The New Delhi bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the earphones other than the parts of the cellular mobile phones attract only basic customs duty of 10% under the exemption notification.
Sennheiser Electronics India Pvt Ltd, the appellant assessee imported earphones of two models namely CX 275s and CX180. Model CX 275s earphones had microphones while CX180 earphones do not have any microphones.
The Commissioner confirmed the demand on earphones CX 275s which had microphones holding that CX 275s was a wired headset and hence was not eligible for the benefit of the exemption notification.
The assessee appealed against the order passed by the Commissioner for imposing a penalty and for confirming the demand for earphones that had a microphone.
Priyanka Rathi and Ashwini, the counsels for the assessee contended that the functionality of the earphones does not depend on the mobile phones nor are the cellular mobile phones dependent on the earphones for their functions and therefore, earphones cannot be considered as parts of the cellular mobile phones and hence eligible for the exemptions under the exemption notification.
Manish Kumar Chawda, the counsel for the department contended that the wired headset had specifically been excluded and earphone model CX 725s was earphone with an in-built microphone and thus it qualifies as a wired headset, and the term part of cellular mobile phone was used in the exemption notification in a very general sense.
The Bench observed that all goods are exempted by the notification excluding some ‘parts of the cellular mobile phones’ including ‘headsets’ and does not exclude all earphones but only headsets which are parts of cellular mobile phones.
Also stated that the earphones in dispute CX 275s are not parts of any mobile phone but are accessories that can be used with a variety of electronic gadgets including cellular mobile phones and the benefit of the exemption notification cannot be denied to earphones CX 275s imported by the assessee.
Further held that earphones other than the parts of the cellular mobile phones attract only basic customs duty of 10% under the exemption notification.
The two-member bench comprising Rachna Gupta (Judicial) and P.V Subba Rao (Technical) quashed the demand of duty confirmed and the penalty imposed while allowing the appeal filed by the assessee.
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