2025 (6) TMI 1287 - AT - Customs

Classification of Low Noise Block Down Converter (LNB) - to be classified under Customs Tariff Heading 85437099 as per CBEC Circular No. 13/2013-Customs or under Heading 85291099 as proposed by the Assessing Officer? - applicability of the Circular No. 13/2013-Customs - HELD THAT - The judgment referred by learned Counsel for the Appellant in Arviva Industries (I) Ltd. case 2007 (1) TMI 6 - SUPREME COURT was passed and the other judgment on Varsa Plastic Pvt. Ltd. 2009 (2) TMI 40 - SUPREME COURT relates to the proviso which states that Board should not issue orders instructions or directions so as to require any Officer of the Customs to make a particular assessment or to dispose of a particular case in a particular manner and not to interfere with the discretionary power of the Principal Commissioner or Commissioner of Customs (Appeals) in exercise of his appellate functions. Literal meaning of this proviso would go to suggest that orders instructions or directions concerning the way in which assessment is to be made should never be issued by the Board and we do not agree to the view that when Board issued a clarificatory instruction on classification of goods it should be considered as interference in the assessment order for the reason that through such clarificatory instruction Board wanted to streamline certain disputes concerning classification but that does not mean that assessment and adjudication order should be passed without even hearing the other side on the ground that classification issue was settled. This is what is we mean by not passing any particular assessment order in a particular manner but this would never suggest arbitrary use of such provision to make any assessment or pass any adjudication order without a rational basis and without following due process of law as has happened in the instant case in putting forth a logic that change of rate of duty would automatically change the Rules of Interpretation and General Explanatory Note etc. despite the fact that explanation appended to the Notification No. 01/2017-Integrated Tax (Rate) has clearly stipulated that those rules of interpretation and general explanatory note would follow apart from the fact that HSN Note and WTO both also have suggested for classification of the disputed goods (LNB) in the same manner as being explained by the Board Circular No. 13/2013-Cus. - the Circular is squarely applicable to the Appellant who had appropriately classified the disputed item LNB under Tariff Heading No. 85437099 and therefore the order passed by the Commissioner (Appeals) in classifying it under Tariff Item No. 85291099 is held to be improper. Conclusion - The classification must be guided by principal function and HS explanatory notes and that Board Circulars issued under Section 151A are binding on Customs officers for uniformity. Changes in duty rates under GST Notifications do not override classification rules under the Customs Tariff Act unless formally amended under the Act. The appellant s classification of LNB under tariff heading 85437099 is correct. The impugned order is set aside - appeal allowed.

Summary

The core legal questions considered in this appeal revolve around the proper classification of the Low Noise Block Down Converter (LNB) imported by the appellant. Specifically, the issues are:

1. Whether the LNB should be classified under Customs Tariff Heading 85437099 as per CBEC Circular No. 13/2013-Customs or under Heading 85291099 as proposed by the Assessing Officer.

2. The applicability and binding nature of CBEC Circular No. 13/2013-Customs on classification of LNB in light of subsequent amendments to Customs Tariff Notifications, particularly those issued under the Integrated Goods and Services Tax (IGST) regime.

3. Whether the Integrated Tax (Rate) Notifications issued under the GST laws can override or render redundant the CBEC Circular and the Customs Tariff Act provisions.

4. The legal effect of instructions or circulars issued by the Board under Section 151A of the Customs Act, 1962, especially regarding their binding nature on Customs officers and the scope of discretion available to adjudicating authorities.

Issue 1: Proper Classification of LNB

The legal framework for classification relies on the Customs Tariff Act, 1975, the Harmonized Commodity Description and Coding System (HS), and the CBEC Circular No. 13/2013-Customs. The Circular interprets the classification of LNB under heading 8543, specifically subheading 85437099, based on the principal function of the device as an electrical appliance performing amplification and frequency conversion. The Circular references HS Explanatory Notes, which categorize high or intermediate frequency amplifiers under heading 8543.

The appellant contended that LNB, being a device that amplifies weak signals and converts frequencies from high GHz to VHF/UHF range, fits squarely within the scope of heading 8543. Precedent decisions of the Tribunal in 2000 and 2002 were cited, where similar devices like Dish Antennas and TV Signal Boosters were classified under heading 8543, affirming the individual function of such components distinct from integral parts of units under heading 8529.

The Assessing Officer, however, proposed classification under heading 85291099, arguing that amendments via Customs Tariff Notifications under the IGST regime had altered the tariff structure, rendering the Circular obsolete. The appellant disputed this, asserting that the Circular remains valid and binding as it interprets the Customs Tariff Act.

The Court analyzed the function and nature of LNB and found that the principal function aligns with heading 8543 as per the Circular and HS Notes. The Tribunal emphasized that classification must be based on the principal function and the established interpretative framework, not merely on tariff rate changes.

