2025 (2) TMI 110 - AT - Customs

Classification of imported goods - Receiver - Microphone - Connectors - various covers and assembles - eligibility for exemption. Classification of imported goods - Receiver - to be classified under CTH 85177090 or under CTH 85181000? - benefit under N/N. 50/2017-Cus. dt. 30.06.2017 (Sl.No.499) - HELD THAT - This very Bench in the case of M/S. FLEXTRONICS TECHNOLOGIES PVT. LTD. COMMISSIONER OF CUSTOMS VERSUS COMMISSIONER OF CUSTOMS CHENNAI M/S. FLEXTRONICS TECHNOLOGIES PVT. LTD. 2024 (2) TMI 1509 - CESTAT CHENNAI where the bench felt it proper to remand this issue for the detailed reasons given therein. Taking cognizance of Note 2 to Section XVI as above the parts which are goods included in any of the headings of Chapter 84 or 85 are required to be classified in their respective headings; parts which are suitable for use principally with goods of heading 8517 and 8525 to 8528 are to be classified in Heading 8517. Receiver claimed to be specifically coming under CTH 8518 is required to be considered in ejusdem generis i.e in the context of the words accompanying with the heading. The tariff heading 8518 refers to micro phones and stands therefor; loud speakers whether or not mounted in their enclosures; head phones and ear phones whether or not combined with a micro phone etc. which are perhaps separate parts per se whereas the Receiver under dispute in this appeal is a part of the phone - The classification sought to be made by the Revenue under CTH 8518 lacks any merit and set aside - since the classification declared by the assessee was in order there was no scope for levying or demanding duty and the consequential interest and penalty and hence the goods are not liable for confiscation. There are no infirmity in the non-levy of redemption fine. Classification of imported Microphone - to be classified under 85183000 or under CTH 85181000? - benefit of concessional rate of duty under N/N. 57/2017-Cus. - HELD THAT - This very Bench in the case of Flextronics Technologies Pvt. Ltd. has dealt with the classification of Microphones very exhaustively and further held that Microphones were not eligible for exemption as claimed by the assessee - there was no suppression involved since the case involves a genuine interpretative issue for which extended period could not be invoked. Hence the demand if any is to be confined to the normal period with applicable interest if any. Classification of impugned Connectors - to be classified under CTI 85177090 or under CTH 85369090? - HELD THAT - The PCBA though a separate part of a mobile phone forms the backbone of the said phone and all inputs or parts of the phone are connected to PCBA either directly or indirectly. Connectors play an important role in completing the PCBA circuiting and would form a part of the PCBA and are thus covered by Sl. No. 6A of N/N. 57/2017-Cus dated 30.06.2017. Therefore it is only in the subsequent Notifications viz. No.37/2018 No.24/2019 and No.03/2021 the scope of PCBA came to be restricted by incorporating exclusions. Therefore when through the subsequent Notifications items like connectors microphones receivers etc. are excluded all the inputs and parts that are specifically excluded will not get the benefit of exemption. In the light of the above subsequent amending Notifications the connectors would also not be eligible for any benefit. However the fact remains that the exemption to BCD was very much available in terms of N/N. 24/2019 - the Assessee is eligible for benefit for exemption for the subject goods viz. Connectors . Classification of Rear Cover A Cover D Cover Assy. B Cover Front Housing Rear Housing Camera Lens Front Cover ASM and Battery Cover ASM - extended period of limitation - HELD THAT - The impugned goods as listed above being parts of cellular phones falling under CTH 85177090 are eligible for the benefit of exemption under Notification No.50/2017 (Sl.No.499) as amended. The impugned order is set aside and Asssessee s Appeal is allowed. Conclusion - i) The Receivers are parts of cellular mobile phones and should be classified under CTH 85177090 as they are not standalone products like microphones or loudspeakers. ii) Microphones are not eligible for exemption under the claimed notification. iii) Connectors are essential parts of mobile phones and are eligible for exemption under the relevant notifications and classified CTH 85369090. iv) The covers and assemblies are integral to cellular phones and eligible for exemption under N/N. 50/2017 and should be classified under CTH 85177090. Appeal disposed off.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment involve the classification of imported goods and their eligibility for customs duty exemptions under specific notifications. The main issues include:

• Whether the imported "Receiver" should be classified under CTH 85177090 or CTH 85181000, affecting the applicable customs duty rate.
• Whether "Microphones" imported for use in mobile phones qualify for duty exemption under Notification No. 57/2017-Cus.
• Whether "Connectors" used in mobile phones are eligible for exemption under Notification No. 57/2017-Cus.
• Whether "Rear Cover, A Cover, D Cover Assy. B Cover, Front Housing, Rear Housing, Camera Lens, Front Cover ASM and Battery Cover ASM" are correctly classified under CTH 85177090 or should be reclassified under CTH 39209999.
• Whether the non-imposition of redemption fines is justified when goods are not physically available.

