Huawei Telecommunication (India) Company Private Limited Vs Commissioner of Customs (CESTAT Mumbai)
CESTAT Mumbai held that ‘interface card’ is classifiable under customs tariff it 8517 7010 and not under customs tariff item 8517 6290. Accordingly, demand of differential duty set aside.
Facts- The appellants herein have filed Bill of Entry for import of goods, namely ’36-Port-100GE Interface Card (FG, QSFP28)’. The goods were self-assessed by the appellants classifying the imported goods as Populated Printed Circuit Board Assembly (PPCBA) under customs tariff item 85177010.
During post-clearance audit verification of self-assessment, the department did not agree with the classification adopted by the appellants, and a show cause notice was issued for reclassifying the imported goods under customs tariff item 8517 6290 for reassessment and consequently demanding differential duty u/s. 28 of the Customs Act, 1962, besides proposing for confiscation of imported goods and for imposition of penalties u/s. 112(a), 117 ibid.
The original authority rejected the classification of the goods under tariff item 8517 7010 as claimed by the appellants and reclassified the goods under Customs tariff item 8517 6290. Further, the original authority vide Order-in-Original confiscated the imported goods and imposed penalty of Rs.2,30,000/- on the importer u/s. 112(a) of the Customs Act, 1962.
Commissioner (Appeals) rejected the appeal filed by the appellants and upheld the original authority’s order. Being aggrieved, the present appeal is filed.
Conclusion- Tribunal in the case of Commissioner of Customs, Mumbai Vs. Reliance Jio Infocomm Ltd. reported in (2023) 3 Centax 96 (Tri.-Bom) held that import of goods viz., ‘cards (Populated Printed Circuit Boards)’ were classified under CTH 85177010 rejecting the department’s for classification under CTH 8517 6290.
Held that the decision of the Tribunal in the case of Commissioner of Customs, Mumbai (Air Cargo Import) Vs. Reliance Jio Infocomm Ltd., deals with classification of ‘cards i.e., Populated Printed Circuit Boards (PCBs)’ incorporated in photonic service switch. Thus, the imported goods in the present case ‘interface cards’ being functionally similar, the decision of the Co-ordinate Bench of the Tribunal, which has been upheld by the Hon’ble Supreme Court in Civil Appeal No.000586-000598/2023 arising out of Diary No.31965/2022, by holding that they do not think it is appropriate to interfere in the impugned order, is relevant to the present case.
FULL TEXT OF THE CESTAT MUMBAI ORDER
This appeal has been filed by M/s Huawei Telecommunication (India) Company Private Limited, Gurugram (herein after, referred to as ‘the appellants’) being aggrieved against the Order-in-Appeal No. MUM-CUSTMAMP-APP-1670/2021-22 dated 15.02.2022 (herein after, referred to as ‘the impugned order’) passed by the Commissioner of Customs (Appeals), Mumbai-III.
2.1 Briefly stated, the facts of the case are that the appellants herein have filed Bill of Entry No. 9315138 dated 19.12.2018 for import of goods, namely ’36-Port-100GE Interface Card (FG, QSFP28)’. The goods were self-assessed by the appellants classifying the imported goods as Populated Printed Circuit Board Assembly (PPCBA) under customs tariff item 85177010. During post-clearance audit verification of self-assessment, the department did not agree with the classification adopted by the appellants, and a show cause notice dated 13.12.2019 was issued for reclassifying the imported goods under customs tariff item 8517 6290 for reassessment and consequently demanding differential duty under Section 28 of the Customs Act, 1962, besides proposing for confiscation of imported goods and for imposition of penalties under Sections 112(a), 117 ibid. The original authority upon receiving written submission dated 14.02.2019 and after giving the appellants a personal hearing on 26.10.2020, had passed an order rejecting the classification under tariff item 8517 7010 claimed by the appellants and reclassified the goods under Customs tariff item 8517 6290. Further, the original authority vide Order-in-Original dated 24.11.2020 confiscated the imported goods and imposed penalty of Rs.2,30,000/- on the importer under Section 112(a) of the Customs Act, 1962.
