9911796707
TMI Blog2024 (1) TMI 683X X X X Extracts X X X X X X X X Extracts X X X X ..... ng module, line amplifier module, wave length selectable switches module, transponder/ mux ponder, multiplexer, demultiplexer, splitter coupler, dispersion compensation module, optical time domain reflectometer module, client module etc. for providing support services in respect of telecommunication networking equipment by categorizing the same as transmission or reception apparatus/ communication apparatus. The appellants have classified the impugned goods under Customs Tariff Item (CTI) 8517 7090 as 'Parts' and under CTI 8517 6290 as 'apparatus' claiming 'NIL' rate of Basic Customs Duty (BCD). 1.2 On the basis of an intelligence developed by Directorate of Revenue Intelligence, Mumbai Zonal Unit (DRI MZU) having reasons to believe that the appellants have wrongly classified the impugned goods under import for avoiding payment of appropriate duty applicable at the rate of 10% BCD, and by claiming ineligible exemption for availing 'NIL' BCD in terms of Notification No.11/2014- Customs dated 11.07.2014, initiated investigation on their imports. Upon conclusion of detailed investigation by DRI MZU, the department had initiated show cause cum demand (SCN) proceedings by issue of SCN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hemselves of the benefit of exemption notification No. 24/2005-Customs dated 01.03.2005 as amended. The list of such items on which the exemption was not available has been categorized by DRI MZU in Annexure-I & III of SCN and differential duty was demanded in the SCN dated 12.07.2019. The said SCN was adjudicated by the learned Additional Director General vide Order-in-Original No.77/MMT(77)ADG(ADJ.)/DRI, MUMBAI/ 2020-21 dated 26.02.2021 (herein after, called in short as 'impugned order') as the common adjudicating authority appointed by CBIC in terms of Notification No.37/2019-Customs (N.T.) dated 26.08.2019 issued under Section 4, Section 5(1) ibid, confirming the adjudged demands proposed in the SCN dated 12.07.2019. Feeling aggrieved with the impugned order, the appellants have preferred this appeals before the Tribunal. 2.1 Learned Advocate appearing for the appellants importer reiterated the points set out in detail in the Appeal Memorandum and the Written Submissions dated 23.01.2023, and further submitted additional Written Submissions, in maintaining brevity and to avoid prolixity, stated that the goods under dispute are to be classified as 'parts' under CTH 8517 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a in the case of Commissioner of Customs, New Delhi Vs. C-Net Communications (India) Pvt. Ltd. reported in [(2007) 12 SCC 72], to state that the Hon'ble Supreme Court, had applied the Common Parlance Test, in classification of the product 'Decoder' in that case. The Hon'ble Court had referred to the definition of the word "apparatus" in Stroud's Judicial Dictionary which defines the term "apparatus" as inclusive of the distribution board of an electrical installation; decoder must be considered as an apparatus, when current is passing through and not when it is in its inanimate state. Further he stated that the term "apparatus" has been interpreted as something which is inclusive of some other appliance. Taking into consideration these definitions, the Hon'ble Supreme Court had interpreted "apparatus" as "the compound instrument or chain of series of instruments designed to carry out specific function or for a particular use." Accordingly, he submitted that the goods imported by the appellants do not fall under the above definition of "apparatus" as defined by the Hon'ble Supreme Court. 2.3 Further, learned Advocate also submitted that all the goods imported by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1/2014-Cus. dated 11.07.2014 issued by the Central Government, excluding the impugned goods from the scope of BCD exemption in the above notification. Countering the arguments placed by the learned Advocate for the appellants that the case is squarely covered in their favour, in terms of the order passed by the Co-ordinate Bench in the case of Commissioner of Customs (Import), Mumbai Vs. M/s Reliance Jio Infocom Ltd. reported in 2019 I369) E.L.T. 1713 (Tri.-Mumbai), the learned AR submitted that the said decision of the Co-ordinate Bench deciding on the issue of classification of 'antenna' for base station is classifiable under CTI 8517 7090 as 'parts', is still pending in C.A. Diary No. 14979/2020, and hence the same cannot be taken as binding decision. 3.2 Learned AR further submitted that recommendations of TRAI and WCO decision about classification of parts as discussed in the impugned order should be taken into account. 3.3 Furthermore, he submitted that as the expert IIT Professor's report cannot be taken as a basis, inasmuch as the procedure prescribed for drawing samples for testing as per Section 144 and Section 18 of the Customs Act, 1962 has not been followed in this c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. "Section 12. Dutiable goods. - (1) Except as otherwise provided in this Act, or any other law for the time being in force, duties of customs shall be levied at such rates as may be specified under the Customs Tariff Act, 1975 (51 of 1975), or any other law for the time being in force, on goods imported into, or exported from, India. (2) The provisions of sub-section (1) shall apply in respect of all goods belonging to Government as they apply in respect of goods not belonging to Government." "Section 1. Short title, extent and commencement. - (1) This Act may be called the Customs Tariff Act, 1975. (2) It extends to the whole of India. (3) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint. Section 2. Duties specified in the Schedules to be levied. - The rates at which duties of customs shall be levied under the Customs Act, 1962 (52 of 1962), are specified in the First and Second Schedules. xxx xxx xxx xxx THE FIRST SCHEDULE - IMPORT TARIFF (Refer Section 2) THE GENERAL RULES FOR THE INTERPRETATION OF IMPORT TARIFF Classification of goods in this Schedule shall be governed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under the heading which occurs last in numerical order among those which equally merit consideration. 