2024 (5) TMI 1547 - AAR - Customs

Eligibility for concessional Basic Customs Duty rate of 10% in terms of S. No. 20 of N/N. 57/2017-Cus. dated 30-6-2017 - Optical Line Terminals - HELD THAT - Board has vide its Circular No. 8/2023 dated 13-3-2023 has clarified items under said entries specifically those at (b) to (h) amongst (a) to (h) in the Notification No. 57/2017-Cus. dated 30-6-2017 for better understanding by all stakeholders for a more effective identification of products and equipment covered therein. In a catena of Supreme Court Judgments it is already settled that circulars are binding upon departmental authorities but the circulars contrary to the plain words of a statute cannot bind the courts. The court independently interprets the statute in their own terms. On going through the provision of Section 151A of the Customs Act it is evident that Commissioner of Customs (Appeals) enjoys the discretion in exercising its power in capacity of appellate functions. The Customs Authority for Advance Rulings lacks such discretionary and appellate functions. Thus it can be deduced that the subject goods Optical Line Terminals has been clearly defined by Circular No. 8/2023 dated 13-3-2023 to be falling under the Notification Description of Combination of one or more of Packet Optical Transport Product or Switch (POTP or POTS) covered under Sr. No. 20 of Notification No. 57/2017-Cus. dated 30-6-2017 as amended. Moreover it is further important to note that Circular No. 8/2023 dated 13-3-2023 has been issued in consultation with the Department of Telecommunication. Conclusion - Optical Line Terminals are not eligible for concessional Basic Customs Duty rate of 10% in terms of S. No. 20 of Notification No. 57/2017-Cus. dated 30-6-2017 in terms of Circular No. 8/2023 dated 13-3-2023.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issue considered in this judgment is whether Optical Line Terminals (OLTs) imported by the Applicant are eligible for a concessional Basic Customs Duty (BCD) rate of 10% under S. No. 20 of Notification No. 57/2017-Cus., dated 30-6-2017, or if they fall under the exclusion category identified by Circular No. 8/2023, dated 13-3-2023, which would make them ineligible for the concessional rate.

ISSUE-WISE DETAILED ANALYSIS

Relevant Legal Framework and Precedents

The legal framework centers around the Customs Act, 1962, specifically Section 28H(I), which governs advance rulings, and Notification No. 57/2017-Cus., which outlines goods eligible for concessional BCD rates. Circular No. 8/2023 issued by the Central Board of Indirect Taxes and Customs (CBIC) provides clarifications on the exclusion categories under this notification.

Court's Interpretation and Reasoning

The Court examined whether the OLTs fall under the exclusion category of "Combination of one or more of Packet Optical Transport Product or Switch (POTP or POTS)" as per the CBIC Circular No. 8/2023. The circular, issued in consultation with the Department of Telecommunications, specifically lists OLTs as part of this exclusion category, thereby making them ineligible for the concessional duty rate.

Key Evidence and Findings

The Applicant argued that OLTs and POTP/POTS are distinct and should not be conflated. They provided technical distinctions between GPON setups and POTP/POTS, emphasizing differences in data transfer mechanisms, bandwidth, deployment, and connectivity architecture. However, the Court found that the circular clearly identifies OLTs as part of the exclusion category, aligning with the notification's intent.

Application of Law to Facts

The Court applied the provisions of Notification No. 57/2017-Cus. and Circular No. 8/2023 to the facts. It concluded that the OLTs imported by the Applicant are indeed covered under the exclusion category of POTP or POTS, as clarified by the circular, and therefore do not qualify for the concessional BCD rate.

Treatment of Competing Arguments

The Applicant contended that the circular erroneously includes OLTs under the exclusion category and that such inclusion lacks technical basis. They also argued that the circular should not override the express provisions of the exemption notification. The Court, however, emphasized that circulars are binding on departmental authorities and that the circular in question was issued after consultation with relevant stakeholders, including the Department of Telecommunications, thus carrying authoritative weight.

Conclusions

The Court concluded that the OLTs fall under the exclusion category as per Circular No. 8/2023 and are not eligible for the concessional BCD rate of 10% under S. No. 20 of Notification No. 57/2017-Cus.

SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning

"Circulars and instructions issued by the Board are no doubt binding in law on the authorities under the respective statutes, but when the Supreme Court or the High Court declares the law on the question arising for consideration, it would not be appropriate for the Court to direct that the circular should be given effect to and not the view expressed in a decision of this Court or the High Court."

Core Principles Established

The judgment reinforces the principle that CBIC circulars, when issued in consultation with relevant departments and stakeholders, hold significant interpretative authority in determining the applicability of concessional duty rates under customs notifications.

Final Determinations on Each Issue

The Court ruled that Optical Line Terminals are not eligible for the concessional Basic Customs Duty rate of 10% as per S. No. 20 of Notification No. 57/2017-Cus., in light of Circular No. 8/2023, which categorically includes them in the exclusion list.