2025 (11) TMI 1373 - AT - Customs

Multifunctional AV gear held classifiable under CTI 8518 4000, not 8527 9100; extended Section 28 period denied

M/s Yamaha Music India Pvt. Ltd. Versus Commissioner of Customs (NS-V), Nhava Sheva, Maharashtra

CESTAT Mumbai held that the imported multifunctional audio-video equipment is classifiable under CTI 8518 4000 as audio/video receivers/amplifiers, rather ... Classification of imported multifunctional audio-video equipment - classifiable under CTI 8518 4000/8543 7099 for AV Receivers/Stereo Receivers/Receivers (AVR), and under CTI 8518 2900/8522 9000 for Home Theatre System/ Packages (HTS) as claimed by the appellants or, is it classifiable under CTI 8527 9100 as determined by the learned Commissioner of Customs, for deciding on the appropriate levy of customs duty? - Invocation of extended period of limitation - HELD THAT:- It is found that the two contending classification i.e., one under CTI 8518 4000 with specific description of “audio/video receivers/amplifiers” as claimed by the appellant and CTI 8527 9100 with general residuary description ‘Other’ adopted by the department, both in the impugned order as well as in the SCN, does provide sufficient ground for comparison of the scope of coverage of the goods, at the level of the ‘terms of headings’, to apply GIR-1 to come to the conclusion as to which of these two classification is more appropriate for classification of impugned goods, as we had carried out, the detailed analysis of the scope of coverage of goods under the specific tariff entries in paragraphs 7 and 8.1 to 8.3, in order to arrive at appropriate classification of imported goods. Therefore, there is no need to examine the specific customs tariff entries under the two contending headings, in terms of other Rules of GIR. From the careful reading of the GIRs, it could be seen that these are required to be followed sequentially; in other words when the classification of goods is not possible to be arrived under the first rule GIR-1 then one need to proceed further, one by one - Thus, it is not feasible to determine appropriate classification by application of any other GIR, other than GTR-1. In the case of Logic India Trading Co. [2016 (3) TMI 5 - CESTAT BANGALORE], the Tribunal had held that multimedia speakers with FM/AM radio facility along with USB play back would be rightly classified under 8518 as these are known in the market as speakers and the radio is not the principal function of such goods. As is seen from the above, the Ministry itself, while expressing opinion on the classification of the mobile phones having a number of additional features, concluded that in as much as the essential purpose of the mobile phone is to communicate, the additional features of having so many other functions will not convert the phones into any other item. As the goods are being marketed and being purchased by the consumers as smart phone or other similar cellular or mobile phone, the additional facilities will not convert the phones into any other item. Invocation of extended period of limitation - HELD THAT:- It has been held in a number of cases by the Hon’ble Supreme Court that when all these facts relating to imports were within the knowledge of the Department, then the Department was not justified in invoking the extended period of limitation. Accordingly, we are of the view that in the present case, the Department would not be entitled to invoke the proviso to Section 28 of the Customs Act, 1962 in order to avail of extended period of limitation for invoking the demand of duty. The impugned goods are classifiable under 8518 4000 of the First Schedule to the Customs Tariff Act, 1975. Accordingly, the impugned order dated 07.09.2017 classifying imported goods under heading 8527 9100 does not stand the scrutiny of law and therefore is not legally sustainable. Appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether the imported multifunctional audio-video equipment (AV Receivers / Stereo Receivers / CD Receivers / Home Theatre Systems) is classifiable under chapter heading 85.18 (audio-frequency electric amplifiers / electric sound amplifier sets) or under chapter heading 85.27 (reception apparatus for radio-broadcasting) of the First Schedule to the Customs Tariff Act, 1975. 2. Whether the departmental re-classification to CTI 8527 9100 supports confirmation of differential duty (including CVD on MRP/retail price), confiscation and imposition of penalties. 3. Whether the Department was entitled to invoke the proviso to Section 28 (extended period of limitation) for demands in respect of the disputed imports covering pre- and post-self assessment periods. ISSUE-WISE DETAILED ANALYSIS - 1. Proper classification: 85.18 v. 85.27 Legal framework: Classification governed by Customs Tariff Act, First Schedule and the General Rules for Interpretation (GRI 1-6), relevant Section/Chapter notes and General Explanatory Notes (HS scheme). Headings in issue: 8518 (loudspeakers; audio-frequency electric amplifiers; electric sound amplifier sets) and 8527 (reception apparatus for radio-broadcasting; subheadings including 8527 9100 'combined with sound recording or reproducing apparatus'). Precedent treatment: Reliance on tribunal and Supreme Court authority holding multifunction devices with amplification as classifiable under 8518 where amplification is principal function; reference to board circular clarifying classification of multifunction speaker systems per their principal function and application of Note 3 to Section XVI and GRI