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TMI Blog2025 (1) TMI 267X X X X Extracts X X X X X X X X Extracts X X X X ..... in the light of relevant Section and Chapter Notes which are statutorily binding like the Headings themselves. It appears that CTH 8517 covers such apparatus which is used in transmission and reception of data and wherein the data is transmitted by way of electromagnetic waves in a wireless network. As discussed in Annexure 1 of this application, where the subject good provides for transmission and reception of data in the RF form in the wireless network, by application of the GRI Rule 1 and considering the HSN explanatory notes, the subject good appears to merit classification under CTH 8517 at four-digit level. It is apparent that all the electrical machinery or equipment covered under Chapter 85 are not regarded as parts or accessories of motor vehicles classifiable under Chapter 87, as they stand excluded from the purview of Section XVII. Applicability of the benefit of the notification - HELD THAT:- The benefit provided under the notification is subject to the condition that the goods being imported from Japan should be originating in Japan and the provisions laid down in Customs Tariff (Determination of Origin of Goods under the Comprehensive Economic Partnership Agreement b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turing and trading of parts of automobiles. For its trading business, the Applicant inter alia imports automotive parts in finished form for further supply of these automotive parts to the manufacturers of motor vehicles in India. 4. For the purposes of the present application, the applicant proposes to import Telematics Control Unit ( TCU subject good ) from Denso Corporation Japan ( Denso Japan ). The subject good is to be imported in finished form and upon its arrival into India the same will be sold to its customers (i.e., automotive companies) in as is condition. The description, technical features, characteristics, and functions of the products are briefly discussed below. About the subject good - 5. Subject good is a device that enables communication and data exchange between a vehicle and external networks or services. It uses cellular network through which signals are transmitted to the server and eventually to the agent or the specified person. It comes with in-built antenna. The automobile manufacturers use the subject good in motor vehicles to perform the following operations : (a) Connect to cellular, satellite, to transmit and receive data, voice, or multimedia messag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility to interact and pass on the received information to the server and subsequently to the end consumer and vice versa, in as imported condition. 11. When the subject good receives signal from different parts of the motor vehicle, it converts such signal to Radio Frequency ( RF ) signal and transmit such signal to the server by way of the connection established through NAD and E-Sim. From the above, it appears that the principal function of the subject good is to act as transmission, conversion, and reception apparatus and to provide further the information or data it receives from the input s end to the output s end. 12. The Applicant qualifies as an applicant under Section 28E(c) of the Customs Act, 1962 ( Customs Act ) 13. Section 28E(c) of the Customs Act reads as under : (c) applicant means any person - (i) holding a valid Importer-exporter Code Number granted under section 7 of the Foreign Trade (Development and Regulation) Act, 1992; or (ii) exporting any goods to India; (iii) with a justifiable cause to the satisfaction of the Authority, who makes an application for advance ruling under section 28H; 14. The Applicant is a company registered in India and is holding a valid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Customs Act. Question raised under the present advance ruling application is not before any officer of Customs, the Appellate Tribunal or any Court. 17. As per Section 281(2)(a) of the Customs Act with regard to procedure on advance ruling application, no application for advance ruling will be accepted if the question raised in the application is already pending before any forum. Relevant extracts of the provision are reproduced below : 281. Procedure on receipt of application. - (1) xx xx xx (2) The Authority may, after examining the application and the records called for, by order, either allow or reject the application : Provided that the Authority shall not allow the application where the question raised in the application is - (a) already pending in the applicant s case before any officer of customs, the Appellate Tribunal or any Court, (b) the same as in a matter already decided by the Appellate Tribunal or any Court. (Emphasis supplied) QUESTION 1 : CLASSIFICATION OF THE SUBJECT GOOD 18. For the subject good, the proposed classification and applicant s interpretation to reach to the proposed classification is discussed as under. 