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TMI Blog2025 (1) TMI 556X X X X Extracts X X X X X X X X Extracts X X X X ..... one Idea Limited [ 2022 (9) TMI 1600 - CESTAT NEW DELHI ] in the matter of the appellant had examined the classification of router line cards imported for use in Cisco Routers. The Tribunal recorded a finding that in contrast to network interface cards, the cards under consideration were router line cards which were essential for the routers to operate. Thus, the Tribunal held that the correct classification of the cards would be under CTI 8517 70 90 as parts and not CTI 8517 69 90 as other communication apparatus . In the present case, the subject goods under dispute are not cross compatible with devices of other manufacturers and hence are solely usable for the pre-determined purpose i.e., usage with the main equipment. Thus, the subject goods also have no separable function of their own. It is also seen that the main equipment has modular chassis i.e., chassis has dedicated slots for the subject goods. Unless the subject goods are slotted in the chassis in their designated slots, the cards do not source power and intelligence and hence cannot operate independently of the main equipment - the twin tests laid down in Vodafone Idea Limited, are satisfied by the subject goods import ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for PTN Equipment 8517 70 90 8517 62 90 8517 70 90 4. In respect of the classification by appellant, the Basic Customs Duty is NIL (S. No. 5 of NN 57/2017), Education Cess is Nil and ISGT is @ 18%. In respect of the classification by department, the Basic Customs Duty is @ 10%, Education Cess on BCD @ 3% and IGST is @ 18%. 5. The appellant cleared these goods under CTI 8517 70 90 as parts by virtue of Section Note 2(b) of Section XVI. However, the department believed that these goods were a kind of Network Interface Cards [NIC cards] classifiable under CTI 8517 62 90 and proposed a demand of Rs. 2,59,32,255/- through the show cause notice dated 05.07.2019. 6. The Principal Commissioner classified the goods under CTI 8517 62 90 and confirmed the proposed duty demand with interest by order dated 29.06.2020. The findings recorded by the Principal Commissioner are as follows: (a) Like NIC cards connect computer over a network in telecommunication, these cards connect OTN equipment over an optical network. Thus, the subject goods are nothing but NIC cards; (b) Group G of HSN Explanatory Notes to Sub-Heading 8517 62 covers NIC cards, multiplexers, and electro-optical converters. Thus, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een imported by the appellant are not a machine in itself but parts of the main equipment and in support of this contention reliance has been placed upon a Division Bench decision of the Tribunal in M/s. Vodafone Idea Limited vs. Principal Commissioner of Customs (Import), New Delhi [Customs Appeal No. 52287 of 2019 decided on 20.09.2022]; and (vi) The subject goods are not NIC Cards. To support this contention reliance has been placed upon the aforesaid decision of the Tribunal Vodafone Idea. 8. Shri Mihir Ranjan, learned special counsel appearing for the department, however, supported the impugned order and contented that it does not call for any interference in this appeal. In this connection, learned special counsel placed the order passed by the Principal Commissioner. 9. The submissions advanced by the learned counsel for the appellant and the learned special counsel appearing for the department have been considered. 10. Though the appellant had earlier claimed classification of the subject goods under CTI 8517 70 90, but the appellant now seeks classification of Hybrid/Pure Matrix Cards for PTN Equipment under CTI 8517 70 10 as parts of goods falling under Heading 8571 and C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h is Packet Transport Network [PTN] equipment classifiable under CTI 8517 62 90; (ii) The main equipment consists of a modular chassis i.e., chassis with dedicated slots for various populated printed circuit boards [Cards]; (iii) All the cards in the main equipment communicate with each other via backplane interface in the chassis of the main equipment; and (iv) This backplane interface is proprietary of the manufacturer and not universal. Thus, these goods will function solely with the chassis of the main equipment, when put in the dedicated slots, and will not function with the chassis of any other vendor. 13. According to the appellant, the goods are an integral and inseparable part of the main equipment, which together form the complete main equipment. The goods cannot function on a standalone basis and function only when put in the slot of the main equipment chassis. It is, therefore, the submission that the goods are proprietary to the main equipment. The term proprietary , as defined in Newton s Telecom Dictionary [ 17 th Updated edition, Newton s Telecom Dictionary, 2001 ], means something that will only work with one vendor s equipment . The subject goods, the appellant cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Tribunal was upheld by the Supreme Court in the judgment rendered on 27.02.2023 in Civil Appeal No s 1475-1477 of 2023. It needs to be noted that Supreme Court in the aforesaid decision noted that the department had accepted that classification of said product determined by the Tribunal. 