TaxTMI 
TaxTMI 
2024 (9) TMI 1838
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....to 2725/2022-23, dated 23-3-2023 (hereinafter, referred together as 'the impugned orders') passed by Commissioner of Customs (Appeals), Mumbai-III, Mumbai. 2. The common issue involved in these group of appeals relates to dispute in classification of various models of CISCO "Catalyst 3850 series Ethernet Switches" imported by the appellants through Customs Commissionerate of Air Cargo Complex, Sahar, Andheri (East), Mumbai. The appellants have classified the imported Ethernet switches under Customs Tariff Item (CTI) 8517 62 90 and claimed the concessional Basic Customs Duty (BCD) @ 10% ad valorem in terms of S. No. 20 of Notification No. 57/2017-Customs, dated 30-6-2017, as amended, treating the same as 'Non-carrier Ethernet Switch'. There is no dispute in the classification of the imported goods adopted by the appellants. However, the Department had re-assessed the aforesaid imported goods under various Bills of Entry (B/Es) and denied the benefit of concessional BCD claimed under the said Notification No. 57/2017-Customs, thereby reassessing the imported goods with BCD payable as 20% ad valorem. It has been stated by the appellants that despite the explanations and clarificati....
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....ed the imported goods viz., "Catalyst 3850 series Ethernet Switches" with "Catalyst ME 3800X series Carrier Ethernet Switches". In this regard, he stated that both the aforesaid products are entirely different inasmuch as the imported goods are enterprise switch which are not having capabilities/specifications of the carrier ethernet switch. The catalogues of the aforesaid products submitted as part of the appeal papers make a distinction between these two different type of switches as follows : Essential future Carrier Ethernet Switches - CISCO ME 3800X series Catalyst Ethernet Switches - CISCO 3850 series MPLS - TP (Traffic Profile) facility Supported Not Supported MEF Certification : (a) MEF 9 & 14 (b) MEF CE 2.0 Certified Not Certified Multi Gig Interface Not Supported Supported PoE/PoE+ & UPoE Not Supported Supported Stack Power Not Supported Supported Multitenant Services Supported Not Supported Standard Services MEF 6.2/MEF 51/MEF 33 None Synchronous Ethernet (SynchE) & Pseudo wire Redundancy Supported Not Supported Placement/Deployment Pre-aggregation for mobile applicat....
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....iz., "Catalyst 3850 series Ethernet Switches", he stated that it can be correlated that the imported goods can be used only for data centre and campus deployment, and therefore they are covered under S. No. 3 above. Whereas, carrier grade ethernet searches having application in Metro Ethernet (ME) edge, falls under the S. No. 2 above. Therefore, Learned Advocate submitted that going by application deployment, the imported Catalyst 3850 series switches are of 'enterprise switch' and are not a 'carrier grade switch', as it does not meet the requirements of the same in terms of the requirements laid down by the Government authorities. Further as per the ER requirements for Carrier ethernet switch, particularly in respect of the following features such as MPLS TP requirement, TDM PWE and service identification, Ethernet PWE and service identification, manageability SNMP Qx Management protocol, Interface 11:Mbps-E2; Interface 13: STM-1 Optical; Interface 14: STM-16 Optical; Interface 15: STM-4 Optical, the imported goods do not support or has such essential requirements. Thus, they submitted that from the above specified essential features of the Carrier ethernet switch, which the impor....
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....of Chapter Heading 8517, other than those goods for which 10% BCD was imposed, continued to be extended under the Notification No. 24/2015-Customs, as amended. Therefore, Learned Advocate stated that the imported goods which are basically 'enterprise switch' are eligible for concessional BCD, and they cannot be equated with 'Carrier ethernet switches' for which such concessional duty is not applicable. 3.6 Learned Advocate also pointed out that in compliance with the Interim Order No. 33-103/2023, dated 18-9-2023 passed by the Tribunal, the appellants had written to the jurisdictional customs authorities vide their letter dated 2-11-2023, providing the details of the premises in Mumbai where the imported "Catalyst 3850 series Ethernet Switches" were available for enabling inspection of the subject goods by the technical experts, in order to provide the factual report for enabling proper classification of the imported goods for the purpose of determining the appropriate rate of customs duty payable on such imported goods. However, the jurisdictional customs authorities have not preferred to conduct such inspection, and on the other hand have submitted the specification of the pro....
