2015(01)LCX0091

IN THE CESTAT, WEST ZONAL BENCH, MUMBAI [COURT NO. II]

S/Shri P.R. Chandrasekharan, Member (T) and Ramesh Nair, Member (J)

Reliance Communications Infrastructure Ltd.

Versus

Commissioner of Customs (I), Nhava Sheva

Final Order Nos. A/12-13/2015-WZB/CB, dated 1-1-2015 in Appeal Nos. C/343 & 421/2009-Mum

Cases Quoted -

Alcatel India Ltd. - 2006(02)LCX0016 Eq 2006 (197) ELT 0176 (A.A.R.) - Applied [Paras 4.1,4.4,5.3]
Bharat Sanchar Nigam Ltd. v. Union of India - 2006(03)LCX0022 Eq 2006 (002) STR 0161 (S.C.) - Distinguished.. [Para 5.4]
C.K. Gangadharan v. Commissioner of Income Tax - 2008(07)LCX0024 Eq 2008 (228) ELT 0497 (S.C.)
= 2008(07)LCX0024 Eq 2009 (016) STR 0659 (S.C.) - Distinguished [Para 5.4]
Commissioner v. Gaurav Enterprises - 2005(09)LCX0386 Eq 2006 (193) ELT 0532 (Bom.) - Referred [Para 3.10]
Commissioner v. Rishi Shipbreakers - 2008(08)LCX0049 Eq 2009 (235) ELT 0524 (Tribunal. Mum.) - Relied on.. [Para 3.9]
Northern Plastic Ltd. v. Collector - 1998(07)LCX0097 Eq 1998 (101) ELT 0549 (S.C.) - Relied on [Paras 3.10,5.4]
Optel Telecommunication Ltd. v. Commissioner - 2005(04)LCX0067 Eq 2005 (186) ELT 0109 (Tribunal)
- Applied [Paras 4.1,4.3,4.5,5.2,5.3]
Plasmac Machine Mfg. Co. Pvt. Ltd. v. Collector -1990(11)LCX0033 Eq 1991 (051) ELT 0161 (S.C.)
- Distinguished [Para 5.4]
Shiv Kripa Ispat Pvt. Ltd. v. Commissioner - 2009(02)LCX0007 Eq 2009 (235) ELT 0623 (Tribunal - LB) - Referred[Para 3.9]
Vodafone Essar South Ltd. v. Union of India - 2009(03)LCX0003 Eq 2009 (237) ELT 0035 (Bom.) - Referred [Para 3.10]

Departmental Clarification Quoted-

C.B.E. & C. Circular No. 12/2006-Cus., dated 28-2-2006 [Paras 4.1,4.2]

Advocated By -

Shri T. Vishwanathan, Advocate, for the Appellant.
Shri K.M. Mondal, Spl. Counsellor the Respondent.

[Order per : P.R. Chandrasekharan, Member (T)]. -

The appeals are directed against Order-in-original No. 17/09 CC(I) JNCH, dated 19-1-2009 passed by the Commissioner of Customs (Imports), JNCH, Nhava Sheva. Vide the impugned order the Id. adjudicating authority has classified the optical fibre cables imported by the appellant under CTH 9001 and denied the benefit of notification No. 24/2005-Cus, dated 1-3-2005 claimed by the appellant, M/s Reliance Communication Infrastructure Limited (RCIL in short) by classifying the product under CTH 8544. Consequently he has confirmed a differential duty demand of Rs. 2,68,50,476/- along with interest thereon under the provisions of Sections 28 and 28AB of the Customs Act, 1962. Further he has confiscated the Optical Fibre Cables (OFCs in short) imported by the appellant valued at Rs. 21.76 Crore under Sections lll(m) and lll(o) of the Customs Act and has given an option to redeem the same on payment of a fine of Rs.5 crore apart from imposing an equivalent amount of penalty on the importer under Section 114A of the said Customs Act. He has also imposed a penalty of Rs. 20 lakhs on Shri Narendra Patil, General Manager (Taxation) of the appellant firm under Section 112(b) of the said Customs Act. Aggrieved of the same, the appellants are before us.


2. The facts relevant to the case are briefly as follows. Acting on intelli-gence that M/s. RCIL was importing optical fibre cables (OFCs in short) through various ports, namely, Nhava Sheva; ACC, Sahar; Kandla CFS and Mundra by mis-classifying the same under CTH 85.44 and claiming the benefit of Notification No. 24/2005-Cus., dated 1-3-2005, investigation was initiated into the imports of OFCs by RCIL The investigation revealed that the appellant had imported OFCs under 35 Bills of Entry during April, 2003 to January, 2006 from different overseas suppliers. It was further noticed that the appellant had claimed exemption from payment of basic customs duty on OFCs under Notification No. 24/2005-Cus. in respect of 10 bills of entry during the period March, 2005 to January, 2006, by wrongly classifying the goods under CTH 85.44. On completion of investigation, a show cause notice dated 8-2-2007 was issued to the appellant proposing re-classification of the goods under CTH 90.01 and demanding differential duty of Rs. 2,68,50,476/- along with interest thereon. The notice also proposed to confiscate the goods under Sections lll(m) and lll(o) of the Customs Act and penalties on the appellant importer and on Shri Narendra Patil, General Manager and Shri Anil Kumar Singh, Vice President & Head (Exim Commercial). The said notice was adjudicated vide the impugned order and the proposals in the notice were confirmed. Hence the appeals before us.


