TaxTMI 
TaxTMI 
2026 (5) TMI 1175
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.... Rs. 2,39,65,764/- under section 28(4) of the Customs Act, 1962 [the Customs Act] with interest under section 28AA of the Customs Act and penalties under sections 114A and 114AA of the Customs Act. 2. Customs Appeal No. 52370 of 2019, Customs Appeal No. 52732 of 2019 and Customs Appeal No. 52733 of 2019 have been filed by Mr. Irudayara Anthony Joseph Balan (Customs Operation Analyst), Mr. Nomula Srinivas (Manager-Application) and Shri Puthupada Nair Veetil Sunish (General Manager and Head of Finance) of the appellant against that portions of the order dated 24.06.2019 passed by the Commissioner that impose penalties upon them under sections 112 and 114AA of the Customs Act. 3. The issues involved in these appeals are whether the goods namely (a) Midos (MVAJ, MVAA, MVAX); (b) Relays for Tap Changer control and transformer monitoring; (c) K-range Relays (KAVR, KAVS), and (d) MICOM (P14, P24, P40) imported by the appellants during the period 05.03.2013 to 04.12.2017 are: 1. relays classifiable under Customs Tariff Item [CTI] 8536 49 00 (- Relays -- Others) or in the nature of Feeder Management Intelligent Electronic Devices [FMIEDs....
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....al differential duty 2,39,65,764 10. The appellant further claims that upon realization of an inadvertent error towards exemption claimed for import of MICOM relays having contact rating over 7 amperes, the appellant, post an internal review, immediately paid an amount of Rs. 4,49,85,564/- (duty + applicable interest) prior to issuance of the show cause notice. The appellant further claims that the inadvertent error was primarily due to an oversight in internal communication regarding the upgrade/change of technology in MICOM relays, which resulted in a change in contact rating to above 7 amperes and restructuring of the Company during the subject period, i.e., Alstom Group was acquired by GE Group worldwide. 11. The appellant has described the technical details of the products in the following manner: "Relay is a device used for control, protection and supervision of an electrical system from overcurrent and voltage. These are used by the appellant in transformers manufactured/used by them in plants. Given the advancement in digital technology and software techniques, certain additional features are part of new-age relays, which merely assist in the effective per....
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.... relays and (b) relays for Tap Changer control and transformer monitoring (as it has additional features)- subject relays owing to their multi-functionality are not relays. (b) The appellant has manipulated the description of goods by misdeclaration of subject goods as relays of contact rating below 7 amperes, instead of FMIEDs. (c) Since the employees were working with the Company for over 10 years, oversight/miscommunication of technological advancement was not inadvertent but intentional. 15. Shri Amar Dave, learned senior counsel for the appellant assisted by Shri Udit Jain, Shri Saurabh Dugar and Ms. Adhya M. made the following submissions: (i) The impugned order fails to specifically analyze each of the products in question, and in the absence of such consideration coupled with a lack of reasoning, the same cannot be sustained. It has mainly relied on brochures of MICOM relays (where duty has been paid before issuance of the show cause notice) and incorporates a brief observation for Relay for tap changer controls (one of the three contested relays) to conclude that all the subject goods are classifiable under CTI 8536 90 90 as FMIEDS. There are ....
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.... Subject goods (other than MICOM) are relays with a contact rating below 7 amperes and hence qualify for exemption; (ix) Exorbitant penalties could not have been imposed as: (a) the matter involves legal interpretation of classification disputes; (b) majority of demand stands voluntarily paid before issuance of show cause notice (c) penalty imposed is disproportionate to the demand involved; and (x) The extended period of limitation could not have been invoked in the facts and circumstances of the case. 16. Shri Nikhil Mohan Goyal, learned authorized representative appearing for the department, however, supported the impugned order and made the following submissions: (i) The appellant willfully mis-declared FMIEDs as "Relays with contact rating less than 7 amperes" under CTI 8536 49 00, while the actual goods were classifiable under CTI 8536 90 90, as they consisted of multiple relays with contact ratings exceeding 7 amperes and were multifunctional intelligent devices; (ii) These devices were capable of measurement, monitoring, protection, communication, data logging and control which are far beyond the functions of....
