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TMI Blog2024 (4) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... and in rest of the cases imported goods were assessed by the department by classifying the products in dispute under Customs Tariff Item (CTI) 8517 6990. The appellants had filed an appeal before the Commissioner of Customs (Appeal) claiming that the self-assessment/assessment made in this regard by the proper officer of Customs were incorrect and seeking reclassification of goods under CTI 8517 1810. Subsequently, the appellants had given additional submissions before the Commissioner (Appeal) vide letters dated 16.03.2020, 24.06.2020 and 13.11.2020, for claiming classification of imported goods in terms of assessment agreed by the department at the level of review of Commissioner (Appeal)'s order for classification of similar goods in other jurisdiction. Accordingly, the appellants claimed that the correct classification of IP Audio phones and IP Audio Conference phones under category (i) and (ii) above shall be under CTI 8517 1810 and Wireless IP Phones of category (iii) as under CTI 8517 1210, on which applicable Basic Customs Duty (BCD) is 'NIL'. As regards import of IP Video phones they had accepted the classification under CTI 8517 6990 on the grounds of adopting uniform pra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 204 (Tri.-Del). 2.2. Further, the learned Advocate had also submitted that as against the total 59 B/Es covering the imported goods of all four categories, in respect of fourth category i.e., (iv) IP Video phones, the appellants had accepted the classification under CTI 8517 6990 even before the Commissioner (Appeals) and they have not filed appeal before the Tribunal in these cases. Thus in their present appeal before the Tribunal, the imported goods covered under the above three categories (i) to (iii) are covered in respect of 48 B/Es, the details of which were furnished by them as additional submission dated 28.06.2022. 2.3. The learned Advocate also stated that the imported IP phones of different types of 'CISCO' brand IP Phones were initially brought into the country through their distributor i.e., Ingram Micro India Private Limited, the appellants, as in the above case. However, subsequently due to various reasons, CISCO themselves had started importing the IP phones. 3. Learned Authroised Representative appearing for the Revenue reiterated the findings recorded by the learned Commissioner (Appeals) in the impugned order and stated that IP Phones (VoIP Phone) are rightl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Customs Act, 1962; the Customs Tariff Act, 1975 and rules framed thereunder for consideration of proper and appropriate classification of the subject goods under dispute. "Section 12. Dutiable goods. - (1) Except as otherwise provided in this Act, or any other law for the time being in force, duties of customs shall be levied at such rates as may be specified under the Customs Tariff Act, 1975 (51 of 1975), or any other law for the time being in force, on goods imported into, or exported from, India. (2) The provisions of sub-section (1) shall apply in respect of all goods belonging to Government as they apply in respect of goods not belonging to Government." "Section 1. Short title, extent and commencement. - (1) This Act may be called the Customs Tariff Act, 1975. (2) It extends to the whole of India. (3) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint. Section 2. Duties specified in the Schedules to be levied. - The rates at which duties of customs shall be levied under the Customs Act, 1962 (52 of 1962), are specified in the First and Second Schedules. xxx xxx xxx xxx THE FIRST SCHEDULE - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essential character, in so far 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 not, however, apply to containers which give the whole its essential character; (b) Subject to the provisions of (a) above, packing materials and packing containers presented with the goods therein shall be classified with the goods if they are of a kind normally used fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "tariff item" means a description of goods in the list of tariff provisions accompanying eight digit number and the rate of customs duty; (2) the list of tariff provisions is divided into Sections, Chapters and Sub- Chapters; (3) in column (3), the standard unit of quantity is specified for each tariff item to facilitate the collection, comparison and analysis of trade statistics." 7. From the plain reading of the above legal provisions, it transpires that in order to determine the appropriate duties of customs payable on any imported goods, one has to make an assessment of the imported goods for its correct classification under the First Schedule to Customs Tariff Act, 1975 in accordance with the provisions of the Customs Tariff Act by duly following the General Rules for Interpretation (GIR) and the General Explanatory notes (GEN) contained therein. The First Schedule to the Customs Tariff Act, 1975 specifies the various categories of imported goods in a systematic and well- considered manner, in accordance with an international scheme of classification of internationally traded goods, i.e., 'Harmonized Commodity Description and Coding System' (HS). Accordingly, goods are t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of goods in the sub-headings shall be determined according to the terms of