2022 (10) TMI 1179 - AAR - Customs

Classification of goods - handheld enterprise mobile computers - to be classified under Heading 84.71 or under the Heading 85.17 of the Customs Tariff? - HELD THAT - These are portable devices used in enterprise environments to run mobile apps capture barcodes take photos and videos and provide voice and data communications for workers and managers. These devices combine personal computer and scanning functions (applies to mobile computers and tablet computers) in a single device that can be outfitted with off-the-shelf or custom software applications that perform everyday tasks such as monitoring deliveries tracking assets and managing inventory. And because they run on familiar operating systems such as Windows/Android they offer the same functionality as a desktop computer or laptop. These processors are also equipped with a barcode scan engine and act as their own host which means one can instantly update and edit information as it is captured. Note 6(C) to Chapter 84 specifies the conditions for a unit to be classified as being part of an automatic data processing system. However from the working and features of the impugned devices it appears that these are not 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 the tasks of data capture and its further processing the Notes 6(D) and 6(E) do not appear to have application in this case. As per Circular No. 20/2013-Cus. dated 14-5-2013 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 . The manufacturer is advertising these products as mobile computers. These devices are essentially ADP machines with additional connectivity capabilities including cellular connectivity in 8 devices - These devices are used by enterprises to capture data. The products are used in inventory management store receiving order processing package tracking tracing delivering etc. These devices use Wi-Fi connectivity and Bluetooth for information sharing. Cellular connectivity is essentially used for GPS and information sharing where Wi-Fi is not available. Cellular connectivity can also be used for making calls. Therefore the devices under consideration are not classifiable as smartphones. The 13 devices listed in the Table-1 in the first paragraph of this ruling are classifiable under Heading 8471 and more specifically under sub-heading 8471 30 90 of the First Schedule to the Customs Tariff Act 1975.

Issues Involved:
1. Classification of handheld enterprise mobile computers under the Customs Tariff.
2. Applicability of Heading 84.71 versus Heading 85.17 for classification.
3. Determination of principal function for classification purposes.
4. Consideration of Chapter Notes and General Rules of Interpretation (GRI).

Detailed Analysis:

1. Classification of handheld enterprise mobile computers under the Customs Tariff:
The applicant, M/s. RET-Tech Private Limited, sought advance rulings on the classification of various models of handheld enterprise mobile computers. The devices in question have features such as barcode scanning, data processing, and wireless connectivity, and some models include cellular network connectivity.

2. Applicability of Heading 84.71 versus Heading 85.17 for classification:
The applicant argued that the devices should be classified under Heading 84.71 as Automatic Data Processing (ADP) machines. They contended that these devices satisfy the criteria set out in Heading 84.71, as their principal function is data processing. The applicant further argued that the devices are commercially known as "mobile computers/touch computers" and not as phones.

3. Determination of principal function for classification purposes:
The applicant provided detailed technical specifications and argued that the devices fulfill the conditions mentioned in Note 6(A) to Chapter 84, which defines ADP machines. These conditions include storing processing programs, being freely programmable, performing arithmetical computations, and executing programs without human intervention. The applicant emphasized that the primary function of these devices is data processing, and any communication capabilities are ancillary.

4. Consideration of Chapter Notes and General Rules of Interpretation (GRI):
The judgment examined the relevant Chapter Notes and GRIs to determine the correct classification. Note 6(A) to Chapter 84 was pivotal in establishing that the devices qualify as ADP machines. The judgment also considered Note 3 to Section XVI, which states that composite machines should be classified based on their principal function. The judgment noted that the principal function of the devices is data processing, akin to ADP machines, and not communication.

Ruling:
The judgment concluded that the 13 devices listed in the application are classifiable under Heading 84.71 and more specifically, under sub-heading 8471 30 90 of the First Schedule to the Customs Tariff Act, 1975. The judgment emphasized that the devices' primary function is data processing, and their communication capabilities are supplementary. Thus, the devices do not fall under Heading 85.17, which covers telephones and other communication apparatus.

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