TaxTMI 
TaxTMI 
2021 (10) TMI 392
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.... and Customs Appeal No. 87872 of 2019 by the Commissioner. 2. The aforesaid order dated 14.06.2019 passed by the Commissioner records the following findings : i. Reliance Jio did not mis-declare the goods since they are 'Base Stations', especially in normal terminology; ii. Thus, if the goods have not been mis-declared, then the payment of duty/differential duty on account of short payment or non-payment of duty has to be restricted to the normal statutory period prescribed under sub-section (1) section 28 of the Customs Act, 1962 [the Customs Act] and the extended period contemplated under sub-section (4) of section 28 cannot be invoked; iii. It is true that on a plain reading of the term 'Base Station', the goods appear to be classifiable under CTH 8517 61 00, which is specific for 'Base Stations', but as the technology involved in these goods goes beyond the basic functionalities of a 'Base Station', the goods would more appropriately be classifiable under CTH 8517 62 90; iv. Reliance Jio had itself, for the period prior to January 01, 2016, classified the goods under CTH 8157 62 90 and claimed exemption from payment of duty in terms of a Notification dated 17.03.....
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....ce Jio classified the goods under CTH 8517 62 90 and claimed exemption of duty under a Notification dated 17.03.2012. Thereafter, w.e.f. January 2016, Reliance Jio started claiming classification under 8517 61 00 for which the rate of duty was 'NIL', as it realized that 'Base Stations' were specifically covered under CTH 8517 61 00. 6. Before adverting to the submissions advanced by Shri J.C. Patel, learned Counsel for Reliance Jio and Ms. Manisha Goel and Shri Ramesh Kumar, learned Authorized Representatives for the Department, it would be useful to reproduce the findings recorded by the Commissioner in the impugned order, the gist of which have been stated above, and they are as follows : "67. The goods in question have been described as E-node B BTS, Microcell BTS, Air Synergy/Air Harmony/Air Velocity BTS etc. and these have either been classified under Customs Tariff item 85176290 or 85176100 as per the details given in Annexure I & II attached with the subject show cause notice. As far as description of the goods is concerned, while averring that the Show Cause Notice itself admits that the goods are commercially known as base stations, the noticee (importer) has inter-alia....
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...., and is controlled by a Radio Network Controller (RNC). However, with an eNB, there is no separate controller element. BTS functions on centralised intelligence control system operating on single band connecting to one user through one BTS at a time, while eNode-B functions on distributed intelligence control system simultaneously operating on multiple band through 4 or more eNode-B at a time on the principle of multiple input multiple output (MIMO) technology, having flat architecture. This has simplified the architecture and allows lower response times. ********* ********* ********* Aforesaid diagram clearly reveals the distinction between BTS as used in 2G technology, NodeB as used in 3G technology & ENodeB as used in 4G/LTE Technology. 6.5 eNodeB is an LTE/4G equipment which has built in functionality of Base Transceiver Station (BTS) and Base Station Controller (BSC) of 2G wireless network or NodeB and Radio Network Controller (RNC) of 3G wireless network Although it may be commercially referred as 'Base Station' of LTE network,. its functionality is beyond the earlier Base Stations (Base Transceiver Station of 2G networks or NodeB of 3G networks). Therefore clas....
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....ed and recovered. Similarly the above would be applicable to finally assessed Bills of Entry listed in Annexure B to the show cause notice mutatis mutandis but for the fact that only the Bills of Entry falling within the statutory period of Section 28(1) shall be covered for re-assessment for re-classification." (emphasis supplied) 7. Learned Counsel for Reliance Jio submitted that : (i) There is enough material to establish that eNodeB, Femto Cells/ Pico Cells are 'Base Stations' in the 4G network which communicate with the User Equipment. Thus, the goods have correctly been classified under CTH 8517 61 00; (ii) Every cellular network, whether, it be 1G Network (First Generation Network), 2G Network (Second Generation Network), 3G (Third Generation Network) or 4G Network (Fourth Generation Network), necessarily has to have a Base Station and it is inconceivable to have a Cellular Network without a Base Station. Therefore, 4G network must necessarily also have Base Station, which is the eNodeB. eNdodeB, therefore, deserves to be classified under the specific sub-heading for 'Base Stations' i.e. 8517 61 00; (iii) A Tariff entry cannot be given a static interpretation, ignori....
