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TMI Blog2025 (1) TMI 797X X X X Extracts X X X X X X X X Extracts X X X X ..... set out below: Whether the word "and" as appearing in CTI 8517 (iv) is to be read in a disjunctive manner and thus be viewed as referring to separate products? FACTUAL BACKGROUND 3. The facts, as discernible from the records, are that the respondent, M/s Ingram Micro India Pvt. Ltd. [hereafter also referred to as 'the respondent'], is a distributor of Information Technology products in India and part of the internationally recognized Ingram Micro Group. During the period July, 2014 to June, 2017, it imported Wireless Access Points (WAPs) from various suppliers, including M/s Cisco Systems International BV, M/s Aruba Networks International Ltd., M/s Fortinet Singapore Pvt. Ltd., and others. These WAPs, which utilize Multiple Input/Multiple Output (MIMO) technology, were used for wireless communication within Local Area Networks (LANs) by connecting wireless-enabled devices like laptops, smartphones, and tablets to wired networks. 4. Under the Customs Tariff Act, 1975, these imported WAPs were classified under Customs Tariff Heading (CTH) 8517, and particularly Custom Tariff Item (CTI) 8517 62 90. A table, setting out the nomenclature of these headings and items, is as under: 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9030 82,00, 9031,41,00 5. All goods for the manufacture of goods covered by S.Nos. 1 to 4 above, 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. [F.N0334/1/2005-TRU] 6. The aforesaid notification was amended by Notification No. 11/2014-Cus. dated 11.07.2014 [hereafter 'Notification No. 11/2014']. The relevant portion of Notification No. 24/2005, as amended by Notification No. 11/2014 [hereafter 'amended Notification No. 24/2005] pertaining to CTH 8517 is extracted below: Sr.No. Heading, sub-heading or tariff item Description x x x 13 8517 All goods, except the following :- (i) soft switches and Voice over Internet Protocol (VoiP) equipment, namely, VolP 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; (iii) Carrier Ethernet Switch, Packet Transport Node (PTN) products, Multiprotocol Label Switching-Transport Profile (MPL5-TP) products; (iv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act. Similar notice was also issued to the respondent's director, Mr. Blaze D'Souza, proposing penalties for his alleged role in the claimed exemption. 11. However, the Additional Director General (Adjudication) [hereafter 'the Adjudicating Authority'], vide its Order-in-Original dated 23.12.2019, adjudicated the SCN in favor of the respondent. The Adjudicating Authority held that the WAPs imported by the respondent, which solely utilized the MIMO technology, were eligible for exemption under the amended Notification No. 24/2005. It observed that the language of the exclusion clause was clear and unambiguous, and the phrase "MIMO and LTE products" referred exclusively to products that used both the technologies together. The Adjudicating Authority further noted that treating the phrase as encompassing three categories of products - MIMO only, LTE only, and both MIMO and LTE - would amount to a distortion of the notification's language and intent, and would be against the principles laid down in Commissioner of Customs (Import), Mumbai v. Dilip Kumar & Co and Ors.: 2018 (361) ELT 577 (SC). It also held that the decision in Sree Durga Distributors v. State of Karnataka (supra) was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia Pvt Ltd are classifiable under 85176290 of the Customs Tariff. Since these Access Points are having MIMO technology but without LTE standard, the Basic Customs Duty (BCD) exemption claimed under Notification No. 24/2005-Cus dated 01.03.2005 as amended vide Notification No. 11/2014-Cus dated 11.07.2014 is allowed to them. 2.2 I do not hold impugned goods, which were imported by them during the period from 11.07.2014 to 30.06.2017, with a declared assessable value of Rs. 31,40,44,170/- through Customs, ACC, Sahar, Andheri (E), Mumbai vide Bills of Entry as detailed in Annexure-C to the show cause notice, as liable for confiscation under Section 111 (m) of the Customs Act, 1962. Therefore, 1 do not confiscate the same. 2.3 The demand of differential Customs duty of Rs. 3,54,42,995/- on the impugned imported goods by them during the period from 11.07.2014 to 30.06.2017 as detailed in Annexure-C to the show cause notice is hereby dropped. 2.4 1 hold that no interest, on the duty foregone is recoverable from them under Section 28AA of the Customs Act, 1962; 2.5 I do not impose any penalty under Sections 112/114A/ 114AA of the Customs, Act, 1962 on the Noticee No.1. 2.6 I d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sjunctively, thereby denying exemptions to products operating either on either MIMO technology or LTE standards. It was Revenue's case that the expression 'products' appearing after LTE has to be read with MIMO as well since the expression 'products' is a common factor for both MIMO and LTE. 14. However, the learned CESTAT, by way of the impugned order dated 12.09.2022, dismissed the Revenue's appeal and upheld the order of the Adjudicating Authority. The learned CESTAT observed that the word "and", as used in exclusion entry (iv) of Serial No. 13, is conjunctive and must be interpreted strictly to refer to products employing both MIMO and LTE technologies together. It noted that exemption notifications must be construed narrowly to avoid frustration of their intended purpose. The learned CESTAT further highlighted that similar exemptions had been granted for identical products under subsequent notifications and in proceedings involving other importers. The relevant extracts of the impugned order are as under: "16. A bare perusal of the exclusion clause (iv) under SI. No. 13 of notification shows that it covers MIMO and LTE products. The sole dispute in this appeal is whether th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o mean that either one of two things or both of them is possible: Many pupils have extra classes In the evenings and/or at weekends. Or: Used to connect different possibilities. is it Tuesday or Wednesday today?" 