TaxTMI 
TaxTMI 
2007 (10) TMI 47
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....s arise against the confirmation of duty of Customs of Rs. 43,84,68,532/- on the following components and parts :- 1. LCD screen; 2. Feeder Cables; 3. Batteries, 4. Printed Circuit Boards; 5. Input Out Cables; 6. Fuse; 7. Chargers Imported by the appellants herein for the manufacture of the two models of CDMA WLL phones, on the ground that the benefit of exemption in terms of Notification No. 21/2002-Cus dated 1.3.02 (sr.no.320 of the table thereto), and Notification No.21/2005-Cus dated 1.3.05 is not admissible to such parts and components as CDMA WLL telephones are not Cellular Phones, and again....
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....gnals. This is different from the Global System for Mobile Communication (GSM) technology used for cellular mobile communication. Hand Held sets which comply with specification IS - 95A can be used in WLL. As such technology a Cellular Mobile Phone cannot be used for the portable WLL service. 10(iii) As discussed by the Hon'ble CESTAT in its decision in the case of Tata Teleservices Ltd v. Commissioner of Customs, Chennai, reported in 2004 (168) ELT 181 (Tri. Del), Cellular Telephone is defined in Work Book Encyclopedia as "Cellular Telephone is a movable telephone unit. It allows people to communicate over a wide area by using a combination of radio, telephone and computer technology". This Encyclopedia also explains the manner in which a Cellular telephone functions as under: "A cellular communication system consists of three main parts : (1) a cellular telephone, (2) a net work of low powered radio aerials, and (3) a central switching office. When a call is made on a cellular telephone, radio waves carry the message to an aerial transmitter. This aerial is centrally located in a g....
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....ecording or reproducing apparatus; television cameras. Central Excise Tariff - Post March, 2005 (8 digit tariff) Tariff Item Description of goods 1 2 85.25 Transmission Apparatus For Radio Telephony, Radio Telegraphy, Radio Broadcasting or Television, Whether or Not Incorporating Reception Apparatus or Sound Recording or Reproducing Apparatus; Television Cameras; Still Image Video Cameras And Other Video Camera Recorders; Digital Cameras 8525 20 - Transmission apparatus incorporating reception apparatus: ---Two way radio communication equipment: 8525 20 10 --- Walkie talkie set 8525 20 12 --- Cordless handset 8525 20 13 --- Car telephone 8525 20 14 --- Transportable telephone 8525 20 15 --- Marine radio communication equipment 8525 20 16 --- Amateur radio equipment 8525 20 17 --- Cellular telephone 8525 20 19 --- Other Customs Tariff 85.25 Transmission Apparatus For Radio Telephony, Radio Telegraphy, Radio Broadcasting Or Television, Whether Or Not Incorporating Recept....
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....e continent known as GSM (global system for mobile communication). 9.2. Be it GSM or CDMA or TDMA, all the standards are based on digital cellular technology. 9.3. In the cellular technology of communication, the geographical area is divided into adjacent, non-overlapping, hexagonal shaped cells. However, in practice, they are hexagonal in shape. Each cell has its own transmitter and receiver called base station, to communicate with the phones in that cell. All the calls are routed through the base station. Each base station is equipped with a low power transmitter. A mobile switching station co-ordinates the hand-off of phones crossing the cell boundaries. The advantage is obvious i.e. the communication is uninterrupted even if the person moves from one cell to another cell. 9.4. The following technical books show that CDMA is one of the standards of digital cellular communication technology. (a) Mobile Cellular Telecommunications, Analog and Digital Systems, 2nd Edition, published by McGraw-Hill International Edition - at pages 1494, and 1499 onwards; (b) Mobile Communication Satellites, published by McGraw-Hill Inc. - pages 1531 to 15....
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....he phones used in cellular technology using CDMA standard are also cellular phones (a) Certificates dated 7.8.06 of Qualcomm (two certificates) at pages 290 and 291 in Vol.1 of paper book - certifying that the phones in question work on cellular technology and are equivalent to LG's LSP 340 model of fixed wireless phone involved in the decision of the Supreme Court in Tata Teleservices; (b) Opinion of IIT, Bombay - at pages 292 to 293 of Vol.1 of the paper book - explaining what is cellular technology, comparison of cellular technology based on GSM and CDMA and certifying that the two models of the phone in question work on cellular technology and are hence cellular phones; (c) Clarification dated 16.10.06 written by Department Of Telecommunication in the Ministry of Communications and Information Technology of Govt. of India to the Dy. Commissioner of Customs, Goa - at page 294, certifying that the two phones in question are cellular phones as they operate on cellular technology. The DOT has also stated that in view of the decision of the Supreme Court in Tata Teleservices, the exemption is available to all telephones including fixed wireless telephones workin....
