TaxTMI 
TaxTMI 
2026 (5) TMI 1184
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....I) 14.09.2022 March 2019 to January 2021 17,27,13,319/- 2 ACC (Import), New Delhi 09/022-23 (SCN-II) 12.05.2022 July 2017 to Jan. 2021 8,46,64,348/- 3 ICD, PPG, New Delhi VIII(6)/ICD/PPG/SCN/GX/India/112/2021-22/2625 (SCN-III) 06.04.2022 06.12.2018 10,54,966/- Total 25,84,32,633/- 2. The appellant is in the business of software Development as well as manufacture, import and trading of Information and Communication Technology [ICT] products as well as network products to internet service providers and consumers. The dispute in this case relates to the nature, classification and eligibility of exemption notification of the following two products imported by the appellant: (i) Optical Network Terminals (ONT)/Optical Network Units (ONU) (home gateway units) which the appellant classified under Customs Tariff Item [CTI] 8517 69 50 as "subscriber end equipment" and claimed full exemption from duty under Notification No. 24/2005-Cus dated 01.03.2005 (Sr No. 13B); and (ii) Optical Line Terminals (OLT) which the appellant classified under CTI 8517 69 90 as "other" and claimed part....
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....0. (ii) In paragraphs 5.3.2 to 5.3.6 of the impugned order, the Commissioner discussed various technical aspects of what is a telecom network but did not cite any technical literature or source in support of his contention. He also did not rely on any technical opinion to substantiate his observations. (iii) The appellant has sought technical opinion of expert of Shri Ravinder Kumar Mishra, retired Deputy Director General, Department of Telecommunication on each of the imported goods whose report has not been referred to in the impugned order, let alone, countering it. For this reason also the impugned order is not correct. (iv) The appellant also relied on by the Customs Advance Ruling Authority, Mumbai, ruling dated 20.01.2022 in the case of Netlink (P) Ltd. to assert that the ONT is classifiable under CTI 8517 69 50 and the appellant was entitled to exemption under Notification 24/2005-Cus dated 01.03.2005 (Sr No. 13B) but the Commissioner did not follow the Advance Ruling. Further Revenue's Writ Petition No. 12398 of 2022 before Madras High Court assailing the above Advance Ruling has since been dismissed by the High Court. (v) In the reply t....
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....cation under section 111(m) of the Act. Penalty under section 114AA can be invoked only against the individual and not the corporate entity. (xii) In view of the above, the appeals may be allowed and the impugned order may be set aside. Submissions of the Revenue 10. Shri Nikhil Goyal, Learned authorized representative for the revenue vehemently supported the impugned order and submitted as follows: (i) The appellant imported ONT/ONUs and classified them under CTI 8517 69 50 and claimed the benefit of Notification No. 24/2005-Cus (Sr No. 13B) and classified ONTs under CTI 8517 69 90 claiming the benefit of exemption notification no. 57/2017-Cus (Sr No. 20). The appellant's claim is that ONT/ONUs were subscriber end equipment while OLTs were "Others". (ii) DRI, Cochin initiated an investigation and found that ONT/ONUs and OLTs were, prima facie, in the nature of optical transport network products. Consequently, the department proposed in the SCNs that the goods should be classified under CTI 8517 62 90. Accordingly, the Commissioner, in the impugned order, confirmed the demand of differential duty and imposed an equivalent amount of penalty under sec....
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....udes machines for reception, conversion and transmission or regeneration of voice, images and other data, including switching and routing apparatus. Under this sub-heading, CTI 8517 62 90 refers to 'other' under which the department seeks to classify ONT. The appellant classified it under CTI 8517 69 50 as "subscriber end equipment". (ix) Customs Tariff Heading 8517 has three customs tariff sub-headings: 8517 61 - base stations 8517 62- machines for reception conversion and transmission or regeneration of voice, images and other data including switching and routing charges, 8517 69 - other goods. (x) Only if the ONT/ONU and OLT imported by the appellant do not fall under 8517 61 or 8517 62 can they fall under the residual category 8517 69. Since the ONT and ONU and OLT are all machines for reception conversation and transmission of data they squarely fall under Customs Tariff sub-heading 8517 62 and not under the residual category of 8517 69. CTI 8517 69 50 and CTI 8517 69 90 are both sub-sets of CTSH 8517 69. Only such 'subscriber end equipment' which do not fall under CTSH 8517 61 or CTSH 8517 62 will be covered under residuary CTSH 85....
