COMMISSIONER OF CUSTOMS, BANGALOREversusM/S SPICE TELECOM, BANGALORE

              COMMISSIONER OF CUSTOMS, BANGALORE                                 A
                                     le
                   M/S SPICE TELECOM, BANGALORE

                            OCTOBER 19, 2006

  [ASHOK BHAN, AL TAMAS KABIR AND DAL VEER BHANDARI, JJ.]                        B

      Customs Act, 1962-s.25-Exemplion Notification No.11197 as amended
by Notification No.51197-Entitlement of, to Radio terminals imported by
Respondent-assessee-Held, entitled as they are solely used with Base             C
Transceiver Station (BTS) and qualify as 'ancillary equipment' of BTS-They
are not independent equipment having independent function-Also cannot
be termed as a general purpose radio equipment, being specially designed
to support Mobile Communication Network in particular GSM

      The Respondent's case is that the Radio Terminals imported by it are       D
Base Transceiver Station (BTS) ancillary equipments, essential for providing
connectivity for use of cellular phones and hence they are entitled to benefit
of Exemption Notification No.11/97; Dated 1-3-1997, as amended by
Notification No.51197 dated 2-6-1997.

      Revenue denied the claim of Respondent on the ground that the Radio        E
Terminals are independent equipment having independent entity and function
and are not ancillary equipments of BTS and are hence not covered under the
said Exemption Notification.

     Tribunal granted benefit of the Exemption Notification to Respondent.
Hence the present appeal by the Revenue.                                         F
     Dismissing the appeal, the Court

      HELD: I. I. 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          G
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. Upholding the said view would
amount to reading 'BTS components' in the notification instead of 'BTS
                                      545                                        H
    546                     SUPREME COURT REPORTS (2006] SUPP. 7 S.C.R.

A ancillary equipment' which is not permissible under law.1551-DI
           1.2. The 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
B   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. 51197 dated 2.6.1997. Radio terminal is not independent
    equipment having its own independent function. lt cannot be termed as a
    general purpose radio equipment as the technical literature clearly indicates
C   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 Revenue.1551-E-Gl

          P. Ramanatha A1yar 's Law Lexicon and Stroud's Judicial Dictionary,
D   referred to.

          Vareed Jacob v. Sosamma Geevarghese, (200416 SCC 378, referred to.

           2. The subsequent Notification No.21/2002 dated 1-3-2002 defines the
    scope of ancillary equipment for BTS by restricting the entry to only three
E   equipments. Radio Terminals in this notification have not been considered as
    ancillary equipment of BTS. Relying upon the said Notification No.21/2002,
    Revenue contended that the same is clarificatory in nature and would be
    applicable to the Radio Terminals imported by the respondent in the year 1998
    as well. But this contention is without substance. The subsequent notification
    which defines the scope of ancillary equipment is effective only from 1.3.2002
F   and does not have retrospective effect. Respondent's 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
G   presumed that the same is retrospective in nature. Revenue has failed to show
    that the subsequent notification is clarificatory in nature. Incidentally, 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. (551-H; 552-A-DI

H         CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1695 of2006.
   COMMR OF CUSTOMS, BANGALORE v. SPICE TELECOM, BANGALORE [BHAN, J.]      547

     From the final Order No. 805/2005 dated 20.5.2005 of the CESTAT, South       A
Zonal Bench, Bangalore in Appeal No. C/144/2003.
     Mohan Parasaran, A.S.G., K. Swami, T.A. Khan and B.K. Prasad for the
Appellant.

     Joseph Vellapally, Nikhil Nayyar and Raghavesh Singh for the                 B
Respopndent.

      The Judgment of the Court was delivered by

       BHAN, J. The 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)             C
ancillary equipment' in order to be given the benefit of exemption Notification
No. 11/97-Cus. dated 1.3.1997, as amended by Notification No. 51/97 dated
2.6.1997.

Exemption Notification and its relevant entries :
                                                                                  D
      The Central Government in exercise of powers conferred by sub-section
(I) 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.
      Notification No. 11/97 was amended by Notification No. 51/97 on 2.6.1997
                                                                                  E
to include certain other goods from payment of duty or partial duty. Relevant
entries in .List 9-8 are:

       "I. Telephonic or telegraphic apparatus of the following description:
            (a) switching apparatus for cellular mobile telephone service.        F
            (b) base station controllers.
       2.   Radio communication equipment including VHS, UHF and
            microwave communication equipment with following description:
            (a) base transceivers stations (BTS)
                                                                                  G

       5.   BTS ancillary equipment. "

                                                          [Emphasis supplied]

                                                                                  H
    548                    SUPREME COURT REPORTS (2006] SUPP. 7 S.C.R.

A         Facts:

          Respondent placed a purchase order on Mis 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. Jn the bill of entry the goods
B   were classified as falling under Entry No. 8525.2009.

