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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 ..... it as data packets or otherwise, power module etc. From the above discussion, the IP phones is classifiable under 8517 18 10, as the principal function of these equipment remain as telephony . It is obvious that since IP Phones are complete products by themselves, the classification is feasible either under the first single dash or the second single dash entries and classification under third single dash entry is ruled out, as these are not parts . 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment 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 practice at various ports of import, to be followed by them. Contrary to the classification claimed by the appellants, department had maintained that the classification of all imported goods shall be under CTI 8517 6990 and assessed these for BCD @20%. The learned Commissioner of Customs (Appeals) had disposed of the appeal by issue of an Order-in-Appeal No. MUM-CUSTM-AMP-APP-1913/2020-21 dated 22.03.2021 (herein after, in short, referred to as the impugned order ) in determining the classification of all types of imported IP phones under CTI 8517 6290 and by dismissing the appeal filed by the appellants. Feeling aggrieved with the impugned o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 rightly classifiable under CTH 8517 6290, as against appellants claim under CTH 8517 1810. To support the claim of Revenue with regard to classification of product, he has relied upon the Notification Nos. 75/2018-Customs dated 11.10.2018 and 02/2019- Customs dated 29.01.2019 issued by the Central Government. The learned AR had also submitted that the issue of classification of VOIP phones have been decided by the Co-ordinate Bench of this Tribunal in its Final Order dated 22.01.2019 in C/85097/2018 in the case of Ingram Micro India Pvt. Ltd. (supra) by holding that VoIP conferencing systems are VoIP equipment, which is used for reception, conversion and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. 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 IMPORT TARIFF (Refer Section 2) THE GENERAL RULES FOR THE INTERPRETATION OF IMPORT TARIFF Classification of goods in this Schedule shall be governed by the following principles: 1. The titles of Sections, Chapters and sub-chapters are provided for ease of reference only; 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, according to the following provisions: 2. (a) Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as presented, the incomplete or un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fic 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 for packing such goods. However, this provisions does not apply when such packing materials or packing containers are clearly suitable for repetitive use. 6. For legal purposes, the classification of goods in the sub-headings of a heading shall be determined according to the terms of those sub headings and any related sub headings Notes and, mutatis mutandis, to the above rules, on the understanding that only sub headings at the same level are comparable. For the purposes of this rule the relative Section and Chapter Notes also apply, unless the context otherwise requires. THE GENERAL EXPLANATORY NOTES (GEN) TO IMPORT TARIFF 1. Where in column (2) of this Schedule, the description of an article or group of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 to be classified taking into consideration the scope of headings / sub-headings, related Section Notes, Chapter Notes and the General Rules for the Interpretation (GIR) of the First Schedule to the Customs Tariff Act, 1975. Rule 1 of the GIR provides that the classification of goods shall be determined according to the terms of the headings of the tariff and any relative Section notes or Chapter notes and thus, gives precedence to this while classifying a product. Rules 2 to 6 provide the general guidelines for classification of goods under the appropriate sub- heading. In the event of the goods cannot be classified solely on the basis of GIR-1, and if the headings and legal notes do not otherwise require, the remaining Rules 2 to 6 may then be appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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 that at the Chapter and Heading level i.e., Chapter 85 and Heading 8517, there is no difference of opinion among the appellants and the department. The dispute in classification lies in the narrow compass of the Sub-headings and the respective Tariff Items falling there under. Now, we may closely examine the scope of the contending Sub- headings and Tariff Items thereof for determining correct classification of the imported goods. The relevant tariff entries in the First Schedule to the Customs Tariff Act are extracted as below: Tariff Item Description of goods Unit Rate of Duty Standard Preferential Areas (1) (2) (3) (4) (5) 8517 Telephone sets, including telephones for cellular networks or for other wireless networks; other apparatus for the transmission or reception of voic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . . . . . . . . . . . . u Free - 8517 69 50 ---Subscriber end equipment. . . . . . . . . . . . . . . . . . . . u Free - 8517 69 60 ---Set top boxes for gaining access to internet. . . . . . u