L.G. Electronics Not Entitled To Claim Concessional Rate Of Basic Customs Duty On Import Of G-Watch: CESTAT
Mariya Paliwala
2 Dec 2023 1:30 PM IST
The Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the assessee, L.G. Electronics, is not entitled to claim the concessional rate of basic customs duty on the import of G-Watch.The bench of Rachna Gupta (Judicial Member) and Hemambika R. Priya (Technical Member) has observed that once the G-Watch works on the internet, it is not acceptable that...
The Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the assessee, L.G. Electronics, is not entitled to claim the concessional rate of basic customs duty on the import of G-Watch.
The bench of Rachna Gupta (Judicial Member) and Hemambika R. Priya (Technical Member) has observed that once the G-Watch works on the internet, it is not acceptable that its essential character remains that of timekeeping only. Thus, the section notes and chapter notes of Chapter 85 are most relevant for the purpose of classifying the imported G-Watch (Smart Watch), which is a device capable of transferring data and even making or receiving phone calls, which was not the intent of the section notes and chapter notes of Chapter 91. Hence, the right classification for the imported product is 8517 6290.
The appellant/assessee had imported 2000 units of “G Watch (Smart Watch)” from the Republic of Korea. They had classified the goods under CTH 91021900 and assessed the basic customs duty at the rate of ‘NIL’ BCD after claiming the benefit of entry serial no. 955 of Notification No. 152/2009-Cus., dated December 31, 2009. However, IGST at the rate of 18% was paid.
The Department observed that the imported goods, “G Watches,” are capable of performing many functions other than those related to timekeeping, and as such, the smart-watches are different from those classifiable under CTH 91021900. The department formed an opinion that such a kind of apparatus or device merits classification under CTH 85176290.
The Show Cause Notice was served upon the appellant, proposing rejection of the classification claimed by the appellant, i.e., under CTH 91021900. It is proposed that the imported goods be classified under 85176290, to which the duty exemption, as availed, is not applicable.
The short payment of customs duty with respect to the import of the goods via two Bills of Entry was proposed to be recovered along with the interest. The imported goods were proposed to be held liable for confiscation. In addition, the penalty was also proposed to be imposed on the appellant. The proposal has been confirmed. While ordering confiscation, the option to impose a redemption fine has not been given, and a penalty of Rs. 8,00,000 has been imposed on the appellant under Section 112(a) of the Customs Act, 1962. Being aggrieved, the appellant is before this Tribunal.
The assessee contended that under Chapter 85 CTH 8517, the goods covered are telephone sets and other apparatus for communication in a wired or wireless network. Whereas the goods covered under CTH 9102 are wrist watches, pocket watches, etc., as the heading suggests, there is no denying that the imported goods are wrist watches for observing time. The brochure of their company describing the imported goods has also been elaborated. From no stretch of the imagination, they can be called telephone sets or other apparatus; hence, the correct classification is CTH 91021900.
The department contended that the declared classification 91021900 covers electrical wrist watches working on the basis of quartz movement. But as per the appellant’s own brochure or catalogue, the G watch, except for being a wearable wrist device and having two moving hands to show time, has combined mechanical movements with digital functionalities including an LCD display, touch sensitivity, microphone, WiFi, and Bluetooth connectivity, and it needs an operating system as provided by Google. Even the initial setup of time is done by syncing the installed device with the user's phone. On the contrary, wrist watches and non-smart watch timepieces are set manually.
The tribunal held that the product imported has mechanical hands and quartz movements that are identical to those of a wrist watch and that this apparatus is also wearable on the wrist. It is a clear case of misunderstanding on the part of the appellant. The question of invoking penal provisions does not at all arise in this circumstance.
Counsel For Appellant: Jyoti Pal and Amitabh Amrit
Counsel For Respondent: Rajesh Singh
Case Title: M/s. L.G. Electronics India Private Limited Versus Principal Commissioner of Customs
Case No.: Customs Appeal No. 50234 of 2021 [DB]