20. It is also seen that the word 'products' is not used after the words 'Multiple Input/Multiple Output (MIMO)'. Infect, 'and' is used after the words 'Multiple Input/Multiple Output (MIMO)'. It is seen that in entry (iii) of the same Serial No. 13 of notification, every technology is followed by the word 'products': "Cartier Ethernet Switch, Packet Transport Node (PTN) products, Multiprotocol Label Switching-transport Profile (MPLS-TP) products 21. Learned special counsel for the appellant contended that clause (iv) would effectively mean and cover two categories of products, namely, (i) Multiple Input/multiple Output (MIMO) products and (II) Long Term Evolution (LTE) products and that MIMO products and LTE products are products which have distinct identities. Learned special counsel also contended that the expression 'Multiple Input/Multiple Output (MIMO)' appearing before 'and' does not, by itself, mean anyt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... greement 18 dated 13.12.1996 by the World Trade Organization. The ITA requires each participant to eliminate and bind customs duties at zero for all products specified in the Agreement. India signed the Agreement on 01.07.1997. Pursuant to ITA, India introduced the notification. At the time of introduction, all goods falling under CTH 8517 were exempted from payment of duties. In 2014, on specified telecommunication products that were not covered under the ITA, the Government imposed customs duties by notification dated 11.07.2014. The Finance Minister's Budget Speech for the year 2014-15 and Tax Research Unit letter dated 10.07.2014 clarify that BCD on specified telecommunication products not covered under the ITA was being increased from NIL to 10%. As WAP is an Information Technology product and is specifically covered under the ITA as 'Network Equipment' in Attachment B, the intention was clearly not to exclude WAP imported by Ingram Micro. The Network Equipment as defined in Annexure-B includes LAN and Wide Area Network 19 apparatus, including those products dedicated for use solely or principally to permit the interconnection of automatic data processing machines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y on MIMO technology and did not support LTE standards. It was further argued that the learned CESTAT's finding that the respondent was justified in claiming exemptions under Serial No. 13 (iv) of the notification and that there was no infirmity in the Adjudicating Authority's order dated 23.12.2019, was incorrect. 17. The learned counsel for the Revenue contended that the respondent's claim of exemption rested on interpreting the word "and" in Serial No. 13 (iv) of the notification as a conjunctive term. However, it was argued that there are instances where the word "and" is used disjunctively. The learned counsel provided examples, such as the phrases "goods and passengers," "Medicinal and Toiletry," and "Ayurvedic and Unani," where the word "and" is commonly interpreted disjunctively to mean separate categories. Accordingly, the learned counsel argued that in Serial No. 13 (iv) of the notification, the phrase "Multiple Input/Multiple Output (MIMO) and Long Term Evolution (LTE) products" should be interpreted disjunctively, excluding products based on MIMO technology, even when they do not incorporate LTE standards, from the benefit of exemption. 18. The learned counsel further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ict interpretation of the notification and the setting aside of the decision of the learned CESTAT. Submissions on Behalf of the Respondent 23. The learned counsel appearing for the respondent Ingram Micro submitted that the WAPs imported by it were rightly eligible for exemption under Serial No. 13 (iv) of the amended Notification No. 24/2005, as these WAPs operated solely on MIMO technology and did not support LTE standards. 24. It was contended that the issue of exemption eligibility for WAPs utilizing only MIMO technology had already been settled in its favor by the Chennai Bench of the learned CESTAT in an earlier case, captioned M/s Ingram Micro India Pvt. Ltd. v. Commissioner of Customs, Chennai: Customs Appeal No. 41694/2019. This decision had attained finality as the Revenue did not challenge the decision. It was argued that the Revenue's acceptance of the earlier decision in an identical matter bars it from taking a contrary stance in the present case. Reliance was placed on the Hon'ble Supreme Court's decisions in Birla Corpn. Ltd. v. Commissioner of Central Excise: (2005) 6 SCC 95 and Jayaswals NECO Ltd. v. Commissioner of Central Excise, Nagpur: (2007) 13 SCC 807, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amework, and denying exemption to WAPs would contravene this international commitment. It was also the respondent's case that the legislative intent, as reflected in the Budget Speech of the Finance Minister and relevant explanatory notes, indicates that the exclusion in Serial No. 13 (iv) applies only to products incorporating both MIMO and LTE technologies, whereas the Revenue's interpretation, which treats MIMO as an independent category, ignores this intent and creates unnecessary ambiguity. 29. The respondent also pointed out that similar investigations against other importers of WAPs had been dropped, and no appeals were filed against such decisions and thus, this selective approach by the Revenue highlighted the inconsistency in its stance. Finally, the respondent submitted that it had discharged its burden of proof by providing complete documentation and evidence to demonstrate that the imported WAPs worked solely on MIMO technology, and that the Revenue's allegations of misrepresentation or suppression were baseless, as the respondent had fully disclosed the nature of the imported goods. 