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.... authority, without deciding the merits of the issue; and (iv) in Order-in-Appeal Nos. MUM-CUSTM-AMP-APP-2723 to 2725/2020-21, dated 23-3-2023, covering total 3 B/Es-1, each dated 20-12-2021, 17-1-2022 and 13-2-2022, the appeal was disposed by the Learned Commissioner (Appeals) on the basis of earlier original order passed on the same issue, by holding that there is no need to pass any further order by him. 4.2 Learned AR submitted that the B/Es covering the imported goods in all 71 appeals relates to the period subsequent to the imports for which assessments have been ordered on merit rate of BCD at 20%, by denying the exemption of customs duty under Serial No. 20 of Notification No. 57/2017-Customs, as amended. In view of such assessment of imported goods, the subsequent imports covered in 71 appeals, no speaking order under Section 17(5) ibid have been issued. Further, in terms of the product literature available in CISCO website titled as 'configuring Multiprotocol Label Switching (MPLS) Configuring Guide', the imported goods shall be treated as switches for IP-MPLS equipment. 4.3 In explaining about the imported goods, Learned AR stated that Carrier ethern....
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....itches" imported by the appellants and classified under Customs Tariff Item 8517 62 90, are eligible to concessional Basic Customs Duty (BCD) in terms of goods covered under Serial No. 20 of Notification No. 57/2017-Customs, as amended through subsequent notifications; or, (ii) whether such goods are not eligible for concessional BCD, as contended by the Department, for deciding on the appropriate levy of customs duty, in respect of various Bills of Entries filed during the disputed period starting from November, 2020 to February, 2022. 7. In order to address the above issue of eligibility to exemption under the said Notification No. 57/2017-Customs, as amended, we would like to refer the relevant legal provisions contained in Sections 12, 25 of the Customs Act, 1962; Section 2 of the Customs Tariff Act, 1975 and notifications issued thereunder for consideration of proper duty applicable on 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, ....
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....ion of the immediately preceding description of the article or group of articles which has "-" or "--"...." Tariff items and Notifications issued under Section 25 ibid in respect of imported goods, during the relevant time : 8.1 In order to address the issue of eligibility to exemption of imported goods, we would also like to refer to the relevant Customs Tariff heading, sub-headings, tariff items and the notifications issued over a period of time, in order to identify the scope of goods covered under such classification in Chapter Heading 8517, CTI 8517 62 90 and the notification issued for providing exemption from Basic Customs Duty, which is the subject matter of dispute in the present appeals before us. The First Schedule of the Customs Tariff in respect of Chapter Heading 8517 as it stood at the time of extending whole of customs duty exemption initially for the first time and the relevant Notification No. 24/2005-Customs, dated 1-3-.2005 is extracted and given as below : Tariff Item Description of goods Unit Rate of Duty Stan-dard Preferential Areas (1) (2) (3) (4) (5) 8517 ELECTRICAL APPARATUS FOR LINE TELEPHONY OR LINE ....
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....net u Free - 8517 80 90 --- Other 8517 90 - Parts : 8517 90 10 --- Populated, loaded or stuffed printed circuit boards Kg. Free - 8517 90 90 --- Other Kg. Free - Notification No. 24/2005-Customs New Delhi, dated the 1st March, 2005 10 Phalguna, 1926 (Saka) G.S.R. (E). - In exercise of the powers 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. 8517, 8520 20 00, 8523 (other t....
