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TMI Blog2023 (3) TMI 1178X X X X Extracts X X X X X X X X Extracts X X X X ..... to hold that IFWT cannot function without 12V SMPS. It is in the nature of energy supplying device which would regulate voltage flow of electricity. IFWT can function even if 12V SMPS is not connected to it. This means IFWT can function if directly plugged to an energy source. Thus there exists no doubt to hold that SMPS is not an integral part of IFWT. The goods imported cannot be considered as part of IFWT. The notification exempts parts, components and accessories of mobile handsets including cellular phones from customs duties when imported. In the case of STATE OF PUNJAB OTHERS VERSUS NOKIA INDIA PVT. LTD. [ 2014 (12) TMI 836 - SUPREME COURT] , the Hon ble Apex Court was considering the issue under the Punjab Value Added Tax Act, 2005 where in the assessee, Nokia India Pvt. Ltd., had sold the cell phone along with battery charger as composite package and discharged lesser duty @4% on the charger. The appeal by the state that assessee has to pay tax @12.5% on the battery charger was allowed. In the said case, the Hon ble Apex Court did not consider as to the interpretation of accessory in terms of Notification No.21/2005-Cus. - Again, in the case of MEHRA BROS. VERSUS JO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r supply system (UPS), voltage stabilizers, regulators and inductors. The imported goods did not appear to be complete unit of SMPS. Batteries, metal casting etc. was required to make a complete unit of SMPS. In Notification No.25/2005-Cus. dt. 01.03.2005, the entry under CTH 85299090 against Sl.No.16 refers to 'Parts'. Again in respect of Central Excise Notification No.6/2006-CE dated 01.03.2006, the entry under Chapter 85 or any other Chapter against Sl.No.31 refers to Parts, components and accessories of mobile handsets including cellular phones . It appeared that the goods imported are parts of Switch Mode Power System (SMPS) and not parts of mobile handsets and cellular phones/fixed wireless phones. Show cause notice was issued proposing to reclassify the goods under Section 85049090 and for demanding the differential duty along with interest. After due process of law, the original authority determined the goods to be classified under CTH 85049090 and thereby denied benefit of Customs Notification No.21/2005 and Central Excise Notification No.6/2006. The proposal for demand of differential duty of Rs.55,87,185/- was confirmed. The appellant filed appeal against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Customs Duty (BCD) under the Notification No. 21/2005 Cus. and from Countervailing Duty (CVD) under the Notification No. 6/2006 CE. The exemption was subject to the importers following the procedure prescribed under the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996 ( 1996 Rules ). Though the Appellants had claimed the CVD exemption under Notification 6/2006-CE, the exemption was also available under Notification 21/2005-Cus. 6. Vide the Impugned Order-in-Appeal dated 13.09.2011 (Impugned Order), the Ld. Commissioner has held that the subject goods are ineligible for the exemption under the above Notifications on the ground that though the subject goods are parts of SMPS, these are not directly parts of IFWT. The view of the department is that since benefit under the Notification is available only to parts, components and accessories of mobile handsets including cellular phones, the benefit cannot be extended to parts of SMPS which are not directly parts of IFWT. On the basis of the above conclusions, the Ld. Commissioner has confirmed the differential duty to the tune of Rs. 55,87,175/- in respect of the subject goods. 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equirements including the system configuration to which the SMPS must adhere to. The subject goods imported in the instant case, correspond to these system configurations mentioned in the Generic Requirement (GR). It is asserted by the Ld. Counsel that in para 9, the Impugned Order accepts that the subject goods are parts of SMPS. 11. Thus, it is submitted that the subject goods intended for manufacture of SMPS must be held to be eligible for exemption since the benefit under the Notification is available to all parts, components and accessories whether or not these are used directly in the manufacture of IFWT. 12. The Ld. Counsel submitted that the Jurisdictional Excise Authorities have not questioned the classification. The Appellant had registered with the Central Excise for the purpose of