The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi has allowed an appeal filed by Bharti Airtel Limited, setting aside an order passed by the Principal Commissioner of Customs which had reclassified certain imported telecom equipment components and confirmed differential customs duty, interest and penalties by invoking the extended period of limitation. The Tribunal held that the imported items were parts of routers, classifiable under CTI 8517 70 90, and not independent “network interface cards” or communication apparatus under CTI 8517 62 90.
The dispute arose from imports made by Bharti Airtel during the period April 7, 2017 to March 9, 2018, covering items such as Modular Port Concentrators (MPCs), Modular Interface Cards (MICs), Fixed Configuration MPCs, Switch Control Boards and Switch Fabric Boards, used in Juniper routers. Airtel classified these items as “parts” of routers and claimed a nil rate of basic customs duty. The Department, however, reclassified the goods as network interface cards or other communication apparatus, alleging that they had independent functionality, and issued a show cause notice dated April 6, 2020 invoking the extended period under Section 28(4) of the Customs Act, 1962.
The Bench comprising Justice Dilip Gupta (President) and P.V. Subba Rao (Member–Technical) noted that routers consist of multiple interdependent components, none of which can perform the routing function independently. Relying on a detailed manufacturer’s certificate issued by Juniper Networks, the Bench held that the imported items had no standalone functional utility and could operate only when installed in a router chassis along with other essential components.
The Tribunal further applied the tests under Section Note 2 of Section XVI of the Customs Tariff, that the goods did not have an independent or individual function and were therefore correctly classifiable as parts under CTI 8517 70 90. On the issue of limitation, the Tribunal rejected the Department’s contention that self-assessment automatically justified the invocation of the extended period. The Tribunal held that mere self-assessment or difference of interpretation does not establish wilful misstatement or suppression. Since the dispute involved the interpretation of tariff entries and Airtel had acted on a bona fide belief supported by precedent, the extended period of limitation was deemed unsustainable.
Accordingly, the Tribunal set aside the impugned order dated October 4, 2023, quashed the demand of differential duty, interest and penalties, and allowed the appeal.
Appearances:
For the Appellant – Advocate Shashi Mathew, Mr. Abhishek, Ms. Lopa Mudra and Ms. Yashika Soni.
For the Respondent – Authorised Representative Shiv Shankar
