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TMI Blog2025 (3) TMI 1073X X X X Extracts X X X X X X X X Extracts X X X X ..... view the HSN explanatory note, according to which, essentially, at least one of the components are required to be present, which incidentally was not found to have been used in the said impugned goods. The adjudicating authority has taken into account the statements recorded from technical expert of the appellant as well as expert opinion and felt that these are in the nature of apparatus or devices meant for certain specific functions like conversion of, inter alia, electrical signal into optical signal and vice versa, using optical fiber cable and therefore, they are more in the nature of OTE. The fact that OTE has been categorically classified under CTH 85176290 in the notification itself also supports that if the impugned goods are in the nature of OTE then it would obviously fall under CTH 85176290. Applicability of exemption under S.No.20 of N/N. 57/2017 - HELD THAT:- The impugned order is a well reasoned order, where after going through the detailed submissions and other evidence on record, the adjudicating authority has rightly held the impugned goods to be classifiable under CTH 85176290 and has also rightly held that these are in the nature of OTE and therefore, they sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies. Their bonafide belief will not be of much help as here, it is an established fact that the classification mentioned in the bills of entry was different than the classification indicated by the supplier of the said goods. Therefore, there are no infirmity in the imposition of penalty under section 114AA.
Conclusion - The goods are classified under CTH 85176290, the exemption under Notification No.57/2017 is denied, the extended period for demand set aside, penalties under sections 112(a) and 114A are dismissed, the penalty under section 114AA is upheld, and the confiscation of goods is overturned.
Appeal partly allowed by way of remand for redetermination of quantum of demand. X X X X Extracts X X X X X X X X Extracts X X X X ..... mended vide Notification No.02/2019-Cus dt.29.01.2019. 4. Based on searches conducted at the premises of appellant as well as statements recorded of Mr. Y. Kasyap Reddy, Managing Director & Mr. B. Sanjay Reddy, General Manager, it was found that appellant had imported the impugned goods for Signaling System, Auxiliary Convertor, Traction Convertor, Solar Invertors, etc., which are used in Control Electronics, Power Electronics and Signaling Components and that the said goods were being used in the manufacture of traction convertor, signaling system. It was noted that optical transceivers are used to convert electrical signal into optical signal and vice versa, whereas, optical transmitters are used to convert electrical signal into optical signal and optical receivers are used to convert optical signal into electrical signal. It was further observed that based on the statements given by the Technical Director, these impugned goods can be considered as optical transport devices, which can be used for various applications like data transfer, voltage isolation application and Optical Transport Network (OTN), etc., even though they are using them for voltage isolation application in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liberately misdeclared the details resulting in deceiving and leading the department into believing n falsehood. 5. On adjudication, the adjudicating authority has gone through the written submissions and other evidence on record. The adjudicating authority also allowed cross-examination in respect of the concerned expert who has provided technical advice, Mr. L. Umanand, HoD, Dept. of Electronic Systems Engineering of IISc, Bengaluru, who attended the personal hearing in virtual mode. 6. Based on the evidence, including written submissions, the adjudicating authority examined the classification in respect the impugned goods. He has also given due weight to the functionality of the articles imported, the details of which are at Para 16.5.2 of the impugned order. According to the same, the item FR50MHNR imported as fiber optic receiver is used to receive optical signals through optical fiber cable and convert the optical signals into electrical signals. Similar, item AXFE 1311 imported as fiber optic transceiver has functions of both devices i.e., fiber optic transmitter and fiber optic receiver built into it. It is used for conversion of electrical signals into optical signals an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Director Current and then convert the same into three-phase Alternating Current ranging up to 2100 Volts maximum and since the final product Traction Convertor falls under CTH 8504, hence, it cannot be classified under 85176290 and it would more appropriately be classified as parts of Traction Convertor falling under CTH 8504. The adjudicating authority, however, felt that those parts, which in themselves, would constitute an article falling under a particular heading and the fact that optical fiber communication is used between traction computers and gate drive cards as well as technical literature would support the fact that fiber optic transmitter and receiver have many applications viz., industrial control data links, factory automation data links, information network, voltage isolation, PLCs, motor drives, sensor, meter and actuator interfaces, and voltage isolation is one of the applications and therefore, same would not be classifiable as part of item falling under CTH 8504. 