2024 (2) TMI 1509 - AT - Customs

Classification of Receivers - to be classified under CTH 85177090 or CTH 85181000? - Classification and eligibility of Microphones for exemption under various notifications - Classification of Battery Cover Back Cover Camera Lens and Front Cover and their eligibility for concessional duty. Classification of Receivers - to be classified under CTH 85177090 or CTH 85181000? - Can an Appellant challenge a matter in appeal which he had earlier acquiesced? - HELD THAT - The power of the Tribunal to permit a new question of law or fact to be raised before it even if it was not taken up during the initial stage is a discretionary one. But the question here is that when the appellant deliberately acquiesced or forewent his right to rebut the charge for proper classification of the goods during three stages of the dispute resolution mechanism can he be allowed to raise it at the Appellate stage. The Tribunal has an inherent power to prevent the right of appeal being abused by an appellant who keeps back till the stage of appeal points of law or fact which he could have raised before the lower authority without showing any reason and thus places the other side at a disadvantage. Persons with good causes of action should pursue the remedy with reasonable diligence at every available opportunity. In a literal sense the term acquiescence means silent assent tacit consent concurrence or acceptance which denotes conduct that is evidence of an intention of a party to abandon a right and also to denote conduct from which another party will be justified in inferring such an intention - Due to the initial stand taken by the Appellant including the paying of duty a complete or effectual adjudication of the proceedings did not take place on merits before the Original Authority who was also lulled into imposing a light penalty considering the payment of duty. There was no examining of the evidence by the Original Authority after taking into account the shifting onus of proof depending on the degree of probative evidence adduced by the Appellant and their arguments on facts and law. Classification and eligibility of Microphones for exemption under various notifications - whether microphones are eligible for concessional rate of duty under S. No. 6A of Notification No. 57/2017Cus. dated 30.06.2017 as part of PCBA or should be denied exemption as they are not parts of PCBA s and are also specifically covered under S. No. 18 of the same Notification which specifically denied exemption to microphones of cellular mobile phones?. Whether microphones are inputs or parts for use in manufacture of PCBA? - HELD THAT - PCBA s are electronic boards which incorporate fundamental electronic components like resistor SMD capacitor processors diode ICs etc. to create a functional circuit. It provides for a MIC interphase. PCBA is a part of the cellular phone just as a microphone camera LCD etc are. All these items mentioned are at some stage of manufacture of cellular phones soldered onto the PCBA circuitry for they require power supply from the battery to function among other things but that does not make them a part of the PCBA. A microphone is a distinct commodity and is not known in trade parlance as a part of a PCBA. Their integration with the PCBA contributes to the functionality of the cellular phone. Just as typewriter ribbon is not an essential part of a typewriter microphone is neither a basic construction component or an essential part of a PCBA and they are commercially not known to be a part of PCBA. They play a crucial role in devices such as cellular phones headsets audio recording equipment etc. to capture sound waves and convert them into electrical signals. Just because a microphone is required for functional testing of the PCBA circuitry it does not mean that it is a part of the PCBA. Goods not defined must be understood in common parlance or commercial parlance - HELD THAT - In M/s Indo International Industries v. Commissioner of Sales Tax Uttar Pradesh 1981 (3) TMI 77 - SUPREME COURT it has been held that if any term or expression has been defined in the enactment then it must be understood in the sense in which it is defined but in the absence of any definition being given in the enactment the meaning of the term in common parlance or commercial parlance has to be adopted . Since PCBA s were not defined for the purpose of Sl no 6A the commercial parlance test has to be resorted to without going for their scientific and technical meaning. General description must yield to those of a special one - HELD THAT - The presumption in law is that the legislature does not intend to enact a law which is contradictory in nature. The burden to prove contra is on the Appellant. The provisions of the notifications are required to be examined carefully to find whether it is purported to have that effect. The issue of the valid prevalence of two contradictory positions in the same notification would fail even if the test for reasonability is that of the prudent man . One