AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2026 (4) TMI 1850
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....nterest under section 28AA and penalty under section 114A of the Customs Act. The goods have also been confiscated under section 111(m) of the Customs Act. 2. The appellant had classified the goods under Customs Tariff Item [CTI] 8517 62 90 of the Customs Tariff Act, 1975 [the Customs Tariff Act] as Wireless Headphones/ Earphones and availed the benefit of the Notification by paying concessional 10% of basic customs duty under serial no. 20 of the Notification. The department, however, believed that the goods imported by the appellant would be classifiable under CTI 8518 30 00 which would entail 15% basic customs duty. 3. Accordingly, a show cause notice dated 10.01.2024 was issued to appellant under section 28(4) of the Customs Act for the period from February, 2020 to January, 2022. After referring to the two competing tariff items and the Notification, the show cause notice mentions: "11.2 M/s. G-Mobile Devices Pvt Ltd while justifying the mis-classification of the Bluetooth Wireless Earphones/ headphones/earbuds /neckbands under CTI 85176290, relied on the Circular No. 36/2013- Customs dated 05.09.2013. M/s G-Mobile Devices Pvt Ltd in their reply dated 15.02.2023....
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....as much more specific in nature, in terms of both - the kind of Bluetooth wireless headsets and also the principal function that it ought to perform in order to be classified under CTH 851762. 11.4 Further, as per product brochures/catalogues, impugned goods i.e. Bluetooth Wireless Earphones/headphones are compatible (i.e. can be paired) with multiple Bluetooth enabled devices like Laptops, computers, tablets, mobile phones, TV etc. Thus, apart from mobile phones, the impugned goods are made compatible with many other devices. Further, nowhere in their brochure, it is mentioned that the impugned goods i.e., Bluetooth Wireless Headphones/Earphones are principally promoted, sold, marketed, manufactured or designed for mobile telephony communication and therefore, it appears clear that the communication function for mobile telephony doesn't characterize the principal function of these Bluetooth wireless earphones/headphones so as to be classified under 851762." (emphasis supplied) 4. The appellant filed a reply to the show cause notice and denied the allegations made therein and contended that the imported goods were correctly classified under CTI 8517 62 90 by the ....
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....elephony. However, M/s. G-Mobile failed to produce any documentary evidence in support of the claim: 1) that they manufactured/designed/imported the impugned goods primarily for mobile telephony. 2) that "communication function for mobile telephony" is the principal function of the impugned goods; 3) that they are selling and promoting the impugned goods primarily for use with mobile phone/cell phone. 23.3 From the technical literature (brochures) furnished by the importer and also available on internet, it appeared that the Bluetooth Wireless Headphones / Earphones / Earbuds / Neckbands imported by them are wire-less Headphones / Earphones, compatible with multiple Bluetooth enabled devices such as mobile phones, Smart TVs, laptops, tablets, Car Audio Systems, etc. Thus, it is evident that the importer has described the imported items as "Bluetooth wireless Headsets / Headphone/ Earphone / Earbud / Neckband." These Ear Phones/Earbuds/Neckbands are electro acoustic receivers used to produce low-intensity sound signals. Like loudspeakers, they transform an electrical effect into a sound effect; the only difference being in the powers of signal inv....
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....or not. The classification of the goods in question can be done based on 'primary function'. ***** 23.14. In conclusion, the imported goods are composite devices with multiple functions. However, the primary function remains audio playback from Bluetooth-connected devices. These devices can play only audio data and not any other data. Further, they can receive audio data in a specific data format only. Thus, the primary function remains the audio play back device. While these goods possess additional features, such as voice transmission and mobile telephony, these functions are secondary and do not supersede the principal function of audio playback. It is pertinent to hold that, while connecting to mobile telephony it can play the received audio from earphone and send the audio to mobile. But in no case it can dial any number. Consequently, it is the audio playback capability that defines the primary nature of the imported item, with the other functions being supplementary and not sufficient to alter or outweigh this core purpose. This is also supported by the facts that the impugned goods can be paired with other electronic devices, having no connection with ....
