The court emphasized the need for appropriate evidence to establish the classification of goods and the limitations of the exemption notification.

ORDER

1. The question in these appeals is whether the telephone LSP 340 imported would be entitled to the benefit of the exemption granted by a Notification No. 2112002 - Cus. dated 1 - 3 - 2002 to cellular telephones classified under Tariff Heading 8525 20 17 of the Customs Tariff Act. Contrary decisions have been taken by different tribunals. However, certain facts are admitted. The basic fact on which there is no controversy is that LSP 340 utilises cellular technology and is mobile although within a limited range. The difference of opinion has arisen because of a circular being b Circular No. 57/2003 dated June 2003 issued by the Central Board of Excise and Customs (CBE&C) in clarification of the exemption notification.

2. Before we come to the contents of the circular, we may note the relevant entries in the Customs Tariff Act. Entries 8525 20 17 refer to "cellular phones". The entry relied upon by the Revenue is Tariff Heading c 8525 20 19 as "Other".

3. The exemption notification granted exemption against Serial No. 313 to "cellular phones and radio trunking terminals" to the extent specified in the notification. The percentages of exemption have varied from time to time. However, the entry remains the same.

4. The circular issued by the Central Board of Excise and Customs d defined the phrase "cellular phones" mentioned at Item 313 of the exemption notification by saying that a telephone would not be considered as a cellular phone merely because it works on cellular technology. This conclusion was drawn on the basis of what the Central Board of Excise and Customs felt was common parlance and the private and commercial use of the phrase. According to the circular the term "cellular phones" as used in the exemption notification only referred to handheld mobile phones. Therefore, it was clarified:

"That the term cellular phone in Notification No. 211 2002 - Cus. (Sl. No. 313) dated 1 - 3 - 2002 covers only handheld mobile phones working on cellular technology. The notification does not cover either fixed f wireless terminals or fixed telephones working on cellular technology."

5. On the basis of this circular the claims of the importers for the benefit under the exemption notification in respect of LSP 340 were rejected and demands were raised on the party importers. The issue first reached the Customs Excise Services Tax Appellate Tribunal (CESTAT), Delhi. The Tribunal held in favour of the Revenue on the ground that LSP 340 had been described as a fixed wireless terminal and that since the essence of a cellular 9 phone was mobility LSP 340 did not qualify. It was also held that the Board circular did not impose any new condition for availing of the exemption. It may be noted at this stage, that both the Ministry of Finance and the Ministry of Commerce had made enquiries from the Department of Telecommunications as to whether LSP 340 could qualify as a cellular phone h for the purposes of the exemption notification. DoT had by a series of letters dated 12 - 3 - 2003, 16 - 4 - 2003 and 29 - 5 - 2003 written to the Department concerned had stated that LSP 340 was a cellular phone as it operated on cellular technology having the properties of both transreceiver and a telephone and that therefore, the items should be classified under the category "cellular phone" and covered under Serial No. 313 of the exemption notification. The Tribunal did not consider this evidence at all.

6. When the same issue was raised before CESTAT (Bombay), the Bombay Bench came to the conclusion that the circular sought to provide conditions to the notification and that this would tantamount to rewriting the notification or legislating by circular when the notification itself did not provide for any such condition viz. that the cellular phone should be handheld. More so, because the Department of Telecommunications had certified that the imported goods were cellular telephones.

7. In addition, the Bombay Tribunal also went into the issue of valuat