1. The Id. Counsel for the appellant made various submissions which are summarised as below : -

3.1 The optical fibre cables imported by the appellant merits classification under CTH 8544 70 90 which covers optical fibre cables, made up of individually sheathed fibres, whether or not assembled with electric conductors or fitted with connectors. CTH 9001 covers Optical fibres, optical fibre bundles and optical fibre cables other than those of heading 85.44. CTHs 9001 and 8544 are mutually exclusive. Therefore, optical fibre cables are classifiable under CTH 8544.

3.2 The issue for consideration is whether the optical fibre cables im-ported by the appellant is made of individually sheathed fibres or not. Optical fibre for telecommunication purposes consists of three components, core, clad-ding and coating. The central region of the fibre is the glass core which ranges in diameter from 8 microns to 62.5 microns. Surrounding the core is a region called 'cladding' which is made of glass or silica and has a diameter of 125 or 140 mi-crons. The third region is the dual layer acrylite or acrylate coating which is 60 microns thick that provides protection to the individual optical fibre.

3.3 As per the manufacturing process, in the first stage a preform is made from ultrapure vapours of silicon tetrachloride and germanium tetrachlo-ride. In the preform, the core material containing germanium is deposited first followed by pure silica cladding. This preform is placed in a draw tower and drawn into a continuous strand of glass fibre and during the manufacture of in-dividually sheathed optical fibre at the preform stage, a high thickness of clad with a very smaller core is achieved in one go. To get thinner core with thicker clad, additional sheathing of pure silica tube is done at the preform stage itself. Next, two layers of coating of acrylate is applied and the same is cured using ul-traviolet lamps.


3.4 As per the book Fibre Optics by D.A. Hill, the cladding layer is sometimes known as sheath but the protective outer covering of a bundle of fi-bres is also termed as sheath. Thus it is clear that cladding is understood as sheathing in the context of optical fibre manufacture.

3.5 As per the certificate given by Corning Cable Systems, Australia, who is one of the suppliers of optical fibre cables imported by the appellant, op-tical fibre cables supplied by Corning are classified under CTH 8544 70 90 by the Customs authorities in USA, Canada, European Union, China, Japan and other far east asian nations.
3.6 As per the book Fibre Optics and Lasers by Sri Ajoy Ghatak and Sri K. Thiagarajan of IIT Delhi, "optical fibres are drawn in an extremely clean environment and are coated with polymers as they are being drawn. Covering the glass fibre with the polymer does not permit contact with the atmosphere and gives it the protection." Thus the polymer coating acts as a sheath. Commercial Rulings Division of the US Customs had ruled that Coming's LT Optical fibre cables composed of optical fibre coated with a combination of dual acrylate and additional thin layer of colour coating are considered as "individually sheathed" fibres classifiable under CTH 8544.

3.7 Prior to 1-3-2005, the rate of customs duty on OFCs falling under TI 8544 and TI 9001 was. the same. From 1-3-2005 onwards, OFCs falling under TI 8544 were exempted from basic Customs duty under Notification 24/2005-Cus., dated 1-3-2005. The appellant had imported OFCs vide 35 bills of entry during 4-4-2003 to 18-1-2006 and claimed classification under CTH 8544 70 90 in all the bills of entry which was accepted by the department. Only in respect of the 10 bills of entry filed after 1-3-2005, where the appellants claimed the benefit of Notification No. 24/2005, dispute relating to the classification has been made. Since there is no suppression or mis-declaration on the part of the appellant in respect of the 10 bills of entry, the demand raised under show cause notice dated 8-2-2007 is clearly time-barred.

3.8 The description of the goods in the bills of entry 5695, dated 4-4-2003 as "G652 Optical Fibre Cable with 48 core" is the same as that given in the corresponding invoice raised by the foreign supplier. Similarly in respect of bill of entry No. 102053, dated 18-4-2005 wherein the description is mentioned as "Optical Fibre Cable Arm G 652 UN/CN Tube PE 12F SM", it is the same as that given in the corresponding invoice. Thus the appellant has not indulged in any misdeclaration of the goods under import. Some of the consignments imported by the appellant have also been examined by the department before clearance was given. In these circumstances, the allegation of misdeclaration and invoca-tion of extended time period for confirmation of duty demand is clearly not sus-tainable in law. In the show cause notice, it has been alleged that the bills of entry were self-assessed by the appellant which is clearly wrong. The self-assessment scheme came into force only in 2011 and during the period involved in the show cause notice, this charge will not hold at all.

3.9 In the impugned order, the adjudicating authority has ordered con-fiscation of the goods imported under Sections lll(m) and lll(o) of the Customs Act. Section lll(o) is invocable only when there is a post-importation condition required to be fulfilled and which has not been complied with. In the present case, the appellant has not claimed the benefit of any exemption subject to fulfilment of post-importation conditions. Therefore Section lll(o) has no application whatsoever. Further in the present case, the goods are neither seized nor available physically and therefore, there cannot be any confiscation with an option of redemption. Reliance is placed on the decisions of this Tribunal in the case of Shiv Kripa Ispat Pvt. Ltd. - 2009(02)LCX0007 Eq 2009 (235) ELT 0623 (Tri.-LB) and the Bombay High Court decision in the Rishi Shipbreakers case in Customs Appeal No. 170 of 2009.

