TaxTMI 
TaxTMI 
2025 (8) TMI 727
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....ion 28(1) of the Customs Act, 1962 [the Customs Act] with interest under section 28AA and penalty under section 112(a) of the Customs Act. 2. Customs Appeal No. 55695 of 2023 has been filed by the appellant to assail the order dated 28.07.2023 passed by the Principal Commissioner by which the concessional rate of basic customs duty at the rate of 10% under the Notification for import of the goods has also been denied and the appellant has been held liable to pay basic customs duty at the rate of 20 percent. Consequently, the differential customs duty of Rs. 17,97,88,217/- has been confirmed under section 28(1) of the Customs Act with interest under section 28AA and penalty under section 112(a) of the Customs Act. 3. The appellant is an e-commerce company. It provides basket of digital services through its web-based platform called "paytm", including payment gateway services to businesses and merchants. The payment gateway service is essentially a universal payment solution facilitating digital payments to merchants enabling the merchants to aid their business for seamless collection of payments from their customers. 4. During the period from 05.08.2019 to 27.02.2022, ....
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....e, be necessary to examine the description and functionality of paytm soundbox Version 1 and Version 2 that have been imported by the appellant. The appellant has described them in the following manner: (i) The goods are portable audio-activated smart devices that notify merchants instantly when they receive payments in their account from their customers. When a customer scans the paytm QR code of the merchant, the device announces the payment amount loudly, ensuring immediate successful payment alert to the merchant. It, therefore, relieves the merchant from the need to check text messages for receipt of payment; (ii) The goods comprise of an in-built speaker for audio output, LED as an indicator for internet connectivity, rechargeable lithium battery, Media Tek processor having Model Number MTK 6261A and radio frequency transceiver having Model No. FX5169D. The Media Tek processor and radio transceiver due to specifications and presence of second generation [2G] antennas, can only be used to connect to the Global Systems for Mobile Communication [GSM] i.e. 2G mobile network for establishing internet connection; (iii) The internet connecti....
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....on. 10. Thereafter, another show cause notice dated 21.02.2023 was issued by the Deputy Commissioner of Customs to the appellant in respect of the imports of the goods from 28.07.2021 to 27.08.2022. Reference was made to the earlier show cause notice dated 02.08.2021 and the order dated 31.08.2022 passed by the Principal Commissioner and it was alleged that the appellant was not eligible for the benefit of the Notification. 11. This second show cause notice was adjudicated by an order dated 28.07.2023 passed by the Principal Commissioner. The order refers to the findings recoded in the earlier order dated 02.02.2021 and also to certain additional findings namely: (i) The International Mobile Equipment Identity [IMEI] certificates for the goods, as submitted by the appellant, cannot be relied upon to conclude that the goods are 2G enabled because these are issued basis the declaration and documentary evidence submitted by the appellant on the online portal and the Department of Telecommunication [DoT] takes no responsibility of verifying the data submitted by the appellant. The certificates are auto-generated, once the relevant details and documents are....
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....ment of Notification with effect from 01.02.2021 is not sustainable; (ix) No interest is recoverable; (x) Goods are not liable for confiscation; and (xi) Penalty has also been incorrectly imposed. 13. Shri S.K. Rahman, learned authorized representative appearing for the department, however, defended the two orders passed by the Principal Commissioner and made the following submissions: (i) The sound box comes with a dedicated SIM slot and will work on 4G connectivity, and will always be connected to the internet in order to manage the payments on behalf of the retailer; (ii) Display of information on the website of the appellant was the sole responsibility of the importer and the department does not require additional evidence to support the claims. As the blog was available on website of paytm itself, the same is an admitted fact and there is no requirement of proving an admitted fact; (iii) From the submissions of the appellant it is an admitted fact that the M2M SIM Card in the goods is capable of receiving 4G signals and, therefore, there is no dispute regarding 4G connectivity provided by service providers like Vodafone ....
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....bout the receipt of payments from the customers in their account. A customer has to scan the paytm QR code of the merchant and the device announces the payment amount loudly regarding successful payment, thereby relieving the merchant from the need to check text messages for receipt of payment. 17. According to the appellant, the goods comprise of an in-built speaker for audio output, LED as an indicator for internet connectivity, rechargeable lithium battery, Media Tek processor having Model No. MTK6261A and radio frequency transceiver having Model No. FX5169D. The appellant contends that the aforesaid Media Tek processor and radio transceiver, due to its specification and presence of 2G antennas, can only be used to connect to the GSM i.e. 2G mobile network for establishing internet connection. The appellant also contends that the internet connectivity of the goods is dependent on M2M type SIM cards of Vodafone or Airtel that come with the goods, pre-installed and activated at time of delivery and that the goods cannot connect to Wi-fi internet connection. The appellant also contends that though the M2M SIM Cards are capable of receiving 4G signals, but the SIM cards, when pla....