those sub-headings and any related sub-heading Notes (GIR-6) (vi) When the description of the goods under a heading is preceded by 'single dash' i.e., "-", the said goods shall be taken to be a sub- classification of the article or group of articles covered by the said heading. (GEN-1) (vii) Where, however, the description of goods is preceded by "- -", the said goods shall be taken to be a sub-classification of the immediately preceding description of the goods or article or group of articles which has "-" single dash. (GEN-1) (viii) Where the description of goods is preceded by "---" or "----", the said goods shall be taken to be a sub-classification of the immediately preceding description of the goods or article or group of articles which has "-" or "--". (GEN-1) 9. In the case before us, the contending classification of imported goods viz., IP Audio phones and IP Audio Conference phones are either under CTI 8517 18 10 or under CTI 8517 62 90; and in respect of Wireless IP Phones either under CTI 8517 12 10 or under 8517 62 90 of the First Schedule to the Customs Tariff Act. Thus, it is clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hing and routing apparatus : u - 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 Free - 8517 62 90 ---Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . u 20% - 8517 69 ---Other: 8517 69 10 ---ISDN System. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . u Free - 8517 69 20 ---ISDN terminal adaptor. . . . . . . . . . . . . . . . . . . . . . . u Free - 8517 69 30 ---Routers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . u Free - 8517 69 40 ---X25 Pads. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . u Free - 8517 69 50 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, amplifier, handset, display panel for details relating to the numbers/contacts, message etc., speaker phone, various functional keys, backlit indicator and a number of other features related to telephone. Product features and specifications of the Cisco IP Phone CP-8841 S.No. Features Specifications 1 Audio Automatic Gain Control, Comfort Noise Generation, Silence Suppression/Voice Activity Detection, Acoustic Echo Cancellation (AEC), Dynamic Noise Reduction 2 Audio codec support G.711 a-law and mu-law, G.722, G.729a/b, Internet Low Bitrate Codec (iLBC), and Internet Speech Audio Codec (iSAC) , G.722.1, G.772.2, OPUS 3 Key call features support +Dialing, Abbreviated dialing, Adjustable ring tones and volume levels, Adjustable display brightness, Agent greeting, Auto-answer, Auto-detection of headset, cBarge, Busy Lamp Field (BLF), Busy Lamp Field (BLF) Pickup, Busy Lamp Field (BLF) speed dial, Callback, Call forward, Call forward notification, Call filter, Call history lists, Call park, Call pickup, Call timer, Call waiting, Call chaperone, Caller ID, Corporate directory, Conference, including traditional Join feature, Cross Cluster Extension Mobility (EMCC), Direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional wireless extension microphone kit (using Digital Enhanced Cordless Telecommunications [DECT] technology), it covers any 20x40-foot room and up to 26 participants. With a daisy-chain configuration of two 8832 units along with the optional wireless extension microphone kit, it covers up to a 20x57-foot room and up to 42 participants. From the above picture, it could be seen the product essentially contain the various features related to telephone. Product features and specifications of Cisco IP Audio Conference Phone CP-8832 S.No. Features Specifications 1 LED bar Indicates call states: Green, solid-Active call Green, flashing-Incoming call Green, pulsing-Held call Red, solid-Muted call 2 Expansion microphone port The wired expansion microphone cable plugs into the port 3 Mute bar Toggles the microphone on or off. When you mute the microphone, the LED bar lights red. 4 Softkey buttons Access functions and services 5 Navigation bar and Select button Scroll through menus, highlight items, and select the highlighted item 6 Volume button Adjusts the speakerphone volume (off hook) and the ringer volume (on hook). When you change the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter 84 or Chapter 85, then the whole falls to be classified in the heading appropriate to that function. 5. For the purposes of these Notes, the expression "machine" means any machine, machinery, plant, equipment, apparatus or appliance cited in the headings of Chapter 84 or 85." 17. The above Section Notes specify that the principal function of the machine or apparatus would be the guiding factor for determination of the appropriate classification of the goods. Though 'telephone' is generally understood to be a device by which sound (such as speech) is converted into electrical impulses and transmitted (by wire or radio waves) to one or more specific receivers, the statutory definition of the phrase 'telephony' under the Indian Telegraph Rules lucidly explains the function of telephone. In terms of Section 2(vv) of Indian Telegraph Rules, 1951, 'telephony' means 'a system of telecommunications set up for the transmission of speech or other sound'. The dispute with regard to classification of IP Phones under consideration has a clear functionality of telephony inasmuch as it is used for communication of speech or audio signals to other person. Its added features that enable the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elephony, radio- telegraphy, local and wide area networks." The Explanatory Notes to HSN describe the goods that are being covered by the first single dash entry for 85.17 i.e., 8517 10 as follows: (I) TELEPHONE SETS, INCLUDING TELEPHONES FOR CELLULAR NETWORKS OR FOR OTHER WIRELESS NETWORKS This group includes: (A) Line telephone sets. Line telephone sets are communication apparatus that convert voice into signals for transmission to another device. Upon receipt of a signal, a line telephone set will convert the signal back to voice. They consist of: (1) The transmitter,............. (2) The receiver, ........... (3) The anti-side tone circuit, .......... (4) The ringer, .......... (5) The switching device or "switch hook",......... (6) The dialing selector, ............ When separately presented, microphones and receivers (whether or not combined as hand-sets), and loudspeakers are classified in heading 85.18 while bells and buzzers are classified in heading 85.31. Telephone sets may incorporate or have fitted: a memory for storing and recalling telephone numbers; a visual display for showing the number dialed, incoming caller's number, date and time, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... smission by line). (D) Apparatus for telegraphic communication other than facsimile machines of heading 84.43. These apparatus are essentially designed for converting characters, graphics, images or other data into appropriate electrical impulses, for transmitting those impulses, and at the receiving end, receiving these impulses and converting them either into conventional symbols or indications representing the characters, graphics, images or other data or into the characters, graphics, images or other data themselves. Examples are.... (E) Telephonic or Telegraphic Switching Apparatus. ..................... (F) Transmitting and receiving apparatus for radio-telephony and radio- telegraphy..... (G) Other communication apparatus. This group includes apparatus which allows for the connection to a wired or wireless communication network or the transmission or reception of speech or other sounds, images or other data within such a network. Communication networks include, inter alia, carrier-current line systems, digital- line systems and combinations thereof. They may be configured, for example, as public switched telephone networks, Local Area Networks (LAN), Metropol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on wireless network, the classification of such goods under second double dash entry 8517 12 is appropriate. 22. From perusal of the detailed coverage of the goods under the scope of the above entries in the second single dash entry, it would become clear that IP Phones does not match the specific description of any of the apparatus mentioned in the '--' entry of the second group at (II) above, namely 'Base stations' and various '---' entries, such as 'PLCC equipment, voice frequency telegraphy, Modems, High bit rate digital subscriber line system, Digital loop carrier system, Synchronous digital hierarchy system and Multiplexers' which are also explained in detail under paragraphs(A) to (G) of HS Explanatory Notes. Even if, one would like to attempt to bring IP phones under second group of '-' items, treating it as an apparatus which allows for connection to a wired or wireless communication network or the transmission or reception of speech or other sounds, images or other data within such a network, then the only entry that could be feasible is 'others'. 23. However, in terms of GIR 3, in a situation where for any reason goods are, prima facie, classifiable under two o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ach refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods. (b) Mixtures, composite 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, in so far 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." The applicability of the rule arises when the goods consisting of more than one material fall in two or more headings. It is further clear that each of the classes are mutually exclusive. What is covered in (a) cannot be classified in (b) and (c) operates when neither applies. It is like a residuary clause. The primary question, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant which are component part of the flow meter shall be classified for purpose of payment of duty under Tariff Heading 90.24." 25. We also find that classification of CISCO IP phones have also been decided by the Co-ordinate Bench of this Tribunal in the case of the manufacturer Cisco Commerce (I) Pvt. Ltd. Vs. Commissioner of Customs, ACC, Mumbai in Final Order No. dated ...... by holding that "CISCO IP Phones" of various models would appropriately be classifiable under CTH 8517 18 10. 26.1 We had also considered the submission made by the Learned AR as he had relied upon the decision of the Coordinate Bench of the Tribunal in the case of Ingram Micro India Pvt. Ltd. (supra), to state that the classification of CISCO IP Phones shall be under tariff item 8517 62 90, inasmuch as the phone used voice over internet protocol for placing and transmitting telephone calls over an IP network such as internet. He has further stated that the said decision of Tribunal has been upheld by the Hon'ble Supreme Court, as the Civil Appeal No. 6389 of 2019 filed by the party was dismissed. In order to appreciate the points put forth by the learned AR, we have carefully perused the above cited ..... X X X X Extracts X X X X X X X X Extracts X X X X
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