TMI Blog2021 (10) TMI 392X X X X Extracts X X X X X X X X Extracts X X X X ..... Stations of 2G and 3G technology, it cannot mean that eNodeB is not a Base Station. It cannot, therefore, be said that Base Stations of 4G technology cannot be called Base Stations because unlike Base Stations of 2G technology and 3G technology, it does not require a separate Controller - it cannot be urged that the Base Station of 4G technology is not a Base Station and cannot be classified under CTH 8517 61 00, which is specifically for Base Stations . The contention of the Department that the scope of CTH 8517 61 00 must be restricted and confined only to be Base Stations of the earlier 2G technology and 3G technology and that the said entry cannot cover an evolved Base Station of the new 4G technology cannot be accepted in view of the decision of the Supreme Court in COLLECTOR OF CUSTOMS CENTRAL EX. VERSUS LEKHRAJ JESSUMAL SONS [ 1996 (2) TMI 135 - SUPREME COURT ]. The Supreme Court held that a Tariff entry cannot be given a static interpretation ignoring the evolution in technology. A perusal of Serial No. 372 (i) of the Notification dated 17.03.2012 would show that it grants exemption from the whole of customs duty of goods specified in List 17 required inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce Jio ] to show cause as to why the classification of the goods described in the Bills of Entry as eNodeB BTS/Micro Cell BTS/Femto Cells BTS/Pico Cells BTS [ the goods ] and claimed to be Base Transceiver Stations for the 4G Long Term Evolution [ LTE ] network should not be changed from Customs Tariff Heading [ CTH ] 8517 61 00 to CTH 8517 62 90 of the Customs Tariff, has led to the filing of Customs Appeal No. 87665 of 2019 by Reliance Jio and Customs Appeal No. 87872 of 2019 by the Commissioner. 2. The aforesaid order dated 14.06.2019 passed by the Commissioner records the following findings : i. Reliance Jio did not mis-declare the goods since they are Base Stations , especially in normal terminology; ii. Thus, if the goods have not been mis-declared, then the payment of duty/differential duty on account of short payment or non-payment of duty has to be restricted to the normal statutory period prescribed under sub-section (1) section 28 of the Customs Act, 1962 [ the Customs Act ] and the extended period contemplated under sub-section (4) of section 28 cannot be invoked; iii. It is true that on a plain reading of the term Base Station , the goods appear to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause 4 of Chapter XIII of the said Schedule require Reliance Jio to install and commission at least one Base Station in a city/town for which frequency has been allotted by WPC. It is for this reason that the Government of India granted license to Reliance Jio to import BTS and in terms of the import license, Reliance Jio imported the goods under various Bills of Entry during the period from October 2014 to May 2017. Initially, upto December, 2015, Reliance Jio classified the goods under CTH 8517 62 90 and claimed exemption of duty under a Notification dated 17.03.2012. Thereafter, w.e.f. January 2016, Reliance Jio started claiming classification under 8517 61 00 for which the rate of duty was NIL , as it realized that Base Stations were specifically covered under CTH 8517 61 00. 6. Before adverting to the submissions advanced by Shri J.C. Patel, learned Counsel for Reliance Jio and Ms. Manisha Goel and Shri Ramesh Kumar, learned Authorized Representatives for the Department, it would be useful to reproduce the findings recorded by the Commissioner in the impugned order, the gist of which have been stated above, and they are as follows : 67. The goods in question have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e base station of 2nd Generation wireless technologies such as GSM and CDMA. E-UTRAN Node B, also known as Evolved Node B, (abbreviated as eNodeB or eNB) is the element in E-UTRAN of LTE that is the evolution of the element Node Bin UTRA of UMTS. It is the hardware that is connected to the mobile phone network that communicates directly with mobile handsets {User Equipment (UEs)}. Traditionally, a Node B of 3G wireless technology has minimum functionality, and is controlled by a Radio Network Controller (RNC). However, with an eNB, there is no separate controller element. BTS functions on centralised intelligence control system operating on single band connecting to one user through one BTS at a time, while eNode-B functions on distributed intelligence control system simultaneously operating on multiple band through 4 or more eNode-B at a time on the principle of multiple input multiple output (MIMO) technology, having flat architecture. This has simplified the architecture and allows lower response times. ********* ********* ********* Aforesaid diagram clearly reveals the distinction between BTS as used in 2G technology, NodeB as used in 3G technology ENodeB as used in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visional classification is CTH 85176100; the demand and recovery of consequent differential duty with interest