TaxTMI 
TaxTMI 
2025 (3) TMI 1073
X X X X Extracts X X X X
X X X X Extracts X X X X
....lant company, has come in appeal against imposition of penalty under section 112(a) and section 114AA of the Customs Act, 1962. 2. The adjudicating authority, vide the impugned order, examined the grounds leveled against the appellant for misclassification of certain imported goods and wrong availment of benefit under Notification No.57/2017 dt.30.06.2017. He has also examined the role played by other appellants viz., Mr. Y. Kasyap Reddy & Mr. B. Sanjay Reddy for imposition of penalty etc. After going through their submissions and evidence on record, he has, inter alia, rejected the classification of goods viz., Fiber Optic Transmitters/ Receivers/ Transceivers (impugned goods) of several models/make imported under various headings of Chapter 85 (other than CTH 85176290) and reclassified the impugned goods under heading CTH 85176290 in respect of bills of entry listed in Annexure-A to the SCN. He has also denied the benefit of exemption under S.No.20 of Notification No.57/2017 dt.30.06.2017. Thereafter, he has confirmed the demand of Customs Duty of Rs.2, 84, 67, 205/-, confiscated the offending goods amounting to Rs.18, 98, 04, 619/- under section 111(m) and 111(o) of the Customs....
X X X X Extracts X X X X
X X X X Extracts X X X X
....This has also been confirmed by the Mr. Y. Kasyap Reddy, MD, in his statement, wherein he has completely agreed with contents of the statement of Mr. Vinod Kumar Agarwal dt.30.08.2022. It was also noticed by the department that subsequent to initiation of investigation, the MD informed that they are importing goods under investigation under the HSN 85176290 based on the supplier's invoice and that only after the investigation was initiated, they have reassessed their import goods datasheets and found that Fiber Optic Transmitters and Receivers are classifiable under the HSN 85423100 as Integrated Circuits under the category of Multi Component Integrated Circuits (MCOs), whereas, the Optical Transceivers, which are small modules and cannot function by themselves cannot be classified as OTE/OTN products. The department went through the technical literature, datasheets, end use, expert opinion, tariff entry and HSN explanatory notes for the contrasting tariff headings to come to the conclusion that the impugned goods are OTE, classifiable under CTH 85176290 and therefore, the appellants are ineligible for benefit under S.No.20 of the notification 57/2017. The department also invoked e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nsceiver has again both functions of fiber optic transmitter and fiber optic receiver. Therefore, essentially, it was held that optical transceivers are used to convert electrical signal into optical signal and vice versa, optical transmitters are used to convert electrical signal into optical signal and optical receivers are used to convert optical signal into electrical signal. 7. The adjudicating authority has also taken into account expert opinion given by Department of Electronics, IISc, Bengaluru, based on the datasheets of the supplier that the impugned goods would fall under the category of OTE. The adjudicating authority has also relied on the statement recorded under section 108 of Customs Act in respect of Mr. Vinod Kumar Agarwal, Technical Director of the appellant company, in which he has, inter alia, stated that the impugned devices can be considered as optical transport devices and can be used for various applications like data transfer, voltage isolation application and optical transport network, etc., as detailed in datasheet and all these devices are used for optical signal transportation and they are using them for voltage isolation application in traction conve....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ellant's letter dt.03.10.2023 as well as datasheets of the transmitter and receiver, it is clear that they do not contain any of the parts like silicon based sensors, actuators, oscillators, resonators, etc. Therefore, on this ground itself, the impugned goods cannot be considered as MCOs falling under CTH 8542. 