9. As regards the appellant's contention that the goods imported by them would fall under CTH 8542 and not under CTH 8517, he has gone by the Note 12(b) to Chapter 85 in the HSN, whereby, Multi Componen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said notification, they have accepted the same and did not challenge such reassessment. It was also noted that even after reassessment by customs, they were still filing bills of entry claiming the benefit of said notification wrongly. He has also noted that appellant changed the description of fiber optic transmitter and receivers in bills of entry to 'integrated circuits', after initiation of investigation by the DRI, to suppress the true nature of goods imported and to misclassify the said goods with an intention to evade payment of BCD. It was also noted that though the supplier's invoice contained correct classification of the impugned goods under CTH 85176290, the appellants deliberately misdeclared and misclassified the goods under CTH 8542. It was also observed that they have also been importing various goods under the category of integrated circuits under CTH 8542 and therefore, they were fully aware of the differences between CTH 8542 and CTH 8517 and despite their seeking clarification from the supplier, wherein the supplier clarified that it would fall under CTH 85176290, the appellant continued to willfully misdeclare and misclassify the goods to avail exemption. Fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ], wherein, it was, inter alia, held that in the absence of evidence produced by the department that the goods in question are designed to function independently as machine, the same cannot on standalone basis be considered as machine and have to be regarded as part only. In the case of CC, New Delhi Vs C-Net Communications (India) Pvt Ltd [2007 (9) TMI 15 -SC], the Hon'ble Supreme Court has applied the common parlance test, in the classification of the product 'decoder' and the Hon'ble Supreme Court interpreted the terms 'apparatus' as compound instrument or chain of series of instruments designed to carry out specific function or for a particular use. In the case of CC, Bangalore Vs Modicom Network Pvt Ltd [2005 (2) TMI 608 - CESTAT Bangalore], the Tribunal classified the modules (Main Switching Centre Hardware Upgrades) imported by the respondents under CTH 851790 as 'parts' and not as 'apparatus'. 15. Learned Advocate also relies on Circular No.08/2023 dt.13.03.2023, whereby, the CBIC has, in consultation with the Department of Telecommunications, made identification of products/equipment covered thereunder at (b) to (h) in Annexure-I of the circular. It is apparent that Fiber ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grated Circuits. He is also contesting that classification by their overseas supplier is not binding on them relying on the judgment of this Bench's decision in the case of CCE & C, Visakhapatnam Vs Reliance Infrastructure Ltd [Final Order No. A/30026/2022 dt.31.01.2022 (Tri-Hyd)]. Learned Advocate has also contested the invocation of extended period on the grounds that no such ingredients, as are required in terms of section 28(4) are there. He has further reiterated that the department was well aware about the change of classification of the impugned goods by the appellant and, in fact, the appellant vide letter dt.03.10.2022 and subsequent information given to the department in November, 2022 informed the change of assessment practice in respect of impugned goods to department. Therefore, extended period is not invokable. Further, even the department issued letter dt.24.10.2022 to the appellant demanding duties on goods cleared in 135 bills of entry and therefore, the allegation of suppression of facts is not sustainable and the issue is entirely relating to short payment of duty on the grounds that goods were considered as OTE and were cleared under ineligible exemption under S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s CC, New Delhi [2017 (355) ELT 430 (Tri-Del)] g) CC (Import), Mumbai Vs Finesse Creation Inc [2009 (248) ELT 122 (HC-Bom)] 19. Insofar as the penalty under section 114AA of the Customs Act is concerned, it can be invoked only when any person knowingly or intentionally makes, signs or causes any declaration or statement which is incorrect or false in any business transaction under the Customs Act, 1962. He has relied on certain case laws as under:- a) Lewek Altair Shipping Pvt Ltd Vs CC, Vijayawada (supra) b) Daxen Agritech India Pvt Ltd Vs Prl CC (Import), New Delhi (supra) 20. Similarly, in respect of imposition of penalty under section 114A, it can be invoked only when the case is involving short payment of duty or interest by way of collusion or willful misstatement or suppression of facts, whereas, in the present case, the allegation is misclassification of the imported goods and incorrect availment of duty exemption only. He