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Sun TV Network Ltd V/S Commissioner of Cus. (Sea-Port), Chennai

    Final Order Nos. 42245-42246/2017 in Appeal Nos. C/228/2008 and C/40506/2015-DB

    Decided On, 04 August 2017

    At, Customs Excise Service Tax Appellate Tribunal South Zonal Bench At Chennai

    By, MEMBER

    For Petitioner: Hari Radhakrishnan And For Respondents: A. Cletus, ADC (AR)

Judgment Text

1. Both these appeals involving same appellant and similar/connected issues, they are taken up for common disposal.

1.1 Appeal No. C/00228/2008 :- M/s. Sun TV Network Ltd., (hereinafter referred to as "M/s. STNL"), the appellant herein filed a Bill of Entry, dated 12-6-2007 for clearance of one Unit of "9.3 Meter Compact Cassegrain Antenna Sub-system - Model 9.3 KPK" (hereinafter referred to as "CCAS") classifying it under CTH 8529 10 19 with declared assessable value of Rs. 68,11,430/- and claiming duty benefit under Customs Notification No. 25/2005 (Sl. No. 15) as 'aerials' or 'antennae' of a kind used for 'radio-telephony' and 'radio-telegraphy'. It appeared from scrutiny of the import documents, that goods imported were "Sub-systems" and not "Antenna". It further appeared that the goods were for, television broadcast and not for 'radio telephony' or 'radio-telegraphy' and hence not eligible for Customs Notification No. 25/2005, since that was applicable only for 'aerials'.

1.2 Proceedings were initiated against the appellants, which culminated in adjudication and issue of impugned order, dated 8-5-2008, which, inter alia, held that imported goods were not 'antenna' but only a 'sub-system' useful only for television broadcasting, denied the benefit of Customs Notification No. 25/2005, redetermined the declared value to USD 2,76,886 (F.O.B.), and confirmed differential duty of Rs. 27,17,073/-. Further, the goods were confiscated, however, given an option for redeeming them with redemption fine of Rs. 15,00,000/-, in lieu of confiscation. Penalty of Rs. 7,50,000/- was also imposed on appellants under Section 112(a) of the Customs Act. Enhancement of value was done based on allegedly identical goods imported by appellants vide a Bill of Entry No. 475717, dated 4-6-2007 for Unit price of USD 2,39,000 (F.O.B.) and that in-plant charges of USD 75,772 for two Units. Hence, appeal No. C/00228/2008.

2.1 Appeal No. C/40506/2015 :

Appellants had also imported two Units of "CCAS" vide Bill of Entry, dated 4-6-2007. Department took the view that the imported goods are 'Antenna Sub-system' and not 'antenna', hence, goods were not eligible for benefit of Customs Notification No. 21/2002-Cus., dated 1-3-2002 (Sl. No. 244), which covers only List 26, Entry 11 'antennas'.

2.2 Proceedings were initiated by issue of a demand notice dated 1-11-2007, which culminated into an order dated 5-11-2013 of original authority confirming denial of benefit of Customs Notification No. 21/2002-Cus., dated 1-3-2002 to the imported goods and confirming demand of differential duty of Rs. 43,03,619/-. Enhancement of value was made by addition of notional freight and insurance at the rate of 20% and 1.125% respectively to the F.O.B. value under Rule 9(2) of CVR, 1988. Hence, appeal No. C/40506/2015.

3. On 4-8-2017, when these appeals came up for hearing, on behalf of the appellants, Learned Advocate Shri Hari Radhakrishnan made oral and written submissions, which can be summarized as under :-

3.1 In appeal No. C/00228/2008, benefit of Notification No. 25/2005 (Sl. No. 15) has been denied on the ground that appellants had imported 'Antenna Sub-system" used in television broadcasting and not for 'radio-telephony' or 'radio-telegraphy'. It is contended that the 'antenna' is used with apparatus, which transmits radio signals, which in turn can be transmitted through 'telephony', 'telegraphy' or 'television'. Even if the goods imported are used for transmitting radio signals for 'television', however, the 'antenna' is of the kind, which is used in apparatus of 'telephony' and 'telegraphy'.

