Customs, Excise and Service Tax Appellate Tribunal, New Delhi: In an appeal filed to quash the order dated 25-08-2020 passed by the Principal Commissioner of Customs (‘Principal Commissioner’), whereby the appellant’s claim to classify the imported ‘IC-Codecs’ as ‘electronic integrated circuits’ was rejected, the bench of Dilip Gupta, J., President and P.V. Subba Rao, Member (Technical) stated that in the present case, the goods were Integrated circuit chips (IC chips), which were incapable of stand-alone function or connection with any other device. The ICs were only capable of functioning as compressor/decompressor upon connection with external peripherals like power supply and interface. No network like LAN/WAN was established between the impugned goods and other components of Printed Circuit Board and the imported goods were not in the nature of machines which were deployed in a network like LAN/WAN.
Thus, the Tribunal stated that the goods imported by the appellant were ‘Integrated Circuits-Codecs’ (‘IC-Codecs’) and were classifiable under ‘electronic integrated circuits’. Therefore, they were exempted from whole of the customs duty leviable on the goods imported into India.
Background
Samsung India Electronics Private Limited-Appellant was engaged in the manufacture and sale of mobile phones and tablet computers. In connection with its manufacturing activities, the appellant imported IC-Codecs for use in the manufacture of mobile phones and tablets. It was stated that these goods were integrated circuits, which function as Codecs, i.e., compressor/decompressor and comprise of Digital Signal Processor, General Purpose Input/Output pins and Inter-Integrated Circuit interface.
During the relevant period from 05-03-2018 to 07-03-2019, the appellant imported the goods, availed the benefit of concessional rate and paid IGST at the rate of 12% on the import of the goods. The department conducted an audit scrutiny of the imports of the goods. The audit team understood that the goods were a Codec that had the capability of transmission and reception of digital information and would, therefore, be classifiable as ‘other communication apparatus’. Thus, accordingly, it would be subject to levy of basic customs duty at the rate of 10% and IGST at the rate of 18%.
Therefore, an investigation was initiated by the Custom Authorities and the Commissioner of Customs issued a Pre-Notice Consultation letter, wherein the appellant was advised to pay the differential duty of Rs. 1,89,05,965. However, a demand cum show-cause notice, was issued to the appellant proposing to re-classify the goods. The appellant filed a detailed reply to the show cause notice refuting all the allegations made therein. Subsequently, the Principal Commissioner passed the order dated 25-08-2020 rejecting the classification of the goods under ‘electronic integrated circuits’ as claimed by the appellant and re-classified the goods as ‘other communication apparatus’ of the .
Thus, the appellant filed the present appeal.
Analysis, Law, and Decision
The Tribunal stated that the goods were IC-Codecs which were electronic integrated circuits and were also known as microelectronic circuit, microchip or chip. An ‘IC-Codec’ was a semi-conductor wafer on which multiple components were fabricated. The Tribunal observed that according to the appellant, the IC Codec imported by it was an array of miniaturized and microscopic components consisting of active components/devices such as transistors and diodes; and passive components/devices such as capacitors and resistors. Thus, the appellant claimed that that at the time of importation, the goods did not have the capability of transmission or reception of data.
The Tribunal noted that the Principal Commissioner had held that the goods could be classified as ‘other communication apparatus’. However, the Tribunal stated that the goods imported were not in the nature of stand-alone devices for communication in a wired or wireless network. Local Area Network (‘LAN’) and Wide Area Network (‘WAN’) are communication networks which connect devices in a limited or broad area, respectively. In fact, they established a communication network within a particular geographical area between stand-alone devices.
The Tribunal stated that in the present case, the goods were IC chips, which were incapable of stand-alone function or connection with any other device. The ICs were only capable of functioning as compressor/decompressor upon connection with external peripherals like power supply and interface. No network like LAN/WAN was established between the impugned goods and other components of Printed Circuit Board and the imported goods were not in the nature of machines which were deployed in a network like LAN/WAN.
Thus, the Tribunal stated that the goods imported by the appellant were IC-Codecs and were classifiable under ‘electronic integrated circuits’. Therefore, they were entitled to the benefit of exemption, that is, they were exempted from whole of the customs duty leviable on the goods imported into India.
[Samsung India Electronics (P) Ltd. v. Commr. of Customs, Customs Appeal No. 51172 of 2020, decided on 22-07-2024]
Advocates who appeared in this case :
For the Appellant: B.L. Narasimhan, Dhruv Matta and Yashi Srivastava Advocate.
For the Respondent: Nagendra Yadav, Authorized Representative of the Department.
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