Custom, Excise & Service Tax Tribunal
Commissioner Of Customs (Imports) vs Vuppalamritha Magnetic Components Ltd on 19 May, 2016
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNALSOUTH ZONAL BENCH
CHENNAI
Appeal No.C/401/2011
[Arising out of Order-in-Appeal C.Cus.No.608/2011 dated 26.8.2011 passed by the Commissioner of Customs (Appeals), Chennai]
Commissioner of Customs (Imports)
Chennai Appellant
Versus
Vuppalamritha Magnetic Components Ltd. Respondent
Appearance:
Shri Veerabhadra Reddy, JC (AR) For the Appellant Shri S. Sankaravadivelu, Advocate For the Respondent CORAM :
HonbleShriD.N. Panda, Judicial Member HonbleShriV. Padmanabhan, Technical Member Heard on :11.5.2016 Proceeding dictated on : 11.5.2016 Order Pronounced on : 19.5.2016 FINAL ORDER No.40795/2016 Per V. Padmanabhan Revenue being aggrieved by the appellate order dt. 26.8.2011 holding that the goods imported by the appellant were the parts, components and accessories of the Fixed Wireless Terminal (FWT) which was complimentary to the telephone instrument to function under CDMA technology and mobile for us and respondent is eligible to get the benefit of the Customs Notification No.21/2005-Cus.
dt. 1.3.2005 and not liable to Additional Duty of Customs has challenged that order praying for reversal thereof maintaining the order of adjudication.
2. On behalf of Revenue, Ld.D.R submits that respondent made import of the goods as per the Bill of Entry which were parts and accessories of CDMA FWT model WF 836F consisting of main PCB, G3 fax PCD, Plastic casings top etc. and claimed exemption of the Additional Duty of Customs thereon in terms of Notification No.21/2005-Cus. dt. 1.3.2005. But such benefit was not available to the respondent. Revenue agitates the matter before Tribunal praying to hold that the goods manufactured by the respondent was neither mobile handsets nor cellular phones since Fixed Wireless Terminal (FWT) is neither mobile handsets nor cellular phone. Accordingly, respondent is not entitled to the benefit of the Notification. Learned Commissioner (Appeals) misconceived the entire object of the notification and decided in favour of the respondent.
2.1. It is further submission of Revenue that respondent manufactured Fixed Wireless Terminal (FWT) without making use of imported material for manufacture of mobile handsets or cellular phones. Therefore, exemption benefit claimed in terms of the notification above is deniable being contrary to law. He relies on para-9 of the OIO to support Revenues contention that respondent should have carried out manufacture of mobile phones or cellular phones making use of the goods imported. According to him, Ld. Adjudicating authority has properly characterized the goods on the basis of technical aspect of the manufacture carried out by the respondent, in para-19 of adjudication order, which reads as under :-
* they do not have any devices such as handset, * They do not have microphones for accepting sound signals, * They are not fitted with ear pieces/speakers for hearing sound waves, * Neither do they have the facility of dialling numbers by any means, such as push buttons or rotary dials, * They do not have any sound emitting device to indicate an incoming call; all of which are a basic feature of even the most rudimentary phones.
* The technical manual as well as the service manual clearly indicate that the fixed wireless terminals have to be connected to a normal line telephone by mean of a wired link through the RJ 11 jack provided in the terminals, to enable use.
