9911796707
TMI Blog2020 (12) TMI 870X X X X Extracts X X X X X X X X Extracts X X X X ..... ch 1, 2005] for payment of 0% basic customs duty. The custom authorities, however, by order dated November 19, 2019, classified the goods imported by the appellant under CTH 8517 69 90 and ordered for re-assessment of the goods. 2. The issue, therefore, that is involved in this appeal is regarding classification of the goods under CTH 8517 18 10 (as claimed by the Appellant) or under CTH 8517 69 90 (as contended by the Department). 3. The appellant had imported one consignment of the goods from a manufacturer in Taiwan under a Commercial Invoice dated February 12, 2019. In the said invoice of the manufacturer, the goods were declared classifiable under H.S. Code 8517.18.0020. Goods were imported at the IGI Airport, New Delhi and a Bill of Entry dated February 21, 2019 was filed by the appellant, classifying the goods under CTH 8517 18 10. The goods were examined under the first check, after which a query dated February 23, 2019 was raised by the Assessing Group requiring the appellant to justify the CTH under which the appellant had classified the goods. The appellant submitted letters dated February 25, 2019, March 1, 2019 and March 15, 2019 justifying the clas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... H 85176990 without benefit of this notification. ORDER 4. In view of discussion & findings hereinabove, I order re-assessment of goods imported under B/E no. 2146635 dated 21.02.2019 under, CTH 85176990 in terms of provisions contained in subsection (4) of Section 17 of the Customs Act, 1962." [emphasis supplied] 5. Feeling aggrieved by the aforesaid order passed by the Deputy Commissioner, the appellant filed an appeal before the Commissioner (Appeals). The Commissioner (Appeals) also did not accept the submissions made on behalf of the appellant and rejected the appeal. The relevant portion of the order passed by the Commissioner (Appeals) is reproduced below: "5.2 ****** The IP Phone works on voice over Internet protocol. The product catalogue also indicates that the product has various network features like power over Ethernet, network access control etc. and also works over Web management portal. Thus the product is an apparatus for transmission and reception of data also besides working as apparatus for transmission and reception for voice. Thus the impugned goods are classifiable under "Other apparatus, for transmission or reception of voice, images or o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apparatus .........". Use of the words 'Other apparatus' indicates that only those goods which are not covered by the first entry at the single dash "-" level are covered under the second entry at single dash "-" level. Reliance has been placed on the judgement of Supreme Court in Collector of Central Excise vs. Delton Cables Ltd. [2005 (181) E.L.T. 373 (S.C.)] ; (iv) The Commissioner (Appeals) decided classification of the goods by straightaway resorting to rule 3(c) of the General Rules, which is impermissible as it is settled law that they have to be considered sequentially. The goods in question are, therefore, clearly classifiable under CTH 8517 18 10; (v) The findings of the Commissioner (Appeals) are factually incorrect; and (vi) Similar goods have been held to be classifiable under CTH 8517 18 10 by the Commissioner (Appeals) at Chennai. 8. Shri Sunil Kumar learned Authorized Representative of the Department made the following submissions: (i) The first sub-heading (i.e. first single dash '-') of CTH 8517 covers 'Telephone sets, including telephones for cellular networks or for other wireless network ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trade or common parlance, and hence the former needs also to be considered while determining classification of an item. Reliance has been placed on the judgement of Supreme Court in O.K.Play (India) Ltd vs. Commissioner of Customs Excise, Delhi-III, Gurgaon [2005 (180) E.L.T. 300 (S.C.)] . It is for this reason that the Commissioner (Appeals) applied rule 3(c) of the General Rules and accorded preference to CTI 8517 69 90 over CTI 8517 18 90; and (vii) The contention of the appellant that the Exemption Notification grants exemption to goods and the same cannot be relied upon for the classification of goods is not correct. 9. The contentions advanced by learned counsel for the appellant and the learned Authorized Representative of the Department have been considered. 10. The classification of the goods under CTH 8517 18 10, as contended by the appellant, or under CTH 8517 69 90, as contended by the Department, is the issue in this appeal. 11. It would, therefore, be necessary to first refer to the scheme of classification as contained in Chapter 85 of the Customs Tariff. Heading 8517, contained in Chapter 85, is reproduced below:- Tariff Item ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 20% - 8517 69 --- Other : 8517 69 10 --- ISDN System . . . . . . . u Free - 8517 69 20 --- ISDN terminal adaptor . . . 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 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material or substance shall be according to the principles of rule 3. 