2026 (2) TMI 137 - HC - Customs

Concessional Basic Customs Duty on Ethernet switches: appeal dismissed as factual CESTAT findings uphold noncarrier classification and circular inapplicable

Whether imported Ethernet switches qualified as NonCarrier (Enterprise) switches for concessional Basic Customs Duty was treated as a factual question; ... Concessional Basic Customs Duty - Carrier Ethernet Switch - Enterprise Ethernet Switch - classification based on end-use - temporal applicability of administrative circulars - Whether the Assessee/Respondent’s imports of various models of CISCO (CATALYST 3850 SERIES ETHERNET) SWITCHES falling under Customs Tariff Item 85176290 are entitled to the concessional Basic Customs Duty (“BCD”) at the rate of 10% ad valorem in terms of Notification No. 57/2017-Customs dated 30th June 2017 as amended by Notification No. 75/2018-Customs dated 11th October 2018 by treating the same as a “Non-Carrier Ethernet Switch” - Whether the Switches imported by the Assessee are Non-Carrier Switches/Enterprise Switches, and therefore entitled to the benefit of the notification - HELD THAT:- We find that the issue as to whether the Switches imported by the Assessee are Non-Carrier Switches/Enterprise Switches, and therefore entitled to the benefit of the notification, has been answered by CESTAT in the impugned order. The CESTAT has given this finding after examining the facts of the case and the evidence produced before it. The CESTAT also noted that the arguments made by the Assessee in paragraphs 3.1 and 3.2 of the impugned order, wherein the Assessee had clearly set out the difference between the “Catalyst Ethernet Switches - CISCO 3850 Series” (the impugned Switches) and the “Carrier Ethernet Switches - CISCO ME 3800X Series”, and which are Carrier Ethernet Switches. The distinction between two switches was brought out by the Assessee as reflected in these paragraphs of the impugned order. Despite all this material, and to ensure that the Revenue is not short-changed, the CESTAT, by an interim order dated 18th September 2023, directed that a proper inspection be carried out by experts in the field [of the impugned Switches] to ascertain whether in fact the Switches imported by the Assessee were Carrier Ethernet Switches or Non-Carrier Ethernet Switches/Enterprise Ethernet Switches. After going through the detailed order passed by the CESTAT, we find that the entire issue is fact based. The findings given by the CESTAT are all fact driven. The CESTAT is the last fact-finding authority. It is not even the case of the Revenue that the findings given by the CESTAT are contrary to the record. Once this is our view, in our opinion, no substantial question of law arises as projected by the Revenue. In fact, three questions of law, namely questions pressed before us, itself clearly establish that these questions would arise only on the basis whether impugned Switches are Enterprise Switches or Carrier Ethernet Switches. This factual finding has been given by the CESTAT and we do not find anything legally perverse in the findings rendered by the CESTAT on this issue. Hence, in our opinion, questions do not give rise to any substantial question of law. Applicability of the Circular issued by the CBIC, being Circular No.08/2023 - The Tribunal has in fact given a categorical finding that these instructions apply to imports made with effect from 1st April 2023, whereas the imports in the present case relate to the period November 2020 to February 2022. This apart, the Tribunal noted that even if the said Circular were to apply, the Switches in the present case do not fall within the exclusion as set out in the said Circular. Thus, we are of the view that even question does not give rise to any substantial question of law requiring an answer by this Court. It is therefore dismissed. However, there shall be no order as to costs. Issues: (i) Whether the imported Catalyst 3850 series Ethernet switches are Enterprise (Non-Carrier) Ethernet switches and therefore eligible for concessional Basic Customs Duty under Notification No. 57/2017-Customs as amended; (ii) Whether the CESTAT erred in treating the switches as Enterprise switches and in disregarding the TEC report and related expert material; (iii) Whether CBIC Circular No.08/2023-Customs applies to the imports in question and excludes the switches from concessional duty; (iv) Whether the Department's failure to conduct the directed physical inspection vitiated the denial of concessional duty.Issue (i): Whether the imported Catalyst 3850 series Ethernet switches qualify as Enterprise (Non-Carrier) Ethernet switches for the purpose of concessional Basic Customs Duty under the relevant notification.Analysis: The classification turns on factual evidence about product features, OEM specifications, customer end-use declarations, and expert testing directed by the appellate authority. The tribunal (CESTAT) recorded that interim directions to permit a technical inspection were not complied with by the Department, that OEM documentation and customer certifications supported enterprise/on-campus use, and that the laboratory/TEC testing did not establish carrier-grade capabilities such as MPLS-TP/IP-MPLS required for exclusion.Conclusion: The factual finding that the switches are Enterprise (Non-Carrier) Ethernet switches is upheld; they are eligible for concessional Basic Customs Duty under the notification.Issue (ii): Whether the CESTAT erred in its assessment of expert material (including the TEC report) and in concluding the switches are Enterprise switches.Analysis: The tribunal evaluated the TEC report alongside laboratory test results, OEM statements and end-use evidence, and found that the TEC's categorical classification as carrier-grade was not supported by the testing and documentary material on record. The tribunal's conclusion was fact-driven and based on the totality of evidence; no record-based contradiction was shown.Conclusion: There is no legal error in the tribunal's fact-based conclusion that the switches are not carrier-grade; the tribunal's assessment is sustained.Issue (iii): Whether CBIC Circular No.08/2023-Customs excludes the impugned imports from the benefit of the notification.Analysis: The tribunal found the circular's operative applicability to imports w.e.f. 01.04.2023, whereas the imports under dispute relate to November 2020 to February 2022. The tribunal also examined whether the technical exclusions listed in the circular matched the features of the impugned switches and concluded they did not.Conclusion: The circular does not apply to the imports in question and, in any event, the impugned switches do not fall within the circular's exclusion categories.Issue (iv): Whether the Department's failure to carry out the tribunal-directed physical/technical inspection invalidates denial of concessional duty.Analysis: The appellate authority had directed inspection by technical experts to resolve factual questions. The Department did not undertake the inspection but relied on a TEC report and other material. The tribunal evaluated the available evidence, including OEM documentation, customer declarations and laboratory test results, and reached a fact-based conclusion in favour of entitlement.Conclusion: The failure to conduct the directed inspection did not render the tribunal's fact-based finding legally vitiated; the denial of concessional duty was not sustained.Final Conclusion: All issues raised are fact-centric and were conclusively resolved by the tribunal on evidence; no substantial question of law arises for adjudication by this Court and the Revenue's appeal is dismissed.Ratio Decidendi: An appellate court will not interfere with a tribunal's fact-based findings where those findings are supported by record evidence including OEM specifications, laboratory testing and end-use documentation, and where no legal perversity in the tribunal's conclusions is shown.