9911796707
TMI Blog2025 (1) TMI 267X X X X Extracts X X X X X X X X Extracts X X X X ..... r the Customs Tariff Heading 8517 62 90 of the First Schedule of the Customs Tariff Act, 1975 in relation to import of the product. 'Telematics Control Unit (TCU)' is correct, and (b) the Applicant is eligible to avail concessional rate of Basic Customs Duty under Sl. No. 666 of the Notification No. 69/2011-Customs, dated 29-7-2011. STATEMENT OF RELEVANT FACTS HAVING A BEARING ON THE QUESTION(S) ON WHICH ADVANCE RULING IS REQUIRED 1. The application is being preferred by M/s. Denso Haryana Private Limited ('Applicant') a company incorporated in India under the provisions of the Companies Act, 1956 and having its registered head office located at New Delhi. 2. Copy of Certificate of Incorporation, Articles of Association and Memorandum of Association (as submitted with the Registrar of Companies in India) is enclosed herewith as Appendix 1 (Colly). 3. The Applicant is presently engaged in the business of manufacturing 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 prese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sors and pass on the information to the server and eventually to the end user through the cellular network. Further, the subject good can also rethote commands from in-phone application or web- portal and view vehicle maintenance and status from such in-phone application or web portal. Picture of the subject good in as imported condition is extracted hereunder for ease of reference : 8. Copy of the data sheet of the subject good indicating working of the of the subject good in different situations is annexed with this application as Appendix 2. 9. Subject good may consist of various components, such as a microprocessor, a memory, a SIM card, network access device, an antenna, a connector interface, etc., depending on the design and specifications. A TCU may be installed as a standalone device, integrated into another vehicle system, or connected to a Smartphone or tablet or other interfaces. 10. The subject good comes embedded with the Network Access Device (NAD) and E-sim which provides it with the capability 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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f value of the goods under the provisions of this Act; (d) applicability of notifications issued in respect of tax or duties under this Act or the Customs Tariff Act, 1975 (51 of 1975) or any tax or duty chargeable under any other law for the time being in force in the same manner as duty of customs leviable under this Act or the Customs Tariff Act; (e) determination of origin of the goods in terms of the rules notified under the Customs Tariff Act, 1975 (51 of 1975) and matters relating thereto; (f) any other matter as the Central Government may, by notification, specify." [Emphasis supplied] 16. The Applicant wishes to obtain the advance ruling on questions relating to classification of subject good and applicability of exemption notification on import of subject good under section 25(1) of Customs Act as detailed out in Annexure II. Therefore, the questions raised by the Applicant falls? within the purview of the provisions of Section 28H(2)(a) and 28H(2)(b) of the Customs Act. Hence, the application for advance ruling is being filed in conformity with the provisions of Section 28H of the Customs Act. Question raised under the present advan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... classification of goods in the Sub-headings of a Heading. 22. GRI 1 stipulates that the goods under consideration should be Classified in accordance with the terms of the Headings and any relevant Section or Chapter Notes. These Section or Chapter Notes and Sub-Notes give detailed explanation as to the scope and ambit of the respective Sections and Chapters. These Notes have been given statutory backing and have been incorporated at the beginning of each Section/Chapter. For ready reference, Rule 1 is extracted herein below: "Classification of goods in this Schedule shall be governed by the following principles : I. The titles of Sections, Chapters and Sab-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 ..." 23. The Larger Bench of the Hon'ble Tribunal in the matter of Saurashtra Chemical, Porbandar v. Collector of Customs, 1986 (23) E.L.T. 283 (Tri. -LB) had held that the tariffs must be interpreted in the light of relevant Section a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd corresponding Chapter Notes and Section Notes. In the light of above facts, to analyze the classification of above product following needs to be kept in mind : (a) General Rules of Interpretation (GRI); (b) Heading/sub-heading of the First Schedule in conjunction with Section/Chapter/Explanatory notes; c. Principal function of the subject good. 28. To ascertain the classification and by application of GRI 1, the following Customs Tariff Heading ('CTH') require attention i.e., CTH 8517 and CTH 8708 : 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 8708 Parts and accessories of the Motor Vehicles of Headings 8701 