SUPREME COURT OF INDIA
Commissioner of Customs, Bangalore
Vs
Messrs Spice Telecom, Bangalore
Appeal (Civil) 1695 of 2006
(Ashok Bhan, Altamas Kabir and, JJ)
19.10.2006
ASHOK BHAN, J.
The question that arises in the present appeal is whether Radio Terminals
imported by the respondent-assessee (for short the Respondent) should be
considered as 'Base Transceivers Station (BTS) ancillary equipment' in order to
be given the benefit of exemption Notification No. 11/97-Cus. Dated 1.3.1997,
as amended by Notification No. 51/97 dated 2.6.1997.
Exemption Notification and its relevant entries:
The Central Government in exercise of powers conferred by sub-section (1) of
Section 25 of the Customs Act, 1962 issued a
notification No. 11/97 dated 01.03.1997 in public interest to exempt certain
goods mentioned in the table of the notification read with relevant list
appended thereto from payment of duty imported into India either in entirety or
partially.
Notification No. 11/97 was amended by Notification No. 51/97 on 2.6.1997 to
include certain other goods from payment of duty or partial duty. Relevant
entries in List 9-B are:
"1. Telephonic or telegraphic apparatus of the following description:
(a) Switching apparatus for cellular mobile telephone service.
(b) Base station controllers.
2. Radio communication equipment including VHS, UHF and microwave communication
equipment with following description:
(a) Base transceivers stations (BTS)
5. BTS ancillary equipment."
[Emphasis supplied]
Facts:
Respondent placed a purchase order on M/s Italter SPA, Italy, for the supply of
30 sets of Radio Terminals amongst other items. Respondent cleared the said
items at customs on payment of applicable duties in a sum of Rs. 64, 80, 572/-
without exemption but under protest. In the bill of entry the goods were
classified as falling under Entry No. 8525.2009.
Respondent had cleared identical goods imported at New Delhi and claimed
benefit of Notification No. 11/97 as amended by Notification No. 51/97. The
Bill of Entry described the goods as radio equipment SRAL/7GHZ by the 8/2 MBPS
under Tariff Heading 8525.20. Based on the Respondent's submissions and
representation, Delhi Customs extended the benefit of the said notification to
the goods imported by the Respondent.
Respondent filed a refund claim for an amount of R. 34, 73, 385/- on 26.8.1999
for the goods imported at Bangalore. Respondent in the refund claim had annexed
thereto technical literature and details explaining the nature of the equipment
to show that radio terminals are to be classified either as 'BTS' equipment or
' BTS ancillary equipment'.
Deputy Commissioner of Customs (Refunds) Bangalore by his order dated 10.4.2000
rejected the Respondent's claim for exemption by holding that radio terminals
are only interconnectivity apparatus between BTS and the Main Switching Centre
(MSC). Deputy Commissioner took the view that the notification gives exemption
only to BTS and not to parts. Radio terminals have an independent function and
identity and therefore are not a part of BTS or MSC. It was accordingly held
that the radio terminal is only part of cellular network and the same cannot be
treated either as BTS itself or as an ancillary of BTS equipment.
Aggrieved by the order dated 10.4.2000 the respondent preferred an appeal
before the Commissioner of Appeals who by his order dated 13.3.2003 dismissed
the appeal by holding that merely because the radio terminals are co-located at
the same site, it does not mean that the said equipment is a part of the main
equipment. The technical literature filed by the respondent was disregarded and
instead of applying the test of co-location of the equipment dismissed the
appeal.
Aggrieved by the order of Commissioner of Appeals respondent filed an appeal
before the Customs, Excise and Service Tax Appellate Tribunal, South Zonal
bench at Bangalore (for short "the Tribunal"). The Tribunal by its
order dated 20.5.2005 after taking into consideration the technical literature
held that the radio terminals and antenna are ancillary equipments of BTS and
without radio terminals there cannot be interconnectivity in the network
system. The Tribunal accordingly granted the benefit of the exemption notification
as had been given by the Delhi Customs House. Aggrieved by the same revenue has
come up in appeal.
Discussion:
It is the case of the respondent that the radio terminals imported by it are
BTS ancillary equipments, essential for providing connectivity for use of
cellular phones. Whereas according to the Revenue the radio terminals are
independent equipment having independent identity and function and are not
ancillary equipments of BTS and are not covered under the said exemption
notification.
What is exempted under the notification is Base Transmeter Station (BTS) or BTS
ancillary equipment. Ancillary has been assigned the meaning in various
dictionaries as:
“P. Ramanatha Aiyar: The Lax Lexicon: "aiding auxiliary; subordinate;
attendant upon; that which aids or promotes a proceeding regarded as the
principal. A work is said to be "ancillary or incidental" to a thing,
trade, or business when it is not necessary thereto or a primary part
thereof." Stroud's Judicial Dictionary:
"A work is said o be "ancillary or incidental" to a trade or
business when it is not necessary thereto or a primary part thereof."
This Court in Vareed Jacob vs. Sosamma Geevarghese, 4,
has accepted the meaning assigned to the word "ancillary" in The Lax
Lexicon:
"The expression "ancillary" means; aiding auxiliary;
subordinate; attendant upon; that which aids or promotes a proceeding regarded
as the principal."
In order to understand the nature of the goods, a brief background of the
cellular network system is required to be understood, as per literature
supplied to us on whom the reliance was placed by the Tribunal as well.
“A Cellular Network comprises of Main Switching Centre (MSC) operating in
tandem with the following:
Base Transceiver Stations.