10. The objection taken by the appellant in respect of outcome of the cross-examination has also been dealt with at para 16.5.8.10.1 of the impugned order, where the appellants have, inter alia, themselves categorically stated that the said equipment is used in voltage isolation in Vande Bharat Express trains, though they are falling under the category of OTE. 11. Since this is an issue of interpretation of notification, inasmuch as the notification only extends the benefit to certain items and excludes certain items categorically, the notification needs to be interpreted and construed strictly. The adjudicating authority has relied on various judgments cited at para 17.5.1 of the impugned order including CC (Import), Mumbai Vs Dilip Kumar & Co. [2018 (361) ELT 577 (SC)], wherein, it was, inter alia, held that exemption notification should be interpreted strictly and the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the Customs Act. Since in terms of section 111(m), when the goods do not correspond in respect of value or any other particular with entry made under the Act, the same shall be liable for confiscation. As far as the penalty is concerned, in the facts of the case, it was found that appellants have intentionally misdeclared and misclassified the goods and therefore, liable to penalty under section 114AA of the Customs Act. 14. Learned Advocate for the appellant has contested the impugned order primarily on the ground of classification and exclusion of impugned items. He submits that the proposed classification under CTH 85176290 is not correct as these impugned items are not complete apparatus and machine having independent function and they are basically components and further, that they are not capable of functioning independently. He also submitted that classification is contrary to the provisions in the relevant HSN entry for CTH 85176290. He has further explained the scheme of things in the HSN explanatory notes to support his contention that the entry covers two categories of goods; first one is telephone sets and the second one is other apparatus, whereas in their case, it....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d circuits, (ii) LED/Photodiode, (iii) LED/Photodiode formed on a single substrate as a single, integrated circuit as an indivisible part designed for assembly onto a printed circuit board and (iv) with two connection pins for the anode and cathode terminals. They have also relied on certain case laws as under in support that the items were electronic integrated circuits and therefore, rightly classifiable under CTH 8542 as items covered under CTH 8517 constitute a complete machinery or apparatus in itself:- a) Bradma of India Ltd Vs CC, Mumbai [2006 (204) ELT 82-(Tri-Mum)] b) CCE, Bangalore Vs Priya Raja Enterprises [1997 (94) ELT 421 (Tri)] c) Samsung India Electronics Pvt Ltd Vs CC, New Delhi [2024 (7) TMI 1409 (Tri-Mumbai)] 16. He has also relied on the decision of Hon'ble Supreme Court in the case of Anjaleem Enterprises Pvt Ltd Vs CCE, Ahmedabad [2006 (194) ELT 129 (SC)], wherein, the Apex Court held that even a programmed integrated circuit is classifiable under Heading 8542 and that essential character of integrated circuit does not change with the programming being embedded therein. Insofar as reliance of....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Ajinomoto India Pvt Ltd Vs CC, Chennai [2024 (21) CENTAX 465 (Tri- Mad)] c) Sirthai Superware India Ltd Vs CC, Nhava Sheva-III [2020 (371) ELT 324] d) CCE Vs Chemphar Drugs & Liniments [1989 (40) ELT 276 (SC)] e) Nizam Sugar Factory Vs CCE, AP [2006 (197) ELT 465 (SC)] f) CC Vs Magus Metals Pvt Ltd [2017 (355) ELT 323 (SC)] 17. He has also submitted that the adjudicating authority has confirmed the excess duty of Rs.1, 08, 76, 790/- by not considering certain duty debited in respect of goods imported by the appellant against MEIS license as well as differential duty paid in December, 2022. He is also contesting the confiscation under section 111(m) on the ground that same can be invoked only in the case involving undervaluation, whereas, there is no undervaluation in this case. Further, full description of the imported goods has been made and the exemption was availed under bonafide belief that it was available to them. They have relied on the following case laws:- a) Northern Plastic Ltd Vs CC & CE [1998 (101) ELT 549 (SC)] b) M/s Bhagwati Products Ltd Vs Prl CC, New Delhi [Final Order No. 50226-50232/2024 dt.09.02.2024 (Tri-New Delhi)] c) Lewek Altair Shipping Pvt....