sequence. Interpretation and reasoning: The Court applied GRI-1 first, reading the terms of headings and notes. Chapter heading 8518 expressly covers 'audio-frequency electric amplifiers' and 'electric sound amplifier sets' (single dash subheading 8518 40 encompassing all audio-frequency amplifiers). Chapter heading 8527 covers radio-broadcast reception apparatus. The Court examined product literature and features and concluded that the principal/essential function of the imported goods is amplification (receiving external inputs and amplifying sound for output), not radio reception or self-contained broadcast reception. CBEC circular on multifunction speaker systems was applied: where amplification is the principal function, classification under 8518 follows; where radio/USB playback is the principal function, 8527/8519 may apply. The Court found the imported AV/CD receivers/HTS primarily perform amplification and are known in trade parlance as AV Receivers / amplifiers; additional FM/AM tuner or USB features do not displace the principal function. Ratio vs. Obiter: Ratio - classification must follow GRI-1 and the principal function test (Note 3 to Section XVI) applied to multi-function audio devices; where amplification is principal, 8518 governs. Obiter - observations comparing complexity/sophistication of functions and some comments on residual headings (8522/8543) as inappropriate here. Conclusion: The imported goods are classifiable under CTI 8518 4000 as audio-frequency electric amplifiers / AV receivers. The departmental classification under CTI 8527 9100 is unsustainable. ISSUE-WISE DETAILED ANALYSIS - 2. Consequences for duty, confiscation and penalty Legal framework: Customs duty liability depends on correct classification under the First Schedule; imposition of confiscation and penalties under relevant provisions requires a legally sustainable demand and, where invoked, proof of suppression, mis-declaration, fraud or collusion justifying extended actions. Precedent treatment: Authorities and judgments cited treat classification errors as determinative of duty liability; tribunal and Supreme Court decisions upheld classification under 8518 when principal function is amplification and have refused departmental reclassification under 8527 in similar fact patterns. Interpretation and reasoning: Because classification under 8518 4000 is the correct legal classification, the basis for departmental demand premised on classification under 8527 (and consequent CVD on MRP/retail price) fails. The Court further noted absence of suppression or wilful misrepresentation at import: product literature provided at assessment, assessments (pre- and post-self assessment) were accepted/cleared without revision by Customs, and facts were within departmental knowledge. Thus, the foundational factual and legal predicates justifying confiscation and penalty under the SCN were undermined. Ratio vs. Obiter: Ratio - where reclassification is legally unsustainable, consequential differential duty, confiscation and penalty founded on that reclassification cannot stand. Obiter - remarks on residual headings and inapplicability of other CTIs (8522/8543) in the factual matrix. Conclusion: Demand for differential duty, confiscation and penalty based on classification under 8527 9100 is not legally sustainable; consequential relief follows from correct classification under 8518 4000. ISSUE-WISE DETAILED ANALYSIS - 3. Limitation / Self-assessment and proviso to Section 28 Legal framework: Proviso to Section 28 of the Customs Act permits extended period of limitation where suppression of facts or fraud is established; self-assessment regime (from 08.04.2011) shifts primary assessment responsibility to importer but preserves verification/re-assessment powers of Customs. Precedent treatment: Courts have held department cannot invoke extended limitation where relevant import facts were within departmental knowledge and no collusion, suppression, willful misrepresentation or fraud is shown. Interpretation and reasoning: The period in dispute spans both pre- and post-self assessment regimes. The Court recorded that product literature was supplied at import, assessments were accepted and not revised by Customs during verification/self-assessment, and there was no evidence of concealment or fraud. Given these facts and authorities, the Department was held not entitled to invoke the proviso to Section 28 to extend limitation. Ratio vs. Obiter: Ratio - extended limitation under proviso to Section 28 cannot be invoked absent suppression/fraud where information was available to the Department. Obiter - commentary on self-assessment era implications for reassessment practice. Conclusion: Department cannot rely on proviso to Section 28 to sustain extended period demands in this matter. CROSS-REFERENCES AND FINAL DETERMINATIONS 1. The Court applied GRI sequence and Note 3 to Section XVI, and relied on CBEC clarification and controlling tribunal/Supreme Court authorities on multifunction audio devices to determine principal function governs classification. 2. Because classification under 8518 4000 is established as correct, all consequential departmental actions premised on classification under 8527 9100 (differential duty including CVD on MRP, confiscation, penalty) are set aside. 3. The Department was not entitled to rely on extended limitation under the proviso to Section 28 in the absence of suppression/fraud given the facts that product literature and relevant information were available and assessments were not revised by Customs.