submitted that there is no evidence adduced to show that either the appellant or its employee has committed the act of collusion or willful misstatement or suppression of facts with an intention to evade duty. Therefore, penalty under section 114A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notification 57/2017. Before we proceed further, the relevant notification is reproduced below : - S.No. Chapter or Heading or Sub-Heading or tariff item Description of goods Standard rate Condition No. (1) (2) (3) (4) (5) 20 85176290 All goods other than wrist wearable devices (commonly known as smart watches) 10% - S.No.20 was further amended vide Notification No. 75/2018-Cus dt.11.10.2018 effective from 12.10.2018 and the same is tabulated below : - S.No. Chapter or Heading or Sub-Heading or tariff item Description of goods Standard rate Condition No. (1) (2) (3) (4) (5) 20 85176290 All goods other than following goods, namely: a) wrist wearable devices (commonly known as smart watches) b) Optical Transport Equipment c) Combination of one or more of packet Optical Transport Product or Switch (POTP or POTS) d) Optical Transport Network (OTN) products e) IP Radios 10% - 21 85176990 All goods other than following goods, namely: a) Soft switches and Voice over Internet Protocol (VoIP) equipment, namely, VoIP phones, media gateways, gateway controllers and session border controllers b) Carrier Ethernet Switch, Packet Transport ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 290 except for certain categories of goods including OTE. The department has mainly contested that the goods are essentially OTE and are also classifiable under heading 85176290. The notification covers goods under various tariff headings including 85176990 & 85176290 but has made a specific exclusion of certain items falling under the headings. Therefore, the first issue to be decided is whether the impugned goods are falling under CTH 85176290 or otherwise and if it is falling under CTH 85176290, then whether they get excluded by virtue of their being OTE or otherwise. 26. The adjudicating authority has gone through the details furnished by the appellant as well as various other documents referred to supra to come to the conclusion that goods are clearly classifiable under CTH 85176290 and the goods are also in the nature of OTE, in view of their actual function. He has also categorically ruled out the possibility of its classification as simple electrical integrated circuit, keeping in view the HSN explanatory note, according to which, essentially, at least one of the components are required to be present, which incidentally was not found to have been used in the said impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is concerned, we find that there has been great deal of debate in terms of coverage under notification 57/2017, which covered multiple items falling under Chapter 85 in so much so that the CBIC has to come out with certain clarification in terms of Circular No.08/2023 dt.13.03.2023. We also find that the grounds taken in the SCN for invoking extended period is also not substantive apart from alleging that they have knowingly and intentionally misclassified their product despite knowing correct classification or as intimated by importer. We find that this could not be a ground for invoking extended period as no element as indicated under section 28(4) is forthcoming. It is a fact that they were classifying under certain heading which later on they switched to another heading. It is also a fact that the foreign supplier has indicated the heading 8517, whereas, they were adopting CTH 8542. It is also an admitted position that sometimes they have paid duty at 20% and sometimes at 10%. However, all these change of stands, etc., were in view of complex nature of classification involved as well as possibility of its being getting classified under two different or multiple headings. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have used a different classification than the classification which was indicated in the invoice, they knew that they are entering wrong classification in the bills of entry and therefore to that extent, the appellants knowingly and intentionally made the said entries. Their bonafide belief will not be of much help as here, it is an established fact that the classification mentioned in the bills of entry was different than the classification indicated by the supplier of the said goods. Therefore, we do not find any infirmity in the imposition of penalty under section 114AA. 34. Therefore, in view of the same, impugned order is set aside to the extent of confiscation of goods and payment of fine as well as for imposition of penalty under section 114A. However, the impugned order is upheld insofar as it relates to classification of goods under CTH 85176290, denial of benefit under S.No.20 of notification 57/2017 and penalty under section 114AA. The demand of confirmed amount to the extent falling within normal period is upheld, whereas, beyond normal period, it is set aside as extended period cannot be invoked. Insofar as the recalculation of demand within normal period is concerned ..... X X X X Extracts X X X X X X X X Extracts X X X X
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