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2023 (6) TMI 1253 - AAR - CustomsBenefit of exemption from customs duty - Uninterrupted Power Supply - General purpose UPS or to be used with automatic data processing machine (ADP) - merits classification under Sub-heading 85044090 of the First Schedule to the Customs Tariff Act, 1975 or not HELD THAT - Even if words, 'solely and principally' have not been used to describe usage of static converter for applicability of notification; the words and phrases used in the notification are sufficient to suggest and clarify that exemption from Basic Custom Duty is applicable to only those static converters which are meant for automatic data processing machine and units thereof, and telecommunication apparatus other than static converters for cellular mobile phones; - The applicant has wrongly interpreted the notification by stating that UPS proposed to be imported by the applicant are intended to be used in operation of machines which either ultimately qualify as Telecommunication apparatus or ADP machine or where ADP machine is an integral part of the whole machine/system The subject goods which are meant only for automatic data processing machine and units thereof, and telecommunication apparatus other than static converters for cellular mobile phones are eligible for exemption from Basic Customs Duty under serial number 4 of the notification No 25/2005-Cus. dated 01.03.2005. Such exemption is not available to static converters meant for machines of healthcare, infrastructure sector etc., machines which can indirectly be considered as ADP machine etc.
Issues Involved:
1. Classification of 'Uninterrupted Power Supply' (UPS) under Sub-heading 85044090. 2. Eligibility for zero rate of Basic Customs Duty under serial number 4 of Notification No. 25/2005-Cus. dated 01.03.2005. Summary: Issue 1: Classification of 'Uninterrupted Power Supply' (UPS) under Sub-heading 85044090 - The applicant proposed to import various variants of UPS such as single phase, three phase, industrial, and transformer-based UPS. They argued that UPS should be classified under Sub-heading 85044090 as it functions as a static converter, as per the General Rules of Interpretation of Import Tariff and HSN Explanatory Notes. The applicant cited judicial precedents and CBIC Circular No. 104/2003-Cus. dated 09.12.2003 to support their classification. Issue 2: Eligibility for zero rate of Basic Customs Duty under serial number 4 of Notification No. 25/2005-Cus. dated 01.03.2005 - The applicant contended that the UPS units should benefit from zero rate of Basic Customs Duty under the specified notification, arguing that the UPS units are used in various sectors such as data centers, healthcare, telecommunication, and industrial applications. They categorized the usage as: - Category 1: ADP Machines (e.g., Large Scale & Hyperscale Data Centers). - Category 2: Machines where ADP machines are integral (e.g., MRI & CT Scan Machines). - Category 3: Telecommunication apparatus (e.g., Air Traffic Control towers). - Category 4: Other machines not falling into the above categories but capable of being used with ADP machines. - The applicant argued that the exemption notification should be interpreted liberally, and the requirement for an end-use certificate at the time of import is not mandatory. They emphasized that the notification does not mandate that subject goods should be "solely and principally" used for ADP machines, and thus, UPS units should be eligible for the exemption. - The Customs Authority for Advance Rulings (CAAR) examined the application, comments from the Commissionerate, and submissions made during the personal hearing. The CAAR noted that the exemption is applicable only to static converters meant for automatic data processing machines and telecommunication apparatus other than static converters for cellular mobile phones. The CAAR found the applicant's interpretation, which included machines indirectly considered as ADP machines or used in healthcare and infrastructure sectors, to be incorrect. - The CAAR referred to the Information Technology Agreement (ITA) of the World Trade Organization, which specifies that machines performing specific functions other than data processing or working in conjunction with an automatic data processing machine are not covered by the agreement. - The CAAR concluded that the benefit of zero rate of Basic Customs Duty under serial number 4 of Notification No. 25/2005-Cus. dated 01.03.2005 is not available to UPS units meant for machines in healthcare, infrastructure sectors, or machines indirectly considered as ADP machines. Ruling: - The subject goods, UPS units, are eligible for exemption from Basic Customs Duty under serial number 4 of Notification No. 25/2005-Cus. dated 01.03.2005 only if they are meant for automatic data processing machines and units thereof, and telecommunication apparatus other than static converters for cellular mobile phones. The exemption is not available for UPS units meant for healthcare, infrastructure sectors, or machines indirectly considered as ADP machines.
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