TMI Blog2015 (12) TMI 1200X X X X Extracts X X X X X X X X Extracts X X X X ..... ication is decided. - Registry is directed to place the matter before the Hon'ble President CESTAT for constitution of a Larger Bench to decide the following Question of Law which arises in the present case:- Whether Optical Fibre Cables (OFC in short) imported by Vodafone Group of Companies and used in Telecommunication are classifiable under Customs Tariff Heading 8544 and eligible for exemption under Notification No. 20/2005 dt. 1.3.2005 or they would fall under Customs Tariff Heading 9001 leviable to basic Customs Duty at 10% under Notification No. 21/2002-Cus dt. 1.3.2002. Matter referred to larger bench. - Appeal No. C/688/2008, Appeal No. C/48-55/2010, Appeal No. C/126/2010, Appeal No. C/372-378/12 - - - Dated:- 2-12-2015 - P. S. Pruthi, Member (T) And Ramesh Nair, Member (J) For the Appellant : Shri T Vishwanathan Adv. Shri Narendra Dave, CA, Adv For the Respondent : Shri A K Singh, Additional Commissioner (AR) ORDER Per P S Pruthi The issue that arises for our consideration is the classification of Optical Fibre Cables (OFC in short) used in Telecommunication - whether they would fall under Tariff Item 854470.90 and be eligible for exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncluding contact lenses), prisms, mirrors and other optical elements of any material, unmounted, other than such elements of glass not optically worked. It was explained that the central issue to be addressed is whether the OFC imported by the appellant consist of fibres individually sheathed to enable classification under CTH 8544. With the help of samples it was explained in detail how, according to them, the OFC imported by them is not a bundle of optical fibres but the fibres in the cables are individually sheathed. In their case the OFC is a tube configuration in which six tubes contain 8 optical fibres each. Each optical fibre consists of - (i) Core made of glass; (ii) Cladding of glass; (iii) Dual Acrylate coating (an Opaque object); (iv) Colour coating over Dual acrylate coating. The centre region of the fibre is called core. This region actually carries the light. The optic core ranges in diameter from 8 microns to 62.5 microns in the most commonly used telecom fibres. The diameter of imported cable fibre is 9.2 microns. Surrounding the optical fibre core is called the cladding. The cladding, typically, is also made of silica (glass) and has an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the goods in question are not made up of individually sheathed fibres and hence not classifiable under CTH 8544. He also relied on Optel Telecommunication vs. Commissioner of C.Ex., Bhopal 2005 (186) E.L.T. 109 (Tri-del.) . He relied on the Hon'ble Supreme Court judgment in the case ofCommissioner of Central Excise vs. Carrier Aircon Ltd. 2006 (199) ELT 577 (S.C) holding that end-use is not the criteria for determining classification of a product. It was further submitted that the order of Commissioner (Appeals) Mumbai holding that the goods are classifiable under CTH 8544 is not applicable to Nhava Sheva Custom House. 4.2 The Ld. AR submitted that the adjudicating authority even allowed cross-examination of TEC officials before coming to the conclusion that the goods fall under Heading 9001. He relied on the following case laws to justify Revenue's appeal for the confiscation and the imposition of penalty and for remanding the case back to the adjudicating authority as the Order-in-Original No. 150/2009 dt. 14.10.2009 in respect of similar goods imported at Mumbai were held to be liable to confiscation: (i) Chicago Pneumatic Ind. Ltd. Vs. Commissioner of Cu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the petitioners in classifying the goods imported after 25/3/2008 under Heading 85.44. Secondly, the decision of Commissioner of Customs (A) is neither stayed by CESTAT nor by any other competent authority, and therefore, the mere fact that the appeal filed by the revenue against the decision of Commissioner of Customs (A) is pending before CESTAT cannot be a ground to hold that the petitioners are guilty of misclassifying the goods under Heading 85.44. Thirdly, the D.R.I. officers are bound by the decision given by Commissioner of Customs (A) and, therefore, so long as the decision of the Commissioner of Customs (A) in classifying the goods under Heading 85.44 holds the field, filing of bills of entry by classifying OFC under Heading 85.44 cannot be faulted. Fourthly, the Bills of Entry filed by the petitioners by classifying the goods under Heading 85.44 have been assessed under Heading 85.44 and the goods have been cleared only on payment of duty as assessed. Therefore, till the assessment is set aside, the customs authorities could not have seized the goods assessed and cleared under Heading 85.44, on the ground that the goods were liable to be assessed under Heading 90.01. F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enovo, (ii) In the case of M/s. Vodafone Essar South Ltd. Vs. Commissioner of Customs, Chennai - 2008-TIOL-1931-CESTAT-MAD, the Tribunal held that the Advance Rulings Authority decision in the case of M/s. Alcatel India Ltd. is binding only on the applicant who sought the decision in terms of Section 28 J of the Customs Act. The Tribunal also held that As we have already indicated, nothing contained in the Advance Ruling Authority's order in M/s. Alcatel's case shall be applied to the case on hand, which requires to be considered independently and disposed of in accordance with law. The party shall be given an effective opportunity to demonstrate their case (by producing samples of the goods) as also to be personally