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2019 (11) TMI 451

..... enna” for Base Transmission Station(BTS) declared the same as “parts” classifying it under CTSH 85177090 of Customs Tariff Act, 1975; alleging that the said imported goods are classifiable under CSH 85176290 - Board’s Circular No.01/2018 dt.15.1.2018 - Refund of Customs Duty - duty paid under protest. Whether the antenna for base station would be considered as a ‘machine’ and accordingly classifiable under CSH 85176290 as claimed by the Revenue or as “parts” classifiable under CSH 85177090, claimed by the Respondent? HELD THAT:- Prior to 2007, the heading 8517 was consisting of Apparatus i.e. telephone instruments only for line telephony and not for radio telephony; the transmission apparatus for radio telephony was covered under heading 8525 and reception apparatus for radio telephony was covered under heading 85.27; the antenna for the apparatus for radio telephony under heading 8525 & 8527 was specifically covered as “parts” under 8527 of CTA,1975. After 01.01.2007 the instruments for radio telephony/mobile network, Apparatus for reception & transmission, and “parts” have been placed under one headin .....

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..... a ‘machine’, attracting classification under Heading 8517.62. Consequently, the observation of the Department in the circular dt.15.01.2018 that the Antenna itself is a complete device and has capability of functioning on its own of conversion of electrical signals into electro-magnetic waves and vice versa in a wireless communication system cannot be applied to the present goods as it would be complete only when connected to a base station. Revenue’s interpretation of the said clause(a) in the present case is that in the event if the goods are not falling under any of the sub heading of heading 8517, then only it will be classifiable as ‘parts’, is incorrect. Clause ‘b’ of the said Note 2 indicates that “other parts”, by implication which are not goods, if suitable for use solely or principally with a particular kind of machine of the same heading are to be classified with the machines of that kind or the headings mentioned under the said clause ‘b’ as appropriate. The correct classification of the Antenna for base station is under Sub-heading 85177090 as “parts” - Since, the main issue of classification .....

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..... dance with the Chapter Note 2(b) of Section XVI of CTA, 1975. The learned Commissioner (Appeals) has also held that goods falling under heading 8517 are exempted from whole of duty of customs under Notification No.24/20005-Cus., dt.01.03.2005. Further, the learned Commissioner (Appeals) has also wrongly held that in terms of sr. no 15 of Notification 25/2005- Cus., dt.01/3/2005 Aerials or antennae of kind used with apparatus for radio telephony are also exempted from BCD of sub heading 8529, which indicates the legislative intention to exempt the antenna for cellular network compatible to function with base station from levy of Basic Customs Duty. 4. Referring to the description of goods mentioned under chapter Heading 8517, the Ld. Special Counsel has submitted that CH 85176100 specifically covers the base station. Further, he has argued that there is no dispute on the classification of the base station, but the dispute is with respect to the classification of antenna which is a part of the base station. 5. It is the Revenue s contention that in view of the Board s Circular No.01/2018 dt.15.1.2018 that the antenna is a completer device with specified function i.e. conversion of el .....

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..... This is quite apparent from the Board s instructions dt.15.01.2018. 7. Further, the learned Special Counsel has submitted that the judgment of Hon ble Supreme Court in the case of CC, Bangalore Vs Hutchison Essar South Ltd- 2015 (324) ELT 240 (S.C.) holding that antenna is an integral and inseparable part of BTS without which it cannot function, is not relevant to the present issue as in that case, the Hon'ble Apex Court was concerned with the interpretation of the entries under Notification No.21/02-Cus dt.1.3.2002 and not concerned with classification of antenna . 8. Further, countering the argument of the Respondent that they are eligible for Notification No.25/2005-Cus, dt.01.03.2005 which exempts aerials of antenna and also Notification No.69/04-Cus, dt.09.07.2004, amended by Notification No.18/2007-Cus, dt.22.02.2007, he has submitted that the notification is not conclusive for determination of classification of the goods. Classification of the goods has to be determined by application of general interpretative rules. It is submitted that antenna under heading 8529 and that 8517 are not one and the same. Notification does not prescribe that all kinds of antenna irrespecti .....