Base Station Controller.
Transcoder.
Operation Maintenance Centre (OMC-R).
Digital Cross Connect Systems.
BASE TRANSCEIVER STATION:
The Base Transceiver Station is the interface between the cellular network and
the mobile subscriber. The basic funbction is to receiver and transmit mobile
calls from the subscriber to the caller through the GSM cellular network
supported by BTS equipment and the following anciallary equipments of BTS:
Miscrowave Communication Equipments (Radio Terminals & Antennas).
Power Converter Unit.
Battery Back-up Unit.
GSM & Miscrowave Antennas.
Installation/Ancillary Items.
BTS equipment is a 19 inch cabinet consisting of Transceiver Control Units, RF
modules like Combiner band pass filter, duplexer, integrated antenna
distribution unit (IADU), Digital Cage consisting of Main Control Unit (MCU),
Fibre optic extender (FOX), Network Interface unit (NIU), power supplies (NPSM
& BPSM) and interconnecting feeder cables. The BTS equipment operates in
900 MHz GSM Band. The speech is converted into digital mode by the mobile and
sent to the BTS situated at the caller's area at 13 kbps and is further
transported to the BSC at 64 kbps through the microwave radio terminal, which
is further routed to the MSC at 2 Mbps. The BTS controls the operation of the subscriber
and enables handovers between cell (BTS) when the mobile subscriber is
traveling.
MISCROWAVE COMMUNICATION EQUIPMENTS (RADIO TERMINALS & ANTENNAS):
The Miscrowave Communication Equipment comprises of radio terminals and
Antennas. The radio terminal is made-up of Indoor units and outdoor units. The
indoor unit consists of Multiplexer, base Band Unit. The Miscrowave Equipment
operates at 7 Ghz/15 Ghz/23 Ghz Radio Frequency and transports the already
converted digital speech and control information from the BTS equipment to the
Base Station Controller (BSC ) through the Outdoor units and antennas. Each
communication link consists of one set comprising of two numbers radio terminal
(IDU, ODU) and antennas at both ends."
In order to have inter-connectivity Radio terminals are a must. The technical
literature produced indicates that the radio terminal and antennas as ancillary
equipment. It "aids and attends" to discharge the functions it is
meant to discharge. The authority in original as well as the Commissioner
(Appeals) have held that radio terminals are part of BTS therefore they are not
eligible for exemption. Upholding the said view would amount to reading ' BTS
components' in the notification instead of 'BTS ancillary equipment' which is
not permissible under law.
The technical literature submitted makes it clear that the radio terminals
transport the already converted digital speech from BTS equipment to the BSC
(Base Station Control) through the outdoor units and antennas. It demonstrates
that these radio terminals are solely and principally used with the BTS and
therefore they rightly qualify as BTS ancillary equipments to be eligible to
the benefit of Notification No. 11/97 dated 1.3.1997 as amended by Notification
No. 51/97 dated 2.6.1997. Radio terminal is not independent equipment having
its own independent function. It cannot be termed as a general purpose radio
equipment as the technical literature clearly indicates that this is specially
designed to support Mobile Communication Network in particular GSM. The
literature makes it abundantly clear that the radio terminal is not a stand
alone equipment and cannot function at all, on its own, as contended by the
Department. Revenue in its appeal has admitted that the radio terminal functions
as a radio wave transmitter between BTS/BSC/MSC. Without this function
BTS/BSC/MSC will be rendered useless as there will be no connectivity.
Revenue has relied upon the subsequent Notification No. 21/2002 dated 1.3.2002.
The subsequent notification defines the scope of ancillary equipment for BTS by
restricting the entry to only three equipments, namely, i) Cellular repeaters,
ii) Amplifiers and iii) Waves Guides (List 22 S. No. 239 of the Table). Radio
terminals in this notification have not been considered as ancillary equipment
of BTS. Revenue contends that Notification No. 21/2002 is clarificatory in
nature and would be applicable to the radio terminals imported by the
respondent in the year 1998 as well. We do not find any substance in this
submission. The subsequent notification which defines the scope of ancillary
equipment is effective only from 1.3.2002 and does not have retrospective
effect. Respondent's clearance pertains to July, 1998 and the Notification No.
21/2002 has come into effect with effect from 1.3.2002. It would not apply to
the goods which have already been cleared. Notification No. 21/2002 cannot be
given retrospective effect. In the absence of any express provision contained
in the notification ordinarily it cannot be presumed that the same is
retrospective in nature. Learned counsel for the Revenue has failed to show
that the subsequent notification is clarificatory in nature. Incidentally, it
may be mentioned that with regard to the identical goods imported through
Delhi, wherein the items were classified under the same heading, Delhi Customs
House extended the benefit of the said notifications to the respondent.
Tribunal in its order after referring to the literature to which we have also
made the reference came to the conclusion:
"From the above it is very clear that without the Radio Terminals there
cannot be any interconnectivity between BTS and BTS or BSC or MSC. In view of
this the Radio Terminals definitely qualify to be ancillary equipments for BTS.
On going through the technical literature it is seen that without the Radio
Terminal there cannot be any interconnectivity at all and the Cellular
Telephony System would not work. Hence, we hold that the imported items namely,
Radio Terminals should be considered as BTS ancillary equipments and given the
benefit of the above- mentioned notification".
We do not find any infirmity at the finding arrived by the Tribunal. The said
finding is approved.
For the reasons stated above, we do not find any merit in the appeal and
dismissed the same leaving the parties to bear their own costs.