as per extant laws and rules shall follow with reference to Bills of Entry post 01.03.2016, i.e, when Notification No. 12/2016 came into force and specifically excluded products having LTE functionalities / technology embedded, from the purview of the exemption, the exemption benefit if availed shall be denied and consequential differential duty and interest shall be demanded and recovered. Similarly the above would be applicable to finally assessed Bills of Entry listed in Annexure B to the show cause notice mutatis mutandis but for the fact that only the Bills of Entry falling within the statutory period of Section 28(1) shall be covered for re-assessment for re-classification. (emphasis supplied) 7. Learned Counsel for Reliance Jio submitted that : (i) There is enough material to establish that eNodeB, Femto Cells/ Pico Cells are Base Stations in the 4G network which communicate with the User Equipment. Thus, the goods have correctly been classified under CTH 8517 61 00; (ii) Every cellular network, whether, it be 1G Network (First Generation Network), 2G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aratus which can perform the functions of transmission or reception of voice, image or other data. eNodeB is providing functionality of not only transmission or reception of voice, image or other data but has also built in functionalities of routing, conversion and regeneration. eNodeB, therefore, cannot be classified as Base Stations under CTH 8517 61 00; (iii) Even under the Harmonized System of Nomenclature [ HSN ], a BTS receives and transmits radio waves to and from cellular wireless networks. CTH 8517 60 00 is a specific entry for Base Stations and covers only those products which are covered under the definition of Base Stations as given in HSN. Any equipment which is not functioning on the aforesaid definition of Base Stations in HSN cannot be classified under CTH 8517 61 00; (iv) Any equipment which performs a combined function of BTS and Base Station Controller (BSC) should be a machine and as the principal function performed by the machine is to decide when the mobile should perform Handover and to which neighbouring cell, the correct classification would be for Base Station Controller, by virtue of Note 3 to section XVI based on the performance of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pter 85 of the Customs Tariff. Heading 8517, contained in Chapter 85, is reproduced below:- Tariff Item Description of goods Unit Rate of Duty 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 8443, 8525,8527 or 8528 - Telephone sets, including telephones for cellular networks or for other wireless networks: 8517 11 -- Line telephone sets with cordless handsets: 85171110 --- Push button type u Free - 85171190 --- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8517 62 60 --- Synchronous digital hierarchy system(SDH u Free 8517 62 70 --- Multiplexers, statistical multiplexers u Free 8517 62 90 --- Other u 20% 12. The competing entries have been highlighted in the aforesaid Table, but before proceeding with the analysis, it would also be necessary to refer to section 2 of the Tariff Act. It provides that the rates at which the duties of customs shall be levied under the Customs Act are specified in the First and Second Schedules. 13. The relevant portions of the General Rules and the General Explanatory Notes contained in the First Schedule also need to be examined. They are reproduced below: THE FIRST SCHEDULE- IMPORT TARIFF GENERAL RULES FOR THE INTERPRETATION OF THIS SCHEDULE Classification of goods in this Schedule shall be governed by the following principles: 1. ******** ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ongs to a group covered under a heading. A double dash (--) indicates that the article is a sub-classification of the preceding article that has a single dash. Similarly, a triple dash (---) or a quadruple dash (----) indicate that the article is a sub-classification of the preceding article that has a double dash or triple dash. 15. It would further be seen from the aforesaid table that at the single dash level, there are three sub-headings and they are: - Telephone sets, including telephones for cellular networks or for other wireless networks - 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) - Parts 16. It is not in dispute that the goods involved in this appeal would fall in the second single dash. This single dash has two double dash entries. A double dash would mean that these two entries are sub-classification under the single dash. The two dash level entries are: -- 8517 61 00 for Base Stations -- 8517 62 for Machines for the reception, conversion and transmission or regeneration of voice, images or other data, inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of speech or other sounds, images or other data between two points by variation of an electric current or optical wave flowing in a wired network or by electro-magnetic waves in a wireless network. The signal may be analogue or digital. The networks, which may be interconnected, include telephony, telegraphy, radio-telephony, radio-telegraphy, local