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..... right under Customs Tariff Act and accordingly covered within the scope of Section Note 2(a). 12. Further, he has submitted that once antenna is treated as independent machine/goods (under Chapter 852910), but certain kinds of antennas are classifiable under Chapter 8517 due to Section notes; the essential nature of antenna classifiable under CSH 8517 as goods does not change. It was submitted that if the antennas are goods under CTA 1975, then are appropriately classifiable under CSH 85176290 as other goods and not under 85177090 as parts . Further, he has submitted that use of words machines under Heading 851762 widens the scope of the said heading as all other headings use the words apparatus . It substantially expands the scope of sub heading 851762 as the definition of machine in the Section Note 5 of Section XVI is exhaustive and not limited. Further, the antenna is specifically cited in Chapter 85, it is covered in the definition of machines in Chapter 851762. Further, referring to the literature of antenna placed during the course of hearing, the learned A.R. for the Revenue has submitted that the antennas are capable of being used across the spectrum of new and evolving t .....

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..... the Bill of Entry or in the protest letter given by the Respondent. 16. Rebutting the reliance placed by the Respondent on the issue of classification of Antenna adopted by other countries he has submitted that the tariff in such cases is not fully aligned with the Customs Tariff in India and in any case, the classification at 8 digit level is left for the country to be decided. The difference in the tariff is clearin most of the examples relied upon by the Respondents. On the classification by WCO is concerned, he has submitted that it is only persuasive effect and not binding on any country. This is evident from the fact that CBIC has decided not to withdraw the circular which classify Antenna under sub heading 85176290. Further, he has submitted that antenna which are used in radio telephony under Chapter 8529 are distinct from the antenna which are used for telecommunication as now only antenna are used for VHF, UHF and radio telegraphy and similar equipments only are classifiable under CH 8529. Therefore, the observation of the learned Commissioner (Appeals) that it is the intention of the Government of India, is incorrect, particularly when viewed in the context of the Judgm .....

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..... ed by the Revenue at this stage is hollow as the Revenue could not demonstrate that the prejudice has been caused to them. In support, the learned Advocate referred to the judgment of Hon'ble Supreme Court in the case of ECIL Vs B. Karunakar - (1993 4 SCC 727); Financial Corporation &Anr. Vs Kailash Chandra Ahuja - (2008 9 SCC 31), Sarv U.P. Gramin Bank Vs Manoj Kumar Sinha - (2010 3 SCC 556). 18. Responding to the second preliminary objection raised by the learned A.R. for the Revenue that since duty was paid under protest, no appeal could have been filed against the assessment until the decision is delivered on the protest by the Deputy Commissioner, the learned Advocate for the Respondent pleaded that no provision under the Customs Act, 1962 or the rules made there-under has been cited by the Revenue in this regard. It is his contention that the appeal filed against the assessment of Bill of Entry itself amounts to protest. Further, he has submitted that in view of the decision of Hon'ble Supreme Court in the case of Priya Blue Industries - 2004 (171) ELT 145 (SC), even though the duty was paid under protest, unless appeal has been filed against the order of assessme .....

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..... to 8517.70 which covers parts. it is his contention that w.e.f. 01.01.2007, the base stations which are transmission and reception apparatus used in radio telephony (cellular network) to be covered under Heading 8517.6100 and antenna for such base station being part, should cover under Heading 8517.70. Referring to the Samson catalogue on base station, the learned Advocate has submitted that the antenna is one of the parts of base station. It is their argument that Hon'ble Supreme Court in the case of CC Vs Hutchison Essar South Ltd (supra) held that antenna is an integral and inseparable part of base station. 22. Rebutting the argument of the Department that the Antenna is a machine, the learned Advocate has submitted that the term machine for the reception, conversion and transmission etc. was placed against double dash (-) in SH 8517.62 and that the term machine is wider than the term apparatus as per Note 5 of Section XVI overlooks the fact that -' entry of machine itself appears under the -' entry viz. other apparatus for transmission or reception of voice, images or other data including apparatus for communication in wired or wireless network such as local or wid .....

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..... from the fact that the tariff itself recognize that the Antenna are not themselves complete apparatus for transmission and reception, a letter dt.02.09.2013 of Assistant Wireless Advisor, Government of India, Department of Telecommunication, indicates that Antennas are passive elements and incapable of radiation itself; being passive element, the same are only parts and not machine/apparatus for transmission and reception. 27. Further assailing the Circular dt.15.01.2018, which is contrary to the Notification No.18/2007-Cus, dt.22.02.2007, the learned Advocate has submitted that the circular has applied Rule 2(a) of Section XVI of CTA on the erroneous premise that Antenna are complete device with specified function of conversion of electrical signals, whereas the Antenna are not a complete device, but a mere passive element. Further, he has submitted that the circular cannot override the statutory notification and circular which is contrary to a statutory notification can have no effect in law. In support, the learned Advocate refers to the judgment of Hon'ble Supreme Court in the case of Sandur Micro Circuits Ltd Vs CCE - 2008 (229) ELT 641 (SC), Microland Ltd Vs CC - 2017 (35 .....