4. Goods which cannot be classified in accordance with the above rules shall be classified under the heading appropriate to the goods to which they are most akin. 5. In addition to the foregoing provisions, the following rules shall apply in respect of the goods referred to therein: (a) Camera cases, musical instrument cases, gun cases, drawing instrument cases, necklace cases and similar containers, specially shaped or fitted to contain a specific article or set of articles, suitable for long-term use and presented with the articles for which they are intended, shall be classified with such articles when of a kind normally sold therewith. This rule does not, however, apply to containers which give the whole its essential character; (b) Subject to the provisions of (a) above, packing materials and packing containers presented with the goods therein shall be classified with the goods if they are of a kind normally used for packing such goods. However, this provisions does not apply when such packing materials or packing containers are clearly suitable for repetitive us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) the list of tariff provisions is divided into Sections, Chapters and Sub-Chapters; (3) in column (3), the standard unit of quantity is specified for each tariff item to facilitate the collection, comparison and analysis of trade statistics." 7. From the plain reading of the above legal provisions, it transpires that in order to determine the appropriate duties of customs payable on any imported goods, one has to make an assessment of the imported goods for its correct classification under the First Schedule to Customs Tariff Act, 1975 in accordance with the provisions of the Customs Tariff Act by duly following the General Rules for Interpretation (GIR) and the General Explanatory notes (GEN) contained therein. The First Schedule to the Customs Tariff Act, 1975 specifies the various categories of imported goods in a systematic and well-considered manner, in accordance with an international scheme of classification of internationally traded goods, i.e., 'Harmonized Commodity Description and Coding System' (HS). Accordingly, goods are to be classified taking into consideration the scope of headings / sub-headings, related Section Notes, Chapter Notes and the General Rules fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (vi) When the description of the goods under a heading is preceded by 'single dash' i.e., "-", the said goods shall be taken to be a sub-classification of the article or group of articles covered by the said heading. (GEN1) (vii) Where, however, the description of goods is preceded by "- -", the said goods shall be taken to be a sub-classification of the immediately preceding description of the goods or article or group of articles which has "-" single dash. (GEN1) (viii) Where the description of goods is preceded by "---" or "---- ", the said goods shall be taken to be a sub-classification of the immediately preceding description of the goods or article or group of articles which has "-" or "--". (GEN1) 9. In the case before us, the contending classification of imported goods discussed in the impugned order are either under CTI 8517 6290 as 'apparatus' or as 'parts' classifiable under CTH 8517 70 of the First Schedule to the Customs Tariff Act, 1975. Thus, it is clear that at the Chapter and Heading level i.e., Chapter 85 and Heading 8517, there is no difference of opinion among the appellants and the department. The dispute in classification lies in the narrow compass of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp; 8517 62 10 --- PLCC equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . u Free - 8517 62 20 --- Voice frequency telegraphy . . . . . . . . . . . . . . . . . . u Free - 8517 62 30 --- Modems (modulators-demodulators). . . . . . . . . . . u Free - 8517 62 40 ---High bit rate digital subscriber line system (HDSL) u Free - 8517 62 50 ---Digital loop carrier system (DLC). . . . . . . . . . . u Free - 8517 62 60 ---Synchronous digital hierarchy system (SDH). u Free - 8517 62 70 ---Multiplexers, statistical multiplexers. . . . . . . . . . . u Free - 8517 62 90 ---Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . u Free - 8517 69 -- Other: 8517 69 10 ---ISDN System. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . u Free - 8517 69 20 ---ISDN terminal adaptor. . . . . . . . . . . . . . . . . . . . . . . u Free - 8517 69 30 ---Routers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . u Free - 8517 69 40 ---X25 Pads. . . . . . . . . . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igital cross connect. It processes various types of electrical signals received through fixed port or removal pluggable in coordination with controller card, and make them ready to be handed over to Switch Module for further processing. 2 Pluggable It is a small removable part which can be inserted in ports of line module. They receive different types of optical signals through optical fibre cables connected at one end of Pluggable. Converts the desired optical signals into electrical signals that are further processed by the line module. 