* In the alternative they may be connected to a computer and after programming the detailed instructions given, they may be used in conjunction with the computer and microphone/speaker headset etc. on the computer. [Emphasis supplied] 2.2 According to ld. D.R, in para-20 of his order, learned adjudicating authority further deals with Fixed Wireless Terminal (FWT) manufactured by the respondent and its different aspects. For convenience reading, that para is reproduced as under :-
Thus the Fixed Wireless Terminals perform an intermediate function of being the connecting link between the CDMA cell tower and common land telephone connected to the device with the help of the RJ 11 telephone jack provided. If the equipment could perform the functions of a telephone, there would be no need of attaching an external telephone to the device. The goods under import are a device that is only capable of functions subsequent to the primary functions performed by the land telephone attached to the equipment, including transmitting electric radio signals from the Cell tower (the base Transceiver station) and receiving radio signals from it. Thus the goods are primarily a transceiver for electric radio signals and cannot receive or reproduce sound signals, this function of converting sound signals to electric impulses and vice versa is carried out by a telephone connected to the terminal.[Emphasis supplied] 2.3. Considering the characteristics of the Fixed Wireless Terminal (FWT) manufactured by the respondent, ld. Adjudicating Authority examined the goods manufactured by the respondent in the light of the judgement of the Apex Court in the case of TATA Teleservices Ltd. Vs CC - 2006 (194) ELT 11 (SC). But in paras 27 to 29 at pages 18 to 20 of the order he was of the opinion that the goods manufactured were only Fixed Wireless Terminal (FWT) but neither cellular phones nor mobile phones. The material facts and technicalities recorded by the ld. Adjudicating Authority has been ignored by learned Commissioner (Appeals). He relied on the Supreme Court judgement in the above case and allowed the appeal of respondent holding that using the parts, components and accessories imported, respondent manufactured FWT which is a mobile phone under CDMA technology.
2.4. Ld.D.R categorically says that end product of the respondent should be either mobile phone or cellular phone to grant notification benefit. Such predominant condition of the notification has not been fulfilled. Placing Notification No.26/2003-Cus.dt. 1.3.2003, he explained that earlier to this notification, Notification No.22/2002-Cus. dt.1.3.2002 was issued. That notification (Ref.98 to 101 of the paper book filed by respondent) at Sl.No.320 allowed exemption of parts, components and accessories of mobile handsets including cellular phones from Additional Duty of Customs. The Government considered that such exemption should not be allowed for which Entry No.427 was enacted in the Notification No.26/2003 dt.1.3.2003 to grant exemption to Routers, Modems and Fixed Wireless Terminals (FWT) if such goods are imported. But respondent imported only parts of FWT not the complete FWT. When FWT was manufactured using the parts, components, accessories imported, respondents case is no manufacture of mobile handsets or cellular phone. Entry No.427 having allowed exemption of Additional Duty of Customs in respect of Routers, Modems and Fixed Wireless Terminals, the FWTs manufactured by the respondent disentitles it to get duty exemption on the parts, components and accessories imported by it for use in manufacture of FWT. Therefore, the claim of exemption of such parts, components and accessories from the levy of additional duty of customs, in terms of Notification No.21/2005-Cus.dt. 1.3.2005 does not arise.
2.5. On the above genesis of law and grounds, Revenues submission is that when object of the notification No.26/2003-Cus. dt.1.3.2003 is to grant exemption to FWT, the respondent manufacturing FWT should not take advantage of the Notification No.21/2005-Cus. dt.1.3.2005 under the plea of FWT is same as mobile handsets or cellular phones.
2.6. Revenues further contention is that the clarification of the BSNL (Ref.page 105 of the respondents paper book and copy of literature at page 134 thereof) is of no consequence to the respondent for the reason that there is conflict of interest of BSNL being buyer of the goods from the respondent. Such evidence relied upon by the respondent is liable to be discarded.
2.7. The Revenue also contended that the decision of Supreme Court in the case of TATA Teleservices Ltd. Vs CC (supra) is quite distinguishable in the present case since that has dealt with classification and not with the grant of exemption notification. Therefore learned adjudicating authority has correctly dealt with the sum and substance of the judgement and denied exemption to the respondent.
2.8. Revenue relied on the HSN classification in respect of tariff heading 85.17 to support its case stating that the goods manufactured by the respondent falls therein without granting any exemption to the goods imported. Ld. D.R supported the order of adjudicating authority going through the decision of the Chief Commissioners Conference as has been recorded in para-21 of the adjudication order. He further relied on the decision of Bangalore Bench of the Tribunal in the case of VuppalamrithaMagnetic Components Ltd. Vs CCE& ST Hyderabad as reported in 2013-TIOL-1011-CESTAT-BANG to submit that although it is a stay order but it still holds field in favour of the Revenue. He also relied on the decision of Chennai Bench of the Tribunal in the case of ACD Communication Pvt. Ltd. reported in 2011-TIOL-236-CESTAT-MAD = 2011 (263) ELT 744 (Tri.-Chennai) to submit that the grant of Exemption Notification No.21/2005-Cus. dt. 1.3.2005 is not available against the basic plea of manufacturing mobile handsets or cellular phones by respondent which is not its case.
