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TMI Blog2007 (10) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... of duty of Customs of Rs. 43,84,68,532/- on the following components and parts :- 1. LCD screen; 2. Feeder Cables; 3. Batteries, 4. Printed Circuit Boards; 5. Input Out Cables; 6. Fuse; 7. Chargers Imported by the appellants herein for the manufacture of the two models of CDMA WLL phones, on the ground that the benefit of exemption in terms of Notification No. 21/2002-Cus dated 1.3.02 (sr.no.320 of the table thereto), and Notification No.21/2005-Cus dated 1.3.05 is not admissible to such parts and components as CDMA WLL telephones are not Cellular Phones, and against penalty imposed on the manufacturer and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... System for Mobile Communication (GSM) technology used for cellular mobile communication. Hand Held sets which comply with specification IS - 95A can be used in WLL. As such technology a Cellular Mobile Phone cannot be used for the portable WLL service. 10(iii) As discussed by the Hon'ble CESTAT in its decision in the case of Tata Teleservices Ltd v. Commissioner of Customs, Chennai, reported in 2004 (168) ELT 181 (Tri. Del), Cellular Telephone is defined in Work Book Encyclopedia as "Cellular Telephone is a movable telephone unit. It allows people to communicate over a wide area by using a combination of radio, telephone and computer technology". This Encyclopedia also explains the manner in which a Cellular telephone functions as under: "A cellular communication system consists of three main parts : (1) a cellular telephone, (2) a net work of low powered radio aerials, and (3) a central switching office. When a call is made on a cellular telephone, radio waves carry the message to an aerial transmitter. This aerial is centrally located in a geographical area called a cell. Cells vary in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f - Post March, 2005 (8 digit tariff) Tariff Item Description of goods 1 2 85.25 Transmission Apparatus For Radio Telephony, Radio Telegraphy, Radio Broadcasting or Television, Whether or Not Incorporating Reception Apparatus or Sound Recording or Reproducing Apparatus; Television Cameras; Still Image Video Cameras And Other Video Camera Recorders; Digital Cameras 8525 20 - Transmission apparatus incorporating reception apparatus: ---Two way radio communication equipment: 8525 20 10 --- Walkie talkie set 8525 20 12 --- Cordless handset 8525 20 13 --- Car telephone 8525 20 14 --- Transportable telephone 8525 20 15 --- Marine radio communication equipment 8525 20 16 --- Amateur radio equipment 8525 20 17 --- Cellular telephone 8525 20 19 --- Other Customs Tariff 85.25 Transmission Apparatus For Radio Telephony, Radio Telegraphy, Radio Broadcasting Or Television, Whether Or Not Incorporating Reception Apparatus Or Sound Recording Or Reproducing Apparatus; Television Cameras; Still Image Video Cameras And Other Video Camera Recorders; Digital Cameras ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into adjacent, non-overlapping, hexagonal shaped cells. However, in practice, they are hexagonal in shape. Each cell has its own transmitter and receiver called base station, to communicate with the phones in that cell. All the calls are routed through the base station. Each base station is equipped with a low power transmitter. A mobile switching station co-ordinates the hand-off of phones crossing the cell boundaries. The advantage is obvious i.e. the communication is uninterrupted even if the person moves from one cell to another cell. 9.4. The following technical books show that CDMA is one of the standards of digital cellular communication technology. (a) Mobile Cellular Telecommunications, Analog and Digital Systems, 2nd Edition, published by McGraw-Hill International Edition - at pages 1494, and 1499 onwards; (b) Mobile Communication Satellites, published by McGraw-Hill Inc. - pages 1531 to 1542 on cellular phones based on GSM; some models of cellular phones - 1545 to 1547; cellular phones based on CDMA and TDMA technology - page 1552 & 1553 (c) Wireless Network Evolution 2G to 3G, published by Pearson Education - pages 1559 to 1561 on Market Tren ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent to LG's LSP 340 model of fixed wireless phone involved in the decision of the Supreme Court in Tata Teleservices; (b) Opinion of IIT, Bombay - at pages 292 to 293 of Vol.1 of the paper book - explaining what is cellular technology, comparison of cellular technology based on GSM and CDMA and certifying that the two models of the phone in question work on cellular technology and are hence cellular phones; (c) Clarification dated 16.10.06 written by Department Of Telecommunication in the Ministry of Communications and Information Technology of Govt. of India to the Dy. Commissioner of Customs, Goa - at page 294, certifying that the two phones in question are cellular phones as they operate on cellular technology. The DOT has also stated that in view of the decision of the Supreme Court in Tata Teleservices, the exemption is available to all telephones including fixed wireless telephones working on cellular technology. This clarification was given by the DOT at the instance of the customs department itself; (d) Clarification dated 5.12.06 written by Telecom Regulatory Authority of India - at page 295 to the Dy. Commissioner of Customs, Goa stating that there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Explanatory Notes to Heading 85.15 and Heading 85.25 have been suitably amended (page 1442). 