2024 (7) TMI 1409 - AT - Customs

Classification of the imported goods - IC-Codecs - To be classified under Customs Tariff Item CTI 8542 39 00 of the Customs Tariff Act 1975 or under CTI 8517 62 90? - onus to prove - whether the imported goods are apparatus or machines ? - benefit of exemption Notification dated 01.03.2005 - HELD THAT - The goods imported are electronic integrated circuits used in the process of manufacture of mobile phones and tablets. The items covered under CTH 8517 constitute a complete machinery or apparatus in itself. The goods imported would not satisfy any of the description of goods covered under CTH 8517 as the ICs-Codecs cannot be described either as a machine or as an apparatus. The goods in the present case i.e. ICs are merely electronic integrated circuits. In the present case, the goods are IC chips which are incapable of stand-alone function or connection with any other device. The ICs are only capable of functioning as compressor/decompressor upon connection with external peripherals like power supply and interface. The goods imported only interact with components which are mounted on the PCB. No network like LAN/WAN is established between the impugned goods and other components of PCB. The imported goods are not in the nature of machines or apparatus which are deployed in a network like LAN/WAN. CTH 8542 deals with electronic integrated circuits i.e. ICs. They would, therefore, be specifically covered under CTH 8542 - HSN Explanatory Notes to CTH 8542 provides that monolithic ICs may be in the form of un-diced wafers. The IC-Codecs, as imported by the appellant, are in form of rolls i.e., un-diced wafers - the goods imported by the appellant are IC-Codecs and are classifiable under Customs Heading 8542 and more specifically under CTI 8542 39 90. Benefit of exemption Notification dated 01.03.2005 - HELD THAT - The appellant is entitled to the benefit of exemption Notification dated 01.03.2005, which exempts whole of the customs duty leviable on the goods imported into India falling under CTH 8542. As the order on merits cannot sustain, the appeal filed by the department deserved to be dismissed - Appeal of assessee allowed.

Summary

Issues Involved:
1. Classification of imported goods (IC-Codecs) under the Customs Tariff.
2. Entitlement to the benefit of the exemption notification.
3. Demand of customs duty and IGST.
4. Confiscation and imposition of penalty.

Detailed Analysis:

1. Classification of Imported Goods:
The primary issue is whether the imported "IC-Codecs" should be classified under CTI 8542 39 00 as claimed by the appellant or under CTI 8517 62 90 as determined by the Principal Commissioner.

- Appellant's Argument: The goods are integrated circuits used in the manufacture of mobile phones and tablets. They are not capable of stand-alone function or connection with any device and do not have the capability of transmission or reception of data at the time of import. Therefore, they should be classified under CTI 8542 39 00.

- Department's Argument: The goods are a kind of Codec with the capability of transmission and reception of digital information, thus classifiable under CTI 8517 62 90 as "other communication apparatus."

- Tribunal's Findings: The goods are IC-Codecs, which are electronic integrated circuits and not stand-alone devices for communication in a wired or wireless network. They do not satisfy the description of goods under CTH 8517, which covers apparatus and machines. The goods are specifically covered under CTH 8542 as electronic integrated circuits.

2. Entitlement to the Benefit of the Exemption Notification:
The appellant claimed the benefit of concessional duty under Serial No. 24 of the Notification dated 01.03.2005.

- Tribunal's Findings: Since the goods are classifiable under CTH 8542, the appellant is entitled to the benefit of the exemption notification, which exempts the whole of the customs duty leviable on goods falling under CTH 8542.

3. Demand of Customs Duty and IGST:
The Principal Commissioner confirmed the demand of customs duty and IGST amounting to Rs. 1,89,05,965/- with interest under section 28AA of the Customs Act.

- Appellant's Argument: The demand is not sustainable as the goods are correctly classified under CTI 8542 39 00. Additionally, IGST and interest on IGST cannot be demanded under section 28 of the Customs Act.

- Tribunal's Findings: The department failed to provide any technical literature or material to show that the imported ICs had the capability of transmission or reception of digital information at the time of import. The demand based on presumptions is not sustainable.

4. Confiscation and Imposition of Penalty:
The department appealed against the Principal Commissioner's decision that the goods are not liable to confiscation under section 111(m) of the Customs Act and no penalty can be imposed under section 112 (a)(ii) of the Customs Act.

- Tribunal's Findings: Since the order on merits regarding classification cannot be sustained, the appeal filed by the department for confiscation and imposition of penalty is dismissed.

Conclusion:
- Customs Appeal No. 51172 of 2020 filed by the appellant is allowed, and the goods are to be classified under CTI 8542 39 00.
- Customs Appeal No. 51204 of 2020 filed by the department is dismissed.

(Order Pronounced on 22.07.2024)