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.... goods by the appellant under CTI 8517 62 90. The benefit of the concessional rate of BCD at @ 10% has been denied because the product was considered to be covered by the exclusionary clause. 23. The contention of learned counsel for the appellant is that the product prior to 01.02.2021 is not covered by the exclusionary clause (h) and after 01.02.2021 is not covered by the exclusionary clauses (h) and (i). Elaborating this submission, learned counsel pointed out that the goods are 2G devices and can work only on GSM/GPRS network standard which fall under the 2G network spectrum. Learned counsel emphasized that the product is not a 4G device and thus does not work on LTE network standard. 24. It is seen from the technical specifications of the goods that they are fitted with a MediaTek chipset processor having model number M1K6261A. This main control chip embedded in the goods has a radio frequency of GSM Bands B2/B3/B5/B8 (GSM 850, EGSM900, DCS1800, PCS1900). The antenna design of the goods is of 2G antenna which connects to the service provider network. 25. It can be gathered from the technical specifications that have been provided that the MediaTek Chip, MT6261A is des....
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....vice is receiving the 2G signal. • Hence it can be concluded that device is operating with 2G signals. xxxxxxxxxx Result: Paytm Soundbox V1 is operating with 2G (GSM) signals. Test Procedure for Model 2: Paytm Soundbox V2- • The lab placed the EUT (Equipment under test) Model: Paytm Soundbox V2 in the Shielding Chamber and the tester is connected. • The device is exposed to GSM i.e. 2G signaling. • Further, as can be seen on the snapshot, the connection is getting established for 2G signal. • Hence, the device is receiving the 2G signal. • Hence it can be concluded that device is operating with 2G signals. Result: Paytm Soundbox V2 is operating with 2G (GSM) signals. 29. The appellant has also placed reliance upon the STS test report which also mentions that the device works on 2G connection and complies with the standard specified for GSM network. 30. The impugned order has discarded these two test reports for the reason that the two reports contradict each other as when ATH subjected the goods to 3G (i.e. 1922.6 Mhz - 2112.6 Mhz) and 4G (i.e.1712.5 Mhz - 1807.5 ....
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.... not 3G UMTS/4G LTE compliant. Therefore, the test report by Alpha Test House does not contradict with the RF chipset technical specification. 4.19. The assumption that, being able to transmit and receive radio waves on a certain frequency band used for 3G UMTS/4G LTE implies that any radio communication on that band must be 3G UMTS/4G LTE complaint, is incorrect (see the explanation in paragraphs 4.5-4.9 and 4.14-4.17 on this report). Q.6 The Radio Test report of M/s STS for the Paytm Soundbox states that it has passed the test of DCS1800 frequency Band which is a LTE frequency band. Will this make the aforesaid device LTE/4G compliant? 4.20. The fact that the Paytm device is able to transmit and receive signals in a certain frequency band used by 4G LTE devices does not indicate that it must be a 4G LTE complaint device, as explained in paragraphs above. Being able to transmit and receive radio waves in a certain frequency band is not the same as being compliant to some technology standard. Being compliant to a certain cellular communication standard means adhering to all protocols of that standard, which is a more stringent requirement than just b....
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....28.07.2023 passed by the Principal Commissioner that has been impugned in Customs Appeal No. 55695 of 2023 has discarded this expert opinion for the reason that the technical opinion had been taken from a IIT Professor without informing the customs department. When such a technical opinion was taken by the appellant from an expert, it could not have been ignored merely because the department was not informed at the time of taking of the opinion. Nothing prevented the department from also taking an opinion from an expert or seeking queries from him. 34. The order has placed reliance on the earlier order dated 31.08.2022 passed by the Principal Commissioner, while adjudicating the first show cause notice, under which the goods were found to be 4G compliant and LTE. In fact in paragraph 5.2 of the order, in connection with the expert opinion submitted by Professor Saif Khan Mohammed, the observations made by the Principal Commissioner are as follows: "5.2 Hence in the light of the above quoted order in original, the subsequent imports of impugned goods, as covered in this notice, shall also be governed by the finding given in the said order. I have observed that the n....