13. The circular dated 27.6.03 of the Board (page 1461), after holding that CDMA phones work on cellular technology, restricted the exemption to hand held mobile phones only. 13.1. The Mumbai Bench of the Tribunal in Bhagyanagar Metals Ltd. vs. CCE, Goa - 2005 (180) ELT 370 (Tri) - page 1468, held in favour of the assessee and held that CDMA Fixed Wireless Telephone LSP 340E of LG make, is a cellular phone and therefore entitled to exemption under Sl.No.313 of Notification No.21/02-Cus. The Tribunal also held that the circular is not correct in holding that CDMA fixed wireless phones are not cellular phones. The Tribunal also held that so long as the phones operate on cellular technology, they are cellular phones and hence entitled to the exemption. While holding so, the Tribunal did not agree with the decision of a co-ordinate Bench of the Tribunal in Tata Teleservices Ltd. - 2004 (168) ELT 181 (Tri). The Bombay Bench of the Tribunal held in para 3(b) as under:- "Term cellular phones cannot be restricted only to hand-held cellular phones as that would be placing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... …... ...Since there is no dispute that the technology used in LSP 340 and the hand held mobile phone is the same there is no warrant to limit either the tariff entry or the exemption notification to hand held cellular phones. Neither the range nor the size would make any difference." 13.5. The Delhi Bench of the Tribunal in its decision reported in 2004 (174) ELT 66 in Tata Teleservices, followed its earlier decision reported in 2004 (168) ELT 181. The Supreme Court, by its decision reported in 2007 (208) ELT A82, set aside the decision of the Tribunal in 2004 (174) ELT 66. 13.6. The Bangalore Bench of the Tribunal in Icomm Tele Ltd. vs. CCE - 2007 (79) RLT 354 (page 1488) has held that CDMA WLL phones are cellular phones and entitled to exemption from payment of Central Excise duty. In para 6.2 it was held as under: "6.2 These handsets which work on CDMA technology have all the features of cellular phones working on GSM technology. The Commissioner has emphasized the difference between the cell phones, which work on GSM technology, and the WLL phones, which have a limited coverage area and holds that the cell phones which work on GSM technology o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nology. The Supreme Court has also held in para 7 of its judgement that the technology used by hand held phones (i.e. GSM) and the fixed wireless phones is same, namely cellular technology. It has been clarified by the DOT and others including BSNL, that the phones in question are cellular phones and compares with the LG's phone model LSP 340. (which was accepted as working on cellular technology on the basis of DOT and Qualcomm opinions.) Since the phones in question work on cellular technology, the appellants are entitled to the exemption. 15. The phone model LSP 340 of LG make and the phones in question are identical to each other and conform to the same specification of Telecom Engineering Centre and are deployed by BSNL in the same network. The comparison chart at page 959 (Vol. III of paper book) show that the phones in question are identical to the phone model LSP 340 of LG make, considered by the Supreme Court. In fact, the phones in question supplied by the appellants to BSNL were deployed by BSNL in the same network, where they had deployed LSP 340, supplied by the competitors of the appellants to BSNL. 15.1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the phones in question will fall under heading 85.25 as "transmission apparatus for radio-telephony, whether or not incorporating reception apparatus". 16.2. For the period after 1.3.05, the Commissioner has classified the phones in question under the residuary category "Others" under tariff item No. 852520.19, disregarding specific tariff item No.852520.17 covering "cellular telephone". The Board in its circular dated 27.6.03 has clarified that CMDA WLL is a recent development and clarified that CDMA WLL fixed wireless phones work on cellular technology. It is settled by the following decisions that advancement in technology has to be taken into account, while considering the classification of the goods or extending the exemption:- (i) Porritts & Spencer Vs. State of Haryana 1983 ELT 1607 (SC) (ii) CC Vs. Lekhraj Jessumal & Sons 1996 (82) ELT 162 (SC) (iii) CST Vs. Agarwal & Co. 1983 ELT 116 (Bom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms used in cellular technology only (see page 1499 and 1500 of compilation containing technical books). Hence, the CDMA WLL phones in question are also cellular phones only. 18. The Commissioner has referred to the advertisements inserted by BSNL on their various wireless telephone services (GSM and CDMA), in paras 28 to 46. According to the Commissioner, BSNL has advertised the CDMA WLL phones as wireless phones and not as cellular phones. The Commissioner has also relied upon the decision of Supreme Court in State of Goa v. Colfax Laboratories Ltd. - 2003 (158) ELT 18 (SC) to hold that advertisements can be taken into account for deciding the classification. However, it is well settled by large numbers of decisions of Tribunal, High Courts and Supreme Court that advertisements cannot be the basis for classification. 