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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 ..... ) imported by the appellant valued at Rs. 21.76 Crore under Sections 111(m) and 111(o) of the Customs Act and has given an option to redeem the same on payment of a fine of Rs. 5 crore apart from imposing an equivalent amount of penalty on the importer under Section 114A of the said Customs Act. He has also imposed a penalty of Rs. 20 lakhs on Shri Narendra Patil, General Manager (Taxation) of the appellant firm under Section 112(b) of the said Customs Act. Aggrieved of the same, the appellants are before us. 2. The facts relevant to the case are briefly as follows. Acting on intelligence that M/s. RCIL was importing optical fibre cables (OFCs in short) through various ports, namely, Nhava Sheva; ACC, Sahar; Kandla CFS and Mundra by mis-classifying the same under CTH 85.44 and claiming the benefit of Notification No. 24/2005-Cus., dated 1-3-2005, investigation was initiated into the imports of OFCs by RCIL The investigation revealed that the appellant had imported OFCs under 35 Bills of Entry during April, 2003 to January, 2006 from different overseas suppliers. It was further noticed that the appellant had claimed exemption from payment of basic customs duty on OFCs under No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tical fibre at the preform stage, a high thickness of clad with a very smaller core is achieved in one go. To get thinner core with thicker clad, additional sheathing of pure silica tube is done at the preform stage itself. Next, two layers of coating of acrylate is applied and the same is cured using ultraviolet lamps. 3.4 As per the book Fibre Optics by D.A. Hill, the cladding layer is sometimes known as sheath but the protective outer covering of a bundle of fibres is also termed as sheath. Thus it is clear that cladding is understood as sheathing in the context of optical fibre manufacture. 3.5 As per the certificate given by Corning Cable Systems, Australia, who is one of the suppliers of optical fibre cables imported by the appellant, optical fibre cables supplied by Corning are classified under CTH 8544 70 90 by the Customs authorities in USA, Canada, European Union, China, Japan and other far east asian nations. 3.6 As per the book Fibre Optics and Lasers by Sri Ajoy Ghatak and Sri K. Thiagarajan of IIT Delhi, "optical fibres are drawn in an extremely clean environment and are coated with polymers as they are being drawn. Covering the glass fibre with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the goods imported under Sections 111(m) and 111(o) of the Customs Act. Section 111(o) is invocable only when there is a post-importation condition required to be fulfilled and which has not been complied with. In the present case, the appellant has not claimed the benefit of any exemption subject to fulfilment of post-importation conditions. Therefore Section 111(o) has no application whatsoever. Further in the present case, the goods are neither seized nor available physically and therefore, there cannot be any confiscation with an option of redemption. Reliance is placed on the decisions of this Tribunal in the case of Shiv Kripa Ispat Pvt. Ltd. - 2009 (235) E.L.T. 623 (Tri.-LB) and the Bombay High Court decision in the Rishi Shipbreakers case in Customs Appeal No. 170 of 2009. 3.10 Inasmuch as the goods are not liable to confiscation, penalty is also not imposable on the appellant. Further as the dispute relates to classification and interpretation of tariff entries, no penalty can be imposed. Reliance is placed on the decisions of the Hon'ble Apex Court in the case of Northern Plastics Ltd. - 1998 (101) E.L.T. 549 (S.C.) and of the Bombay High Court in the case of Gaur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for technical specifications of the imported and indigenously procured goods and he was well aware of the nature of the goods imported. Further in respect of the domestically procured goods by the appellant, the same were being classified under CTH 9001. Therefore, the classification declared in the bills of entry by the appellant was intentional misdeclaration and suppression of true facts and hence the extended period of time is rightly invocable in the present case. There is no evidence led by the appellant to show that the goods imported were examined prior to clearance as claimed by the appellant and the appellant had availed self-assessment scheme for clearance of the goods. In view of the above, he pleads for upholding the impugned order and rejecting the appeals. 5. We have carefully considered the submissions made by both the sides. 5.1 There are two issues for consideration and decision in the present case. They are, - (i) What is the correct classification of OFCs imported by the appellant RCIL, that is, whether they merit classification under CTH 8544 70 90 or under CTH 9001 of the Customs Tariff? (ii) Whether extended period of time could be in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... findings of the learned Commissioner that the coating of acrylate amounts to sheathing as the Explanatory Notes clearly mentions that the optical fibre cables drawn from glass have a very thin coating of plastics invisible to the naked eyes; which renders the fibres less prone to fracture. The Revenue has also not brought any material on record to prove that this thin coating of acrylate is not invisible to the naked eyes. The Appellants have also brought on record the Certificate given by the Department of Electrical engineering of SV Government Polytechnic, Bhopal according to which cables manufactured by the assessee are multifibre sheathed cables. They have also brought on record the opinion given by the Chief Electrical Manager (P) in the Office of Chief General Manager Telecommunication Projects, Bombay according to which the optical fibre cables in question is not made up by individually sheathed fibre. Revenue on the other hand, has not brought any technical opinion to rebut the opinion / certificate brought on record by the assessee. The Deputy Commissioner in the Order-in-Original No. 13/2002 has referred to the test report given by the Chief Examiner, CRCL, which, accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... them before the Authority and which they propose to import, be taken to be made up of individually sheathed fibres? 