the 1996 Rules. The jurisdictional Assistant Commissioner of Central Excise accepted the impugned components as parts or components required for the manufacture of CDMA 2000 1x IFWT for voice and two-way SMS, patch panel antenna, 12V SMPS power system, RF Feeder Cables Antenna, connectors and accessories, provided the Annexure III to the 1996 Rules and has also accepted the bond execut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onary Ninth Edition Accessory - Something of secondary or subordinate importance. The Law Lexicon by P. Ramanatha Aiyar (4th Edition, 2010) Accessories. The term accessories is used to describe goods which may have been manufactured for use and an aid or addition. Accessories are not necessarily confined to particular machineries for which they may serve as aids. The same item may be an accessory or more than one kind of instrument. Annapurna Carbon Industries v. State of A.P. AIR 1976 SC 1418, 1421. An accessory is something supplementary or subordinate in nature and need not be essential for the actual functioning of the product. An object or device not essential in itself but that adds to the convenience or effectiveness of something else. 17. To stress that the imported goods qualify as accessories to IFWT, it is submitted by the Ld. Counsel that SMPS adds to the effectiveness of the IFWT and therefore can qualify as an accessory of IFWT. SMPS was procured by BSNL for application in rural areas wherein there is high voltage fluctuations and regular power cuts. Without SMPS, regulated suppl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deciding on the applicability of benefit under Notification No. 21/2005 to VRLA batteries, held that the batteries cannot be considered as parts or accessories to IFWT since these batteries do not contribute to the efficiency or effectiveness of the telephone but merely provide power in the absence of electric supply from the mains. In other words, though the Tribunal has recognised that the battery operates as a secondary source as power, the batteries have been held to be not a part or an accessory to IFWT. 23. Ld. Counsel submitted that, however, the function performed by the SMPS is integral to the functioning of the IFWT as the same regulates the supply of power to IFWT. Thus, while battery may be an alternative source of power, SMPS continuously regulates the power supplied to IFWT. Therefore, the decision in ACD Communications (supra) cannot be equated to the present case due to the difference in factual scenarios in the matters. 24. Further, subsequent to the decision of the Tribunal in ACD Communications, the Hon ble Apex Court in State of Punjab v. Nokia India Pvt. Ltd., 2014 (12) TMI 836 Supreme Court, held that the charger of a mobile phone is an accessory to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. 28. The Purchase Order dated 10.05.2006 adverted to by the Ld. Counsel for appellant is only expression of interest for purchase of the said telephone instruments (IFWT) along with other equipments by the purchaser viz. BSNL. In para 5.1 of the purchase order it is stated that the supply of 3,73,736 Nos. 2000 1X WLL CDMA Integrated FWTs shall include Subscriber Terminals, SMPS Power System, RF Feeder Cable, Antenna Connectors, Patch Panel Antenna, Accessories (without internal battery) etc. as per Bill of Material enclosed . The scope of Purchase Order does not support the argument of the appellant that the equipments mentioned therein cannot function independently. Therefore, the reliance placed on the Purchase Order for availment of Notification benefit of duty-free import is futile. 29. It is also submitted by Ld. A.R that as per GR No.GR/RST-01/01 JUN 2004 issued by the Telecommunications Engineering Centre (TEC) specifying generic requirements for CDMA 2000 1X Remote Stations (RS), 3.1.4. The RS may be of following types: (i) Fixed Wireless Terminal (FWT): FWT is a CDMA 2000 1x radio terminal to which conventional fixed telephony equipment such as telephon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inductors'. The Ld. A.R submitted that the imported goods are neither parts or accessories of IFWT. The question as to whether the imported goods are accessories have not been examined by the adjudicating authority or the Commissioner (Appeals). 32. Ld. A.R prayed that the appeal may be dismissed. 33. Heard both sides. 34. The issue to be decided is whether the appellant is eligible for benefit of Notification No.21/2005-CE (Sl.No.31) with regard to the goods imported and declared as '12V SMPS consisting of main PCB, lightening protector, DC/AC cables, Fuse/Fuse holders and others'. 