3. On behalf of the respondent, learned advocate submits that the grant of the Notification No.21/2005-Cus. dt. 1.3.2005 is to exempt parts, components and accessories of mobile handsets/cellular phones. The object of the notification is clear from the wordings used therein. Earlier government had granted exemption to the complete goods i.e. FWT imported since such goods were not manufactured in India. But when technology was developed to manufacture FWT the notification in question should be interpreted in a broad sense in the light of the judgement of the Apex Court in TATA Teleservices Ltd. Vs CC (supra).
3.1. He relied on para-10 of the above judgement to say that there was no case for Revenue to establish that parts, components and accessories imported by the respondents were not used for mobile handsets or cellular phones since FWT in combination with a phone serves the purpose of mobile handset being movable and functions without cable wire. He explained that the goods imported were used to manufacture Fixed Wireless Terminal (FWT) and such FWT are used along with telephone sets in remote areas where cable laying is not possible, to capture signals and serve the purpose of mobile handsets. Therefore, it cannot be said that telephone used along with WTP were not mobile handsets. The only dispute being whether FWT serving the purpose of mobile handset and that being answered by Apex Court in the aforesaid judgement in para-10 thereof, the goods imported being used therein enjoy duty exemption. Import of parts, components and accessories thereof is exempted from duty.
3.2. In his further submission, ld. Advocate submitted that respondent fulfilled the condition of the imports and also the condition of the concessional Rule. Therefore, for no violation of the condition of the notification it is not disentitled to exemption of Additional Duty of Customs. The goods imported as per Notification 21/2005-Cus. dt. 1.3.2005 being specified description of goods and were used in the mobile handsets of the nature described aforesaid, the respondent is covered by the scope of the grant of exemption. It is his further submission that CBEC amended its circular No.57/2003 dt. 27.6.2003 as appearing on page 118 of the paper book and informed to field formation that Apex courts decision in TATA Teleservices Ltd. explains the situation to resolve the disputed issue. It was also submitted that page 105 of paper book read with page 134 thereof explains the very nature of the goods manufactured by respondent demonstrates that those are mobile handsets only.
3.3 Relying on Circular No.15/2006-Cus. Dt. 20.4.2006 at page 118 of the paper book respondent submitted that Boards intention being very clear on the basis of Apex court decision in the case reported in 2006 (194) ELT 11 (SC), the Bombay Bench of the Tribunal in the case of Teracom Private Ltd. Vs CC Goa - 2008 (222) ELT 58 (Tri.-Mumbai) has held that the like goods manufactured by the respondent is not disentitled to the benefit of exemption notification.
3.4 Drawing attention to the Revenues submission which was relying on the decision in the case of ACD Communication Pvt. Ltd. & Others Vs CC Chennai (supra), respondent explained that this decision rather supports the case of the respondent on the ground that FWT is nothing but mobile handsets. Relying on page 102 of the paper book which deals with Notification No23/2010-Cus.Dt. 27.2.2010, it was submitted by respondent that Government has considered to encourage manufacture of FWT and granted benefit of exemption which cannot be denied to it.
