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TMI Blog2015 (9) TMI 614X X X X Extracts X X X X X X X X Extracts X X X X ..... heading 9001 specifically covers optical fibre cables other than those of heading 8544, products in question would accordingly fall squarely under heading 9001 Thus, correct classification of OFCs imported by appellant was under CTH 9001 Customs Tariff Therefore impugned order in respect of classification of goods, upheld. No evidence to prove that appellant misdeclared description of goods under import with intent to evade payment of duty Goods were imported by appellant over long period of time and they have been classifying same under CTH 8544 all along Goods were also examined or ought to have been examined by Customs at time of importation Therefore, laying claim to some exemption, was matter of belief of assessee and does not amount to misdeclaration warranting confiscation Also show cause notice for demand of differential duty was hit by time-bar Thus, entire differential duty demand with interest, confiscation of goods, imposition of fine and penalties were not sustainable and hereby set aside Decided in favour of Assesse. - C/343 & 421/2009-Mum - Final Order Nos. A/12-13/2015-WZB/CB - Dated:- 1-1-2015 - Shri P.R. Chandrasekharan, Member (T) and Rames ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r CTH 90.01 and demanding differential duty of ₹ 2,68,50,476/- along with interest thereon. The notice also proposed to confiscate the goods under Sections 111(m) and 111(o) of the Customs Act and penalties on the appellant importer and on Shri Narendra Patil, General Manager and Shri Anil Kumar Singh, Vice President Head (Exim Commercial). The said notice was adjudicated vide the impugned order and the proposals in the notice were confirmed. Hence the appeals before us. 3. The ld. Counsel for the appellant made various submissions which are summarised as below : - 3.1 The optical fibre cables imported by the appellant merits classification under CTH 8544 70 90 which covers optical fibre cables, made up of individually sheathed fibres, whether or not assembled with electric conductors or fitted with connectors. CTH 9001 covers Optical fibres, optical fibre bundles and optical fibre cables other than those of heading 85.44. CTHs 9001 and 8544 are mutually exclusive. Therefore, optical fibre cables are classifiable under CTH 8544. 3.2 The issue for consideration is whether the optical fibre cables imported by the appellant is made of individually sheathed fibres or n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of colour coating are considered as individually sheathed fibres classifiable under CTH 8544. 3.7 Prior to 1-3-2005, the rate of customs duty on OFCs falling under TI 8544 and TI 9001 was the same. From 1-3-2005 onwards, OFCs falling under TI 8544 were exempted from basic Customs duty under Notification 24/2005-Cus., dated 1-3-2005. The appellant had imported OFCs vide 35 bills of entry during 4-4-2003 to 18-1-2006 and claimed classification under CTH 8544 70 90 in all the bills of entry which was accepted by the department. Only in respect of the 10 bills of entry filed after 1-3-2005, where the appellants claimed the benefit of Notification No. 24/2005, dispute relating to the classification has been made. Since there is no suppression or mis-declaration on the part of the appellant in respect of the 10 bills of entry, the demand raised under show cause notice dated 8-2-2007 is clearly time-barred. 3.8 The description of the goods in the bills of entry 5695, dated 4-4-2003 as G652 Optical Fibre Cable with 48 core is the same as that given in the corresponding invoice raised by the foreign supplier. Similarly in respect of bill of entry No. 102053, dated 18-4-2005 wherei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly optical fibre cables, made up of individually sheathed fibres are covered under CTH 8544 while such cables other than of Heading 8544 would come under Heading 9001. While classifying the goods under CTH 9001, the adjudicating authority has relied upon Board s circular No. 12/2006, dated 28-2-2006 and this Tribunal s decision in the case of Optel Telecommunication Ltd. - 2005 (186) E.L.T. 109 (T) and the ruling of the Advanced Authority for Ruling in the case of Alcatel India Ltd. - 2006 (197) E.L.T. 176 (AAR). 4.2 As per the Board s circular OFCs composed of fibres which are not individually sheathed would come under CTH 9001. 4.3 In the Optel Telecommunication case, this Tribunal held that OFCs of fibres which are not individually sheathed fall under CTH 9001 and it found no evidence or material to show that coating of UV cured acrylate amounts to sheathing of optical fibres. It was further held that end-use cannot be the criterion for classification of OFCs. 4.4 In the Alcatel case (supra) dealing with the contention of the party that fibres are coated with different colours and are housed in jelly material which would amount to individually sheathing the fibre, the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of both the sides. Heading 85.44 applies, inter alia, to optical fibre cables, made up of individual sheathed fibre, whether or not assembled with electric conductors or fitted with connectors. Heading 90.01 reads as under : Optical fibres and optical fibre bundles; optical fibre cables other than those of Heading No. 85.44; sheets and plates of polarizing material; lenses (including contact lenses), prisms, mirrors and other optical elements, of any material unmounted, other than such elements of glass not optically worked. Thus Optical fibre cables fall under both Headings 85.44 and 90.01, if the optical fibre cable is made up of individually sheathed fibre, it fall under Heading 85.44 and all other optical fibre cables fall under Heading 90.01. The