Full Judgment Text
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CASE NO.:
Appeal (civil) 1695 of 2006
PETITIONER:
Commissioner of Customs, Bangalore
RESPONDENT:
M/s Spice Telecom, Bangalore
DATE OF JUDGMENT: 19/10/2006
BENCH:
Ashok Bhan, Altamas Kabir & Dalveeer Bhandari
JUDGMENT:
J U D G M E N T
BHAN, J.
The question that arises in the present appeal is whether
Radio Terminals imported by the respondent-assessee (for
short the Respondent) should be considered as ’Base
Transceivers Station (BTS) ancillary equipment’ in order to be
given the benefit of exemption Notification No. 11/97-Cus.
Dated 1.3.1997, as amended by Notification No. 51/97 dated
2.6.1997.
Exemption Notification and its relevant entries :
The Central Government in exercise of powers conferred
by sub-section (1) of Section 25 of the Customs Act, 1962
issued a notification No. 11/97 dated 01.03.1997 in public
interest to exempt certain goods mentioned in the table of the
notification read with relevant list appended thereto from
payment of duty imported into India either in entirety or
partially.
Notification No. 11/97 was amended by Notification No.
51/97 on 2.6.1997 to include certain other goods from
payment of duty or partial duty. Relevant entries in List 9-B
are:
"1. Telephonic or telegraphic apparatus of the following
description:
(a) switching apparatus for cellular mobile
telephone service.
(b) base station controllers.
2. Radio communication equipment including VHS,
UHF and microwave communication equipment
with following description:
(a) base transceivers stations (BTS)
xxx xxx
5. BTS ancillary equipment."
[ Emphasis supplied ]
Facts:
Respondent placed a purchase order on M/s Italter SPA,
Italy, for the supply of 30 sets of Radio Terminals amongst
other items. Respondent cleared the said items at customs
on payment of applicable duties in a sum of Rs. 64,80,572/-
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without exemption but under protest. In the bill of entry the
goods were classified as falling under Entry No. 8525.2009.
Respondent had cleared identical goods imported at New
Delhi and claimed benefit of Notification No. 11/97 as
amended by Notification No. 51/97. The Bill of Entry
described the goods as radio equipment SRAL/7GHZ by the
8/2 MBPS under Tariff Heading 8525.20. Based on the
Respondent’s submissions and representation, Delhi Customs
extended the benefit of the said notification to the goods
imported by the Respondent.
Respondent filed a refund claim for an amount of R.
34,73,385/- on 26.8.1999 for the goods imported at
Bangalore. Respondent in the refund claim had annexed
thereto technical literature and details explaining the nature of
the equipment to show that radio terminals are to be classified
either as ’BTS’ equipment or ’ BTS ancillary equipment’.
Deputy Commissioner of Customs (Refunds) Bangalore
by his order dated 10.4.2000 rejected the Respondent’s claim
for exemption by holding that radio terminals are only
interconnectivity apparatus between BTS and the Main
Switching Centre (MSC). Deputy Commissioner took the view
that the notification gives exemption only to BTS and not to
parts. Radio terminals have an independent function and
identity and therefore are not a part of BTS or MSC. It was
accordingly held that the radio terminal is only part of cellular
network and the same cannot be treated either as BTS itself or
as an ancillary of BTS equipment.
Aggrieved by the order dated 10.4.2000 the respondent
preferred an appeal before the Commissioner of Appeals who
by his order dated 13.3.2003 dismissed the appeal by holding
that merely because the radio terminals are co-located at the
same site, it does not mean that the said equipment is a part
of the main equipment. The technical literature filed by the
respondent was disregarded and instead of applying the test of
co-location of the equipment dismissed the appeal.
Aggrieved by the order of Commissioner of Appeals
respondent filed an appeal before the Customs, Excise and
Service Tax Appellate Tribunal, South Zonal bench at
Bangalore (for short "the Tribunal"). The Tribunal by its order
dated 20.5.2005 after taking into consideration the technical
literature held that the radio terminals and antenna are
ancillary equipments of BTS and without radio terminals there
cannot be interconnectivity in the network system. The
Tribunal accordingly granted the benefit of the exemption
notification as had been given by the Delhi Customs House.
Aggrieved by the same revenue has come up in appeal.
Discussion :
It is the case of the respondent that the radio terminals
imported by it are BTS ancillary equipments, essential for
providing connectivity for use of cellular phones. Whereas
according to the Revenue the radio terminals are independent
equipment having independent identity and function and are
not ancillary equipments of BTS and are not covered under the
said exemption notification.
What is exempted under the notification is Base
Transmeter Station (BTS) or BTS ancillary equipment.
Ancillary has been assigned the meaning in various
dictionaries as :
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" P. Ramanatha Aiyar: The Lax Lexicon:
"aiding auxiliary; subordinate; attendant
upon; that which aids or promotes a
proceeding regarded as the principal.
A work is said to be "ancillary or
incidental" to a thing, trade, or business
when it is not necessary thereto or a
primary part thereof."
Stroud’s Judicial Dictionary:
"A work is said o be "ancillary or
incidental" to a trade or business when it
is not necessary thereto or a primary part
thereof."
This Court in Vareed Jacob vs. Sosamma Geevarghese,
2004 (6) SCC 378, has accepted the meaning assigned to the
word "ancillary" in The Lax Lexicon:
"The expression "ancillary" means; aiding
auxiliary; subordinate; attendant upon;
that which aids or promotes a proceeding
regarded as the principal."
In order to understand the nature of the goods, a brief
background of the cellular network system is required to be
understood, as per literature supplied to us on which the
reliance was placed by the Tribunal as well.
