2024 (11) TMI 1056 - HC - Customs

Classification - Integrated Circuit Micro Electro Mechanical System Microphones hereafter also referred to as the product being imported by the appellant - Customs Tariff Heading 8518, specifically Tariff Item 8518 10 00 OR under CTH 8542, specifically Tariff Item 8542 39 00. HELD THAT - Technical literature, relied upon by the appellant, itself describes the product as a microphone or MEMS microphone and does not use the term Integrated Circuit MEMS Microphone anywhere. This supports the view of this Court that the core identity of the product is a microphone, though it is enhanced or powered by MEMS technology. Thus, while the appellant has referred to the product as an Integrated Circuit MEMS Microphone , it appears this terminology has been selectively chosen for potential classification advantage. The correct nomenclature for the product should simply be Microphone or MEMS Microphone or MEMS-Enabled Microphone . It is also clear from a reading of the Product Functioning provided by the appellant that the product acts as an energy conversion device and performs the functions of converting sound signals into electrical signals . We are of the opinion that, it is not the technology which is used in the product that defines the product and decides its classification under the CTH, but it is the product (which may be created using a particular technology) which decides the classification. For this reason, it is the microphone which has the technology of MEMS, which adds value to the microphone, and it is not the microphone which is adding value to the technology of MEMS. The inclusion of MEMS technology enhances the product s function but does not change its primary identity as a microphone. In the given case, the product is not a stand-alone sensor or an EIC. This is not a case where the appellant is importing a separate integrated circuit that could be combined with various other components to create devices with diverse functions. Had the appellant imported an individual integrated circuit (such as an ASIC chip) or standalone MEMS sensors, our findings may have differed. However, the item being imported is a fully assembled MEMS microphone, a final product with integrated components like the ASIC chip (an EIC) and MEMS sensor, pre-packaged and mounted on a PCB, creating a complete and tradable unit a microphone. It is not the case of the appellant that it is importing only an integrated circuit sans the microphone. Had it been the case, our conclusion may have been different. As considering the Headings, Section Notes, Chapter Notes of the Customs Tariff Act as well as the Explanatory Notes to HSN, we are of the firm view that the contention of the appellant that the product should be classified as an EIC, under CTH 8542, and not as a microphone under CTH 8518, is unmerited.

Summary

Issues Involved:

1. Whether the impugned order by the Customs Authority of Advance Rulings (CAAR) should be set aside.
2. Appropriate classification of MEMS Microphones under Customs Tariff Item 8518 100 or 8542 3900.

Issue-wise Detailed Analysis:

1. Whether the impugned order by the Customs Authority of Advance Rulings (CAAR) should be set aside:

The appellant challenged the CAAR's decision, which classified the MEMS Microphones under Customs Tariff Heading (CTH) 8518. The appellant argued that the product should be classified under CTH 8542 as an Electronic Integrated Circuit (EIC) due to its composition and function. The Court examined the CAAR's reasoning, which was based on the product's description as a microphone and its primary function of converting sound signals into electrical signals. The CAAR's decision was supported by the technical literature provided by the appellant, which consistently referred to the product as a microphone or MEMS microphone. The Court agreed with the CAAR's classification, noting that the product's core identity as a microphone remained unchanged despite the integration of MEMS technology.

2. Appropriate classification of MEMS Microphones under Customs Tariff Item 8518 100 or 8542 3900:

The Court considered whether the MEMS Microphones should be classified under CTH 8518 or 8542. The appellant contended that the product, being a Multi-Component Integrated Circuit (MCO) with MEMS sensors and an ASIC chip, should fall under CTH 8542 as an EIC. However, the Court emphasized the importance of the product's primary function, which aligns with that of a microphone. The Court referred to the Harmonized System of Nomenclature (HSN) and General Rules of Interpretation (GI Rules), which prioritize the essential character and specific description of the product. The Court found that the product's function of converting sound signals into electrical signals is characteristic of a microphone, thus justifying its classification under CTH 8518. Additionally, the Court noted that the inclusion of MEMS technology enhances the microphone's performance but does not alter its fundamental identity. The Court concluded that the product is a fully assembled MEMS microphone, a complete and tradable unit, and should be classified under Tariff Item 8518 10 00. The appeal was dismissed, affirming the CAAR's classification.