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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 ..... o.6/2002-CE dated 1.3.02 on the ground that the two models of phone in question viz. TI-ETS 2288 and TERA DX -22B are not Cellular phones. The Customs appeals arise against the confirmation 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 its General Manager. In both the cases, extended period of limitation has been applied against the appellants (The excise show cause notice dated 24.11.05 covers the period December, 2003 to September 2005 while the Customs show case notice dated 8.12.05 covers the perio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 size and number, according to the area of the network. The transmitter sends the message to a computerized central switching office. The central switching office transmits the message to a local or long distance telephone company, where the call is sent to its destination. As a caller moves across a service area, the call is automatically passed from one transmitter to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eras; 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 8525 20 - Transmission apparatus incorporating reception apparatus: ---Two way radio communication equipment: 8525 20 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of communication, the geographical area is divided 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 Pears ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivalent 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 no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 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 an uncalled for restriction on ..... 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 only could b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. The tender of BSNL is at page 641 of the paper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner 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.) We therefore hold that, for the period subsequent to 1.3.2005, the phone models in dispute fall for classification under Heading 852520.17. 17. References to Tender of BSNL and purchase order of BSNL placed on the appellants not relevant to the issue involved in the present appeal 17.1. The Commissioner has referred to the tender documents and also the purchase orders of BSNL in paras 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso 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 manufacturer of cosmetics. The ratio of Supreme Court is not that advertisements can be looked into for deciding the classification of the product under the Central Excise tariff. 18.2. Be that as it may, in the present case, the BSNL has not advertised that CDMA WLL phone are not cellular phones. The advertisement refers to the CDMA WLL phones as wireless phones. In the advertisements referred to in the impugned order, BSNL has not stated that CDMA WLL are not cellular phones. Hence, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 author has concluded that WLL phone is not a mobile phone. The author has not addressed the precise issue raised in the present case i.e. whether CDMA WLL phones are cellular phones or not. 19.2 In para 38, the Commissioner has referred to the article appearing in the website of International Engineering Consortium on Wireless in Local Loop which is as under:- "The International Engineering Consortium online tutorial titled "Wireless in Local Loop" defined the system that connects subscribers to the public switched telephone network (P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 - voice services. WLL uses the radio waves to transmit signals over the "last mile" i.e. the distance between the subscriber premises and the nearest switching point. Also WLL substitute the copper wire upto the subscriber's premises or part of the connection and can be accessed by various wireless technologies. It is an application of radio technology and personal communication system. It uses multiple access radio system instead of wires in the distribution/ access network. It is also used in remote areas, where it is uneconomical to lay cables and also for rapi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... self, 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 Tribunal was not as to whether CDMA WLL phone is a cellular phone or not. Hence, the decision relied upon by the Commissioner does not advance the case of the Revenue. These decisions related to violation of the licence condition by the operators. A licence is required by the operators to provide telecommunication services in India. The licence issued by the Government to the operators stated that the fixed wireless telephones should not be taken outside the customers- premises. Contrary to the licence condition, the operators advertised the phones to be "walky", giving an impression to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ones. 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 facts and on technology also. 23. Information downloaded from the website of International Engineering Consortium on WLL states that WLL will be implemented across five categories of wireless technology viz. digital cellular, analog cellular, personal communication network, cordless telephones - 2nd generation and proprietary implementations. Under the heading digital cellular, CDMA is mentioned which itself shows that CDMA WLL is based upon digital technology. We also note that in the world wide database of CDMA, Tata Teleservices is shown as one of the service providers using CDMA WLL and Supreme Court decision in Tata Teleservices is in respect of import of fixed wireless telephone model LSP 340 in CDMA WLL net work. 24. In the light of the above discussion, we hol ..... X X X X Extracts X X X X X X X X Extracts X X X X
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