          Respondent 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
C   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.

          Respondent filed a refund claim for ar. amount of R. 34,73,385/- on
    26.8.1999 for the goods imported at Bangalore. Respondent in the refund claim
D   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'.

           Deputy Commissioner of Customs (Refunds) Bangalore by his order
    dated 10.4.2000 rejected the Respondent's claim for exemption by holding that
E   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 ofBTS
    or MSC. It was accordin$1Y held that the radio terminal is only part of cellular
    network and the same cannot be treated eith.:r as BTS itself or as an ancillary
F   of BTS equipment.

        Aggrieved 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 tenninals are
G 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.
          Aggrieved by the order of Commissioner of Appeals respondent filed
H an appeal before the Customs, Excise and Service Tax Appellate Tribunal,
  COMMR OF CUSTOMS, BANGALORE 1·. SPICE TELECOM, BANGALORE [BHAN, J .]        549

South Zonal Bench at Bangalore (for sho1t "the Tribunal"). The Tribunal by           A
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. Aggrieved by              B
the same revenue has come up in appeal.

Discussion :

       lt is 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            C
independent equipment having independent identity and function and are not
ancillary equipments of BTS and are not covered under the said exemption
notification.

      What is exempted under the notification is Base Transmeter Station
(BTS) or BTS ancillary equipment. Ancillary has been assigned the meaning D
in various dictionaries as :

      "P. Ramanatha Aiyar: The lax lexicon:

                  "aiding auxiliary; subordinate; attendant upon; that which
                  aids or promotes a proceeding regarded as the principal.           E
                  A work 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:
                                                                                     F
        "A work is said to 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 v. Sosamma Geevarghese, [2004] 6 SCC 378,
has accepted the meaning assigned to the word "ancillary" in The Lax Lexicon:
                                                                                     G
      "The 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 H
supplied to us on which the reliance was placed by the Tribunal as well.
     550                   SUPREME COURT REPORTS (2006] SUPP. 7 S.C.R.

A              "A Cellular Network comprises of Main Switching Centre (MSC)
            operating in tandem with the following:
            *    Base Transceiver Stations
            *    Base Station Controller
13          *   Transcoder

            *   Operation Maintenance Centre (OMC-R)

            *   Digital Cross Connect Systems.

           BASE TRANSCEIVER STATION:
c
            The Base Transceiver Station is the interface between the cellular
            network and the mobile subscriber. The basic funbction is to receive
            and transmit mobile calls from the subscriber to the caller through the
            GSM cellular network supported by BTS equipment and the following
            ancillary equipments of BTS:
D
            *   Miscrowave Communication Equipments (Radio Terminals &
                Antennas)

            *   Power Converter Unit

            *   Battery Back-up Unit
E
            *   GSM & Miscrowave Antennas

            *   Installation/Ancillary Items.
            BTS equipment is a 19 inch cabinet consisting of Transceiver Control
            Units, RF modules like Combiner band pass filter, duplexer, integrated
F
            antenna distribution unit (IADU), Digital Cage consisting of Main
            Control Unit (MCU), Fibre Optic Extender (FOX), Network Interface
            Unit (NIU), Power supplies (NPSM and 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
G           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.
H
   COMMR OF CUSTOMS, BANGALORE"- SPICE TELECOM, BANGALORE [BHAN, J j     551

MISCROWAVE COMMUNICATION EQUIPMENTS (RADIO TERMINALS                            A
AND ANTENNAS):

        The Miscrowave Communication Equipment comprises of radio
        terminals and Antennas. The 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           B
        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."                   C
       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 D
not eligible for exemption. Upholding the said view would amount to reading
' BTS components' in the notification instead of 'BTS ancillary equipment'
which is not permissible under law.

       The technical literature submitted makes it clear that the radio terminals
transport the already converted digital speech from BTS equipment to the E
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 p
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 G
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.

      Revenue has relied upon the subsequent Notification No. 21/2002 dated H
1.3.2002. The subsequent notification defines the scope of ancillary equipment
    552                     SUPREME COURT REPORTS [2006] SUPP. 7 S.C.R.

A for BTS by restricting the entry to only three equipments, namely, i) Cellular
    repeaters, (ii) Amplifiers and (iii) Waves Guides (List 22 S. No. 239 of the
    Table). Radio tem1inals 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
B   substance in this submission. The subsequent notification which defines the
    scope of ancillary equipment is effective only from 1J.2002 and does not have
    retrospective effect. Respondent's 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
C   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
D   heading, Delhi Customs House extended the benefit of the said notifications
    to the respondent.

         Tribunal in its order after referring to the literature to which we have
    also made the reference came to the conclusion:

E            " .... From 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
F            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
G   said finding is approved.

         For the reasons stated above, we do not find any merit in the appeal
    and dismiss the same leaving the parties to bear their own costs.

    B.B.B.                                                      Appeal dismissed.
H