and wide area networks. (I) TELEPHONE SETS, INCLUDING TELEPHONES FOR CELLULAR NETWORKS OR FOR OTHER WIRELESS NETWORKS ******* (II) 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) (A) Base stations. The most common types of base stations are those for cellular networks, which receive and transmit radio waves to and from cellular telephones or to other wired or wireless networks. Each base station covers a geographical area (a cell). If the user moves from one cell to another while telephoning, the call is automatically transferred from one cell to another without interruption. (B) Entry-phone systems. The systems usually consist of a telephone handset and keypad or a loud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation covers a Cell. If the user moves from one cell to another while telephoning, the call is automatically transferred from one cell to another without interruption. Such automatic transfer of the call from the Base Station in one cell to the Base Station in another cell to which the user moves while telephoning is referred to as Handover . 24. HSN also describe Base Stations for cellular networks as those which receive and transmit radio waves to and from cellular telephones and each Base Station covers a geographical area which is called a cell . It also states that if a user moves from one cell to another while telephoning, the call is automatically transferred from one cell to another without interruption. 25. It would also, at this stage, be useful to understand the concept of Base Stations under 1G, 2G, 3G and 4G. The 1G Network was the first Cellular Network. It was based on Analog signals. In 1G Network, all the Handover decisions were taken at the Base Station itself. The 2G Network changed to Digital signals from Analog Signals and was in that sense the first generation of digital radio technology. In the digital system, the technology in 2G and 3G was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... twork by the S1-interface (figure 2 ). The reason for distributing the intelligence amongst the base-stations in LTE is to speed up the connection set-up and reduce the time required for a handover . For an end-user the connection set-up time for a real time data session is in many cases crucial, especially in on-line gaming. The time for a handover is essential for real-time services where end-users tend to end calls if the handover takes too long. (emphasis supplied) (b) The website http://www.3gpp. org/technologies/keywords-acronyms/100-the-evolved-paccket-core contains the following information : Figure 2 shows a very basic architecture of the EPS when the User Equipment (UE) is connected to the EPC over E-UTRAN (LTE access network). The Evolved NodeB (eNodeB) is the base station for LTE radio . In this figure, the EPC is composed of four network elements: the Serving Gateway (Serving GW), the PDN Gateway (PDN GW), the MME and the HSS. The EPC is connected to the external networks, which can include the IP Multimedia Core Network Subsystem (IMS). (emphasis supplied) (ii) In the book LTE for UMTS OFDMA and SC-FDMA Based Radio Access , the authors Harri-Holm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... feature set with reasonable cost and power . Multi-core digital signal processors (DSP) combine cores with processing flexibility and hardware coprocessors that accelerate complex functionalities or repetitive processes, and, as such, are suitable hardware architectures to execute complex operations in real-time. (emphasis supplied) (iv) Technical Literature to show that Femto Cells BTS/Home eNodeB/Pico cells BTS are also Base Stations. Chapter 19 of WCDMA for UMTS, Fifth Edition, Edited by Harri Holma and Antti Toshala, deals with Home Node B and Femtocells and the relevant portion is reproduced below : For the zero-touch and plug play market use cases, the dedicated 3GPP radio technology is the Home Node B (HNB) which belongs to the Femto segment in Figure 19.1. Home' relates to usage in a customer's home, e.g. also denoted customer premise equipment (CPE), but this term is rather limited compared to the discussed uses for the radio technology which encompasses also small to medium enterprise (SME) and hot-spot applications as can be seen in Figure 19.1. xxxxxx xxxxxx xxxxxx The HNB is fundamentally a new small base station in the sense that it h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : Name of Product Varient(s) Base Station 1. BTS (GSM) 2. NodeB (WCDMA) 3. eNodeB (LTE) 4. MSR GSM 5. MSR WCDMA 6. MSR LTE 7. MSR GSM + WCDMA 8. MSR WCDMA + LTE 9. MSR GSM + WCDMA + LTE 10.MSR GSM + LTE 11.MSR LTE WCDMA and/ or LTE with Active Antenna System 28. Learned Authorized Representatives appearing for the Department have, however, submitted that though the goods may be eNodeB, which are Long Term Evolution products used in 4G wireless technology, but since eNodeB performs many more functions that performed by Base Stations, it cannot be classified as a Base Station . To support this contention learned Authorized Representatives have placed reliance upon the