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.... 8517 was exempt, at that time, there was no basis for disputing eligibility of any goods under the aforesaid exemption. 8.4 From the documents placed on record, it is noted that the aforesaid Notification No. 24/2005-Customs was subsequently amended by issue of an amending Notification No. 11/2014-Customs, dated 11-7-2014, so as to exclude certain specified tariff items, which was proposed to attract the tariff rate of basic customs duty of 10%. Such proposal of imposing 10% BCD was explained by the Union Finance Minister in the Union Budget, 2014 as follows : "Budget 2014-2015 Speech of Arun Jaitley Minister of Finance July 10, 2014 xxx xxx xxx 215. The demand for electronics is growing very fast. To boost domestic production and reduce our dependence on imports, I intend to take the following steps : • Impose basic customs duty at 10 percent on specified telecommunication products that are outside the purview of the Information Technology Agreement; • Exempt all inputs/components used in the manufacture of personal compu....
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.....S.R. (E). - In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby makes the following further amendments 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 1st March, 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....
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....e First Schedule to the Customs Tariff Act, 1975 (51 of 1975) as arc specified in the corresponding entry in column (2) of the said Table, when imported into India, from so much of the duty of customs leviable thereon under the said First Schedule as is in excess of the amount calculated at the standard rate as specified in the corresponding entry in column (4) of the said Table subject to any of the conditions, as specified in the Annexure to this notification, the condition number of which is mentioned in the corresponding entry in column (5) of the said Table. TABLE S. No. Chapter or Heading or Sub-heading or tariff item Description of goods Stan-dard rate Condition No. (1) (2) (3) (4) (5) 20. 8517 62 90 All goods other than wrist wearable devices (commonly known as smart watches) 10% -"; [TO BE PUBLISHED IN THE GAZETTE OF INDIA. EXTRAORDINARY. PART II. SECTION 3, SUB-SECTION (i)] GOVERNMENT OF INDIA MINISTRY OF FINANCE (Department of Revenue) Notification No. 75/2018 - Customs New Delhi, the 11th October, 2018 G.S.R. (E) - In exercise of the powers conferred by sub-section (1) ....
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....7-Customs, dated the 30th June, 2017, published in the Gazette of India, Extraordinary, Part II. Section 3, Sub-section (i), vide, number G.S.R. 798(E), dated the 30th June, 2017, namely :- 1. In the said notification, in the TABLE. - (V) for serial number 20 and the entries relating thereto, the following serial number and entry shall be substituted, namely :- (1) (2) (3) (4) (5) "20 8517 62 90 or 8517 69 90 All goods other than the following goods, namely :- (a) Wrist wearable devices (commonly known as smart watches); (b) Optical transport equipment; (c) Combination of one or more of Packet Optical Transport Product or Switch (POTP or POTS); (d) Optical Transport Network (OTN) products; (e) IP Radios; (f) Soft switches and Voice over Internet Protocol (VoIP) equipment, namely, VoIP phones, media gateways, gateway controllers and session border controllers; (g) Carrier Ethernet Switch. Packet Transport Node (PTN) products. Multiprotocol Label Switching Transport Profile (MPLS-TP) products; (h) Multiple Input-Multiple Output (MIMO) and Long Term Evolution (LTE) products 10% -"; (VI)&....
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....p; Modems (combined modulators-demodulators). (3) Routers, bridges, hubs, repeaters and channel to channel adaptors. (4) Multiplexers and related line equipment (e.g., transmitters, receivers or electro-optical converters). (5) Codecs (data compressors/decompressors) which have the capability of transmission and reception of digital information. (6) Pulse to tone converters which convert pulse dialed signals to tone signals." 8.9 It is further noticed that in the year 2022, in order to align the customs tariff along with the changes introduced in terms of HS Commodity Description and Coding System WCO, inter alia, the goods covered under Chapter Heading 8517 was amended with effect from 1-2-2022 as follows : (changes indicated in red-coloured letters/figures) 8517 TELEPHONE SETS, SMARTPHONES AND OTHER TELEPHONES FOR CELLULAR NETWORKS OR FOR OTHER WIRELESS NETWORKS : OTHER APPARATUS FOR THE TRANSMISSION OR RECEPTION OF VICE, IMAGES OR OTHER DATA, INCLUDING APPARATUS FOR COMMUNICATION IN A WIRED OR WIRELESS NETWORK (SUCH....