30. In light of these arguments, the respondent prayed that the appeal filed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... logy to enhance network capacity and reliability by leveraging multiple antennas for data transmission and reception. However, they do not incorporate the LTE standard. Interpretation of the Phrase 'MIMO and LTE Products' 36. The phrase 'MIMO and LTE Products' is at the heart of the dispute, specifically the interpretation of the word 'and'. The disagreement is whether the said phrase means and includes: (i) only the products combining both MIMO technology and LTE standard; or (ii) the products using either MIMO technology or LTE standard, independently. 37. A closer examination of Serial No. 13 of the amended Notification No. 25/2005 reveals that wherever the Central Government intended to specify products individually, the terms such as "products", "equipment" or the nomenclature of a specific product have been mentioned after the respective technology or feature. In this regard, we may again take note of the four exclusion entries in Serial No. 13, which are as under: (i) soft switches and Voice over Internet Protocol (VoiP) equipment, namely, VolP phones, media gateways, gateway controllers and session border controllers; (ii) optical transport equipments, combinatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O and LTE Products" includes three categories - (i) products using MIMO but not LTE, (ii) products using LTE but not MIMO, and (iii) products using both MIMO and LTE. In the written submissions filed on behalf of the Revenue, it has been asserted that the grammatically, the only possible way to fulfil this intention was to add the word 'and' between 'MIMO' and 'LTE' and then suffix the term 'products' after 'MIMO and LTE' as the same would have the meaning of 'MIMO product and LTE product'. 46. However, in our opinion, the aforesaid contention is unmerited. If the intention of the Central Government was to include products utilizing either MIMO technology or LTE standard or both, the phrase 'MIMO or LTE Products' could have been used. The use of the conjunction 'or' would have naturally encompassed all products with either of the two technologies/standards, and also those products which combine both. There would have been no need to use 'and' in place of 'or', as the latter would inherently fulfill the purpose of including all such categories. To explain in simpler terms, the phrase "MIMO or LTE Products" would mean - products having MIMO technology or products having LTE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 has observed as follows: - "11. ........ In interpreting a taxing statute, equitable considerations are entirely out of place. Nor can taxing statutes be interpreted on any presumptions or assumptions. The court must look squarely at the words of the statute and interpret them. It must interpret a taxing statute in the light of what is clearly expressed: it cannot imply anything which is not expressed; it cannot import provisions in the statutes so as to supply any assumed deficiency." 21. Therefore, the attempt of the High Court to read down the provision by way of substituting the word "OR" by an "AND" so as to give relief to the assessee is found to be erroneous. In that regard the submission of the counsel for the appellant is well-founded that once the said credit is taken the beneficiary is at liberty to utilize the same, immediately thereafter, subject to the Credit rules." (Emphasis added) 50. The Hon'ble Supreme Court in Commissioner of Customs (Import), Mumbai v. Dilip Kumar & Co and Ors. (supra), held as under: "21. The well settled principle is that when the words in a statute are clear, plain and unambiguous and only one meaning can be inferred, the Courts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have meant, although there has been an omission to enact it. In a Court of Law or Equity, what the Legislature intended to be done or not to be done can only be legitimately ascertained from that which it has chosen to enact, either in express words or by reasonable and necessary implication. It is an application of this principle that a statutory notification may not be extended so as to meet a casus omissus. As appears in the judgment of the Privy Council in Crawford v. Spooner. '... we cannot aid the Legislature's defective phrasing of the Act, we cannot add, and mend, and, by construction, make up deficiencies which are left there.' The learned Counsel for the respondents is possibly right in his submission that the object behind the two notifications is to encourage the actual manufacturers of handloom cloth to switch over to power looms by constituting themselves in co-operative Societies. But the operation of the notifications has to be judged not by the object which the rule making authority had in mind but by the words which it has employed to effectuate the legislative intent." (Emphasis added) 51. Further, the term "and" is a conjunction, commonly understood to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to the amendment so as to have a binding effect on such authorities or on the Courts to hold as correct the clarification as the guiding principle to decide the entry which stood prior to such amendment in its original form. 57. We are of the view that the clarification is brought about in the Statute when there is ambiguity and disputes arise due to such ambiguities. The fact that a clarification is needed to be brought about in the subject entry by the Finance Act, 2021 would point out towards the inherent ambiguity experienced in its interpretation and application which prompted and necessitated the subject amendment and clarification. In the light of this observation and the facts of the present case as well as the judicial precedents in similarly situated cases, we are of the opinion that exclusion clause (iv) of Serial No. 13 of the amended Notification No. 24/2005, which reads as 'MIMO and LTE products', would have to be read in its original form applying the law and rules of interpretation of statutes, especially as applicable in cases of taxation. 58. While adjudicating cases of disputes over an entry attracting or not attracting customs duty, the first and foremost ru ..... X X X X Extracts X X X X X X X X Extracts X X X X
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