3.2 So also, adoption of value for goods imported by Bill of Entry No. 475717, dated 4-6-2007 is not correct, since the later import relates to "Two Units of 9.3 Meter Compact Cassegrain Antenna Sub-system-Model 9.3 KPCC", whereas, in appeal No. C/00328/2008 goods imported was "one Unit of "9.3 Meter Compact Cassegrain Antenna Sub-system - Model 9.3 KPK."

4. In respect of appeal No. C/40506/2015, Learned Advocate contends that they had submitted detailed packing list to demonstrate that all the components of 'antenna' have been imported in a disk assembly condition. Further, though the import or invoice used the words "Antenna Sub-system", what has actually been imported is in fact the complete 'antenna'. Therefore, denial of Notification benefit of 21/2002-Cus., on the ground that imported item was not complete 'antenna' is not correct. They have produced 'Freight Certificate' issued by the 'freight forwarder' and also a specific 'Insurance Certificate before the Commissioner (Appeals). However, that has not been considered and value has been enhanced unilaterally.

5. On the other hand, Learned Authorised Representative supports the impugned orders.

6. Heard both sides and we have gone through the facts.

7.1 We, first intend to take up the dispute in respect of appeal No. C/00228/2008. The adjudicating authority has denied the benefit of Notification No. 25/2005 (Sl. No. 15) on the grounds that the goods imported are 'Antenna Sub-systems" used for television broadcasting purpose and not those used for 'telephony' and 'telegraphy'. In this regard, we find that the lower authority has analyzed the technical aspects concerning frequencies used for radio and television broadcasting in great depth. He has found that radio waves are having frequency in the range of 3 Hertz. to 300 Giga Hertz, and are divided into 11 bands of various frequencies such as, Extremely Low Frequency (ELF), Super Low Frequency (SLF), Ultra Low Frequency (ULF), Very Low Frequency (VLF), Low Frequency, Medium Frequency, Very High Frequency (VHF), Ultra High Frequency (UHF), Super High Frequency (SHF) and Extremely High Frequency (EHF), that for 'telephony' and 'telegraphy' purposes ratio waves having frequencies up to 3000 Mega Hertz. 3 (Giga Hertz) are used. Radio frequency in the range of 4 Giga Hertz, and 8 Giga Hertz are called 'C band' and that of 12 Giga Hertz. and 18 Giga Hertz. is known as 'Ku band' (Hurtz-under band). C band satellite uses 3.7 to 4.2 Giga Hertz, for downlink and 5.925-6.425 Giga Hertz, for uplink and primarily used for open satellite communication, whether for full time satellite TV network or raw satellite feeds. The 'Ku band' primarily is used for satellite communication particularly for editing and broadcasting satellite television. This band is split into multiple segments broken down in geographical regions, as determined by the International Telecommunication Union (hereinafter referred to as, "ITU"). The Ku band is a portion of the electromagnetic spectrum in the microwave range of frequencies ranging from 11.7 to 12.7 Giga Hertz, (downlink frequencies) and 14 to 14.5 Giga Hertz, (uplink frequencies). Ku band satellites are also used for backhauls and particularly for satellite from the remote locations back to a television network's studio for editing and broadcasting.

7.2 From the catalogue produced by the importer and from the website of the supplier, it was found that the CAS are designed for 3.4 to 15 Giga Hertz. frequency operation and the minimum frequency used for downlink is 3.625 Giga Hertz, and the maximum frequency used for unlinking is 14.500 Giga Hertz.

7.3 In the event, the adjudicating authority has correctly concluded that the subject imported goods cannot be considered as 'of a kind used in the apparatus' for 'radio telephony' and 'radio telegraphy', leave alone the issue of whether the goods are 'antenna' or 'antenna sub-system'.

7.4 Once it is established that the imported goods are not of a type used with apparatus for 'radio-telephony' and 'radio-telegraphy', the benefit of Notification No. 25/2005 will then not be applicable to such goods. The appellants' protestations on this score hence do not carry merit. It is also pertinent to note that in a proximate import vide Bill of Entry No. 475717, dated 4-6-2007, an identical "Antenna Sub-system" had been imported. Interestingly, however, importer in that case did not choose to seek benefit of Notification No. 25/2005-Cus., available to 'aerials' or 'antenna' used for 'radio-telephony', or 'radio-telegraphy' but instead chose to seek the benefit of another Notification No. 21/2002 (Sl. No. 344), which was specifically meant for import of 'antennas.'