2.2 Feeling aggrieved of the above order, the appellants had preferred an appeal before the Commissioner of Customs (Appeals), Mumbai-III. The learned Commissioner (Appeals), after giving a personal hearing to the appellants on 24.01.2022, had passed the impugned order dated 15.02.2022, holding that the imported goods are covered under the category of Optical Transport Network (OTN) which are mentioned in exclusion product list under the entry Sl. No.20 of notification No.75/2018- Customs dated 11.10.2018 as amended by notification No.02/2019- Customs dated 29.01.2019. Accordingly, learned Commissioner (Appeals) rejected the appeal filed by the appellants and upheld the original authority’s order. Being aggrieved against the impugned order, the appellants have preferred this appeal before the Tribunal.
3.1. The learned Advocate appearing for the appellants stated that the imported goods are ‘interface cards’ which is a kind of Populated Circuit Board Assembly (PCBA) and forms a part of Packet Optical Transport Switch (POTS). It is used in cloud engine switches providing the function of data packet processing and traffic management on 36 100GE optical ports. He further stated that the imported goods are distinguishable with ‘network interface cards’ inasmuch as the ‘interface cards’ works as intermediate component in the network, and it will not initiate or terminate data communication; whereas, ‘network interface cards’ is an interface connecting the computer to transmission medium through LAN connection through RJ45 port, and works as terminal component in the network and all network data will be initiated or terminated by it. In support of their stand they also claimed that they had obtained a technical opinion from Professors of IIT, Delhi. Further, learned Advocate claimed that the description of the goods has been declared in the Bill of Entry correctly as per the product description in the catalogue ’36-port 100GE interface card (FD1, QSFP28)’ bearing part no. 03024UCT with card name ‘CE-L36CQ-FD1’ as well as there is no case of undervaluation or any other mis-declaration and thus the order confiscating the imported goods under Section 111(m) ibid, is not sustainable. Thus, he pleaded to set aside the impugned order by allowing their appeals.
3.2. In support of their claim for classification of imported goods, learned Advocate relied upon the order of the Tribunal in the case of Commissioner of Customs, Mumbai Vs. Reliance Jio Infocomm Ltd. reported in (2023) 3 Centax 96 (Tri.-Bom) in which import of goods viz., ‘cards (Populated Printed Circuit Boards)’ were classified under CTH 85177010 rejecting the department’s for classification under CTH 8517 6290. He further submitted that the said order of the Tribunal was upheld by the Hon’ble Supreme Court in Civil Appeal Diary No.31965 of 2022 stating that they did not think it appropriate to interfere in the impugned order and consequently dismissed the appeals filed by the Revenue. Thus, learned Advocate submitted that the imported goods cannot be classified as a machine or apparatus under CTH 8517 6290 and have to be classified as parts of Packet Optical Transport Switch (POTS) and appropriately classifiable under CTH 8517 7010. He also submits that the issue has also been decided in their favour by the following judgements:
(i) Commissioner of Customs, Bangalore Vs. N.I. Systems (India) Pvt. Ltd. – (2010) 11 S.C.C. 638
(ii) Inter Continental (India) Vs. Union of India – 2003 (154) E.L.T. (Guj.)
4. Learned Authorised Representative appearing for the Revenue reiterated the findings of the impugned order and stated that since there is misclassification of the imported goods, the imported goods are liable for confiscation and imposition of penalty. He also submitted that in terms of exemption entry at Sl. No. 20 of notification No.75/2018- Customs dated 11.10.2018 as amended, Optical Transport Network (OTN) products are classifiable under tariff item 85176290. The Order-in-Appeal had confirmed the imported goods as OTN products and thus rightly classified the same under customs tariff item 8517 6290 attracting 20% BCD. Hence, he stated that the impugned order is sustainable and the appeal is liable to be rejected.
5. Heard both sides and perused the records of the case, written submissions made in the form of paper book by both parties.
6. In the impugned order, the learned Commissioner (Appeals) has concluded on the issue of classification and applicable rate of duty on imported goods, as follows: The relevant paragraphs 6 to 8 of the impugned order, for ease of reference, is extracted as below:
“6. In view of the above, I hold that the impugned goods imported by the appellants falls under the category of OTN (Optical Transport Network) product covered in exclusion product list of impugned notification and thus are not eligible for exemption under serial No.20 of the notification No.57/2017, dated 30.06.2017 by virtue of notification No.75/2018- Customs dated 11.10.2018 and notification No.02/2019-Customs, dated 29th January, 2019.