35. According to the appellant, SMPS is a part of IFWT without which the IFWT cannot function. Learned Counsel for the appellant explained that scope of supply included IFWT subscriber terminals along with Switch Mode Power System (SMPS). It is argued that this SMPS integrated with the IFWT ensured that the power supplied to IFWT was constantly regulated and would not exceed 12V during the functioning of IFWT. 36. On perusal of the purchase order dated 10.05.2006, it can be seen that the requirement to supply SMPS along with IFWT is mentioned in Sl.No.5 which reads as under : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996. In the said letter the appellant has referred to Notification No.21/2005-Cus. dated 1.3.2005 and also stated that said notification would apply and the estimated duty payable on the goods imported after availing the notification benefit would be NIL. From the documents, it is clear that the goods imported have been used to make SMPS power system. 38. Before appreciating as to the eligibility of the notification for the goods imported, it would be worthwhile to understand the nature and function of the 12V SMPS. The appellant has produced ICOMM Service Manual showing the image of SMPS as under : 39. In Chapter-1 of the said manual, the overview of 12V SMPS is given as under : 40. The appellant has classified the goods under 85299090 as parts of IFWTs. It is the case of the appellants that the imported goods in the nature of main PCB, lightening protector, DC/AC cables etc. were used for making SMPS which is integral part of IFWT and therefore the imported goods are part of IFWT. The department has determined the classification to be under 85049090 and has also taken the view that imported g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 43. The appellant has furnished Central Excise Registration Certificate dated 6.6.2006. In the Annexure at Sl. No.6 the parts that go into the making of 12V SMPS is given. Annexure to the Registration Certificate reads as under : ANNEXURE TO REGISTRATION CERTIFICATE NO.2/2006 Dated 06.06.2006 (Revised on .01.2007 as per the request of M/s.ACD Communications Pvt. Ltd., Yanam vide their letter dated 17.01.2007) List of Parts, Components and Accessories of Cellular phones i.e. Integrated Fixed Wireless Telephones model No.ACP 606, operating on Cellular Technology. 1) Handset Assembly consists of Handset, Screw, Screw Stopper 2) Other Parts consists of Hook, Speaker, Speaker button, RF Cable with Connector, Antenna, Coiled cable, Screws 3) Front Case Assembly consists of Front Case, LCD Module, Keypad PCB, Key pad, Wall Hook 4) Back Case Assembly consists of includes back case, UIM Cover, Battery Cover, Battery Spring 5) Main PCB Assembly consists of Main PCB, CDMA Module, ands free Mic, Handset Socket 6) 12V SMPS consists of Main PCB, Lightning Protection, DC/AC Cable, Fuse/Fuse Holder and Other i.e. Gum paper, Screws 7) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to cater the load (650mA max.) battery charging requirements of 1 4A at C/5 rate for 7AH battery and C/10 rate for 14AH battery. Complied 46. Ld. Counsel has argued that the parts imported by the appellant are the very same which has been described in the G.R. except for the battery mentioned in the description. The goods imported included all the items which have been mentioned therein as part of 12V SMPS. That therefore SMPS being an integral part of IFWT, the parts imported have to be considered as pars of IFWT. Ld. counsel has also relied on the technical specification dated 13.09.2006 to submit that it has been certified that 12V SMPS for CMDA FWT s cleared by them conforms to the TEC (GR) specifications. 47. There is no doubt that the parts imported have been used to make/assemble an SMPS. The question is whether SMPS is an integral part of IFWT so as to make the parts of SMPS to be part of IFWT. From the specifications of the product placed before us, we understand that SMPS is intended to be used in Float-cum-charge mode as a regulated DC power source. It is simply an electrical power supply that incorporates a switching regulator to co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oticed in para 16 above. It is argued that an accessory need not be essential for actual function of the product but is used to add convenience or effectiveness. That the SMPS increases the effectiveness of IFWT by providing regulated power supply and has to be considered an accessory. To support the argument that SMPS would qualify as an accessory of IFWT, the