4. We have considered the submissions and arguments put forth by the D.R. as well as the advocate for respondent at length. Before we appreciate the technical aspects of the issue before us, it may be useful to have an idea about the progress of the cellular telephony in our country. When the cellular phones were introduced in India, the technology used was GSM technology which was prevalent in all parts of the world other than the North American continent. Subsequently, CDMA technology, which was widespread in use in the North American continent, was also adopted in India. Later on, it was found by BSNL, that CDMA technology can be usefully made use of for last mile connectivity through Wireless in local loup (WLL) system. This system made use of the same technology as the CDMA cellular telephone system. The Fixed Wireless Terminal (FWT) is used in conjunction with an ordinary telephone instrument to provide the telephone service under the WLL system of BSNL. In the initial days, for import of the mobile handsets including cellular phones were granted full exemption from customs duty. Subsequently, the duty free import was also allowed to the parts and components of mobile handsets including cellular telephones for use in their manufacture. 5. We have perused the relevant documents and the various case laws cited by both sides. The respondent imported, through several Bills of Entry, various parts, such as PCB, Plastic casings etc. for the manufacture of Fixed Wireless Terminal and claimed the benefit of Notification No.21/2005-Cus. dt. 1.3.2005. For ready reference, this notification is extracted below :-
In exercise of the powers conferred by sub section (1) of the section 25 of the Customs Act, 1962 (52 of 1962) the Central Government, on being satisfied that it is necessary in the public interest to do so, hereby exempts parts, components and accessories of mobile handsets including cellular phones, from the whole of duty of customs leviable thereon under the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and from the whole of the additional duty leviable thereon under sub section (1) of section (3) of the said Customs Tariff Act subject to the condition that the importer follows the procedure set out in the Customs (Import of Goods at Concessional Rate of Duty for the manufacture of excisable goods) Rules, 1996.
This notification exempts parts, components and accessories of mobile handsets including cellular phones from Customs duties when imported. The various parts imported were to be assembled into model FWT WF 836F. The entire dispute centers around the question whether this equipment described as Fixed Wireless Terminal can be considered as a "mobile handset including cellular phone". The original authority decided, after considering the salient features of the FWT, that they cannot fall within the description of "mobile handsets including cellular phones" and consequently denied the benefit of Notification No.21/2005-Cus. dt. 1.3.2005. At the stage of the first appeal, the Commissioner (Appeals) reversed the decision and the matter is before us by way of Revenues appeal.
6. Revenue submitted a copy of service manual of the FWT and argued that the physical appearance of the goods does not resemble cellular phones or handsets and also lacks in several other important features. However, the respondent made out its case explaining that the very same dispute has arisen time and again in the context of direct import of FWTs in the context of eligibility of exemption under the erstwhile Customs Notification No.21/2002-Cus., as amended by Notification No.26/2003-Cus. dt. 1.3.2003. It was also submitted that the Revenue initially held the view that such FWTs cannot be considered on par with mobile handsets/cellular phones. However, the view has since been changed, clarificatory circular has been issued by the CBEC Circular No.15/2006-Cus. dt. 20.4.2006. In this circular, reference has been made to Apex Courts decision in the case of TATA Teleservices Ltd. Vs CC (supra). In this decision, the Apex Court has, in turn, referred to several other cases in which the technical question whether such FWTs can be considered as cellular phones has been discussed at length and the Apex Court concluded that technology used in the equipments imported by TATA Teleservices and the hand held mobile phones is the same and hence they will be eligible for the exemption notification available to hand held cellular phones. The Board in its circular has reiterated this and in turn has withdrawn earlier Circular No.57/2003 dt. 27.6.2003. Thus Apex Court has settled the issue once and for all that the equipments working on FWT technology can be considered to be on par with cellular phones. This decision has also been followed by this Tribunal in many of its cases, such as in the case of Teracom Private Ltd. Vs CC Goa (supra) where the matter has been discussed at very great length.
7. Thus we come to the conclusion that CDMA FWT equipments are on par with cellular phones and mobile handsets as held by the Apex Court. Hence the benefit given under Notification No.21/2005 which exempts parts, components and accessories of mobile handsets including cellular phones will have to be extended to parts and accessories of CDMA FWT. Consequently, the Revenues appeal is liable to rejection. We order accordingly upholding the order passed by the Commissioner (Appeals).
(Order pronounced in court on 19.5.2016) (D.N. PANDA) (V.PADMANABHAN) JUDICIAL MEMBER TECHNICAL MEMBER gs 11