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....anufactured when 4G LTE standard did not even exist. Going by the analogy, it is true that a local train cannot be operated/used, even if desired, like a superfast train as it has no features/technology viz. it cannot match the speed and other facilities of a superfast train. However, a superfast train, which has higher features/ technology can be operated/used like a local train. Similarly, it is true that in case of communication a 2G enabled device cannot be used/operated, even if desired, on advanced technology but a 4G LTE product, can be used/operated, if desired, like an older version. Today, there has been a lot of development in communication technology and old technology devices are no more in demand and are out of manufacture. In the instant case, the subject goods are latest technology goods. 4G LTE standard now exits. xxxxxxxxxxx. Regarding the claim of the noticee that once it is put to use it can function as a 2G device only, I note that the said goods having the 4G LTE compatibility can be used on 2G network but liability of duty is not based on how the subject goods are used but on their identity as a 4G/LTE product. In the light of above....
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....which provides transportation service. Similarly, a frequency band is a physical resource which provides wireless communication service. Different types of trains can be in the service of transporting people from city A to city B. Similarly different types of devices (analogous to trains) can be used to communicate on a frequency band (analogous to rail line). Consider two different types of trains between cities A and B, (i) superfast/high speed trains, and (ii) local trains. Both these trains can carry people from city A to city B on the same rail line. Superfast trains travel at high speed and stop at very few intermediate stations, whereas local trains have lower speed and stop at almost all intermediate stations. Similarly, both a 4G LTE compliant device and a 2G GSM/GPRS compliant device can be used to communicate information over the same frequency band. A 4G LTE compliant device can achieve higher communication speed (in Mbps) than a 2G GSM/GPRS compliant device (i.e., a 4G LTE complaint device can communicate a given number of information bits in lesser time when compared to a 2G GSM/GPRS complaint device). A 4G LTE complaint device is therefore like a superfast/high ....
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....er than building a whole new spectrum. Hence, on a single spectrum, one can find different bands of GSM, 3G and LTE working simultaneously. This is what was emphasised by the Professor in his opinion namely that 2G and 4G devices both can travel or work on same bandwidth and any device operating on such common bandwidth does not become 2G as well 4G compliant. The bandwidth is merely a path wherein 2G and 4G can be considered as bike and car wherein the travelling speeding (i.e. data transmission capabilities) can only be determined basis the technically specification of the device. What has also been emphasised by the Professor is that the goods lack the transmission/reception pins which can work on 4G network. The goods also have a Gaussian filter and not OFDM modulation method required for 4G network and most importantly it supports VAMOS because of the MediaTek MT6261A chip, which is primarily meant to work with 2G devices only. 38. In this connection, it would also be relevant to refer to Query No. 3 and the opinion given by the Professor to this Query: "Q.3 What can be the other parameters to determine if a device is 2G or 4G compliant? 4.11. 2G GSM/GPRS ....
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....en by the Professor to the six queries raised. In such a situation when the two test reports and the expert opinion of the Professor hold that the 'paytm' soundbox Version 1 and Version 2 operates with 2G (GSM) signals, the Principal Commissioner could not have ignored the two test reports and the expert opinion and himself drawn a conclusion, which is completely contrary to the two test reports and the expert opinion. 41. The Principal Commissioner has placed emphasis on a blog post appearing on the website of the appellant in which it is stated that the goods are 4G enabled. The appellant has not admitted the contents of the blog post as this information was published on the website of the appellant by a stanger and not by any employee of the appellant. It cannot, therefore, be said that because of this information appearing in the blog post on the website of the appellant, the product is 4G compliant. The product has to be independently examined to determine whether it is 4G enabled or not and not by what is posted on a blog by a stanger on the website of the appellant. 42. The Principal Commissioner has also relied upon two articles available on Wikipedia website to ....
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.... (emphasis supplied) 44. In the absence of any test report or cogent evidence produced by the department, the two articles published on the website of Wikipedia could not have been considered by the Principal Commissioner to arrive at a conclusion that the product is compliant to LTE standards. 45. Learned counsel for the appellant also submitted that the demand pertaining to the period prior to the amendment made on 01.02.2021 in the Notification is not sustainable. In this connection, learned counsel pointed out that prior to the amendment the scope of the exclusionary clause at (h) to Serial No. 20 of the Notification was restricted to the products that have both MIMO and LTE technology as was observed by the Tribunal in Commissioner of Customs (AIR) Chennai-VII Commissionerate, Chennai vs. Ingram Micro India Pvt. Ltd., but the order passed by the Principal Commissioner has not given any finding as to whether the product has MIMO technology or not. 46. This submissions made by the learned counsel for the appellant deserves to be accepted. 47. The Tribunal in Ingram Micro India was called upon to examine Serial No. 13(iv) of heading 8517 that exempted all goods ....