process of manufacture, as given by the assessee and mentioned in brief in Order-in-Original No. 13/2002, dated 8-8-2002 clearly shows that after the fibre has been drawn and coloured for identification purposes, two fibres are placed in a loose tube filled with jelly and these loose tubes, (three numbers or six numbers) are stranded around FRP center tension member to form the core of the cable. In the process of manufac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the classification of the fibre. Accordingly, we hold that the Department has not proved that the impugned optical fibre cables is made up of individually sheathed fibres so as to warrant classification under Heading 85.44. Accordingly, we set aside the impugned order and allow all the appeals filed by the assessee without going into other submissions raised by the learned Advocate. Consequently, the Appeal filed by the Revenue is rejected. (emphasis supplied) 5.3 Another decision on the same issue pertains to the ruling of Advanced Authority for Ruling in the case of Alcatel Ltd. We are well aware that the said decision is binding only the appellant and the department and cannot form a binding precedent. Nevertheless, the said decision examines in detail the various technical issues involved and has a significant persuasive value. The issues raised therein were also identical to those raised before us in the present case. Further, the technical expert of the appellant Mr. Manohar Rampal in his statement recorded under Section 108 by the investigating officer has also confirmed that the manufacturing process of optical fibre cables imported by their company was similar to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cal fibre cables of this heading (which may be fitted with connectors) consist of a sheath containing one or more optical fibre bundles, the fibres of which are not individually sheathed . Though in this Note also, no definition or explanation of the word sheath has been given, nevertheless some clue is available to discern as to what a sheath is meant to be. In the first part of the sentence in this Explanatory Note, it has referred to sheath as containing one or more optical fibre bundles. This, in turn, implies that sheath has to be something in the form of a jacket or container. The same meaning should logically be attached to it when interpreting the expression individually sheathed appearing in the latter part of the same sentence. The distinction, in the description of the goods in Question, namely, optical fibre cables in headings 85.44 and 90.01 lies in the fact that the former refers to individually sheathed fibres , whereas the latter (as the HSN Explanatory Note clarifies), refers to a sheath containing one or more optical fibre bundles, the fibres of which are not individually sheathed . In so far as the Section/Chapter Notes to Chapters 85 90 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inhibit cabling losses, by providing protection against mechanical damage, protection against moisture and debilitating environments, compatibility with fiber and cable manufacture, and compatibility with the jacketing process. Coatings include fluorpolymers, Teflon, Kynar, polyurethane, and many others E. . In the website Answers.Com, fiber optics glossary, the word coating has been taken to mean a protective layer applied over the fiber cladding during the drawing process to protect it from the environment. We think there is no need to multiply the references to drive home the point that coating is not treated as sheathing either in ordinary sense or in the scientific/technical field, (emphasis supplied) In support of their contention that the products in question should be classifiable under tariff heading 8544, the applicant referred to the HSN Explanatory Note for heading 8544 in which the issue of insulation of conductors has been dealt with. In our view, it is of no help to them. That Explanatory Note merely states that for insulation purpose, one or more coverings of insulating materials are generally used and in certain cases the insulation is obtained by an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inished optical fibre cable is then imported. Each of the subject optical fibres is manufactured individually; with its dual - layer acrylate coating and colouring processes either integrated into a single-step of production, or separated in two steps, clad and coated. The industry standard specifications for coated, coloured optic fibres are 250 +/- 15 microns, and it s AFC3/Colour-Lock or additional coloured layer process exceeds this standards. The amount of coating applied to its optical fibre is 60 to 62.5 microns thick and reflects an industry standard . The incorporation of AFC3 coating and Colour-Lock process as well as uncoloured coating further coloured during an additional manufacturing step protects the individual optical fibres from abrasions on the glass core and cladding that could cause short or long-term failures. The AFC3 dual acrylate coating and Colour-Lock are clearly visible to the naked eye, and are not proportionately very thin with respect to the diameter of the optical fibre core and cladding. It has been further stated by the applicant in their letter dated 13-12-2005, that early cable designs produced by Alcatel were based on an individual addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and buffer coating which is the same as the Alcatel products. 3. htpp://www.ciscopress.com/articles/article.asp?p=170740 seqNum= 4 rl=1 : This is an article from Cisco who are a multi-national telecommunication supplier and the article describes in detail the construction of optical fibre cables. 