way to resolve the issue is by expanding on the Latin maxim generalia specialibus non derogant which means that general law shall not derrogate from specific law or the provisions of a general statute must yield to those of a special one. In CCE v. Jayant Oil Mills (P) Ltd. 1989 (3) TMI 132 - SUPREME COURT the Apex Court has accepted the aforesaid rule as the basic rule of construction that is to say a more specific item should be preferred to one less so. In this light the listing of special or declared goods in the very same notification seems to be that as far as cellular phones are concerned the object was to treat microphones which are parts of cellular phones differently as against parts of PCBA. When the Sl no of a notification denies concessional rate of duty to a specific part of a cellular phone like a microphone it cannot be held in terms of strict interpretation to be eligible for exemption under another Sl no of the same notification by elaborate discussions on what constitutes inputs or parts of a PCBA. Whether the insertion in notification is clarificatory and retrospective in nature? - HELD THAT - N/N. 24/2019 Cus dated 06.07.2019 amending Sl. No 6A of Notification No. 57/2017-Cus. inserted a proviso to negativate the inclusion of specific goods under Sl. No. 6A. An insertion clarifying the legal position with respect to goods which was earlier not correctly understood puts it beyond any possibility of controversy. By describing the given goods with a hard and fast exclusion whereby no other meaning can be assigned to the goods in dispute is clarificatory in nature and will be effective from the inception of the notification. In Commissioner of Income Tax Bombay Ors. v. Podar Cement Pvt. Ltd. Ors. 1997 (5) TMI 2 - SUPREME COURT it was held that a clarificatory statute would be retrospective in nature. If two views on an existing provision were not prevailing or possible in such a situation the amendment would not be held to be clarificatory. Since Notification No. 24/2019 Cus. dated 06.07.2019 amending Sl. No 6A of Notification No. 57/2017-Cus. by way of a proviso seeks to remove the confusion which pertains to two Sl. Nos. of the same notification it is hence only clarificatory in nature. A harmonious reading of the notification shows that it could never have been intended by the Legislature to have taxed the same goods at two different rates of duty more so in the very same notification for the Appellant to choose the Sl. No. which is more beneficial to him - This being so microphones will not be eligible for exemption under Sl. No. 6A of Notification No. 57/2017-Cus. dated 30.06.2017 being part of a cellular mobile phone specifically mentioned under Sl. No. 18 and are also excluded from Sl. No. 6A of the said Notification. The insertion made by Notification No.22/2018-Cus only clarifies this position and would be effective retrospectively. Onus of proof of fulfilment of condition subject to which an exemption may be admissible lies on the assessee - HELD THAT - The Learned Adjudicating Authority has stated in the impugned order that microphones are distinct commodities as known in trade parlance and are treated so in various extant notifications. Implicit in that reasoning is the fact that microphones are not part of PCBA s and are distinct. Further as held by a Constitutional Bench Apex Court in M/s Dilip Kumar and Company 2018 (7) TMI 1826 - SUPREME COURT (LB) the onus of proof of fulfilment of condition subject to which an exemption may be admissible lies on the assessee or upon a party claiming benefit under the Notification. There is no murmur by the Appellant of having followed the procedure set out in the Customs (Import of Goods at Concessional Rate of Duty) Rules 2017 as applicable to the goods imported and claiming exemption as per Sl. No. 6A of Notification No. 57/2017-Cus. dated 30.06.2017. By choosing not to lead evidence on the classification heading of PCBA s under the Customs Tariff whether under an independent tariff line/ heading or as a part of cellular phones the classification of microphones as a part of PCBA or that of a cellular phone is left in doubt. Boards circulars and the doctrine of contemporanea expositio - HELD THAT - Boards circulars are not binding on the Tribunal however the doctrine of contemporanea expositio is from time to time evoked by courts to cull out the intendment of the legislature and for removing ambiguity in its understanding of the statute. In Desh Bandhu Gupta and Ors v. Delhi Stock Exchange 1979 (2) TMI 175 - SUPREME COURT the Apex Court held that this principle can be invoked though the same will not always be decisive on the question of construction. But the contemporaneous construction placed by administrative or executive officers charged with executing the statute although not controlling is nevertheless entitled to considerable weight as highly persuasive - The circular makes it clear that the intention of the amendment was to make explicit what was considered implicit and remove any confusion