Commissioner of Customs Vs Reliance Jio Infocomm Ltd (CESTAT Mumbai)
Differential classification of same goods imported at different places would negate very purpose of Tariff Act
CESTAT held that differential classification of the impugned goods imported at different places would negate the very purpose of the Tariff Act on the one hand and would cause avoidable litigation for the importers on the other.
FULL TEXT OF THE CESTAT MUMBAI ORDER
A bunch of appeals (No. C/88479, 88483, 88485, 88487, 88492/2018, C/87032, 87033, 87034, 87035, 87036, 87037, 87038, 87039/2019) filed by the Revenue against various Order-in-Originals passed by the Commissioner of Customs, Mumbai (Air Cargo Import) were decided by this Bench vide Final Order No. A/85571-85583/2022 dated 22.06.2022. The respondents filed a miscellaneous application seeking the rectification of the order in respect of three appeals i.e. No. C/88483, 88487 & 88492/2018 stating that though the common issue of classification of Populated Printed Circuit Boards (PPCB) for DWDM Equipment – Photonic Service Switch, common to all the appeals was decided by the above cited order, another issue of classification of Small Factor Pluggable (SFP) and alternative claim of exemption under Notification No. 24/2005-Cus dated 1.3.2005 remained to be decided in respect of the three appeals mentioned above. This Bench vide Miscellaneous Order No. M/85546/2022 dated 12.07.2022 has ordered that these three appeals be delinked and placed before the Bench for a fresh hearing on 13.07.2022. Accordingly, the hearing was held on 13.07.2022.
2. Learned Counsel for the respondents submits that SFP are parts of various telecommunication equipment viz. Alcatel-Lucent 1830 Photonic Service Switch (PSS), Ethernet Switch and eNodeB; SFPs are fitted in the said equipment and function as integral part of such equipment; SFP cannot perform any function on its stand-alone basis as a machine or apparatus by itself; it lacks power and intelligence and derives the same from the equipment in which it is fitted as a part; function performed by the SFP is integral and inseparable from the function performed by the telecommunication equipment; SFP purchased from any Original Equipment Manufacturer (Cisco or others) are exclusively used inside the equipment of same original equipment manufactured by the same manufacturer; there is no evidence relied upon by the Department to show that the said SFP can function independently on a stand-alone basis; the grounds of appeal specifically mentioned the SFP to be parts of Photonic Service Switch.
2.1 Learned Counsel further submits that vide order dated 25.01.2017, the Commissioner (Appeals), Hyderabad has held that SFPs are classifiable as parts under CTH 8517 70 and not as complete machine or apparatus under CTH 8517 6290; the said order of the Commissioner (Appeals), Hyderabad has been accepted by the Department and no appeal has been preferred; learned Commissioner (Appeals) in the impugned order followed the order of the Commissioner (Appeals), Hyderabad; further vide Order-in-Appeal dated 30.08.2019, Commissioner (Appeals), Mumbai has also held that SFPs are classifiable as parts under CTH 8517 70. Learned Counsel submits that without prejudice to above, SFPs are exempt from duty under Sr. No. 13 of Notification No. 24/2005-Cus dated 1.3.2005; irrespective of the subheading the items are exempted under the Notification cited above, which exempts all goods of heading 8517 except those mentioned in clause (i) to (iv) of the notification, the impugned SFP do not fall under the said clauses.
3. Learned AR for the Revenue reiterates the grounds of appeal and submits that the above mentioned telecommunication devices are part which are devices of line equipment such as transponder, Optical Amplifier, Wavelength Tracker, Optical add-drop Multiplexer etc. are having independent and specific function and therefore, they are rightly classifiable under sub-heading 8517 62; these are various telecommunication devices used in optical communication by transmitting digital signal/ messages in one or both directions over a single transmission path on optical fibres; firstly, wavelength of various signals are changed and such signals having different wavelength are mixed and loaded on a single optical fibre and transmitted for optimum use of fibre i.e. single fibre used for transmitting various signals together; at the receiving points, these signals were de-mixed/separated and wavelengths are then again changed to original one and used by the recipient devices. In the whole process devices such as ‘Transponder’, ‘Muxponder’, ‘Wavelength Tracker’, ‘Amplifier’, ‘Small Form Factor Pluggables’ etc. are used and all of them are placed on a Switch called Photonic Service Switch (PSS), which gives a platform to the devices.
3.1 Learned AR takes us through the HSN Notes for Heading CTH 8517 and submits that part ‘E’ of HSN for Heading 3517 describes ‘Automatic switchboards and exchanges’; Switch Board incorporates various devices classifiable under 8517 62 such as analogue to digital converters, digital to analogue converters, data compression/ decompression devices, modems, multiplexers are parts of Switch Board and have specific function to perform in such switch board, even though they are classified under sub-heading 8517 6230 and 8517 6270. He submits that by applying the above logic/principles, the imported apparatus being parts of Photonic Service Switch are to be classified under CTH 8517 6290; as per Explanation ‘G’ for Heading 8517, it is clear that the apparatus which allows connection to communication network or the transmission or reception within such a network are to be classified under sub-heading CTH 8517 62. HSN specifically mentions that this group i.e. 851762 includes (1) Network Interface cards (e.g. Ethernet Interface cards), (2) 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/de-compressors) which have the capability of transmission and reception of digital information, (6) Pulse to tone converters which convert pulse dialed signals to tone signals; SFPs are having rightly classifiable under 851762.
4. Heard both sides and perused the records of the case.
5. The classification of Populated Printed Circuit Boards for DWDM Equipment – Photonic Service Switch has been decided by us vide Final Order dated 22.06.2022. We adopt the arguments put-forth by us to the impugned goods i.e. SFP in this case also as may be applicable. We find that as submitted by the learned Counsel for the respondents, the learned Commissioner (Appeals), Hyderabad has gone into the issue in detail manner vide order dated 25.02.2017 and has found as below: –
“5. I have considered the submissions made by the appellant in writing as well as those made during the personal hearing. I have also perused the documents submitted in defence. The issue to be decided is the correct classification of the goods imported. To decide correct classification of goods it is necessary to decide whether the SFP modules imported are equipment by themselves which are capable of providing the essential function of transmission and reception of optical data they are merely parts of the ethernet switch/parts of telecom equipment. The chapter sub-heading 8517 of CTA is given as below.