18.1 The ratio of the decision of Supreme Court in Colfax Lab. is that Old Spice manufactured by the assessee is not a medicament but a cosmetic. In that context, the Supreme Court referred to the advertisement issued by the assessee to the Public inviting fixed deposits, wherein the assessee has treated himself as the manufa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese two systems appear to be similar and are often confused with each other; the requirements for the two systems are significantly different. Mobile Telephone system is primarily meant to provide telephony for people on the move and the telephone is meant to keep the person connected while he/ she is away from home and office. The key here is universal coverage. Wireless in Local Loop (WiLL), on the other hand, is meant to serve subscribers at homes or offices, where the telephone provided must be at least as good as wired phone. Therefore, even though the mobile communication systems and wireless in local loop systems may appear to be similar and sometimes even used interchangingly, the requirements are quite distinct. This paper also shows that cell concept is a concept of wireless radio telephony and not limited to cellular telephony, as was stated by Shri Harshwardhan Pagay, during the investigation of this case, as Cell radius is perhaps the most important factor governing the spectrum utilisation in a wireless system and plays the dominant role in determining the subscriber density given a certain frequency spectrum." From the extracts reproduced , it is clear that the aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carriers and new telecom carriers a powerful weapon to fight for market share. In view of the worldwide deployment and growing momentum of CDMA WLL, there is no doubt that CDMA WLL systems, which integrate fixed network infrastructure and radio access, will become the new direction of telecom development following PSTN and Public Land Mobile Network (PLMN)." 19.5 In paras 41 and 42, the Commissioner has referred to the website of BSNL relating to engineering instructions on LG make CDMA WLL phones which is reproduced below:- "M/s BSNL, which were the exclusive buyers of these two CDMA WLL phones, in their two Engineering Instructions titled "INTRODUCTION TO WLL (CDMA) - LG MAKE" and "Acceptance Testing of WLL (Rural) LG Make (EI No. Electronic Switching/ WLL/ AT-03)" states that CDMA Wireless in Local Loop system is a digital wireless local loop system is a digital wireless local system based on CDMA technology evolved from the existing wired and CDMA digital cellular system. WLL is a wireless local communication network which is capable of providing users access to "PSTN" Network and associated facilities supporting local loop functionalities to serve users with voice and non - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove sites relied upon by the Commissioner refer to WLL as wireless technology. These websites also state that radio waves are used for communication by WLL. However, none of the websites relied upon by the Commissioner state that WLL is not a cellular phone. They are silent on this aspect. Hence, the information provided in these websites cannot be relied upon. They compare the CDMA WLL with GSM network. GSM standard alone is taken as cellular technology by the Commissioner. There is no basis for assuming so and further, as clarified by the Board itself, GSM and CDMA WLL operate on cellular technology. 20. Reliance on the decision of Telecom Dispute Settlement Appellate Tribunal in Tata Teleservices Ltd. The decision relied upon by the Commissioner in para 47 onwards relates to the advertisement issued by Tata Teleservices to the effect that their CDMA WLL is a walky meaning thereby it is a mobile phone. The said advertisement claimed that the CDMA WLL phone can be taken anywhere. This was objected to by other service providers stating that CDMA WLL cannot be taken out of customer's premises. The issue before the Telecom Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Metals, which was set aside by the Supreme Court. The Commissioner has come to the conclusion that in the present case, the department has adduced enough evidence to show that CDMA WLL phones are not cellular phones and they do not operate on cellular technology and hence the benefit of the decision of Supreme Court in Tata Teleservices is not available to them. For the same reasons, the Commissioner has also declined to apply the circular dated 20.4.06 to the present case. 22.1. We note that phone model LSP 340 considered by the Supreme Court was also a CDMA WLL phone. The department has not disputed that the said CDMA WLL phone was a cellular phone. That being so, all CDMA WLL phones are cellular phones. It is not possible to accept that one model of CDMA WLL phone is a cellular phone but other model of the CDMA WLL phone is not a cellular phone. Either the CDMA WLL phone is a cellular phone or it is not. It is not dependent upon the manufacture of the phone and the service provider. Hence, the assumption and the reason that the phones in question are not cellular phone is incorrect on fact ..... X X X X Extracts X X X X X X X X Extracts X X X X
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