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TMI Blog2023 (6) TMI 1253X X X X Extracts X X X X X X X X Extracts X X X X ..... ntegral part of the whole machine/system The subject goods which are meant only for automatic data processing machine and units thereof, and telecommunication apparatus other than static converters for cellular mobile phones are eligible for exemption from Basic Customs Duty under serial number 4 of the notification No 25/2005-Cus. dated 01.03.2005. Such exemption is not available to static converters meant for machines of healthcare, infrastructure sector etc., machines which can indirectly be considered as ADP machine etc. - CAAR/11/2023 - - - Dated:- 6-6-2023 - SHRI SAMAR NANDA (CUSTOMS AUTHORITY FOR ADVANCE RULINGS, NEW DELHI) Present for the Applicant : Shri Anshul Girotra, Authorized Representative Shri Sanjeev Nair, Advocate, Shri Pratik Gupte, Product Manager Present for the Department : None RULING M/s. Socomec India Private Limited, 756, Pace City - II, Sector 37, Gurgaon -122001, Haryana, having IEC No. 0500013420 and PAN-AAECS2270D (applicant, in short) has filed an application dated 19.12.2022, received in this office on 20.12.2022 seeking advance ruling under section 28-H of the Customs Act, 1962 before the Customs Authority for Advance Rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be classified under heading 850440 only and this view is affirmed by the Hon'ble Supreme Court in the case of JK. Synthetics Ltd. versus Commissioner of Central Excise, Jaipur reported at 2003 (152) E.L.T. 35 (SC). The applicant has further stated that, CBIC Circular No. 104/2003-Cus. dated 09.12.2003 made it clear that the UPS system merits classification under heading 8504 of the Customs Tariff Act, 1975; it is settled that the UPS merits classification under Chapter heading 8504 and more specifically under Sub-heading 85044090 and it can be called as a static converter of a type having rectifier, inverter, battery and a bypass switch mainly to convert AC current from mains to DC current which charges battery and then at the time of power cut from mains, inverter will convert it to AC current and will supply the machines with which it is attached. 3.2 The applicant has also stated that, the subject goods will be ultimately supplied to data centers, healthcare sector, infrastructure, telecommunication and for industrial applications etc.; subject goods can be broadly classified into 4 categories based on their use; an indicative list of machines, based on broad categ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and units thereof'. Further, the applicant submitted that, without prejudice to the exclusion provided under Note 5E to Chapter 84, while a general-purpose data processing machine is classifiable under Chapter Heading 84.71 the special purpose data processing machine incorporated or acting in conjunction with a machine is classified on merits by virtue of Note 5E to Chapter 84; special purpose data processing machines do not cease to be data processing machines merely because by virtue of special rules of classification embodied for such machines in Note 5E to Chapter 84, they are classified under headings other than 8471.; this view has been endorsed by Hon'ble Tribunal in the matter of Vodafone Essar Gujarat Ltd. v. Commr. of Cus. (Imports), Mumbai reported at (2009) 237 ELT 458; it can be concluded that though MRI CT scan machines themselves are not classifiable as ADP machines, they work in conjunction with ADP machines which are integral to their functioning and in absence of the inbuilt machines, MRI and CT scan machines cannot function; in other words, MRI CT scan machines are ADP machines which are capable of performing the function of an ADP machine and o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e capable of being used as ADP or telecommunication apparatus but will be put to use (by the customer of the applicant) along with machines which do not qualify in the above mentioned 3 categories of machines; in the present case, it is undisputed that subject goods are UPS classifiable under Sub-heading 85044090; these UPS systems are designed primarily to be used with ADP machines or with machines in which ADP machine are an integral part, but they also have the capability to be connected to multiple devices; this can be verified by analyzing the built specification of such UPS and the type of ports and the output voltage range and other parameters; however, merely because the UPS system have a capability of use in both ADP machines and non-ADP machines cannot be a basis for deciding whether they are eligible for exemption or not; serial number 4 of exemption notification states 'static converter for automatic data processing machines ...'; it does not state that the goods shall be solely and principally be used with ADP machine unlike Notification 24/2005 dated 01.03.2005 (which provided exemption to specified goods to Chapter 38, 84, 85 and 90 and all goods for the manu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be kept in mind and accordingly, the applicant is eligible for the duty benefit under serial number 4 of exemption Notification No. 25/2005-Cus.; without prejudice to the above, it is trite in law that wherever end use is contemplated, the notification necessarily has to provide a mechanism for the same; the applicant has placed reliance on the Supreme Court judgement in the case of State of Haryana v. Dalmia Dadri Cement Ltd, reported at 1988 (14) ECR 292 (SC) and on the judgement of the Hon'ble Tribunal in the matter of Collector of Central Excise, Ahmedabad v. Maize Products, reported at 1997 (94) E.L.T. 651 (Tri). In light of the foregoing submissions, the applicant has submitted that, in the present case the exemption notification must be considered liberally, and the benefit thereof should not be denied by taking recourse to a narrow interpretation; it is settled law that a person claiming benefit of an exemption notification must show that he satisfies the eligibility criteria once, post that if it is found that the exemption notification is applicable, the same should be construed liberally; that in the present case as well, the applicant is