2018 (1) TMI 959 - AT - Customs

Classification of goods - Optical Fibre Cables (OFC) - Whether OFC imported by Vodafone Group of Companies and used in Telecommunication are classifiable under Customs Tariff Heading 8544 and eligible for exemption under N/N. 20/2005 dated 01/03/2005 or they would fall under Customs Tariff Heading 9001 leviable to basic Customs Duty at 10% under N/N. 21/2002-Cus dated 01/03/2002? - The entire argument of the appellant hinges on their claim that the 'Dual Acrylic Coating' amounts to sheathing of fibre. Interpretation of statute - the term 'Sheath' or 'Sheathed' as it appears in the Tariff and HSN - Held that - The HSN is relevant for the proper classification of the said product - It is apparent the term coating and sheathing have different meaning in the tariff. In fact the term 'sheath' has been used to describe separate object as can be seen from the table 4.3.1 above. It is seen that the expression used in many places is 'encased in rigid sheath', 'encased in sheath', 'in a sheath composed of layers of paper', 'in a sheath of lead or tin', 'machines for braiding a wire sheath on hose of rubber', 'consisting of a simple wire mesh sheath' etc. which clearly indicates that 'sheath' is by itself an object. In those circumstances it is seen that the tariff does not recoganise coating as sheathing and treats the two as different. The term 'sheath' refers to a separate object which is used to encase other items. Whether the telecommunication wires and cables are classifiable under heading 85.44 and therefore the fibre optic cables used for telecommunication should also be classified under the same heading? - Held that - all insulated conductors (including enamelled or anodised) are classifiable under heading 85.44. The heading is not limited to telecommunication wires. It covers all insulated wires and cables, including those used for telecommunication. The tariff has deliberately chosen to differentiate between the optical fibre cables containing individually sheathed fibres and others. The tariff /HSN classifies them separately in different headings and different chapters. The legislature if it wished to classify all optical fibre telecommunication cables under heading 85.44 could have stated so. The HSN specifically mentions only the telecommunication wires made up of insulated wires. It is seen that the tariff entries do not make any distinction on the basis of use of the product. The sole distinction is based on the basis of the manner in which the fibres are 'sheathed' - it is obvious that the coating over the cladding is feature of all optical fibres (including those used in medical imaging and mechanical engineering inspection) and not merely those used in telecommunication. The literature and other evidence relied upon by the referral bench and also produced by both the parties during this hearing does not establish that the dual acrylic coating' results in 'individually sheathed fibre'. Optical Fibre Cables (OFC in short) imported by Vodafone Group of Companies and used in Telecommunication are not classifiable under Customs Tariff Heading 8544 and they would fall under customs Tariff Heading 9001. Reference disposed off.

Issues Involved:
1. Classification of Optical Fibre Cables (OFC).
2. Applicability of Customs Tariff Heading 8544 vs. 9001.
3. Eligibility for exemption under Notification No. 20/2005.
4. Interpretation of "individually sheathed" fibres.
5. Reliance on Harmonized System Nomenclature (HSN) and Explanatory Notes.
6. Evaluation of technical literature and expert opinions.
7. Consistency with international rulings and interpretations.

Detailed Analysis:

1. Classification of Optical Fibre Cables (OFC):
The primary issue was whether OFC imported by Vodafone Group of Companies should be classified under Customs Tariff Heading 8544 or 9001. The tribunal examined the attributes of the OFC, including its structure and technical specifications, and compared it to the definitions and notes provided in the HSN.

2. Applicability of Customs Tariff Heading 8544 vs. 9001:
The tribunal noted that Heading 8544 covers "optical fibre cables, made up of individually sheathed fibres," whereas Heading 9001 includes "optical fibre cables other than those of heading 8544." The tribunal concluded that the OFC in question, which consists of fibres coated with dual layers of acrylate, does not meet the criteria of "individually sheathed" as required by Heading 8544. Therefore, the correct classification is under Heading 9001.

3. Eligibility for Exemption under Notification No. 20/2005:
The tribunal examined the eligibility for exemption under Notification No. 20/2005, which applies to goods classified under Heading 8544. Since the OFC was classified under Heading 9001, it was not eligible for the exemption provided by Notification No. 20/2005.

4. Interpretation of "Individually Sheathed" Fibres:
The tribunal discussed the ambiguity of the term "individually sheathed" and emphasized that dictionary meanings are not always reliable. Instead, the tribunal relied on the HSN Explanatory Notes and technical literature, which distinguish between "coating" and "sheathing." The tribunal concluded that the dual acrylate coating on the fibres does not constitute "individual sheathing."

5. Reliance on Harmonized System Nomenclature (HSN) and Explanatory Notes:
The tribunal heavily relied on the HSN and its Explanatory Notes to interpret the tariff headings. It cited previous decisions, such as Jagson International Ltd. v. CC, to support the use of HSN as a guide. The tribunal found that the HSN notes clearly differentiate between sheathed and coated fibres, supporting the classification under Heading 9001.

6. Evaluation of Technical Literature and Expert Opinions:
The tribunal reviewed various technical literatures, including books and articles, and concluded that none of them supported the argument that dual acrylate coating is equivalent to sheathing. The tribunal also scrutinized expert opinions provided by the appellants, noting that some were based on drafts prepared by the appellants themselves, making them unreliable.

7. Consistency with International Rulings and Interpretations:
The tribunal considered international rulings, including those from the US Customs and the European Communities. However, it found that these rulings were either not directly applicable or were based on different criteria. The tribunal emphasized that the Indian tariff and HSN should be the primary reference points.

Conclusion:
The tribunal concluded that the OFC imported by Vodafone Group of Companies is not classifiable under Customs Tariff Heading 8544 but falls under Heading 9001. Consequently, the OFC is not eligible for the exemption under Notification No. 20/2005. The decision was based on a thorough examination of the HSN, technical literature, and expert opinions, ensuring consistency with the established legal framework.

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