2023 (11) TMI 69 - AT - Customs

Wireless Access Points with MIMO technology qualify for customs duty exemption under notification Serial No. 13

CESTAT New Delhi held that Wireless Access Points (WAP) with MIMO technology are classifiable under CTI 8517 62 90 and eligible for customs duty exemption ... Conjunctive construction of 'and' in exemption clauses - exclusionary clause in exemption notification to be strictly and narrowly construed - interpretation of tariff/notification language to determine scope of excluded goods - entitlement to exemption under the Information Technology Agreement (ITA)-derived notification - classification under Customs Tariff Item 8517 62 90Conjunctive construction of 'and' in exemption clauses - interpretation of tariff/notification language to determine scope of excluded goods - Whether the exclusion at Serial No. 13(iv) - 'Multiple Input/Multiple Output (MIMO) and Long Term Evolution (LTE) Products' - excludes products having only MIMO technology or only those products which have both MIMO and LTE. - HELD THAT: - The Tribunal accepted the respondent's contention that the conjunction 'and' in clause (iv) is to be given its ordinary conjunctive meaning and, read in the textual and contextual matrix of the notification, denotes products which contain both MIMO and LTE. The word 'products' does not appear after 'MIMO' and the entry must be read as drafted; if the Government intended to exclude products having MIMO technology alone, the term 'products' would have been used after 'MIMO' as well. Reliance was placed on the ordinary dictionary meaning of 'and' and on earlier decisions holding that a conjunctive 'and' is to be given its conjunctive sense in tariff/notification language. The Tribunal further noted that exclusionary parts of exemption notifications must be construed narrowly so as not to frustrate the object of the exemption. Having regard to these principles and the earlier Tribunal decision in Ingram Micro confirming classification of identical WAP under CTI 8517 62 90, the conclusion was reached that clause (iv) applies only to goods combining both MIMO and LTE technologies and does not capture WAPs having MIMO technology but not supporting LTE. [Paras 25, 27, 28, 29, 31]Clause (iv) of Serial No.13 excludes products which contain both MIMO and LTE; products having only MIMO technology are not covered by the exclusion.Entitlement to exemption under the Information Technology Agreement (ITA)-derived notification - classification under Customs Tariff Item 8517 62 90 - strict construction of exclusionary clause in an exemption notification - Whether the imported Wireless Access Points (WAP) of Beetal Teletech, which are MIMO-enabled but do not support LTE, are entitled to exemption from the whole of customs duty under Serial No.13 of the notification and whether demands, penalties and confiscation proposals could be sustained. - HELD THAT: - Applying the interpretation that clause (iv) requires both MIMO and LTE, the Tribunal found that the imported WAPs work on MIMO technology without LTE and are classifiable under CTI 8517 62 90. The Tribunal observed that India's entry into the ITA and the original intent of the exemption support extending the benefit to such networking equipment. As exclusionary clauses must be narrowly construed, the Department's proposals to deny exemption, invoke extended limitation, confiscate goods or impose penalties were not sustainable on the facts. The Tribunal also relied on the prior Ingram Micro decision granting identical relief, which the Department had accepted, and concluded there was no infirmity in the adjudicating authority's order dropping duty demands and penalties. [Paras 28, 29, 31, 32, 33]WAPs imported by Beetal Teletech (MIMO-enabled but not LTE-capable) are entitled to exemption under Serial No.13 and the demand, confiscation proposals and penalties were correctly dropped; departmental appeals are dismissed.Final Conclusion: The appeals by the Department are dismissed: clause (iv) of Serial No.13 excludes only products having both MIMO and LTE, WAPs with MIMO but without LTE are entitled to exemption under the notification (classified under CTI 8517 62 90), and the demand and penalties were rightly dropped. Issues Involved:1. Classification of Wireless Access Points (WAP) under Customs Tariff Item (CTI) 8517 62 90.2. Availability of exemption from Basic Customs Duty (BCD) under the notification dated 01.03.2005, as amended by the notification dated 11.07.2014.3. Interpretation of exclusion clause (iv) in Serial No. 13 of the notification.4. Invocation of the extended period of limitation under section 28(4) of the Customs Act, 1962.5. Imposition of penalties under sections 112, 114AA of the Customs Act.Summary:1. Classification of WAP:Beetal Teletech Limited imported Wireless Access Points (WAP) and classified them under CTI 8517 62 90, claiming they work on MIMO technology but do not support LTE standard. The Additional Director General (Adjudication) ruled in favor of Beetal Teletech, classifying WAP under CTI 8517 62 90 and granting exemption from BCD.2. Exemption from BCD:The exemption under Serial No. 13 of the notification dated 01.03.2005, as amended by the notification dated 11.07.2014, was claimed. The relevant entry exempts all goods under heading 8517 except specified items, including 'Multiple Input/Multiple Output (MIMO) and Long Term Evolution (LTE) Products.' The Department issued a show cause notice proposing to deny the exemption, arguing the exclusion applies to both MIMO and LTE products separately.3. Interpretation of Exclusion Clause (iv):The core issue was whether the exclusion clause covers products having only MIMO technology and not LTE standard. The Department contended 'and' should be read as 'or', covering MIMO and LTE products separately. Beetal Teletech argued 'and' should be interpreted conjunctively, covering only products having both MIMO and LTE. The Tribunal accepted Beetal Teletech's interpretation, emphasizing that 'and' is conjunctive and the exclusion clause applies only to products with both MIMO and LTE.4. Extended Period of Limitation:The show cause notice invoked the extended period of limitation under section 28(4) of the Customs Act, 1962. However, the Tribunal found no willful suppression of information by Beetal Teletech, as the presence of MIMO technology was evident in all Bills of Entry.5. Imposition of Penalties:The proposals for confiscation and penalties under sections 112, 114AA of the Customs Act were dropped by the Additional Director, as Beetal Teletech satisfactorily discharged the onus for its claim and no willful suppression was found.Conclusion:The Tribunal upheld the order dated 28.11.2019, granting exemption from the whole of the customs duty to Beetal Teletech for WAP classified under CTI 8517 62 90. The appeals filed by the Department were dismissed, affirming that the exclusion clause (iv) applies only to products having both MIMO and LTE. The Tribunal did not find it necessary to address other contentions, including the invocation of the extended period of limitation.