eligible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r its own CTH, even when it satisfies the necessary criteria of storing and processing information. Further, they submitted that the Nil BCD exemption under serial number 4 of Notification 25/2005-Cus. dated 01.03.2005 can only be extended to those items where the description of the goods is in accordance with the description as set out in the impugned notification; in case any deviation, the benefit of the impugned notification cannot be extended to the items; when the goods are being imported under the said notification, the importer should possess technical literature/write-up and /or end use certification, which clearly established the fact that the imported items are exclusively used in ADP machines, as defined in serial number 6 of the Notes under Chapter 84 of the Customs tariff; it is imperative to state that the declarations made by the importer at the time of filing of bill of entry will be subjected to regular examinations as per the RMS Instructions/Examination order. 6. Personal Hearing in the matter was held on 19.04.2023, wherein the Authorized Representative (AR) started with explaining usage of goods in question i.e 'Uninterrupted Power Supply' (UPS) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e solely and principally be used for ADP machines which merit classification under heading 8471 or telecommunication apparatus; such narrow interpretation that serial number 4 of the exemption notification is applicable only to those goods under Chapter heading 850440 which are solely and principally to be used only for ADP machines which merit classification under CTH 8471 is uncalled for and defeats the purpose of a beneficial notification; - Chapter Note 6(A) of Chapter 84 only defines the expression, 'automatic data processing machine' for the purposes of heading 8471 which means that the term, 'automatic data processing machine' is defined in the said Chapter Note only for the purposes of classification under heading 8471 and the meaning assigned in the Chapter Note 6 of Chapter 84 cannot be extrapolated to the wordings used in the exemption notification; - the subject goods are intended to be used in operation of machines which either ultimately qualify as Telecommunication apparatus or ADP machine or ADP machine is an integral part of that whole machine/system and the exemption notification does not mandate subject goods to be used 'solely and p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eligible for exemption or not; -serial number 4 of Notification No. 25/2005-Cus. states 'Static converters for automatic data processing machines and units thereof, and telecommunication apparatus, other than static converters for cellular mobile phones'; it does not state that the goods shall be solely and principally be used with ADP machine unlike Notification 24/2005-Cus. dated 01.03.2005 (which provided exemption to specified goods to Chapter 38, 84, 85 and 90 and all goods for manufacture thereof), where at serial number 17 and 18, it is specifically mentioned 'solely and principally used in an automatic data processing system'; had it been the intention of the legislature to restrict the scope of serial number 4 of Notification 25/2005-Cus. only to those static converters which are actually used or solely and principally to be used with ADP machines, the phraseology used in the exemption notification would have been different as, for example, 'goods actually used' or 'goods used' or 'solely and principally to be used' or similar language as used in Notification No. 24/2005, since both being issued on the same date; however, this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us. dated 09.12.2003. The application for advance ruling has been filed by them to ascertain applicability of serial number 4 of Notification No. 25/2005-Cus. dated 01.03.2005 on import of Uninterrupted Power Supply. 10.1 After going through the application for advance ruling, comments of the concerned Commissioner, additional submissions of the applicant and submissions made during the personal hearing, I note that, the subject goods can be used in multiple sectors viz data centers, healthcare, infrastructure, telecommunication etc.; on plain reading of Notification No. 25/2005-Cus., it is observed that the exemption from duties has been extended only to static converters which are meant for automatic data processing machine and units thereof, and telecommunication apparatus other than static converters for cellular mobile phones; the argument of the applicant in support of their contention regarding applicability of notification does not hold good even if words, 'solely and principally' have not been used to describe usage of static converter for applicability of notification; the words and phrases used in the notification are sufficient to suggest and clarify that exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Organization. Further, the Information Technology Agreement of WTO dated 13.12.1996 states inter-alia that, pursuant to the modalities set forth in the Annex to this Declaration, each party shall bind and eliminate customs duties and other duties and charges of any kind, within the meaning of Article II: 1(b) of the General Agreement on Tariffs and Trade 1994, with respect to the following: (a) all products classified (or classifiable) with Harmonized System (1996) ( HS ) headings listed in Attachment A to the Annex to this Declaration; and (b) all products specified in Attachment B to the Annex to this Declaration, whether or not they are included in Attachment A; Attachment B of the Agreement covers positive list of specific products to be covered by the agreement wherever they are classified in the HS. I note that one of the product as per Attachment B is Computers and the description of the same has been amplified as automatic data processing machines capable of 1) storing the processing program or programs and at least the data immediately necessary for the execution of the program; 2) being freely programmed in accordance with the requirements of the user; 3) perfor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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