2020 (12) TMI 870 - AT - Customs

Classification of imported goods - Executive IP Phone with 7 colour touch screen, 100 programmable keys, POE and 10/100/100 LAN and PC connections- FON 670i (VoIP Telephone) - whether classified under CTH 8517 18 10 (as claimed by the Appellant) or under CTH 8517 69 90 (as contended by the Department)? HELD THAT - The appellant imported an Executive Level IP Phone of model FON 670i. It is, therefore, an IP Phone. The description of the goods under consideration will not fall in either of the two Sub-Headings 8517 11 or 8517 12. Being an IP telephone it would fall under Sub-Heading 8517 18 (third double dash) under which the description of the goods is others . It is a push button type telephone and, therefore, would fall under Tariff Item No. 8517 18 10. Rule 1 of the General Rules also provides that the titles of Section, Chapters and Sub-Chapters are provided for ease of reference - In COMMISSIONER OF CENTRAL EXCISE, NAGPUR VERSUS SIMPLEX MILLS CO. LTD. 2005 (3) TMI 117 - SUPREME COURT , the Supreme Court held that rule I gives primacy to the Section and Chapter Notes along with the terms of the Headings and so this rule should be applied first. It is only when a clear picture is not emerging that the subsequent rules have to be applied. The second entry at single dash level starts with the words other apparatus . This clearly indicates that only those goods which are not covered by the first single dash entry will be covered under the second single dash entry. Thus, as the product under consideration is covered by the first single dash entry, it is not necessary to examine the second single dash entry. Learned counsel for the appellant, in the alternative, submitted that even if the product under consideration is prima facie classifiable under two or more Headings, the classification would be effected in the manner prescribed in (a) or (b) or (c) of rule 3 of the General Rules and so the Heading which provides the most specific description shall be preferred to Headings providing a more general description. In such a situation also the product under consideration would fall under the Tariff Item Heading 8517 - This submission of learned counsel of the appellant deserves to be accepted. The product under consideration is an Executive IP Phone. It would satisfy the specific description of Tariff Item Heading 8517. In MOORCO (INDIA) LTD. VERSUS COLLECTOR OF CUSTOMS, MADRAS 1994 (9) TMI 68 - SUPREME COURT , the Supreme Court held that the First Schedule appended to the Customs Act lays down the General Principles for the interpretation and classification of goods for import tariff and that the applicability of rule 3 arises when the goods consisting of more than one material fall in two or more headings. The Supreme Court observed that each of the classes are mutually exclusive. The Commissioner (Appeals) has relied upon rule 3(c) to hold that since Tariff Item Number 8517 69 90 falls last in the numerical order among those which equally merit consideration, the product under consideration would be classifiable under CTH 8517 69 90 and not CTH 8517 18 10 - Commissioner (Appeals) clearly committed in error in straight away jumping to rule 3 (c) without first exhausting rule 3(a) and rule 3 (b) - Commissioner (Appeals) also committed an error in holding that the goods in question are for video calling. As noticed above, the facility of video codec support is available only in model 675i, whereas the imported goods model is 670i, which does not have any feature of video support. The Order Information contained in the product literature, also describes model 675i as an Executive Video IP Phone , while model 670i is described as an Executive IP Phone . This clearly shows that the facility of video calling is not available in the model imported by the Appellant. The product under consideration, which is an Executive IP Phone (Model No. FON670i), is classifiable under CTH 8517 18 10 and not under CTH 8517 69 90 - Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Classification of the goods under CTH 8517 18 10 or CTH 8517 69 90.
2. Application of General Rules for the Interpretation of the First Schedule to the Customs Tariff Act.
3. Reliance on Exemption Notification for classification.
4. Consistency in classification decisions across different Collectorates of Customs.

Detailed Analysis:

Classification of Goods:
The primary issue in the appeal was the classification of the imported goods, specifically whether they should be classified under CTH 8517 18 10 as claimed by the appellant or under CTH 8517 69 90 as contended by the Department. The goods in question were "Executive IP Phone with 7” colour touch screen, 100 programmable keys, POE and 10/100/100 LAN and PC connections- FON 670i (VoIP Telephone)."

The appellant argued that the goods should be classified under CTH 8517 18 10, which covers "push button type" phones. The Department, however, classified the goods under CTH 8517 69 90, which pertains to "other apparatus for transmission or reception of voice, images or other data."

Application of General Rules for Interpretation:
The judgment emphasized the need to follow the General Rules for the Interpretation of the First Schedule to the Customs Tariff Act. Rule 1, which gives primacy to the terms of the headings and any relevant Section or Chapter Notes, was highlighted. The Supreme Court's ruling in Simplex Mills Co. Ltd. was cited, emphasizing that the classification should first be determined according to the terms of the headings and any relative Section or Chapter Notes before resorting to subsequent rules.

The Tribunal found that the appellant’s goods, being an IP Phone, should fall under the first single dash entry of CTH 8517, specifically under Sub-Heading 8517 18, which covers "Other" telephone sets, including push button types. The Tribunal criticized the Commissioner (Appeals) for directly resorting to Rule 3(c) without first exhausting Rule 3(a) and Rule 3(b).

Reliance on Exemption Notification:
The Department's reliance on the Exemption Notification dated January 29, 2019, which classified VoIP phones under CTH 8517 69 90, was rejected. The Tribunal held that classification should be based on the terms of the headings and any relevant Section or Chapter Notes, not on Exemption Notifications. This was supported by the Tribunal's decision in Ruchi Soya Industries Ltd., which stated that classification should follow the General Rules for Interpretation and not be influenced by Exemption Notifications.

Consistency in Classification Decisions:
The Tribunal noted that similar goods had been classified under CTH 8517 18 10 by the Commissioner (Appeals) at Chennai in two separate orders dated February 27, 2020, and March 9, 2020. The Tribunal emphasized that different Collectorates of Customs should not adopt different standards on the same issue, citing the Calcutta High Court's decision in Opal Exports Pvt. Ltd. The Tribunal found no justification for a different classification in the present case and highlighted the need for consistency.

Conclusion:
The Tribunal concluded that the goods in question, being an Executive IP Phone (Model No. FON670i), are classifiable under CTH 8517 18 10 and not under CTH 8517 69 90. The order passed by the Commissioner (Appeals) was set aside, and the appeal was allowed.