Smart Cards Are Standalone Articles, Not Parts of Set-Top Boxes: CESTAT Quashes ₹56.47 Cr Duty Demand on Dish TV

Smart Cards Are Standalone Articles, Not Parts of Set-Top Boxes: CESTAT Quashes ₹56.47 Cr Duty Demand on Dish TV

Introduction

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has quashed a ₹56.47 crore customs duty demand against Dish TV India Ltd in a dispute over the classification of imported smart cards. The tribunal held that the smart cards were correctly classified as standalone articles with independent function and identity.

Factual Background

Videocon D2H Limited (now Dish TV India Ltd) imported viewing cards between July 2013 and March 2018 for use in its DTH set-top boxes. These cards enable conditional access to subscribed television content and are inserted into the STBs provided to customers. The company classified the imported cards under Customs Tariff Item (CTI) 8523 52 90, which specifically covers smart cards.

Procedural Background

The Directorate of Revenue Intelligence (DRI) alleged that the cards were misclassified and should be classified under CTI 8529 90 90 as parts of set-top boxes. The DRI demanded differential duty, which led Videocon to file an appeal before the CESTAT challenging the demand and classification.

Issues

1.  Classification of Imported Smart Cards: Whether the smart cards are correctly classified under CTI 8523 52 90 or CTI 8529 90 90 as parts of set-top boxes.
2.  Invocation of Extended Period of Limitation: Whether the extended period under Section 28(4) of the Customs Act can be invoked.

Contentions of the Parties

Appellant's Contention: Videocon contended that the imported viewing cards are standalone articles with independent function and identity and therefore cannot be classified as "parts" of set-top boxes. It argued that the goods were correctly classified under CTI 8523 52 90.

Respondent's Contention: The DRI alleged that the cards were misclassified and should be classified under CTI 8529 90 90 as parts of set-top boxes.

Reasoning and Analysis

The coram of Justice Dilip Gupta (President) and Technical Member P V Subba Rao observed that merely because the classification in the Bill of Entry does not conform to the view of DRI in hindsight, the goods will not be liable to confiscation. It held that a good will not become part of another good simply because it is used in conjunction with such good or because it is customized to work with that good.

Decision

The tribunal accepted Videocon's classification and set aside the demand of ₹56.47 crore, the confiscation of goods, and all penalties. The appeals filed by Videocon and its officials were allowed.

Implications

The judgment highlights the importance of correct classification of goods and the limitations on invoking the extended period of limitation under the Customs Act.

In this case the appellant was represented by Shri A.R. Madhav Rao, Shri Mukunda Rao and Shri Krishna Rao, Advocates. Meanwhile the Department was represented by Shri Gurdeep Singh, Special Counsel and Shri Rakesh Kumar, Authorized Representative.