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.... 28(4) of the Act; and (iv) whether penalties on the importer have been correctly imposed in the impugned order. Classification 13. Duties of customs are to be paid as per the Customs Tariff. It is divided into sections and chapters within each section. Each chapter is further divided into four-digit customs tariff headings (CTH) and further into six-digit Customs Tariff sub heading (CTSH) and still further into eight-digit Customs Tariff items (CTI). 14. Goods should be classified as per the Customs tariff headings, sub-headings and tariff items read with any section notes or chapter notes. In this case, there is no dispute that the goods fall under the four-digit CTH 8517. There are no relevant section notes or chapter notes and none have been relied upon by either side. What is in dispute is the further classification within CTH 8517. The portion of the customs tariff related to CTH 8517 is reproduced below: Tariff Items Description of goods 8517 TELEPHONE SETS, INCLUDING SMARTPHONES AND OTHER TELEPHONES FOR CELLULAR NETWORKS OR FOR OTHER WIRELESS NETWORKS: OTHER APPARATUS FOR THE TRANSMISSION OR RECEPTION OF VICE, IMAGES OR O....
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....e description of the article or group of articles is preceded by "-", the said article or group of articles shall be taken to be a sub-classification of the immediately preceding description of the article or group of articles which has "-". Where the description of the article or group of articles is preceded by "---" or "----", the said article or group of articles shall be taken to be a sub-classification of the immediately preceding description of the article or group of articles which has "-" or "--". 16. The four digit tariff heading 8517 is divided into two single dashes '-'. The first single dash covers telephones sets including smart phones and other phones for cellular network or for other wireless network. It is not the case of either party that disputed goods fall under this single dash. The disputed goods fall under the second single dash which covers 'other apparatus for transmission or reception for voice, images or data including apparatus for communication in voice or wireless network (such as a local vide area network)'. There is no dispute upto this level of classification. 17. Under the above single dash there are three double dashes as follows: 8....
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....21. There is no dispute that the goods were not base stations (CTI 8517 61 00). The question is whether they are 'machines that receive convert and transmit voice, machines or other data' (CTSH 8517 62) are not. From the elaborate submissions made by the learned counsel and also the learned authorized for the Revenue and discussed above, it is evident that the only purpose and function of these devices is to provide internet connection through optical fiber from the ISP and transmit it to various devices in the household or office, thus transmitting data from the internet to various devices of the subscriber and also transmitting the data about the internet usage to the ISP. Therefore, there cannot be any manner of doubt that these receive and transmit data. Such being the case, they deserve to be classified CTHS 8517 62 and cannot be classified under CTHS 8517 69 which is the residual category. 22. Within the six-digit heading 8517 62 there are various eight-digit CTIs for PLCCA equipment (CTI 8517 62 10) voice frequency polygraphy (CTI 8517 62 20) modems (CTI 8517 65 30) hybrid weight digital subscribe systems (CTI 8517 62 40) digital crew carry assistance (CTI 8517 62 50), sy....
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....ch receive and transmit data and, therefore, they deserve to be classified under six digit CTSH 8517 62. Only goods which are not machines for reception or transmission of data will fall under the residual category of "others" (CTSH 8517 69). The appellant's claim of classification of these OLTs under CTI 8517 69 90 cannot, therefore, be accepted. In view of the above, we find that on merits the classification of the OLT under CTI 8517 62 90 in the impugned order is correct and proper. Exemption Notification 28. Exemption Notification No. 57/2017 as applicable during the relevant period exempted goods falling on both CTI 8517 62 90 and under CTI 8517 69 90 with some exceptions. These included (i) Optical Transmit network (ii) combination of one or more packet optical transmit product or switches (POTP or POTS) (iii) And optical transport network (OTN) products. The SCN alleged that these are optical transport equipment or optical transport network and Commissioner. The impugned order held that they were POTP and for this reason denied the benefit of the exemption notification. The submission of the learned counsel for the appellant is that the ONT/ONU cannot be called as opti....
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....ce any contrary technical opinion to show that the goods were POTP. 30. In the impugned order the Commissioner has denied the benefit of the exemption notification No. 24/2005-Cus dated 01.03.2005(Sr. No. 13B) for ONT/ONU products and also held that the appellant was not entitled to the benefit of the Notification No. 57/2017-Cus Dated 30.06.2017 (Sr No. 20). This was for the reason that ONT/ONU products were in the nature of optical transport network products and, therefore, excluded from the benefit of the exemption notification Sr. No. 13 of this notification was amended by Notification No. 11/2014Cus dated 11.07.2014 and certain goods were excluded from the exemption notification. The relevant portion of the Notification No. 11/2014-CUS is reproduced below: G.S.R. (E).- In exercise of the powers conferred by subsection (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....