1.10 Inasmuch as the goods are not liable to confiscation, penalty is also not imposable on the appellant. Further as the dispute relates to classification and interpretation of tariff entries, no penalty can be imposed. Reliance is placed on the decisions of the Hon'ble Apex Court in the case of Northern Plastics Ltd. -1998(07)LCX0097 Eq 1998 (101) ELT 0549 (S.C.) and of the Bombay High Court in the case of Gaurav Enterprises - 2005(09)LCX0386 Eq 2006 (193) ELT 0532 (Bom.) and Vodafone Essar South Ltd. - 2009-TIOL-117-H.C- MUM-CUS = 2009(03)LCX0003 Eq 2009 (237) ELT 0035 (Bom.).


2. The Id. special consultant appearing for the Revenue made the following arguments : -

4.1 As per tariff description of Headings 8544 and 9001 read with the HSN explanatory notes, only optical fibre cables, made up of individually sheathed fibres are covered under CTH 8544 while such cables other than of Heading 8544 would come under Heading 9001. While classifying the goods un-der CTH 9001, the adjudicating authority has relied upon Board's circular No. 12/2006, dated 28-2-2006 and this Tribunal's decision in the case of Optel Tele-communication Ltd. - 2005(04)LCX0067 Eq 2005 (186) ELT 0109 (T) and the ruling of the Advanced Authority for Ruling in the case of Alcatel India Ltd. - 2006(02)LCX0016 Eq 2006 (197) ELT 0176 (AAR).

4.2 As per the Board's circular OFCs composed of fibres which are not individually sheathed would come under CTH 9001.

4.3 In the Optel Telecommunication case, this Tribunal held that OFCs of fibres which are not individually sheathed fall under CTH 9001 and it found no evidence or material to show that coating of UV cured acrylate amounts to sheathing of optical fibres. It was further held that end-use cannot be the criterion for classification of OFCs.

4.4 In the Alcatel case (supra) dealing with the contention of the party that fibres are coated with different colours and are housed in jelly material which would amount to individually sheathing the fibre, the Authority held that coating and sheathing are two different entities. Based on the various infor-mation, technical or otherwise, the Authority was of the view that the nature and depth of coating or the degree of protection it seeks to provide, would not take it out of the realm of 'coating' and give it an identity of 'sheathing'.

4.5 Sri Manohar Rampal, Technical Expert of the appellant firm, in his statement dated 27-10-2006, has confirmed that the manufacturing process of optical fibre cables imported by the appellant was similar to that in the case of Alcatel covered by the Advanced Ruling Authority's decision and that described in the Optel case.

4.6 As regards the contention of time-bar raised by the appellant, the Id. special consultant submits that Sri Manohar Rampal, the technical expert with the appellant firm was responsible for technical specifications of the imported and indigenously procured goods and he was well aware of the nature of the goods imported. Further in respect of the domestically procured goods by the appellant, the same were being classified under CTH 9001. Therefore, the classification declared in the bills of entry by the appellant was intentional misdeclara-tion and suppression of true facts and hence the extended period of time is rightly invocable in the present case. There is no evidence led by the appellant to show that the goods imported were examined prior to clearance as claimed by the appellant and the appellant had availed self-assessment scheme for clearance of the goods.

In view of the above, he pleads for upholding the impugned order and rejecting the appeals.


5. We have carefully considered the submissions made by both the sides.
5.1 There are two issues for consideration and decision in the present case. They are, -
(i) What is the correct classification of OFCs imported by the appellant RCIL, that is, whether they merit classification under CTH 8544 70 90 or under CTH 9001 of the Customs Tariff?

(ii) Whether extended period of time could be invoked for confirmation of duty demand and imposition of penalties in the present case?

5.2 As regards the first question, we find that an identical issue was considered by this Tribunal in the case of Optel Communications Ltd. (cited supra).

The relevant extracts from the said decision is reproduced verbatim below :-

"8. We have considered the submissions of both the sides. Heading 85.44 applies, inter alia, to optical fibre cables, made up of individual sheathed fi-bre, whether or not assembled with electric conductors or fitted with con-nectors. Heading 90.01 reads as under :

Optical fibres and optical fibre bundles; optical fibre cables other than those of Heading No. 85.44; sheets and plates of polarizing material; lenses (including contact lenses), prisms, mirrors and other optical elements, of any material unmounted, other than such elements of glass not optically worked."

Thus Optical fibre cables fall under both Headings 85.44 and 90.01, if the optical fibre cable is made up of individually sheathed fibre, it fall under Heading 85.44 and all other optical fibre cables fall under Heading 90.01. The process of manufacture, as given by the assessee and mentioned in brief in Order-in-Original No. 13/2002, dated 8-8-2002 clearly shows that after the fibre has been drawn and coloured for identification purposes, two fibres are placed in a loose tube filled with jelly and these loose tubes, (three numbers or six numbers) are stranded around FRP center tension member to form the core of the cable. In the process of manufacture, nowhere it is mentioned that the fibre is sheathed individually which is required for clas-sifying it under Heading 85.44. Learned Advocate has referred to Webster's English Dictionary, 1983 edition, according to which "Individual" means 'subsisting as one indivisible entity or distinct being; single; pertaining to one only." There is substantial force in the submissions of the Advocate that even if the stage of lacing fibres in loose tubes is treated as the process of sheathing, no individual cable is sheathed, as even according to Order-in-Original No. 13/2002, two fibres cables are placed in the loose tubes. No material has been brought on record by the Revenue to show that coating of UV cured acrylate amounts to sheathing of optical fibre cables. Explanatory Notes of HSN under Heading No. 90.01 also does not support the findings of the learned Commissioner that the coating of acrylate amounts to sheath-ing as the Explanatory Notes clearly mentions that the optical fibre cables drawn from glass have a very thin coating of plastics invisible to the naked eyes; which renders the fibres less prone to fracture. The Revenue has also not brought any material on record to prove that this thin coating of acrylate is not invisible to the naked eyes. The Appellants have also brought on record the Certificate given by the Department of Electrical engineering of SV Government Polytechnic, Bhopal according to which cables manufac-tured by the assessee are multifibre sheathed cables. They have also brought on record the opinion given by the Chief Electrical Manager (P) in the Office of Chief General Manager Telecommunication Projects, Bombay according to which the optical fibre cables in question is not made up individually sheathed fibre. Revenue on the other hand, has not brought any technical opinion to rebut the opinion / certificate brought on record by the assessee. The Deputy Commissioner in the Order-in-Original No. 13/2002 has referred to the test report given by the Chief Examiner, CRCL, which, according to him, does not give direct reply to the query whether optical fibre cables are made up of individually sheathed fibre or not. We also agree with the learned Advocate that as the classification of the impugned product depends only on the fact whether the optical fibre cables is individually sheathed or not the end-use cannot be a factor for determining the classification of the fibre. Accordingly, we hold that the Department has not proved that the impugned optical fibre cables is made up of individually sheathed fibres so as to warrant classification under Heading 85.44. Accordingly, we set aside the impugned order and allow all the appeals filed by the assessee without going into other submissions raised by the learned Advocate. Consequently, the Appeal filed by the Revenue is rejected." (emphasis supplied)

