The Delhi High Court has held that import of wireless access points employ Multiple Input/Multiple Output (MIMO) technology exempted from basic customs duty.
The bench of Acting Chief Justice Vibhu Bakhru and Justice Swarana Kanta Sharma has observed that the phrase “MIMO and LTE Products” in Serial No. 13(iv) of the amended Notification No. 24/2005 applies solely to products combining MIMO technology and LTE standards, and thus, the WAPs imported by the respondent, which employ MIMO technology but not the Long Term Evolution (LTE) standards, are entitled to the exemption from Basic Customs Duty.
The respondent/assessee, M/s Redington (India) Limited, is a distributor of Information Technology products in India. During the period July, 2014 to June, 2017, the respondent imported Wireless Access Points (WAPs) from various suppliers, including M/s. Cisco Systems International, M/s. Fortinet Singapore Private Limited, and others. These WAPs, which utilize Multiple Input/Multiple Output (MIMO) technology, were used for wireless communication within Local Area Networks (LANs) by connecting wireless-enabled devices like laptops, smartphones, and tablets to wired networks.
The controversy began when the Directorate of Revenue Intelligence (DRI), Bangalore Zonal Unit, initiated an investigation in 2017, alleging that the WAPs imported by the respondent were ineligible for the claimed exemption. Pursuant to the investigation, the Additional Director General of the DRI issued a Show Cause Notice (SCN) dated 13.12.2018, under Sections 28 and 124 of the Act.
The SCN called upon the respondent to explain why the exemption benefit claimed under the notification should not be denied. The SCN noted that the exclusion entry (iv) of Serial No. 13 in the amended Notification No. 24/2005, which mentions “MIMO and LTE products”, should be interpreted to deny exemptions to all products operating on either MIMO or LTE standards.
It was also mentioned that there are only two types of products in exclusion entry (iv) and the conjunctive “and” has been used without using the term “product” for both the items.
The department contended that in case the purpose was to apply the condition on the products having both MIMO technology and LTE standards and, therefore, Serial No. 13(iv) should have read as LTE products having MIMO technology or LTE products with MIMO technology.
The Adjudicating Authority acknowledged that the respondent had provided all the necessary information in its declarations and bills of entry, which clearly identified the imported WAPs as MIMO-enabled products. It rejected the allegations of willful suppression of facts or misrepresentation by the respondent.
The department filed an appeal before the CESTAT contending that the word “and” used in the exclusion entry (iv) of Serial no. 13 should be interpreted disjunctively, thereby denying exemptions to products operating either on either MIMOtechnology or LTE standards.
However, the CESTAT, by way of the impugned order dated 30.10.2023, dismissed the Revenue‟s appeal and upheld the order of the Adjudicating Authority. The CESTAT observed that the word “and”, as used in exclusion entry (iv) of Serial No. 13, is conjunctive and must be interpreted strictly to refer to products employing both MIMO and LTE technologies together. It noted that exemption notifications must be construed narrowly to avoid frustration of their intended purpose.
The court while dismissing the appeal of the department held that the order of the CESTAT does not suffer from any infirmity or error and, is, therefore upheld.
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Case Details
Case Title: Commissioner Of Customs (Air) Chennai-Vii Commissionerate Versus M/S Redington (India) Limited
Case No.: CUSAA 44/2024
Date: 13.01.2025
Counsel For Appellant: Mr Akshay Amritanshu, Senior Standing Counsel with Mr Samyak Jain, Ms Drishti Safar and Ms Pragya Upadhyay, Advocates.
Counsel For Respondent: Alok Agarwal and Mr Prachit Mahajan, Advocates.
