTL for manufacturing OFCs, as the final products were classified under CSH 9001.10, not CSH 8544.70, thereby disentitling them from the exemption.

3. Validity of Penalties Imposed:
The penalties imposed on the assessees and their executives were contested. It was argued that the penalties were unjustified because the dispute was purely one of classification. The assessee had correctly declared the description of the goods, and it was the duty of the assessing officer to classify them correctly. The penalties imposed were seen as a perverse exercise of power, especially the hefty penalty of Rs. One crore on an executive of Bharti Airtel. The Tribunal found these penalties to be unjustified and set them aside.

4. Jurisdiction of the Commissioner in Revising Classifications:
The Tribunal found that the Commissioner had acted beyond his jurisdiction by relying on an advice from the Authority for Advance Rulings (AAR) which was binding only on the party seeking advice and the jurisdictional Commissioner. The Commissioner's reliance on the AAR's ruling to decide the classification dispute was inconsistent with Section 28J of the Customs Act, 1962. Moreover, the Commissioner of Central Excise (Adjudication) does not have the authority to decide or revise the classification of items assessed by the Central Excise authorities.

Conclusion:
The Tribunal set aside all personal penalties and allowed the appeals filed by the executives. The appeals of the assessees were allowed by way of remand, instructing the Commissioner to decide the classification dispute de novo within two months, ensuring the appellants are given adequate opportunity to present their case. The operative part of the order was pronounced in Open Court on 22-9-2008.