Commissioner of Customs (Air) Chennai-VII Commissionerate v. M/s Redington (India) Limited

9. The controversy began when the Directorate of Revenue Intelligence (DRI), Bangalore Zonal Unit, initiated an investigation in 2017, alleging that the WAPs imported by the respondent were ineligible for the claimed exemption. Pursuant to the investigation, the Additional Director General of the DRI issued a Show Cause Notice (SCN) dated 13.12.2018, under Sections 28 and 124 of the Act. The SCN called upon the respondent to explain why the exemption benefit claimed under the notification should not be denied. The SCN noted that the exclusion entry (iv) of Serial No. 13 in the amended Notification No. 24/2005, which mentions “MIMO and LTE products”, should be interpreted to deny exemptions to all products operating on either MIMO or LTE standards. It was also mentioned that there are only two types of products in exclusion entry (iv) and the conjunctive „and‟ has been used without using the term „product‟ for both the items. It was further the Revenue‟s case that in case the purpose was to apply the said condition on the products having both MIMO technology and LTE standards and, therefore, Serial NO. 13(iv) should have read as „LTE products having MIMO technology‟ or „LTE products with MIMO technology‟. The SCN also noted that between the words „MIMO‟ and „LTE‟, the word „and‟ is placed, however, it is not followed by a comma. Reliance was placed on the decision in Sree Durga Distributors v. State of Karnataka: 2007 (212) ELT 12 SC.

10. The SCN further proposed to recover a total differential customs duty of ₹17,18,03,287/-, invoke the extended limitation period under Section 28(4) of the Act, confiscate the goods under Section 111(m) of the Act, and impose penalties under Sections 112, 114A, and 114AA of the Act. Similar notice was also issued to the respondent‟s director, Mr. E. H. Kasturi Rangan, proposing penalties for his alleged role in the claimed exemption.

11. However, the Additional Director General (Adjudication) [hereafter „the Adjudicating Authority‟], vide its Order-in-Original dated 29.11.2019, adjudicated the SCN in favor of the respondent. The Adjudicating Authority held that the WAPs imported by the respondent, which solely utilized the MIMO technology, were eligible for exemption under the amended Notification No. 24/2005. It observed that the language of the exclusion clause was clear and unambiguous, and the phrase “MIMO and LTE products” referred exclusively to products that used both the technologies together. The Adjudicating Authority further noted that treating the phrase as encompassing three categories of products — MIMO only, LTE only, and both MIMO and LTE — would amount to a distortion of the notification‟s language and intent, and would be against the principles laid down in Commissioner of Customs (Import), Mumbai v. Dilip Kumar & Co and Ors.: 2018 (361) ELT 577 (SC). It also held that the decision in Sree Durga Distributors v. State of Karnataka (supra) was not applicable since it is silent on a possible situation where a set of two words, having „and‟ in between them, is not followed by comma but by a „full stop‟. The Adjudicating Authority also acknowledged that the respssondent had provided all the necessary information in its declarations and bills of entry, which clearly identified the imported WAPs as MIMO-enabled products. It rejected the allegations of willful suppression of facts or misrepresentation by the respondent. The conclusion of the Adjudicating Authority and the final order passed by it are extracted hereunder:

1.[3] The demand of differential Customs duty of Rs.13,83,58,832/- on the impugned goods imported by them during the period from 11.07.2014 to 30.06.2017 is hereby dropped. 1.[4] No interest, on the duty foregone should be recovered from them under Section 28AA of the Customs Act, 1962; 1.[5] I do not impose any penalty under Sections 112 /l14A/114AA of the Customs, Act, 1962 on the Noticees. 1.[6] I do not appropriate the amount of Rs.2,00,00,000 (Rupees Two Crores only) paid by them voluntarily vide two TR-6/GAR[7] Challans No. 001373 dated 19/04/2018 and No.000248 dated 04/07/2018 towards the liabilities as proposed in the show cause notice. 1.[7] I do not impose any penalty under Section 112 or 114AA of the Customs Act, 1962 on Shri E. H. Kasturi Rangan, Whole Time Director, M/s Redington India Ltd., Chennai.

2. In respect of charges answerable to the Principal Commissioner/ Commissioner of Customs Chennai- II Commissionerate, Sea Port, Customs House 60, Rajajisalai, Chennai-600001:

