2016 (3) TMI 5 - AT - Customs

Classification of import of Multimedia Speakers - Appellant claimed the classification of the same as falling under Customs Tariff Heading 8518 22 00 while the Revenue s contention is to classify it under Chapter Heading 8519 81 00 where speakers imported were having additional functions of USB Port with playback port and under 8527 99 19 where speakers imported were having the facility of FM Radio along with USB port playback - Held that - the speaker is primarily a speaker and some additional feature or facility for use of USB playback will not convert the same into a product equivalent to the products covered by Heading 8519 which covers Sound recording or reproducing apparatus. Similarly, Heading 8527 takes into its ambit the Reception apparatus for radio-broadcasting, whether or not combined, in the same housing . The additional feature of FM radio in the speaker, in our opinion, would again not convert the huge speaker into a FM radio. Even going by the common parlance test, nobody would buy a huge speaker for the purpose of FM radio. Also, the goods in question are speakers with added function, as such the main role of the item in question remains amplifying the sound received by it either from outside source or from inbuilt feature. As such, going by the Interpretative Rules and Section note 3 to Section XVI, the criteria for classifying the product is the principal and the main function it performs, which in the present case remains to be that of a speaker. We accordingly hold that the goods in question are properly classifiable under Chapter Heading 8518 22 00. We may also add that the invoices raised by the seller of the goods stand examined by it and the description stand given as Multimedia Speaker . This also reflects upon the fact that the goods in question, in common parlance are also traded as speakers. The appellants have also submitted an affidavit of the dealers, the invoices raised by them against the customers and the statement of Service Manager of the assessee. Examination of these documents shows that goods are primarily sold as speakers. Even the brochures placed on record indicate that the goods are being traded as speakers only and not as either FM radio or the sound reproduction system. This view is also strengthened by the decision of the Hon ble Supreme Court in the case of Xerox India Ltd. vs. Commissioner of Customs, Mumbai 2010 (11) TMI 20 - SUPREME COURT OF INDIA. Though the said decision did not deal with the items under consideration in the present appeal but the ratio of law laid down by the Hon ble Supreme Court would be squarely applicable to the facts of the present case. It was held that the multifunctional printing machines having fax facility and screening facility would continue to fall under Heading 8471 of the Customs Tariff Act as digital printers only inasmuch as the predominant function of the machine in question was printing. - Decided in favor of assessee.

Summary

Issues Involved:
1. Correct classification of imported "Multimedia Speakers" under the Customs Tariff Act.
2. Applicability of Circular No. 27/2013-Cus. dated 1.8.2013.
3. Interpretation of the General Rules for the Interpretation (GRI) and Section Note 3 to Section XVI.
4. Precedential value of earlier circulars and judgments.

Detailed Analysis:

1. Correct Classification of Imported "Multimedia Speakers":
The primary issue revolves around the correct classification of "Multimedia Speakers" imported by the appellant. The appellant claimed classification under Customs Tariff Heading (CTH) 8518 22 00, which attracts 10% Basic Customs Duty and 12% Countervailing Duty (CVD). However, the Revenue contended that these speakers should be classified under Chapter Heading 8519 81 00 or 8527 99 19, depending on whether they have features like USB playback or FM Radio, resulting in higher CVD.

The appellant imported three types of speakers:
- Plain speakers without USB port or FM Radio (no dispute on classification under CTH 8518 22).
- Speakers with USB port and playback (Revenue's proposed classification under CTH 8519 81).
- Speakers with FM Radio and USB playback (Revenue's proposed classification under CTH 8527 99).

2. Applicability of Circular No. 27/2013-Cus. dated 1.8.2013:
The lower authorities relied on Circular No. 27/2013-Cus., which discussed the classification of multifunctional speakers. The Circular concluded that speakers with USB playback should fall under Heading 8519, and those with FM Radio under Heading 8527. The appellant argued that this Circular misinterpreted the classification rules and that Circulars are not binding on courts.

3. Interpretation of the General Rules for the Interpretation (GRI) and Section Note 3 to Section XVI:
The Tribunal analyzed the General Rules for the Interpretation (GRI) and Section Note 3 to Section XVI, which states that composite machines should be classified based on their principal function. The Tribunal found that the principal function of the "Multimedia Speaker" is sound amplification, and additional features like USB playback or FM Radio do not change its primary classification as a speaker.

4. Precedential Value of Earlier Circulars and Judgments:
The Tribunal referred to earlier Circulars and judgments to support its decision. Circular No. 17/2007-Cus. and Circular No. 20/2013-Cus. emphasized that additional features do not alter the primary classification of a product. The Tribunal also cited the Supreme Court's decision in Xerox India Ltd. vs. Commissioner of Customs, Mumbai, which held that multifunctional machines should be classified based on their predominant function.

Conclusion:
The Tribunal concluded that the primary function of the imported "Multimedia Speakers" is sound amplification, and additional features like USB playback or FM Radio do not change their classification. Therefore, the speakers should be classified under CTH 8518 22 00. The Tribunal set aside the impugned order and allowed the appeals with consequential relief to the appellants. The Tribunal also emphasized that Circulars are not binding on courts and should not override statutory provisions.