2009 (1) TMI 269 - AT - Customs

Exemption to mobile phone parts Parts/ accessories of CDMA mobile phones - importer claimed the classification of goods under CTH 85259090 which applies to parts suitable for use solely or principally with the apparatus of headings 8525 to 8528. They also claimed full exemption from payment of Customs Duty under Sl. No. 320 of Customs Not. 21/2002-Cus. dated 1-3-2002 held that - there is no dispute that the appellant herein had followed the procedures as given under Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules 1996. There is no allegation or any adverse findings that the appellants have not followed said procedures benefit of exemption granted - contention of the revenue that the appellants have imported the complete handset/cellular phone in the guise of parts/accessories does not hold any water - the dispute cannot be raised the revenue to load the amount paid for delayed delivery in the valuation and it is undisputed that the appellant has not paid any other extra amount to supplier in respect of these CIF consignment.

Summary

Issues Involved:
1. Classification of imported goods.
2. Eligibility for customs duty exemption under Notification No. 21/2002-Cus.
3. Valuation of imported goods.

Issue-wise Detailed Analysis:

1. Classification of Imported Goods:
The central issue was whether the imported goods, described as "Parts, components & accessories of cellular phones" and "Parts, components & accessories of mobile handsets," should be classified as parts under CTH 85259090 or as complete cellular phones under CTH 85252017. The lower authorities concluded that the goods were complete cellular phones in disassembled/unassembled condition and should be classified under CTH 85252017. The appellants argued that the goods were parts and components, which were assembled into mobile handsets in their factory, and thus should be classified under CTH 85259090.

2. Eligibility for Customs Duty Exemption:
The appellants claimed full exemption from customs duty under Sl. No. 320 of Notification No. 21/2002-Cus., which exempts "Parts, components & accessories of mobile handsets including Cellular phones" from customs duty, provided the importer follows the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996. The lower authorities denied this exemption, asserting that the goods were complete handsets and not parts. The appellants contended that they adhered to the required procedures and that the parts were assembled into handsets in their factory, thus qualifying for the exemption.

3. Valuation of Imported Goods:
The appellants argued that the valuation of certain consignments should be based on CIF (Cost, Insurance, and Freight) terms instead of FOB (Free on Board) due to delayed shipments and renegotiation with the supplier. The lower authorities did not accept this adjustment and included freight charges in the valuation, leading to a higher assessable value and differential duty demand. The appellants maintained that the renegotiated CIF terms were valid and should be recognized.

Judgment Analysis:

Classification of Imported Goods:
The Tribunal held that the parts, components, and accessories imported by the appellants were indeed parts of mobile handsets and not complete handsets. The Tribunal referenced the case of LG Electronics India Pvt. Ltd., where similar parts were classified under Chapter Heading 852990.90 and granted exemption under Notification No. 21/2002-Cus. The Tribunal emphasized that the assembly of parts into handsets, including software loading, occurred in the appellants' factory, thus supporting the classification as parts.

Eligibility for Customs Duty Exemption:
The Tribunal found that the appellants had followed the required procedures under the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996. The Tribunal concluded that the parts and components imported by the appellants qualified for the exemption under Sl. No. 320 of Notification No. 21/2002-Cus. The Tribunal rejected the lower authorities' assertion that the goods were complete handsets, noting that the assembly and software loading occurred in the appellants' factory.

Valuation of Imported Goods:
The Tribunal accepted the appellants' argument regarding the renegotiated CIF terms. The Tribunal noted that the supplier had agreed to the CIF terms due to delayed shipments, and there was no additional payment made by the appellants to the supplier. The Tribunal concluded that the valuation should be based on the CIF terms, without loading the freight charges, thus invalidating the differential duty demand based on the higher assessable value.

Conclusion:
The Tribunal set aside the impugned order in its entirety, allowing the appeal with consequential relief. The Tribunal held that the imported goods were parts and components of mobile handsets, eligible for customs duty exemption under Notification No. 21/2002-Cus., and that the valuation should be based on the renegotiated CIF terms.