3. When by application of rule 2(b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows: (a) The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods. (b) Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to (a), shall be classified as if they consisted of the material or component which gives them their essential character, in so far as this criterion is applicable. (c) When goods cannot be classified by reference to (a) or (b), they shall be classified under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... features of various brands. The relevant features relating to display and voice activity detection are reproduced below : SPECIFICATIONS FON175 FON-375 FON475 FON570 FON- 670i/675i FON-C71 FON-D71 FONH25 FONH35 FortiFone Softclient Telephone Features Display 2.4" color display 2.8"+ 2.4 color display 4.3" color display 7"color touch screen 7"color touch screen 3.1"248 *120 pixel graphic display 2.4"240 *320 pixel graphic display 3.5 color display xxxxx xxxxx xxxxx xxxxx xxxxx xxxxx xxxxx xxxxx xxxxx xxxxx xxxxx xxxxx xxxxx xxxxx xxxxx xxxxx xxxxx xxxxx ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n mind for classification of this Executive IP Phone. 17. It needs to be noted that the manufacturer has classified the goods in the invoice under H.S. Code 8517.18. 18. The relevant portion of Heading 8517 to the Explanatory Notes of Harmonized System of Nomenclature [HSN] is reproduced below: Harmonized Commodity Description and Coding System Explanatory Notes 8517- Telephone sets, including telephones for cellular networks or for other wireless networks; other apparatus for the 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), other than transmission or reception apparatus of heading 84.43, 85.25, 85.27 or 85.28(+). - Telephone sets, including telephones for cellular networks or for other wireless networks: 8517.11 -- Line telephone sets with cordless handsets 8517.12 -- Telephones for cellular networks or for other wireless networks 8517.18 -- Other Other apparatus for transmission or reception of voice, images or other data, including apparatus for communication ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al integrated circuits for operation. The heading covers all kinds of telephone sets including: (i) Cordless telephone sets. ******* (ii) Telephones sets. ******** (B) Telephones for cellular networks or for other wireless networks. This group covers telephones for use on any wireless network. Such telephones receive and emit radio waves which are received and retransmitted, e.g., by base stations or satellites. These include, inter alia: (1) Cellular phones or mobile phones. (2) Satellite phones. 19. Reverting back to the classification under the Customs Tariff, it is seen that perusal of Heading 8517 indicates that it contains three entries at single dash '-' level and they are: (a) Telephone sets, including telephones for cellular networks or for other wireless networks; (b) Other apparatus for transmission or reception of voice, images or other data, including apparatus for communication in a wired or a wireless network (such as a local or wide area network); and (c) Parts. 20. The First single dash covers telephone sets, while the second single dash starts with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her the heading nor the notes suffice to clarify the scope of a heading, then it must be construed according to the other following provisions contained in the Rules. Rule-I gives primacy to the Section and Chapter Notes along with terms of the headings. They should be first applied. If no clear picture emerges then only can one resort to the subsequent rules. The appellants have relied upon Rule 3. Rule 3 must be understood only in the context of subrule (b) of Rule 2 which says inter alia that the classification of goods consisting of more than one material or substance shall be according to the principles contained in Rule 3. Therefore when goods are prima facie, classifiable under two or more headings, classification shall be effected according to sub-rules (a), (b) and (c) of Rule 3 and in that order. ****** 12. Applying the Rules of Interpretation particularly Rule 1, we are of the opinion that the reasoning of the Tribunal in Jyoti Overseas is unexceptionable and in our opinion the decision in Simplex-I was correctly overruled." (emphasis supplied) 25. The second entry at single dash level starts with the words "other apparatus". This clearly i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nication network or the transmission or reception of speech or other sounds, images or other data within such a network. Communication networks include, inter alia, carriercurrent line systems, digital-line systems and combinations thereof. They may be configured, for example, as public switched telephone networks, Local Area Networks (LAN), Metropolitan Area Networks (MAN) and Wide Area Networks (WAN), whether proprietary or open architecture. This group includes: (1) Network interface cards (e.g., Ethernet interface cards). (2) Modems (combined modulators-demodulators). (3) Routers, bridges, hubs, repeaters and channel to channel adaptors. (4) Multiplexers and related line equipment (e.g., transmitters, receivers or electro-optical converters). (5) Codecs (data compressors/decompressors) which have the capability of transmission and reception of digital information. (6) Pulse to tone converters which convert pulse dialed signals to tone signals. 27. A perusal of the aforesaid portion of the HSN Explanatory Notes shows that base stations, entry-phone systems, vide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntative of the Department cannot be entertained as the impugned order is not based on this reason. The Supreme Court in Mohinder Singh Gill observed that when a statutory functionary makes an order based on certain grounds, the validity of that order has to be judged on the reasons stated in the order and the order cannot be supplemented by fresh reasons. 30. The Gujarat High Court in F.S. Enterprise vs. State of Gujarat [2020 (32) G.S.T.L. 321(Guj.)] , followed the decision of the Supreme Court in Mohinder Singh Gill and observed that it is not permissible to supplement the original order by additional reasons. 