to 8705 Analysis of Chapter 85 29. Given the above, CTH 8517 merits consideration, which provides for "other apparatus for the transmission or reception of voice, images, or other da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 34. It is pertinent here to note that the capability of subject good to perform transmission and reception function in wireless mode is there at the time of import. This is evident from the fact that at the time of import, the subject good comes embedded with the NAD and E-sim which provide the subject good with the capability to transmit and receive the data in the wireless network. This is established from the fact that the subject good in as imported condition has the IMEI number (for the NAD) and ICCID Number (for the E-sim) mentioned on the subject good (refer picture of TCU in as imported form below). This goes on to show that the TCU in as imported condition is capable to perform transmission and reception function, and hence merits classification at CTH 8517 at the four-digit level. 35. Given the above, the Applicant now needs to ascertain the classification at the six-digit and eight-digit level. 36. At six-digit level, CTH 8517 62 covers "machines for the reception, conversion and transmission or regeneration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of reference - "(a) parts which are goods included in any of the headings of Chapter 84 or 85 (other than headings 8409, 8431, 8448, 8466, 8473, 8487, 8503, 8522, 8529, 8538 and 8548) are in all cases to be classified in their respective headings;" [Emphasis Supplied] 41. Therefore, upon bare reading of the above stated Section Note, it can be construed that TCU which is an identifiable machine/good as a whole and is going to be used in the motor vehicle merits classification under the Chapter 85 only. Analysis of Chapter 87 42. At this juncture, the Applicant also considers it relevant to discuss heading of Chapter 87 under section XVII of the Customs Tariff which covers vehicles (other than railway or tramway rolling stock) and parts and accessories thereof. The parts and accessories of motor vehicles are covered under CTH 8708. To understand the coverage of parts and accessories of motor vehicles, it is important to refer to Section notes of Section XVII. 43. In terms of Section Note 2(f) to Section XVII, electrical machinery and equipment are not regarded "parts or accessories" of the goods of Section XVII even if they are identifiable for use with these goods. Note Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aragraph (A) below), They must be suitable for use solely at principally with the articles of Chapters 86 to 88 (see paragraph (B) below, and they must not be more specifically included elsewhere in the Nomenclature (see paragraph (C) below : (A) Parts and accessories excluded by Note 2 to Section XVII This Note excludes the following parts and accessories, whether or not they are identifiable for as for the articles of this Section. (7) Electrical machinery or equipment of Chapter 85, for example : [Emphasis supplied] 47. From the above, 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 in view of the above. Specific entry to prevail over general entry by virtue of GRI 3(a) 48. Without prejudice to the discussion above, reference is made to Rule 3(a) of the GRI which provides that the heading that provides the most specific description of the goods shall be preferred to headings providing a more general description. In this regard, Rule 3 of the GRI is extracted as below :- "3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judicial precedents cited above, where there is a specific heading for the subject good under Chapter 85 (i.e., CTH 8517), it will not merit classification in the residuary heading as parts of motor vehicles under CTH 8708. Legal developments after the decision of Hon'ble Supreme Court in the matter of M/s. Westinghouse Saxby Farmer Ltd. and its application in the present case 53. In the decision of Westinghouse Saxby Farmer Ltd. v. Commissioner of Central Excise, Calcutta - 2021 (3) TMI 291, while deciding upon classification of relays used for railway signalling system, the Hon'ble Supreme Court has held that those parts which are suitable for use solely or principally with an article of Chapter 86 cannot be taken to a different Chapter as the same would negate the very objective of group classification. In the above decision, the Hon'ble Supreme Court does not discuss the WCO General Explanatory Notes to Sections XVII and XV, which indicate that if the goods are specifically excluded under Note 2 or if the goods have a specific classification under another heading, the goods cannot be classified as parts and accessories, irrespective of whether the goods are used along with s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of M/s. Westinghouse Saxby Farmer Ltd. v. Commissioner of Central Excise, Calcutta - Reg". (Annexed as Appendix 5). 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 of M/s. Intel Design Systems (India) P. Ltd. v. Commissioner of Customs & C. Ex-2008 (A) Apart from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iples as propounded in the CBIC Circular (supra). 