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2023 (7) TMI 839 - AT - CustomsClassification of imported goods - CX 275s and CX180. Model CX 275s earphones have microphones - CX180 earphones - classified under customs tariff heading 8518 30 00 or not - N/N. 57/2017-Cus dated 30.06.2017 as amended by N/N. 22/2018-Cus dated 02.02.2018 (S. No. 18) - HELD THAT - It is undisputed that earphones CX 275s have two speakers for the ears and an inbuilt microphone. It is also not in dispute that CX 275s can be used with the cell phone. There is nothing on record to show that it cannot be used with any other device. It is common knowledge that earphones with microphone can be used with laptop, i-pad, desktop, i-pod, mobile phone etc., and they perform the same function of providing audio output through the speakers and receiving audio input through the microphone from device they are attached to. The utility of the earphones is limited by the compatibility of the jack with the port on the device. So long as the jack is compatible, the same earphone can be used with tablet, cell phone, gaming devices etc. Therefore, earphone utility of the earphone is not confined to cellular mobile phone. The earphones are neither a part of nor are they essential to use a mobile phone. They only add additional utility. Therefore, the earphone will qualify as an accessory which can be used with cellular mobile phone as well as other electronic devices. When used with the cellular mobile phone, it will be an accessory to mobile phone but will not be its part - What is evident from the entry no. 18 is that only such microphones, wired headsets and receivers as are parts of cellular mobile phones get excluded from the exemption notification and all other goods falling under CTH 8518 are exempted. Earphones CX 275s imported by the appellant, while being earphones, are clearly not parts of any mobile phone. In Dilip Kumar and Company 2018 (7) TMI 1826 - SUPREME COURT , the Supreme Court did not completely rule out the possibility of liberal interpretation of an exemption notification but affirmed its previous decisions in COLLECTOR OF CENTRAL EXCISE VERSUS PARLE EXPORTS (P) LTD. 1988 (11) TMI 108 - SUPREME COURT and CCE VERSUS M/S HARI CHAND SHRI GOPAL 2010 (11) TMI 13 - SUPREME COURT that strict and liberal interpretations of the notification should be applied at different stages. To see if the subject is covered by the notification or not, strict interpretation should be applied and once this ambiguity or doubt is resolved, the Court may construe the notification by giving full play bestowing wider and liberal construction. In this case, clearly, all goods falling under CTH 8518 are exempted by S. No. 18 of the notification excluding some parts of the cellular mobile phones including headsets . Clearly, S. No. 18 does not exclude all earphones but only headsets which are parts of cellular mobile phones. The earphones in dispute CX 275s are not parts of any mobile phone but are accessories which can be used with a variety of electronic gadgets including cellular mobile phones. Even for this reason, the benefit of the exemption notification cannot be denied to earphones CX 275s imported by the appellant. The demand of duty in the impugned orders cannot, therefore, be sustained and need to be set aside. Consequently, the penalty imposed in one of the order dated June 1, 2020 also need to be set aside - appeal allowed.
Issues Involved:
1. Classification of imported earphones under customs tariff heading. 2. Eligibility for exemption under Notification No. 57/2017-Cus as amended by Notification No. 22/2018-Cus. 3. Determination of whether earphones are parts or accessories of cellular mobile phones. 4. Imposition of penalty under section 112 of the Customs Act. Summary: 1. Classification of Imported Earphones: The appellant classified two models of earphones, CX 275s (with microphones) and CX180 (without microphones), under customs tariff heading 8518 30 00, attracting a basic customs duty of 15%. 2. Eligibility for Exemption: The appellant claimed the benefit of exemption Notification No. 57/2017-Cus, which levied a reduced duty of 10% on goods under heading 8518, except for certain parts of cellular mobile phones, including "microphone, wired headset, receiver." The Principal Commissioner dropped the demand for CX180 but confirmed it for CX 275s, considering it a wired headset and thus excluded from the exemption. 3. Determination of Parts or Accessories: The appellant argued that the earphones are standalone products and not integral parts of cellular mobile phones. They can be used with various devices like laptops, iPods, and gaming equipment, and thus qualify as accessories rather than parts. The Tribunal agreed, stating that earphones are not essential to the functioning of mobile phones and are more accurately classified as accessories. 4. Imposition of Penalty: In one order, a penalty of Rs. 4,53,744/- was imposed under section 112 of the Customs Act. The Tribunal found no ambiguity in the exemption notification and concluded that the earphones are accessories, not parts, thus qualifying for the exemption. Consequently, the penalty was also set aside. Conclusion: The Tribunal set aside the impugned orders, allowing the appeals and granting consequential relief to the appellant, affirming that earphones CX 275s are accessories and not parts of cellular mobile phones, thus eligible for the exemption under Notification No. 57/2017-Cus.
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