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....rks. CTH 8517 60 00 is a specific entry for 'Base Stations' and covers only those products which are covered under the definition of 'Base Stations' as given in HSN. Any equipment which is not functioning on the aforesaid definition of 'Base Stations' in HSN cannot be classified under CTH 8517 61 00; (iv) Any equipment which performs a combined function of BTS and 'Base Station Controller' (BSC) should be a machine and as the principal function performed by the machine is to decide when the mobile should perform 'Handover' and to which neighbouring cell, the correct classification would be for Base Station Controller, by virtue of Note 3 to section XVI based on the performance of the principal function; (v) Base Station Controllers are apparatus covered under sub-heading 8517 62 and since no tariff item is specified, they would be classifiable under CTH 8517 62 90 under the residual tariff item entry of sub-heading 8517 62; (vi) Even if it is assumed that eNodeB can be classified both under CTH 8517 61 00 and CTH 8517 62 90, then too in view of paragraph 3(c) of the General Rules for the Interpretation of Import Tariff, it would be classifiable under CTH 8517 62 90; (vii) W....
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....443, 8525,8527 or 8528 - Telephone sets, including telephones for cellular networks or for other wireless networks: 8517 11 -- Line telephone sets with cordless handsets: 85171110 --- Push button type u Free - 85171190 --- Other u Free - 851712 -- Telephones for cellular networks or for other wireless networks: 8517 12 10 --- Push button type u 20% - 8517 12 90 --- Other u 20% - 8517 18 -- Other: 8517 18 10 --- Push button type u Free - 8517 18 90 --- Other u Free - - Other apparatus for transmission or reception of voice, images or other data including apparatus for communication in a wired or wireless network (such as a local or wide area network): 8517 61 00 -- Base stations u 10% - 8517 62 -- Machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus: 8517 62 10 --- PLCC equipment u Free - 8....
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....n. 4. Goods which cannot be classified in accordance with the above rules shall be classified under the heading appropriate to the goods to which they are most akin. THE GENERAL EXPLANATORY NOTES TO IMPORT TARIFF 1. Where in column (2) of this Schedule, the description of an article or group of articles under a heading is preceded by "-", the said article or group of articles shall be taken to be a sub-classification of the article or group of articles covered by the said heading. Where, however, the description of an article or group of articles is preceded by "--", the said article or group of articles shall be taken to be a sub-classification of the immediately preceding description of the article or group of articles which has "-". Where the description of an article or group of articles is proceeded by "---" or "----", the said articles or group of articles shall be taken to be a sub-classification of the immediately preceding description of the article or group of articles which has "-" or "--". 2. ******** 3. ********" 14. It would be clear from aforesaid that a single dash (-) at the beginning of a description denotes an article that belongs to a group covered un....
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....System Explanatory Notes 8517- Telephone sets, including telephones for cellular networks or for other wireless networks; other apparatus for the transmission or reception of voice, images or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network), other than transmission or reception apparatus of heading 84.43, 85.25, 85.27 or 85.28(+). - Telephone sets, including telephones for cellular networks or for other wireless networks: 8517.11 -- Line telephone sets with cordless handsets 8517.12 -- Telephones for cellular networks or for other wireless networks 8517.18 -- Other - Other apparatus for transmission or reception of voice, images or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network): 8517.61 -- Base stations 8517.62 -- Machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus 8517.69 -- Other 8517.70 - Parts This heading covers apparatus for the transmission or reception of speech or other sounds, images or other data between two points....
