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CASE NO.:

Appeal (civil) 1695 of 2006

PETITIONER:

Commissioner of Customs, Bangalore

RESPONDENT:

M/s Spice Telecom, Bangalore

DATE OF JUDGMENT: 19/10/2006

BENCH:

Ashok Bhan, Altamas Kabir & Dalveeer Bhandari

JUDGMENT:

J U D G M E N T

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)

xxx xxx

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/-

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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 :

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" 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,

2004 (6) SCC 378, 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 which 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 &

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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

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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:

"\005From 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\005".

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.