following: (i) Annexure 1 to the Recommendations on Telecom Equipment Manufacturing Policy , published by TRAI , dated 12.04.2011, which deals with Wireless Equipment, wherein the following facts have been stated in connection with 2G Wireless, 3G Wireless and 4G Wireless: (a) 2G Wireless (i) Base ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eNodeB (eNB) that interfaces with the UE. The eNB hosts the PHYsical (PHY), Medium Access Control (MAC), Radio Link Control (RLC), and Packet Data Control Protocol (PDCP) layers that include the functionality of user-plane header-compression and encryption. It also offers Radio Resource Control (RRC) functionality corresponding to the control plane. It performs many functions including radio resource management, admission control, scheduling, enforcement of negotiated UL QoS, cell information broadcast, ciphering/deciphering of user and control plane data, and compression/decompression of DL/UL user plane packet headers. (ii) A Monthly Bulletin of telecom technology called Technology Digest (Issue no. 19, January 2013), wherein eNodeB has also been described and the relevant portion is reproduced below: In LTE-Advanced network architecture, NodeB in 3G system was replaced by evolved NodeB (eNB), which is a combination of NodeB and radio network controller (RNC). The eNB communicates with User Equipments (UE s) and can serve one or several cells at onetime. The evolved packet core (EPC) comprises of the four components as shown in Figure-1. The serving gateway(S-GW) is r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so state that LTE access network is simply a network of Base Stations which are evolved NodeB (eNodeB); and viii. The books referred to in paragraph 26 of this order also state that eNodeB is a Radio Base Station and that Base Stations such as eNodeB are distributed throughout the network coverage area. Each eNodeB resides near the actual radio antennas. 30. It also needs to be noticed that the show cause notice that was issued to Reliance Jio, in paragraph 6.5, states that eNodeB is a LTE/4G equipment which has built in functionality of Base Transceiver Station and Base Station Controller of a 2G wireless network or NodeB and Radio Network Controller of a 3G wireless network and although it may be commercially referred to as a 'Base Station' of LTE network in the 4G Wireless Network, its functionality is beyond that of the earlier Base Stations (Base Transceiver Stations of 2G Networks or NodeB of 3G Networks). The show cause notice, therefore, proceeds on the footing that the classification of eNodeB should take into consideration the fact that it is a machine performing functions of both the Base Transceiver Stations/eNodeB as well as that of the Base Station Con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been expressed whether the said goods are classifiable under CTH 8517 6100 or CTH 8517 6290. 2. The Board examined the issue. In this regard it is clarified that eNodeB is an LTE/4G equipment which has built in functionality of Base Transceiver Station (BTS) and Base Station Controller (BSC) of 2G wireless network or NodeB and Radio Network Controller (RNC) of 3G wireless network. Although it may be commercially referred as 'Base Station' of LTE network, it s functionality is beyond the earlier Base Stations (Base Transceiver Station of 2G networks or NodeB of 3G networks). Therefore classification of eNodeB should take into consideration the fact that it is a machine performing functions of both BTS/NodeB as well as BSC/RNC . In the communication network architecture BSC/ RNC controls and manages many BTS / Node B and it also provides intelligence to BTS/ NodeB. In fact BSC/RNC works as a small switch within the network sub-system and it enables distributed architecture of eNodeB (i.e. Base Band Unit and Remote Radio Heads). 3. In view of functions detailed above and by application of GIR 1 6, eNodeB fall into the description given under heading 8517 62 i.e. Mac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es not require a separate Controller. As noticed above, historically the very first Base Station of 1G Technology also did not have a separate Controller and the requirement of a Controller in 2G technology and 3G technology was perceived to be a drawback, as it slowed down the speed of connection. Thus, it cannot be urged that the Base Station of 4G technology is not a Base Station and cannot be classified under CTH 8517 61 00, which is specifically for Base Stations . 41. The contention of the Department that the scope of CTH 8517 61 00 must be restricted and confined only to be Base Stations of the earlier 2G technology and 3G technology and that the said entry cannot cover an evolved Base Station of the new 4G technology cannot be accepted in view of the decision of the Supreme Court in Collector of Customs Central Ex. vs. Lekhraj Jessumal Sons [ 1996 (82) E.L.T. 162 (S.C.) ]. The Supreme Court held that a Tariff entry cannot be given a static interpretation ignoring the evolution in technology. The observations of the Supreme Court are as follows: 2. The respondent had imported miniaturised switches for use in electronic hearing aids which it manufactured. It appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 42. Learned Authorized Representatives also submitted, based on the Recommendations of TRAI, that since eNodeB hosts physical, medium access control, radio link control and packet data control for user-plan header compression and encryption and performs many functions, including radio resource management, admission and control, eNodeB cannot be classified as Base Station. 