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....ver-transmitter. (3) Picture telegraphic apparatus. The ancillary photographic equipment used with this apparatus (e.g., developing equipment) falls in Chapter 90. 21. To appreciate the contentions advanced by the learned Counsel for Reliance Jio and the learned Authorized Representatives for the Department, it would be useful to understand what a 'Base Station' is. BASE STATION 22. A 'Base Station' is considered to be a fixed equipment in the Access part of the Cellular Telephone Network, which communicates with the User Equipment i.e. a Mobile Phone/Cellular Phone. It receives and transmits radio waves to and from cellular telephones or to other wired or wireless networks. Since the user mobile phone accesses the network by communicating with the Base Station by radio waves, this portion of the network is referred to as Radio Access Network and as the Base Station transmits and receives radio waves to and from the user mobile phone, it is also referred to as Base Transceiver Station. 23. A Cellular network is divided into Cells (Geographical areas) and each Base Station covers a Cell. If the user moves from one cell to another while telephoning, the call is automatically tr....
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....lls BTS are miniature eNodeB or Home eNodeB, which cater to smaller areas such as residential complex or office complex. 27. To substantiate the aforesaid statements, learned Counsel for Reliance Jio referred to websites and literature/books on this aspect and they are: (i) The 3GPP Standards, which have also been referred to in the show cause notice at paragraph 6.2, mention that eNodeB and Home eNodeB are the 'Base Stations' in 4G LTE network, which communicate with the User Equipment and this would be evident from the two websites namely, http://www.3gpp.org/technologies/key-wordsacronyms/98-lte and http://www.3gpp. org/technologies/keywordsacronyms/100-the-evolved-paccket-core (a) The website http://www.3gpp. org/technologies/keywords-acronyms/98-lte contains in the following information : "The LTE access network is simply a network of base stations, evolved NodeB (eNB), generating a flat architecture (figure 2). There is no centralized intelligent controller, and the eNBs are normally inter-connected viathe X2-interface and towards the core network by the S1-interface (figure 2). The reason for distributing the intelligence amongst the base-stations in LTE is to s....
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....e new, feature-rich wireless standard called long-term evolution (LTE) is a complex application that needs a large amount of processing power. LTE is the next evolutionary step after 3G for mobile wireless communication, and is aimed at increasing the wireless network capacity while improving the spectral efficiency. LTE unites many technological innovations from diverse research areas such as digital signal processing, Internet protocols, network architecture, and security, and, as such, will drastically change the way that the worldwide mobile network is used in the future. LTE is anticipated to be the first truly global wireless standard, as it may be deployed in a variety of spectrum and operating scenarios, and has the capacity to support a myriad of wireless applications. Numerous operators and service providers around the world have already deployed LTE on their networks or have announced LTE as their intended next generation technology. An LTE eNodeB or base station must use powerful embedded hardware platforms, to offer a complete feature set with reasonable cost and power. Multi-core digital signal processors (DSP) combine cores with processing flexibility and hardware ....
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.... version of the femto access point is the Home eNode B (HENB). Femto is a complete new way or building the mobile network. It covers a number of new aspects including interference control, architecture, mobility, security and access control, which are all different from the macro cell networks. Therefore, this chapter gives more detailed description about the femto-related solutions and their backgrounds compared to other chapters in the book." (emphasis supplied) (v) The Obligation of TEC in respect of essential requirements of 'Base Stations'. They are reproduced below: "Scope This document lays down the Essential Requirements under the mandatory testing Framework in accordance with Government of India Gazette Notification No. G.S.R. 1131(E), dated 05th September 2017, for Base Station to be used in Indian Telecom Network using 2G/3G/4G technology. The document defines the mandatory testing requirements for certification under the MT&CTE framework. This ER covers following variants of the product: Name of Product Varient(s) Base Station 1. BTS (GSM) 2. NodeB (WCDMA) 3. eNodeB (LTE) 4. MSR - GSM 5. MSR - WCDMA 6. MSR - LTE 7. MSR - GSM + WCDMA....