" A Cellular Network comprises of Main
Switching Centre (MSC) operating in tandem with
the following:
? Base Transceiver Stations
? Base Station Controller
? Transcoder
? Operation Maintenance Centre (OMC-R)
? Digital Cross Connect Systems.
BASE TRANSCEIVER STATION:
The Base Transceiver Station is the interface
between the cellular network and the mobile
subscriber. The basic funbction is to receiver
and transmit mobile calls from the subscriber
to the caller through the GSM cellular network
supported by BTS equipment and the following
anciallary equipments of BTS:
? Miscrowave Communication Equipments
(Radio Terminals & Antennas).
? Power Converter Unit
? Battery Back-up Unit
? GSM & Miscrowave Antennas
? Installation/Ancillary Items.
BTS equipment is a 19 inch cabinet consisting
of Transceiver Control Units, RF modules like
Combiner band pass filter, duplexer,
integrated antenna distribution unit (IADU),
Digital Cage consisting of Main Control Unit
(MCU), Fibre optic extender (FOX), Network
Interface unit (NIU), power supplies (NPSM &
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BPSM) and interconnecting feeder cables. The
BTS equipment operates in 900 MHz GSM
Band. The speech is converted into digital
mode by the mobile and sent to the BTS
situated at the caller’s area at 13 kbps and is
further transported to the BSC at 64 kbps
through the microwave radio terminal, which
is further routed to the MSC at 2 Mbps. The
BTS controls the operation of the subscriber
and enables handovers between cell (BTS)
when the mobile subscriber is traveling.
MISCROWAVE COMMUNICATION
EQUIPMENTS (RADIO TERMINALS &
ANTENNAS):
The Miscrowave Communication Equipment
comprises of radio terminals and Antennas.
The radio terminal is made-up of Indoor units
and outdoor units. The indoor unit consists of
Multiplexer, base Band Unit. The Miscrowave
Equipment operates at 7 Ghz/15 Ghz/23 Ghz
Radio Frequency and transports the already
converted digital speech and control
information from the BTS equipment to the
Base Station Controller (BSC ) through the
Outdoor units and antennas. Each
communication link consists of one set
comprising of two numbers radio terminal
(IDU, ODU) and antennas at both ends."
In order to have inter-connectivity Radio terminals
are a must. The technical literature produced indicates that
the radio terminal and antennas as ancillary equipment. It
"aids and attends" to discharge the functions it is meant to
discharge. The authority in original as well as the
Commissioner (Appeals) have held that radio terminals are
part of BTS therefore they are not eligible for exemption.
Upholding the said view would amount to reading ’ BTS
components’ in the notification instead of ’BTS ancillary
equipment’ which is not permissible under law.
The technical literature submitted makes it clear that
the radio terminals transport the already converted digital
speech from BTS equipment to the BSC (Base Station Control)
through the outdoor units and antennas. It demonstrates that
these radio terminals are solely and principally used with the
BTS and therefore they rightly qualify as BTS ancillary
equipments to be eligible to the benefit of Notification No.
11/97 dated 1.3.1997 as amended by Notification No. 51/97
dated 2.6.1997. Radio terminal is not independent equipment
having its own independent function. It cannot be termed as a
general purpose radio equipment as the technical literature
clearly indicates that this is specially designed to support
Mobile Communication Network in particular GSM. The
literature makes it abundantly clear that the radio terminal is
not a stand alone equipment and cannot function at all, on its
own, as contended by the Department. Revenue in its appeal
has admitted that the radio terminal functions as a radio wave
transmitter between BTS/BSC/MSC. Without this function
BTS/BSC/MSC will be rendered useless as there will be no
connectivity.
Revenue has relied upon the subsequent Notification No.
21/2002 dated 1.3.2002. The subsequent notification defines
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the scope of ancillary equipment for BTS by restricting the
entry to only three equipments, namely, i) Cellular repeaters,
ii) Amplifiers and iii) Waves Guides (List 22 S. No. 239 of the
Table). Radio terminals in this notification have not been
considered as ancillary equipment of BTS. Revenue contends
that Notification No. 21/2002 is clarificatory in nature and
would be applicable to the radio terminals imported by the
respondent in the year 1998 as well. We do not find any
substance in this submission. The subsequent notification
which defines the scope of ancillary equipment is effective only
from 1.3.2002 and does not have retrospective effect.
Respondent’s clearance pertains to July, 1998 and the
Notification No. 21/2002 has come into effect with effect from
1.3.2002. It would not apply to the goods which have already
been cleared. Notification No. 21/2002 cannot be given
retrospective effect. In the absence of any express provision
contained in the notification ordinarily it cannot be presumed
that the same is retrospective in nature. Learned counsel for
the Revenue has failed to show that the subsequent
notification is clarificatory in nature. Incidentally, it may be
mentioned that with regard to the identical goods imported
through Delhi, wherein the items were classified under the
same heading, Delhi Customs House extended the benefit of
the said notifications to the respondent.
Tribunal in its order after referring to the literature to
which we have also made the reference came to the
conclusion:
"\005From the above it is very clear that
without the Radio Terminals there cannot
be any interconnectivity between BTS and
BTS or BSC or MSC. In view of this the
Radio Terminals definitely qualify to be
ancillary equipments for BTS. On going
through the technical literature it is seen
that without the Radio Terminal there
cannot be any interconnectivity at all and
the Cellular Telephony System would not
work. Hence, we hold that the imported
items namely, Radio Terminals should be
considered as BTS ancillary equipments
and given the benefit of the above-
mentioned notification\005".
We do not find any infirmity at the finding arrived by the
Tribunal. The said finding is approved.
For the reasons stated above, we do not find any merit in
the appeal and dismissed the same leaving the parties to bear
their own costs.