of Customs, Bangalore Vs. M/S Spice Telecom, Bangalore  Insc 697 (19 October 2006)
Bhan, Altamas Kabir & Dalveeer Bhandari Bhan, J.
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.
1.3.1997, as amended by Notification No. 51/97 dated 2.6.1997.
Notification and its relevant entries :
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.
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
Telephonic or telegraphic apparatus of the following description:
apparatus for cellular mobile telephone service.
communication equipment including VHS, UHF and microwave communication
equipment with following description:
transceivers stations (BTS) xxx xxx
ancillary equipment." [ Emphasis supplied ] Facts:
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.
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.
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'.
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.
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.
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.
by the same revenue has come up in appeal.
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.
is exempted under the notification is Base Transmeter Station (BTS) or BTS
has been assigned the meaning in various dictionaries as :
Ramanatha Aiyar: The Lax Lexicon: "aiding auxiliary; subordinate;
attendant upon; that which aids or promotes a proceeding regarded as the
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:
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:
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.
Cellular Network comprises of Main Switching Centre (MSC) operating in tandem
with the following:
Operation Maintenance Centre (OMC-R)
Digital Cross Connect Systems.
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:
Communication Equipments (Radio Terminals & Antennas).
Power Converter Unit
? Battery Back-up Unit
& Miscrowave Antennas
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.
COMMUNICATION EQUIPMENTS (RADIO TERMINALS & ANTENNAS):
Communication Equipment comprises of radio terminals and Antennas.
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.
the said view would amount to reading ' BTS components' in the notification
instead of 'BTS ancillary equipment' which is not permissible under law.
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.
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,
Waves Guides (List 22 S. No. 239 of the Table).
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
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.
in its order after referring to the literature to which we have also made the
reference came to the conclusion:
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
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.