7.5 Coming to the valuation aspect, we do not find any infirmity in the adjudicating authority placing reliance on declared values in respect of identical import of the same goods, by appellant themselves, within a month of the import in the present case. On this score also, we do not find any merit in the appellant's appeal.

7.6 Coming to the matter of imposition of redemption fine and penalty, we find that the goods have been confiscated after their clearance and when they were not physically available. It is not the allegation that goods were cleared under bond or under a specific post-import condition, which, at the most, would have justified such confiscation even if they had been physically unavailable. This, however, is not the case. In the event, we have no hesitation in setting aside that part of the impugned order confiscating the goods under the Customs Act and imposing fine of Rs. 15,00,000/- under Section 125(1) ibid in lieu of confiscation.

7.7 It is also an admitted fact that the entire dispute relates to one of interpretation on the type of radio/broadcasting frequencies that can be handled by the imported goods. In fact, as already discussed herein above, even the adjudicating authority had to go to great technical depths to arrive at the correct nature of the imported goods for the purpose of denying the notification benefit. In this factual matrix, the penalty of Rs. 7,50,000/- under Section 112(a) imposed on the appellants is an overkill and cannot be sustained. We, therefore set aside the same.

7.8 Appeal No. C/00228/2008 is partly allowed as above.

8.1 Coming to appeal No. C/40506/2015, first dispute emanates from the belief of the department that imported item is not 'antenna' but 'antenna subsystems' and hence cannot get benefit of Notification No. 21/2002-Cus., dated 1-3-2002 (Sl. No. 244). In respect of this issue, appellants have alluded to the details in the packing list, which give the list of all items as well as packs of crates/panels details. Appellants have also contended that the WPC Licence has been issued to the appellants for import of 'antenna' only and not 'parts of antenna' and that the same has been ascertained by the Customs officer at the time of clearance of the goods and the said officer has also countersigned the WPC Licence. We find that although the demand notice dated 1-11-2007 alleges that the goods imported as 'sub-assembly of antenna' and not 'antenna', there is no reasoning given in the notice for such an allegation. Even in the order dated 5-11-2013 of original authority, the discussion therein on this point are only restricted to the finding that "supplier invoices shows that the goods imported are "antenna sub-systems". In response to the show cause notice, appellants vide their letter dated 13-11-2007 and also in the personal hearing had contended that the 'antenna 9.3 meters' is imported in knocked down condition and reassembled as a completed Unit at their site. Appellants also pointed out the hubs in 'antenna' are the centre part of the 'antenna' holding the ribs of the antenna. However, none of these conditions have been addressed by the original authority or even by the lower appellate authority in the impugned order. No technical opinion of an expert in the field has been brought out by the department to support their contention that the imported item is only 'sub-assembly' and not the full 'antenna'. In view thereof, denial of the benefit of the Notification No. 21/2002, dated 1-3-2002 (Sl. No. 244) to the imported items on this ground cannot be sustained and will have to be set aside, which we hereby do.

8.2 Coming to the second issue concerning addition of notional freight and insurance charges to the declared value for the purpose of assessment of duty, appellants contend that they have produced the Arrival Notice/Invoice No. MAA-42016 (OI), da

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ted 4-6-2007 issued by M/s. Eagle Global Logistics (I) Ltd., (hereinafter referred to as "M/s. EGL"), wherein it is clearly mentioned "collect international ocean freight Rs. 14,60,063.80". The appellants also produced the policy issued by the National Insurance Co. Ltd. It was also explained that the insurance was taken for a value of Rs. 9,25,15,500/- on payment of premium of Rs. 1,01,763/-. However, the original authority has held that this does not hold valid without submission of evidence of payment of freight and insurance from concerned authorities. We are at a loss to understand as to what the "original authority is alluding to. Lower authority has no doubt referred to copy of the insurance book and copy of the arrival notice as proof of insurance and freight submitted by the appellants. However, the said appellate authority has discarded these documents on technical grounds, for example, that mode of transport is mentioned as "Air" in insurance policy. We are afraid that this manner of addition of notional freight and insurance in the face of proof produced by the importer is arbitrary, to say the least, and cannot be sustained. In view thereof, the impugned order is set aside in toto and the Appeal No. C/40506/2015 is allowed with consequential benefits, if any, as per law. Appeal Nos. C/228/2008 and C/40506/2015 disposed of on above terms.