43. A perusal of the aforesaid Recommendations of TRAI, which have been reproduced in paragraph 28 of this order reveals that eNodeB interfaces with the User Equipment. This is a function of a Base Station and, therefore, eNodeB would be a Base Station of 4G LTE. The functions which have thereafter been stated are infact the means by which the performance of the said function of interfacing with the User Equipment is achieved. It is cannot, therefore, be said that eNodeB performs some functions which are other than those performed by Base Stations . 44. Learned Authorized Representatives appearing for the Department also submitted that between the two entries namely, CTH 8517 61 00 for Base Stations and CTH 8517 62 90 for Other , it is the latter which is more specific and, therefore, the goods sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This contention advanced by the learned Authorized Representatives of the Department cannot be accepted as there can be no estoppel either against the importer or against the Department in matters of classification and merely because Reliance Jio or other importers have claimed a particular classification, it cannot be urged that a correct classification cannot be subsequently claimed. 48. This is what was observed by the Supreme Court in Dunlop India Ltd Madras Rubber Factory Ltd. vs. Union of India and Others [ 1983 (13) E.L.T. 1566 (S.C.) ] and the observations are as follows: 40. At one stage Mr. Sanghi pointed out that in certain Bill of Entry of Dunlop India Limited, their Agents, Messrs Mackinnon, Mackenzie Co., Private Ltd., gave the I.C.T. Item No. 87 with regard to the imported V.P. Laitex. This, according to Mr. Sanghi, clearly shows how the appellants themselves have understood the matter. There is, however, no estoppel in law against a party in a taxation matter. In order to clear the goods for the Customs, the appellant Agents may have given the classification in accordance with the wishes of the authorities or they may even be under some misapprehension ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of goods specified in List 17 required inter alia for cellular mobile telephone service. The said exemption is subject to condition no. 52, which requires that the importer should be licensed by the Department of Telecommunications of the Government of India for providing cellular mobile telephone service. There is no dispute that Reliance Jio satisfies condition no. 52. List 17 mentions Base Transceiver Stations at Serial No. 3(a) and Base Station Controllers at Serial No. 1(b). The said Notification was amended on 01.03.2016, by which in Serial No. 372 an insertion was made to the effect that notwithstanding anything contained in List 17, exemption shall not apply to specified goods of Heading 85.17, which, amongst others, included Long Term Evolution Products. The very fact that it was only by the said amendment that the exemption was made inapplicable to LTE products, shows that till 01.03.2016, if any imported goods answered description of items listed in List 17, the same were eligible to exemption even though they may be LTE products. If the products contained in List 17 were not to cover the said product using LTE technology, there would have been no necessity to bring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as issued on 19.07.2018, except for the last Bill of Entry which is of 02.01.2017, all the other Bills of Entry pertain to the period prior to July 2016 and would be beyond the normal limitation period of two years provided for in section 28(1) of the Customs Act. Learned Counsel submitted that the extended period of limitation contemplated under section 28(4) of the Customs Act cannot be invoked as there was no collusion, wilful mis-statement or suppression of facts with intent to evade payment of service tax. According to the learned Counsel, the goods had been correctly described in the Bills of Entry and claiming a particular classification or claiming exemption under Notification is a matter of belief of the importer and the larger period of limitation cannot be invoked merely because the classification/exemption is later disputed by the Department. Learned Counsel also pointed out that out of the 22 Bills of Entry which were finally assessed, 13 Bills of Entry were assessed by the Officers and not the system and infact in 5 out of these 13 Bills of Entry, the final assessment was done by the Officers after physical examination of the goods. 60. The submission advanced by t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