Free - 8517 69 70 ---Attachments for telephones. . . . . . . . . . . . . . . . . . u Free - 8517 69 90 ---Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . u 10% - 8517 70 -Parts : 8517 70 10 --Populated, loaded or stuffed printed circuit boards. [u] Free - 8517 70 90 --Other kg 15% - 10. It could be seen that by applying the GIR-1 - rule at (i) above, the position is made clear that Heading 8517 covers within its scope and ambit, mainly of two broad categories of goods for ascertaining proper classification: (i) first one i.e., Telephone sets, including telephones for cellular networks or for other wireless networks and (ii) the other, second one i.e., other apparatus for the transmission or reception of voice, images or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network) ,which are other than transmission or reception apparatus of heading 8443, 8525,8527 or 8528. 11. Hence, in simple words, it ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, Forced access codes and client matter codes, Group call pickup, Hold, Intercom, Immediate divert, Malicious-caller ID, Message-Waiting Indicator (MWI), Meet-me conference, Mobility, Music on Hold (MoH), Mute, Network profiles (automatic), On- and off-network distinctive ringing, Personal directory, Pick-Up, Pre-dialling before sending, Privacy, Private Line Automated Ringdown (PLAR), Redial, Ring tone per line appearance, Service Uniform Resource Locator (URL), Shared line, Silent monitoring and recording, Speed dial, Time and date display, Transfer, Uniform Resource Locator (URI) dialling, Visual voice mail, Voice mail, Whisper coaching. 13. The above product essentially contain the telephone handset, push button keys, 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. Besides the above, the data sheet also contain information on network features, electronic hook switch, Cisco Intelligent proximity, physical features including weight, dimensions (Height x Width X Depth), phone casing composition, operational and non- operational temperature, deta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the imported goods are rightly classifiable under tariff item 8517 62 90, under the second broad category of other apparatus on the basis of its functionality and the learned Commissioner (Appeals) had come to the conclusion that IP phone is an equipment using Voice over Internet Protocol (VoIP) technology as detailed in paragraphs 10 to 14 of the impugned order, by placing reliance on the decision of the Co-ordinate Bench of the Tribunal in Ingram Micro India Pvt. Ltd. (supra). 16. Therefore, in order to decide further within the Chapter Heading 8517, whether the imported goods fall under the first broad category as telephone sets or under the second broad category other apparatus , one needs to look further into relative Section or Chapter notes. In this regard, we find that Section Note 1 to Section XVI covering Chapters 84 and 85, provide for the list of goods that do not get covered under the said Chapters. Besides, Section Note 2 providing for classification of parts of machines or articles are not relevant here. Thus, we find that Section Notes 3 to 5 to Section XVI generally guide classification of goods under Chapter 84 and 85. The relevant Section Notes are extracted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he data-sheet as above, the IP phones consist of transmission and reception hardware such as telephone handset, speaker, dialing push buttons, transmission and reception of audio signals either by converting it as data packets or otherwise, power module etc. From the above discussion, we are of the prima facie view that the IP phones is classifiable under 8517 18 10, as the principal function of these equipment remain as telephony . 18. In order to further examine the classification in terms of HS explanatory notes of the WCO, which describe in detail the scope and coverage of the goods under the Customs classification, the extract of HS classification in respect of heading 8517 is given below: Harmonized Commodity Description and Coding System Explanatory Notes 8517- Telephone sets, including telephones for cellular networks or for other wireless networks; other apparatus for the transmission or reception of voice, images or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network), other than transmission or reception apparatus of heading 84.43, 85.25, 85.27 or 85.28(+). - Telephone sets, including telephones for cellu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unicating with a person on another telephone. Telephone sets incorporating these devices may also have keys or push- buttons which enable their operation, including a switching key which enables the telephone to be operated without removing the hand-set from the cradle. Many of these devices utilize a microprocessor or digital integrated circuits for operation. The heading covers all kinds of telephone sets including: (i) Cordless telephone sets. (ii) Telephones sets. (B) Telephones for cellular networks or for other wireless networks. This group covers telephones for use on any wireless network. Such telephones receive and emit radio waves which are received and retransmitted, e.g., by base stations or satellites. These include, inter alia: (1) Cellular phones or mobile phones. (2) Satellite phones. The Explanatory Notes to HSN describe what would be covered by the second single dash entry for 8517 60 as follows: (II) OTHER APPARATUS FOR TRANSMISSION OR RECEPTION OF VOICE, IMAGES OR OTHER DATA, INCLUDING APPARATUS FOR COMMUNICATION IN A WIRED OR WIRELESS NETWORK (SUCH AS A LOCAL OR WIDE AREA NETWORK) (A) Base stations. The most common types of base stations are those for cellular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecs (data compressors/decompressors) which have the capability of transmission and reception of digital information. (6) Pulse to tone converters which convert pulse dialed signals to tone signals. The third single dash entry at 8517 70 covers only parts . 