Issue 2: Applicability of CBEC Circular No. 13/2013-Customs Post GST Notifications

The respondent relied on Notifications No. 01/2017-Integrated Tax (Rate) and No. 50/2017-Customs (as amended) to argue that these supersede the Circular. The appellant countered that these Notifications, issued under the CGST Act, 2017, do not directly amend the Customs Tariff Act unless done pursuant to Section 11A of the Customs Tariff Act, which was not the case here.

The Court examined the legal effect of these Notifications and noted that the Integrated Tax (Rate) Notifications were not issued under Section 11A of the Customs Tariff Act, which empowers the Central Government to alter Customs duty rates. Instead, these Notifications provide for IGST rates and exemptions but do not modify the classification principles or tariff headings under the Customs Tariff Act.

Moreover, the Court referred to the explanatory note in Notification No. 01/2017 that explicitly states that the Rules of Interpretation of the Customs Tariff Act, including Sections, Chapter Notes, and General Explanatory Notes, shall apply to the interpretation of the Notification. This confirms that classification principles remain governed by the Customs Tariff Act and related circulars.

Hence, the Tribunal concluded that the Circular No. 13/2013-Customs continues to apply and is not rendered redundant by the GST-related Notifications.

Issue 3: Effect of Board Circulars and Section 151A of the Customs Act

The respondent cited a Supreme Court decision to argue that Customs officers have independent quasi-judicial powers and are not bound by Board Circulars. The appellant relied on other Supreme Court rulings affirming that Board Circulars are binding on Customs officers for uniformity in classification and levy of duty.

The Court carefully analyzed Section 151A of the Customs Act, which empowers the Board to issue instructions to officers for uniformity in classification and levy of duty, making such instructions binding. However, the proviso to Section 151A prohibits the Board from directing officers to make particular assessments or dispose of specific cases in a particular manner, preserving the discretion of appellate authorities.

The Tribunal reconciled the apparently conflicting precedents by distinguishing between instructions on classification (which are binding) and directions on the outcome of individual assessments (which are not). The Circular in question is a clarificatory instruction on classification, intended to streamline disputes and promote uniformity, not to dictate adjudication outcomes without due process.

The Court rejected the respondent's argument that the Circular interfered with the discretion of the assessing authority. It emphasized that adherence to classification instructions does not preclude a fair hearing or due process but prevents arbitrary or inconsistent classification decisions.

Issue 4: Application of Law to Facts and Final Determination

Applying the above legal principles, the Tribunal found that the appellant had correctly classified the LNB under heading 85437099 in accordance with the CBEC Circular and established legal precedents. The amendments in duty rates via GST Notifications did not affect the classification rules or the applicability of the Circular.

The Assessing Officer's classification under heading 85291099 was held to be improper as it disregarded the binding Circular and the interpretative framework governing classification. The Tribunal set aside the order of the Commissioner (Appeals) that upheld the Assessing Officer's classification and allowed the appeal with consequential relief to the appellant.

Significant Holdings

"The Harmonized Commodity Description and Coding System (HS) Explanatory Notes can be used to determine the proper interpretation of the entries in the Customs Tariff. ... Since the principal function of Low-Noise-Block (LNB) down converter is to amplify the weak signals and converts the frequencies from very high levels (2.5 to 12.45 GHz) to levels within the VHF and UHF range (less than 2 GHz), and this device performs an electrical function not specifically covered by any heading, the classification in subheading 8543 would seem most appropriate."

"The Board is of the view that by application of GRIs 1 (Note 2 (a) to Section XVI), and 6, separately presented LNB down converter (LNB) would be appropriately classifiable in heading 85.43, more specifically in subheading 8543.70, tariff item 854370.99."

"Integrated Tax (Rate) Notification issued under GST can't have direct effect on the Customs Tariff Act unless Section 11A of the Customs Tariff Act, 1975 is followed to make changes in the tariff which was not even done subsequently through Customs Notifications."

"The Board's order, instructions and directions are binding on the Officers of Customs who shall observe and follow such orders, instructions and directions of the Board for the purpose of uniformity in the classification of goods or in respect of levy of duty."

"Orders, instructions or directions concerning the way in which assessment is to be made should never be issued by the Board ... but this would never suggest arbitrary use of such provision to make any assessment or pass any adjudication order without a rational basis and without following due process of law."

The Tribunal established that classification must be guided by principal function and HS explanatory notes, and that Board Circulars issued under Section 151A are binding on Customs officers for uniformity. Changes in duty rates under GST Notifications do not override classification rules under the Customs Tariff Act unless formally amended under the Act. The appellant's classification of LNB under tariff heading 85437099 was correct, and the contrary classification and duty demand were set aside.