ISSUE-WISE DETAILED ANALYSIS

1. Classification of "Receiver"

• Legal Framework and Precedents: The classification dispute centers around whether the "Receiver" falls under CTH 85177090 or CTH 85181000. The relevant legal framework includes the Customs Tariff Act, 1975, and related notifications.
• Court's Interpretation and Reasoning: The Court found that the "Receiver" is a part of cellular mobile phones and should be classified under CTH 85177090, consistent with the Explanatory Notes to HSN and previous judicial interpretations.
• Key Evidence and Findings: The Court relied on Section Note 2 to Section XVI of the Customs Tariff Act, 1975, which provides guidelines for classifying parts of machines.
• Application of Law to Facts: The classification of the "Receiver" under CTH 85177090 was deemed appropriate as it is a part of the mobile phone, not a standalone item.
• Treatment of Competing Arguments: The Court rejected the Revenue's classification under CTH 8518, citing lack of merit and support from relevant legal notes.
• Conclusions: The classification under CTH 85177090 is upheld, allowing the appeal filed by the Assessee-Importer.

2. Classification and Exemption of "Microphones"

• Legal Framework and Precedents: The issue involves the interpretation of exemption notifications, particularly Notification No. 57/2017-Cus.
• Court's Interpretation and Reasoning: The Court held that "Microphones" are not eligible for exemption under S. No. 6A of Notification No. 57/2017-Cus., as they are distinct commodities not considered parts of PCBAs.
• Key Evidence and Findings: The Court examined the definition of PCBA and relevant Board circulars, concluding that microphones do not form part of PCBAs.
• Application of Law to Facts: The classification of microphones as distinct commodities led to the denial of the claimed exemption.
• Treatment of Competing Arguments: The Court addressed the appellant's arguments regarding the classification and exemption of microphones, ultimately siding with the Revenue's interpretation.
• Conclusions: The appeal is partly allowed, restricting the demand to the normal period with applicable interest.

3. Classification and Exemption of "Connectors"

• Legal Framework and Precedents: The classification of connectors involves Notification No. 57/2017-Cus. and subsequent amendments.
• Court's Interpretation and Reasoning: The Court found that connectors are essential parts of mobile phones and eligible for exemption under the relevant notifications.
• Key Evidence and Findings: The Court considered the role of connectors in mobile phone assembly and their classification under specific tariff headings.
• Application of Law to Facts: The Court upheld the classification under CTH 85177090, granting exemption benefits.
• Treatment of Competing Arguments: The Court rejected the Revenue's reclassification of connectors, emphasizing their integral role in mobile phones.
• Conclusions: The appeal is allowed, granting exemption benefits to the Assessee.

4. Classification of Plastic Covers and Related Parts

• Legal Framework and Precedents: The classification dispute involves whether certain mobile phone parts should be classified under CTH 85177090 or CTH 39209999.
• Court's Interpretation and Reasoning: The Court held that the parts in question are components of cellular phones and should be classified under CTH 85177090.
• Key Evidence and Findings: The Court relied on previous decisions and the applicability of Notification No. 50/2017.
• Application of Law to Facts: The classification under CTH 85177090 was deemed appropriate, granting exemption benefits.
• Treatment of Competing Arguments: The Court rejected the Revenue's reclassification, citing lack of evidence to support the charge.
• Conclusions: The appeal is allowed, upholding the classification under CTH 85177090.

SIGNIFICANT HOLDINGS

• Core Principles Established: The judgment emphasizes the importance of proper classification based on the nature and use of the imported goods, as well as the interpretation of exemption notifications in line with legislative intent and commercial parlance.
• Final Determinations on Each Issue: The Court allowed the appeals concerning the classification of "Receiver," "Connectors," and plastic parts, granting exemption benefits. The appeal concerning "Microphones" was partly allowed, with the demand restricted to the normal period.
• Verbatim Quotes of Crucial Legal Reasoning: The Court stated, "The classification sought to be made by the Revenue under CTH 8518 lacks any merit and hence, we set aside the impugned order."