2.1. The Access Points imported by M/s Redington India Ltd are classifiable under 85176290 of the Customs Tariff. Since these Access Points are having MIMO technology but without LTE standard, the Basic Customs Duty (BCD) exemption claimed under Notification NO. 24/2005-Cus dated 01.03.2005 as amended vide Notification No. 11/2014-Cus dated 11.07.2014 is allowed to them. 2.[2] I do not hold impugned goods imported by them liable for confiscation under Section 111(m) of the Customs Act, 1962, during the period from 11.07.2014 to 30.06.2017, with a declared Assessable value of Rs.39,78,50,088/- through Sea Port Chennai vide Bills of entry detailed in Annexure-C to the show cause notice. Therefore, 1 do not confiscate the same. 2.[3] The demand of differential Customs duty of Rs. 3,34,44,455/-on the impugned imported goods by them during the period from 11.07.2014 to 30.06.2017 is hereby dropped. 2.[4] No interest, on the duty foregone should be recovered from them under Section 28AA of the Customs Act, 1962; 2.[5] I do not impose any penalty under Sections 112/114A/114AA of the Customs, Act, 1962 on the Noticee. 2.[6] I do not impose any penalty under Section 112 and 114AA of the Customs Act, 1962 on Shri E.H. Kasturi Rangan, Whole Time Director, M/s Redington India Ltd., Chennai.”

12. Aggrieved by the aforesaid order, the Revenue filed an appeal (Customs Appeal No. 51823 of 2021) before the learned CESTAT, inter alia contending that the word “and” used in the exclusion entry

(iv) of Serial no. 13 should be interpreted disjunctively, thereby denying exemptions to products operating either on either MIMO technology or LTE standards. It was Revenue‟s case that the expression „products‟ appearing after LTE has to be read with MIMO as well since the expression „products‟ is a common factor for both MIMO and LTE.

13. However, the learned CESTAT, by way of the impugned order dated 30.10.2023, dismissed the Revenue‟s appeal and upheld the order of the Adjudicating Authority. The learned CESTAT observed that the word “and”, as used in exclusion entry (iv) of Serial No. 13, is conjunctive and must be interpreted strictly to refer to products employing both MIMO and LTE technologies together. It noted that exemption notifications must be construed narrowly to avoid frustration of their intended purpose. The learned CESTAT further highlighted that similar exemptions had been granted for identical products under subsequent notifications and in proceedings involving other importers. The relevant extracts of the impugned order are as under:

Oxford Dictionary of English, Third Edition: And: Used to connect words of the same part of speech, clauses or sentences, that are to be taken jointly; bread and butter they can read and write a hundred and fifty. Or: Used to link alternatives: a cup of tea or coffee are you coming or not either take taxis or walk everywhere... Collins Cobuild English Dictionary for Advanced Learners: And: You can use and to link two or more words, groups, or clauses. When he returned, she and Simon had already gone... Or: You can use 'or' to link two or more alternatives. Tea or coffee?... Cambridge Advanced Learners Dictionary, Fourth Edition: And: Used to join two words, phrases, parts of sentences, or related statements together: Ann and Jim; Boys and Girls; Knives and Forks And/ or used to mean that either one of two things or both of them is possible: Many pupils have extra classes In the evenings and/or at weekends. Or: Used to connect different possibilities. is it Tuesday or Wednesday today?"

20. It is also seen that the word 'products' is not used after the words 'Multiple Input/Multiple Output (MIMO)'. Infect, 'and' is used after the words 'Multiple Input/Multiple Output (MIMO)'. It is seen that in entry (iii) of the same Serial No. 13 of notification, every technology is followed by the word 'products': "Cartier Ethernet Switch, Packet Transport Node (PTN) products, Multiprotocol Label Switching-transport Profile (MPLS-TP) products

21. Learned special counsel for the appellant contended that clause (iv) would effectively mean and cover two categories of products, namely, (i) Multiple Input/multiple Output (MIMO) products and (II) Long Term Evolution (LTE) products and that MIMO products and LTE products are products which have distinct identities. Learned special counsel also contended that the expression 'Multiple Input/Multiple Output (MIMO)' appearing before 'and' does not, by itself, mean anything unless it is followed by expressions like 'technology' or 'products'. Since the exception carved out has to be 'goods', this expression has to be interpreted to connote products based on MIMO technology. Thus, the expression 'products', appearing after 'LTE' has to be read with 'MIMO' to mean and cover MIMO products. Further, 'products' being the common factor for both MIMO technology and LTE standard, the expression 'and' has been used in a conjunctive way to cover individually MIMO products and LTE products. Learned special counsel, therefore, contended that as there are only two types of products at Serial No. 13 (iv), the conjunctive 'and' has been used without using the term 'products' twice. There is, therefore, no ambiguity and the expression 'Multiple Input/Multiple Output (MIMO) and Long Term Evolution (LTE) Products" denotes Multiply Input/Multiple Output (MIMO) products on the one hand and Long Term Evolution (LTE) products on the other. There is, therefore, no need to refer to the World Trade Organisation ITA.

22. Though it is correct that clause (iv) would effectively mean include two categories of products namely MIMO and LTE and that they have distinct identities, but it is not possible to accept the Contention advanced by learned special counsel for the Department that MIMO does not by itself mean anything unless it is followed by the expressions 'technology' or 'products' and, therefore, since the exception carved out has to be 'goods', this expression has to be Interpreted to connote products based on MIMO technology.