5.3 Another decision on the same issue pertains to the ruling of Advanced Authority for Ruling in the case of Alcatel Ltd. We are well aware that the said decision is binding only the appellant and the department and cannot form a binding precedent. Nevertheless, the said decision examines in detail the various technical issues involved and has a significant persuasive value. The issues raised therein were also identical to those raised before us in the present case. Further, the technical expert of the appellant Mr. Manohar Rampal in his statement recorded under Section 108 by the investigating officer has also confirmed that the manufacturing process of optical fibre cables imported by their company was similar to the manufacturing process of OFC described in the Advanced Rul-ing judgment in the case of Alcatel Ltd. and that described in the Optel Communication case cited supra. In view of the above factual position, in our considered view the analysis of the issue in Alcatel case is very much relevant and applicable to the facts of the case before us. Relevant extracts from the said decision relating to the various contentions raised, the technical literature on the subject and the conclusions drawn, are reproduced below :-

"11. We begin our task of examining the core issue which crystalises from the above factual details on record. The basic question, which needs to be addressed is - Can the optical fibre cables as per the technical details given by the applicant in the respective application and whose samples have been submitted by them before the Authority and which they propose to import, be taken to be made up of individually sheathed fibres?

9. Before examining the applicant's contention on the modern technology aspect, we would first focus our attention on the relevant entries in the Tariff. Though the description of the goods given in the tariff heading 8544 both in the HSN and in the Act, inter alia, refers to the expression "made up of individually sheathed fibres', no explanation/definition of the word "sheath' or "sheathing' appears either in the HSN Explanatory Notes or in the Section/Chapter Notes to Chapter 85 of the Act. In the HSN Explanatory Note for the tariff heading 85.44 it has however been mentioned inter alia that "the heading also covers optical fibre cables, made up of individually sheathed fibres, whether or not assembled with electric conductors or fitted with connectors. The sheaths are usually of different colours to permit iden-tification of the fibres at both ends of the cable." The word "sheathed" has been used in the text, but it is not explained or defined what actually consti-tutes a 'sheath' or individually "sheathing" fibre. All that the Note says is that the sheaths are usually of different colours which facilitates identification of the fibres at both ends of the cable. The buffer coating put on the individual fibre also has a colour coating for the same purpose but this fact, per se, does not make the coating a sheathing. The HSN Explanatory Note to the heading 90.01 also refers to the word "sheath" while explaining that "optical fibre cables of this heading (which may be fitted with connectors) consist of a sheath containing one or more optical fibre bundles, the fibres of which are not individually sheathed". Though in this Note also, no definition or explanation of the word 'sheath' has been given, nevertheless some clue is available to discern as to what a 'sheath' is meant to be. In the first part of the sentence in this Explanatory Note, it has referred to 'sheath' as containing one or more optical fibre bundles. This, in turn, implies that 'sheath' has to be something in the form of a jacket or container. The same meaning should logically be attached to it when interpreting the expression "individually sheathed" appearing in the latter part of the same sentence. The distinction, in the description of the goods in Question, namely, optical fibre cables in headings 85.44 and 90.01 lies in the fact that, the former refers to "individually sheathed fibres", whereas the latter (as the HSN Explanatory Note clarifies), refers to 'a sheath containing one or more optical fibre bundles, the fibres of which are not individually sheathed'. In so far as the Section/Chapter Notes to Chapters 85 & 90 of the Act are concerned, term 'sheath' or 'sheathing' has also not been defined or explained, (emphasis supplied) i

13. Since the terms 'sheath' and 'coating' are not defined or explained in the HSN or the Act, we have to understand them in the sense in which they are understood by English speaking people ordinarily as well as in scien-tific/technical context. Therefore, necessarily, we have to look for the mean-ing of these words in the dictionary which, in our view, would give a rea-sonably clear perception of what a 'sheath' and 'coating' ordinarily stand for and how they are commonly understood. This is what we found.
The New Shorter Oxford English Dictionary -1993 Edition

Sheath 1 A close-fitting case or covering for the blade esp. of a sword, dag-ger, etc. when not in use; b A case or covering with a similar function or purpose; 4a A thin-walled, hollow part of a device or mechanism which surrounds another part.

