CESTAT Rules Receiver as Mobile Phone Part, not Separate Component Under Audio Device Tariff [Read order]

The Chennai Bench of Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) ruled that the "Receiver" imported by the assessee was a part of mobile phones and not a separate audio device component.

Bharath FIH Ltd., appellant-assessee, imported items through multiple Bills of Entry, declaring them as "Receiver" under CTH 85177090 and paid 5% Basic Customs Duty ( BCD ), claiming the benefit under Notification No. 50/2017-Cus. for the period from July 4, 2017, to January 30, 2018.

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The Revenue later suspected that the items should have been classified under tariff item 85181000, attracting a higher BCD of 10%, which increased to 15% from February 2, 2018. It issued a Show Cause Notice ( SCN ) on May 4, 2019, proposing reclassification, demanding differential duty with interest and a penalty, and seeking confiscation of certain goods.

The assessee defended its classification, but the Commissioner of Customs, Chennai VII, rejected the claim. Through Order-in-Original No. 600/2019-AIR dated October 9, 2019, the Commissioner confirmed the SCN proposals, including the duty demand, interest, and penalty. The assessee challenged this order by filing Appeal No. C/40065/2020 before this forum.

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The assessee claimed that the "Receiver" was a part of mobile phones, usable only with them, and was correctly classified under CTH 85177090. It argued that the Revenue's classification under CTH 8518 was wrong, as "Receivers" were excluded from that heading.

The Special Counsel argued that Customs Notification No. 57/2017 and Board's Circular No. 09/2016-Customs classified all "Receivers" under CTH 8518. He also referred to the Phased Manufacturing Programme (PMP) Schedule, which made "Receivers" chargeable to duty from 2017-18, and cited other notifications and letters to support the Revenue's stance.

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The two member bench comprising P.Dinesha ( Judicial Member ) and Ajit Kumar ( Technical Member ) reviewed the contentions, documents, and judicial rulings. It noted that in a similar case involving Flextronics Technologies Pvt. Ltd., the same bench had remanded the matter for further examination.

Read More:Earphones Other than the parts of Cellular Mobile Phones Attracts only Basic Custom Duty of 10% under Exemption Notification: CESTAT

Referring to Section Note 2 of the Customs Tariff Act, 1975, the tribunal observed that parts used mainly with machines under headings 8517 and 8525 to 8528 should be classified under heading 8517. It found that the "Receiver," being a part of a mobile phone, fell under CTH 8517, which covers cellular network devices.

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The tribunal ruled that the Revenue's attempt to classify the item under CTH 8518, meant for standalone devices like microphones and loudspeakers, was incorrect. It held that the "Receiver" was an integral part of the phone, making the assessee's classification appropriate, and set aside the impugned order.

In short,the appeal filed by the assessee was allowed.

To Read the full text of the Order CLICK HERE

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