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....in the Circular, the imported products are not principally designed for mobile telephony and thus travel beyond the scope of Circular No. 36/2013 as discussed at paras above. As these headphones/earbuds are compatible with multiple systems, their primary function is audio reproduction and renders them classifiable under tariff heading 8518, which covers devices that produce sound. Consequently, they are more appropriately classified under tariff heading 8518, based on their primary function as audio devices." (emphasis supplied) 9. The Principal Commissioner also held that the extended period of limitation was correctly invoked in the facts and circumstances of the case. 10. Shri Tarun Gulati, learned senior counsel for the appellant assisted by Shri Rupesh Gupta, Shri Tarun Jain and Ms. Kritika Tuli made the following submissions: (i) The issue of classification of Wireless Earphones under CTI 8517 62 90 has been examined and clarified by CBIC in the Circular dated 05.09.2013 in favour of the appellant. The reason assigned in the impugned order to deny classification claimed by the appellant is that the goods have not been marketed with the principal function of ....
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....which clearly provides the description of Headphones and Earphones whether not combined with the microphone. The goods that have been imported by the appellant are Earphones combined with the Microphone. The Microphone is an instrument for converting sound effect into electrical effect, which may then be amplified, transmitted or recorded. Thus, based on the design and purpose, the imported goods are Earphones/Headphones which are designed to perform the aforesaid principal function and that communication function for mobile telephony is only one of the many functions and that too when its connected to a mobile. The imported goods are, therefore, correctly classifiable under CTI 8518 30 00. The budget changes in the Finance Act 2022 only aimed at sub dividing the already existed Sub-Heading 8518 30; and (iv) The Circular dated 05.09.2013 does not refer to all types of Bluetooth devices but only to a Bluetooth Headset device solely or principally designed for mobile communication. In the present case, the principal function of the Headphones/Earbuds is production of low intensity sound similar and it is only when the Headphones are connected to a mobile phone that these add....
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....Standard Preferential (1) (2) (3) (4) (5) (1) 8518 Microphones and stands therefor; loudspeakers, whether or not mounted in their enclosures; headphones and earphones, whether or not combined with a microphone, and sets consisting of a microphone and one or more loudspeakers; audio-frequency electric amplifiers; electric sound amplifier sets ***** ***** ***** 8518 30 00 Headphones and earphones, whether or not combined with a microphone, and sets consisting of a microphone and one or more loudspeakers: 15% 14. Serial No. 20 of the Notification, of which benefit has been claimed by the appellant, refers to CTI 8517 62 90 or CTI 8517 69 90. It is, therefore, clear that the appellant would be entitled to the benefit of the Notification only if the goods imported by the appellant fall under CTI 8517 62 90. 15. The appellant imported two types of Headphones/ Headsets/ Earphones. The first was wireless and the other was wired. The appellant classified the Bluetooth/Headsets /Earphones/Earbuds under CTI 8517 62 90 and availed the benefit of....
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....Mobile Phones. Thus, as the Headphones/ Earbuds are compatible with multiple systems, the primary function is audio reproduction which would render them classifiable under Tariff Heading 8518. 18. Learned senior counsel appearing for the appellant, however, placed reliance upon a judgment of the Delhi High Court Amazon Wholesale India as also the decisions of the Tribunal in Minda D-Ten and L.G. Electronics. 19. Shri Nikhil Mohan Goyal, learned authorized representative appearing for the department, however, very succinctly pointed out that these decisions will not come to the aid of the appellant as the products involved in those decisions and the product involved in the present appeal are entirely different. Learned authorized representative placed the aforesaid decisions and explained in detail why they will not apply to the products imported by the appellant. 20. In Amazon Wholesale India, learned authorized representative pointed out that the products involved were Echo 4th Gen, Echo Dot 4th Gen, Echo Show 5/8/10, Echo Studio, Echo Flex, Echo Auto, Echo Link/Link Amp while the products involved in the present appeal are Tecno Buds 1, Tecno H2, Oraimo OEB - Bluetooth W....
