2019 (11) TMI 451 - AT - Customs

Classification of goods - Antenna for base station imported by the Respondent used in mobile telecommunication network - Respondents during the period May 2017 to August 2017 imported Antenna for Base Transmission Station(BTS) declared the same as parts classifying it under CTSH 85177090 of Customs Tariff Act, 1975; alleging that the said imported goods are classifiable under CSH 85176290 - Board s Circular No.01/2018 dt.15.1.2018 - Refund of Customs Duty - duty paid under protest. Whether the antenna for base station would be considered as a machine and accordingly classifiable under CSH 85176290 as claimed by the Revenue or as parts classifiable under CSH 85177090, claimed by the Respondent? HELD THAT - Prior to 2007, the heading 8517 was consisting of Apparatus i.e. telephone instruments only for line telephony and not for radio telephony; the transmission apparatus for radio telephony was covered under heading 8525 and reception apparatus for radio telephony was covered under heading 85.27; the antenna for the apparatus for radio telephony under heading 8525 8527 was specifically covered as parts under 8527 of CTA,1975. After 01.01.2007 the instruments for radio telephony/mobile network, Apparatus for reception transmission, and parts have been placed under one heading i.e 8517 of CTA, 1975. Revenue continued classification of Antenna for mobile network as parts accepting its classification under 85177090 post 01.01.2007. A simple analysis of heading 8517 effective from 01.01.2007, it is clear that the instruments/telephone sets for cellular networks/wireless net works, apparatus both for transmission and reception of voice, images or other data in a wired or wireless network, and parts classified under the said heading broadly placed under three categories of single dash(-). First single dash(-) for telephone sets, including telephones for cellular network or for other wireless network; second single dash (-) for other apparatus for transmission or reception of voice, images, or other data including apparatus for communication in wired or wireless network (such as local or wide area network); and the third single dash(-), for parts . The base station is classified under the second category under CSH 85176100, to which neither side disputes. The Revenue s argument is based on the clarification issued by the Board on 01.01.2018 that Antenna is an essential device of a wireless communication system; the information can travel only in the electro-magnetic wave form. The antenna radiates the information in the form of electro-magnetic wave in an efficient and desired manner to the base station, where the information is picked up by the receiving antenna and passed on to the receiver via transmission line. The signal is de-modulated and the original message is then recovered at the receiver. Thus, the wireless communication gets established. It is the contention of the department that since the antenna can generate electro-magnetic wave from current and voltages and which can convert electromagnetic wave to current and voltages with these waves impinge on it, therefore, it can be considered as a machine, which independently receives and transmits electro-magnetic waves. In the present case, the manufacturer of Antenna as well as the chartered engineer s certificate, in clear terms clarified that the Antenna in question transmits and receives only signals and not performing any other function like conversion or regeneration of voice, images or other data signals and switching/routing of signals. Therefore, the Antenna stand alone cannot be considered as a machine , attracting classification under Heading 8517.62. Consequently, the observation of the Department in the circular dt.15.01.2018 that the Antenna itself is a complete device and has capability of functioning on its own of conversion of electrical signals into electro-magnetic waves and vice versa in a wireless communication system cannot be applied to the present goods as it would be complete only when connected to a base station. Revenue s interpretation of the said clause(a) in the present case is that in the event if the goods are not falling under any of the sub heading of heading 8517, then only it will be classifiable as parts , is incorrect. Clause b of the said Note 2 indicates that other parts , by implication which are not goods, if suitable for use solely or principally with a particular kind of machine of the same heading are to be classified with the machines of that kind or the headings mentioned under the said clause b as appropriate. The correct classification of the Antenna for base station is under Sub-heading 85177090 as parts - Since, the main issue of classification has been addressed, the other ancillary/alternative submission/issues on the eligibility of various exemption notifications issued in support of the classification of the said goods, becomes more of academic, hence not analysed. Appeal dismissed - decided against Revenue.

Summary

Issues Involved:
1. Classification of imported "Antenna" for Base Transmission Station (BTS).
2. Applicability of exemption notifications under the Customs Tariff Act.
3. Alleged violation of principles of natural justice.
4. Maintainability of the appeal due to duty paid under protest.

Issue-wise Detailed Analysis:

1. Classification of imported "Antenna" for Base Transmission Station (BTS):

The core issue was whether the imported antenna should be classified under CSH 85176290 as a "machine" or under CSH 85177090 as "parts" of a base station. The Respondents classified the antenna under CSH 85177090, while the Revenue argued it should be under CSH 85176290. The Revenue's contention was based on the Board's Circular No.01/2018, which described the antenna as a complete device capable of converting electrical signals into electromagnetic waves and vice versa, thus fitting the definition of a "machine" under Note 5 of Section XVI of the Customs Tariff Act, 1975.

The Tribunal found that the antenna could not function independently and was a passive element that only transmitted and received signals when connected to a base station. The Tribunal relied on the manufacturer's clarification and the Chartered Engineer's certificate, which confirmed that the antenna did not perform functions like conversion or regeneration of data signals independently. Consequently, the antenna could not be classified as a "machine" under CSH 85176290. The Tribunal also referred to the HS Committee's 62nd session, which classified such antennas under Heading 8517.70 as "parts." Therefore, the Tribunal upheld the classification of the antenna under CSH 85177090.

2. Applicability of exemption notifications under the Customs Tariff Act:

The Respondents claimed eligibility for exemption under Notification No.25/2005-Cus, which exempts aerials or antennas of a kind used with apparatus for radio telephony. The Tribunal noted that even though the tariff heading 8529.10 was mentioned in the notification, the description of the goods matched the imported antenna. The Tribunal referenced the Hon'ble Supreme Court's judgment in Jain Engineering Co. and others, which allowed the benefit of exemption notification to be claimed at any stage of proceedings. Therefore, the Tribunal upheld the Respondents' eligibility for exemption under the said notification.

3. Alleged violation of principles of natural justice:

The Revenue argued that the learned Commissioner (Appeals) violated the principles of natural justice by not providing adequate opportunities for the Department to present its case. The Tribunal found that the Commissioner (Appeals) had followed the normal practice of serving a copy of the appeal to the Department, which did not file any written submissions or request for a personal hearing or adjournment. The Tribunal held that there was no violation of principles of natural justice as the Department was given due notice and opportunity to respond.

4. Maintainability of the appeal due to duty paid under protest:

The Revenue contended that since the duty was paid under protest, the assessment was not final, and hence, no appeal could lie before the Commissioner (Appeals). The Tribunal rejected this contention, citing the Hon'ble Bombay High Court's judgment in Karan Associates, which held that an assessed Bill of Entry is an appealable order, regardless of whether the duty was paid under protest.

Conclusion:

The Tribunal upheld the classification of the imported antenna under CSH 85177090 as "parts" of a base station and confirmed the Respondents' eligibility for exemption under Notification No.25/2005-Cus. The Tribunal found no violation of principles of natural justice and held that the appeal was maintainable despite the duty being paid under protest. Consequently, the Revenue's appeals were dismissed.