18. In Ciena Communications India, the Tribunal held that the goods Hybrid/Matrix Cards and Small Form Factor Pluggable for OTN equipment are correctly classifiable under 8517 70. The Tribunal also noted that the goods do not perform their function independently, without being fitted in the chassis of the main equipment. It also needs to be noted that while making reference to Section Note 2(b) to Section XVI, the Tribunal held that the goods are classifiable as parts . The Tribunal also relied upon the earlier decision of the Tribunal in Commissioner of Customs, Mumbai (AIR Cargo Import) vs. Reliance Jio Infocomm Ltd. decided on 22.06.2022, which decision was upheld by the Supreme Court in the judgment rendered on 30.01.2023 in Civil Appeal No s. 586-598 of 2023. It also needs to be noted that the Tribunal held, in view of the decision of the Supreme Court rendered on 30.01.2023, that goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s., Bangalore vs. Modicom Network Pvt. Ltd [2005 (185) E.L.T. 333 (Tri - Bang.)]. (iii) Goods are parts of equipment which cannot function independently Similar to subject goods used in the main equipment, the cards used with DWDM/OTN equipment are specifically designed for use with the said equipment. Such cards draw power and intelligence from the DWDM/OTN equipment and cannot function unless incorporated in the DWDM/OTN equipment. The subject goods in the present appeal are dependent on the backplane components of the main component for drawing power and intelligence. Consequently, the subject goods cannot function unless they are incorporated in the main equipment. Thus, the subject goods and the cards of DWDM/OTN equipment are different from NIC Cards. 22. Thus, as in the case of cards of DWDM/OTN equipment, the subject goods in the present appeal cannot be considered as complete communication apparatus having an independent function. The subject goods cannot function independently without the other components of the main equipment and become functional only when plugged into the slot of modular chassis of the main equipment. Since the subject goods cannot be considered as an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the instant case and would be classifiable as parts of CTI 8517. 26. This apart, the subject goods are in the nature of Populated PCB. Undisputedly, the main equipment is classifiable under CTI 8517 62 90. The subject goods are not specifically covered under any heading of Chapter 84 or 85. Thus, they do they do not merit classification as per Note 2(a). Sub Heading 8517 70 specifically identifies and recognizes populated PCBs as parts . The subject goods (Hybrid/Pure Matrix Cards) are populated PCB and thus merit classification under CTI 8517 70 10 as parts of goods falling under Heading 8517 by virtue of Section Note 2(b) of Section XVI. 27. HSN Explanatory Notes to CTH 8534 distinguishes PCBs and PCBs mounted with mechanical/ electrical components (i.e., populated PCBs). It clarifies that populated PCBs are classified in accordance with Section Note 2 to Section XVI. It is, therefore, seen that even HSN Explanatory Notes treat populated PCBs as parts of the primary apparatus. 28. In this regard, reliance can be placed on the decision of the Tribunal in Modicom Network, wherein the Tribunal held that the modules in the form of populated PCBs are parts and are correctly classifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... converts frame data received from the computer into bits and transmits these bits to the medium in the correct signal format. 34. Hence, NIC is effectively a translator which allows a computer to communicate with a network by translating the output of the computer into a format understandable by the network and vice versa. If a computer is not to be connected to a network, there is no need for the NIC of the computer to function. A computer is complete in itself and does its job of data processing without any need for NIC. 35. It has been clearly established in Vodafone that NIC cards are distinct and separable from the overall equipment and thus satisfy the twin tests laid down by this Tribunal. Using the analogy laid down in Vodafone, the subject goods which are tailor-made for the main equipment are in contrast to the NIC cards and are very much essential for the main equipment to operate. 36. Thus, the subject goods are not similar in nature to NIC Cards and any reliance on the classification of NIC Cards to determine appropriate classification for the subject goods is misplaced. 37. Thus, for all the reasons stated above, Hybrid/Pure Matrix Cards for PTN Equipment would be cla ..... X X X X Extracts X X X X X X X X Extracts X X X X
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