Imported Wap was entitled to an exemption from Basic Customs Duty

Commissioner of Customs (Air) Vs Ingram Micro India Pvt. Ltd. (CESTAT Delhi)

Conclusion: Imported WAP was entitled to an exemption from the whole of the customs duties under the ITA as it worked on technology and did not support the LTE standard.

Held: Respondent was a distributor of information technology products. It imported WAP from various suppliers for trading purposes in India, and it classified the imported WAP under CTI 8517 62 90 during the period from 11.07.2014 to 30.06.2017. The department contended that TRAI, in its recommendations on Telecom Equipment Manufacturing Policy dated 12.04.2011, had regarded Wi-Fi WAP as a broad band equipment under the category of telecom equipment. The notification dated October 5, 2012, issued by the Department of Telecommunications, following the policy of preferential treatment to indigenous manufacturers in government purchases, had categorised WAP as’ Wi-Fi based broadband wireless access systems’. The amendment made by the notification had taken out specified telecom products for increasing the BCD to 10%, and this included Wi-Fi based WAP. It was held that the Finance Minister’s Budget Speech for the year 2014-15 and Tax Research Unit letter dated 10.07.2014 clarified that BCD on specified telecommunication products not covered under the ITA was being increased from NIL to 10%. As WAP was an Information Technology product and was specifically covered under the ITA as ‘Network Equipment’ in Attachment B, the intention was clearly not to exclude WAP imported by Ingram Micro. The Network Equipment as defined in Annexure-B included LAN and Wide Area Network apparatus, including those products dedicated for use solely or principally to permit the interconnection of automatic data processing machines and units thereof for a network that was used primarily for the sharing of resources such as central processor units, data storage devices and input or output units – including adapters, hubs, in-line repeaters, converters, concentrators, bridges and routers, and printed circuit assemblies for physical incorporation into automatic data processing machines and units thereof. Imported WAP was a networking equipment working in LAN connecting Wi-fi enabled devices such as laptops, smartphones, tablets, etc. to a wired network. Thus also, imported WAP was entitled to the exemption from the whole of the customs duties under the ITA.

FULL TEXT OF THE CESTAT DELHI ORDER

The Commissioner of Customs (Air) Chennai-VII Comminssionerate ¹ has filed this appeal to assail the order dated 23.12.2019 passed by the Additional Director General (Adjudication), Directorate of Revenue Intelligence, New Delhi², holding that Wireless Access Points³ imported by M/s. Ingram Micro India Pvt. Ltd⁴ would be classifiable under Customs Tariff Item⁵ 8517 62 90 and accordingly would be entitled to exemption from Basic Customs Duty⁶ under the notification dated 01.03.2005, as amended by the notification dated 11.07.2014. The demand of customs duty for the period from 11.07.2014 to 30.06.2017 has, therefore, been dropped. The penalty imposed upon Ingram Micro as also its Director Material, Blase D’Souza have also been dropped.

2. Ingram Micro is a distributor of Information Technology It imported WAP from various suppliers such as Cisco Systems International BV, Aruba Networks International Ltd., Fortinet Singapore Pvt. Ltd, Ruckus Wireless, Symbol Technologies LLC, Juniper Networks (Hong Kong) Ltd. for trading purpose in India and it classified the imported WAP under CTI 8517 62 90 during the period 11.07.2014 to 30.06.2017. According to the appellant, WAP works on Multiple Input/Multiple Output⁷ technology, but does not support Long Term Evolution⁸ standard.

3. It would, therefore, be necessary to state briefly about WAP, MIMO and LTE:

(i) WAP: It is a networking device used for wireless communication within the Local Area Network⁹ . It helps in connecting wireless enabled devices such as Laptops, Smartphone, Tablets etc., to a wired network;

(ii) MIMO: It is a technology wherein multiple antennas are used simultaneously for transmission and multiple antennas are used simultaneously for reception;

(iii) LTE: In telecommunication, it is a standard for highspeed cellular communication for mobile devices and data It increases the capacity and speed using a different radio interface together with core network improvements.

4. The issue in this appeal pertains to the availability of exemption from the whole of the customs duty by Ingram Micro under Serial No. 13 of the notification dated 01.03.2005, as amended by notification dated 11.07.2014. The relevant Serial No. 13, as it stood during the relevant period is as follows:

“Exemption to goods of specific heading, from customs duty (ITA Bound). – In exercise of the powers conferred by sub­section (1) of section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the following goods of the description as specified in column (3) of the Table below and falling under the heading, sub­heading or tariff-item of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) as specified in the corresponding entry in column (2) of the said Table when imported into India, from the whole of the duty of customs leviable thereon under the said First Schedule, namely:-