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TMI Blog2023 (12) TMI 263X X X X Extracts X X X X X X X X Extracts X X X X ..... n making or receiving phone calls which have not been the intent of the section notes and chapter notes of Chapter 91. Hence, First point of adjudication stands decided in favour of Revenue holding the right classification for the impugned imported product is 8517 6290. Whether the appellant is eligible to claim concessional rate of basic customs duty under serial no. 955 of the Notification No. 152/2009 dated 31.12.2009? - HELD THAT:- The appellant has wrongly classified the goods under 9102 1900. These are held classifiable under Tariff Entry 8517 6290. From the Notification No. 152/2009-Cus. dated 31.12.2009, we observe that the entry at serial no. 955 thereof gives the benefit of exemption from customs duty to the goods falling under Tariff Entry 9102 to 9103 only. As already held above the goods are classifiable under 8157 6290, the benefit of the said notification shall not be available to the appellant. The certificate for origin is not sufficient to extend the benefit of nil rate of duty. As the origination from Korea is not the criteria of the Notification no. 152/2009-Cus. but such goods originating from Korea as are mentioned in the table under the said notification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... serial no. 955 of Notification No. 152/2009-Cus., dated 31.12.2009. However, IGST at the rate of 18% was paid. Department observed that the imported goods, G Watches are capable of performing many functions other than those related to timekeeping and as such are the smart watches as different from those classifiable under CTH 91021900. Department formed an opinion that such kind of apparatus/device merits classification under CTH 85176290. Resultantly, the Show Cause Notice No. 01/2020 dated 13.01.2020 was served upon the appellant proposing rejection of classification claimed by the appellant i.e. under CTH 91021900. It is proposed that the imported goods be classified under 85176290 to which the duty exemption, as availed, is not applicable. Resultantly, short payment of customs duty amounting to Rs. 86,62,852/- with respect to the import of the impugned goods vide the aforementioned two Bills of Entry was proposed to be recovered along with the interest. The imported goods were proposed to be held liable to confiscation. In addition, the penalty was also proposed to be imposed upon the appellant. The said proposal has been confirmed vide the Order-in-Original bearing no. 55/2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.-LB) and Mauri Yeast India Pvt. Ltd. Vs. State of U.P. reported as 2008 (225) ELT 321 (SC) has been relied upon by the learned counsel. Learned counsel also submitted that the technological advancements have to be taken into consideration while determining the classification. Various other functions of the imported goods is nothing but technological advancement due to which wrist watch/clock cannot be made to fall under any other tariff entry. The decision in the case of Collector of Customs Central Excise Vs. Lekhraj Jessumal Sons reported as 1996 (82) ELT 162 (SC) has been relied upon. Learned counsel further submitted that while importing the goods the benefit of Notification No. 152/2009 has rightly been claimed as the country of origin certificate was duly submitted. All the requirements thereof have duly been satisfied. Above all, the benefit of notification can be claimed at any stage. Finally it is submitted that even if the classification of appellant is not accepted, the act of appellant is merely a claim for incorrect classification. It cannot be alleged as mis-declaration. Question of imposition of penalty upon the appellant does not at all arise. The decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant with respect to the impugned imported goods and the Bills of Entry in question, we observe that the following are the issues to be adjudicated: (i) Whether LG Watch W7 as imported by the appellant is classifiable under CTH 91021900 as claimed by the appellant or is classifiable under CTH 85176290 as confirmed vide the Order-in-Original. (ii) Whether the appellant is eligible to claim concessional rate of basic customs duty under serial no. 955 of the Notification No. 152/2009 dated 31.12.2009 (iii) Whether the imported goods are liable for confiscation and the appellant is liable for being penalized. 6. First point of adjudication: Both the parties have relied upon the General Rules of Interpretation (GRI) and have impressed upon that the chapter notes read with GRI decides the tariff entry for a particular goods. In view thereof, we foremost need to look into the tariff entries in question and then the General Rules of Interpretation. Chapter heading and chapter note for Chapter 85 are as follows: Tariff Item Description of goods Unit Rate of duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 62 -- Machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus: u Free 8517 62 10 --- PLCC equipment u Free 8517 62 20 --- Voice frequency telegraphy u Free 8517 62 30 --- Modems (modulators-demodulators) u Free 8517 62 40 --- High bit rate digital subscriber line system (HDSL) u Free 8517 62 50 --- Digital loop carrier system (DLC) u Free 8517 62 60 --- Synchronous digital hierarchy system (SDH) u Free 8517 62 70 --- Multiplexers, statistical multiplexers u 20% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... housing one or more flash memories (for example, FLASH E2PROM ) in the form of integrated circuits mounted on a printed circuit board. They may include a controller in the form of an integrated circuit and discrete passive components, such as capacitors and resistors; (b) The term smart cards means cards which have embedded in them one or more electronic integrated circuits (a microprocessor, random access memory (RAM) or read-only memory (ROM)) in the form of chips. These cards may contain contacts, a magnetic stripe or an embedded antenna but do not contain any other active or passive circuit elements. 7. For the purpose of heading 8536, connectors for optical fibres, optical fibre bundles or cables means connectors that simply mechanically align optical fibres end to end in a digital line system. They perform no other function, such as the amplification, regeneration or modification of a signal. - For the purposes of heading 8523, Information Technology software means any representation of instructions, data, sound or image, including source code and object code, recorded in a machine readable form, and capable of being manipulated or providing interactivity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u 20% - 9102 99 90 --- Other u 20% - The Chapter note for Chapter 91 reads as Clocks and watches and parts thereof . Few of the relevant notes are as follows: 2. Heading 9101 covers only watches with case wholly of precious metal or of metal clad with precious metal, or of the same materials combined with natural or cultured pearls, or precious or semi-precious stones (natural, synthetic or reconstructed) of headings 7101 to 7104. Watches with case of base metal inlaid with precious metal fall in heading 9102. For the purposes of this Chapter, the expression watch movements means devices regulated by a balance-wheel and hairspring, quartz crystal or any other system capable of determining intervals of time, with a display or a system to which a mechanical display can be incorporated. Such watch movements shall not exceed 12 mm in thickness and 50 mm in width, length or diameter. 