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....assifiable under heading 85.25. The Committee considered two competing entries viz. Heading 85.15 and 85.25 and came to the conclusion that cellular phones are classifiable under heading 85.25, by applying General Interpretative Rule 1. 12.3. After the said decision, the HSN Explanatory Notes to Heading 85.15 and Heading 85.25 have been suitably amended (page 1442). 13. The circular dated 27.6.03 of the Board (page 1461), after holding that CDMA phones work on cellular technology, restricted the exemption to hand held mobile phones only. 13.1. The Mumbai Bench of the Tribunal in Bhagyanagar Metals Ltd. vs. CCE, Goa - 2005 (180) ELT 370 (Tri) - page 1468, held in favour of the assessee and held that CDMA Fixed Wireless Telephone LSP 340E of LG make, is a cellular phone and therefore entitled to exemption under Sl.No.313 of Notification No.21/02-Cus. The Tribunal also held that the circular is not correct in holding that CDMA fixed wireless phones are not cellular phones. The Tribunal also held that so long as the phones operate on cellular technology, they are cellular phones and hence entitled to the exemption. While holding so, the Trib....
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....eads thus, - "10. We are of the view that the reasoning of the Bombay Bench of the Tribunal as well as that of the Andhra Pradesh High Court must be affirmed and the decision of the Delhi Tribunal set aside insofar as it relates to the eligibility of the LSP 340 to the benefit of the exemption notification…... ...Since there is no dispute that the technology used in LSP 340 and the hand held mobile phone is the same there is no warrant to limit either the tariff entry or the exemption notification to hand held cellular phones. Neither the range nor the size would make any difference." 13.5. The Delhi Bench of the Tribunal in its decision reported in 2004 (174) ELT 66 in Tata Teleservices, followed its earlier decision reported in 2004 (168) ELT 181. The Supreme Court, by its decision reported in 2007 (208) ELT A82, set aside the decision of the Tribunal in 2004 (174) ELT 66. 13.6. The Bangalore Bench of the Tribunal in Icomm Tele Ltd. vs. CCE - 2007 (79) RLT 354 (page 1488) has held that CDMA WLL phones are cellular phones and entitled to exemption from payment of Central Excise duty. In para 6.2 it was held as under: "6.2 These handse....
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....chnology but however, proposed to deny the exemption on the ground that the fixed wireless phones are bigger in size, and that cellular phones mean phones working on GSM technology. 14.2. The Board, DOT and other technical authorities have clarified that the CDMA WLL fixed wireless phones work on cellular technology. The Supreme Court has also held in para 7 of its judgement that the technology used by hand held phones (i.e. GSM) and the fixed wireless phones is same, namely cellular technology. It has been clarified by the DOT and others including BSNL, that the phones in question are cellular phones and compares with the LG's phone model LSP 340. (which was accepted as working on cellular technology on the basis of DOT and Qualcomm opinions.) Since the phones in question work on cellular technology, the appellants are entitled to the exemption. 15. The phone model LSP 340 of LG make and the phones in question are identical to each other and conform to the same specification of Telecom Engineering Centre and are deployed by BSNL in the same network. The comparison chart at page 959 (Vol. III of paper book) show t....
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....hnology is a cellular phone. Chapter 85 of the Central Excise Tariff as it stood prior to 2005 is fully aligned with the HSN Explanatory Notes, at 4 digit level. HSN Explanatory Notes to Heading 85.25 specifically covers cellular phones by name under heading 85.25. In the absence of any sub-heading for the period prior to 1.3.05, the phones in question will fall under heading 85.25 as "transmission apparatus for radio-telephony, whether or not incorporating reception apparatus". 16.2. For the period after 1.3.05, the Commissioner has classified the phones in question under the residuary category "Others" under tariff item No. 852520.19, disregarding specific tariff item No.852520.17 covering "cellular telephone". The Board in its circular dated 27.6.03 has clarified that CMDA WLL is a recent development and clarified that CDMA WLL fixed wireless phones work on cellular technology. It is settled by the following decisions that advancement in technology has to be taken into account, while considering the classification of the goods or extending the exemption:- (i) Porritts & Spencer Vs. State of Haryana 1983 ELT 1607 (SC) &nb....