3 Controller Card It contains a processor that controls timing functions and acts as a high-speed computational engine for performing switch configurations. It controls the overall functionality of the entire networking equipment. 4 Switch Module It is the central part of the switching system and installed between two line modules in the chassis. Each switch module has paths to all line modules. Switch module directs the signals from one line module to other line module. 5 Switch and Control timing module It has the combined functionality of both switch module and controller card i.e., to monitor the other line modules and switch sign ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... needs to look further into relative Section or Chapter notes. In this regard, we find that Section Note 1 to Section XVI covering Chapters 84 and 85, provide for the list of goods that do not get covered under the said Chapters. Besides, Section Note 2 providing for classification of 'parts' of machines or articles are also relevant here. Thus, we find that Section Notes 2 to 5 to Section XVI generally guide classification of goods under Chapter 84 and 85. The relevant Section Notes are extracted as below: "SECTION XVI MACHINERY AND MECHANICAL APPLIANCES; ELECTRICAL EQUIPMENT; PARTS THEREOF; SOUND RECORDERS AND REPRODUCERS, TELEVISION IMAGE AND SOUND RECORDERS AND REPRODUCERS, AND PARTS AND ACCESSORIES OF SUCH ARTICLES NOTES : 1. This Section does not cover : .......................... 2. Subject to Note 1 to this Section, Note 1 to Chapter 84 and to Note 1 to Chapter 85, parts of machines (not being parts of the articles of heading 8484, 8544, 8545, 8546 or 8547) are to be classified according to the following rules : (a) parts which are goods included in any of the headings of Chapter 84 or 85 (other than headings 8409, 8431, 8448, 8466, 8473, 8487, 8503, 8522, 8529 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods under the Customs classification, the extract of HS classification in respect of heading 8517 is given below: "Harmonized Commodity Description and Coding System Explanatory Notes "8517- Telephone sets, including telephones for cellular networks or for other wireless networks; other apparatus for the transmission or reception of voice, images or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network), other than transmission or reception apparatus of heading 84.43, 85.25, 85.27 or 85.28(+). - Telephone sets, including telephones for cellular networks or for other wireless networks: 8517.11 -- Line telephone sets with cordless handsets 8517.12 --Telephones for cellular networks or for other wireless networks 8517.18 -- Other - Other apparatus for transmission or reception of voice, images or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network): 8517.61 -- Base stations 8517.62 -- Machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and keypad or a loudspeaker, a microphone and keys. These systems are usually mounted at the entrance of buildings housing a number of tenants. With these systems, visitors can call certain tenants, by pressing the appropriate keys and talk to them. (C) Videophones. Videophones for buildings, which are a combination consisting principally of a telephone set for line telephony, a television camera and a television receiver (transmission by line). (D) Apparatus for telegraphic communication other than facsimile machines of heading 84.43. These apparatus are essentially designed for converting characters, graphics, images or other data into appropriate electrical impulses, for transmitting those impulses, and at the receiving end, receiving these impulses and converting them either into conventional symbols or indications representing the characters, graphics, images or other data or into the characters, graphics, images or other data themselves. Examples are.... (E) Telephonic or Telegraphic Switching Apparatus. ..................... (F) Transmitting and receiving apparatus for radio-telephony and radio-telegraphy..... (G) Other communication apparatus. This g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... '. The classification under 'first single dash' entry is not relevant for the impugned goods, as these are for telephony. 20. The description of goods covered under Sub-Heading 8517 60 (second double dash) are Base stations or other machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus. The impugned goods do not get covered under the group of 'Base stations' and thus needs to be examined for coverage under the next group of 'other machines' of sub-heading 851762 or under 'others'. The various goods specified under specific CTI of the First Schedule under 85176210 to 85176270 being PLCC equipment, Voice frequency telegraphy, Modems (modulators-demodulators), High bit rate digital subscriber line system (HDSL), Digital loop carrier system (DLC). Synchronous digital hierarchy system (SDH), Multiplexers, statistical multiplexers, these are not specifically cover any of the 13 specified products which are the impugned goods in this case. We also note that the item at Sl. No. 12 is Multiplexer, Demultiplexer - Mux/Demux by its functional input is a passive device for multiplexing and de-multiplex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not indicate that they function independently as a machine or apparatus, inasmuch as they are to be fitted in the chassis of various models of Ciena networking equipment. Thus, it is not feasible to classify the impugned goods under the heading 8517 6290 as 'other machines' for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus. Further, in terms of Section Note 2(b) to Section XVI, parts which are equally suitable for mic principally with the goods of headings 8517 and 8525 to 8528 are to be classified in heading 8517 only. Hence, in our considered view, the appropriate classification of the imported goods at Serial No.1 of Table at paragraph 12, would be under Customs Tariff Item 8517 70 10 covering 'Populated, loaded or stuffed printed circuit boards' and for other impugned goods at Serial No. 2 to 13 of Table at paragraph 12, under Customs Tariff Item 8517 70 90 of the First Schedule to the Customs Tariff Act, 1985. 