2023 (11) TMI 68 - AAR - Customs

Wireless routers and mesh Wi-Fi systems classified under sub-heading 8517 62 90 with duty exemption

AAR Mumbai ruled that wireless routers and mesh Wi-Fi systems (Wavlink models Quantum D2G, Quantum S2K, and WL-WN529E4) are classifiable under sub-heading ... Classification of routers under Heading 8517 and sub-heading 8517 62 90 - Application of HSN Explanatory Notes to tariff classification - General Rules for Interpretation (GIR) - Rule 1 - Admissibility of advance ruling where prior show cause notices relate to an earlier tariff regime - Eligibility for exemption under Notification No. 24/2005-Customs (Sr. No. 13N) for goods classifiable as routersAdmissibility of advance ruling where prior show cause notices relate to an earlier tariff regime - Section 28-I(2)(a) proviso - bar on admission if question already pending - Application for advance ruling is admissible despite earlier show cause notices which relate to a period when a different tariff item existed - HELD THAT: - The Authority examined whether the CAAR application was barred under the proviso to Section 28-I(2)(a) because of pending show cause notices. The SCNs related to alleged misclassification for periods prior to 1-1-2020 when a specific tariff item for routers (8517 69 30) existed and when the exemption under Sr. No. 13N had not been introduced. With the elimination of tariff item 8517 69 30 effective 1-1-2020, the legal framework has changed and there is no longer a pending question in the applicant's case under the current tariff/notification regime. On that basis the Authority allowed admission of the applications for advance ruling under Section 28-I(2)(a). [Paras 5]Applications admitted for advance ruling as the prior SCNs pertain to a pre-1-1-2020 legal regime and do not bar the present applicationClassification of routers under Heading 8517 and sub-heading 8517 62 90 - Application of HSN Explanatory Notes to tariff classification - GIR Rule 1 - titles are for reference; classification by terms of headings and notes - The imported routers are classifiable under sub-heading 8517 62 90 of the Customs Tariff Act, 1975 - HELD THAT: - The Authority applied the Harmonized System principles and GIR Rule 1, and relied on the HSN Explanatory Notes to Heading 85.17 which expressly list 'routers' among 'other communication apparatus'. The devices under consideration perform the characteristic functions of routers - receiving and forwarding data packets between packet-switched networks and enabling connection to wired or wireless communication networks - and thus satisfy the criteria for inclusion under sub-heading 8517 62 which covers machines for reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus. As routers are not otherwise specifically described within the enumerated tariff items of 8517 62, they fall within the residual entry 8517 62 90. [Paras 5]Routers covered by the application are classifiable under sub-heading 8517 62 90Eligibility for exemption under Notification No. 24/2005-Customs (Sr. No. 13N) for goods classifiable as routers - The routers classifiable under sub-heading 8517 62 90 are eligible for duty exemption under Sr. No. 13N of Notification No. 24/2005-Customs, as amended - HELD THAT: - Having held that the subject goods fall within sub-heading 8517 62 90, the Authority examined the notification and found that Sr. No. 13N exempts 'Routers' falling under Heading 8517 62 90 from customs duty. Therefore, the impugned goods, being classifiable under that sub-heading, qualify for the exemption provided by the notification. [Paras 6]The impugned routers are entitled to the duty exemption under Sr. No. 13N of Notification No. 24/2005-CustomsFinal Conclusion: The Authority admitted the advance ruling application (as the earlier SCNs related to a prior tariff regime) and ruled that the specified router models are classifiable under sub-heading 8517 62 90 of the Customs Tariff Act, 1975, and eligible for customs duty exemption under Sr. No. 13N of Notification No. 24/2005-Customs, as amended. Issues Involved:1. Classification of the routers under the Customs Tariff Act, 1975.2. Eligibility for duty exemption under Notification No. 24/2005-Customs, dated 1-3-2005, as amended.Detailed Analysis:1. Classification of Routers:The applicant, M/s. Ingram Micro India Pvt. Ltd., sought an advance ruling on the classification of four models of routers intended for import. The models are:- WAVLINK HALO Base Pro X2 Dual Band 1200 Mbps Wireless Mesh Router- WAVLINK QUANTUM D2G 1200 Mbps Dual Band Full Gigabit Wireless Router- WAVLINK QUANTUM S2K 300 Mbps Wireless Router- WAVLINK WL-WN529E4 4G LTE N300 Wireless RouterThe applicant argued that these routers should be classified under Chapter Heading 8517 of the Customs Tariff Act, 1975, specifically under sub-heading 8517 62 90, which includes 'Machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus.'The applicant supported their classification with references to the Harmonized System of Nomenclature (HSN) Explanatory Notes, which state that routers are apparatus for the transmission or reception of data in a wired or wireless network. The applicant also cited various Supreme Court judgments to support the use of dictionary definitions and trade parlance for terms not defined in the statute.The Authority for Advance Rulings (AAR) agreed with the applicant, noting that the routers meet the criteria laid out in the relevant headings, sub-headings, and HSN notes. The routers are devices that manage traffic between networks by forwarding data packets to their intended IP addresses, and they allow multiple devices to use the same internet connection. Therefore, the AAR ruled that the routers are classifiable under sub-heading 8517 62 90.2. Eligibility for Duty Exemption:The applicant also sought confirmation on the eligibility for duty exemption under Sr. No. 13N of Notification No. 24/2005-Customs, dated 1-3-2005, as amended. This notification exempts 'Routers' falling under Heading 8517 62 90 from the whole of the duty of customs leviable thereon.The AAR noted that the applicant had been issued Show Cause Notices (SCNs) for the period prior to 1-1-2020, proposing a different classification (Tariff Item 8517 69 30) and denying the benefit of the notification. However, the specific Tariff Item for routers (8517 69 30) was eliminated effective 1-1-2020, and the exemption for routers under Sr. No. 13N of Notification No. 24/2005-Cus. was introduced only from that date.Given that the new legal framework came into existence from 1-1-2020, the AAR found no pending dispute under the current classification and notification benefit. Consequently, the AAR ruled that the routers are eligible for the duty exemption under Sr. No. 13N of Notification No. 24/2005-Cus., dated 1-3-2005, as amended.Conclusion:The Authority for Advance Rulings concluded that the routers in question are classifiable under sub-heading 8517 62 90 of the Customs Tariff Act, 1975, and are eligible for the duty exemption benefit under Sr. No. 13N of Notification No. 24/2005-Customs, dated 1-3-2005, as amended.