2006 (9) TMI 317 - AT - Customs

Summary

Issues:
Correct classification of integrated circuits for imported postage franking machines under Customs Tariff Heading 8542.50 vs. CTH 8470.90.

Analysis:
The dispute in the present appeal revolves around the classification of integrated circuits (software for imported postage franking machines) under Customs Tariff Heading 8542.50 as claimed by the importers, as opposed to the department's contention that they should be classified under CTH 8470.90, which covers franking machines and parts thereof.

Upon hearing both sides, the Tribunal referred to a recent decision by the Apex Court in the case of Anjaleem Enterprises Pvt. Ltd. v. CCE, Ahmedabad, where it was established that even a programmed IC falls under Heading 85.42, emphasizing that the essential character of an IC remains unchanged with the program embedded in it. Applying Note 2(a) to Section XVI of the Tariff, encompassing Chapters 84 and 85, the Tribunal concluded that the ICs in question should be classified under Heading 85.42, despite being parts of franking machines, as they are specifically listed under Heading 85.42.

Moreover, Note 5 to Chapter 85 was invoked, asserting that the classification of ICs under CTH 85.42 takes precedence over any other heading in the Schedule covering ICs by function. Therefore, even if the ICs could be considered parts of franking machines, their classification under Chapter Heading 85.42 prevails over CTH 8470.90. Consequently, the Tribunal upheld the importers' claim for classification under CTH 85.42, overturned the challenged order, and allowed the appeal in favor of the importers.