60. It may be added here that the CBIC had issued a further clarification on the issued vide Instruction 25/2022-Cus., dated 3-10-2022 (annexed as Appendix 6), clarifying that the law continues to remain the same and hence the aforesaid instruction would remain valid without any changes. 61. In this context, additional reliance is also placed on the judgment of Hon'ble Delhi Tribunal, in case of Kafila Forge Ltd. v. Principal Commissioner of Customs, (Import) ICD TKC, Customs [2023 (7) TMI 1251 - CESTAT New Delhi], where the Tribunal has held that parts of transmission shafts fall under 8483 and not under 8708. In this case, the revenue relied upon Westinghouse judgment to classify the goods under Heading 8708 based on sole or principal use. While the bench did not discuss the applicability of Westinghouse judgment but independently evaluated the classification based on section notes and chapter notes and a few other rulings. The bench observed that on comparison of both the headings 8483 and 8708, the impugned goods i.e., Universal Joint Parts to be used in transmission shaft are more specifically covered under sub-heading 8483 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hip Agreement between the Republic of India and Japan) Rules, 2011 are complied with. So long as the imported goods are rightly classifiable under CTH 8517 62 90 and are originating in Japan, the Applicant is eligible to avail concessional duty benefit @ 0% BCD. To this extent, it is humbly requested before the Hon'ble Authority that the above understanding of the Applicant may be accepted. PRAYER In the light of the above, a ruling is sought from the Hon'ble Authority as follows : (A) The subject good is correctly classifiable under Customs Tariff Heading 8517 62 90 of the First Schedule of the Tariff Act. (B) The Applicant is concessional rate of BCD @0% as per S. Nos. 666 to NN 69/2011, dated 29-7-2011 on import of subject good subject to satisfaction of origin criteria that the goods are originating from Japan. 2. Unfortunately, the response from the Customs Port Commissionerate of ICD, Patparganj, New Delhi has not been received in spite of multiple reminders being issued to the Commissionerate. The applicant had filed two applications pertaining to two ports on the same matter under consideration. The first application has the port Commissionerate of Custo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh hearing." 4. As no comments of the Port Commissionerate has been received, let's look at the original submissions made by the applicant. 4.1 Classification of goods covered under the Customs Tariff is done as per the General Rules of Interpretation ('GRI'). GRI 1 to 5 lay down the principles determining classification of goods under a specific Heading whereas GRI 6 is applicable if the objective is to determine the classification of goods in the Sub-headings of a Heading. The Larger Bench of the Hon'ble Tribunal in the matter of Saurashtra Chemical, Porbandar v. Collector of Customs, 1986 (23) E.L.T. 283 (Tri. - LB) had held that the tariffs must be interpreted in the light of relevant Section and Chapter Notes which are statutorily binding like the Headings themselves. In the light of above facts, to analyze the classification of above product following needs to be kept in mind : (i) General Rules of Interpretation (GRI); (ii) Heading/sub-heading of the First Schedule in conjunction with Section/Chapter/Explanatory notes; (iii) Principal function of the subject good. 4.1.1 To ascertain the classification and by application of GRI 1, the following Customs Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an electric current or optical wave flowing in a wired network or by electro-magnetic waves in a wireless network. The signal may be analogue or digital. The networks, which may be interconnected, include telephony, telegraphy, radio-telephony, radio-telegraphy, local and wide area networks." 4.1.4 In view of the above extracted portion of the HSN explanatory notes, 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. 4.1.5 It is pertinent here to note that the capability of subject good to perform transmission and reception function in wireless mode is there at the time of import. This is evident from the fact that at the time of import, the subject good comes embedded with the NAD and E-sim which provide the subject good with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... performs transmission, conversion, and reception of signals in a wireless network and hence, merit classification under CTH 8517 62 at the six-digit level. Since the subject good is not specifically covered under any specific tariff entry at the eight-digit level, it merits classification in the residual category of 'Others' at eight-digit level i.e., CTH 8517 62 90. 