2016 (2) TMI 855 - AAR - Customs

Classification of import of mobile phone by the name of Galaxy K Zoom under the Galaxy series - Whether the product is rightly classifiable as a telephone under Custom Tariff Heading (hereinafter referred to as CTH ) 8517 or as a Camera under CTH 8525? - Claim of benefit of exemption under the Notification 25/2005 - Held that - as per trade parlance and consumer perception test also, the product is mobile phone, classifiable under CTH 8517 12. The product i.e. Galaxy K Zoom is classifiable as telephone under Customs Tariff Heading 8517. Second question i.e., if the correct classification of the product is under CTH 8525, then whether applicant is entitled to the benefit of the exemption provided under Notification No. 25/2005, becomes infructuous.

Summary

Issues Involved:
1. Classification of the product "Galaxy K Zoom" under the appropriate Customs Tariff Heading (CTH) - whether as a telephone under CTH 8517 or as a camera under CTH 8525.
2. Eligibility for customs duty exemption under Notification No. 25/2005 if classified under CTH 8525.

Issue-wise Detailed Analysis:

1. Classification of the Product "Galaxy K Zoom":
- Applicant's Argument: The applicant contends that the "Galaxy K Zoom" should be classified under CTH 8517 as a telephone. The product performs functions such as transmission and reception of calls, text messages, multimedia messages, emails, images, and videos, aligning with the description under CTH 8517. They argue that the essential character of the product is that of a mobile phone, despite its advanced camera features.
- Revenue's Argument: The Revenue argues that the product should be classified under CTH 8525 as a digital camera. They emphasize the product's advanced camera features like a 20.7MP BSI CMOS sensor, 10x optical zoom, and its marketing as a camera-centric device. They rely on Note 3 to Section XVI of the Import Tariff, which states that composite machines should be classified based on the component that performs the principal function.
- Authority's Analysis: The Authority examines the relevant tariff headings and the Harmonized System of Nomenclature (HSN) explanatory notes. They note that the principal function test and essential character test are crucial for classification. The Authority observes that the product is marketed and perceived as a smartphone rather than a camera. They also reference the trade parlance and consumer perception test, concluding that the product is sold in phone shops, not camera shops.

2. Eligibility for Customs Duty Exemption:
- Applicant's Argument: If the product is classified under CTH 8525, the applicant claims eligibility for customs duty exemption under Notification No. 25/2005, which exempts digital still image cameras from customs duty.
- Authority's Conclusion: Since the Authority concludes that the product is classifiable under CTH 8517 as a telephone, the question of eligibility for customs duty exemption under CTH 8525 becomes irrelevant.

Conclusion:
The Authority for Advance Rulings holds that the product "Galaxy K Zoom" is classifiable as a telephone under Customs Tariff Heading 8517. Consequently, the question of eligibility for customs duty exemption under Notification No. 25/2005 does not arise.