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....evices have Zigbee smart home hub capability, temperature sensors, and presence detection. These functions are entirely unrelated to audio. The earphones involved in this appeal do not have such features. (iv) Note 3 to Section XVI applied because devices were composite / multifunction machines. The combined Echo devices in Amazon Wholesale India like speaker + microphone + Wi-Fi + cloud AI + smart home hub are genuinely multiple and complementary functions requiring Note 3 to resolve the classification. The earphones involved in this appeal have one function, namely, acoustic sound reproduction. Note 3 will, therefore, not apply as there is no second function to resolve. 22. It is, therefore, clear that the judgment of the Delhi High Court in Amazon Wholesale India will have no application to the facts of the present appeal. 23. Learned authorized representative appearing for the department also submitted that the decision of the Tribunal in Minda D-Ten will not apply to the facts of the present case. 24. It is seen that the Tribunal in Minda D-Ten allowed the appeal on two specific grounds, none of which will apply to the present appeal. The two grounds....
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....paratus. (ii) The good in L.G. Electronics independently processed and transmitted data. The Tribunal in L.G. Electronics specifically noted that the G-Watch could send/receive messages, make/receive calls, run apps, and connect to Wi-Fi networks, all autonomously. The earphones involved in this appeal do not have autonomous data processing capability. They receive an audio bitstream from a paired phone and convert it to sound. This is passive audio reproduction and not data communication. (iii) Heading 8518 is more specific than Heading 8517 for the goods of the appellant. Even applying GRI 3(a) (most specific description), CTI 8518 30 00 specifically names "Headphones, earphones and combined microphone and loudspeaker sets." CTI 8517 62 90 is a broad residual entry covering "other" machines for reception/conversion/transmission of data. Under GRI 3(a), the more specific heading prevails. In L.G. Electronics, the Tribunal applied GRI 3(b) (essential character) because no heading specifically named a "smart watch". In the present appeal, Heading 8518 specifically names the products imported by the appellant. 29. It needs to be noted that the p....
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....w: "118. It is also clear that Chapter Heading 7610 is an eo-nomine provision and makes no reference to use in any manner whatsoever, either explicitly or inherently. Thus, Chapter Heading 7610 is purely an eo-nomine provision. As laid down above, an eo-nomine provision is one that describes a commodity by its name. A use limitation cannot be imposed on an eo-nomine provision unless the name inherently suggests use. An eo-nomine provision would ordinarily include all forms of the name article. Consequently, Chapter Heading 7610 would cover all forms of aluminium structures, except for prefabricated buildings of heading 94.06, which have been excluded by the heading itself. ***** 126. Chapter Heading 8436 is an eo nomine provision. It refers to goods by their name: 'agricultural machinery'. The fact that an entry does not specify a particular article, but rather a category of articles, does not change it from an eo nomine provision to a 'use' provision. Tariff headings often name broad categories without losing their eo nomine character." (emphasis supplied) 33. CTH 8518 (Headphones and earphones) is a classic eo nomine provision. It names the articl....
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....mobile phones and would be under Heading 8517. This cannot be accepted in view of the judgment of the Supreme Court in Welkin Foods. The classification must be based on the objective characteristics and properties of the goods at the time of import. The fact that these devices are used with mobile phones is the "actual use" that cannot determine classification. Even Heading 8518 admits earphones "whether or not combined with a microphone". It contemplates combined use with communication devices. These devices can also be used with laptops and computers. 39. The aforesaid discussion would lead to the inevitable conclusion that the goods imported by the appellant are classifiable under CTI 8518 30 00. The demand would, therefore, have to be confirmed with interest. 40. Learned senior counsel for the appellant also submitted that substantial portion of the demand is barred by limitation as the provisions of section 28(4) of the Customs Act would not be applicable. Learned senior counsel pointed out that the period involved in this appeal is from 01.02.2020 to 31.01.2022, whereas the show cause notice was issued to the appellant on 10.01.2024. Learned senior counsel also pointed ....