there may have been in this regard. The TRU s DO reflects the position as discussed. Exemption notification should be interpreted strictly - HELD THAT - Exemption notification should be interpreted strictly. It is noted that both notifications i.e. 50/2017-Cus. and 57/2017-Cus. were issued on the same date. Hence there is some degree of ambiguity in the language used as there could not be an intention to tax the same goods differently on the same day and the notifications should be interpreted in favour of Revenue. Furter in this situation the general description in notification 50/2017-Cus. must yield to those of a specific description in 57/2017-Cus. - it cannot be said that the dispute was one where two equally applicable exemptions were involved and the assessee was eligible to the benefit of that exemption notification which gives him greater relief. As discussed the impugned goods are not eligible for concessional duty under either of the notifications. Whether intention of Notification to be understood through declared Government Policy? - HELD THAT - The microphones were not eligible for exemption under S. No. 6A of Notification No. 57/2017-Cus. dated 30.06.2017 nor under S. No. 427 of Notification No. 50/2017-Cus. dated 30.06.2017. However it is settled law that the extended period cannot be invoked when the case involves a genuine interpretative issue which is not merely an excuse given by an Appellant when confronted for non-payment of duty. In such a situation the Appellant is not involved in a blame worthy act and no fine can be levied and penalty imposed. No mis-declaration or suppression of facts can be alleged in such a situation. The demand will have to be confined to the normal period with applicable interest. This view has also been held by the Apex Court in Northern Plastic Ltd. v. Collector of Customs Central Excise 1998 (7) TMI 91 - SUPREME COURT . Whether redemption fine can be imposed when goods are not available? - HELD THAT - In any case the Appellant has not been found committing a blame worthy act and the demand has been restricted to the normal period. Hence the appeal filed by Revenue is rejected. Classification of Battery Cover Back Cover Camera Lens and Front Cover and their eligibility for concessional duty - HELD THAT - There is no dispute that the imported goods are parts of cellular phones and unless they are parts which are goods included in any of the specific headings of the Customs Tariff they merit classification as parts as per the relevant Section Notes etc. Even the TRU s DO refers to the goods being imported as parts or sub-parts or accessories of cellular mobile phones. Revenue has not alleged that the impugned goods are included in any of the specific headings of the Customs Tariff. This being so and cellular phones being classifiable under chapter 85 the classification of the impugned goods cannot be done under Note 2(a) to Section XVI and should be examined in the light of Note 2(b) of the said section which states that parts suitable for use solely or principally with a particular kind of machine or with a number of machines of the same heading are to be classified with the machines of that kind. Since notification no 50/2017 (Sl no 499) as amended is applicable to parts of cellular phones falling under CTH 851770 the impugned goods are eligible for the benefit of the same. The impugned order hence merits to be set aside. Conclusion - i) For classification of receivers the matter may be reexamined by the Adjudicating Authority on merits and a speaking order passed after affording the Appellant a reasonable opportunity to submit their written submissions if they so desire and after hearing them afresh within ninety days of receipt of this order. The appellant should also cooperate with the Adjudicating Authority in completing the process expeditiously. ii) Microphones were not eligible for exemption under S. No. 6A of Notification No. 57/2017-Cus. dated 30.06.2017 nor under S. No. 427 of Notification No. 50/2017-Cus. dated 30.06.2017. However it is settled law that the extended period cannot be invoked when the case involves a genuine interpretative issue which is not merely an excuse given by an Appellant when confronted for non-payment of duty. In such a situation the Appellant is not involved in a blame worthy act and no fine can be levied and penalty imposed. No mis-declaration or suppression of facts can be alleged in such a situation. The demand will have to be confined to the normal period with applicable interest. The impugned order stands modified accordingly. iii) As regards Battery Cover Back Cover Camera Lens and Front Cover the department has not been able to prove its charge of classifying the impugned goods under CTH 3920 9999 and hence the classification of the same under CTH 8517 7090 as done by the Appellant holds good. Since notification no 50/2017 (Sl no 499) as amended is applicable to parts of cellular phones falling under CTH 851770 the impugned goods are eligible for the same. Appeal disposed off.