Ld. counsel has placed reliance on the Hon'ble Supreme Court's judgment in the case of Mehra Bros. Vs Joint Commercial Officer - 1991 (51) ELT 173 (SC). The relevant part of this judgment is as under : 6 . In Supreme Motors v. State of Karnataka case (supra), the Karnataka High Court has taken different view. It held that the car seat covers, at best could make the seat more comfortable, but do not serve as aids to the vehicle as a whole, and therefore, they must fall outside the ambit of Entry 73 of the Second Schedule to the Karnataka Sales Tax Act, 1957 and was not exigible to sales tax at 13 per cent. Undoubtedly this ratio would help the appellant. The learned Judges laid emphasis thus:- Every part is useful to the car for its effective operation likewise should be the aid of the accessories in order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of U.P. under Section 3, 3-A of the U.P. Sales Tax Act (15 of 1948) with the same reasoning, as was given by the Karnataka High Court to be not accessories. We express that the Allahabad High Court also has not laid down the test correctly. 7. Thus considered we hold that car seat covers or upholstery are accessories as an addition; an adjunct; an accompaniment for comfortable use of the motor vehicles or for adding elegance to the seat. Admittedly the appellant manufactured car seat covers and upholstery for sale as an automobile part in the regular course of business. Therefore, they are exigible to sales tax at 13 per cent under Entry 3 of Schedule 1st read with Section 3 (3) of the Act. Therefore, we do not find any ground warranting interference. The appeals are accordingly dismissed but in the circumstances without costs. 51. Another case relied is the case of State of Punjab Others Vs Nokia India Pvt. Ltd. - 2015 (315) ELT 162 (SC) wherein the Hon'ble Apex Court held that mobile/cell phones charger is accessory and not a part of cell phone. The battery charger cannot be held to be a composite part of the cell phone but is an independent product which can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a car seat cover. The seat cover is a complete product which enhances the use of the seat. Similarly, in the case of State of Punjab Vs Nokia India (supra) the issue decided was whether the mobile charger is an accessory to the mobile phone. In the case on hand, the goods imported are parts of SMPS. The benefit of notification is available only to parts, components, or accessories of cellular phones. The benefit is not applicable to parts of an accessory of a cellular phone. The Main PCB, Lightening protector etc. used in SMPS cannot be considered as accessory of IFWT. 54. We also have to mention that in the appellant's own case the issue that was decided is as to the exemption claimed under the very same notification in respect of batteries (VRLA) imported by them for use in IFWT. Tribunal held that batteries cannot be held as parts, components or accessories. The relevant part of the Tribunal decision reads as under : 6 . He argues that the impugned batteries are designed to fit into the SMPS and therefore they are integral parts of the SMPS. However, SMPS being a part of the IFWT, the batteries should also be treated as a part of the IFWT. He also argues that batt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He further states that in the following cases, it has been held that battery cells are articles by themselves and are not parts of any machines :- (i) M/s. Webel Telecommunication Industries v. CC, Calcutta - 1995 (76) E.L.T. 163 (ii) M/s. Electronic and Engineering Co. v. CC, Bombay - 1997 (92) E.L.T. 382 (iii) CC, Madras v. Kodi Medical Electronics Pvt. Ltd. - 1998 (98) E.L.T. 535 (iv) M/s. Titan Watches Ltd. v. CC, Coimbatore - 1999 (108) E.L.T. 643. ... ... .... 10 . It is an admitted position that the impugned VRLA batteries cannot be used inside the telephones because of its size as also the fact that it is not a dry cell battery but a lead-acid battery containing electrolyte. It is also admitted that the VRLA batteries are actually placed in the Switch Mode Power Supply (SMPS) which supplies power to the telephone. During the argument of the case, the ld. Advocate has indicated that the IFW telephones are typically used in rural areas and since electrical power from the transmission lines are often interrupted, the SMPS is useful since automatically it switches from the main power supply to VRLA battery used in the SMPS, thereby ensuring continuous functi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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