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..... h is also evident from the nature of various machines specified under SH 8517.62 as these machines interact and interface with data in its original form for converting such data into electrical current or optical waves or vice versa. This is the process of conversion referred to S.H. 8517.62 and Antenna is not capable of doing any such conversion, but receives mere RF signals and emits electro-magnetic waves. Rebutting the argument of the learned A.R. for the Revenue that the Antenna in question can be used across a wide spectrum of technology and not merely a part of base station, the learned Advocate submitted that the said argument has not been substantiated and also beyond the scope of appeal. 29. Without prejudice to their submissions advanced, the learned Advocate has submitted that in any event, the Antenna of a kind used with apparatus for radio telephony, are covered under Sr.No.15 of Notification No.25/2005-Cus, dt.01.03.2005, which has been upheld by the learned Commissioner (Appeals) in the impugned order but not challenged by the Revenue in the present appeal. It is his contention that even though Sr.No.15 mentions tariff heading 8529.10, the antenna in question satisf .....

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..... g the assessment of the respective Bills of Entry. The learned Commissioner (Appeals), after considering various aspects of the case, directed assessment under CSH 85177090 of CTA, 1975 and remanded the matter to the Adjudicating authority, accordingly. 33. Revenue assailed the order of the learned Commissioner (Appeals), inter alia, on the following grounds:- 3. Hence, telecommunication Antenna being a complete device with a specified function, i.e. Conversion of electrical signals into electromagnetic waves and vice versa in a wireless communication system, is appropriately covered by single dash heading -Other apparatus for transmission or reception of voice, images or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network) of heading 8517 as an transmitting and receiving apparatus for radio-telephony . Further, a double dash level, it is squarely covered by the heading 8517 62 -Machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus . 4. The classification of parts of the Goods of Chapter 85 is governed by rules enumerated in .....

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..... 11.2017 passed by the Commissioner of Customs (Appeals), Zone-III, Mumbai to the extent of setting aside of assessment of 60 Bills of Entry, reassessment of Antenna with Base Station under CTH 85177090 and refund of Duty paid under protest is not maintainable in the first instance. 34. Before proceeding to analyse the Revenue s aforesaid grounds in considering the correctness of the Order impugned, it is necessary to address the preliminary objections raised by the Revenue, which are though not part of the above grounds, but addressed during the course of hearing. 34. It is contended that Ld. Commissioner (appeals) has failed to observe the principles of natural justice, in as much of as, the Department was not provided with adequate opportunities to present their case. Countering the said plea, the Respondent on the other hand has submitted that a copy of the appeal has been endorsed to the Department by the learned Commissioner (Appeals); no written submission was filed by the department in response to the said Appeal, nor any request for a personal hearing or adjournment of the hearing scheduled had been advanced. Besides, it is also argued that the relevant provision under the .....

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..... to the merits of the case, it is not in dispute that the imported Antenna was meant to be used with the base station for mobile telecommunication network. It is also not in dispute that the antenna for base station, imported by the Respondent earlier, that is prior to May 2017 had been subjected to classification as parts under Heading 85177090, and such assessment was never challenged by the Revenue. 38. The dispute now centres around the issue, whether the antenna for base station would be considered as a machine and accordingly classifiable under CSH 85176290 as claimed by the Revenue or as parts classifiable under CSH 85177090, claimed by the Respondent. 39. Therefore, to understand the scope of the competing entry 85176290 & 85177090 and its applicability to the imported goods in question, it is necessary to have a glimpse on the development (changes) brought into the said tariff heading 8517 and related tariff entry 8525, 8527 & 8529 of CTA 1975. Before 01.01.2007: 8517 Electrical apparatus for line telephony or line telegraphy, including line telephone sets with cordless handsets and telecommunication apparatus for carrier-current line systems or for digital line sys .....

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..... 8525 20 14 - Transportable telephone u Free - 8525 20 15 - Marine radio communication equipment u Free - 8525 20 16 - Amateur radio equipment u Free - 8525 20 17 - Cellular telephone u Free - 8525 20 18 - Other u Free - 8525 20 19 - Other: u Free - 8525 20 91 - VSAT terminals u Free - 8525 20 92 - Other satellite communication equipment u Free - 8525 20 99 - Other u Free - 8525 30 00 - Television cameras u 12.5% - 8525 40 00 - Still image video cameras and other video camera recorders; digital cameras u 12.5% - 8527 Reception apparatus for radiotelephony, radio-telegraphy or radio-broadcasting, whether or not combined, in the same housing, with sound recording or reproducing apparatus or a clock - Radio-broadcast receivers capable of operating without an external source of power, including apparatus capable of receiving also radio-telephony or radio-telegraphy: 8527 12 00 - Pocket-size radio cassette-players u 12.5% - 8527 13 00 - Other apparatus combined with sound recording or reproducing apparatus u 12.5% - 8527 19 00 - Other u 12.5% - Radio-broadcast receivers not capable of operating without an external source of power, of a kind used in motor vehicles, including apparatus ca .....

