2023 (8) TMI 362 - AT - Customs

Classification of imported goods - Computer Systems with modifications for enhancement of gaming - Computer System Desktop (personal computers with accessories like mouse, power adapter and gaming console) - to be classified under CTH 9504 5000, as the principal function was gaming or classifiable under Chapter Heading 8471 3090 as automatic data processing machines? - HELD THAT - An automatic data processing machine or personal computer is said to be capable, in terms of Chapter Note 5(A) to Chapter 84, of storing the processing programmes and is also freely programmable in accordance with the requirements of the user and capable of computing and executing without human intervention. Whereas video game consoles are simply plug and play devices, which are more user friendly, and meant purely for gaming or entertainment purposes and are not capable of computing, internet surfing, word processing, etc. Any Computer System which has got additional features for playing games, continues to be a Computer System and can also be used for general purposes other than as an entertainment device. The impugned goods are freely programmable whereas video game consoles only operate on fixed programmes. As the impugned goods answer to the requirements of the HSN Explanatory Notes to Heading 84.71 as well as Chapter Note 5 (A) to Chapter 84, they are more appropriately classifiable under CTH 8471 as automatic data processing machines. Though the imported goods, declared as computer desktop systems, are known in the market parlance as gaming computers, they are to be treated as computers / automatic data processing machines though many modifications have been brought out in the form of enhancements like inclusion of higher version of graphics cards, hardware for enhancement of audio and other gaming equipment. Thus, it is amply clear that such video game consoles and video game machines alone fall under the purview of HSN Explanatory Note (2), whether or not they satisfy the conditions of Note 5(A) to Chapter 84. Thus, primarily, to fall within the ambit of the above Note, the goods necessarily have to be such video game consoles/machines as defined above. However, as differentiated by us elsewhere in this order, the impugned goods/Computer System Desktop are neither video game consoles nor video game machines , but are an entirely different product which, though have gaming capabilities, are also having a wide array of functionalities such as internet surfing, multimedia playing, etc., and can be put to multiple uses in business and industry - the reliance on the HSN Explanatory Note (2) to Heading 95.04 by the lower appellate authority is misplaced. The fact is also noted that Computer Systems with modifications for enhancement of gaming, by inclusion of additional audio/video devices, are being classified under CTH 8471 as ADPs. In support of his contention, the Ld. Advocate has submitted many copies of Bills-of-Entry where similar products by the same manufacturer with the latest configuration in new series of machines have been classified under CTH 8471 in various Custom Houses and Air Cargo Complexes. Considering the differences that exist between video game console, video game machine and the imported product, it is held that the imported Computer System Desktops are classifiable under CTH 8471 as automatic data processing machines - the impugned order set aside - appeal allowed.

Summary

Issues Involved:

1. Classification of imported goods: Whether the imported goods are classifiable under Chapter Heading 8471 3090 as 'automatic data processing machines' or under Chapter Heading 9504 5000 as 'video game consoles'.

Issue-wise Comprehensive Details:

1. Classification of Imported Goods:

M/s. Asus India Private Limited filed an appeal challenging the re-classification of their imported goods by the Department. The appellant had declared the goods as "Computer System Desktop" under CTH 8471 3090, but the Department re-classified them under CTH 9504 5000 as "Electronic Games (Console)" based on the product's gaming capabilities and features.

The appellant argued that the imported goods are multi-tasking personal computers capable of computing, internet surfing, multimedia playing, and word processing, and should not be classified as video game consoles. They cited previous classifications of similar goods under Tariff Item No. 8471 3090 and emphasized that the goods are not exclusively designed for gaming.

The lower appellate authority observed that the goods were specially designed for gaming purposes, categorizing them under the 'Republic of Gamers (ROG)' series with high-end gaming specifications. The authority concluded that despite meeting the criteria for automatic data processing machines under CTH 8471, the principal function of the goods being gaming warranted their classification under CTH 9504.

The appellant contended that video game consoles and gaming computers are distinct products, with video game consoles being cheaper, designed for single-purpose gaming, and not freely programmable. They argued that gaming computers, while having enhanced gaming features, remain multi-functional and should be classified under CTH 8471.

The Tribunal examined the characteristics of gaming desktop computers and video game consoles, noting that gaming desktops are capable of multi-tasking, are freely programmable, and can be used for various applications beyond gaming. They concluded that the impugned goods, despite their gaming enhancements, are more appropriately classified as automatic data processing machines under CTH 8471.

The Tribunal found that the lower appellate authority's reliance on HSN Explanatory Note (2) to Heading 95.04 was misplaced, as the impugned goods did not fit the definition of video game consoles or machines. They also noted that similar products had been classified under CTH 8471 in other Custom Houses and Air Cargo Complexes, and at the time of export from China, these goods were classified under Chapter Heading 8471.

Consequently, the Tribunal held that the imported "Computer System Desktops" are classifiable under CTH 8471 as 'automatic data processing machines' and set aside the impugned order, allowing the appeal with consequential relief as per the law.