Coating - 3. A layer of any substance, as paint, tin, etc., spread over or cov-ering a surface;

Chambers Dictionary of Science and Technology

Sheath (ElecEng) The covering of a cable.

Coating (ElecEng) - The metallic sheets or films forming the plates of a ca-pacitor;

The New Oxford American Dictionary

Sheath A close-fitting cover for something, esp. something that is elongated in shape, in particular; A cover for the blade of a knife or sword; A protec-tive covering around an electric cable.

Coating - a thin layer or covering of something : a coating of paint..

McGraw-Hill - Dictionary of Scientific and Technical Terms - Fifth Edition

Sheath [ELEC] A protective outside covering on a cable.
ELECTROMAG] The metal wall of a waveguide. [SCI TECH] A protective case or cover
Coating -1. Any material that will form a continuous film over a surface. 2. The film formed by the material.

From the above, it is dear that as is understood and perceived not only in common parlance but also in scientific/technical sense, a "sheath" is something different from a "coating". Nowhere have these two words been shown as synonym. No material has also been placed before us to show that they are treated as synonymous. In Tiber Optics' by Robert J. Hoss & Edward A. Lacy*, the expression 'Optical-Fiber Coating' has been explained as "a protective material bonded to an optical fiber, over the cladding if any, to preserve fiber strength and inhibit cabling losses, by providing protection against mechanical damage, protection against moisture and debilitating environments, compatibility with fiber and cable manufacture, and compatibility with the jacketing process. Coatings include fluorpolymers, Teflon, Kynar, polyurethane, and many others E.'. In the website Answers.Com, fiber optics glossary, the word 'coating' has been taken to mean "a protective layer applied over the fiber cladding during the drawing process to protect it from the environment." We think there is no need to multiply the references to drive home the point that 'coating' is not treated as 'sheathing' either in ordinary sense or in the scientific/technical field, (emphasis supplied)

In support of their contention that the products in question should be clas-sifiable under tariff heading 8544, the applicant referred to the HSN Ex-planatory Note for heading 8544 in which the issue of insulation of conduc-tors has been dealt with. In our view, it is of no help to them.

That Explanatory Note merely states that for insulation purpose, one or more coverings of insulating materials are generally used and in certain cases the insulation is obtained by anodizing or by a similar process (e.g., the production of a surface coating). In fact, in the same Explanatory Note, the word 'sheath' has been used in contradistinction to coating when it clarifies that in certain cases a metal sheath (e.g., lead, brass, aluminium or steel) serves as a protective covering for the insulation of a conductor. It is, therefore, clear that the coating and sheathing are two different entities, though both of them may have the same function, namely, insulation of conductors. We are, therefore, unable to appreciate as to how the expression "individually sheathed fibres" employed in the heading 8544, would justify the view that a 'coating' given on the cladding of an optical fibre, becomes a 'sheath', notwithstanding their common protective purpose."

10. Having examined the relevant tariff entries, let us now turn to the de-scription of the goods and the submissions made in regard to Alcatel's products under consideration. On the nature of coating applied by the ap-plicant during manufacturing process of optical fibre followed by them, this is what they have to say :-

"Alcatel applies a dual acrylate coating called 'AFC3', and a colour coating called 'Colour Lock', during its optical fibre manufacturing process or uses uncoloured fibres that are further identified via the application of an addi-tional coloured layer. The thickness of Alcatel's UV curable dual acrylate coatings and colouring is 60 to 62.5 microns thick in keeping with industry standards. The dual acrylate coating provides important fibre protection and structural integrity to the bare glass fibres, responsible for each fibre's tensile strength, to the extent that the bare glass fibres could not be used without it. The application of dual acrylate coatings/sheathing provides significant protection against abrasion of the optic fibres, enhances tensile strength and reduces the effects of long-term stress, in particular exposure to humid environments which can lead to failure due to a phenomenon called 'static fatiguer. After the individual fibres are manufactured (with their coatings) they are placed inside buffer tubes. Each cable also has a varied number of individual optical fibres grouped in a number of buffered tubes or similar coverings, including different types of insulation, which are all contained within a particular cable's outermost layer or jacket. The finished optical fibre cable is then imported. Each of the subject optical fibres is manufactured individually; with its dual - layer acrylate coating and colouring processes either integrated into a single-step of production, or separated in two steps, clad and coated. The industry standard specifications for coated, coloured optic fibres are 250 +/-15 microns, and it's AFC3/Colour-Lock or additional coloured layer process exceeds this standards. The amount of coating applied to its optical fibre is 60 to 62.5 microns thick and reflects 'an industry standard'. The incorporation of AFC3 coating and Colour-Lock process as well as uncoloured coating further coloured during an additional manufacturing step protects the individual optical fibres from abrasions on the glass core and cladding that could cause short or long-term failures. The AFC3 dual acrylate coating and 'Colour-Lock' are clearly visible to the naked eye, and are not proportionately 'very thin' with respect to the diameter of the optical fibre core and cladding. It has been further stated by the applicant in their letter dated 13-12-2005, that "early cable designs produced by Alcatel were based on an individual additional protection of the fibres, either in the form of buffer sheath tightly applied around the fibre or of a soft material, coating the fibre individually and housed in a protective sheath or slot. The evolution of the telecommunications market requiring telecommunications cable designs to be smaller; or to accommodate a greater number of fibres in the same space; and the rapid evolution of transmission technologies requiring the use of optical fibres of more and more complex design and with a higher sensitivity to bending effects (i.e. when the fibre bends it does not show unacceptable attenuation increases), have resulted in changes in cable design technology to a 'loose design package' as the cable core, i.e. several individually sheathed fibres, the sheath being a UV curable resin with additional protective gel, housed in a stainless steel or plastic tube depending upon whether the cable is for submerged or terrestrial applications respectively. Alcatel current cable design followp this technology where the individual sheathing of the fibres is provided using today's technology i.e. UV curable resin to provide protective 'sheath.' To support their contention the applicant also gave reference to the following website links along with a brief introduction to each one of them with regard to the optical fibre cable technology :