heard. The appellants have cited a line of decisions in support of their contention that the burden of classification lies on the Department and therefore there can be no confiscation of imported goods on the ground of misclassification .. The authority classifying the goods must see whether the cables are made up of individually sheathed fibers, whether or not assembled with electric conductors or fitted with connectors. If the fiber cables are foun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... que object); iv) Colour coating over Dual acrylate coating. Core optic fibre is cladded by glass. Refractive Index of the core is stated in the technical literature to be lower than that of cladding to ensure total internal reflection of the light passed through the core. Each individual optic fibre is cladded. It is not that a pair of fibers is cladded together. Dual acrylate coating is an opaque coating of acrylae monomer, two times over 'core and clad'. According to the Technical Books, Dual acrylate coating protects optical fiber from external interference and external abrasion. A colour coating is done over the dual acrylate coating. This is done for identification of the fibers at both the ends of the cable. 9.1 The appellants have imported OFC from M/s Coming Cable Systems, Australia, and also from M/s Prysmian Wuxi Cable Company Ltd. As explained by M/s Corning The cable design is called loose buffer type cable. The cable contains 48 optical fibres. The single mode optical fibres used in the imported OFC is in conformity with ITU-T-G.352 Standards. ITU-T-6.352 is a standard applied to single mode optical fibre used for long distance telecom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v) Article on optical fiber by Pirelli downloaded from www.pirellityre.com states that Current optical fibres for telecommunications are single-mode fibers. Typically, these are characterized by a guiding nucleus of roughly 10mm diameter and an index jump of 0.1%. The diameter of the sheath is standardized at 125mm. Single modality ensures the possibility of achieving attenuation levels close to the intrinsic levels of the material, maximizes the transmission bandwidth of the fibre, and guarantees low junction loss. These characteristics have made the single-mode fibre the chosen physical carrier for modern telecommunication systems. (v) The Book on Basics of Fiber Optic Gyros by Wolff Data states that an optic fiber consists of two concentric layers of high-purity silica glass which are enclosed by aprotective sheath. The light rays modulated into digital pulses with a laser move along the core without penetrating the cladding. The light stays in the core because the cladding has a lower refracting index. 10.1 The technical literature above state an optic fibre has a sheath. And the fibres are individually sheathed. The purpose of the sheath is given to be as a protect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sheathed fibres. Although we have seen the cables in question to be composed of individual fibres, which according to Technical Literature reproduced above are sheathed, we may refer to the internationally accepted nomenclature i.e. HSN on which our tariff is based and the Explanatory Notes to the HSN, for more clarity. Under the Explanatory Notes to Heading 8544, the heading also covers optical fibre cables, made up of individually sheathed fibres, whether or not assembled with electrical conductors .. The sheaths are usually of different colours to permit identification of the fibres at both ends of the cable. Such cables are used mainly for telecommunication because their capacity for the transmission of data is greater than that of electrical conductors. Looking at the OFC imported in the present case, we find every sheathed optical fibre is colour coated for identification of each fibre at both ends of a cable and the cables are imported for use in long distance telecommunication. To us it does seem that it satisfies the description of Heading 85.44. However we may also see the HSN Notes under Heading 9001. This Heading covers optical fibres, optical fibre bundles and optic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... word sheath is construed differently there. 12. Appellants have also referred to the following Technical opinion in support of their contention on classification under Heading 85.44. (i) Letter dated 29.10.2006 by M/s. Prysmian Wuzi Cable Co. Ltd., China stating that Individually sheathed fibres, as provided in our cables, comprise of 4 component parts. a) The Optical glass core - Manufactured from silica, and is used as the transmission medium for digital, optical signals. b) Cladding layer - Is manufactured from doped silica and has a slightly different refractive index from the optical core. Thus operates as a form of mirror to reflect and retain the optical signals within the core. c) Individual sheathing with a UV curved acrylate is used a protection for the primary components of the fibre, i.e. the core and the cladding. d) Thin UV cured ink layer used to uniquely identify the fibre - 24 and 48 Fibre Armoured Cables - These cables consist of six elements, SZ stranded around a phosphate coated steel, central strength member. The Optical fibres are placed in PBT Plastic tubes (8 fibres / tube) and included in the tube is a jelly to prevent wat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In this connection, comparison can be made with plastic jackets or sleeves associated with copper wires and it belongs to the same category of thermoplastics. The function of both the coating and jacket is to protect the optical fiber/wire and so both are in fact sheaths. 