Relief for One97: CESTAT Rules Paytm Soundbox is a 2G Device Not 4G/LTE Compliant, Quashes Customs Duty Demand [Read Order]

One97 Communications Limited, the appellant, had imported Paytm Soundbox devices and claimed concessional basic customs duty at 10 percent under Serial No. 20 of Notification No. 57/2017-Cus. The customs department denied the benefit by alleging that the Soundbox was 4G/LTE and MIMO compliant and thus fell within the exclusion clause of the notification.

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Two separate orders were passed against the appellant confirming demands of Rs. 3.29 crore and Rs. 17.97 crore respectively, along with interest, penalties under Section 112(a), and a proposal to confiscate the goods under Section 111(m) of the Customs Act, 1962.

The appellant’s counsel argued that the Soundbox devices operated only on 2G GSM networks and used a MediaTek MT6261A chipset that was not capable of 4G or LTE communication. It was submitted that the hardware lacked features necessary for LTE compliance, such as multiple antennas, OFDM modulation, and MIMO technology.

The appellant relied on two independent lab reports from Alpha Test House and Shenzhen STS Test Services and a technical expert opinion from Professor Saif Khan Mohammed of IIT Delhi to support its position that the devices were 2G-only.

The revenue counsel argued that the devices used SIM cards capable of operating on 4G networks and that the frequency bands used by the Soundbox overlapped with those used for 4G LTE communication. The department also relied on content from Wikipedia and blog articles available on Paytm’s own website, which it claimed supported its position that the Soundbox was 4G compatible.

The tribunal comprising Justice Dilip Gupta (President) and Ms. Hemambika R. Priya (Technical Member) explained that operating on a frequency band used by LTE is not enough to make a device LTE compliant.

The tribunal held that specific hardware capabilities are required, including appropriate chipsets, antennas, and modulation standards. The tribunal pointed out that the chipset used in the Soundbox supported only 2G networks and lacked LTE features, and that the test reports submitted by the appellant confirmed this.

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The tribunal further held that reliance on Wikipedia pages and blogs could not be accepted as legal evidence in classification disputes. It explained that the opinion from the IIT professor was misread by the adjudicating authority and clarified that the professor had only used a railway track analogy to explain that a 2G device can work in a 4G environment without becoming 4G in nature.

The tribunal held that there was no misdeclaration or concealment by the appellant, and that the details in the bills of entry correctly described the nature of the goods. It ruled that the exclusion clause under Notification No. 57/2017 did not apply and that the Soundbox qualified for the concessional customs duty rate.

The appeals were allowed. The tribunal set aside the duty demands, interest, penalties, and confiscation orders.

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