G-Mobile Devices Pvt. Ltd. Vs Principal Commissioner of Customs (CESTAT Delhi)
Conclusion: Bluetooth Wireless Earphones because of its Bluetooth/Wireless connectivity did not transform an earphone into a “data transmission machine” for classification purpose. Tribunal noted that the classification must be based on the objective characteristics and properties of the goods at the time of import, therefore, directed classification under CTI 8518 for higher customs duty.
Held: Assessee-importer challenged the order passed by the Principal Commissioner of Customs denying the benefit of concessional customs duty under Notification No. 57/2017-Cus. on import of Bluetooth Wireless Earphones, Headphones, Earbuds and Neckbands. Assessee classified the goods under Customs Tariff Item (CTI) 8517 62 90 and claimed concessional basic customs duty at 10%. Department, however, contended that the goods were appropriately classifiable under CTI 8518 30 00 as headphones and earphones combined with microphones, attracting higher customs duty at 15%. Department alleged that the principal function of the imported goods was audio playback and sound reproduction and not mobile telephony or data communication. A show cause notice was issued invoking the extended period of limitation under section 28(4) of the Customs Act, 1962 demanding differential duty along with interest and penalty and proposing confiscation of goods. Assessee contended that the imported products were Bluetooth-enabled wireless communication devices and relied upon CBIC Circular No. 36/2013-Cus., decisions of the Delhi High Court in Amazon Wholesale India Pvt. Ltd. and Tribunal decisions in Minda D-Ten Pvt. Ltd. and LG Electronics India Pvt. Ltd. to submit that goods having Bluetooth communication capability were classifiable under CTI 8517 62 90. It was further argued that there was no suppression or intent to evade duty and therefore the extended period of limitation and penalty provisions were not invocable. Tribunal held that the imported goods were correctly classifiable under CTI 8518 30 00 as headphones and earphones combined with microphones. It was observed that the principal and essential function of the imported goods was audio playback and sound reproduction, whereas the Bluetooth functionality merely enabled wireless transmission of audio signals and did not alter the essential character of the goods. Tribunal held that Heading 8518 was a specific entry covering headphones and earphones, whereas Heading 8517 was a broader function-based entry relating to machines for transmission or reception of data. Applying the General Rules for Interpretation and relying in Commissioner of Customs v. Welkin Foods, the Tribunal held that once the goods were specifically covered under Heading 8518, there was no requirement to resort to competing functional classifications. However, on the issue of limitation, the Tribunal held that the dispute was one of classification involving interpretational issues and mere adoption of an incorrect tariff entry could not amount to suppression of facts with intent to evade duty. Since the appellant had disclosed all material particulars and had relied upon circulars and judicial precedents, invocation of the extended period under section 28(4) was held to be unsustainable. Consequently, the demand pertaining to the extended period and penalty under section 114A of the Customs Act were set aside, while the demand falling within the normal period of limitation along with applicable interest was upheld.