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nal into optical signal and optical receivers are used to convert optical signal into electrical signal. Therefore, these goods are involved in transmission of optical signals over fiber optic network and therefore, it can be categorized as OTE. This view is also supported by the expert opinion of professor at IISc, Bengaluru. They have also highlighted the fact that MCOs are combination of one or more monolithic hybrid or multichip integrated circuits with at least one of the following components i.e., silicon based sensors, actuators, oscillators, resonators. However, the datasheets of the transmitter and receiver clearly show that they do not contain any of the parts which are mandatorily required to be part of MCOs. Therefore, by virtue of the same, the goods cannot be classified as MCOs. They have also highlighted the fact that appellant has not produced any test report to support that these are MCOs and in fact, on the other hand, even the technical datasheets of impugned goods do not mention them as integrated circuits. The reliance has been placed in the case of Dunlop India Ltd & Madras Rubber Factory Ltd Vs UOI & Others [1983 (13) ELT 1566 (SC)], wherein, inter alia, it w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hapter or Heading or Sub-Heading or tariff item Description of goods Standard rate Condition No. (1) (2) (3) (4) (5) 20 85176290 or 85176990 All goods other than following goods, namely: a) wrist wearable devices (commonly known as smart watches) b) Optical Transport Equipment c) Combination of one or more of packet Optical Transport Product or Switch (POTP or POTS) d) Optical Transport Network (OTN) products e) IP Radios f) Soft switches and Voice over Internet Protocol (VoIP) equipment, namely, VoIP phones, media gateways, gateway controllers and session border controllers g) Carrier Ethernet Switch, Packet Transport Node (PTN) products, Multiprotocol Label Switching-Transport Profile (MPLS-TP) products h) Multiple Input/Multiple Output (MIMO) and Long-Term Evolution (LTE) products 10% - 24. Further, some of the admitted facts are that they have been importing goods under CTH 85176290 and only when they were put under investigation by DRI, they changed the heading to another classification i.e., CTH 8542. It is also on record that the supplier had, based on their enquiry, clearly held that the goods supplied to the appellant were falling under....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n the light of technical literature as well as statements given by various people to come to the conclusion that these impugned goods are in the nature of OTE. He has also given due weightage to the expert opinion of premiere institute like IISc, Bengaluru. 27. We find that the appellants have tried to take various submissions including the fact that these are not machines or apparatus, relying on various judgments and descriptions. The adjudicating authority has taken into account the statements recorded from technical expert of the appellant as well as expert opinion and felt that these are in the nature of apparatus or devices meant for certain specific functions like conversion of, inter alia, electrical signal into optical signal and vice versa, using optical fiber cable and therefore, they are more in the nature of OTE. The fact that OTE has been categorically classified under CTH 85176290 in the notification itself also supports that if the impugned goods are in the nature of OTE then it would obviously fall under CTH 85176290. The adjudicating authority has also relied on various case laws including judgment of Supreme Court in the case of CC (Import), Mumbai Vs Dilip Kuma....
X X X X Extracts X X X X
X X X X Extracts X X X X
....more evidence on record to prove their deliberate plan or deliberate suppression in order to hoodwink the department into believing something else. Merely because they chose to claim classification under a heading, which they thought was more appropriate, it cannot be a ground for invoking extended period. Further, though the adjudicating authority has tried to bring in the concept of fraud for invoking extended period in the sense that they were deliberately misleading the department, it has neither been alleged in the SCN nor has been explained in what way the appellants were indulging in fraud. Therefore, in view of the facts of the case, as also cited case laws, we find that invocation of extended period is not tenable and therefore, to that extent the impugned order is liable to be set aside. 30. As regards, wrong calculation of duty demanded, we do not find any discussion on this issue and therefore, the matter needs to be remanded back to the adjudicating authority to examine this aspect and allow the benefit of this amount if it has already been paid, as submitted by the appellant. 31. Insofar as the confiscation of impugned goods is concerned, we find that in view of the....