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....the BSCs coverage area. BSC also determines when the mobile should perform handover and to which neighbouring cell. Any transactions required between the MSC and the mobile for any communication or resource allocation are coordinated through the BSC. (b) 3G Wireless (i) RNC 5. The Radio Network Controller (RNC) is equivalent of BSCs in 3G and is responsible for controlling the Node Bs that are connected to it. It carries out radio resource management, some of the mobility management functions and is the point where encryption is done before user data is sent to and from the mobile. (ii) NodeB 6. NodeB in UTMS is equivalent of BTS in GSM. It is the part of the network that communicates directly with mobile handsets. (c) 4G Wireless (i) eNodeB 8. The evolved RAN for LTE consists of a single node, i.e., the eNodeB (eNB) that interfaces with the UE. The eNB hosts the PHYsical (PHY), Medium Access Control (MAC), Radio Link Control (RLC), and Packet Data Control Protocol (PDCP) layers that include the functionality of user-plane header-compression and encryption. It also offers Radio Resource Control (RRC) functionality corresponding to the control plane. It perform....
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....ion Network) or 4G Network (Fourth Generation Network), has to necessarily have a Base Station; iv. HSN also describe 'Base Stations' for cellular networks as those which receive and transmit radio waves to and from cellular telephones and each 'Base Station' covers a geographical area which is called a 'cell'. It also states that if a user moves from one cell to another while telephoning, the call is automatically transferred from one cell to another without interruption; v. The essential requirement of 'Base Stations' contained in the Obligation of TEC, covers many variants, including eNodeB (LTE); vi. 3GPP Standards mention that eNodeB and Home eNodeB are the 'Base Stations' in 4G LTE network which communicate with the User Equipment; vii. The two websites stated in paragraph 26 of this order also state that LTE access network is simply a network of 'Base Stations' which are evolved NodeB (eNodeB); and viii. The books referred to in paragraph 26 of this order also state that eNodeB is a Radio Base Station and that Base Stations such as eNodeB are distributed throughout the network coverage area. Each eNodeB resides near the actual radio antennas. 30. It also needs to ....
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.... of 4G network and indeed none has been pointed out during the course of hearing. 34. Learned Authorized Representatives appearing for the Department have, however, placed reliance upon the Instructions dated 07.06.2017, issued by the Central Board of Excise and Customs regarding classification of eNodeB and have submitted that based on a careful consideration of all the relevant factors, the Board had taken a conscious decision to classify eNodeB under CTH 8517 62 90. 35. It would, therefore, be appropriate to reproduce the said Instructions and they are as follows: "INSTRUCTIONS DATED 07.06.2017 Subject: Classification of eNodeB-reg. Board has received references regarding the classification of eNodeB which is an LTE equipment used in wireless or cellular networks. A doubt has been expressed whether the said goods are classifiable under CTH 8517 6100 or CTH 8517 6290. 2. The Board examined the issue. In this regard it is clarified that eNodeB is an LTE/4G equipment which has built in functionality of Base Transceiver Station (BTS) and Base Station Controller (BSC) of 2G wireless network or NodeB and Radio Network Controller (RNC) of 3G wireless network. Although it may b....
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.... intelligence to communicate directly as a result of which 'Handover' of calls takes place directly without the intervention of any Controller. This helps to speed-up the connection set-up and reduce the time required for 'Handover'. It has further been explained that for an end-user, the connection set-up time for a real time session is crucial and that if the 'Handover' takes too long, the end-users tend to end the calls. 40. Merely because the Base Stations of 4G LTE have overcome the aforesaid drawback of the Base Stations of 2G and 3G technology, it cannot mean that eNodeB is not a Base Station. It cannot, therefore, be said that 'Base Stations' of 4G technology cannot be called 'Base Stations' because unlike Base Stations of 2G technology and 3G technology, it does not require a separate Controller. As noticed above, historically the very first Base Station of 1G Technology also did not have a separate Controller and the requirement of a Controller in 2G technology and 3G technology was perceived to be a drawback, as it slowed down the speed of connection. Thus, it cannot be urged that the Base Station of 4G technology is not a Base Station and cannot be classified under CTH....