23. What needs to be remembered is that MIMO is a technology and cannot be treated as an independent product. If the intention was to exclude even products having only MIMO technology, then the word 'products' should have been used after MIMO as well as after LTE. It, therefore, follows that the scope of 'products' excluded by entry (iv) would be products which use both MIMO and LTE. Thus, the term 'Multiple Input/Multiple Output (MIMO) and Long Term Evolution (LTE) Products' means products which contain both MIMO and LTE. This view finds support from the following decisions. * * *

27. This apart, what also needs to be noted is that India is a signatory to the Information Technology Agreement 18 dated 13.12.1996 by the World Trade Organization. The ITA requires each participant to eliminate and bind customs duties at zero for all products specified in the Agreement. India signed the Agreement on 01.07.1997. Pursuant to ITA, India introduced the notification. At the time of introduction, all goods falling under CTH 8517 were exempted from payment of duties. In 2014, on specified telecommunication products that were not covered under the ITA, the Government imposed customs duties by notification dated 11.07.2014. The Finance Minister's Budget Speech for the year 2014-15 and Tax Research Unit letter dated 10.07.2014 clarify that BCD on specified telecommunication products not covered under the ITA was being increased from NIL to 10%. As WAP is an Information Technology product and is specifically covered under the ITA as 'Network Equipment' in Attachment B, the intention was clearly not to exclude WAP imported by Beetal Teletech. The Network Equipment as defined in Annexure-B includes LAN and Wide Area Network 19 apparatus, including those products dedicated for use solely or principally to permit the interconnection of automatic data processing machines and units thereof for a network that is used primarily for the sharing of resources such as central processor units, data storage devices and input or output units - including adapters, hubs, in- line repeaters, converters, concentrators, bridges and routers, and printed circuit assemblies for physical incorporation into automatic data processing machines and units thereof. Imported WAP is a networking equipment working in LAN connecting Wi-fi enabled devices such as laptops, smartphones, tablets, etc. to a wired network. Thus also, imported WAP is entitled to the exemption from the whole of the customs duties under the ITA. * * *

29. It has been stated that the investigation by the DRI was not only against Reddington but few other importers of these goods also and the proceedings initiated against other importers was dropped but appeals have not been filed by the Department.

30. The aforesaid discussion leads to be inevitable conclusion that WAP imported by the appellant works on technology and does not support LTE standard. Beetal Teletech was, therefore, justified in claiming exemption from the whole of the customs duty under Serial No. 13(iv) of the notification. There is, therefore, no infirmity in the order dated 29.11.2019 passed by the Additional Director.

31. Such being the position, it would not be necessary to examine the other contentions raised by the learned counsel for the respondent, including the submission relating to the invocation of the extended period of limitation.

32. The appeal filed by the Department, therefore, deserves to be dismissed and is dismissed…”

14. Aggrieved by the decision of the learned CESTAT, the Revenue has filed the present appeal, challenging the learned CESTAT‟s interpretation of the exclusion entry (iv) of Serial No. 13 of the amended Notification No. 24/2005 and its findings on the eligibility of the imported MIMO-enabled WAPs for exemption from customs duty.

15. The respondent, conversely, has opposed the present appeal, inter alia, on the ground that the WAPs imported by it were rightly held eligible for exemption under Serial No. 13(iv) of the amended Notification No. 24/2005, as these WAPs operated solely on MIMO technology and did not support LTE standards, and there is no infirmity in the impugned order of the learned CESTAT.

THE DECISION

16. The core issue before this Court is whether the WAPs, which work on MIMO technology, imported by the respondent would qualify for an exemption from Basic Customs Duty.

17. It is apposite to note that the present appeal was heard along with CUSAA 38/2023, captioned Commissioner of Customs Air Chennai-VII Commissionerate v. M/s Ingram Micro India Pvt. Ltd., filed by the Revenue, assailing a similar order passed by the learned CESTAT. These appeals were admitted on the same question of law by this Court.

18. By way of judgment dated 13.01.2025 delivered today in CUSAA 38/2023, we have answered the question of law in favour of the respondent and against the Revenue, and held that the phrase “MIMO and LTE Products” in Serial No. 13(iv) of the amended Notification No. 24/2005 applies solely to products combining MIMO technology and LTE standards, and thus, the WAPs imported by the respondent, which employ MIMO technology but not the LTE standards, are entitled to the exemption from Basic Customs Duty.

19. In view thereof, we are of the opinion that the order of the learned CESTAT does not suffer from any infirmity or error and, is, therefore upheld.

20. Accordingly, in view of the detailed reasons and conclusion recorded in the judgment delivered in CUSAA 38/2023, the present appeal also stands dismissed.

21. Pending application also stands disposed of.

SWARANA KANTA SHARMA, J VIBHU BAKHRU, ACJ JANUARY 13, 2025