23. We also find that our such view has also been considered favourably by the Co-ordinate Bench of the Tribunal in the case Reliance Jio Infocomm Ltd. (Supra) where the issue of clas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erit classification CTH 85177010. We also find that the appellants have submitted US Customs Rulings on the classification of the impugned goods, though they are not binding on us, they would certainly have a persuasive effect more so in the absence of any evidence to the contrary. In view of the discussion as above, and considering the fact that Commissioner (Appeals) has been consistent in rejecting the department's claim, we are of the considered opinion that there is no merit in the appeals filed by the Department." 24. The aforesaid order was appealed by the department before the Hon'ble Supreme Court (Civil Appeal No. 000586 - 000598 of 2023), and the same were dismissed. The relevant paragraphs in the said judgement are extracted below: "IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL No(s). OF 2023 (Arising out of Diary No(s). 31965/2022) COMMISSIONER OF CUSTOMS (IMPORT) Petitioner(s) VERSUS M/S RELIANCE JIO INFOCOMM LTD. Respondent(s) ORDER Mr. Balbir Singh, learned Additional Solicitor General, after getting instructions, fairly submits that the revenue has not indeed challenged the order(s) in the similar matters as mentioned in the Or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion claimed by the appellant importer or for accepting the same in favour of Revenue, in select four products. We also note the pointed made by the learned AR that the decision of the Tribunal in the case of 'antenna' as parts in Reliance Jio Infocomm Ltd. is pending before the Apex Court in C.A. Diary No. 14979/2020. However, we find that since the products under the present dispute are different from "antenna" forming part of Basic Transmission Station dealt in that pending case, and that the factual matrix of both cases are different, we are unable to agree with the argument made by AR that the decision of Hon'ble Supreme Court in a similar case of Reliance Jio Infocomm Ltd. in C.A. No. 38695/2022 should not be followed. Accordingly, we find that these arguments do not have any force, in determining the classification of the goods, in the present case. 26. Having decided the issue of classification, now we would like to peruse the scope of exemption contained in the relevant entry in the notification No. No.11/2014-Customs dated 11.07.2014. We find that the said notification is an amending notification to the firstly issued Notification No.24/2005-Customs dated 01.03.2005 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Notification No. 132/2006-CUSTOMS G.S.R. (E). - In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962(52 of 1962), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby makes the following amendments in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No.24/2005- Customs, dated the 1st March, 2005, namely:- In the said notification (i) in the opening paragraph for the words, figures and letters "following goods, falling under the heading, sub-heading or tariff-item of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and specified in column (2) of the Table below", the words "following goods of the description as specified in column (3) of the Table below and falling under the heading, sub-heading or tariff-item of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) as specified in the corresponding entry in column (2) of the said Table" shall be substituted; (ii) for the table, the following table shall be substituted, nam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Transport Network(OTN) products, and IP Radios; (iii) Carrier Ethernet Switch, Packet Transport Node (PTN) products, Multiprotocol Label Switching-Transport Profile (MPLS-TP) products; (iv) Multiple Input / Multiple Output (MIMO) and Long Term Evolution (LTE) Products: provided that the importer follows the procedure set out in the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996." 27. On careful examination of the exemption entry at serial No. 13, at notifications dated 01.03.2005, 30.12.2006 and amendment introduced on the said exemption entry on 11.07.2014 indicate clearly that the exemption initially extended to 'All goods' covered under the heading 8517 was restricted in its scope of coverage to 'All goods of heading 8517, other than the specified goods at (i) to (iv) above namely, (i) soft switches and Voice over Internet Protocol (VoIP) equipment, namely, VoIP phones, media gateways, gateway controllers and session border controllers; (ii) optical transport equipments, combination of one or more of Packet Optical Transport Product or Switch (POTP or POTS), Optical Transport Network (OTN) products, and IP Radios; (i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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