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CESTAT: Communication Modules Are Independent Parts Of Communication Hubs Or Smart Meters

CESTAT: Communication Modules Are Independent Parts of Communication Hubs or Smart Meters
The New Delhi Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has ruled that imported communication modules function independently as parts of communication hubs and should be classified under Customs Tariff Item (CTI) 8517 70 90.
The bench, comprising Judicial Member Binu Tamta and Technical Member P.V. Subba Rao, observed that since the communication modules were imported separately, they must be classified accordingly. The tribunal affirmed that "the correct classification of the communication modules is CTI 8517 70 90."
It further stated that "since communication modules are imported as such and not as part of either the communication hubs or smart meters, they ought to be classified ‘as such’ under CTI 8517 70 90 in accordance with Note 2(a) to Section XVI. Consequently, the goods were also eligible for corresponding exemptions."
The case revolved around the classification of communication modules used in the manufacturing of smart meters. The Principal Commissioner had rejected the importer’s claim that these modules should be classified under CTI 8517 70 90 as parts of communication hubs. Instead, the Commissioner ruled that they should fall under CTI 9028 90 10 or CTI 9028 90 90 as parts of electricity or gas meters.
The core question before the Tribunal was whether these communication modules should be classified under CTI 9028 90 10 / 9028 90 90 or under CTI 8517 70 90, as per the First Schedule to the Customs Tariff Act, 1975.
The importer/appellant argued that the communication modules function independently as parts of communication hubs, specifically designed for data reception and transmission, and therefore, should be classified under CTI 8517 70 90. Additionally, they contended that Notes 3 and 4 to Section XVI of the Customs Tariff Act apply to composite machines, but in this case, only individual components (communication modules) were imported, not composite machines.
On the other hand, the Revenue authorities contended that the importer was bringing in communication modules intended for smart energy meters and was misclassifying them under CTI 8517 70 90 to avail benefits under Notification No. 24/2005-Cus. (dated 01.03.2005, Sl. No. 13) and Notification No. 57/2017-Cus. (dated 30.06.2017, Sl. No. 5).
These exemptions apply only to goods classified under CTH 8517, whereas the Revenue argued that the goods should be classified under CTI 9028 90 10 (for electricity meters) or CTI 9028 90 90 (for gas meters).
The Tribunal ultimately overturned the Principal Commissioner's classification, rejecting the Revenue's argument that the communication modules should be classified as parts of electricity or gas meters under CTI 9028 90 10 / 9028 90 90.
The bench further opined that the charge of customs duty under Section 12 applies only to goods in the form in which they are imported into India and not what they may become after importation. Since the charge is imposed on the imported goods, the duty must be assessed based on their original form at the time of import.
In light of these observations, the Tribunal ruled in favor of the assessee, allowing the appeal while dismissing the Revenue's appeal.