TaxTMI 
TaxTMI 
2024 (7) TMI 1409
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....] to the extent of Rs. 1,89,05,965/- on the import and clearance of the goods has been confirmed under section 28 (1) of the Customs Act, 1962 [the Customs Act]. The order also directs payment of interest under section 28AA of the Customs Act. However, the Principal Commissioner also held that the goods are not liable to confiscation under section 111(m) of the Customs Act and also refrained from imposing any penalty under section 112 (a)(ii) of the Customs Act. 2. Customs Appeal No. 51204 of 2020 has been filed by the department to assail that part of the order dated 25.08.2020 passed by the Principal Commissioner that refrains from confiscating the goods and imposing penalty. 3. The appellant is engaged in the manufacture and sale of mobile phones and tablet computers. In connection with its manufacturing activities, the appellant imports 'Integrated Circuits-Codecs' [the goods] for use in the manufacture of mobile phones and tablets. It is stated that these goods are integrated circuits, which function as Codecs, i.e., compressor/decompressor and comprise of Digital Signal Processor [DSP], General Purpose Input/Output [GPIO] pins and Inter-Integrated Circuit [12C] interfac....
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....he order passed by the Principal Commissioner are as follows: (i) The appellant admits that the goods function as Codecs. The appellant has neither given any explanation that the transmission and reception features are not inbuilt in the goods nor has the appellant provided any evidence that the goods are not Codecs; (ii) Rule 3(a) of General Rules of Interpretation is not applicable as the appellant has not been able to suggest how the pre-requisite conditions under the said rule are fulfilled for the classification of the goods; and (iii) Section Note 2(b) to Section XVI is applicable as the goods are used in the manufacture of mobile phones and the same would be classifiable as 'parts of mobile phone' and classifiable under Customs Tariff Heading [CTH] 8517. 9. This appeal has been filed to assail the aforesaid order passed by the Principal Commissioner. 10. Shri B.L. Narasimhan, learned counsel for the appellant assisted by Shri Dhruv Matta and Ms. Yashi Shrivastava, made the following submissions: (i) The order passed by the Principal Commissioner is a non-speaking order and the burden of proof lies on the department if the department ....
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....sifiable under CTH 8517, the components used therein will be classifiable in that Chapter Heading only in line with the provisions of Note 3 and Note 4 to Section XVI of Customs Tariff Act. 12. The submissions advanced by learned counsel for the appellant and the learned authorised representative appearing for the department have been considered. 13. The issue that arises for consideration in this appeal is as to whether the goods imported by the appellant namely "IC-Codecs" deserve classification under CTI 8542 39 00 as claimed by the appellant or under CTI 8517 62 90 as determined in the impugned order. 14. It would, therefore, be appropriate to refer to the relevant tariff items under CTH 8517 and the same are as follows: Tariff Description of goods Unit Rate of Duty (1) (2) (3) (2) (4) 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 transmiss....
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....2 39 00 Other . . . . . . . . . . . . . . . . . . . . u 7.5% - 8542 90 00 Parts . . . . . . . . . . . . . . . . . . . . kg. Free - 16. The goods are IC-Codecs which are electronic integrated circuits and are also known as microelectronic circuit, microchip or chip. An 'IC-Codec' is a semi conductor wafer on which multiple components are fabricated. According to the appellant, the IC Codec imported by it is an array of miniaturized and microscopic components consisting of active components/devices such as transistors and diodes; and passive components/devices such as capacitors and resistors. The goods are imported in the form of rolls and after importation, they undergo further process to make them functional. Thus, it is claimed by the appellant that at the time of importation the goods do not have the capability of transmission or reception of data. 17. The description of goods under CTH 8517, amongst others, is "other apparatus for transmission or reception of voice, images or other data, including apparatus for communication under the wired or wireless network". Customs Tariff sub-heading 8517 62 with double dash is "Machines for reception, conv....
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....ea between stand-alone devices. 24. In the present case, the goods are IC chips which are incapable of stand-alone function or connection with any other device. The ICs are only capable of functioning as compressor/decompressor upon connection with external peripherals like power supply and interface. The goods imported only interact with components which are mounted on the PCB. No network like LAN/WAN is established between the impugned goods and other components of PCB. The imported goods are not in the nature of machines or apparatus which are deployed in a network like LAN/WAN. 25. On the other hand, CTH 8542 deals with "electronic integrated circuits" i.e. ICs. They would, therefore, be specifically covered under CTH 8542. 26. The IC-Codecs imported by the appellant are covered under the definition of "monolithic integrated circuit" as defined under Chapter Note 9 (b) to Chapter 85 of the Customs Tariff. The relevant portion is extracted below: "9. For the purposes of headings 8541 and 8542: ........ (b) "Electronic integrated circuits" are: (i) Monolithic integrated circuits in which the circuit elements (diodes, transistors, resis....