2025 (3) TMI 1073 - AT - Customs

Classification of imported goods - Fiber Optic Transmitters/Receivers/Transceivers - classifiable under CTH 85176290 or CTH 854230? - applicability of exemption under S.No.20 of N/N.57/2017 - Extended period of limitation - confiscation - penalties. Whether the impugned goods imported by the appellant are classifiable under CTH 85176290 or under CTH 854230 as contended by the appellants? - HELD THAT - The adjudicating authority has gone through the details furnished by the appellant as well as various other documents referred to supra to come to the conclusion that goods are clearly classifiable under CTH 85176290 and the goods are also in the nature of OTE in view of their actual function. He has also categorically ruled out the possibility of its classification as simple electrical integrated circuit keeping in view the HSN explanatory note according to which essentially at least one of the components are required to be present which incidentally was not found to have been used in the said impugned goods. The adjudicating authority has taken into account the statements recorded from technical expert of the appellant as well as expert opinion and felt that these are in the nature of apparatus or devices meant for certain specific functions like conversion of inter alia electrical signal into optical signal and vice versa using optical fiber cable and therefore they are more in the nature of OTE. The fact that OTE has been categorically classified under CTH 85176290 in the notification itself also supports that if the impugned goods are in the nature of OTE then it would obviously fall under CTH 85176290. Applicability of exemption under S.No.20 of N/N. 57/2017 - HELD THAT - The impugned order is a well reasoned order where after going through the detailed submissions and other evidence on record the adjudicating authority has rightly held the impugned goods to be classifiable under CTH 85176290 and has also rightly held that these are in the nature of OTE and therefore they shall not be entitled for the benefit under notification 57/2017. In view of the same the classification as well as denial of benefit under S.No.20 of the notification 57/2017 upheld. Invocation of extended period - HELD THAT - There is nothing wrong for the appellant to have a bonafide belief to choose a heading which may be more beneficial to them even though ultimately it may not be found to be correct classification. However this per se cannot become ground for invoking extended period of limitation. There has to be much more evidence on record to prove their deliberate plan or deliberate suppression in order to hoodwink the department into believing something else. Merely because they chose to claim classification under a heading which they thought was more appropriate it cannot be a ground for invoking extended period. Further though the adjudicating authority has tried to bring in the concept of fraud for invoking extended period in the sense that they were deliberately misleading the department it has neither been alleged in the SCN nor has been explained in what way the appellants were indulging in fraud. Therefore invocation of extended period is not tenable and therefore to that extent the impugned order is liable to be set aside. Wrong calculation of duty demanded - HELD THAT - There are no discussion on this issue and therefore the matter needs to be remanded back to the adjudicating authority to examine this aspect and allow the benefit of this amount if it has already been paid as submitted by the appellant. Confiscation - HELD THAT - When the issue is primarily that of classification the confiscation cannot sustain and therefore on that count itself the impugned order to the extent of confiscation of impugned goods and imposition of fine is also not tenable. Penalty u/s 114A - HELD THAT - In view of the fact that the extended period cannot be invoked in the present case as also there is no element of fraud suppression or misstatement etc. therefore the penalty under this section is not sustainable. Penalty u/s 114AA - HELD THAT - In this case whenever they have used a different classification than the classification which was indicated in the invoice they knew that they are entering wrong classification in the bills of entry and therefore to that extent the appellants knowingly and intentionally made the said entries. Their bonafide belief will not be of much help as here it is an established fact that the classification mentioned in the bills of entry was different than the classification indicated by the supplier of the said goods. Therefore there are no infirmity in the imposition of penalty under section 114AA. Conclusion - The goods are classified under CTH 85176290 the exemption under Notification No.57/2017 is denied the extended period for demand set aside penalties under sections 112(a) and 114A are dismissed the penalty under section 114AA is upheld and the confiscation of goods is overturned. Appeal partly allowed by way of remand for redetermination of quantum of demand.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment are:

• Whether the imported goods, specifically Fiber Optic Transmitters/Receivers/Transceivers, are classifiable under CTH 85176290 or CTH 854230.
• Whether the goods qualify for exemption under S.No.20 of Notification No.57/2017, given their classification and nature as Optical Transport Equipment (OTE).
• The applicability of the extended period for demand under section 28(4) of the Customs Act, 1962.
• The validity of penalties imposed under sections 112(a), 114A, and 114AA of the Customs Act.
• The legitimacy of the confiscation of goods under sections 111(m) and 111(o) of the Customs Act.