Summary

1. ISSUES PRESENTED and CONSIDERED

The judgment addresses several core legal issues related to the classification and exemption of imported goods used in the assembly of mobile phones. These issues include:

• Classification of 'Receivers' and whether they should be classified under CTH 85177090 or CTH 85181000.
• Classification and eligibility of 'Microphones' for exemption under various notifications.
• Classification of 'Battery Cover, Back Cover, Camera Lens, and Front Cover' and their eligibility for concessional duty.
• Whether an appellant can challenge a matter in appeal which they had earlier acquiesced.
• Interpretation of exemption notifications and the relevance of government policy in determining classification and exemption eligibility.
• Whether redemption fine can be imposed when goods are not available.
• Applicability of Board Circulars and the doctrine of contemporanea expositio.

2. ISSUE-WISE DETAILED ANALYSIS

Receivers

The core issue was whether 'Receivers' should be classified under CTH 85177090, attracting 5% BCD, or CTH 85181000, attracting a higher duty. The appellant had initially acquiesced to the classification under CTH 85181000 but challenged it at the appellate stage. The Tribunal held that the appellant could raise the issue at the appellate stage, allowing them to resile from their earlier position. The matter was remanded for de novo adjudication to allow a complete examination of the evidence and arguments.

Microphones

The classification of 'Microphones' was not under dispute; rather, the issue was their eligibility for exemption under S. No. 6A of Notification No. 57/2017-Cus. and S. No. 427 of Notification No. 50/2017-Cus. The Tribunal found that microphones were not eligible for exemption as they were distinct commodities and not parts of PCBA. The insertion in Notification No. 57/2017-Cus. was deemed clarificatory and retrospective. The Tribunal held that the extended period could not be invoked due to the genuine interpretative issue, and the demand was confined to the normal period with applicable interest.

Battery Cover, Back Cover, Camera Lens, Front Cover

The dispute involved the classification of these goods under CTH 3920 9999 or CTH 8517 7090. The Tribunal found that the goods were parts of mobile phones and not articles of plastic, as claimed by the department. The classification under CTH 8517 7090 was upheld, and the goods were deemed eligible for exemption under Notification No. 50/2017-Cus. The Tribunal emphasized that the burden of proof was on the department to justify their classification.

General Legal Principles

• The Tribunal reiterated that exemption notifications should be interpreted strictly, with the burden of proving applicability on the assessee.
• Government policy, such as the Phased Manufacturing Programme (PMP), could be considered for understanding legislative intent but could not determine classification.
• Board Circulars are not binding if contrary to statutory provisions or judicial interpretations.

3. SIGNIFICANT HOLDINGS

The Tribunal made several key determinations:

• The power to classify goods lies with the proper officer and the importer, and classification cannot be dictated by government policy or exemption notifications.
• Exemption notifications must be interpreted strictly, with ambiguity resolved in favor of the revenue.
• In cases of genuine interpretative issues, the extended period for demand cannot be invoked, and no penalties can be imposed.
• Goods must be classified according to their popular meaning rather than scientific or technical definitions.
• The classification of goods under CTH 8517 7090 was upheld for mobile phone parts, rejecting the department's classification under CTH 3920 9999.
• Flextronics is eligible for consequential relief as per law.

The Tribunal's decision emphasizes the importance of adhering to statutory provisions and established legal principles in classification and exemption matters, while also considering government policy as a guiding factor in understanding legislative intent.