1. Except as provided in Note 1, movements and other parts suitable for use both in clocks or watches and in other articles (for example, precision instruments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to (a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable. (c) When goods cannot be classified by reference to (a) or (b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration. 4. Goods which cannot be classified in accordance with the above rules shall be classified under the heading appropriate to the goods to which they are most akin. 5. In addition to the foregoing provisions, the following rules shall apply in respect of the goods referred to therein: (a) Camera cases, musical instrument cases, gun cases, drawing instrument cases, necklace cases and similar containers, specially shaped or fitted to contain a specific article or set of articles, suitable for long-term use and presented with the articles for which they are intended, shall be classified with such articles when of a kind normally sold therewith. This rule does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hip out your smart phone. A smart watch is a wearable computing device that closely resembles a wristwatch or other time-keeping device. In addition to telling time, many smart watches are Bluetooth - capable. The gadget becomes a wireless Bluetooth adaptor capable of extending the capabilities of the wearer s smart phone to the watch. The wearer can use the watch s interface to initiate and answer phone calls from their mobile phone, read email and text messages, get weather reports, listen to music, dictate email and text messages, and ask a digital assistant a question. Smart watches offer many features. Among them are the following: health informatics, such as heart rate, blood oxygen level, blood pressure and temperature monitoring; contactless payment and digital wallet applications; messaging and calling features, similar to those on a smart phone; emergency calls for assistance if the watch detects the wearer has fallen; social media and other notifications from synchronized smart phone applications; games, music, photos and other entertainment options; location features, such as maps, a compass and an altimeter; and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so be the quartz movement i.e. a battery powered movement utilizing a vibrating quartz crystal and an electric circuit to tell the time very accurately. (ii) The case of the watch which is the main body of the watch containing the movement inside and dial on the top. These conventionally were made of stainless steel with several advancements, various different quality of alloys, plastics, giving various other different types can be used for these cases. Clock/watch is so related to time keeping that they even are used as verbs for time recording. For example, clock the raise and timely vigilance example watch in watch out . 6.6 From the above discussion about tariff entries, GRIs, definitions of smart watch and watch/clock, we are of the opinion that the watches and clocks of Chapter 91 are designed mainly for time and date display though with some extra elements but nothing related to transmission of data in any form. Whereas the smart watch is actually a computer, an apparatus which is capable of transmitting and receiving data, irrespective it is a device wearable on wrist just like watch and is capable of time telling also. 6.7 Reverting to the product in questio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... datory. Thus in addition to the looks of the impugned product which is almost similar to a watch/clock having two hands with quartz movement meant for telling time and even a chronograph, the impugned good can be used to do the following: (i) can send and receive a text message, (ii) user can make and receive telephonic calls of his mobile phone at this product, (iii) can download and open any app (application) on the app screen, (iv) the home screen can be used as compass, stopwatch, timer, calibration, barometer and LT meter, the functions similar to that of watch, (v) have Google fit app to view the workout reports, (vi) it takes tasks using voice commands as it has a built in google assistance. However for the purpose, a data or wifi connection is required on the companion device and device must be in a Bluetooth range, (vii) While using the Bluetooth the impugned G-Watch can be connected to other mobile devices including the added wi-fi networks, (viii) it provides upon source software information. 6.9 The specific features of the impugned imported product, as discussed above, make it clear that the main function of this device is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require in such manner that heading which provides most specific description shall be preferred to headings providing a more general description. The rules say that in any other case the goods shall be classified under the heading appropriate to the goods to which they are most akin. Essential character of the impugned good is to be a computer on wrist as different from being watch on wrist [GRI 2(a)]. A computer is an apparatus for transmission or receiving date though it is simultaneously telling time also but it is still different from specific description of watch/clock under chapter heading and notes of Chapter 85 [Rule 3 GRI]. 6.12 In the light of above discussion it is held that once admittedly the impugned goods work on internet, it is not acceptable that the essential character of the impugned goods remains that of time keeping only. Thus we hereby hold that section notes and chapter notes of Chapter 85 are most relevant for the purpose of classifying imported G-Watch (Smart Wat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing benefit of ineligible exemption notification did not amount to misdescription of goods neither did it amount to making faldr or incorrect statement. In the present case also, we observe that the appellant is convinced of the fact that the product imported has mechanical hands and quartz movements as identical to a wrist watch and that this apparatus is also wearable on wrist. It is a clear case of misunderstanding on part of the appellant. Question of invoking penal provisions does not at all arise in this circumstance. Resultantly, we decide the third point of adjudication in favour of the appellant. 9. As an outcome of the entire above discussion on three of the points of adjudication, we hereby hold that the product imported is a Smart Watch which is classifiable under 8517 6290. The appellant has wrongly classified it under 9102 1900. Thus the benefit under exemption Notification No. 152/2009-Cus. was not available to products of 8517 tariff entry hence it is held that same has wrongly been claimed. The order under challenge to the extent confirming demand of customs duty is therefore hereby upheld. However, the order imposing penalty and confiscating the goods is hereby ..... X X X X Extracts X X X X X X X X Extracts X X X X
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