RELIANCE COMMUNICATIONS INFRASTRUCTURE LTD. Vs. C.C. (I)
LAWS(CE)-2015-1-137
CUSTOMS EXCISE AND GOLD(CONTROL) APPELLATE TRIBUNAL
Decided on January 01,2015

Reliance Communications Infrastructure Ltd. Appellant
VERSUS
C.C. (I) Respondents


Referred Judgements :-

C K GANGADHARAN VS. COMMISSIONER OF INCOME TAX [REFERRED TO]


JUDGEMENT

P.R.CHANDRASEKHARAN - (1.)THE appeals are directed against Order -in -original No. 17/09 CC(I) JNCH, dated 19 -1 -2009 passed by the Commissioner of Customs (Imports), JNCH, Nhava Sheva.
(2.)Vide the impugned order the ld. adjudicating authority has classified the optical fibre cables imported by the appellant under CTH 9001 and denied the benefit of notification No. 24/2005 -Cus, dated 1 -3 -2005 claimed by the appellant, M/s. Reliance Communication Infrastructure Limited (RCIL in short) by classifying the product under CTH 8544. Consequently he has confirmed a differential duty demand of Rs. 2,68,50,476/ - along with interest thereon under the provisions of Sections 28 and 28AB of the Customs Act, 1962. Further he has confiscated the Optical Fibre Cables (OFCs in short) imported by the appellant valued at Rs. 21.76 Crore under Sections 111(m) and 111(o) of the Customs Act and has given an option to redeem the same on payment of a fine of Rs. 5 crore apart from imposing an equivalent amount of penalty on the importer under Section 114A of the said Customs Act. He has also imposed a penalty of Rs. 20 lakhs on Shri Narendra Patil, General Manager (Taxation) of the appellant firm under Section 112(b) of the said Customs Act. Aggrieved of the same, the appellants are before us. The facts relevant to the case are briefly as follows. Acting on intelligence that M/s. RCIL was importing optical fibre cables (OFCs in short) through various ports, namely, Nhava Sheva; ACC, Sahar; Kandla CFS and Mundra by mis -classifying the same under CTH 85.44 and claiming the benefit of Notification No. 24/2005 -Cus., dated 1 -3 -2005, investigation was initiated into the imports of OFCs by RCIL The investigation revealed that the appellant had imported OFCs under 35 Bills of Entry during April, 2003 to January, 2006 from different overseas suppliers. It was further noticed that the appellant had claimed exemption from payment of basic customs duty on OFCs under Notification No. 24/2005 -Cus. in respect of 10 bills of entry during the period March, 2005 to January, 2006, by wrongly classifying the goods under CTH 85.44. On completion of investigation, a show cause notice dated 8 -2 -2007 was issued to the appellant proposing re -classification of the goods under CTH 90.01 and demanding differential duty of Rs. 2,68,50,476/ - along with interest thereon. The notice also proposed to confiscate the goods under Sections 111(m) and 111(o) of the Customs Act and penalties on the appellant importer and on Shri Narendra Patil, General Manager and Shri Anil Kumar Singh, Vice President & Head (Exim Commercial). The said notice was adjudicated vide the impugned order and the proposals in the notice were confirmed. Hence the appeals before us. The ld. Counsel for the appellant made various submissions which are summarised as below: - -
2.1 The optical fibre cables imported by the appellant merits classification under CTH 8544 70 90 which covers optical fibre cables, made up of individually sheathed fibres, whether or not assembled with electric conductors or fitted with connectors. CTH 9001 covers Optical fibres, optical fibre bundles and optical fibre cables other than those of heading 85.44. CTHs 9001 and 8544 are mutually exclusive. Therefore, optical fibre cables are classifiable under CTH 8544.