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....ical opinion that reed switches would improve the performance of hearing aids, the High Court held that reed switches were covered by the tariff entry. The High Court also noted that it was not the case of the Customs authorities that the respondent was trying to divert the imported reed switches from the manufacture of hearing aids to another purpose. 4. We do not think that we can put it better. Progress cannot be stifled by an over-rigid interpretation of Import Policy or Customs Tariff. Both must be read as they stand on the date of importation and whatever is reasonably covered thereby must be allowed to be imported regardless of the fact that it was not in existence or even contemplated when the policy or tariff was formulated." (emphasis supplied) 42. Learned Authorized Representatives also submitted, based on the Recommendations of TRAI, that since eNodeB hosts physical, medium access control, radio link control and packet data control for user-plan header compression and encryption and performs many functions, including radio resource management, admission and control, eNodeB cannot be classified as Base Station. 43. A perusal of the aforesaid Recommendations of TRAI,....
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....r the said double dash (--) sub-heading 8517 62, which will cover transmission and reception apparatus other than 'Base Stations'. Between the double dash (--) description "Base Stations" in sub-heading 8517 61 00 and the triple dash (---) description "Other" in sub-heading 8517 62 90, it is the former which is specific. Since eNodeB answers the said specific description of a Base Station, it can never be consigned to the said residuary sub-heading CTH 8517 62 90 for "Other". 46. Learned Authorized Representatives appearing for the Department also submitted that not only was Reliance Jio prior to January 2016 classifying eNodeB/LTE under CTH 8517 62 90, but even other importers have also been classifying eNodeB under the same sub-heading. 47. This contention advanced by the learned Authorized Representatives of the Department cannot be accepted as there can be no estoppel either against the importer or against the Department in matters of classification and merely because Reliance Jio or other importers have claimed a particular classification, it cannot be urged that a correct classification cannot be subsequently claimed. 48. This is what was observed by the Supreme Court in D....
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....under a particular heading, the correct classification has to be arrived at in accordance with law. 52. It is, therefore, also not possible to accept the view expressed by the Board in the Instructions dated 07.06.2017. 53. The learned Authorized Representatives appearing for the Department also submitted that the Commissioner committed an illegality in granting the benefit of the Notification dated 17.03.2012 to Reliance Jio since this Notification does not apply and infact it is the Notification dated 01.03.2005, as amended by Notification dated 11.07.2014, that would apply. 54. A perusal of Serial No. 372 (i) of the Notification dated 17.03.2012 would show that it grants exemption from the whole of customs duty of goods specified in List 17 required inter alia for cellular mobile telephone service. The said exemption is subject to condition no. 52, which requires that the importer should be licensed by the Department of Telecommunications of the Government of India for providing cellular mobile telephone service. There is no dispute that Reliance Jio satisfies condition no. 52. List 17 mentions 'Base Transceiver Stations' at Serial No. 3(a) and 'Base Station Controllers' at S....
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....tended period of limitation contemplated under section 28(4) of the Customs Act could not have been invoked in the present case. In this connection learned Authorized Representatives pointed out that that w.e.f. 08.04.2011 section 17 of the Customs Act was amended to provide for self-assessment of duty by an importer and, therefore, if the importer had claimed exemption under a Notification with which the Department disagrees, it would amount to mis-declaration. 59. Learned Counsel for Reliance Jio, however, pointed out that out of the 22 Bills of Entry which were finally assessed (Annexure II to the show cause notice), 21 Bills of Entry pertain to the period 2014 to January 2017. As the show cause notice was issued on 19.07.2018, except for the last Bill of Entry which is of 02.01.2017, all the other Bills of Entry pertain to the period prior to July 2016 and would be beyond the normal limitation period of two years provided for in section 28(1) of the Customs Act. Learned Counsel submitted that the extended period of limitation contemplated under section 28(4) of the Customs Act cannot be invoked as there was no collusion, wilful mis-statement or suppression of facts with intent....