TaxTMI 
TaxTMI 
2015 (12) TMI 1200
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....c Customs Duty at 10% under Notification No. 21/2002-Cus. dt. 1.3.2002. 2. On the basis of information that M/s. Vodafone Essar Group of Companies (hereinafter referred as VEG) were misclassifying imported OFC and evading duty, 3 consignments totally valued at Rs. 4.65 Crore imported by M/s. Vodafone Essar South Ltd. (VES) from M/s. Corning Cable Systems Pvt. Ltd. were placed under seizure. Samples of the 3 consignments were drawn and sent to Telecommunication Engineering Centre (TEC), Ministry of Communication and Information Technology, Department of Communications, Government of India for expert opinion. TEC vide letter dt. 14.1.2009 opined that the cables contain bundles of optical fibres which were not individually sheathed and, therefore, are covered under Customs Tariff Heading 9001. During investigation VEG paid Rs. 1.83 Crores towards differential duty liability. Investigations culminated in issuance of show cause notice dt. 17.3.2009. In adjudication, Commissioner of Customs imports confirmed the classification under Tariff Item 90011000 and demanded differential duty amounting to Rs. 3,25,19,948/- under Section 28(2) of the Customs Act. Recovery of interest was ordere....
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.... It is applied in two layers. The dual acrylate coating protects the fibre against micro-bending and against abrasion. The outer diameter of the primary coating is 245 microns. The primary or buffer coating is easily strippable by means of a mechanical stripping tool to enable splicing of two optical fibres. Each fibre in a cable is coated with colour for identification of the fibre for joining dining installation. The contention is that each of the strands of optical fibre is individually cladded, coated with dual acrylate coating and colour coated. Therefore it should be treated as a fibre individually sheathed, hence classifiable under CTH 8544 & eligible for exemption. We were taken extensively through Technical Literature in support of this contention. 3.1 The Ld. Counsel relied on the Order-in-Appeal No. 165/2008/MCH/AC/Gr.VB/07-08 dt. 25.3.2008 passed by Commissioner (Appeals) Mumbai I holding the said goods to be classifiable under CTH 8544. 4. Ld. A.R. appearing for Revenue questioned at the outset whether the importer can file appeal in case of assessment made by themselves or whether Commissioner (Appeals) has rightly rejected the appeals filed by the importers ....
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....sioner of C. Ex. New Delhi 2001 (129) E.L.T. 170 (Tri-Delhi.) It was also submitted that the Order-in-appeal No. 165 dt. 25.3.2008 may be quashed. He submitted that the opinion obtained from Associate Professor, IIT Chennai by the appellant cannot have legal basis as the samples presented before him were not drawn in the presence of a Customs Officer. Further, the Director IIT had refused to give technical opinion. Therefore, the opinion given by the Associate Professor has no evidentiary value. 5. On the 23 rd September when the hearing took place before this Bench, the Ld. A.R. objected to the samples produced by the appellant questioning whether they represent the imported goods. Therefore, the Bench decided to examine the samples seized by DRI which were presented on 9 th October in the presence of the DRI Officer. 5.1 The OFC cable was cut across its section. It was found to consist of six tubes and within each tube there were eight optical fibres, each fibre being coated with different colour. Each OFC therefore consists of forty eight numbers of optical fibres. 5.2 The appellants submit that this OFC is made up Single Mode fibres with step index, conforming to IT....
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....ty, there would be no question of recovering differential duty, and therefore, collection of the amount of Rs. 1,83,46,210/- towards the differential duty is wholly unjustified............ ..........The fact that the petitioners themselves were classifying the goods in the past under Heading 90.01 would not preclude them from classifying the goods under Heading 85.44 in the light of the order passed by Commissioner of Customs (A), Mumbai....................................... ...............The contention of the revenue that the petitioners have voluntarily paid the amount towards the differential duty is equally unacceptable, because, in the covering letters all dated 19-12-2008 the petitioners have specifically stated that the amount is being paid in view of the threat given by the D.R.I. officers to arrest the directions / employees if the differential duty is not paid." It is seen that the Hon'ble High Court vindicated the stand of the appellant in changing the long standing practice of classification. 8. We may now briefly relate the judgments on this issue referred by both sides to have an idea of the judicial views so far on the issue of classific....