2.2 The issue for consideration is whether the optical fibre cables imported by the appellant is made of individually sheathed fibres or not. Optical fibre for telecommunication purposes consists of three components, core, cladding and coating. The central region of the fibre is the glass core which ranges in diameter from 8 microns to 62.5 microns. Surrounding the core is a region called 'cladding' which is made of glass or silica and has a diameter of 125 or 140 microns. The third region is the dual layer acrylite or acrylate coating which is 60 microns thick that provides protection to the individual optical fibre.

2.3 As per the manufacturing process, in the first stage a preform is made from ultrapure vapours of silicon tetrachloride and germanium tetrachloride. In the preform, the core material containing germanium is deposited first followed by pure silica cladding. This preform is placed in a draw tower and drawn into a continuous strand of glass fibre and during the manufacture of individually sheathed optical fibre at the preform stage, a high thickness of clad with a very smaller core is achieved in one go. To get thinner core with thicker clad, additional sheathing of pure silica tube is done at the preform stage itself. Next, two layers of coating of acrylate is applied and the same is cured using ultraviolet lamps.

2.4 As per the book Fibre Optics by D.A. Hill, the cladding layer is sometimes known as sheath but the protective outer covering of a bundle of fibres is also termed as sheath. Thus it is clear that cladding is understood as sheathing in the context of optical fibre manufacture.

2.5 As per the certificate given by Corning Cable Systems, Australia, who is one of the suppliers of optical fibre cables imported by the appellant, optical fibre cables supplied by Corning are classified under CTH 8544 70 90 by the Customs authorities in USA, Canada, European Union, China, Japan and other far east asian nations.

2.6 As per the book Fibre Optics and Lasers by Sri Ajoy Ghatak and Sri K. Thiagarajan of IIT Delhi, "optical fibres are drawn in an extremely clean environment and are coated with polymers as they are being drawn. Covering the glass fibre with the polymer does not permit contact with the atmosphere and gives it the protection." Thus the polymer coating acts as a sheath. Commercial Rulings Division of the US Customs had ruled that Coming's LT Optical fibre cables composed of optical fibre coated with a combination of dual acrylate and additional thin layer of colour coating are considered as "individually sheathed" fibres classifiable under CTH 8544.

2.7 Prior to 1 -3 -2005, the rate of customs duty on OFCs falling under TI 8544 and TI 9001 was the same. From 1 -3 -2005 onwards, OFCs falling under TI 8544 were exempted from basic Customs duty under Notification 24/2005 -Cus., dated 1 -3 -2005. The appellant had imported OFCs vide 35 bills of entry during 4 -4 -2003 to 18 -1 -2006 and claimed classification under CTH 8544 70 90 in all the bills of entry which was accepted by the department. Only in respect of the 10 bills of entry filed after 1 -3 -2005, where the appellants claimed the benefit of Notification No. 24/2005, dispute relating to the classification has been made. Since there is no suppression or mis -declaration on the part of the appellant in respect of the 10 bills of entry, the demand raised under show cause notice dated 8 -2 -2007 is clearly time -barred.

2.8 The description of the goods in the bills of entry 5695, dated 4 -4 -2003 as "G652 Optical Fibre Cable with 48 core" is the same as that given in the corresponding invoice raised by the foreign supplier. Similarly in respect of bill of entry No. 102053, dated 18 -4 -2005 wherein the description is mentioned as "Optical Fibre Cable Arm G 652 UN/CN Tube PE 12F SM", it is the same as that given in the corresponding invoice. Thus the appellant has not indulged in any misdeclaration of the goods under import. Some of the consignments imported by the appellant have also been examined by the department before clearance was given. In these circumstances, the allegation of misdeclaration and invocation of extended time period for confirmation of duty demand is clearly not sustainable in law. In the show cause notice, it has been alleged that the bills of entry were self -assessed by the appellant which is clearly wrong. The self -assessment scheme came into force only in 2011 and during the period involved in the show cause notice, this charge will not hold at all.