19. The import and export of goods into and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lves. Thus, the Section and Chapter Notes have an overriding force on the respective Headings. This judgment was approved by the Hon ble Supreme Court of India in the case of Saurashtra Chemicals v. Collector of Customs, 1997 (95) E.L.T. 455 (S.C.). Harmonized System of Nomenclature 24. The Customs Tariff in India is based on Harmonized Commodity Description and Coding System, generally referred to as Harmonized System of Nomenclature ( HSN ) developed by the World Customs Organization ( WCO ) which is applied uniformly by more than 137 countries of the world. Under the HSN, various goods are classified under different headings, sub-headings and tariff items. For the purposes of the uniform interpretation of the HSN, the WCO has published detailed explanatory notes to HSN which have long been recognized as a safe guide to interpret the Tariff Schedule. 25. In the case of O.K. Play (India) Ltd. v. C.C.E. Delhi-III, 2005 (180) E.L.T. 300 (S.C.), a 3-Member Bench of the Hon ble Supreme Court of India made the following observations : (a) There cannot be a static parameter for correct classification; (b) HSN along with the explanatory notes provide a safe guide for interpretation of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les : CTH Description of Goods 8517 Telephone sets, including Smartphone and other 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 8443, 8525, 8527 or 8528 - 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): 8517 62 - Machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus: 8517 62 90 - Other 30. As per Rule 1 of the GRI, subject good should be classified in accordance with the terms of the headings and any relevant and Section or Chapter Notes. 31. CTH 8517 covers apparatus used for transmission or reception of voice, images or other data, including apparatus used for communication in a wired or wireless network. The machines whose principal function is to transmit and/or receive data or communica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... three functions of reception, conversion and transmission are covered under CTH 8517 62. Hence, in case a product only performs one or two of such aforesaid functions, it will not be covered under the purview of CTH 8517 62. In this regard, reliance is placed on the decision of the Hon ble Bombay Tribunal in the case of CCE v. Reliance Jio Jnfocom Ltd., 2019 (369) E.L.T. 1713 (Tri - Bom) wherein while determining the classification of Antenna the court held that all the three functions of reception, conversion and transmission are required to be performed by a machine to fall under CTH 8517 62. 37. As discussed in Annexure 1 above, signals received by the subject good from other parts of the motor vehicle are first converted into RF signals for transmission in wireless mode, and then the RF signals are transmitted to the server and subsequently to the end user by way of connection established through the usage of NAD and E-sim. 38. In a similar manner, in case the user intends to provide any of the specified command to its vehicle through the smart phone/web portal, the command initiated by the user is first sent to the server. The server passes the command through telecom network ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods of this Section : (f) electrical machinery or equipment (Chapter 85); [Emphasis Supplied] 44. The Section Note 2(f) of Section XVII thus explicitly excludes the electrical machinery or equipment of Chapter 85 from the purview of Section XVII. Further, reference is made to Note 3 to Section XVII which provides that references in Chapters 86 to 88 to the parts or accessories do not apply to parts or accessories which are not suitable for use solely or principally with the articles of those Chapters. A part or accessory which answers to a description in two or more of the headings of those Chapters is to be classified under that heading which corresponds to the principal use of that part or accessory. In the instant case, the product is principally used for the purposes of transmission, conversion, and reception of data from any part of the motor vehicle to the end user or vice versa. 45. While Note 3 prescribes that a part or an accessory to merit classification under CTH 8708 should be suitable for use solely or principally with motor vehicles, Note 2(f) states that even such a part, which is suitable for use with motor vehicles, will not be regarded as part or an accessory clas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g a more general description. However, when two or more headings each 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, 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. [Emphasis Supplied] 49. Reliance in this regard is placed on the case of Mauri Yeast India Pvt. Ltd. v. State of UP, 2008 (225) E.L. T. 321 (S.C.) wherein it was held by the Hon ble Supreme Court that if there is a conflict between two entries one leading to an opinion that it comes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21st May 2019 (annexed as Appendix 4). To streamline the assessment of parts and accessories of automobiles, the Office of Commissioner issued the said Note wherein legal position was explained in the following manner : As per explanatory notes to Section XVII of the HSN, parts and accessories of the vehicles, aircraft or equipment concerned should he classified under headings of section XVU, only if they comply with following conditions : (a) They must not be excluded by the terms of Note 2 to Section XVII (b) They must be suitable for use solely or principally with the articles of Chapters 86 to 88 and (c) They must not be more specifically included elsewhere in the Nomenclature. 