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....e not made up of individually sheathed fibers, they would automatically fall under Heading 9001, which is residuary to Heading 8544. In the nature of this dispute, we have found this case to be unique in that it involves meticulous interpretation of the Tariff entries coupled with the basic question of fact as to whether the cables in question were made up of individually sheathed fibres. In this nature of the case, we are of the view that it will not be just and fair to impose any penalty on the importer even in the event of a decision being taken against them. The learned Commissioner shall have regard to these aspects while taking up the case of de novo adjudication. The impugned order is set aside and the appeal is allowed by way of remand." It is seen that the Tribunal directed that the classification should be decided after examining the goods. (iii) In the case of Optel Telecommunication Ltd. (supra) the department itself desired the goods to be classified under Heading 8544 instead of Heading 9001. The duty at that time was higher under Heading 85.44. The Tribunal had observed that "No material has been brought on record by the Revenue to show that coating of UV cu....
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.... distance telecommunications. Fibre types - mode and multi mode There are two main types of optical fibres with which we are concerned for the present purposes. One is - single mode" fibre and the other is "multi mode" fibre. Single mode fibre is defined as "an optical fibre with a small core, propagating only on mode of light above the cut-off wavelength". Multi mode fibre is defined as "a large core fibre that support more than one propagation mode." In multi mode fibre, the light can be fed into the fibre at different angles, at the same time. However, in single mode, the light can be fed from one angle. Fibre Type - Step index fibre and graded index fibre In step index fibre, the core refractive index is uniform throughout the fibre so that a sharp step in refractive index occurs at the core-to-cladding interface. Graded index fibre means a fibre in which core is composed of concentric rings of glass where the refractive indices deco as from the centre axis whose purpose is to reduce modal dispersion. Optical fibre for telecommunication is made of very pure silica. It consists of the following components: i) core ii) cladding ....
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....ose of the sheath is given to be as a protective layer etc. Therefore there is some merit in the contention of the Ld. Counsel that the Opaque Dual Acrylate coating is nothing but a sheath. 10.2 We find that optical fibres find use in light transmission as well as in telecommunications. From the literature we notice that the construction and structure for these two end-uses is different. Technical books state that optical fiber bundles consist of thousands of fibers. "Mastering Optics by John Blackwell and Shane Thornton" states that optical fiber bundles are used for illumination when incoherently bundled and image transmission when coherently bundled. It also states that bundle can contain many hundreds of fibres. The most common applications of incoherent bundles are in endoscopes or in any medical instrument used to obtain an image from within the human body. Introduction of Fibre Optics by John Crisp says that "As the light travels down the fiber, light rays get thoroughly jumbled up. This means that a single fiber can only carry on average value of the light that enters it. To convey a picture along a single fiber is quite impossible. To produce a picture, a large numbe....
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.... covers optical fibres, optical fibre bundles and optical fibre cables. It states that "Optical Fibers consist of concentric layers or glass or plastics of different refractive indices. Those drawn from glass have a very thin coating of plastics, invisible to the naked eye, which renders the fibers less prone to fractures... They are used to make optical fiber bundles and optical fiber cables. Optical fiber bundles---- If coherently bundled, they are used for transmission of images, but if randomly bundled they are suitable only for transmission of light for illumination. The optical fibre cables consist of a sheath containing one or more optical fibre bundles, the fibres of which are not individually sheathed. Optical fibre bundles and cables of Heading 9001 are used primarily in optical apparatus, particularly in endoscopes. 11.1 OFC imported has, in all 48 optical fibres (6 tubes X 8 fibre each). They cannot be called as optical fibre bundle as the optical fibre bundle of Heading 90.01 consist of hundreds or thousands of optical fibres. The fibres used in the present case are for transmission of data. The 48 fibres as such, cannot transmit light or image as required by endosc....
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.... PBT Plastic tubes (8 fibres / tube) and included in the tube is a jelly to prevent water penetration and to protect the fibres from shock. To obtain a total of 48 fibres, 6 tubes are used and for the 24 fibre cables, 3 tubes are used, and 3 polyethylene fillers of the same diameter as the tubes are included to fill the vacant space. The stranding is retained with two helical binders. This cable uses "dry core" technology to prevent ingress of water. Two water blocking yarns are placed around the central strength member (one longitudinally and one helically) and over the core, is applied a longitudinal water swellable tape. (ii) Letter from the appellants and Opinion by M/s. Prysmian Wuzi Cable Co. Ltd., China who supply the cables stating that "The following features of the cable are highlighted a) the fibers in the cabel are silicon glass fibers b) the fibers are single mode, step index fibers c) the fibers are used for long distance telecommunications d) the fiber is protected by dual acrylate coating e) the fibers are identified with colour code, a coat applied on the dual acrylate coating 13) According to ....
