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2023 (5) TMI 449 - AAR - CustomsClassification of goods proposed to be imported - Cryptogenic Devicc/Token (ProxKey and ProxKey PRO) - to be classified under CTH 8471 80 00 or under 8473 30 99 - applicability of Sr. No. 2 of Notification No. 24/2005-Customs, dated 01.03.2005, as amended - HELD THAT - Parts and Accessories (Other than covers, carrying cases and the like) suitable for use solely or principally with machines of heading 8470 to 8472, 8473 30-Parts and Accessories of machines of heading 8471 are capable of directly connecting to and designed for use with an Automatic Data Processing System (Hereafter known as ADPS) of Heading 8471. The accessories covered by this heading are interchangeable parts or devices designed to adapt a machine for a particular operation, or to perform a particular service relative to the main function of the machine, or to increase its range of operations. It is observed that the applicant has not ruled out possibility of classification of goods under consideration under 8473 30 and specifically 8473 30 99 as the product is also in the nature of an accessory which has to be used only with ADP machine for a very distinct function of generating digital certificates and signing, encryption authentication of data. The said function is relative or supplementary to the main function of ADP System - The functions of the apparatus are controlled by firmware (a chip containing a programme) installed in the product at the manufacturing process. The product contains small flash storage of 2 MB for auto run plug and play feature loaded with its middleware from factory. The product docs not have any function which can even remotely be related to that of a flash drive as used in general parlance. Applicant has stated that when a user buys the product under consideration, he buys it for its function of Digital Signature, Signing, Encryption and Authentication and not to use as a flash drive or pen drive. The applicant's contention that the classification of goods should be based on its primary function, is agreed upon. On the ground of provisions of GRI the specific heading will prevail over the general heading. Moreover, the product has specific character which are in consonance with principles laid to Chapter note 5C of 84, WCO Explanatory notes to 8471 80 and specific product entry of WCO classification opinion under 8471 80. There is nothing contrary to this opinion in the chapter 84 to the first schedule to the Customs Tariff Act, 1975. HSN/WCO classification opinion has a significant guidance value in deciding the matters of classification under the Customs law. In the case of Collector of Customs, Bombay Vs Business Forms Ltd, 2002 (1) TMI 68 - SUPREME COURT , the Hon'ble Supreme court held that Explanatory Notes to HSN need to be given due consideration for classifying goods. There are few more apex court judgments echoing similar views. Hence, based on foregoing discussion, it is found that the product will be classifiable under CTH 8471 80 00 as other units of automatic data processing machines. The entry 8471 is mentioned at serial no. 8 that extends the benefit of exemption from whole of the duty of Customs leviable on all goods covered under heading 8471 of first schedule of Customs Traffic Act, 1975. Applicant has incorrectly quoted and claimed eligibility to avail benefit under benefit under Sr. 2 of Notification No 24/2005- Customs - the 'Cryptogenic Device/Token' (ProxKey and ProxKey PRO) fall under Tariff entry 8471 80 00 Other units of automatic data processing machines of chapter 84 of the first schedule of the Customs Tariff Act, 1975. Said goods are eligible for duty exemption under serial number 8 of the notification. No. 24/2005- Customs amended from time to time.
Issues Involved:
1. Classification of 'Cryptogenic Device/Token' (ProxKey and ProxKey PRO). 2. Applicability of Sr. No. 2 of Notification No. 24/2005-Customs, dated 01.03.2005. Summary: Issue 1: Classification of 'Cryptogenic Device/Token' (ProxKey and ProxKey PRO) M/s. Pagaria Infotech Ventures LLP filed an application for advance ruling on the classification of 'Cryptogenic Device/Token' (ProxKey and ProxKey PRO). The applicant argued that the products should be classified under heading 8471 80 00 - Other units of automatic data processing machines or 8473 30 99 - Others - Parts and accessories of the machines heading 8471 (ADPS). They emphasized that the products are used for strong authentication, secure access, and online transactions, featuring a plug-and-play capability. The products comply with international standards like ISO 7816, FIPS 140-2, and possess reliable encrypting capabilities such as DES, 3DES, and RSA. The applicant contended that the products resemble USB Flash Drives in physical appearance but function differently, as they generate and securely retain private keys for digital signatures. They cited various provisions of the Information Technology Act, 2000, and the Information Technology (Certifying Authorities) Rules, 2000, to support their claim. The ruling examined multiple tariff headings, including 8523, 8471, and 8473. The Authority concluded that the products do not fit under heading 8523 due to their specific data processing functions. The products were found to comply with Chapter Note 5C of heading 8471, which covers units of automatic data processing systems. HSN Explanatory Notes and WCO classification opinions further supported the classification under 8471 80 00. The Authority ruled that the products fall under Tariff entry 8471 80 00 as other units of automatic data processing machines. Issue 2: Applicability of Sr. No. 2 of Notification No. 24/2005-Customs The applicant sought applicability of Sr. No. 2 of Notification No. 24/2005-Customs for duty exemption. However, the Authority found that the correct entry is serial number 8 of the notification, which extends the benefit of exemption from the whole of the duty of Customs leviable on all goods covered under heading 8471. Ruling: The 'Cryptogenic Device/Token' (ProxKey and ProxKey PRO) are classified under Tariff entry 8471 80 00: Other units of automatic data processing machines. They are eligible for duty exemption under serial number 8 of Notification No. 24/2005-Customs, as amended.
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