19. We have examined each of the single dash entry and the goods covered thereunder as shown above. The scope of coverage of goods under the three different single dash entries of Chapter Heading 8517 is as follows: First one at 8517 10 is Telephone sets, including telephones for cellular networks or for other wireless networks ; second one at 8517 60 is for Other apparatus for transmission or reception of voice, images or other data, including apparatus for communication in a wired or a wireless network (such as a local or wide area network) ; and third one at 8517 90 is for Parts . 20. It is obvious that since IP Phones are complete products by themselves, the classification is feasible either under the first single dash or the second single dash entries and classification under third single dash entry is ruled out, as these are not parts . 21. The description of goods covered under first single dash entry 8517 i.e., Sub-Headin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... push button type or under 8517 1290 for other types of telephones for wireless networks, is more specific than the contending CTI 8517 62 90 covering other of machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus. Hence, in our considered view, the appropriate classification of the imported goods would be under Customs Tariff Item 8517 18 10 in respect of (i) IP Audio Phones (ii) IP Audio Conference Phones and similarly the appropriate classification for (iii) Wireless IP Phones would be under Customs Tariff Item 8517 12 90. 24. We also find that our such view has also been considered favourably by the Hon ble Supreme Court in the case Moorco (India) Ltd. Vs. Collector of Customs, Madras (Civil Appeal No. 4342 of 1986), reported in 1994 (74) E.L.T. 5 (S.C.). The relevant paragraphs in the said judgement are extracted below: 4. Does classification change and the goods are liable to be placed in Heading 90.29 by virtue of the Interpretory Rules appended to the Customs Schedule? These Rules are framed on Brussels Convention so that same description may apply to a particular class and character ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than one description. Or it may be satisfying specific and general description. In either situation the classification which is the most specific has to be preferred over the one which is not specific or is general in nature. In other words, between the two competing entries the one most nearer to the description should be preferred. Where the class of goods manufactured by an assessee falls say in more than one heading one of which may be specific, other more specific, third most specific and fourth general. The rule requires the authorities to classify the goods in the heading which satisfies most specific description. For instance, taking the case of the appellant the item manufactured by the appellant is described and used as flow meter. It is an instrument for measuring volume as well. Flow meter is specifically classified in Heading No. 90.24. Whereas the Heading 90.26 is general in nature. It applies to every production meter or calibrating meter for gas, liquid and electricity supply. Therefore, on the finding recorded by the Assistant Collector, the goods produced by the appellant specifically fall in Heading No. 90.24. They may also fall in Heading No. 90.26 but that bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n question involved in the order passed by the Coordinate Bench is picturized below for proper appreciation of the facts: 26.2 On careful examination of the above system, we find that the Co-ordinate Bench had dealt with video conferencing systems ; whereas, in the case in hand, we are dealing with IP Phones , whose features are entirely different than the products dealt with by the Co-ordinate Bench. Hence, the ratio of the judgement of Co-ordinate Bench does not apply to the facts of this case. Furthermore, from the product data sheet submitted by the appellants as written submissions in respect of various models of CISCO IP Phones covered in the appeals before us, it is shown that these phones capture voice/audio communications only, but do not have the capacity of making/receiving video calls. It has further been stated in the affidavit that in respect of fourth category (iv)IP Video Phones, which has the facility of both audio/voice and video capabilities, the appellants have been classifying such IP Phones under 8517 69 90 and they are not disputing such IP phones, which are not in dispute in this appeal. 27. We also find that the Co-ordinate Bench of this Tribunal, in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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