55. In the instant case, the product under consideration has specifically been excluded by the working of Note 2(f) of Section XVII (covering Chapters 86 to 89) which provides that the expressions parts and parts and accessories do not apply to the electrical machinery or equipment (Chapter 85). Furthermore, there is a more specific CTH as against general CTH under Chapter 87. Therefore, the product under consideration cannot be classified under the Chapter 87 in view of the conditions at points (a) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ters 86 to 88 and (c) They must not be more specifically included elsewhere in the nomenclature (B) While relying on these conditions, the Hon ble Supreme Court held - The items, therefore, manufactured by the appellants are identifiable or are in the nature of goods falling under Chapter 8536. Since these fall under the category of excluded goods under chapter notes, even though they are used specifically solely or principally with the armoured vehicles of Chapter Heading 8710, they are classifiable under chapter heading 853690 only as held by the adjudicating authority. (C) By taking cognizance of the conditions mentioned in the HSN explanatory notes the exclusionary clause under Note 2 has been given precedence over the sole or principal use of the items. It was recognized that since one of the conditions i.e. of the exclusions mentioned in Note 2 (condition (a)) was not met, the said goods could not be classified under Chapter 87. 58. Taking cognizance of the rationale laid down in the judgment in the matter of M/s. Intel Design Systems (India) P. Ltd. v. Commissioner of Customs Central Excise and the instructions issued by the CBIC as discussed above, for goods to be classifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing is not explicitly discussed by the bench). 63. To sum up, it is submitted in the present case that the subject good being electrical equipment failing under Chapter 85, does not satisfy the very first condition of three-layer test, as these are covered under the exclusion in Note 2(f) of the Notes to Section XVII. On the other hand, coverage under Chapter 85 is clearly supported through the principles of classification viz. GRI and the explanatory notes, as discussed supra. 64. Accordingly, it is the humble submission of the Applicant that the subject good should merit classification under the specific tariff line available for TCU i.e., CTH 8517 62 90. QUESTION 2 : APPLICABILITY OF NOTIFICATION NO. 69/2011-CUSTOMS, DATED 29-7-2011. 65. The Central Government vide Notification No. 69/2011-Cus., dated 29-7-2011 has exempted all the goods falling under CTH 8517 from the whole of BCD leviable under the First Schedule of Customs Tariff Act, 1975 when the goods are imported from the Japan. The Notification further provides that the exemption of import of goods notified shall only be available when the origin of such goods is from Japan and the provisions laid down in Customs Tariff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulation, 2021 in order to stick to the 90 days mandatory timeline given under the Act Rules. 3. I have taken into consideration of all the materials placed on record in respect of the subject goods including the submissions made by the applicant during the course of personal hearing for the other application filed for Commissionerate of Customs, Chennai-II (Imports). As no comments have been received from the Customs Port Commissionerate of ICD, Patparganj, New Delhi, I proceed to decide the present application regarding classification of Telematics Control Unit (TCU) on the basis of the information on record as well as the existing legal framework having bearing on the classification of the TCU under the first schedule of the Customs Tariff Act, 1975. 3.1 As per the sub-rule 19 of the CAAR Regulation, 2021 as provided under Notification No. 01/2021-Customs (N.T.), dated 4-1-2021 as amended vide Notification No. 63/2022-Customs (NT.), dated 20-7-2022, Hearing of application ex parte. - Where on the day fixed for hearing or any other day to which the case is adjourned, the applicant or the Principal Commissioner or Commissioner does not appear in person or through an authorised repr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Headings 8701 to 8705 4.1.2 Given the above, CTH 8517 merits consideration, which provides for other apparatus for the transmission or reception of voice, images, or other data . As stated in Annexure 1 above, the subject good imported by the Applicant is a networking device which is going to be used in the motor vehicles : CTH Description of Goods 8517 Telephone sets, including smartphones and other telephones for cellular networks or for other wireless networks: other apparatus for the transmission of 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 8443. 