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TMI Blog2023 (7) TMI 839X X X X Extracts X X X X X X X X Extracts X X X X ..... tibility of the jack with the port on the device. So long as the jack is compatible, the same earphone can be used with tablet, cell phone, gaming devices etc. Therefore, earphone utility of the earphone is not confined to cellular mobile phone. The earphones are neither a part of nor are they essential to use a mobile phone. They only add additional utility. Therefore, the earphone will qualify as an accessory which can be used with cellular mobile phone as well as other electronic devices. When used with the cellular mobile phone, it will be an accessory to mobile phone but will not be its part - What is evident from the entry no. 18 is that only such microphones, wired headsets and receivers as are parts of cellular mobile phones get excluded from the exemption notification and all other goods falling under CTH 8518 are exempted. Earphones CX 275s imported by the appellant, while being earphones, are clearly not parts of any mobile phone. In Dilip Kumar and Company [ 2018 (7) TMI 1826 - SUPREME COURT] , the Supreme Court did not completely rule out the possibility of liberal interpretation of an exemption notification but affirmed its previous decisions in COLLECTOR OF C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Notification No. 22/2018-Cus dated 02.02.2018 (S. No. 18). This exemption notification exempted all goods falling under customs tariff heading 8518 except the following parts of cellular mobile phones, namely, microphone, wired headset, receiver in excess of 10%. 2. In other words, goods covered by this exemption notification were leviable to basic customs duty of only 10 %. The appellant claimed the benefit of this exemption notification in its self-assessment of duty. 3. During the post audit clearance conducted by the Department, it was felt that the appellant was not entitled to the benefit of this exemption notification because the earphones were wired headset and were parts of cellular mobile phones and hence were excluded from S. No. 18 of the Exemption Notification. It was felt that the appellant had to pay duty at the tariff rate of 15%. Show cause notices were issued to the appellant proposing recovery of the differential duty along with interest and imposition of the penalty. In the order dated 12.02.2020 the Principal Commissioner party dropped the demand insofar as it pertained to earphones CX 180 (which do not have microphone) but confirmed the demand on e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earphones for their functions. Therefore, earphones cannot be considered as parts of the cellular mobile phones. Reliance is placed on the following case laws: (a) CCE, Delhi vs. Insulation Electrical (P) Ltd. 2008 (224) ELT 512 (SC). (b) Chemplast sanmar Ltd. Vs. CC (Import), Chennai 2018 (364) ELT 345, CESTAT . (ii) Earphones qualify as accessories to cellular mobile phones because they are not a part but they enhance the enjoyment of mobile phones. Anything which is not a part but which adds value and utility to the device is an accessory. Reliance is placed on the following case laws: (a) State of Punjab vs. Nokia India Pvt Ltd. 2015 (315) ELT 162 (SC) (b) Nicco Corporation Ltd. Vs. Commissioner of C. Ex., Calcutta 2006 (203) ELT 362 (SC) (c) Commissioner of Cus, New Delhi vs. C-Net Communication (I) Pvt Ltd. 2007 (216) ELT 337 (SC) (d) Mehra Bros. vs. The Joint Commercial Officer, Madras, (1991) 1 SCC 514 (e) Pragiti Silicon v. CCE, (2007) 9 SCC 470 (f) Annapurna Carbon Industries co. Vs. State of Andhra Pradesh, (1976) 2 SCC 273 (iii) Accessories have been separately excluded in S. Nos. 10 and 12 of the same ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, earphone utility of the earphone is not confined to cellular mobile phone. 8. On the other hand mobile phones are often used without earphones. Thus, the earphones are neither a part of nor are they essential to use a mobile phone. They only add additional utility. Therefore, the earphone will qualify as an accessory which can be used with cellular mobile phone as well as other electronic devices. When used with the cellular mobile phone, it will be an accessory to mobile phone but will not be its part. Therefore, the submission of the learned counsel for the appellant that earphones are not parts of cellular mobile phones must be accepted. Entry at S. No. 18 exempts all goods falling under CTH 8518 other than some parts of the cellular mobile phone. It is true that wired headset as commonly used is not a part of a cellular mobile phone. The same exemption notification has used the expression parts or sub-parts or accessories to cellular mobile phone in entry nos. 10 and 12 and parts of cellular mobile phone in entry no. 18. The two expressions should be considered as distinct and different. We, therefore, are unable to accept the submission made on behalf of the Reven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a notification for exemption. These observations are made in para 17 of the judgment, which read as follows: How then should the Courts proceed? The expressions in the Schedule and in the notification for exemption should be understood by the language employed therein bearing in mind the context in which the expressions occur. The words used in the provision, imposing taxes or granting exemption should be understood in the same way in which these are understood in ordinary parlance in the area in which the law is in force or by the people who ordinarily deal with them. It is, however, necessary to bear in mind certain principles. The notification in this case was issued under Rule 8 of the Central Excise Rules and should be read along with the Act. The notification must be read as a whole in the context of the other relevant provisions. When a notification is issued in accordance with power conferred by the statute, it has statutory force and validity and, therefore, the exemption under the notification is as if it were contained in the Act itself. See in this connection the observations of this Court in Orient Weaving Mills (P) Ltd. v. Union of India, 1962 Supp 3 SCR 481 = A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t at stage of applicability. But once that hurdle is crossed construe it liberally. Since the respondent did not fall in the first clause of the notification there was no question of giving the clause a liberal construction and hold that production of goods by respondent mentioned in the notification were entitled to benefit. 46. The above decision, which is also a decision of two-Judge Bench of this Court, for the first time took a view that liberal and strict construction of exemption provisions are to be invoked at different stages of interpreting it. The question whether a subject falls in the notification or in the exemption clause, has to be strictly construed. When once the ambiguity or doubt is resolved by interpreting the applicability of exemption clause strictly, the Court may construe the notification by giving full play bestowing wider and liberal construction. The ratio of Parle Exports case (supra) deduced as follows : Do not extend or widen the ambit at stage of applicability. But once that hurdle is crossed, construe it liberally . 47. We do not find any strong and compelling reasons to differ, taking a contra view, from this. We respectfully ..... X X X X Extracts X X X X X X X X Extracts X X X X
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