"1. http ://www.corning.com/opticalfiber/guidelinesmagazine/ eguide-lines/vol6/view. aspx?article=2&page=l&r egion=na&language=e : Corning are the biggest manufacturer worldwide of optical fibres. This is an article on coating in optical fibres. The article explains that the technology has changed from a one layer coating into a 2 layered coating and this has become an industry norm. The main reason being that the former was only for protection from scratches and scuff while current technology provides protection to the light carrying ability and preserves its strength. The article also explains that there are two types of these cables i.e. those used for laser applications and those used for telecoms e.g. submarine fibre. The article also finally states that coating has changed over the years from infinitely stiff (tubing) to an infinitely elastic material.,

2. htfp://www.howstuffworks.com/fiber-optical.htm. The article provides basic information on optical fibre cables and provides a diagram of its construction i.e. core, cladding and buffer coating which is the same as the Alcatel products.

3. h tpp: / / www .ciscopress.com/ articles / article.asp?p=170740&seqNum= 4&rl=l : This is an article from Cisco who are a multi-national telecommunication supplier and the article describes in detail the construction of optical fibre cables.


4. http://www.itu.int/itudoc/gs/promo/tsb/85003.pdf. : The ITU (In-ternational Telecommunication Union), is an organization for developments on standards world-wide in the telecommunication sector. The diagram on page 2 of this article shows the optical fibre and its configuration.

5. http://www.mrfiber.com/fiber-history.htm. : This website gives you a brief history of fibre optic technology and also the development of this technology."

15. An optical fibre consists of three main regions - (a) a central cylinder or 'core'; (b) a surrounding layer of material called 'cladding'; and (c) an outer coating over the cladding. The 'core' transmits the lightwaves; the 'cladding' keeps the lightwaves within the 'core' and provides some strength to the core. The cladding has a lower refractive index (faster speed) than that of the core in order to keep the light in the core. The outer coating which is also called a buffer coating or a primary coating, is a protective layer applied over the fibre cladding to provide physical and environmental protection for the fibre. Optical fibres are made of extremely pure optical glass. The first step in the manufacture of optical fibre is making a 'preform' glass cylinder which is usually done by a process called 'modified chemical vapour deposition (MCVD)'. The process of making preform blank is highly automated and takes several hours. After the preform blank cools, it is tested for quality control (index of refraction). The second step is to get this blank loaded into a fibre drawing tower in which it gets lowered into a high-temperature graphite furnace and the tip gets melted until a molten glob falls down by gravity. As it drops, it cools and forms a thread. In the third step which is virtually an extension of the second step itself, the operator threads the strand through a series of coating cups (buffer coatings) and ultraviolet light curing ovens onto a tractor-controlled spool on which the finished product is wound. The finished optical fibre is then tested for various parameters like tensile strength, refractive index profile, information carrying capacity, operating temperature/humidity range, ability to conduct light underwater (important for undersea cables) etc. (Source -How Fibre Optics Work - an article by Craig C. Freudennich, Ph.D - in www.howstuffworks.com). The coating is typically an ultraviolet (UV) light-cured acrylate applied during the manufacturing process of the fibre. The "buffer coating" could also be constructed out of one or more layers of polymer, non-porous hard elastomers or high performance PVC materials. During the installation process, this coating is stripped away from the cladding to allow proper termination to an optical transmission system. The coating size can vary, but the standard sizes are 250 micrometer (one micrometer means one millionth of a meter, also called a micron) and 900 micrometer. The 250 micrometer coating takes less space in larger outdoor cables. The 900 micrometer is larger and more suitable for smaller indoor cables. (Source - chapter from the book Optical Network Design & Implementation by Vivek Alwayn, courtesy of Cisco Press - www.ciscopress. com).
16. In effect, what the applicant is claiming, is that the cable design technology followed by them is "loose buffer construction" to which we have already made a reference earlier. They also assert that their products in question are having a core, cladding and a buffer coating. As explained by them, several fibres each of which has UV curable dual acrylate coating and a colour coating on it, with additional protective gel, are housed in a stainless steel tube for submerged applications or in a plastic tube for terrestrial applications. According to them, coating of thickness 60 to 62.5 microns will provide individual sheathing of the fibres. We have checked up the textual contents of the -websites referred to by the applicant but are unable to find any support therefrom to their claim that the improved technique of coating including the UV curable dual acrylate coating is recognized in the modern cable design technology as sheathing of individual fibre. In fact, the applicant, has not produced any technical literature to show that primary or buffer coating of thickness 60-62.5 microns is accepted and acted upon in the industry as individually sheathing of the fibre, (emphasis supplied)

