Composite network equipment classified as routers, exemption allowed, but concessional duty denied due to express exclusion for carrier ethernet switches.

Data centre switch router models were classified under sub-heading 85176290 because they were composite network equipment performing switching and routing functions, and their principal function was routing under Rule 1 of the General Rules for Interpretation and Note 3 to Section XVI. On that basis, the goods qualified as routers for Sr. No. 13N of Notification No. 24/2005-Customs, which was applied according to its plain text. However, the concessional benefit under Sr. No. 20 of Notification No. 57/2017-Customs was denied because the goods were capable of functioning as carrier-grade ethernet switches and the notification expressly excluded carrier ethernet switches.

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Issues: (i) Whether the data centre switch router models are classifiable under sub-heading 85176290 of the First Schedule to the Customs Tariff Act, 1975. (ii) Whether the goods are eligible for the benefit of Sr. No. 13N of Notification No. 24/2005-Customs. (iii) Whether the goods are eligible for the benefit of Sr. No. 20 of Notification No. 57/2017-Customs.

Issue (i): Whether the data centre switch router models are classifiable under sub-heading 85176290 of the First Schedule to the Customs Tariff Act, 1975.

Analysis: The goods were found to be network equipment capable of both switching and routing functions. Sub-heading 851762 covers machines for reception, conversion and transmission of data, including switching and routing apparatus. Applying Rule 1 of the General Rules for the Interpretation of the First Schedule and Note 3 to Section XVI, composite machines performing two or more complementary or alternative functions are classified according to their principal function. On the technical material, the principal function of the impugned goods was routing.

Conclusion: The goods are classifiable under sub-heading 85176290.

Issue (ii): Whether the goods are eligible for the benefit of Sr. No. 13N of Notification No. 24/2005-Customs.

Analysis: The notification exempts routers. The entry was construed according to its plain language, and no additional restriction was read into it. Since the goods were held to be routers on the basis of their principal function, they fall within the exemption.

Conclusion: The benefit under Sr. No. 13N of Notification No. 24/2005-Customs is available.

Issue (iii): Whether the goods are eligible for the benefit of Sr. No. 20 of Notification No. 57/2017-Customs.

Analysis: The notification grants concessional duty to goods under sub-heading 85176290 but excludes carrier ethernet switches. On the technical opinion and product capability, the goods were capable of functioning as carrier-grade ethernet switches. Exemptions are to be strictly construed, and an excluded category cannot claim the concession.

Conclusion: The benefit under Sr. No. 20 of Notification No. 57/2017-Customs is not available.

Final Conclusion: The goods are accepted for classification as routers under sub-heading 85176290 and qualify for the router exemption, but they are excluded from the concessional duty benefit reserved for non-excluded goods under the later notification.

Ratio Decidendi: A composite machine is classified according to its principal function, and an exemption notification must be applied strictly according to its text, especially where the entry contains an express exclusion.

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