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2021 (4) TMI 1362 - AAR - CustomsClassification of goods proposed to be imported - Portable Computers viz. Barcode Mobile Computers RFID Mobile Computer and Tablet Mobile Computer - to be classified under heading 8471 or not - HELD THAT - From the working and features of the impugned devices it appears that these are not the units of ADP machines but ADP machines themselves. Note 6(D) to chapter 84 lists certain separately presented products that are to be excluded from heading 8471 even if they can be classified as part of an ADP system. Note 6(E) to chapter 84 mentions that a machine incorporating or working in conjunction with an automatic data processing machine and performing a specific function other than data processing are to be classified in the headings appropriate to their respective functions or failing that in residual headings. As the impugned devices as described by the applicant appear to be akin to ADP machines performing capturing of data and its further processing notes 6(D) and 6(E) do not appear to have application in this case. From the note it is clear that a composite machine performing various functions is to be classified according to the principal function performed by such a device - In the instant case these devices combine computing and scanning functions for monitoring deliveries tracking assets and managing inventory. 18 out of 36 devices also have communication capabilities. However for the products under consideration automatic data processing appears to be the main function while other functionalities of said machines are not different from auxiliary functions that could be seen on any computer such as desktop or laptop computers. In circular no. 20/2013- Cus dated 14.05.2013 clarification has been given by the Central Board of Excise and Customs (CBEC) regarding the classification of tablet computers under heading 8471 - as per the said circular tablet computers are classifiable under heading 8471 and not under heading 8517 despite the fact that the product is having cellular connection functionality considering its principal function as automatic data processing. Similarly in this case the principal function of the impugned devices is barcode scanning and data processing for monitoring deliveries tracking assets and managing inventory. Therefore these devices appear to merit classification under heading 8471 and not under heading 8517. The devices under consideration are principally not telephones for cellular networks. In fact 18 out of 36 models do not have the functionality of cellular connectivity which shows that the SIM is not an integral part of these devices as these devices are able to perform their primary function with or without the SIM card. These devices do not appear to be convenient for the purpose of telephony as a principal function. As per circular no. 20/2013- Cus. dated 14.05.2013 the difference between a smartphone and tablet computer is not based on whether the product has a voice calling function or not but on the principal features that a producer has intended for the device when designing and developing it . These devices are essentially ADP machines with additional connectivity capabilities including cellular connectivity for 18 models - the devices under consideration are not classifiable as smartphones. They merit classification under subheading 8471 30 90. Thus the 36 devices are classifiable under Customs tariff heading 8471 and more specifically under subheading 8471 30 90 of the first schedule to the Customs Tariff Act 1975.
Issues Involved:
1. Classification of Portable Computers (Barcode Mobile Computers, RFID Mobile Computer, and Tablet Mobile Computer) under the Customs Tariff Act, 1975. Detailed Analysis: Issue 1: Classification of Portable Computers The applicant, M/s. Senate Solutions Private Limited, sought advance rulings on the classification of various Portable Computers, including Barcode Mobile Computers, RFID Mobile Computer, and Tablet Mobile Computer. The models proposed to be imported under each category were detailed, with specific mention of their wireless connectivity options and whether they had cellular calling functions. Applicant's Submission: The applicant argued that these Portable Computers should be classified under heading 8471 as automatic data processing (ADP) machines based on the following points: - The principal function of these devices is data processing. - They are commercially known as "Barcode Mobile Computers, RFID Mobile Computer, and Tablet Mobile Computer," not as phone/communication devices. - They meet the criteria set out in Note 6(A) to Chapter 84, which defines ADP machines. The applicant highlighted that the devices: - Store processing programs and necessary data. - Are freely programmable. - Perform arithmetical computations specified by the user. - Execute processing programs without human intervention. The applicant also submitted that the devices, even if capable of performing multiple functions, should be classified based on their principal function, which is data processing. They emphasized that the products are marketed as computers, not as smartphones or communication devices. Legal Analysis: The Customs Authority for Advance Rulings (CAAR) examined whether the devices met the criteria for classification under heading 8471. The authority considered the General Rules of Interpretation (GRI) and relevant chapter notes. Chapter Note 6(A) to Chapter 84: The devices were found to satisfy the requirements of an ADP machine as they: - Store processing programs and necessary data. - Are freely programmable. - Perform arithmetical computations. - Execute processing programs without human intervention. Chapter Notes 6(C), 6(D), and 6(E): The devices were determined to be ADP machines themselves, not just units of ADP systems. Notes 6(D) and 6(E) were found inapplicable as the devices perform data processing as their principal function. Alternate Heading 8517: The authority examined the possibility of classification under heading 8517, which covers telephones and other apparatus for communication. Note 3 to Section XVI was considered, which states that composite machines should be classified based on their principal function. The authority concluded that the principal function of the devices is data processing, not communication, despite some models having cellular connectivity. Circular No. 20/2013-Cus: The circular clarified that tablet computers, despite having cellular connectivity, are classified under heading 8471 based on their principal function of data processing. This reasoning was applied to the Portable Computers in question. Harmonized System Committee Opinion: The classification opinion of the 68th session of the Harmonized System Committee, which classified RFID/barcode readers with cellular connectivity under subheading 8517 13, was considered. However, the authority noted that the devices in question are not primarily telephones for cellular networks and emphasized their principal function as ADP machines. Conclusion: The CAAR ruled that the 36 models of Portable Computers listed are classifiable under Customs tariff heading 8471 and more specifically, under subheading 8471 30 90 of the first schedule to the Customs Tariff Act, 1975. The ruling was based on the devices' principal function of data processing and their compliance with the criteria for ADP machines.
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