Wired Headset Not A Part Of Any Mobile Phone: CESTAT Allows Customs Duty Exemption
The Delhi Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has allowed the customs duty exemption on Earphones.The bench of Dr. Rachna Gupta (Judicial Member) and P. V. Subba Rao (Technical Member) has observed that all goods falling under CTH 8518 are exempted by S. No. 18 of the notification, excluding some ‘parts of the cellular mobile phones’...
The Delhi Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has allowed the customs duty exemption on Earphones.
The bench of Dr. Rachna Gupta (Judicial Member) and P. V. Subba Rao (Technical Member) has observed that all goods falling under CTH 8518 are exempted by S. No. 18 of the notification, excluding some ‘parts of the cellular mobile phones’ including ‘headsets’. S. No. 18 does not exclude all earphones but only headsets, which are parts of cellular mobile phones. The earphones are not parts of any mobile phone but are accessories that can be used with a variety of electronic gadgets, including cellular mobile phones.
During the post-audit clearance, the Department noted that the appellant or assessee was not entitled to the benefit of this exemption notification because the earphones were "wired headsets" and were parts of cellular mobile phones. Hence, the earphones were excluded from S. No. 18 of the Exemption Notification.
The department stated that the appellant had to pay duty at the tariff rate of 15%. Show cause notices were issued to the appellant, proposing the recovery of the differential duty along with interest and the imposition of the penalty.
The Principal Commissioner Party dropped the demand as it pertained to earphones CX 180 (which do not have microphones) but confirmed the demand on earphones CX 275 (which have microphones). The commissioner held that the CX 275s is a wired headset and hence is not eligible for the benefit of the exemption notification.
The assessee contended that the functionality of the earphones does not depend on the mobile phones, nor are the cellular mobile phones dependent on the earphones for their functions. Therefore, earphones cannot be considered part of cellular mobile phones. Earphones qualify as accessories to cellular mobile phones because they are not part of them but enhance the enjoyment of mobile phones. Anything that is not a part but adds value and utility to the device is an accessory.
The department contended that any exemption notification must be strictly construed and that any benefit of doubt must be given to the Revenue and not to the assessee. In entry S. No. 18 of the exemption notification, wired headsets have specifically been excluded, and earphone model CX 725s is an earphone with an in-built microphone, so it qualifies as a wired headset. The term part of a cellular mobile phone is used in the exemption notification in a very general sense. Therefore, any technical interpretation to distinguish between parts and accessories is neither required nor relevant.
The tribunal noted that the earphones CX 275s can be used with a variety of devices, including cellular mobile phones, and they, therefore, cannot be considered part of any of the devices, including cellular mobile phones.
Case Title: M/S Sennheiser Electronics India Pvt Ltd Versus Principal Commissioner, Customs (Import)Inland Container Depot
Case No.: Customs Appeal No. 50983 Of 2020
Date: 19/07/2023
Counsel For Appellant: Priyanka Rathi
Counsel For Respondent: Manish Kumar Chawda