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..... r u Free - 8517 18 - Other: u Free - 8517 18 10 - Push button type u Free - 8517 18 90 - Other u Free - Other apparatus for transmission or reception of voice, images or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network): u Free - 8517 61 00 - Base stations u Free - 8517 62 - Machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus: u Free - 8517 62 10 - PLCC equipment u Free - 8517 62 20 - Voice frequency telegraphy u Free - 8517 62 30 - Modems (modulators-demodulators) u Free - 8517 62 40 - High bit rate digital subscriber line system (HDSL) u Free - 8517 62 50 - Digital loop carrier system (DLC) u Free - 8517 62 60 - Synchronous digital hierarchy system (SDH) u Free - 8517 62 70 - Multiplexers, statistical multiplexers u Free - 8517 62 90 - Other u Free - 8517 69 - Other: u Free - 8517 69 10 - ISDN System u Free - 8517 69 20 - ISDN terminal adapter u Free - 8517 69 30 - Routers u Free - 8517 69 40 - X 25 Pads u Free - 8517 69 50 - Subscriber end equipment u Free - 8517 69 60 - Set top boxes for gaining access to internet u .....

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..... diates the information in the form of electro-magnetic wave in an efficient and desired manner to the base station, where the information is picked up by the receiving antenna and passed on to the receiver via transmission line. The signal is de-modulated and the original message is then recovered at the receiver. Thus, the wireless communication gets established. It is the contention of the department that since the antenna can generate electro-magnetic wave from current and voltages and which can convert electromagnetic wave to current and voltages with these waves impinge on it, therefore, it can be considered as a machine, which independently receives and transmits electro-magnetic waves. 43. The Respondent s contention, on the other hand, is that the antenna is a passive element. It cannot function on its own unless connected to the base station, Therefore, the same does not fall within the scope and meaning of machine prescribed at Note 5 under Section XVI. 44. In support of their contention that the Antenna imported for base station is a passive element, the Respondent placed on record the opinion of Vinod Gandhi & Associates, Government registered Chartered Engineer. Al .....

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..... performing any other function like conversion or regeneration of voice, images or other data signals and switching/routing of signals. Therefore, the Antenna stand alone cannot be considered as a machine , attracting classification under Heading 8517.62. Consequently, the observation of the Department in the circular dt.15.01.2018 that the Antenna itself is a complete device and has capability of functioning on its own of conversion of electrical signals into electro-magnetic waves and vice versa in a wireless communication system cannot be applied to the present goods as it would be complete only when connected to a base station. In the event if the Antenna so designed, instead of working as a passive element, besides the above function, it also performs some more functions as in the case of other entries under the same category, its classification under sub heading 851762 may be attracted, considering the same as an independent of machine . 46. The Revenue s contention to classify the Antenna for base station under sub heading 851762 rests on the ground that as per note 2(a) of section XVI, parts which in themselves constitute an article covered by a heading of this section, in a .....

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..... ich are equally suitable for use principally with the goods of heading 85.17 and headings of 8517 and 8525 to 8528 are to be classified as headings of 8517. Therefore, Antennas since parts of BTS, as held by Hon'ble Supreme Court in Hutchison Essar South Ltd. s case (supra), therefore, be classified as parts under 8517.7090. 48. To resolve the issue about classification of Antenna for base station between the competing entries of 851762 and 851770 arose before the member countries, the HS Committee in 62nd session, after deliberation, recorded as follows:- No Product description Classification HS codes considered Classification rationale 22 Antenna for Base Station It is a directional dual-polarized plate antenna with a width of 0.3 m and a length of 1.4 m. The antenna works at 1.7-2.7 GHz frequency band and is part of a base station which plays a role as a core facility for mobile communication. Used in a mobile communication system, the base station antenna receives and transmits electromagnetic waves in the base station system. Its main features are as follows:- * Directivity: horizontal beam width of 65 degrees for cellular sector networking; * High gain: 18dBi; * Vertical .....

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