7. Under the circumstances as discussed above, I do not find any reason to interfere with the impugned order of the Revenue and the appeal filed by the appellant is liable to be rejected and I accordingly reject the same.
8. The appeal is disposed of accordingly.”
Learned Commissioner (Appeals) in the impugned order had confirmed the reclassification of imported goods under tariff item 85176290, besides confirming the adjudged demands, penalty as held in the original order on the basis of following findings:
(i) The imported goods i.e., ‘interface card’, indubitably, deals in optical transportation; these cannot be treated as mere PPCB, but are a complete module having various kind of ports and indicators and can be installed in the cabinet/rack indicating that it is a ready to use item.
(ii) Expert opinion has been obtained by the appellants ex-parte, and from electrical engineers. As the item is telecommunication item, and it does not explain in detail as to how they have concluded the imported goods as PPCB, he declined to accept the
(iii) The imported goods, even if, considered as optical circuit switch or optical switching and routing device will be covered in exclusion product list of impugned notification or PPCB of CTH 8517 7010, as they are nothing but OTN (Optical Transport Network) product.
7. In the case before us, the brief issue for consideration is the classification of imported goods as to whether, the same merits classification under Customs Tariff Item 8517 7010 as claimed by the appellants; or, is it classifiable under Customs Tariff Item 8517 62 90 as contended by the Department, for deciding on the appropriate levy of customs duty, in respect of such imported goods under the First Schedule to the Customs Tariff.
8.1 From careful perusal of the legal provisions of the Customs Tariff Act, 1975, it transpires that imported goods are to be classified taking into consideration the scope of headings / sub-headings, related Section Notes, Chapter Notes and the General Rules for the Interpretation (GIR) of the First Schedule to the Customs Tariff Act, 1975. For legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes.
8.2 In terms of the above legal provisions, in order to determine the appropriate duties of customs payable on any imported goods, one has to make an assessment of the imported goods for its correct classification under the First Schedule to Customs Tariff Act, 1975 in accordance with the provisions of the Customs Tariff Act, by duly following the General Rules for Interpretation (GIR) and the General Explanatory notes (GEN) contained therein. The First Schedule to the Customs Tariff Act, 1975 specifies the various categories of imported goods in a systematic and well-considered manner, in accordance with an international scheme of classification of internationally traded goods, i.e., ‘Harmonized Commodity Description and Coding System’ (HS or HSN). Accordingly, goods are to be classified taking into consideration the scope of headings / sub-headings, related Section Notes, Chapter Notes and the General Rules for the Interpretation (GIR) of the First Schedule to the Customs Tariff Act, 1975. Rule 1 of the GIR provides that the classification of goods shall be determined according to the terms of the headings of the tariff and any relative Section notes or Chapter notes and thus, gives precedence to this while classifying a product. Rules 2 to 6 provide the general guidelines for classification of goods under the appropriate sub-heading. In the event of the goods cannot be classified solely on the basis of GIR 1, and if the headings and legal notes do not otherwise require, the remaining Rules 2 to 6 may then be applied in sequential order. Further, while classifying goods, the foremost consideration is the ‘statutory definition’, if any, provided in the Customs Tariff Act. In the absence of any statutory definition, or any guideline provided by HS explanatory notes, the trade parlance theory to be adopted for ascertaining as to how the goods are known in the common trade parlance for the purpose of dealing between the parties.
9. We find that the contending classification of imported goods discussed in the impugned order are either under 8517 7010 or 8517 62 90 of the First Schedule to the Customs Tariff Act. Thus, it is clear that at the Chapter and Heading level i.e., Chapter 85 and Heading 8517, there is no difference of opinion among the appellants and the department. The dispute in classification lies in the narrow compass of the Sub-headings and the respective Tariff Items falling there under. Now, we may closely examine the scope of the contending Sub-headings and Tariff Items thereof for determining correct classification of the imported goods. The relevant tariff entries in the First Schedule to the Customs Tariff Act are extracted as below:
