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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 ..... and accessories of mobile handsets including cellular phones are exempted from Customs duty. The Department was of the view that the imported goods are nothing but parts of Switch Mode Power System (SMPS) classifiable under CTH 85049090 which is a specific tariff heading for parts of electrical transformers, converters, inverters, uninterrupted power 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 du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cribed as 'Parts of Integrated Fixed Wireless Phone Operating on Cellular Technology (Model No. ACP 606) 12V' SMPS consisting of Main PCB, lightning protection, DC/AC cables, fuse/fuse holder and others' (subject goods). 5. The Appellant classified the subject goods under Tariff Item 85299090 and claimed the benefit of exemption from Basic 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 availab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods are parts of IFWT. 10. In the instant case, the SMPS manufactured by the Appellant are made in accordance with GR No. GR/SMP-02/01 JAN 2004 ("GR") which specifically provides that requirements must be met for the manufacture of a 12V SMPS intended for use with CDMA FWTs. The said GR exhaustively covers the general technical requirements 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssories include a battery charger and shoulder strap. Origin from medieval Latin accessories 'additional thing'. Part - a manufactured object assembled with others to make a machine; a component. Black's Law Dictionary - 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 proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eir own case ACD Communications Pvt. Ltd. v. CC - 2011 (263) E.L.T. 744 (Tri. - Chennai) and explained that the Tribunal while 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication. The appellants have misdeclared classification of the goods in order to claim benefit of exemption notification. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... H 8504 which deals with parts of 'electrical transformers, static converters and 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 goods though may be parts of SMPS are not parts of IFWT and therefore not eligible for the exemption under Notification No.21/2005. 41. The Ld. Counsel has not put forward arguments as to the classification of the goods imported and submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) 12V 7 AH VRLA Battery. 44. A copy of G.R (Generic Requirements) for SMPS has been placed before us. Ld. Counsel has adverted to the description of SMPS given in Section 1 of the G.R. and the same reads as under : Sl.No. Description Compliance / Remarks 12V SWITCH MODE POWER SUPPLY (SMPS) FOR CDMA FWTs & SIMILAR SYSTEMS SECTION 1 1.0 Introduction 1.1 This document contains the generic requirements of a 12V SMPS power supply for lower power CDMA FWTs & similar systems for providing two way communication in rural areas. Complied 1.2 The fixed wireless terminals may be CDMA Fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rporates a switching regulator to convert the electrical energy more efficiently. Though the UPS used for computers also do the same function, UPS has back up facility which is lacking in the case of SMPS. From the specifications, function and use, it cannot be said that SMPS are vital and integral part of IFWT. It is an option. 48. After perusing the description of 12V SMPS as given in G.R as well as the images in service manual noticed above, we are not able to find any ground 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. We therefore have no doubt to hold that SMPS is not an integral part of IFWT. The goods imported cannot be considered as part of IFWT. 49. Appellant has also put forward an alternative argument that even if the imported goods do not form part of IFWT, the goods would be an accessory of IFWT and therefore the exemption under notification 21/2005 would apply. The Ld. A.R has contended that this issue was not examined by the authoritie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he accessories in order to fall within the said entry. The accessory to a part which has no convenience of effectiveness to be entire car as such cannot in our opinion fall within Entry 73". Having given our anxious consideration, with respect, we are of the considered view that the test laid down by the Karnataka High Court that the accessories as a part must contribute for convenience or effectiveness in the use of the car as a whole is not a correct test. In our view the correct test would be whether the article or articles in question would be an adjunct or an accompaniment or an addition for the convenient use of another part of the vehicle or adds to the beauty, elegance or comfort for the use of the motor vehicle or a supplementary or secondary to the main or primary importance. Whether an article or part is an accessory cannot be decided with reference to its necessity to its effective use of the vehicle as a whole. General adaptability may be relevant but may not by itself be conclusive. Take for instance Stereo or Air-conditioner designed and manufactured for fitment in a motor car. It would not be absolutely necessary or generally adapted. But when they are fitted to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduct which can be sold separately, without selling the cell phone. 52. The notification exempts parts, components and accessories of mobile handsets including cellular phones from customs duties when imported. In the case of Nokia India Pvt. Ltd. (supra) 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 (supra) the Hon'ble Court was considering the issue of tax ability of seat covers under the Tamil Nadu General Sales Tax Act, 1959. These decisions are distinguishable on facts. The Tribunal in the case of Twenty First Century Builders Vs. Commissioner of Cus Delhi, New Delhi 2004 (172) ELT 459 (Tri. Delhi) examined the issue as to whether casting, terminal, stickers, PCM are eligible for the benefit of Notificati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat batteries cannot be considered to be consumables as has been held by the adjudicating Commissioner as they do not get consumed but wear out in course of time as any other part. He argues that alternatively, the impugned batteries should be extended the exemption considering the same as accessories to the IFWT. He also argues that since the impugned batteries have been imported for use with original equipment and not for sale, the appellants are not required to register themselves with the Ministry of Environment and Forest under Rule 5 of the Batteries (Management and Handling) Rules, 2001. The ld. Advocate also cites the following decisions in favour of the arguments advanced by him. (a) Vanasthali Textiles Industries Ltd. v. CCE, Jaipur - 2007 (218) E.L.T. 3 (S.C.) (b) Mak Controls v. CCE, Coimbatore - 2001 (138) E.L.T. 1152 (Tri.-Chenn.) (c) CCE v. Mak Controls - 2005 (183) E.L.T. A73 (S.C.) (d) Union Carbide (I) Ltd. v. State of Andhra Pradesh - 1995 (76) E.L.T. 489 (S.C.) (e) TeracomPvt. Ltd. v. CC, Goa - 2008 (222) E.L.T. 58 (Tri.-Mumbai) (f) Jayshree Industries v. CCE - 1993 (63) E.L.T. 492 (Tri.) (g) Eveready Industries India Ltd. v. CCE, Lucknow - 2005 (1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he telephone. It appears that functioning of the SMPS is more akin to the UPS which are nowadays used along with the computers, which provide continuous power at times of power cuts. The question to be decided in this case is whether VRLA batteries which supply power to IFW telephones at the time of power cuts can be considered as parts of IFW telephones as argued by the ld. Advocate." 55. Though the appellant filed appeal before the Hon'ble Apex Court against this order, the appeals were dismissed. Ld. Counsel has been at pains to distinguish the view taken by the Tribunal in their own case. The decision of the Hon'ble Apex Court in the case of State of Punjab Vs Nokia India (supra) has been relied to counter the view taken by the Tribunal earlier with respect to the batteries. As discussed above, the issue in the case was in regard to a complete product in the nature of mobile phone charger. In the present case, the goods imported are parts of SMPS. We have already held that SMPS is not a part of IFWT. The goods imported cannot be considered as accessory as these parts are not used to increase the effectiveness or convenience of IFWT. We categorically hold that the goods ..... X X X X Extracts X X X X X X X X Extracts X X X X
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