2026-VIL-884-CESTAT-DEL-CU
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CUSTOMS CESTAT Cases

Customs - Classification of Optical Network Terminals/Units (ONT/ONU) and Optical Line Terminals (OLT) under Customs Tariff – Appellant classified Optical Network Terminals/Units and Optical Line Terminals under Customs Tariff items relating to subscriber end equipment and claimed exemption from duty, whereas the revenue authority classified them under machines for reception, conversion and transmission of data - Whether the ONT/ONUs and OLTs imported by the appellant are classifiable under CTI 8517 62 90, as held in the impugned order or under CTI 8517 69 50 (OLT), as asserted by the appellant - HELD - Since the function and purpose of the disputed goods is to receive broadband internet connection through optical fiber and transmit it to various devices of the subscriber, they constitute machines for reception and transmission of data. The Customs tariff sub-heading covering subscriber end equipment is a residual category that can only apply to goods not falling under more specific headings relating to machines for transmission and reception of data - Even though subscriber end equipment is a specific heading, it cannot override the more specific classification if the goods clearly perform the function of receiving and transmitting data. Once it is accepted that the ONTs/ONU are meant for reception and transmission of data, the irresistible conclusion is that they fall under CTI 8517 62 and, therefore, they cannot be fall under CTI 8517 69. Accordingly, the classification of both Optical Network Terminals/Units and Optical Line Terminals deserve to be classified CTHS 8517 62 and cannot be classified under CTHS 8517 69 which is the residual category - the appeal is partly allowed and partly remanded – Ordered accordingly - Classification of optical line terminal (OLT) – HELD - These are the equipment which are installed at the end of the internet service providers and they provide the link between the ISP and the subscriber to provide the broadband. These are also machines which receive and transmit data and, therefore, they deserve to be classified under six digit CTSH 8517 62. Only goods which are not machines for reception or transmission of data will fall under the residual category of “others” (CTSH 8517 69). The appellant’s claim of classification of these OLTs under CTI 8517 69 90 cannot be accepted - Whether the appellant was entitled to the benefit of the Notification No. 24/2005-Cus as amended (S.No. 13A) on ONT/ONU and Notification No. 57/2017-Cus (S.No. 20) on OLT – HELD - Denial of exemption notification No. 24/2005-Cus dated 01.03.2005 (as amended) (Sr. No. 13B) on the ground that the goods were Optical Transport Network Products is remanded back to the Commissioner to consider the report of the Telecom Expert submitted by the appellant which specifically states that the ONT/ONU were not optical transport network products. The Commissioner may examine/ cross examine the expert and decide this question - Invocation of Extended Period of Limitation under Section 28(4) of the Customs Act – HELD - The extended period of limitation cannot be invoked merely because the importer changed the classification of goods under different bills of entry. The court reasons that although the importer had initially classified goods under one tariff item and subsequently changed the classification in disputed bills of entry, this change by itself does not prove collusion, willful misstatement or suppression of facts, which are the essential ingredients for invoking the extended period of limitation. Claiming a particular classification or notification based on the importer's understanding, even if later found to be incorrect, does not amount to willful misstatement or suppression of facts. Accordingly, the extended period of limitation is set aside and the demand is restricted to the normal period of limitation - Imposition of Penalties under Sections 114A and 114AA of the Customs Act - Whether penalties under sections 114A and 114AA can be sustained when the extended period of limitation has been found to be incorrectly invoked – HELD - Since the elements required for imposing penalty under Section 114A are identical to those required for invoking extended period of limitation, and the extended period of limitation has been found to be unjustifiable, the penalty under section 114A cannot be sustained. With respect to section 114AA, the penalty cannot be imposed because classification of goods is a matter of opinion and interpretation, not a statement of fact - Misstatement requires declaration of wrong facts, whereas classification differences represent differing interpretations of the correct Customs tariff item. Accordingly, penalties under both sections are set aside.
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GSTAT Appeal filed wrongly...
By CA Vivek Jalan

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