2022 (8) TMI 76 - AT - Customs

Seeking the rectification of the order - classification of goods - Populated Printed Circuit Boards (PPCB) for DWDM Equipment Photonic Service Switch - Small Factor Pluggable (SFP) - exemption under Notification No. 24/2005-Cus dated 1.3.2005 - HELD THAT - The classification of Populated Printed Circuit Boards for DWDM Equipment Photonic Service Switch has been decided in COMMISSIONER OF CUSTOMS-MUMBAI (AIR CARGO IMPORT) AND COMMISSIONER OF CUSTOMS-MUMBAI (ACC) VERSUS RELIANCE JIO INFOCOMM LTD. 2022 (6) TMI 1051 - CESTAT MUMBAI - the arguments put-forth to the impugned goods i.e. SFP in this case also as may be applicable. The appeals filed by the Department are rejected.

Summary

Issues Involved:
1. Classification of Small Factor Pluggable (SFP).
2. Alternative claim of exemption under Notification No. 24/2005-Cus dated 1.3.2005.

Detailed Analysis:

1. Classification of Small Factor Pluggable (SFP):
The primary issue concerns the classification of Small Factor Pluggable (SFP) modules. The respondents argued that SFPs are integral parts of various telecommunication equipment and cannot function independently. They emphasized that SFPs lack power and intelligence on their own and derive functionality from the equipment they are fitted into, such as the Alcatel-Lucent 1830 Photonic Service Switch (PSS), Ethernet Switch, and eNodeB. The respondents cited previous orders from the Commissioner (Appeals), Hyderabad and Mumbai, which classified SFPs as parts under CTH 8517 70, not as complete machines under CTH 8517 6290. The Department, however, contended that the SFPs and other telecommunication devices, being part of line equipment with specific functions, should be classified under sub-heading 8517 62, which includes devices used in optical communication.

The Tribunal referred to the detailed findings of the Commissioner (Appeals), Hyderabad, who had concluded that SFPs are not standalone equipment capable of providing essential functions of transmission and reception of optical data independently. Instead, they are parts of the Ethernet switch apparatus, providing interfaces between electrical and optical domains. The Tribunal also noted that the original manufacturer, Cisco, clarified that SFPs, along with I/O card modules, are parts of Ethernet switches and cannot function on their own. The Commissioner (Appeals), Mumbai, similarly classified SFPs as parts under 8517 7090, aligning with the Hyderabad ruling. The Tribunal emphasized the importance of consistent classification across different jurisdictions to avoid unnecessary litigation and upheld the classification of SFPs as parts under CTH 8517 7090.

2. Alternative Claim of Exemption under Notification No. 24/2005-Cus dated 1.3.2005:
The respondents claimed that SFPs are exempt from duty under Sr. No. 13 of Notification No. 24/2005-Cus, which exempts all goods of heading 8517 except those mentioned in specific clauses. The Tribunal found that the impugned SFPs do not fall under the excluded clauses of the notification. Both the Commissioner (Appeals), Hyderabad and Mumbai, had granted the benefit of the exemption, and the Department had not appealed against these decisions. The Tribunal upheld the exemption under Notification No. 24/2005-Cus, aligning with the previous rulings.

Conclusion:
The Tribunal rejected the appeals filed by the Department, affirming the classification of SFPs as parts under CTH 8517 7090 and granting the exemption under Notification No. 24/2005-Cus. The Tribunal emphasized the need for consistent classification to avoid unnecessary litigation and upheld the detailed and reasoned findings of the Commissioner (Appeals) in both Hyderabad and Mumbai. The decision was pronounced in open court on 29.07.2022.