12. Before examining the applicant's contention on the modern technology aspect, we would first focus our attention on the relevant entries in the Tariff. Though the description of the goods given in the tariff heading 8544 both in the HSN and in the Act, inter alia, refers to the expression "made up of individually sheathed fibres', no explanation/definition of the word "sheath' or "sheathing' appears either in the HSN Explanatory Notes or in the Section/Chapter Notes to Chapter 85 of the Act. In the HSN Explanatory Note for the tariff heading 85.44 it has however been mentioned inter alia that "the heading also covers optical fibre cables, made up of individually sheathed fibres, whether or not assembled with electric conductors or fitted with connectors. The sheaths are usually of different colours to permit identification of the fibres at both ends of the cable." The word "sheathed" has been used in the text, but it is not explained or defined what actually constitutes a 'sheath' or individually "sheathing" fibre. All that the Note says is that the sheaths ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose; 4a A thin-walled, hollow part of a device or mechanism which surrounds another part. Coating - 3. A layer of any substance, as paint, tin, etc., spread over or covering a surface; Chambers Dictionary of Science and Technology Sheath (ElecEng) The covering of a cable. Coating (ElecEng) - The metallic sheets or films forming the plates of a capacitor; The New Oxford American Dictionary Sheath A close-fitting cover for something, esp. something that is elongated in shape, in particular; A cover for the blade of a knife or sword; A protective covering around an electric cable. Coating - a thin layer or covering of something : a coating of paint.. McGraw-Hill - Dictionary of Scientific and Technical Terms - Fifth Edition Sheath [ELEC] A protective outside covering on a cable. [..... ELECTROMAG] The metal wall of a waveguide. [SCI TECH] A protective case or cover Coating -1. Any material that will form a continuous film over a surface. 2. The film formed by the material. From the above, it is dear that as is understood and perceived not only in common parlance but also in scientific/technical sense, a "sheath" is something different from a "coating". Nowhere have thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the description of the goods and the submissions made in regard to Alcatel's products under consideration. On the nature of coating applied by the applicant during manufacturing process of optical fibre followed by them, this is what they have to say :- "Alcatel applies a dual acrylate coating called 'AFC3', and a colour coating called 'Colour Lock', during its optical fibre manufacturing process or uses uncoloured fibres that are further identified via the application of an additional coloured layer. The thickness of Alcatel's UV curable dual acrylate coatings and colouring is 60 to 62.5 microns thick in keeping with industry standards. The dual acrylate coating provides important fibre protection and structural integrity to the bare glass fibres, responsible for each fibre's tensile strength, to the extent that the bare glass fibres could not be used without it. The application of dual acrylate coatings/sheathing provides significant protection against abrasion of the optic fibres, enhances tensile strength and reduces the effects of long-term stress, in particular exposure to humid environments which can lead to failure due to a phenomenon called 'static fatiguer. After the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lastic tube depending upon whether the cable is for submerged or terrestrial applications respectively. Alcatel current cable design followp this technology where the individual sheathing of the fibres is provided using today's technology i.e. UV curable resin to provide protective 'sheath.' To support their contention the applicant also gave reference to the following website links along with a brief introduction to each one of them with regard to the optical fibre cable technology : "1. http ://www.corning.com/opticalfiber/guidelinesmagazine/ eguidelines/vol6/view. aspx?article=2&page=1&r egion=na&language=e : Corning are the biggest manufacturer worldwide of optical fibres. This is an article on coating in optical fibres. The article explains that the technology has changed from a one layer coating into a 2 layered coating and this has become an industry norm. The main reason being that the former was only for protection from scratches and scuff while current technology provides protection to the light carrying ability and preserves its strength. The article also explains that there are two types of these cables i.e. those used for laser applications and those used for tel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... step which is virtually an extension of the second step itself, the operator threads the strand through a series of coating cups (buffer coatings) and ultraviolet light curing ovens onto a tractor-controlled spool on which the finished product is wound. The finished optical fibre is then tested for various parameters like tensile strength, refractive index profile, information carrying capacity, operating temperature/humidity