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.... - 8517 69 50 --- Subscriber end equipment u Free - 8517 69 60 --- Set top boxes for gaining access to internet u Free - 8517 69 70 --- Attachments for telephones u Free - 8517 69 90 --- Other u *20% - - Parts : 8517 71 00 -- Aerials and aerial reflectors of all kinds; parts suitable for use therewith u 20% - 8517 79 -- Other : 8517 79 10 --- Populated, loaded or stuffed printed circuit boards u 20% - 8517 79 90 --- Other u 15% - Thus, on perusal of the above details, we find that right through the disputed period of November, 2020 to February, 2022 covering the imports over the said period, the scope and coverage of the goods under chapter sub-heading 8517.62 remained the same and there was no change even after the HS changes for technological changes of goods such as 'smart phones' that were introduced in the year 2022, and made effective from 1-2-2022. 9.1 In the above back ground, we had examined the scope of coverage of the goods under Information Technology Ag....
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....as follows. The relevant extract of the said reference is given below : "The undersigned is directed to refer to the Department of Revenue's OM INC 332/12/2016-TRU, dated 29-7-2016 on the subject mentioned above and to furnish the comments of this department as under : (a) Layer 2 unmanaged Ethernet switches & half managed Ethernet switches are non-carrier Ethernet switches and appear to be not covered by the notification 11/2004-Custom, dated 11-7-2014. (b) Managed Ethernet switches & web managed Ethernet switches can be carrier Ethernet switches or non-carrier Ethernet switches/Enterprise Ethernet switches. (c) There is no definite technical classification between Carrier Ethernet switches and Enterprise Ethernet switches/Non carrier Ethernet switch based on features/services supported. As carrier Ethernet switches and enterprise Ethernet switches may have overlapping features and may vary from OEM to OEM. Carrier Ethernet Switch and Enterprise Ethernet Switch can only be classified based on usage by TSP/ISP (Telecommunications Service Provider/internet Service Provider) or....
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.... have been excluded from the scope of such exemption in terms of specific description of goods. Thus, 'Carrier Ethernet Switch' used for telecommunication purpose is not eligible for the concession provided in such exemption entry of the aforesaid notifications. 9.4 We have also carefully perused the instructions issued by the Central Board of Indirect Taxes & Customs (CBIC) vide Circular No. 8/2023, dated 13-3-2023. It is clearly stated therein that the CBIC, on being made aware of the various technology related descriptions used for products and equipment covered in the exclusion categories (b) to (h) of the exemption entry in Notification No. 57/2017-Customs and No. 2/2019-Customs in respect of Tariff Items under 8517 26 90 and 8517 69 90, have consulted with the Department of Telecommunication, and have identified the list of products/equipment covered under those exclusion categories. Accordingly, CBIC had decided that the specific product descriptions for which customs duty exemption are excluded will be captured in the bills of entry with effect from 1-4-2023 in terms of Bill of Entry (Electronic Integrated Declaration and Paperless Processing) Regulations, 2018. Therefor....
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....ebsite (www.cisco.com) Ethernet has evolved from a LAN (Local Area Network) technology to a much more robust, carrier-grade transport technology for metropolitan service networks. Ethernet is the dominant LAN technology in most offices used to interconnect high-speed corporate networks. However, some of the attributes that make Ethernet simple and inexpensive for office LANs impede its use for carrier-grade data services over larger metropolitan networks. The amount of corporate, home, and internet data traffic has increased exponentially. Therefore, the capacity and configuration is highly relevant to determine the classification as Carrier Ethernet Switch. Basically, Carrier Ethernet is extension to Ethernet to enable users such as telecommunications network providers to provide Ethernet services to customers and to utilize Ethernet technology in their networks. xx xx xx 12. IEEE 802.1Q Virtual LANs (Serial No. 15 above, of specification of Catalyst 3850) : Virtual LANs, also known as 802.1Q, provides a method for assigning a "Virtual Identifier" or VID tag to each Ethernet frame. Within an ....