17. While the Corning website informs us that the optical fibre coating has come a long way in the past three decades and the quest for the 'holy grail' of coating - the ideal coating - has changed over the years, from a coating that is infinitely stiff to one that is infinitely elastic, or one that is entirely resistant to temperature, it does not however, treat coating as identical to a 'sheath'. Therefore, it follows that a coating does not don the identity of a 'sheath' within the meaning of the expression used in the heading 8544 with which we are ultimately concerned. As the definitions given in the dictionaries would go to show, sheath is a separate cover or shell and each fibre is enclosed in its own protective sheath to add further protection. Subsequently, these individually sheathed optical fibres are fitted with a common sheath and/or armour and other protective mechanisms to form a telecommunication cable. The individual sheathing on each fibre provides protection from damage should such fibres rub against each other. That technologically improved quality of coating on each fibre ensures as good a protection as a 'sheath' can possibly provide to the fibre, is of no relevance in so far as the coverage of the expression "made up of individually sheathed fibres' in the tariff heading 8544 is concerned, (emphasis supplied)

18. On a careful consideration of the material submitted by the applicant and those gathered by us from various technical literature/websites, it has become evident that, optical fibres being highly sensitive and delicate products by themselves, need protection from physical and environmental stress of various kinds, right from the stage of their manufacturing till they are cabled to form optical fibre cables ready to be sold and purchased in the market. The degree of protection depends on the ultimate use which the re-sultant cables would be put to. It is also seen that the fibres and the cables made therefrom have to go through various rigorous tests before they be-come marketable. Applying dual acrylate coating on individual fibre at the manufacturing stage is undoubtedly aimed at giving the fibre more protection than what a single layer of coating could provide. As the text in Corning website www.corning.com records - "optical fiber coatings are designed to serve two primary roles : to protect the light carrying ability of the glass fiber and to preserve its strength. While some of the first coatings in the history of optical fiber were a single layer of protective material, dual-layer coatings are the industry norm today, as researchers discovered early on that they offered improved performance for the fibre. Thus, it is clear that what is reported to be the industry norm today is an improved version of coating only and not treating such coating as a 'sheath' on individual fibre. That individual sheathing of the fibre is provided using present day technology i.e. UV curable resin of thickness 60-62.5 microns to provide a protective sheath is merely a claim or statement made by the applicant without any support from technical literature/documents. We are therefore not in a position to agree with this point of view. (emphasis supplied)

19. While on this subject, we cannot but notice another point of considerable significance concerning the interpretation of the expression "individually sheathed fibres". From the manufacturing process of an optical fibre, which we have briefly narrated in the earlier part of this ruling, it is indisputably established that the primary or buffer coating is an integral part of the manufacturing of an optical fibre. In otherwords, a fibre is not a fibre unless it is complete with the coating. That being the factual position, if coating is to be treated as sheathing as the contention of the applicant is, then the 'fibre' should be taken to be already 'individually sheathed' once it gets born as a 'fibre' on completion of its manufacturing process. In that event, the expression "individually sheathed' before the word "fibres" as employed in the tariff heading 8544 would become completely redundant and superfluous. Obviously, such an interpretation cannot merit any support or acceptance. From this angle as well, it sounds logical to assume that the framers of the expression in the H5N and in the Act would not have used the word "sheathed' to mean "coated" in the context of optical fibre cables covered by the heading 8544. (emphasis supplied)

20. We have gone through the various rulings given by the USA Customs, copies of which have been furnished to us by the applicant. All these rulings excepting one have been issued by the Commercial Rulings Division of USA Customs, New York while the Customs ruling HQ964632 detailing the process of coating and why this is considered as sheathing was issued by the USA Customs Headquarters in Washington. We have, studied them carefully with keen interest as they have dealt with the same issue which is before us. Much emphasis has been placed in the ruling on Alcatel's assertion that the amount of coating applied to its optical fibre is 60 microns thick and reflects "an industry standard' and that its incorporation of AFC3 coating and Colour Lock process protects the individual optical fibres from abrasions on the glass core and cladding that could cause short or long-term failures. The officials giving the ruling observed, "insofar as the subject optical fiber is individually coated with 60 microns of protective dual acrylate, it is our opinion that optical fiber cable composed of this optical fiber and coated with this combination of 60 microns of dual acrylate coatings and "Colour Lock' would be classifiable as "individually sheathed" under heading 8544 HTSUSEE Alcatel's 60 microns of dual acrylate coatings do substantially add to the overall protection, security, and reliability of each individual optical fiber and should be considered sheathing. 'Moreover, while making it clear that it is not their view that every coating, buffering, jacket, covering or sheathing (merely because it is called "sheathing") affords an optical fibre sufficient protection for it to be classifiable under heading 8544, the said ruling nevertheless noted, "in this case, Alcatel has adequately demonstrated that its combination of 60 microns of dual acrylate coating and colouring does provide substantial sheathing protection to the individual optical fibres in its optical fibre cable'. We however, noted that neither any authentic, independent and supportive technical information/literature/document/norms or standards nor any evidence showing any such practice being in vogue in the concerned industry, had been cited or analyzed in the rulings to show (a) that combination of 60 micron thick UV curable double acrylate coating with Colour Lock process is acknowledged and accepted as individually sheathing the fibre; (b) any norm or measure to judge what constitutes 'substantial sheathing protection'; and (c) that any 'coating' which gives an optical fibre 'substantial sheathing protection' is regarded as a 'sheath'. It is worthwhile to mention that the heading 8544 does not employ the expression 'made up of fibres individually having substantial sheathing protection'. The words used are 'made up of individually sheathed fibres'. The entire focus is on each fibre being individually sheathed and not on any mechanism which gives equal protection as what a sheath would normally give.

