CESTAT Delhi Quashes Customs Duty Demand On Bharti Airtel In Router Parts Classification Dispute

The Customs, Excise and Service Tax Appellate Tribunal, New Delhi, on Tuesday quashed the levy of differential customs duty on telecom major Bharti Airtel Limited.

It held that the imported router components were classifiable as “parts of routers” and not as “Network Interface Cards (NICs) or standalone communication apparatus” under the customs tariff.

A coram comprising President Justice Dilip Gupta and Technical Member PV.Subba Rao allowed Bharti Airtel's appeal and set aside an order passed by the Principal Commissioner of Customs, New Delhi.

The dispute centered on the classification of Modular Port Concentrators (MPCs), Modular Interface Cards (MICs), Fixed Configuration MPCs, Switch Fabric Boards, and Switch Control Boards imported by Bharti Airtel during 2017–2018 for use in routers.

Bharti Airtel had classified the goods as parts of routers attracting nil duty. The Department, however, reclassified them as NICs, or independent communication apparatus, and raised demands of differential duty along with interest and penalties by invoking the extended period of limitation.

Examining the technical architecture, the tribunal noted that the imported items were slot-based and proprietary components that derived power and functionality only when integrated into a router chassis. It held that the goods were incapable of performing any communication function independently.

Rejecting the Department's classification, the Bench relied on its earlier decision in Vodafone Idea Ltd. v. Principal Commissioner of Customs (Import) and observed that NICs are standard, standalone devices capable of functioning independently with computers, whereas router line cards and control boards are inseparable from the router and cannot function outside it.

The tribunal also found fault with the invocation of the extended period of limitation, clarifying that mere self-assessment or an alleged wrong classification does not justify its application. It held that deliberate suppression or intent to evade duty must be established, and in the absence of such evidence, the demand was time-barred. The Bench observed:

“It is trite that for invocation of extended period of limitation the department is required to prove deliberate suppression and concealment of the material facts on the part of the assessee to evade duty liability.”

Accordingly, the tribunal set aside the reclassification, duty demand, interest, and penalties and allowed the appeal.

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