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....hich was published only on 31-7-2019. However, I find that the appellants have ignored the information which were available earlier for the same goods in their won website showing it as "carrier Ethernet switch". Hence I do not accept the contention of the appellant that impugned (CATALYST 3850 SWITCHES) items are "non-carrier grade" one. As such, the duty as per exclusion clause (g) of Notfn. 02/2019-Cus., Sr. 20 will be applicable and the goods shall be liable for BCD-@ 20%." 11.1 We find from the above, that the authorities below including the Learned Commissioner (Appeals) have not examined the issue of eligibility to exemption of impugned goods in detail and on the basis of factual data about the imported goods in question. In respect of Orders-in-Appeal No. MUM-CUSTM-AMP-APP-1923 to 1952/2020-21, dated 24-3-2021 and No. MUM-CUSTM-AMP-APP-2723 to 2725/2020-21, dated 23-3-2023, Learned Commissioner (Appeals) besides the above findings having been reiterated therein, he had inter alia found that the imported goods also supports high capacity of 10 GBPS with mac addresses running into huge number, being indicative of that catalyst 3850 switch is capable of creating wide area n....
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....sioner (Appeals) is not legally sustainable. Further, when re-assessment for payment of higher BCD on the imported goods have been ordered by the departmental authorities contrary to the self-assessment, we are also unable to appreciate how such assessments were considered as provisional and for what reasons it was done so, as these have not been explained or discussed for taking a proper view in the matter. Hence, we find that the same is also not legally sustainable. 11.3 We also find that it is clearly on record that the main contention in all these appeals remains the same i.e., eligibility to concessional BCD under Sl. No. 20 of Notification No. 57/2017-Customs, dated 30-6-2017, as amended, and therefore such common issue for all these appeals needs to be addressed by the Tribunal in the present case before us. 12.1 By taking into account the above discussed various factors into consideration including the contrary claims made by the appellants and the findings in the impugned orders, and in order to provide an evidential basis for deciding the above common issue of eligibility of imported 'Catalyst 3850 Ethernet Switches' to concessional BCD, during the course of hearin....
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....rpose of payment of the customs duty. Inspection should be done in presence of the appellant's representative. It is expected that the report should be submitted by the Department within a period of 30 days from the date of passing of the order. Accordingly, the matter is adjourned to 6-11-2023 for reporting compliance and for a decision on merits on the appeal filed by the appellant." 12.2 In pursuance of the above, the departmental authorities have belatedly submitted the report, which the appellants had objected to it. From the report submitted by the jurisdictional Customs authorities addressed to the Learned AR, which have been submitted as a rejoinder to the Revenue's written submission on 3-5-2024, we find that firstly such an exercise as detailed in the above interim order has not been undertaken by the departmental authorities, despite cooperation from the appellants informing the premises where the imported goods are situated for conducting the technical examination/inspection. On the contrary, it is found that the technical opinion of the Telecom Engineering Centre (western region), Mumbai, on the basis of letter No. CUS/APR/IPR/3/2023 Gr.5A/ACC, dated 4-4-2024 provid....
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....ue's arguments that these are used for 'carrier ethernet' or telecommunication purpose. In the absence of any such efforts having been taken by the customs authorities, either by themselves through some officers from the Department having technical knowledge on the subject goods or through TEC, we are unable to accept the various arguments made by the Learned AR and the findings arrived at by the Learned Commissioner (Appeals) in the impugned order, on the basis of certain specifications or features of the imported goods. Therefore, we are of the considered view that such findings are not sufficient to give a different treatment to the imported goods for denying the concessional basic customs duty exemption available under the Notifications No. 11/2014-Customs, dated 11-7-2014 and No. 57/2017-Customs, dated 30-6-2017, as amended. 13. On the basis of the above factual details of the imported goods, and inasmuch as the report dated 24-4-2024 and the earlier report dated 18-1-2024 provided by TEC does not fulfill the requirements of the directions given in the interim order dated 18-9-2023, we are not able to consider the same having any merits for treating it as an expert opinion ....