Another reason given in these rulings relates to the exclusion of the optical fibre cables under consideration from the coverage of the heading 9001. The particular portion of the HSN Explanatory Note to heading 90.01 to which reference has been made in this context reads as follows - "Optical fibres consist of concentric layers of glass or plastics of different refractive indices. Those drawn from glass have a very thin coating of plastics, invisible to the naked eye, which renders the fibres less prone to fracture. Optical fibres are usually presented on reels and may be several kilometers in length. They are used to make optical fibre bundles and optical fibre cables". This, only gives the general description of an optical fibre and does not in any way exclude from the purview of heading 90.01 optical fibres having thicker coatings or a coating which is visible to naked eye. What is actually excluded from the coverage of this heading is clearly stipulated in the same Explanatory Note where it states that "the heading, however, excludes optical fibre cables made up of individually sheathed fibres (heading 85.44)". It has further been clarified in another part of this Explanatory Note that "Optical fibre cables of this heading (which may be fitted with connectors) consist of a sheath containing one or more optical fibre bundles, the fibrers of which are not individually sheathed". So, the only thing that matters in deciding whether optical fibre cables would fall within or go out of the ambit of tariff heading 9001 is whether they are made up of individually sheathed fibres or not. Based on various information, technical and otherwise, gathered by us and highlighted in foregoing paras, we are of the view that the nature and depth of coating or the degree of protection it seeks to provide, would not take it out of the realm of'coating' and give it an identity of a different entity known as 'sheath'. With due respect, we are therefore, not persuaded to agree with the opinion expressed in the rulings given by USA Customs, (emphasis supplied)
21. Having carefully examined the question posed by the applicant, both from the technical as well as legal angles, we are inevitably led to the conclusion that the products involved in these applications, namely, optical fibre cables are not "made up of individually sheathed fibres" which is the basic criterion to be fulfilled by any optical fibre cable to merit classification under tariff heading 8544 of the First Schedule to the Act. That being the case, they cannot be classified under the heading 8544. Since the tariff heading 9001 specifically covers "optical fibre cables other than those of heading 8544, the products in question would accordingly fall squarely under the heading 9001. Note 1(h) of Chapter 90. states that "optical fibre cables of heading 8544 are not covered in Chapter 90. In other words, optical fibre cables made up of fibres that are not "individually Sheathed" zoould be classifiable under the heading 9001. Having regard to the tariff lay-out of the heading 9001, we find that the products in question would more precisely be classifiable under the tariff item 9001 10 00. The question posed by the applicant is therefore, to be answered in the negative." (emphasis supplied)

We agree entirely with the above technical and legal analysis made by the AAR in the Alcatel case and adopt the same in the present proceedings. Accordingly we hold that the correct classification of OFCs imported by the appellant RCIL is under CTH 9001 of the Customs Tariff.

5.4 The next issue for consideration is whether the demands are hit by time-bar. The appellant's contention is that they have been classifying the impugned goods under CTH 8544.70 even when the duty rates were the same on goods falling under CTH 8544 and CTH 9001 and the fact that the department has not sought to demand any differential duty in respect of OFCs imported by the appellant during the period prior to 1-3-2005 under 25 bills of entry also supports their contention. We find merit in this contention. Though the principles of res judicata and estoppel do not apply to tax assessments as held by the Hon'ble Apex Court in the case of Plasmac Machine - 1990(11)LCX0033 Eq 1991 (051) ELT 0161 (S.C), C.K. Gan-gadharan v. CIT - 2008(07)LCX0024 Eq 2008 (228) ELT 0497 (S.C.) = 2008(07)LCX0024 Eq 2009 (016) STR 0659 (S.C.) and BSNL - 2006(03)LCX0022 Eq 2006 (002) STR 0161 (S.C.) since the cause of action for each assessment is distinct, yet Revenue has to prove that the appellant misdeclared the description of the goods under import with an intent to evade payment of duty- No such evidence is forthcoming in the instant case and the only evidence adduced is that Mr. Manohar Rampal was aware that the goods merited classification under CTH 9001 as indigenously procured goods were being classified under the said heading. We are afraid this evidence is not conclusive enough to establish the Revenue's case of misdeclaration and suppression. We observe that the goods were being imported by the appellant over a long period of time and they have been classifying the same under CTH 8544 all along. The goods were also examined or ought to have been examined by the Customs at the time of importation. The description of the goods given in the bill of entry was as per the description given in the corresponding invoices. Therefore, as held by the Hon'ble Apex Court in the case of Northern Phislic ltd. laying claim to some exemption, whether admissible or not, is a matter of belief of the assessee and does not amount to misdeclaration warranting confiscation under Section lll(m) or imposition of fine and penalty under the provisions of Section 125 or Section 114A/112(a)/(b) of the Customs Act. in the present case, we find that the show cause notice for demand of differential duty has been issued only on 8-2-2007 for the imports made during March, 2005 to January, 2007. Thus the demand is hit by time-bar and we hold accordingly. Consequently, the entire differential duty demand with interest, confiscation of the goods, imposition of fine and penalties on the main appellant and the co-appellant are not sustainable and we hold according-
6. To sum up, we hold that, -

(1) the Optical Fibre Cables imported by the appellant M/s. Reliance Communication Infrastructure Ltd. merit classification under CTH 9001 of the Customs Tariff and not under CTH 8544 70 90;

(2) However, the differential duty demand on account of such reclassification is hit by time-bar. As a result, the entire duty demand along with interest thereon is not sustainable in law. Consequently, the confiscation of the goods with an option to redeem the same on payment of fine and imposition of penalties on the main appellant and its employee are also not sustainable in law and accordingly set aside.

(Operative part of the order pronounced in the Court on 1-1-2015)

Equivalent 2015 (320) ELT 0306 (Tri. - Mumbai)