ISSUE-WISE DETAILED ANALYSIS

Classification of Goods

• Relevant legal framework and precedents: The classification dispute centers on whether the goods fall under CTH 85176290, which includes Optical Transport Equipment, or CTH 854230, which pertains to Multi Component Integrated Circuits (MCOs).
• Court's interpretation and reasoning: The adjudicating authority examined technical literature, expert opinions, and HSN explanatory notes to determine that the goods are more appropriately classifiable under CTH 85176290. The authority noted that the goods function as Optical Transport Equipment, converting signals for transmission over optical networks.
• Key evidence and findings: The court relied on expert opinions from the Department of Electronics, IISc, Bengaluru, and statements from the appellant's technical director, confirming the goods' classification as OTE.
• Application of law to facts: The goods' functionality and technical specifications aligned with the description of OTE, supporting their classification under CTH 85176290.
• Treatment of competing arguments: The appellant argued for classification under CTH 854230, citing the goods as components rather than complete apparatus. However, the court found that the goods' use in signal conversion and transmission justified their classification as OTE.
• Conclusions: The court upheld the classification of the goods under CTH 85176290, denying the appellant's claim for classification under CTH 854230.

Exemption under Notification No.57/2017

• Relevant legal framework and precedents: The notification provides a concessional rate for certain goods but excludes OTE and other specified items.
• Court's interpretation and reasoning: The court interpreted the notification strictly, in line with precedents that require strict interpretation of exemption notifications.
• Key evidence and findings: The goods were found to be OTE, which are explicitly excluded from the exemption under S.No.20 of the notification.
• Application of law to facts: The exclusion of OTE from the exemption was clear, and the goods' classification as OTE precluded them from benefiting from the notification.
• Conclusions: The court denied the exemption under S.No.20 of Notification No.57/2017, as the goods were classified as OTE.

Extended Period for Demand

• Relevant legal framework and precedents: Section 28(4) of the Customs Act allows for an extended period for demand in cases of fraud, suppression, or willful misstatement.
• Court's interpretation and reasoning: The court found no substantive evidence of deliberate suppression or fraud to justify the extended period.
• Key evidence and findings: The court noted the complexity of classification and the appellant's attempts to comply with the correct classification, which did not indicate intentional evasion.
• Conclusions: The invocation of the extended period was not justified, and the demand beyond the normal period was set aside.

Penalties under Sections 112(a), 114A, and 114AA

• Relevant legal framework and precedents: Penalties are imposed for misdeclaration, fraud, or willful misstatement under the Customs Act.
• Court's interpretation and reasoning: The court upheld the penalty under section 114AA for knowingly making false declarations but set aside penalties under sections 112(a) and 114A due to the absence of fraud or misstatement.
• Key evidence and findings: The court found that the appellants knowingly used incorrect classifications, supporting the penalty under section 114AA.
• Conclusions: Penalties under sections 112(a) and 114A were set aside, while the penalty under section 114AA was upheld.

Confiscation of Goods

• Relevant legal framework and precedents: Sections 111(m) and 111(o) of the Customs Act address confiscation for misdeclaration and non-compliance.
• Court's interpretation and reasoning: The court found that the issue was primarily one of classification, not warranting confiscation.
• Conclusions: The confiscation of goods and imposition of fines were set aside.

SIGNIFICANT HOLDINGS

• Core principles established: The judgment reinforced the principle of strict interpretation of exemption notifications and the requirement for clear evidence of fraud or suppression to invoke extended periods for demand.
• Final determinations on each issue: The goods were classified under CTH 85176290, the exemption under Notification No.57/2017 was denied, the extended period for demand was set aside, penalties under sections 112(a) and 114A were dismissed, the penalty under section 114AA was upheld, and the confiscation of goods was overturned.