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....t he specifically mentioned that the ONT/ONU imported by the appellant do not fall in the category of optical transport network equipment. The Commissioner has neither considered the expert opinion of Shri Ravinder Kumar Mishra produced by the appellant nor has he given any finding as to why he does not agree with the same. Learned counsel for the appellant specifically states that the Commissioner had not even called Shri R.K. Mishra, to examine or to question him about his report. Exemption Notification for OLT. 32. The appellants claim of Exemption Notification No. 57/2017-Cus dated 30.06.2017 (Sr No. 20) for OLT was denied by the Commissioner. The relevant portion of this exemption notification is below; (1) (2) (3) (4) (5) "20 8517 62 90 All goods other than 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) 10% - 33. Reasons for extended period of limitation is given in the show cause notice is as below: "It is seen that some of their Bills of....
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....ide intention to evade import duties to the tune of Rs. 17,27,13,319/- (BCD-13,26,01,099/- + SWS,37,66,121/- + IGST-2,63,46,100/-). Hence the Noticee is liable to pay the differential duty to the tune of Rs. 17,27,13,319/- (BCD13,26,01,099/- + SWS-1,37,66,121/- + IGST 2,63,46,100/-) as detailed in [Annexure-B] attached to this notice. Despite being pointed out to them, they have not discharged the differential duty for the above cited bills of entry." 34. The submissions of the appellant before the Commissioner regarding invocation of extended period of limitation were as follow: "27.1. The Show Cause Notice dated 12.09.2022 demands duty for the period March, 2019 to January 2021 and has been served on the Noticee on 19th September, 2022. The same, therefore, partially extends beyond the period of limitation of two years provided in Section 28 (1) of the Customs Act 1962 and is to that extent partially barred by time. 27.2. The Noticee submit that the larger period of limitation of 5 years provided in Section 28 (4) of the Customs Act 1962 is inapplicable in the present case since there is no collusion or wilful mis-statement or suppression of facts on the part....
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....oods and had removed the same under lower rate of Prior to 1-111986, the said goods were cleared as sanitary wares. The goods remained of duty. the same; the commercial understanding remained the same; but to avail of the concessional rate of duty applicable to laboratory wares, misdeclaration was made and facts were suppressed. The dealers were describing the said sinks as kitchen sinks. The plea that the appellants were not concerned as to how its dealers described their products, in the facts and circumstances of the case only confirms the view that it was an intentional and mala fide step to evade payment of appropriate duty of excise." 5.8.4 I find that the Hon'ble Supreme Court of India in the case of M/s Novopan India Ltd. vs C.C.E & C, Hyderabad as reported in [1994 (73) E.L.T. 769 (S.C.)] has interalia held that exemption being in the nature of exception to be construed strictly at the stage of determination whether assessee falls within its terms or not and in case of doubt or ambiguity, benefit of it must go to the State. 5.8.5 1 find that the Noticee has changed classification of their goods under CTH 8517 62 90 to CTH 8517 69 50/8528 69 90 without....
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....ons 114A and 114AA. These sections read as follow: "114A. Penalty for short-levy or non-levy of duty in certain cases. - Where the duty has not been levied or has been short-levied or the interest has not been charged or paid or has been part paid or the duty or interest has been erroneously refunded by reason of collusion or any wilful mis-statement or suppression of facts, the person who is liable to pay the duty or interest, as the case may be, as determined under sub-section (2) of section 28 shall also be liable to pay a penalty equal to the duty or interest so determined: [Provided that where such duty or interest, as the case may be, as determined under sub-section (2) of section 28, and the interest payable thereon under section 28-AB, is paid within thirty days from the date of the communication of the order of the proper officer determining such duty, the amount of penalty liable to be paid by such person under this section shall be twenty-five per cent. of the duty or interest, as the case may be, so determined: Provided further that the benefit of reduced penalty under the first proviso shall be available subject to the condition that....
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.... section 28, penalty under section 114A also cannot be sustained. Accordingly, penalty under section 114A is set aside. 40. Penalty under section 114AA can be imposed for willfully mis-stating any facts. In this case the appellant had declared the goods correctly and classified them under CTI which is different quite from the CTI under which they have been classified in the impugned order. Mis-declaration could would apply that the wrong fact has been mentioned. Classification is not a matter of fact but a matter of opinion. It is the opinion of the person self-assessing duty or re-assessing it or adjudicating a matter or deciding the matter in appeal as to which is the appropriate classification. It cannot be said as true of false. The importer may classify the goods under a particular heading, the officer may re-assess it under a different heading and on appeal the Commissioner (Appeals), this Tribunal or courts may change the classification again. It does not mean that the importer had misstated any fact or that the officer has mis-stated any fact in classifying goods under a particular CTI. We, therefore, find that penalty under section 114AA could not have been imposed in t....