Relief for Videocon D2H: CESTAT Rules Viewing Cards Are Smart Cards, Not Set-Top Box Parts, Quashes Customs Demand [Read Order]

The New Delhi Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) set aside a customs duty demand of Rs. 56 crore and held that viewing cards imported by the company are smart cards and not parts of set-top boxes.

Videocon D2H Limited, now Dish TV Ltd., had imported viewing cards between July 2013 and March 2018 through Delhi and Mumbai Air Cargo Complexes, classifying them as smart cards under Customs Tariff Item 8523 52 90.

The Directorate of Revenue Intelligence (DRI) alleged that the goods were misclassified and should have been treated as parts of set-top boxes under CTI 8529 90 90, making them ineligible for exemption.

Based on this allegation, a show cause notice was issued demanding duty with interest, along with proposals for confiscation and penalties. The adjudicating authority confirmed the demand of Rs. 56.47 crore, imposed an equal penalty on Videocon under Section 114A, and levied personal penalties on three company executives.

The appellant’s counsel argued that the cards met the definition of smart cards under Chapter Note 5(b) of Chapter 85 and that classification could not change based on later use. They explained that customs authorities had cleared the goods at the time of import, sometimes after physical examination.

They also pointed out that an expert opinion from IIT Delhi confirming the classification as smart cards was wrongly ignored, and that statements relied on by DRI were inadmissible without compliance with Section 138B of the Customs Act.

The revenue counsel argued that the cards contained additional circuits and algorithms, making them integral to set-top boxes. They pressed for treating the imports as misdeclaration and sought penalties under Section 114AA and redemption fine.

The two-member bench comprising Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) observed that classification is part of assessment and that acceptance by customs officers at the time of clearance could not later be treated as misdeclaration.

The tribunal observed that the evidence did not prove the presence of additional circuits beyond the chip and that the expert opinion in favour of the assessee could not be ignored. It pointed out that goods like ATM or debit cards, though linked to machines, are not treated as machine parts.

The tribunal explained that the extended limitation was wrongly applied since all facts were already disclosed. It set aside the duty demand, penalties, and confiscation. The appeals of Videocon and its executives were allowed, while the revenue’s appeal for additional penalties and fine was dismissed.

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