4. http://www.itu.int/itudoc/gs/promo/tsb/85003.pdf. : The ITU (International Telecommunication Union), is an organization for developments on standards world-wide in the telecommunication sector. The diagram on page 2 of this article shows the optical fibre and its configuration. 5. http://www.mrfiber.com/fiber-history.htm. : This website gives you a brief history of fibre optic technology and also the development of this technology. 15. An optical fibre consists of three main regions - (a) a central cylinder or core ; (b) a surrounding layer of material called cladding ; and (c) an outer coating over the cladding. The core transmits the lightwaves; the cladding keeps the lightwaves within the core and provides some strength to the core. The cladding has a lower refractive index (faster speed) than that of the core in order to keep the light in the core. The outer co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owed by them is loose buffer construction to which we have already made a reference earlier. They also assert that their products in question are having a core, cladding and a buffer coating. As explained by them, several fibres each of which has UV curable dual acrylate coating and a colour coating on it, with additional protective gel, are housed in a stainless steel tube for submerged applications or in a plastic tube for terrestrial applications. According to them, coating of thickness 60 to 62.5 microns will provide individual sheathing of the fibres. We have checked up the textual contents of the websites referred to by the applicant but are unable to find any support therefrom to their claim that the improved technique of coating including the UV curable dual acrylate coating is recognized in the modern cable design technology as sheathing of individual fibre. In fact, the applicant, has not produced any technical literature to show that primary or buffer coating of thickness 60-62.5 microns is accepted and acted upon in the industry as individually sheathing of the fibre. (emphasis supplied) 17. While the Corning website informs us that the optical fibre coating has co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the history of optical fiber were a single layer of protective material, dual-layer coatings are the industry norm today, as researchers discovered early on that they offered improved performance for the fibre. Thus, it is clear that what is reported to be the industry norm today is an improved version of coating only and not treating such coating as a sheath on individual fibre. That individual sheathing of the fibre is provided using present day technology i.e. UV curable resin of thickness 60-62.5 microns to provide a protective sheath is merely a claim or statement made by the applicant without any support from technical literature/documents. We are therefore not in a position to agree with this point of view. (emphasis supplied) 19. While on this subject, we cannot but notice another point of considerable significance concerning the interpretation of the expression individually sheathed fibres . From the manufacturing process of an optical fibre, which we have briefly narrated in the earlier part of this ruling, it is indisputably established that the primary or buffer coating is an integral part of the manufacturing of an optical fibre. In otherwords, a fibre is not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g (merely because it is called sheathing ) affords an optical fibre sufficient protection for it to be classifiable under heading 8544, the said ruling nevertheless noted, in this case, Alcatel has adequately demonstrated that its combination of 60 microns of dual acrylate coating and colouring does provide substantial sheathing protection to the individual optical fibres in its optical fibre cable . We however, noted that neither any authentic, independent and supportive technical information/literature/document/norms or standards nor any evidence showing any such practice being in vogue in the concerned industry, had been cited or analyzed in the rulings to show (a) that combination of 60 micron thick UV curable double acrylate coating with Colour Lock process is acknowledged and accepted as individually sheathing the fibre; (b) any norm or measure to judge what constitutes substantial sheathing protection ; and (c) that any coating which gives an optical fibre substantial sheathing protection is regarded as a sheath . It is worthwhile to mention that the heading 8544 does not employ the expression made up of fibres individually having substantial sheathing protection . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legal angles, we are inevitably led to the conclusion that the products involved in these applications, namely, optical fibre cables are not made up of individually sheathed fibres which is the basic criterion to be fulfilled by any optical fibre cable to merit classification under tariff heading 8544 of the First Schedule to the Act. That being the case, they cannot be classified under the heading 8544. Since the tariff heading 9001 specifically covers optical fibre cables other than those of heading 8544, the products in question would accordingly fall squarely under the heading 9001. Note 1(h) of Chapter 90. states that optical fibre cables of heading 8544 are not covered in Chapter 90. In other words, optical fibre cables made up of fibres that are not individually Sheathed would be classifiable under the heading 9001. Having regard to the tariff lay-out of the heading 9001, we find that the products in question would more precisely be classifiable under the tariff item 9001 10 00. The question posed by the applicant is therefore, to be answered in the negative. (emphasis supplied) We agree entirely with the above technical and legal analysis made by the AAR in the A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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