2022 (10) TMI 331 - AT - Customs

Tribunal grants duty exemption for imported microphones, dismisses demand for differential duty.

The Tribunal ruled in favor of the appellant, determining that the imported microphones were correctly classified under entry No. 6A of Notification No. ... Classification of imported goods - rate of BCD - Microphone for Cellular Mobile Phone - Classified under CTH 85181000 or not - benefit in terms of Entry No. 6A of Notification No. 57/2017 dated 30.06.2017 as amended by 06.07.2019 - applicability of benefit of entry No. 427 / list 20 in Notification No. 50/2017 dated 30.6.2017 - period 02.02.2018 to 06.07.2019 - Penalty - HELD THAT:- All kinds of microphones irrespective of being the part of PCBA or being the part of cellular mobile phones, are subject to nil rate of duty. The Notification was applicable during the entire period in question, hence it becomes clear that even without dwelling into controversy about PCBA or cellular mobile phones, we observe that microphones are eligible to 100% exemption from the duty liability. The benefit of said notification in alternative was available to the appellant. No question of confirmation of duty demand otherwise at all arise. The benefit of Entry No. 427 has been denied by the Adjudicating Authority below for the reason that the appellant had not claimed the said benefit and ignorance of law is not a ground to claim the benefit as that of exemption - Hon’ble Apex Court in the case of Share Medical Care vs. Union of India [2007 (2) TMI 2 - SUPREME COURT] has held that where the appellant is entitled to benefit under two different Notifications, he can claim more benefit and it shall be the duty of the authorities to grant such benefit provided. Hon’ble Apex Court also clarifies that even if applicant does not claim benefit under a particular notification at initial stage, he is not debarred, prohibited or estopped from claiming such benefit at a later stage - It was held that even the appellant does not claim the benefit under a particular Notification at the initial stage, he is not debarred, prohibited or estopped from claiming such benefit at a later stage - The benefit of said Notification has to be extended in favour of the appellant. Such benefit has wrongly been denied on the ground it being claimed belatedly. The order under challenge is not sustainable on this count. Levy of penalties - HELD THAT:- Penalties can be imposed only in the case where there had been intentional malafide on the part of the assessee - there was no liability upon the appellant to pay any Customs duty while importing microphones during the relevant period. The question of non payment thereof that too with an intent to evade, does not at all arise. Penalties imposed under section 112 (b)(ii) read with section 117 of the Customs Act, 1962 does not at all arises. Appeal allowed. Issues Involved:1. Classification of imported microphones under the correct Customs Tariff Heading (CTH).2. Eligibility for duty exemption under Notification No. 57/2017 and Notification No. 50/2017.3. Validity of the demand for differential duty and interest.4. Imposition of penalties under the Customs Act, 1962.Detailed Analysis:Issue 1: Classification of Imported MicrophonesThe primary issue was whether the imported microphones should be classified under entry No. 6A or entry No. 18 of Notification No. 57/2017. Entry No. 6A pertains to inputs or parts for use in the manufacture of Printed Circuit Board Assembly (PCBA) of cellular mobile phones, which are subject to a nil rate of duty. Entry No. 18 covers parts of cellular mobile phones, including microphones, which are subject to a 10% duty.The Tribunal observed that PCBA is defined under Explanation B of Notification No. 57/2017, which does not specifically list microphones as components of PCBA. However, the Tribunal found that the imported microphones, which need to be soldered onto the PCBA, should be considered parts of PCBA based on the expert opinion from the Indian Institute of Technology, Delhi (IIT). The expert report indicated that components requiring soldering on PCBA are considered PCBA components. Therefore, the Tribunal concluded that the imported microphones are eligible for duty exemption under entry No. 6A of Notification No. 57/2017.Issue 2: Eligibility for Duty ExemptionThe Tribunal also considered the applicability of Notification No. 50/2017, which exempts microphones under entry No. 427. The Tribunal noted that all kinds of microphones, irrespective of being part of PCBA or cellular mobile phones, are subject to a nil rate of duty under this notification. The Tribunal emphasized that the benefit of this notification should be extended to the appellant even if it was claimed at a belated stage. The Tribunal relied on precedents from the Supreme Court, which held that substantial benefits of exemption notifications could be availed at any stage of the proceedings.Issue 3: Validity of the Demand for Differential Duty and InterestThe Tribunal found that the demand for differential duty and interest was not sustainable. The Tribunal noted that the imported microphones were eligible for duty exemption under both Notification No. 57/2017 and Notification No. 50/2017. Therefore, there was no liability on the appellant to pay any customs duty on the imported microphones during the relevant period.Issue 4: Imposition of PenaltiesThe Tribunal held that penalties could only be imposed in cases of intentional malafide conduct by the assessee. The Tribunal found no evidence of such conduct by the appellant. The Tribunal noted that the appellant was entitled to duty exemption under the relevant notifications and had complied with the conditions of the notifications. Therefore, the imposition of penalties under section 112(b)(ii) read with section 117 of the Customs Act, 1962, was not justified.ConclusionThe Tribunal set aside the order under challenge, confirming that the imported microphones were eligible for duty exemption under both Notification No. 57/2017 and Notification No. 50/2017. Consequently, the demand for differential duty and interest and the imposition of penalties were held to be unsustainable. The appeal was allowed in favor of the appellant.