2023 (6) TMI 907 - AAR - Customs

Classification of Data Center Switch Router Models for Customs Tariff Benefits

M/s Ingram Micro India Pvt. Ltd. Versus Commissioner of Customs (III), Mumbai

The Data Center Switch Router models are classified under sub-heading 85176290 of the Customs Tariff Act, eligible for benefits under Sr. No. 13N of ... Classification of goods proposed to be imported - 15 models of Data Center Switch Routers belonging to 3 different series - classifiable under the Tariff Item 8517 62 90 of the Customs Tariff of India or not - applicability of Sr. No. 13N of Notification No. 24/2005-Customs dated 01.03.2005 and Sr. No. 20 of Notification No. 50/2017-Customs, dated 30.06.2017. HELD THAT:- Sub-heading 851762 covers machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus. DCSRs are capable of performing functions such as reception, conversion and transmission of data. Further, the subheading specifically covers switching and routing apparatus. Therefore, the DCSRs performing both switching and routing functions are clearly classifiable under subheading 851762 - As the principal function of these devices is routing, they are classifiable as routers under sub-heading 85176290. Eligibility for the benefit under Sr. No. 20 of Notification No. 57/2021- Customs, dated 30.06.2017, as amended - HELD THAT:- When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must he interpreted in favour of the revenue. The notification clearly excludes carrier ethernet switches from the purview of the duty benefits. As per the technical expert TEC these goods can function as carrier-grade ethernet switches. Accordingly the benefit of Sr. No. 20 of Notification No. 57/2021 -Customs would not be available in the instant case. Notification benefit under Sr. No. 13N of Notification No. 24/2005, as amended - HELD THAT:- In the present case, the entry describes goods as 'Routers'. It does not specify indentation, conditions or capacity and capability for such routers. It does not bar the routers used by telecom networks, support service providers and data centres. It does not exclude routers capable of performing secondary functions. The impugned goods, on the application of GIR I and Note 3 to Section XVI read with the technical opinion of the TEC merit classification as routers based on their principal function of routing. Therefore, the goods under consideration appear to be covered by the said notification. Accordingly, they are eligible to claim benefits under the above-mentioned notification. Thus, the Data Centre Switch Router models specified in para 2 are classifiable under sub-heading 85176290 of the first schedule to the Customs Tariff Act, 1975 and are eligible to avail the benefit under Sr. No. 13N of Notification No. 24/2005-Customs, as amended. However, they are not eligible to avail benefits of Sr. No. 20 of Notification No. 57/2021 -Customs, dated 30.06.2017. Issues Involved:1. Classification of Data Center Switch Routers (DCSRs) under the Customs Tariff of India.2. Eligibility for benefits under Sr. No. 13N of Notification No. 24/2005-Customs.3. Eligibility for benefits under Sr. No. 20 of Notification No. 57/2017-Customs.Issue-wise Detailed Analysis:1. Classification of Data Center Switch Routers:The applicant, M/s Ingram Micro India Private Limited, sought classification for 15 models of Data Center Switch Routers (DCSRs) under Tariff Item 8517 62 90 of the Customs Tariff of India. The DCSRs, which are a combination of network switches and routers, are used in large-scale data centers and enterprise networks. They perform both switching and routing functions. According to the applicant, these devices are primarily used as non-carrier ethernet switches, making them eligible for classification under subheading 851762. The jurisdictional Commissionerate and the Telecommunication Engineering Centre (TEC) agreed that these devices are capable of performing both functions but identified them primarily as routers. Therefore, the DCSRs are classified under subheading 85176290 based on their principal function of routing.2. Eligibility for Benefits under Sr. No. 13N of Notification No. 24/2005-Customs:The applicant claimed that the DCSRs should be eligible for benefits under Sr. No. 13N of Notification No. 24/2005-Customs, which exempts routers of sub-heading 85176290. The applicant argued that the exemption is based on functionality and that multifunction devices should not be disqualified from exemptions if one of their functions qualifies. The jurisdictional Commissionerate, however, argued that the devices are 'Ethernet Data Switches' and not 'Routers,' thus not eligible for the exemption. The Authority for Advance Rulings concluded that since the DCSRs are primarily routers, they are eligible for the exemption under Sr. No. 13N of Notification No. 24/2005-Customs.3. Eligibility for Benefits under Sr. No. 20 of Notification No. 57/2017-Customs:The applicant also sought benefits under Sr. No. 20 of Notification No. 57/2017-Customs, which provides a concessional rate of duty for goods under subheadings 85176290 or 85176990, excluding certain specified goods. The jurisdictional Commissionerate and TEC pointed out that the DCSRs have features that can support carrier ethernet and can function as carrier ethernet switches, which are excluded from the notification. The Authority ruled that since the DCSRs can function as carrier-class ethernet switches, they are excluded from the benefits under Sr. No. 20 of Notification No. 57/2017-Customs.Conclusion:The Data Center Switch Router models specified are classifiable under sub-heading 85176290 of the Customs Tariff Act, 1975. They are eligible for benefits under Sr. No. 13N of Notification No. 24/2005-Customs but are not eligible for benefits under Sr. No. 20 of Notification No. 57/2017-Customs.