range, ability to conduct light underwater (important for undersea cables) etc. (Source - How Fibre Optics Work - an article by Craig C. Freudennich, Ph.D - in www.howstuffworks.com). The coating is typically an ultraviolet (UV) light-cured acrylate applied during the manufacturing process of the fibre. The "buffer coating" could also be constructed out of one or more layers of polymer, non-porous hard elastomers or high performance PVC materials. During the installation process, this coating is stripped away from the cladding to allow proper termination to an optical transmission system. The coating size can vary, but the standard sizes are 250 micrometer (one micrometer means one millionth of a meter, also called a micron) and 900 micrometer. The 250 microme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unication cable. The individual sheathing on each fibre provides protection from damage should such fibres rub against each other. That technologically improved quality of coating on each fibre ensures as good a protection as a 'sheath' can possibly provide to the fibre, is of no relevance in so far as the coverage of the expression "made up of individually sheathed fibres' in the tariff heading 8544 is concerned. (emphasis supplied) 18. On a careful consideration of the material submitted by the applicant and those gathered by us from various technical literature/websites, it has become evident that, optical fibres being highly sensitive and delicate products by themselves, need protection from physical and environmental stress of various kinds, right from the stage of their manufacturing till they are cabled to form optical fibre cables ready to be sold and purchased in the market. The degree of protection depends on the ultimate use which the resultant cables would be put to. It is also seen that the fibres and the cables made therefrom have to go through various rigorous tests before they become marketable. Applying dual acrylate coating on individual fibre at the manufac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hrough the various rulings given by the USA Customs, copies of which have been furnished to us by the applicant. All these rulings excepting one have been issued by the Commercial Rulings Division of USA Customs, New York while the Customs ruling HQ964632 detailing the process of coating and why this is considered as sheathing was issued by the USA Customs Headquarters in Washington. We have, studied them carefully with keen interest as they have dealt with the same issue which is before us. Much emphasis has been placed in the ruling on Alcatel's assertion that the amount of coating applied to its optical fibre is 60 microns thick and reflects "an industry standard' and that its incorporation of AFC3 coating and Colour Lock process protects the individual optical fibres from abrasions on the glass core and cladding that could cause short or long-term failures. The officials giving the ruling observed, "insofar as the subject optical fiber is individually coated with 60 microns of protective dual acrylate, it is our opinion that optical fiber cable composed of this optical fiber and coated with this combination of 60 microns of dual acrylate coatings and "Colour Lock' would be clas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey are used to make optical fibre bundles and optical fibre cables". This, only gives the general description of an optical fibre and does not in any way exclude from the purview of heading 90.01 optical fibres having thicker coatings or a coating which is visible to naked eye. What is actually excluded from the coverage of this heading is clearly stipulated in the same Explanatory Note where it states that "the heading, however, excludes optical fibre cables made up of individually sheathed fibres (heading 85.44)". It has further been clarified in another part of this Explanatory Note that "Optical fibre cables of this heading (which may be fitted with connectors) consist of a sheath containing one or more optical fibre bundles, the fibrers of which are not individually sheathed". So, the only thing that matters in deciding whether optical fibre cables would fall within or go out of the ambit of tariff heading 9001 is whether they are made up of individually sheathed fibres or not. Based on various information, technical and otherwise, gathered by us and highlighted in foregoing paras, we are of the view that the nature and depth of coating or the degree of protection it seeks to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of Plasmac Machine - 1991 (51) E.L.T. 161 (S.C.), C.K. Gangadharan v. CIT - 2008 (228) E.L.T. 497 (S.C.) = 2009 (16) S.T.R. 659 (S.C.) and BSNL - 2006 (2) S.T.R. 161 (S.C.) since the cause of action for each assessment is distinct, yet Revenue has to prove that the appellant misdeclared the description of the goods under import with an intent to evade payment of duty. No such evidence is forthcoming in the instant case and the only evidence adduced is that Mr. Manohar Rampal was aware that the goods merited classification under CTH 9001 as indigenously procured goods were being classified under the said heading. We are afraid this evidence is not conclusive enough to establish the Revenue's case of misdeclaration and suppression. We observe that the goods were being imported by the appellant over a long period of time and they have been classifying the same under CTH 8544 all along. The goods were also examined or ought to have been examined by the Customs at the time of importation. The description of the goods given in the bill of entry was as per the description given in the corresponding invoices. Therefore, as held by the Hon'ble Apex Court in the case of Northern P ..... X X X X Extracts X X X X X X X X Extracts X X X X
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