2025 (1) TMI 267 - AAR - Customs

Classification of imported goods - Telematics Control Unit (TCU) - to be classified under the Customs Tariff Heading 8517 62 90 of the First Schedule of the Customs Tariff Act, 1975 or not - eleigibility to avail concessional rate of Basic Customs Duty under Sl. No. 666 of the N/N. 69/2011-Customs, dated 29-7-2011. Classification of goods - HELD THAT - Classification of goods covered under the Customs Tariff is done as per the General Rules of Interpretation ( GRI ). GRI 1 to 5 lay down the principles determining classification of goods under a specific Heading whereas GRI 6 is applicable if the objective is to determine the classification of goods in the Sub-headings of a Heading. The Larger Bench of the Hon ble Tribunal in the matter of Saurashtra Chemical, Porbandar v. Collector of Customs 1985 (8) TMI 183 - CEGAT, NEW DELHI-LB had held that the tariffs must be interpreted in the light of relevant Section and Chapter Notes which are statutorily binding like the Headings themselves. It appears that CTH 8517 covers such apparatus which is used in transmission and reception of data and wherein the data is transmitted by way of electromagnetic waves in a wireless network. As discussed in Annexure 1 of this application, where the subject good provides for transmission and reception of data in the RF form in the wireless network, by application of the GRI Rule 1 and considering the HSN explanatory notes, the subject good appears to merit classification under CTH 8517 at four-digit level. It is apparent that all the electrical machinery or equipment covered under Chapter 85 are not regarded as parts or accessories of motor vehicles classifiable under Chapter 87, as they stand excluded from the purview of Section XVII. Applicability of the benefit of the notification - HELD THAT - The benefit provided under the notification is subject to the condition that the goods being imported from Japan should be originating in Japan and the provisions laid down in Customs Tariff (Determination of Origin of Goods under the Comprehensive Economic Partnership Agreement between the Republic of India and Japan) Rules, 2011 are complied with. So long as the imported goods are rightly classifiable under CTH 8517 62 90 and are originating in Japan, the Applicant is eligible to avail concessional duty benefit @ 0% BCD. Conclusion - The subject goods i.e. Telematics Control Unit (TCU) is rightly classifiable under Customs Tariff Heading (CTH ) 8517and more specifically under 8517 62 90 - The applicant is eligible to avail concessional rate of Basic Customs Duty on import of the subject goods as per SI. No. 666 of Notification No 69/2011 - Customs, dated 29-7-2011.

Summary

1. ISSUES PRESENTED and CONSIDERED

The legal judgment revolves around two core issues:

• Whether the classification of the 'Telematics Control Unit (TCU)' under the Customs Tariff Heading 8517 62 90 is correct.
• Whether the Applicant is eligible to avail a concessional rate of Basic Customs Duty (BCD) under Sl. No. 666 of Notification No. 69/2011-Customs, dated 29-7-2011.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Classification of the Subject Good

• Relevant Legal Framework and Precedents: The classification of goods under the Customs Tariff is governed by the General Rules of Interpretation (GRI) and the Harmonized System of Nomenclature (HSN). The GRI and HSN provide the necessary framework and guidelines for classifying goods under specific headings.
• Court's Interpretation and Reasoning: The court considered the principal function of the TCU, which is to transmit, convert, and receive data in a wireless network. The judgment emphasized that the TCU, with its embedded Network Access Device (NAD) and E-sim, is capable of performing these functions at the time of import.
• Key Evidence and Findings: The TCU's ability to transmit and receive data using electromagnetic waves in a wireless network was a critical factor. The presence of IMEI and ICCID numbers on the TCU further supported its classification under CTH 8517.
• Application of Law to Facts: The court applied GRI Rule 1, which requires classification based on the terms of the headings and relevant section or chapter notes. The TCU's functions aligned with the description under CTH 8517, specifically under sub-heading 8517 62 90.
• Treatment of Competing Arguments: The judgment addressed the potential classification under Chapter 87, which covers parts and accessories of motor vehicles. However, it was concluded that the TCU, being an electrical equipment, is excluded from this chapter as per Section Note 2(f) of Section XVII.
• Conclusions: The TCU is correctly classifiable under CTH 8517 62 90, as it satisfies the criteria for machines used for transmission, conversion, and reception of data.

Issue 2: Applicability of Notification No. 69/2011-Customs

• Relevant Legal Framework and Precedents: Notification No. 69/2011-Customs provides an exemption from BCD for goods falling under CTH 8517 when imported from Japan, subject to compliance with the Customs Tariff (Determination of Origin of Goods under the Comprehensive Economic Partnership Agreement between India and Japan) Rules, 2011.
• Court's Interpretation and Reasoning: The court interpreted the notification to mean that the TCU, being classifiable under CTH 8517 and originating from Japan, is eligible for the concessional duty benefit.
• Key Evidence and Findings: The classification of the TCU under CTH 8517 and its origin from Japan were pivotal in determining eligibility for the duty exemption.
• Application of Law to Facts: The court applied the conditions of the notification, confirming that the TCU meets the criteria for exemption from BCD.
• Treatment of Competing Arguments: The judgment did not encounter significant competing arguments regarding the applicability of the notification, as the conditions were clearly met.
• Conclusions: The Applicant is eligible to avail the concessional rate of BCD at 0% as per the notification, provided the goods are imported from Japan and meet the origin criteria.

3. SIGNIFICANT HOLDINGS

• Preserve Verbatim Quotes of Crucial Legal Reasoning: "The subject goods i.e. 'Telematics Control Unit (TCU)' is rightly classifiable under Customs Tariff Heading (CTH) 8517 and more specifically under 8517 62 90."
• Core Principles Established:
  
  • The classification of goods should be determined based on the principal function and the specific description provided in the tariff headings.
  • Exclusions provided in section notes must be considered, especially when determining if a product falls under a specific chapter.
  • Eligibility for duty exemptions is contingent on compliance with the conditions set forth in relevant notifications and agreements.
  
  
• Final Determinations on Each Issue:
  
  • The TCU is correctly classified under CTH 8517 62 90.
  • The Applicant is eligible for a concessional rate of BCD at 0% under Notification No. 69/2011-Customs, subject to compliance with origin criteria.