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....he effects of long-term stress, in particular exposure to humid environments which can lead to failure due to a phenomenon called "static fatigue". 20) As a result of technological advances, optical fiber cables is not comprised of optical fibers that are covered with the traditional thick, protective, removable plastic. Thus, the application of acrylate coating/sheathing applied primarily for providing strength to the optical fibers would constitute a "sheath" for purposes of Heading 85.44, as in the optical fiber trade such coating is considered as a sheath around the optical fiber to form individually sheathed optical fiber. The coating of acrylate itself enhances the structural integrity and provides additional physical protection to the optical fibers and acts as a sheath to the optical fiber and is as such individually sheathed, classifiable under Heading 85.44." (iii) Certificate dt. 29.3.2009 of the manufacturer M/s. Corning Cable Systems as reproduced below- "To whomsoever it concerns, Corning Cable Systems confirms that we have supplied optical fibre cables to major customers in countries like USA, Canada, Europe (Germany, France, Great....
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....Revenue has not shown that acrylate coating amounts to sheathing. Respectfully we beg to differ. 'Sheathing' has a wide connotation as per the dictionary meaning. Here we are dealing with imported goods whereas in the said case the goods were manufactured in India. We have seen that the imported OFC consists of core, cladding, further coated with dual acrylate coating which is mentioned as sheath in technical literature, and colour coating of different colours. Thus, the decision of the CESTAT in Optel case is not applicable in the present case. Interestingly we note that in the Optel case, Revenue was seeking classification under 8544. Significant to note that the duty under CTH 9001 was more than the duty under CTH 8544 at that time. Revenue has changed its stance from the earlier one. 14. We find from records that another party namely Reliance Communications Infrastructures Ltd. had been classifying their similar goods described as "G652 Optical Fiber Cable with 48 Core" and "Optical Fiber Cable 12F G652" for the period April 2003 to December 2004 at Navi Mumbai and their goods were assessed under Heading 8544. They have produced copies of 25 B/Es as evidence. At the ....
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....echnologically improved coating to provide as good a protection as sheath is of no relevance. AAR also states that the claim of party that the individual sheathing is provided using present day technology i.e. resin is not supported by technical literature. Further it says that if coating is to be taken as sheathing then once it gets born as a fibre, the expression 'individually sheathed' would become redundant. AAR says that the nature and depth of coating will not take it out of the realm of 'coating'. It also holds that the Govt of India's obligation Information Technology Agreement (ITA) is only restricted to cables classifiable under Heading 8544. 15.1 We may also refer to some main points, other than above, which were advanced by the Commissioner in the impugned Order. He states that the dual acrylate coating is an integral part of the fibre and the coating is removed only at the fibre ends to facilitate proper joins at the terminal end. He also refers to the Explanatory Notes under Heading 9001 which state that the fibres have a thin coating of plastics which render the fibres less prone to fracture. Even the International Telecommunication Union (ITU)....
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....ally relevant as the dictionary meaning. The technical literature supports this view. 16. It is also our considered view that the applicability of the ITA agreement should not be rejected for the reason that it would only apply to Heading 8544 and not to 9001 as viewed by the ARA. We are of the opinion that the purpose of the Agreement is to exempt goods of IT industry, which the goods in question certainly are. That is why the European countries and USA have exempted such cables as borne by the Rulings referred to as well as by the manufacturers. However we do agree that this may not be the ultimate determining factor for arriving at the correct classification. 17. Moreover the Ruling of AAR will apply only in respect of the party that applied for such Ruling in terms of Section 28J of the Customs Act. 18. We have seen the opinion of the Telecommunication Engineering Centre (TEC). Without passing any judgement on the authority of the Centre to give opinion on an issue with wide ramifications, we do find that the opinion does not deal with the issue as extensively as it should have. Considering the importance of the issue, we would expect a technical opinion to refer to de....
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....es Technical opinions support the submission on classification under Heading 85.44 Letter dated 29.10.2006 by M/s. Prysmian Wuzi Cable Co. Ltd., China Letter from the appellants and Opinion by M/s. Prysmian Wuzi Cable Co. Ltd., China Letter from the appellant and Opinion by M/s. Corning Cables Systems (world leader in manufacturing and supplying OFC for telecom sector Certificate from the Department of Electrical Communication Engineering, Institute of Science, Bangalore 20. In our considered view the OFC merit classification under Heading 8544. One of us was a member of the Bench in the case of Reliance Communications Infrastructure Ltd which decided the classification of similar goods to be under Heading 9001. Our differing view is based to a significant extent on the Technical books/Literature, the benefit of which was not available to the bench in the case of Reliance Communications Infra Ltd case or in Optel Telecommunication Ltd. Therefore in our opinion, the matter needs to be referred to a Larger Bench of the CESTAT for resolving the dispute. At this stage we find that other issues such as confiscability and penalties wo....