4.1.9 In addition to above, it is also imperative to refer Note 2(a) of Section XVI which provides for classification of parts of machines. It states that parts which are goods of any heading of Chapter 84 or 85 are in all cases to be classified in the respective headings. Relevant extract of Section Note has been reproduced below for ease of reference - "(a) parts which are goods included in any of the headings of Chapter 84 or 85 (other than headings 8409, 8431, 8448, 8466, 8473, 8487, 8503, 8522, 8529, 8538 and 8548) are in all cases to be classified in their respective headings;" [Emphasis Supplied] Therefore, upon bare reading of the above stated Section Note, it can be construed that TCU which is an identifiable machine/good as a whole and is going to be used in the motor vehicle merits classification under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of parts and accessories of vehicles, aircraft or equipment concerned. It should, however be noted that these headings apply only to those parts or accessories which comply with all three of the following conditions : They must not be excluded by the terms of Note 2 to this Section (see Paragraph (A) below), They must be suitable for use solely or principally with the articles of Chapters 86 to 88 (see paragraph (B) below), and They must not be more specifically included elsewhere in the Nomenclature (see paragraph (C) below) : (A) Parts and accessories excluded by Note 2 to Section XVII This Note excludes the following parts and accessories, whether or not they are identifiable for as for the articles of this Section. (7) Electrical machinery or equipment of Chapter 85. for example : [Emphasis Supplied] From the above, 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 in view of the above. 4.1.14 Without prejudice to the discussion above, reference is made to Rule 3(a) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esidual heading. In view of GRI 3(a) and the judicial precedents cited above, where there is a specific heading for the subject good under Chapter 85 (i.e., CTH 8517), it will not merit classification in the residuary heading as parts of motor vehicles under CTH 8708. 4.1.16 Legal developments after the decision of Hon'ble Supreme Court in the matter of M/s. Westinghouse Saxby Farmer Ltd. and its application in the present case In the decision of Westinghouse Saxby Farmer Ltd. v. Commissioner of Central Excise, Calcutta - 2021 (3) TMI 291 - Supreme Court, while deciding upon classification of relays used for railway signalling system, the Hon'ble Supreme Court has held that those parts which are suitable for use solely or principally with an article of Chapter 86 cannot be taken to a different Chapter as the same would negate the very objective of group classification. In the above decision, the Hon'ble Supreme Court does not discuss the WCO General Explanatory Notes to Sections XVII and XV, which indicate that if the goods are specifically excluded under Note 2 or if the goods have a specific classification under another heading, the goods cannot be classified as parts and acce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y with the articles of chapters 86 to 88 and (c) They must not be more specifically included elsewhere in the nomenclature. 4.1.19 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 classified under the chapters of Section XVII, fulfilment of the three-layer test postulated "Under the Sub-heading (iii) Parts and Accessories " of the explanatory notes to Section XVII as issued by the WCO is imperative. It is only when all these three conditions are met that a particular item would be classified under the Chapters of Section XVII. 4.1.20 In other words, the shape/design/specification of a product is not a determinant of principal or sole use. Further, Note 3 of Section XVII cannot be applied blanketly and needs to be construed narrowly otherwise the exclusion under Note 2 would become superfluous. To this extent, the Videocon judgment is particularly important, and it is also aligned with the WCO classification principles as propounded in the CBIC Circular (supra). It may be added here th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specified) 666 8517 All Goods 0 4.2.1 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 between the Republic of India and Japan) Rules, 2011 are complied with. So long as the imported goods are rightly classifiable under CTH 8517 62 90 and are originating in Japan, the Applicant is eligible to avail concessional duty benefit @ 0% BCD. 5. The answers to the questions raised by the applicant are as follows : (a) Question 1 : Whether the import of 'Telematics Control Unit (TCU)' is correctly classifiable under Customs Tariff Heading 85176290 of the First Schedule of the Customs Tariff Act, 1975? Answer : The subject goods i.e. 'Telematics Control Unit (TCU)' is rightly classifiable under Customs Tariff Heading (CTH') 8517and more specifically under 8517 62 90. (b) Question 2 : Whether the Applicant is eligible to avail concessional rate of Basic Customs Duty (BCD) @0% as per S. No. 666 to NN 69/2011, dated 29-7-2011 on import of subject good subj ..... X X X X Extracts X X X X X X X X Extracts X X X X
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