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....t clarification from BSNL as to whether CDMA WLL phones are cellular phones or not. On the contrary, the BSNL has clarified that CDMA WLL are cellular phones and they work on cellular technology. 17.3. The tender documents extracted in the impugned order refers to hard hand off, soft hand off, Inter-BSC (base station controller) and other terms used in cellular technology only (see page 1499 and 1500 of compilation containing technical books). Hence, the CDMA WLL phones in question are also cellular phones only. 18. The Commissioner has referred to the advertisements inserted by BSNL on their various wireless telephone services (GSM and CDMA), in paras 28 to 46. According to the Commissioner, BSNL has advertised the CDMA WLL phones as wireless phones and not as cellular phones. The Commissioner has also relied upon the decision of Supreme Court in State of Goa v. Colfax Laboratories Ltd. - 2003 (158) ELT 18 (SC) to hold that advertisements can be taken into account for deciding the classification. However, it is well settled by large numbers of decisions of Tribunal, High Courts and Supreme Court that advertisements cannot be the basis for ....
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....cal Loop (WILL), in contrast to that of a Mobile cellular system needed to be clearly understood, since there is little doubt that wireless access systems deployed now are provided by digital access and connectivity thereunder to subscribers today is provided by mobile communication systems as well as wireless in local loop systems. The paper noted that though these two systems appear to be similar and are often confused with each other; the requirements for the two systems are significantly different. Mobile Telephone system is primarily meant to provide telephony for people on the move and the telephone is meant to keep the person connected while he/ she is away from home and office. The key here is universal coverage. Wireless in Local Loop (WiLL), on the other hand, is meant to serve subscribers at homes or offices, where the telephone provided must be at least as good as wired phone. Therefore, even though the mobile communication systems and wireless in local loop systems may appear to be similar and sometimes even used interchangingly, the requirements are quite distinct. This paper also shows that cell concept is a concept of wireless radio telephony and not limited to cell....
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....DMA WLL phones in question which is reproduced below:- "The Huawei, who has designed the impugned IFWT phones of the appellant-assessee herein, in their web write-up titled "Huawei WLL solution - Fostering a new public network (Wireless Asia)" states that fully integrated with the PSTN, yet with no lack of mobility, CDMA-based wireless local loop (WLL) offers fixed-line carriers and new telecom carriers a powerful weapon to fight for market share. In view of the worldwide deployment and growing momentum of CDMA WLL, there is no doubt that CDMA WLL systems, which integrate fixed network infrastructure and radio access, will become the new direction of telecom development following PSTN and Public Land Mobile Network (PLMN)." 19.5 In paras 41 and 42, the Commissioner has referred to the website of BSNL relating to engineering instructions on LG make CDMA WLL phones which is reproduced below:- "M/s BSNL, which were the exclusive buyers of these two CDMA WLL phones, in their two Engineering Instructions titled "INTRODUCTION TO WLL (CDMA) - LG MAKE" and "Acceptance Testing of WLL (Rural) LG Make (EI No. Electronic Switching/ WLL/ AT-03)" states that CDMA Wireless in Local Loop ....
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....ous types of WLL systems and technologies exist. This referencer also states that Fixed Wireless Terminals or FWT units differ from conventional mobile terminal units operating within cellular networks, such as, GSM, in that a fixed wireless terminal or desk phone will be limited to an almost permanent location with almost no roaming or find-me anywhere facilities." 19.7 The above sites relied upon by the Commissioner refer to WLL as wireless technology. These websites also state that radio waves are used for communication by WLL. However, none of the websites relied upon by the Commissioner state that WLL is not a cellular phone. They are silent on this aspect. Hence, the information provided in these websites cannot be relied upon. They compare the CDMA WLL with GSM network. GSM standard alone is taken as cellular technology by the Commissioner. There is no basis for assuming so and further, as clarified by the Board itself, GSM and CDMA WLL operate on cellular technology. 20. Reliance on the decision of Telecom Dispute Settlement Appellate Tribunal in Tata Teleservices Ltd. The decision relied upon by the Commissioner in para 47 on....
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....easons given in the impugned order for distinguishing the decision of Supreme Court in Tata Teleservices are not sustainable in law The Commissioner has held that there was no dispute before the Supreme Court that the phone considered by the Supreme Court, namely LSP 340 worked on Cellular technology. The Commissioner had also extracted from the order of the Commissioner passed in Bhagayanagar Metals, which was set aside by the Supreme Court. The Commissioner has come to the conclusion that in the present case, the department has adduced enough evidence to show that CDMA WLL phones are not cellular phones and they do not operate on cellular technology and hence the benefit of the decision of Supreme Court in Tata Teleservices is not available to them. For the same reasons, the Commissioner has also declined to apply the circular dated 20.4.06 to the present case. 22.1. We note that phone model LSP 340 considered by the Supreme Court was also a CDMA WLL phone. The department has not disputed that the said CDMA WLL phone was a cellular phone. That being so, all CDMA WLL phones are cellular phones. It is not possible to accept that one model of CDMA WLL phone i....