18) Further proof for it being a sheath and not just part of the fiber can be seen from the fact that this coating needs to be stripped away from the cladding to actually connect/couple/terminate the fiber onto the respective end unit. Different stripping tools are available for removing the buffer coating to the fiber. Thus, this coating is Sheath and has no contribution to the actual working of the optical fiber. Only the high refractive index core and a cladding with a lower refractive index is what is needed for the proper functioning of the fiber in transmitting/carrying /propagating light from one to other. 19) The application of acrylate coating provides significant protection against abrasion of the optical fibers, enhances tensile strength and reduces the effects of long-term stress, in particular exposure to humid environments which can lead to failure due to a phenomenon called static fatig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urpose which can be classified under Heading 8544. The department has referred to CBEC Circular No. 91/25/96-CX dated 27.3.1996 which clarifies that Pigtail/Patchcord containing single fibre sheathed would be classified under Heading 8544. We agree with the contention of the appellant that the product of Heading 8544 is cable consisting of individually sheathed optical fibers. Therefore, cable must consist of more than one fibre each individually sheathed to merit classification under Heading 8544. As the Pigtail/Patchchord consists of only one fibre, it cannot be classified under Heading 8544. However the context in which the circular is issued is different. 13. The CESTAT in Optel Telecommunication Vs. CCE - 2005 (186) ELT 109 (T) held that optical fibre cable is classifiable under Heading 9001 in the absence of production of any evidence substantiating that the sheathing was there over core and cladding. In the present case we have seen the goods with reference to the technical literature. CESTAT held that Revenue has not shown that acrylate coating amounts to sheathing. Respectfully we beg to differ. 'Sheathing' has a wide connotation as per the dictionary meaning. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olours (which is a coating) as sheathing. Before discussing the views of ARA, we may see the dictionary meaning of 'sheath' as below: Oxford Dictionary Sheath 1. Close fitting cover, esp. for the blade of a knife or sword. 2 a condom. 3. Bot., Anat., Zool. An enclosing case or tissue. 4 the protective covering round an electric cable. 5 a woman's close-fitting dress McGRAW-HILL Dictionary of Scientific Technology Terms 'Sheath' - A protective outside covering on a cable. (ELECTR) a space charge formed by ions near an electrode in a gas tube. (ELECTROMAG] The metal wall of a waveguide. (SCI TECH] a protective case or cover. After seeing the above meanings, we have given deep thought to the views of ARA. We respectfully differ with their views because the purpose and method of sheathing may be manifold. We may therefore refer to some points forming the basis of AAR Ruling. It says that the dictionary meaning of sheath is 'a separate protective cover'. And that the technologically improved coating to provide as good a protection as sheath is of no relevance. AAR also states that the claim of party that the individual sheathing is prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to mean covering with a plastic tube or insulation has to change with the tremendous change in technology over time. Sheathing should not be thought of in the same manner as copper wires are sheathed. We may venture to stay that with rapid changes in technology, we may even see in the forseeable future invention of a method of coating of copper wires that dispense with the need for a separated plastic tube / cover for insulation purposes. With due respect to the AAR, all that we are trying to say is that the change in technology has warranted that thin optic fibres can be sheathed with acrylate coating which gives a protective cover. Further, why should a cover not be called a cover simply because the process of covering is an integral part of the process of manufacture of fibres. In our view we should not be deterred from doing so. The consequent redundancy of a particular wording in the Heading notes also should not deter us from arriving at a more reasonable conclusion. The technological meaning would be equally relevant as the dictionary meaning. The technical literature supports this view. 16. It is also our considered view that the applicability of the ITA agreement sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Relevant extract on optical fibre by Pirelli Relevant text on Basics of Fibre Optic Gyros by Wolff Data Imported OFC is not a bundle of optical fibres as the bundle of optical fibre bundles are used only for illumination when incoherently bundled and image transmission when coherently bundled and also because the bundle of optical fibres consist of hundreds or thousands of optical fibres as mentioned in following technical books on optical fibre bundle: Relevant text of fibre optics from the book Mastering Optics by John Blackwell and Shane Thornton . Relevant extract on design of Optic fiber and Light from the book Introduction to Fibre Optics by John Crisp Sub Heading 8544 70 00 includes optical fibre cables, designed for example telecommunication use, made up of optical fibres individually coated with a dual layer of acrylate polymer placed in a protective casting. The coating consists of an inner sheath of soft acrylate and outer sheath of hard acrylate, the latter being coated by a layer of various co ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
