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SFPs Classifiable As Parts Of Telecom Equipment: CESTAT Allows Customs Duty Exemption To Reliance Jio Infocomm

Mariya Paliwala
9 Aug 2022 7:15 AM GMT
SFPs Classifiable As Parts Of Telecom Equipment: CESTAT Allows Customs Duty Exemption To Reliance Jio Infocomm

The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has granted the customs duty exemption to Reliance Jio Infocomm and held that Customs Excise and Service Tax Appellate Tribunal (CESTAT) is classifiable as part of telecom equipment.

The two-member bench of S.K. Mohanty (Judicial Member) and P. Anjani Kumar (Technical Member) has observed that the SFP is part of the I/O card module of the Ethernet switch apparatus, which can function only when connected with an Ethernet switch providing an interface between two domains, i.e., electrical and optical. As such, they are considered parts and are correctly classifiable under CTH 8517 7090 of the Customs Tariff.

The respondents, Reliance Jio Infocomm, filed a miscellaneous application seeking the rectification of the order in respect of three appeals. The respondent stated that the common issue of classification of populated printed circuit boards (PPCB) for DWDM Equipment – Photonic Service Switch, common to all the appeals, was decided. Another issue of classification of Small Factor Pluggable (SFP) and an alternative claim of exemption under Notification No. 24/2005-Cus dated 1.3.2005 remained to be decided in respect of the three appeals. The CESTAT's bench vide Miscellaneous Order has ordered that the three appeals be delinked and placed before the bench for a fresh hearing on 13.07.2022. The hearing was held on July 13, 2022.

The respondents submitted that SFPs are parts of various telecommunication equipment, viz., Alcatel-Lucent 1830 Photonic Service Switch (PSS), Ethernet Switch, and eNodeB; SFPs are fitted into the equipment and function as an integral part of such equipment. SFP cannot perform any function on a stand-alone basis as a machine or apparatus by itself. It lacks power and intelligence and derives it from the equipment of which it is fitted as a part. The function performed by the SFP is integral and inseparable from the function performed by the telecommunication equipment. SFPs purchased from any original equipment manufacturer (Cisco or others) are exclusively used inside the equipment of the original equipment manufactured by the same manufacturer. There is no evidence relied upon by the Department to show that the said SFP can function independently on a stand-alone basis. The grounds of appeal specifically mentioned the SFP as being part of the Photonic Service Switch.

The respondent submitted that the Commissioner (Appeals) has held that SFPs are classifiable as parts under CTH 8517 70 and not as complete machines or apparatus under CTH 8517 6290. The order of the Commissioner (Appeals), Hyderabad, has been accepted by the Department and no appeal was preferred. The Commissioner (Appeals), Mumbai, has also held that SFPs are classifiable as parts under CTH 8517 70.

The respondent submitted that, without prejudice, the SFPs are exempt from duty under Sr. No. 13 of Notification No. 24/2005-Cus dated 1.3.2005. Irrespective of the sub-heading, the items are exempt under the notification, which exempts all goods of heading 8517.

The department contended that telecommunication devices are part of line equipment having independent and specific functions. Therefore, they are rightly classifiable under sub-heading 8517 62. The various telecommunication devices used in optical communication transmit digital signals or messages in one or both directions over a single transmission path on optical fibres. The wavelength of various signals is changed and such signals having different wavelengths are mixed and loaded on a single optical fibre and transmitted for optimum use of the fibre, i.e., a single fibre used for transmitting various signals together. At the receiving points, the signals are de-mixed or separated and the wavelengths are then changed back to the original ones and used by the recipient devices. In the whole process, devices such as "Transponder", "Muxponder", "Wavelength Tracker", "Amplifier", "Small Form Factor Pluggables", etc. are used, and all of them are placed on a switch called the Photonic Service Switch (PSS), which gives a platform to the devices.

The department contended that the imported apparatus, being parts of the Photonic Service Switch, is to be classified under CTH 85176290, as per Explanation 'G' for Heading 8517. It is clear that the apparatus which allows connection to a communication network or the transmission or reception within a network are to be classified under sub-heading CTH 851762. The SFPs are classifiable under 851762.

"We find that it is not open for the Department to take a different stand on the same issue in Mumbai and Hyderabad. Such a differential classification of the impugned goods imported at different places would negate the very purpose of the Tariff Act on the one hand and would cause avoidable litigation for the importers on the other. We find that the findings given by the learned Commissioner (Appeals) vide the order cited above are quite elaborate and reasoned, which were followed by the learned Commissioner (Appeals), Mumbai, in the impugned order," the CESTAT said.

The tribunal rejected the appeals filed by the department.

Case Title: Commissioner of Customs-Mumbai (Air Cargo Import) Versus Reliance Jio Infocomm Ltd.

Citation: Customs Appeal No. 88483 of 2018

Dated: 29.07.2022

Counsel For Appellant: Authorized Representative Ramesh Kumar

Counsel For Respondent: Advocates J. C. Patel with Shilpa Balani

Click Here To Read/Download Order

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