2024 (9) TMI 189 - AT - Customs

Classification of imported goods - import of electrical components viz, capacitors, ICs, Bare PCBs, LED, Fuse, Relay, etc. - Department is of the view that these un-mounted PCBs or circuit layouts, (commonly known) are specific items and deserve to be classified in Chapter Heading 84159000 of the Customs Tariff Act, 1975 - HELD THAT - The two items i.e. Buzzer and LED were in any case are being classified under Tariff Heading 84159000 and other items were classified under Chapter 85 of CTA by the party excepting silicone keypad, Zebra/Keypad and springs which were classified under Tariff Heading, 39269099, 40169990, 73209090 respectively. The classification as done by the appellant in respect of item at Sr. No. 1-15 of table in factual matrix Capacitors, Resistor, Bare PCB, Fuse, Relay, Connecting Terminals, Rectifiers, Transistor, Mosfet, IRED, LED Backlight, Crystal, Integrated Circuit / Micro IC, Line Cord and Switching Power Supply Transformer upheld; Silicone Key Pad, Buzzer and LCD will be classified under Tariff Heading 84159000, item at Sr. No. 17 Zebra/Keypad under Tariff Heading 40169990 and item at Sr. No. 18 i.e. Spring under Tariff Heading 73209090. Appeal disposed off.

Issues Involved:

1. Classification of imported electrical components.
2. Applicability of Rule 2(a) of the General Rules for Interpretation (G.R.I).
3. Relevance of Section Note 2 of HSN Explanatory Notes to Section XVI.
4. Use of NIDB data for classification.
5. Revenue neutrality and impact on customs duty.

Issue-wise Detailed Analysis:

1. Classification of Imported Electrical Components:
The appellant, M/s Elite Electronics, imported 11 electrical components for manufacturing remote handsets and 20 components for main PCBs. The Deputy Commissioner classified these components under CTH 84159000 as "Parts of Air Conditioner and Parts of A.C. Remote System". The appellant contested this classification, arguing that the components should be classified under their specific headings in Chapter 85, as they are imported separately and not as parts of a complete system. The tribunal upheld the appellant's classification for items 1-15 under Chapter 85, while items 16, 19, and 20 were classified under CTH 84159000, item 17 under CTH 40169990, and item 18 under CTH 73209090.

2. Applicability of Rule 2(a) of the General Rules for Interpretation (G.R.I):
The Commissioner applied Rule 2(a) of G.R.I, treating the imported goods as unassembled or disassembled parts of a complete article, thus classifying them under CTH 84159000. The appellant argued that Rule 2(a) is not applicable as the components were imported separately and did not have the essential character of the final goods at the time of import. The tribunal agreed with the appellant, stating that specific Chapter Notes and Section Notes should be preferred over general interpretative rules, thus rejecting the application of Rule 2(a).

3. Relevance of Section Note 2 of HSN Explanatory Notes to Section XVI:
The Commissioner relied on Section Note 2, which states that parts suitable for use solely or principally with a particular machine are classified under the same heading as that machine. The appellant countered that this rule does not apply to parts that constitute an article covered by a specific heading, even if designed for a specific machine. The tribunal upheld the appellant's interpretation, classifying the items under their specific headings in Chapter 85, as they are distinct articles even if used in a specific machine.

4. Use of NIDB Data for Classification:
The Commissioner used NIDB data to support the classification under CTH 84159000, arguing that similar parts were classified under this heading in other imports. The appellant contended that the NIDB data pertained to finished parts, whereas their imports were components for manufacturing. The tribunal found the NIDB data inapplicable to the appellant's case, as the imported items were not finished parts but components for manufacturing.

5. Revenue Neutrality and Impact on Customs Duty:
The appellant argued that classifying the silicone keypad under CTH 84159000 would be revenue-neutral, as the input tax credit is available on IGST. The tribunal acknowledged this point and classified the silicone keypad, along with the buzzer and LCD, under CTH 84159000. The tribunal also noted that the classification of these items did not affect the overall duty liability significantly.

Conclusion:
The tribunal upheld the appellant's classification for items 1-15 under Chapter 85, while items 16, 19, and 20 were classified under CTH 84159000, item 17 under CTH 40169990, and item 18 under CTH 73209090. The appeal was accepted with modifications, and the classification was disposed of accordingly.

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