2017 (2) TMI 9 - AT - Customs

Classification of imported goods - Benefit of exemption under N/N. 6/2006-CE dated 1st March 2006 - appellant classified the goods as under heading 85235210 of the first schedule to the Customs Tariff act, 1975 as SIM modules - revenue s claim that the imported goods are classifiable under heading 8542 of first schedule to Customs Tariff Act, 1975 as integrated chip modules and hence not eligible for exemption from additional duty that is extended under relevant notification to smart cards - whether the imported goods are SIM modules or integrated chip modules? Held that - u/r 2(a) of the General Interpretative Rules supra, SIM as imported, is liable to be treated as a finished SIM card . Denial of benefit of exemption notification on the ground that it is not card but a mere precursor to card would create an anomalous situation. SIM embedded in a card with a personalization, imported from abroad would be eligible for the exemption notification. On the other hand, the bulk of the SIM cards sold in the market, also imported and subject to personalization in India for different mobile service providers, would render the goods liable to additional duty. The coverage of sl.no.22(1) of N/N. 06/2006-CE supra would be available only to mobile service operators, who either import the embedded SIMs, or to entities who enter into exclusive supply contracts with a specific service provider. The SIM imported in reel is a card classifiable under heading 8523 as a smart card fulfilling all the essential ingredients of a smart card - benefit of notification allowed - appeal allowed - decided in favor of appellant.

Summary

Issues: Classification of imported goods under Customs Tariff Act, 1975; Eligibility for exemption under notification no. 6/2006-CE; Application of General Interpretative Rules; Challenge to the order of Commissioner of Customs.

In the judgment delivered by the Appellate Tribunal CESTAT CHENNAI, the appeal pertained to the classification of imported goods, specifically 'SIM modules,' under the Customs Tariff Act, 1975, for which the appellant claimed exemption under notification no. 6/2006-CE. The dispute revolved around whether 'SIM cards' could be considered as 'smart cards' eligible for the exemption. The revenue contended that the goods were classifiable under heading 8542 as 'integrated chip modules' and not under heading 8523 for 'smart cards.' The appellant argued that the imported SIM modules were essentially SIM cards, loaded with operating system software and security algorithms, and should be classified as smart cards. The Tribunal analyzed the features and functionality of SIM cards, emphasizing their role in enabling mobile device connectivity and service provider flexibility. It noted that despite the need for embedding and personalization, the SIM modules could function as SIM cards without further processing. The Tribunal also referred to the General Interpretative Rules to support its classification decision.

Regarding the historical classification of SIM cards and the opinions from experts, the Tribunal scrutinized the credibility of the evidence presented by the revenue. It highlighted the evolution of the tariff description to include SIM cards under heading 8523 and the appellant's reasonable belief in classifying the goods under heading 8542 before the tariff revision. The Tribunal dismissed the revenue's reliance on expert opinions that questioned the classification of SIM cards as smart cards, noting potential commercial interests and lack of specificity in the opinions. The Tribunal also considered the appellant's argument that similar imports at another location were classified under heading 8523 without challenge, supporting the classification of the imported SIM modules as SIM cards.

In the final analysis, the Tribunal concluded that the imported SIM modules should be treated as finished SIM cards under Rule 2(a) of the General Interpretative Rules, eligible for the exemption notification as smart cards. It emphasized the functional aspects of SIM cards in mobile communication and the necessity of personalization for service provider distinction. The Tribunal rejected the revenue's restrictive interpretation of the exemption notification, highlighting the implications for market transactions and international agreements. Consequently, the Tribunal set aside the impugned order and allowed the appeal in favor of the appellant, classifying the imported goods as 'smart cards' under heading 8523.