2.9 In the impugned order, the adjudicating authority has ordered confiscation of the goods imported under Sections 111(m) and 111(o) of the Customs Act. Section 111(o) is invocable only when there is a post -importation condition required to be fulfilled and which has not been complied with. In the present case, the appellant has not claimed the benefit of any exemption subject to fulfilment of post -importation conditions. Therefore Section 111(o) has no application whatsoever. Further in the present case, the goods are neither seized nor available physically and therefore, there cannot be any confiscation with an option of redemption. Reliance is placed on the decisions of this Tribunal in the case of Shiv Kripa Ispat Pvt. Ltd. - 2009 (235) E.L.T. 623 (Tri. -LB) and the Bombay High Court decision in the Rishi Shipbreakers case in Customs Appeal No. 170 of 2009.

2.10 Inasmuch as the goods are not liable to confiscation, penalty is also not imposable on the appellant. Further as the dispute relates to classification and interpretation of tariff entries, no penalty can be imposed. Reliance is placed on the decisions of the Hon'ble Apex Court in the case of Northern Plastics Ltd. - : 1998 (101) E.L.T. 549 (S.C.) and of the Bombay High Court in the case of Gaurav Enterprises - : 2006 (193) E.L.T. 532 (Bom.) and Vodafone Essar South Ltd. - :2009 -TIOL -117 -H.C - MUM -CUS : 2009 (237) E.L.T. 35 (Bom.).

(3.)THE ld. special consultant appearing for the Revenue made the following arguments: - -
3.1 As per tariff description of Headings 8544 and 9001 read with the HSN explanatory notes, only optical fibre cables, made up of individually sheathed fibres are covered under CTH 8544 while such cables other than of Heading 8544 would come under Heading 9001. While classifying the goods under CTH 9001, the adjudicating authority has relied upon Board's circular No. 12/2006, dated 28 -2 -2006 and this Tribunal's decision in the case of Optel Telecommunication Ltd. - : 2005 (186) E.L.T. 109 (T) and the ruling of the Advanced Authority for Ruling in the case of Alcatel India Ltd. -, 2006 (197) E.L.T. 176 (AAR).

3.2 As per the Board's circular OFCs composed of fibres which are not individually sheathed would come under CTH 9001.

3.3 In the Optel Telecommunication case, this Tribunal held that OFCs of fibres which are not individually sheathed fall under CTH 9001 and it found no evidence or material to show that coating of LTV cured acrylate amounts to sheathing of optical fibres. It was further held that end -use cannot be the criterion for classification of OFCs.

3.4 In the Alcatel case (supra) dealing with the contention of the party that fibres are coated with different colours and are housed in jelly material which would amount to individually sheathing the fibre, the Authority held that coating and sheathing are two different entities. Based on the various information, technical or otherwise, the Authority was of the view that the nature and depth of coating or the degree of protection it seeks to provide, would not take it out of the realm of 'coating' and give it an identity of 'sheathing'.

3.5 Sri Manohar Rampal, Technical Expert of the appellant firm, in his statement dated 27 -10 -2006, has confirmed that the manufacturing process of optical fibre cables imported by the appellant was similar to that in the case of Alcatel covered by the Advanced Ruling Authority's decision and that described in the Optel case.

3.6 As regards the contention of time -bar raised by the appellant, the ld. special consultant submits that Sri Manohar Rampal, the technical expert with the appellant firm was responsible for technical specifications of the imported and indigenously procured goods and he was well aware of the nature of the goods imported. Further in respect of the domestically procured goods by the appellant, the same were being classified under CTH 9001. Therefore, the classification declared in the bills of entry by the appellant was intentional misdeclaration and suppression of true facts and hence the extended period of time is rightly invocable in the present case. There is no evidence led by the appellant to show that the goods imported were examined prior to clearance as claimed by the appellant and the appellant had availed self -assessment scheme for clearance of the goods.

In view of the above, he pleads for upholding the impugned order and rejecting the appeals.

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