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....rd by the appellant for these three products that they not only identify the goods imported by the appellant as relays but also show that the products imported by the appellant, except MICOM, have contact rating of less than 7 amperes. The details contained in the technical brochures are as follows: Relay Type Contact Rating Midos relays (MVAJ, MVAA, MVAX) 5 amperes Relays for Tap Changer control and transformer monitoring 5 amperes K-range Relays (KAVR, KAVS) 5 amperes 21. No evidence has been brought on record by the department to substantiate that the contact ratings of these three products imported by the appellant is more than 7 amperes. 22. The Commissioner, therefore, committed an error in holding that these three products imported by the appellant also have contact rating of less than 7 amperes. 23. The second issue that arises for consideration is regarding the classification of the four products imported by the appellant. 24. The contention of the learned senior counsel for the appellant is that the impugned order fails to analyze each product and has mainly relied on the brochures of MICOM relays and incorporates a brief observation fo....
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....he appellant in the Bills of Entry are actually Feeder Management Intelligent Electronic Devices called FMIEDs. To support this view, the Commissioner has placed reliance upon the statement made under section 108 of the Customs Act, which statement could not have been relied upon as the procedure contemplated under section 138B of the Customs Act was not followed. 31. As noticed above, relay is a device used for control, protection and supervision of any electrical system from overcurrent and voltage. They have been used by the appellant in transformers manufactured by the appellant and in the plants. Due to advancement in digital technology and software techniques, certain additional features are part of the new age relays. They only assist in the effective performance of the relays as they display the change in voltage on a monitor, record various input and output features and initiate audible alarms. In fact, the MIDOS relays facilitate protection applications mainly by way of tripping. Relays for tap changer control and transformer monitoring compare the actual current value to the prefixed value and determine variable for tap change of the transformer in case of deviation. ....
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....dio capabilities with color screens, QWERTY keyboard, touch screen. It may also run application software and synchronize with PCs, function as Global Positioning System (GPS) receiver. These devices work on operating systems (software) like Symbian OS. Microsoft Windows Mobile OS Linux OS which are similar to the software used in desktop PC/laptop. All these functionalities grouped as PDA or pocket PC or camera or GPS receiver, contained in cellular/ mobile phones, though represent as composite machine, for the purpose of classification, it will be governed by the Customs Tariff Act and the General Rules for Interpretation (GRI) as explained in para 4 above. Accordingly, in terms of Section Note 3 to Section Note XVI when the goods satisfy the following conditions these would be characterized as transmission apparatus in cellular/ wireless network rather than as an Automatic Date Processing (ADP) machine or camera or GPS receiver. xxx xxx xxx 9. In trade parlance too, it is noticed that the goods are sold as cellular or mobile phones with various additional facilities, the use of which is dependant on the cellular service provided. Further consumers purchase such ....
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....ces of an ADPM (computer) and thus serve as unit of an ADPM, which on a reading of Chapter Note 5(C), clearly classifies them as falling under Heading 84.71.60 of the Act." (emphasis supplied) 37. In Logic India Trading Co. vs. Commissioner of Customs, Cochin [2016 (337) E.L.T. 65 (Tri. - Bang.)] the Tribunal held as follows: "As is seen from the above, the products considered in the said circular are identical to the products being imported by the assessee. For arriving at the conclusion that the speaker with the USB playback would fall under Heading 8519 and the speakers with FM radio would fall under Heading 8527, the Board has referred to the General Rules for the Interpretation specifically to Rule 1 and to Section Note 3 to Section XVI. The said Note is to the effect that where composite machine consists of two or more machine, the classification would be decided depending upon the machine which performs the principal function. However, we find that the principal function of the 'Multimedia Speaker" is amplification of the sound and the USB port or FM radio is an additional feature introduced to such speakers. Looking at the speakers produced before us, and....
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....ntact rating is over 7 amperes. 41. It has now to be examined whether penalties under section 114A and 114AA of the Customs Act could have been imposed upon the appellant. 42. As noticed above out of the total amount of differential duty of Rs. 2,39,65,764/-, an amount of Rs. 1,78,79,947/- pertains to MICOM relays of contact rating more than 7 amperes. The appellant paid the duty amount and applicable interest prior to the issuance of the show cause notice. It has been found that the other three imported items have a contact rating of less than 7 amperes. This differential duty of Rs. 60,85,817/- was, therefore, not required to be paid by the appellant. The imposition of penalty under section 114A of the Customs Act, therefore, deserves to be set aside. 43. Penalty under section 114AA is imposed for use of false and incorrect material. It is only with respect to MICOM that the appellant had wrongly said that it had a contact rating of 7 amperes, but the appellant paid the entire differential duty prior to the issuance of the show cause notice. Penalty under section 114AA of the Customs Act could not have been imposed upon the appellant. 44. Penalties under section 112 o....