2025 (1) TMI 744 - AAR - Customs

Eligibility to claim the benefit of reduced duty of 10% vide Sl. No. 22 of N/N. 57/2017-Customs, dated 30-6-2017 in respect of populated printed circuit boards (PCBs) imported for the manufacture of telecommunication equipment, specifically GPON ONTs/OLTs - HELD THAT - The product intended to be imported by the Applicants is not a finished product but a part of the finished product GPON ONT/OLT device. From the assembling process illustrated in the pictures provided in Annexure-2 of the reply letter dated 4-4-2024 it can be seen that this process includes putting the accessories to the PCBA (configuring/Connecting and checking all the cables) adding CMOS battery, adding PON modules and testing thereof and adding the software before it is finally packed. The configuration, testing and addition of software apparently play a crucial role in giving character GPON ONT/OLT device. Hence it appears that the department contention that the subject import goods is not parts but is a complete goods does not appears sound and tenable. It is clear from above that under CTI 85176290 the products sought to be covered are to be finished products and not parts. In the instant case the applicant proposes to import the Populated Printed Circuit Board for the manufacturing of Telecommunication equipment and more specifically for the purpose of manufacturing of GPON ONTs/OLTs which is aptly covered under Combination of one or more of Packet Optical Transport Product or Switch (POTP or POTS) . The decision of the Tribunal in the case of Commissioner of Customs, Mumbai (Air Cargo Import) v. Reliance Jio Infocomm Ltd. 2022 (6) TMI 1051 - CESTAT MUMBAI , deals with classification of cards i.e., Populated Printed Circuit Boards (PCBs) incorporated in photonic service switch. Thus, the imported goods in the present case interface cards being functionally similar, the decision of the Coordinate Bench of the Tribunal, which has been upheld by the Hon ble Supreme Court in Civil Appeal No. 000586-000598/2023 arising out of Diary No. 31965/2022 2023 (1) TMI 1297 - SC ORDER , by holding that they do not think it is appropriate to interfere in the impugned order, is relevant to the present case. Thus, the subject goods for the manufacturing of Telecommunication equipment and more specifically for the purpose of manufacturing of GPON ONTs/OLTs are covered under Sr. No. 22 of Notification No. 57/2017-Cus., dated 30-6-2017 as amended. Conclusion - The applicant is eligible to claim the benefit of reduced duty of 10% vide Sl. No. 22 of Notification No. 57/2017-Customs, dated 30-6-2017 in respect of Populated Printed Circuit Boards, for the manufacture of telecommunication equipment and more specifically for the purpose of manufacturing of GPON ONTs/OLTs.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal question presented and considered in this judgment is whether the applicant, M/s. Netlink ICT Private Limited, is eligible to claim the benefit of a reduced customs duty rate of 10% under Sl. No. 22 of Notification No. 57/2017-Customs, dated 30-6-2017, for the importation of populated printed circuit boards (PCBs) intended for the manufacture of telecommunication equipment, specifically GPON ONTs/OLTs.

2. ISSUE-WISE DETAILED ANALYSIS

Issue: Eligibility for Reduced Customs Duty Rate

Relevant Legal Framework and Precedents

The relevant legal framework involves the Customs Tariff Act, 1975, and Notification No. 57/2017-Customs, which prescribes a reduced customs duty rate for certain electronic goods. The specific tariff item under consideration is 8517 79 10, which covers "Populated, loaded or stuffed printed circuit boards." The applicant argues that their imported PCBs fall under this classification and are eligible for the reduced duty rate as per the notification.

Court's Interpretation and Reasoning

The court examined the classification of the imported goods under the Customs Tariff Act and the applicability of the reduced duty rate under Notification No. 57/2017-Cus. The court considered the applicant's argument that the PCBs are parts of telecommunication equipment and not finished products, which should be classified under 8517 79 10. The court also reviewed the jurisdictional commissioner's view that the goods should be classified under 8517 62 90 as complete GPON apparatus, not eligible for the reduced rate.

Key Evidence and Findings

The applicant provided detailed descriptions and functions of the PCBs in the GPON ONTs/OLTs, emphasizing that they are components rather than complete devices. The applicant also referenced Circular No. 08/2023, which clarifies the classification of products under Packet Optical Transport Product or Switch (POTP or POTS), supporting their claim that the imported PCBs qualify for the reduced duty rate.

Application of Law to Facts

The court applied the legal framework to the facts, analyzing the classification of the imported PCBs and their role in the manufacturing process of GPON ONTs/OLTs. The court determined that the PCBs are indeed parts of telecommunication equipment and fall under the specific tariff item 8517 79 10, making them eligible for the reduced duty rate under the notification.

Treatment of Competing Arguments

The court considered the jurisdictional commissioner's argument that the imported goods are complete GPON apparatus and should be classified under 8517 62 90. However, the court found this argument unconvincing, noting that the PCBs require additional components and processes to function as complete GPON devices. The court emphasized the importance of classifying goods under the most specific tariff entry, rejecting the use of a residual entry unless no specific entry applies.

Conclusions

The court concluded that the applicant's imported PCBs are classified under 8517 79 10 and are eligible for the reduced customs duty rate of 10% as per Sl. No. 22 of Notification No. 57/2017-Cus. This conclusion was supported by the detailed analysis of the classification, legal framework, and relevant precedents.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning

The court highlighted: "The product in question finds specific mention under 8517 79 10 which reads 'Populated, loaded or stuffed printed circuit boards.' The classification proposed by the Applicants is more specific and for this reason, the classification proposed by the Applicants have to be adopted applying Rule 3(a) of the General Rules for the Interpretation of this Schedule contained in the First Schedule - Import Tariff."

Core Principles Established

The judgment establishes the principle that goods should be classified under the most specific tariff entry available, and a residual entry should only be used when no specific entry applies. The court also emphasized the importance of considering the role and function of imported components in determining their classification and eligibility for reduced duty rates.

Final Determinations on Each Issue

The court ruled that the applicant is eligible to claim the benefit of a reduced duty rate of 10% under Sl. No. 22 of Notification No. 57/2017-Customs for the importation of populated printed circuit boards used in the manufacture of GPON ONTs/OLTs. The ruling was based on the classification of the PCBs as parts of telecommunication equipment under tariff item 8517 79 10.