8525, 8527 or 8528 - 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) : 8517 62 - Machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus: 8517 62 90 - Other As per Rule 1 of the GRI, subject good should be classified in accordance with the ter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight-digit level. At six-digit level, CTH 8517 62 covers machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus . From the plain reading of the tariff sub-heading, it appears that only those machines which independently perform all three functions of reception, conversion and transmission are covered under CTH 8517 62. Hence, in case a product only performs one or two of such aforesaid functions, it will not be covered under the purview of CTH 8517 62. In this regard, reliance is placed on the decision of the Hon ble Bombay Tribunal in the case of CCE v. Reliance Jio Infocom Ltd., 2019 (369) E.L.T. 1713 (Tri. - Bom.) wherein while determining the classification of Antenna the court held that all the three functions of reception, conversion and transmission are required to be informed by a machine to fall under CTH 8517 62. 4.1.7 As discussed in Annexure 1, signals received by the subject good from other parts of the motor vehicle are first converted into RF signals for transmission in wireless mode, and then the RF signals are transmitted to the server and subsequently to the end user by way ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods of Section XVII even if they are identifiable for use with these goods. Note Section 2(f) to Section XVII is extracted hereunder for reference purposes : 2. The expressions parts and parts and accessories do not apply to the following articles, whether or not they are identifiable as for the goods of this Section : (f) electrical machinery or equipment (Chapter 85); [Emphasis Supplied] 4.1.12 The Section Note 2(f) of Section XVII thus explicitly excludes the electrical machinery or equipment of Chapter 85 from the purview of Section XVII. Further, reference is made to Note 3 to Section XVII which provides that references in Chapters 86 to 88 to the parts or accessories do not apply to parts or accessories which are not suitable for use solely or principally with the articles of those Chapters. A part or accessory which answers to a description in two or more of the headings of those Chapters is to be classified under that heading which corresponds to the principal use of that part or accessory. In the instant case, the product is principally used for the purposes of transmission, conversion, and reception of data from any part of the motor vehicle to the end user or vice versa. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, 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. [Emphasis Supplied] 4.1.15 The following cases are cited to support the claim : (i) Reliance in this regard is placed on the case of Mauri Yeast India Pvt. Ltd. v. State of UP, 2008 (225) E.L.T. 321 (S.C.) wherein it was held by the Hon ble Supreme Court that if there is a conflict between two entries one leading to an opinion that it comes within purview of tariff entry and another the residuary entry, the former should be preferred. (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nuary 2022 issued instruction No. 1/2022-Customs with subject Implication of the judgment of the Hon ble Supreme Court in the case of M/s. Westinghouse Saxby Farmer Ltd. v. Commissioner of Central Excise, Calcutta - reg . This was to align with the divergent practice being followed on assessment of parts after the Westinghouse Saxby judgment (supra) was issued. In the said instructions while making a reference to the judgment of the Hon ble Supreme Court in the case of M/s Intel Design Systems (India) P. Ltd. v. Commissioner of Customs Central Excise, among others the CBIC has instructed as follows - 3. In the context of the divergent practices arisen, it is noted that the classification of parts of goods falling under Section XVII of the Customs or Central Excise Tariff is a complex issue. Further, apparently, the section notes have been suitably applied in relevant judgments of the Hon ble Supreme Court on issues of classification of parts and accessories. Thus, the collective wisdom of these judgments indicates the manner in which such classification issues are to be approached. Few of such judgments are illustrated in succeeding paragraphs : 3.1 M/s. Intel Design Systems (India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and contention of the Revenue to classify the item based on sole or principal use as laid down in the Westinghouse case has not been considered. This ruling effectively reiterates that classification based on section and chapter notes would still prevail despite Westinghouse judgment (although this ruling is not explicitly discussed by the bench). To sum up, it can be concluded that the subject good being electrical equipment falling under Chapter 85, does not satisfy the very first condition of three-layer test, as these are covered under the exclusion in Note 2(f) of the Notes to Section XVII. On the other hand, coverage under chapter 85 is clearly supported through the principles of classification viz. GRI and the explanatory notes, as discussed supra. 4.2 As far as the applicability of the benefit of the notification is concerned, the Central Government vide Notification No. 69/2011-Cus., dated 29-7-2011 has exempted all the goods falling under CTH 8517 from the whole of BCD leviable under the First Schedule of Customs Tariff Act, 1975 when the goods are imported from the Japan. The Notification further provides that the exemption of import of goods notified shall only be avail ..... X X X X Extracts X X X X X X X X Extracts X X X X
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