The Mumbai bench of the Customs Excise and Service Tax Appellate Tribunal ( CESTAT ) ruled that Small Form-Factor Pluggable ( SFP ) optical transceivers of various models should be classified under Customs Tariff Item ( CTI ) 8517 7090, making them eligible for exemption or duty concession.
The issue involved in this appeal is relating to the eligibility of goods imported by appellants, under various Bills of Entry (B/E) filed by declaring these as ‘Small Form-factor Pluggable ( SFP )-25G-SR Optical Transceiver, SFP-10G-SRL Optical Transceiver, QSFP-10G-UNIV Optical Transceiver, etc.’ classifiable under Customs Tariff Item ( CTI ) 8517 6290, for exemption/duty concession under Notification No.57/2017-Customs dated 30.06.2017 (Sl. No.20), as amended
The brief facts of the case are that during Post Clearance Audit of import transactions of the appellants for the period November, 2018 to October, 2019 through Air Cargo Complex ( ACC ) Customs Commissionerate, Sahar, Mumbai, the Department alleged that the appellants had incorrectly claimed concessional rate of duty under Sl. No.20 of Notification No.57/2017-Customs dated 30.06.2017. Accordingly, the Department had conducted Pre-Notice Consultation on 19.02.2020 and 13.08.2020 with the appellants for advising them to voluntarily pay the differential duty in denial of the exemption claimed by the appellants and after their disagreement, the Department had issued show cause proceedings by issue of Show Cause Notice ( SCN ) dated 06.10.2020.
Out of the total 22 Bills of Entry (B/E) covering the entire import transactions during the disputed period, 2 B/Es relating to imports by STPI were excluded being imports under free of duty, and differential customs duty of Rs.36,16,445/- was demanded under Section 28(1) of the Customs Act, 1962 along with applicable interest, besides the proposal for confiscation of the impugned goods under Section 111(m) ibid and imposition of penalties under Section 112(a) and 117 ibid.
B.V. Kumar representing the appellants, stated that the impugned goods viz. ‘Transceiver for Ethernet switch/ Transceiver modules of different models’ all essentially sub-assemblies/components/parts of Optical Transport Equipment. The function of these transceiver modules is to link or connect the switch/router devices to the network, and these goods do not work or function on their own.
Mr. Deepak Sharma representing the revenue reiterated the findings recorded by the learned Commissioner (Appeals) in the impugned order and stated that exemption under Notification No.57/2017-Customs dated 30.06.2017 (Sl. No.20) is not applicable to the impugned goods, as the appellants themselves contradicted their declaration of imported goods as complete equipment in B/E and in the appeal as these are only parts. Hence, he claimed that the appeal is liable to be set aside.
The bench found that imported goods under dispute have been declared with complete description as ‘Small Form-factor Pluggable ( SFP ) – Optical Transceiver’ of various models and notification benefit under Sl. No.20 of Notification No.57/2017-Customs dated 30.06.2017 was claimed for concessional Basic Customs Duty ( BCD ) of 10%. However, as the proper officer was not convinced with the justification given by the appellants, the impugned goods were reassessed at merit rate of 20% BCD by denying the notification benefit and the same were appealed against before the Commissioner of Customs (Appeals).
The two member bench of the tribunal comprising S.K. Mohanty (Judicial member) and M.M. Parthiban (Technical member) observed that the small form-factor pluggable optical transceivers of various models are classifiable under Customs Tariff Item ( CTI ) 8517 7090, and not under CTH 8517 62 90, as claimed by Revenue. Accordingly, the impugned goods are eligible for exemption/duty concession under Serial No. 5(a) of Notification No. 57/2017-Customs dated 30.06.2017, as amended. Therefore, we are of the considered view that the impugned order passed by the learned Commissioner (Appeals) in confirmation of the adjudged demands in the original order cannot be sustained on merits.
Accordingly, the appeal was allowed in favour of the appellants, by setting aside the impugned order.
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