31. The aforesaid decision of the Supreme Court in O.K. Play would not help the Department. The submissions made by the learned authorized representative of the Department in regard to (G) of (II) of entry 85.17 of the HSN cannot, therefore, be accepted. 32. What also supports the case of the appellant are the two orders dated February 27, 2020 and March 9, 2020 passed by the Commissioner of Customs (Appeals-II), Chennai, in matters relating to the present appellant, wherein in respect of similar goods, but of different models, the Commissioner (A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , including telephones for cellular networks or for other wireless networks. Since these phones can be used through internet, these cannot be classified under CTH 85171110. Therefore, the right classification appears to be CTH 851718 (Other) and sub-classification 85171810 push button type. Going by the HSN explanatory notes for CTH 8517 telephone sets including telephone for cellular networks or other networks, these items are appropriately to be Classified under CTH 851718 only as "others". The relevant portion of the HSN explanatory notes is reproduced; "Telephones sets, may incorporate or have fitted a memory for storing and recalling telephone numbers, a visual display for showing the number dialed, incoming callers number, date and time and duration of the call, an extra loud speaker and microphone to enable communication without using the hand set; devices for automatically answering calls, transmitting a recorded message, recording incoming messages and playing back recorded message on command; devices for holding a connection on line while communicating with the person on another telephone. Telephone sets incorporating these devices may also have keys or push butto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one 8831 & 8832 are basically voice telephones having push buttons. Going by the literatures all the 6 models are having push buttons and fixed keys and are to be classified under CTH 8517 18 10 as claimed by the appellant M/s. Ingram Micro India Pvt. Ltd." (emphasis supplied) 36. Learned counsel for the appellant submitted that different Collectorates of Customs cannot adopt different standards on a particular issue and in this connection placed reliance upon the decision of the Calcutta High Court in Opal Exports Pvt. Ltd. vs. Collector of Customs [1992 (60) E.L.T. 232 (Cal.)] . 37. The Calcutta High Court held in Opal Exports that Custom Authorities cannot be permitted to practice discrimination and that the Collectorates of the Customs have to adopt a similar stand on a particular issue. The relevant portion of the judgment is reproduced below: "28. The respondent Customs authorities by treating similar imports as imports of spares while adopting a different view in the case of the petitioner (who is placed in similar circumstances as other importers of similar goods) have discriminated against the petitioner in violation of the guarantee of equal prote ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the General Principles for the interpretation and classification of goods for import tariff and that the applicability of rule 3 arises when the goods consisting of more than one material fall in two or more headings. The Supreme Court observed that each of the classes are mutually exclusive. What is covered in (a) cannot be classified in (b), and (c) operates when neither (a) or (b) applies. It is like a residuary clause. The observations are as follows: "The primary question, therefore, is whether the goods manufactured by the appellant fall in clause (a) and if it can be classified with reference to (a) then clauses (b) and (c) would not apply. Clause (a) incorporates the common and general principle that the goods which can be classified specifically with reference to any heading should be placed in that category alone. The specific heading of classification has to be preferred over general heading. The clause contemplates goods which may be satisfying more than one description. Or it may be satisfying specific and general description. In either situation the classification which is the most specific has to be preferred over the one which is not specific or is general in nat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the product literature, also describes model 675i as an "Executive Video IP Phone", while model 670i is described as an "Executive IP Phone". This clearly shows that the facility of video calling is not available in the model imported by the Appellant. 46. Learned Authorized Representative of the Department also submitted that the Commissioner (Appeals) committed no legality in placing reliance upon the Exemption Notification dated January 29, 2019, which Notification suggests that VoIP phones are classifiable under CTH 8517 69 90 and are not eligible for exemption. 47. This contention of learned the Authorized Representative of the Department cannot also be accepted. The classification of goods has to be done in accordance with the terms of Headings and any relative Section or Chapter Note. The classification is not required to be done in terms of any Exemption Notification. This is what was also observed by the Tribunal in Ruchi Soya Industries Ltd. vs. Commissioner of Customs (Acc& Imp.), Mumbai [2019 (369) E.L.T. 1529 (Tri.-Mumbai)] . The relevant portion of the decision is reproduced below: "5.3 In the present case the benefit of Exemption Notification ..... X X X X Extracts X X X X X X X X Extracts X X X X
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