TaxTMI 
TaxTMI 
2024 (1) TMI 683
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....le, switch module, switch and control timing module, line amplifier module, wave length selectable switches module, transponder/ mux ponder, multiplexer, demultiplexer, splitter coupler, dispersion compensation module, optical time domain reflectometer module, client module etc. for providing support services in respect of telecommunication networking equipment by categorizing the same as transmission or reception apparatus/ communication apparatus. The appellants have classified the impugned goods under Customs Tariff Item (CTI) 8517 7090 as 'Parts' and under CTI 8517 6290 as 'apparatus' claiming 'NIL' rate of Basic Customs Duty (BCD). 1.2 On the basis of an intelligence developed by Directorate of Revenue Intelligence, Mumbai Zonal Unit (DRI MZU) having reasons to believe that the appellants have wrongly classified the impugned goods under import for avoiding payment of appropriate duty applicable at the rate of 10% BCD, and by claiming ineligible exemption for availing 'NIL' BCD in terms of Notification No.11/2014- Customs dated 11.07.2014, initiated investigation on their imports. Upon conclusion of detailed investigation by DRI MZU, the department had initiated show cause c....
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....ave by wilful mis-statement have wrongly availed themselves of the benefit of exemption notification No. 24/2005-Customs dated 01.03.2005 as amended. The list of such items on which the exemption was not available has been categorized by DRI MZU in Annexure-I & III of SCN and differential duty was demanded in the SCN dated 12.07.2019. The said SCN was adjudicated by the learned Additional Director General vide Order-in-Original No.77/MMT(77)ADG(ADJ.)/DRI, MUMBAI/ 2020-21 dated 26.02.2021 (herein after, called in short as 'impugned order') as the common adjudicating authority appointed by CBIC in terms of Notification No.37/2019-Customs (N.T.) dated 26.08.2019 issued under Section 4, Section 5(1) ibid, confirming the adjudged demands proposed in the SCN dated 12.07.2019. Feeling aggrieved with the impugned order, the appellants have preferred this appeals before the Tribunal. 2.1 Learned Advocate appearing for the appellants importer reiterated the points set out in detail in the Appeal Memorandum and the Written Submissions dated 23.01.2023, and further submitted additional Written Submissions, in maintaining brevity and to avoid prolixity, stated that the goods under dispute ar....
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....basis for classification of goods as apparatus, he relied upon the judgement of the Division Bench Hon'ble Supreme Court of India in the case of Commissioner of Customs, New Delhi Vs. C-Net Communications (India) Pvt. Ltd. reported in [(2007) 12 SCC 72], to state that the Hon'ble Supreme Court, had applied the Common Parlance Test, in classification of the product 'Decoder' in that case. The Hon'ble Court had referred to the definition of the word "apparatus" in Stroud's Judicial Dictionary which defines the term "apparatus" as inclusive of the distribution board of an electrical installation; decoder must be considered as an apparatus, when current is passing through and not when it is in its inanimate state. Further he stated that the term "apparatus" has been interpreted as something which is inclusive of some other appliance. Taking into consideration these definitions, the Hon'ble Supreme Court had interpreted "apparatus" as "the compound instrument or chain of series of instruments designed to carry out specific function or for a particular use." Accordingly, he submitted that the goods imported by the appellants do not fall under the above definition of "appa....
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.... appellants' claim under CTH 851770. To support the claim of Revenue with regard to classification of product, he has relied upon the Notification No. 11/2014-Cus. dated 11.07.2014 issued by the Central Government, excluding the impugned goods from the scope of BCD exemption in the above notification. Countering the arguments placed by the learned Advocate for the appellants that the case is squarely covered in their favour, in terms of the order passed by the Co-ordinate Bench in the case of Commissioner of Customs (Import), Mumbai Vs. M/s Reliance Jio Infocom Ltd. reported in 2019 I369) E.L.T. 1713 (Tri.-Mumbai), the learned AR submitted that the said decision of the Co-ordinate Bench deciding on the issue of classification of 'antenna' for base station is classifiable under CTI 8517 7090 as 'parts', is still pending in C.A. Diary No. 14979/2020, and hence the same cannot be taken as binding decision. 3.2 Learned AR further submitted that recommendations of TRAI and WCO decision about classification of parts as discussed in the impugned order should be taken into account. 3.3 Furthermore, he submitted that as the expert IIT Professor's report cannot be taken as a basis, ina....
