2024 (9) TMI 1726 - AT - Customs

Classification of imported NIKON brand digital still image video cameras - entitlement to Basic Customs Duty BCD exemption under the notification dated 01.03.2005 as amended by the notification dated 17.03.2012 - HELD THAT - The matter has since been decided by the larger bench of the Tribunal 2024 (6) TMI 1422 - CESTAT NEW DELHI LB . The larger bench held that the appellants are eligible to exemption from BCD under the said Notification 25/2005 CE dated 1.3.2005 as amended. The appellant would therefore be eligible to claim exemption from Basic Customs Duty under notification dated 01.03.2005. The impugned order dated 06.06.2019 passed by the Commissioner of Customs (Appeals) is accordingly set aside - appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal were:

(i) Whether the "digital still image video cameras" imported by the appellant are entitled to exemption from Basic Customs Duty (BCD) under the notification dated 01.03.2005, as amended by the notification dated 17.03.2012, which added an Explanation clarifying the scope of exemption.

(ii) Whether the Tribunal's earlier decision dated 19.12.2017 correctly interpreted the scope and applicability of the Explanation added to the exemption notification.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Entitlement of "digital still image video cameras" to BCD exemption under the notification dated 01.03.2005, as amended

Relevant legal framework and precedents: The exemption notification No. 25/2003-Cus dated 01.03.2005, as amended on 17.03.2012, contains an Explanation that sets out threshold parameters for digital cameras to qualify for exemption from BCD. The Explanation specifies that all three parameters/functions of a digital camera must be cumulatively considered to determine eligibility. A constitutional bench precedent was cited, which established the interpretative principle that ambiguity in charging provisions must be resolved in favor of the assessee, whereas ambiguity in exemption notifications must be resolved in favor of the Revenue.

Court's interpretation and reasoning: The larger bench emphasized that the presence of ambiguity is a prerequisite to applying the principle of strict interpretation in favor of the Revenue. Since no ambiguity was found in the Explanation, the notification should be liberally interpreted to grant exemption where the parameters fall within the prescribed limits. The Explanation requires that if any one of the parameters-such as recording time-is below the threshold (e.g., recording time less than 30 minutes in a single sequence using maximum storage capacity), the camera qualifies for exemption.

Key evidence and findings: The appellant adduced evidence demonstrating that their imported digital still image video cameras met the criteria set out in the Explanation, specifically that at least one parameter fell below the threshold limit, thereby qualifying for exemption.

Application of law to facts: Applying the literal interpretation of the Explanation to the facts, the Tribunal found that the appellant's cameras satisfied the exemption criteria. The Revenue did not dispute the absence of ambiguity in the notification's wording but contended that the exemption should not apply. However, given the evidence and the clear language of the Explanation, the Tribunal concluded that the appellant was entitled to the exemption.

Treatment of competing arguments: The Tribunal carefully considered the Revenue's argument that the exemption should be narrowly construed but found no ambiguity warranting strict interpretation against the appellant. The appellant's evidence was accepted as sufficient to establish eligibility.

Conclusion: The appellant's "digital still image video cameras" are eligible for BCD exemption under the notification dated 01.03.2005, as amended.

Issue (ii): Correctness of the Tribunal's earlier decision dated 19.12.2017 interpreting the Explanation

Relevant legal framework and precedents: The earlier Division Bench decision had taken a contrary view denying exemption. The larger bench re-examined this in light of interpretative principles established by a Constitutional Bench, which overruled prior conflicting authority and clarified the approach to ambiguity in exemption notifications.

Court's interpretation and reasoning: The larger bench found that the earlier decision did not correctly interpret the Explanation. The earlier ruling had overlooked the cumulative reading of the three parameters and the threshold limits. The larger bench emphasized that the Explanation must be read literally and cumulatively to ascertain eligibility, and that the appellant's cameras met these criteria.

Key evidence and findings: The larger bench reviewed the evidence presented by the appellant and found it sufficient to rebut the earlier conclusion.

Application of law to facts: The larger bench applied the clarified interpretative approach to the facts and evidence, leading to a conclusion opposite to that of the earlier bench.

Treatment of competing arguments: The Tribunal noted that the Revenue itself admitted no ambiguity existed in the notification's wording, undermining the basis for the earlier strict interpretation.

Conclusion: The earlier Tribunal decision was incorrect in its interpretation of the Explanation, and the larger bench's ruling supersedes it.

3. SIGNIFICANT HOLDINGS

"In case of ambiguity in a charging provision, the benefit must be given to the assessee and in case of an exemption Notification, the benefit of ambiguity is strictly interpreted in favour of the Revenue. This ratio has been laid down by the Constitutional Bench while overruling the earlier decision in Sun Export Corporation v. Collector. To apply the said ratio to the facts of a case, presence of ambiguity in the subject for interpretation is a sine qua non. If there is no ambiguity in the interpretation of the exemption Notification, the same should be liberally interpreted adopting the tools of interpretation applicable to a Notification granting exemption from payment of duty."

"A literal interpretation of the said Explanation reveals that all the three parameters/functions of a digital camera should be cumulatively read so as to ascertain whether all the characteristics are above the threshold limit; in that event, the digital camera would not be eligible to the exemption from BCD under the said Notification. In the event any one of the parameter/characteristic is below the threshold limit e.g. recording time is less than 30 minutes in a single sequence using the maximum storage (including expanded) capacity, then the cameras would be eligible to the benefit of the said Notification."

"The Revenue has never claimed that there is ambiguity in the said Notification. On the contrary, the Learned Special Counsel in the written submission mentioned that there is no ambiguity in the wordings of the Notification and it should be literally interpreted within the legal framework."

Final determinations:

- The appellant's imported digital still image video cameras qualify for exemption from Basic Customs Duty under the notification dated 01.03.2005 as amended.

- The earlier Tribunal decision denying exemption was incorrect in its interpretation of the Explanation and is overruled by the larger bench.

- The impugned order dismissing the appellant's appeal is set aside, and the appeal is allowed with consequential relief.