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....oms Act, 1962; the Customs Tariff Act, 1975 and rules framed thereunder for consideration of proper and appropriate classification of the subject goods under dispute. "Section 12. Dutiable goods. - (1) Except as otherwise provided in this Act, or any other law for the time being in force, duties of customs shall be levied at such rates as may be specified under the Customs Tariff Act, 1975 (51 of 1975), or any other law for the time being in force, on goods imported into, or exported from, India. (2) The provisions of sub-section (1) shall apply in respect of all goods belonging to Government as they apply in respect of goods not belonging to Government." "Section 1. Short title, extent and commencement. - (1) This Act may be called the Customs Tariff Act, 1975. (2) It extends to the whole of India. (3) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint. Section 2. Duties specified in the Schedules to be levied. - The rates at which duties of customs shall be levied under the Customs Act, 1962 (52 of 1962), are specified in the First an....
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.... by reference to (a), shall be classified as if they consisted of the material or component which gives them their essential character, in so far as this criterion is applicable. (c) When goods cannot be classified by reference to (a) or (b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration. 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. 5. In addition to the foregoing provisions, the following rules shall apply in respect of the goods referred to therein: (a) Camera cases, musical instrument cases, gun cases, drawing instrument cases, necklace cases and similar containers, specially shaped or fitted to contain a specific article or set of articles, suitable for long-term use and presented with the articles for which they are intended, shall be classified with such articles when of a kind normally sold therewith. This rule does not, however, apply to containers which give the whole its essential character; (b) Subject to the provisions of (a) above....
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....ading", in respect of goods, means a description in the list of tariff provisions accompanied by a six-digit number and includes all tariff items the first six-digits of which correspond to that number; (c) "tariff item" means a description of goods in the list of tariff provisions accompanying eight digit number and the rate of customs duty; (2) the list of tariff provisions is divided into Sections, Chapters and Sub-Chapters; (3) in column (3), the standard unit of quantity is specified for each tariff item to facilitate the collection, comparison and analysis of trade statistics." 7. From the plain reading of the above legal provisions, it transpires that in order to determine the appropriate duties of customs payable on any imported goods, one has to make an assessment of the imported goods for its correct classification under the First Schedule to Customs Tariff Act, 1975 in accordance with the provisions of the Customs Tariff Act by duly following the General Rules for Interpretation (GIR) and the General Explanatory notes (GEN) contained therein. The First Schedule to the Customs Tariff Act, 1975 specifies the various categories of imported good....
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....and 3(c) [GIR 3] (iv) Goods which cannot be classified in accordance with the aforesaid rules, then the same shall be classified under the heading appropriate to the goods to which they are more akin. (GIR 4) (v) For legal purposes, the classification of goods in the sub- headings shall be determined according to the terms of those sub-headings and any related sub-heading Notes (GIR 6) (vi) When the description of the goods under a heading is preceded by 'single dash' i.e., "-", the said goods shall be taken to be a sub-classification of the article or group of articles covered by the said heading. (GEN1) (vii) Where, however, the description of goods is preceded by "- -", the said goods shall be taken to be a sub-classification of the immediately preceding description of the goods or article or group of articles which has "-" single dash. (GEN1) (viii) Where the description of goods is preceded by "---" or "---- ", the said goods shall be taken to be a sub-classification of the immediately preceding description of the goods or article or group of articles which has "-" or "--". (GEN1) 9. In the case before us, the contending classifi....
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.... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . u Free - - Other apparatus for transmission or reception of voice, images or other data, including apparatus for communication in a wireless network (such as a local or wide area network) : 8517 61 00 -- Base stations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . u Free - 8517 62 --Machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus : u 8517 62 10 --- PLCC equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . u Free - 8517 62 20 --- Voice frequency telegraphy . . . . . . . . . . . . . . . . . . u Free - 8517 62 30 --- Modems (modulators-demodulators). . . . . . . . . . . u Free - 8517 62 40 ---High bit rate digital subscriber line system (HDSL) u Free - 8517 62 50 ---Digital loop carrier system (DLC). . . . . . . . . . . u Free - 8517 62 60 ....
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....be put that the distinction between these two categories of goods is that the first one is 'telephone sets' and second one is 'other apparatus'. In the present case, the imported goods are not 'telephone sets' hence the classification under first category of goods as explained above under (i) of para 10 is not relevant. It is the second category of goods as explained under (ii) of para 10 that are relevant for discussion here. 12. The impugned goods on which the issue of classification is under dispute are covered under 13 different description as follows and the key functionality has been briefly described as follows: Table - explaining the Product features of the impugned goods S. No. Product Gist of detailed description and function 1 Line module Line module is essentially populated printed circuit board (PCB) fitted on to the chassis of the Ciena 5400/Ciena 6500 digital cross connect. It processes various types of electrical signals received through fixed port or removal pluggable in coordination with controller card, and make them ready to be handed over to Switch Module for further processing. 2 Pluggable It is a small removable part which ....
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....ime Domain Reflectometer (OTDR)module It identifies the distance at which fiber cut has taken place. 12 Multiplexer, Demultiplexer - Mux/Demux It is a passive device for multiplexing and de- multiplexing optical wavelengths into a single fiber pair that i.e. combining and splitting of multiple optical wavelengths 13 Client module It is used to connect different equipment such as routers, switches and digital cross connects using appropriate pluggable. 13. In comparison of the description of the product and its functions as above, with the different category of goods listed out in the sub-heading level or the tariff item level under CTH 8517, do not provide a direct one-to-one match for classifying under any specific entry relevant to a customs tariff item. 14. Therefore, in order to decide further within the Chapter Heading 8517, whether the imported goods fall under the first category as 'apparatus' or under the second category 'parts', one needs to look further into relative Section or Chapter notes. In this regard, we find that Section Note 1 to Section XVI covering Chapters 84 and 85, provide for the list of goods that do not get covered under the sai....
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....ed by one of the headings in Chapter 84 or Chapter 85, then the whole falls to be classified in the heading appropriate to that function. 5. For the purposes of these Notes, the expression "machine" means any machine, machinery, plant, equipment, apparatus or appliance cited in the headings of Chapter 84 or 85." 16. The above Section Notes specify that the principal function of the machine or apparatus would be the guiding factor for determination of the appropriate classification of the goods. Though certain machines or apparatus have been listed out in the First Schedule of the Customs Tariff by specific description in CTH 8517, at sub-heading level from 851762 to 851769, the aforesaid 13 different products in the above Table, do not get covered by any specific description. Further, the coverage of the products as 'parts' are separately provided under CTH 851770. 17. In order to further examine the classification in terms of HS explanatory notes of the WCO, which describe in detail the scope and coverage of the goods under the Customs classification, the extract of HS classification in respect of heading 8517 is given below: "Harmonized Commodity Description ....
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...... (B) Telephones for cellular networks or for other wireless networks. This group covers telephones for use on any wireless network. Such telephones receive and emit radio waves which are received and retransmitted, e.g., by base stations or satellites. These include, inter alia: (1) Cellular phones or mobile phones. (2) Satellite phones. The Explanatory Notes to HSN describe what would be covered by the second single dash entry for 8517 60 as follows: (II) 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) (A) Base stations. The most common types of base stations are those for cellular networks, which receive and transmit radio waves to and from cellular telephones or to other wired or wireless networks. Each base station covers a geographical area (a cell). If the user moves from one cell to another while telephoning, the call is automatically transferred from one cell to another without interruption. (B) Entry-phone systems. The systems usually consist o....
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....he third single dash entry at 8517 70 covers only 'parts' and this has been described in HSN as follows: PARTS Subject to the general provisions regarding the classification of parts (see the General Explanatory Note to Section XVI), parts of the apparatus of this heading are also classified here." 18. We have examined each of the 'single dash' entry and the goods covered thereunder as shown above. The scope of coverage of goods under the three different single dash entries of Chapter Heading 8517 is as follows: (I) First one at 8517 10 is 'Telephone sets, including telephones for cellular networks or for other wireless networks'; (II) Second one at 8517 60 is for 'Other apparatus for transmission or reception of voice, images or other data, including apparatus for communication in a wired or a wireless network (such as a local or wide area network)'; and (III) Third one at 8517 90 is for 'Parts'. 19. It is obvious that as the impugned goods in this case relates to reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing function, for providing services of telecommunication ne....
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.... stations' and various '---' entries, such as 'PLCC equipment, voice frequency telegraphy, Modems, High bit rate digital subscriber line system, Digital loop carrier system, Synchronous digital hierarchy system and Multiplexers' which are also explained in detail under paragraphs (A) to (G) of HS Explanatory Notes. Even if, one would like to attempt to bring impugned goods under second group of '-' items, treating it as an apparatus which allows for connection to a wired or wireless communication network or the transmission or reception of speech or other sounds, images or other data within such a network, then the only entry that could be feasible is 'other'. 22. However, in terms of harmonious reading of GIR 1 and GIR 3, classification of goods shall be decided in terms of the headings and further in a situation where for any reason goods are, prima facie, classifiable under two or more headings, classification shall be preferred under the heading which provides the most specific description to the heading providing a more general description. Further, as per Section Note 5 to Section XVI, the expression "machine" means any machine, machinery, plant, equipment, apparatus o....
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....alogue published by the manufacturer supplier suggests that the impugned goods are parts of Ciena's 5430 Packet Optical Switch (Platform) and therefore shall be classifiable as parts under CTH 85177010 being PCB. (b) In terms of Notification 57/2017 all goods falling under CTH 8517 are exempt from BCD unconditionally. Revenue preferred these appeals against the impugned orders. xx xx xx xx xx 20. In view of the above, we find that the Department could not support their contention. No technical literature was submitted; in spite of the fact that the imports have been taking place over a period of time. Learned Commissioner (Appeals) has been upholding the contention of the C/88479,88483,88485,88487,88492/2018 C/87032 to 87039/2019 20 appellants. In one instance Revenue has accepted the order of Commissioner (Appeals). We find that the Department has not drawn any samples and did not obtain technical opinion to support their claim that the impugned goods are complete machines or equipment capable of independent function themselves so as to merit classification under CTH 85176270. On the contrary, the respondents could demonstrate by technical literature; samples and the r....
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....s 'apparatus' in support of the decision in the impugned order. In this regard, we find that the recommendations of TRAI unless these are transformed into specific directions notified by the Ministry of Finance in the context of classification and exemption from duty, the same would not directly apply to the impugned goods in this case. Similarly, the decision of HSC as mentioned above, though provide assistance in classification of goods, unless the same are implemented by way of instructions or tariff classification circulars which are issued under Section 151A of the Customs Act, 1962 for bringing in uniformity 'in the classification of goods or with respect to the levy of duty thereon', the same cannot be applied on the impugned goods. Further, it would not be relevant to follow such recommendations of TRAI or decisions of HSC, inasmuch as the goods covered under the present case, as listed in Table at paragraph 12 above, are neither demonstrated nor explained to be same, as held in the proceedings of TRAI or HSC, by the learned adjudicating authority in the impugned order. Further, the learned AR himself submitted that the expert opinion of the IIT professor cannot be taken in....
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....ers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the following goods, falling under the heading, sub-heading or tariff-item of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and specified in column (2) of the Table below, when imported into India, from the whole of the duty of customs leviable thereon under the said First Schedule, namely:- TABLE S. No. Goods falling under Heading, Sub-heading or Tariff item (1) (2) 1. 3818 00 2. 8456 91 00, 8469 11 00, 8470, 8471, 8473 21 00, 8473 29 00, 8473 30, 8473 50 00 3. 3. 8517, 8520 20 00, 8523 (other than those falling under tariff item 8523 30 00), 8524 31 19, 8524 31 90, 8524 40 19, 8524 40 90, 8524 91 19, 8524 91 90, 8525 20, 8531 20 00, 8532, 8533, 8534 00 00, 8541, 8542, 8543 11 00, 8543 81 00, 8544 70 4. 9009 11 00, 9009 21 00, 9009 91 00, 9009 92 00, 9009 93 00, 9009 99 00, 9010 41 00, 9010 42 00, 9010 49 00, 9013 80 10, 9013 90 10, 9026, 9027 20 00, 9027 30, 9027 50, 9027 80, 9030 40 00, 9030 82 00, 9031 41 00 5. ....
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....nts in the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 24/2005-Customs, dated the 1st March, 2005, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R.122 (E), dated the 1stMarch, 2005, namely: - In the said notification, in the Table,- (a)against serial number 13, in column (3), for the existing entry, the following entry shall be substituted, namely:- "All goods, except the following:- (i)soft switches and Voice over Internet Protocol (VoIP) equipment, namely, VoIP phones, media gateways, gateway controllers and session border controllers; (ii) optical transport equipments, combination of one or more of Packet Optical Transport Product or Switch (POTP or POTS), Optical Transport Network(OTN) products, and IP Radios; (iii) Carrier Ethernet Switch, Packet Transport Node (PTN) products, Multiprotocol Label Switching-Transport Profile (MPLS-TP) products; (iv) Multiple Input / Multiple Output (MIMO) and Long Term Evolution (LTE) Products. (b) after serial number 39 and the entries relating thereto, the following ....