2023 (12) TMI 757 - HC - Customs

Echo Family Devices classified under CTH 8517 62 90 as communication equipment not speakers under CTH 8518

Amazon Wholesale India Private Limited Versus Customs Authority Of Advance Ruling, New Delhi & Anr.

Delhi HC held that Echo Family Devices are classifiable under CTH 8517 62 90 as communication devices rather than under CTH 8518 as speakers. The court ... Classification of imported goods - Echo Family Devices - classifiable under CTH 8517 and more particularly Tariff Entry 8517 62 90 thereof or under CTH 8518? - HELD THAT:- A similar question arose for the consideration of the Supreme Court in Commissioner of Customs, Central Excise and Service Tax, Hyderabad vs. Ashwani Homeo Pharmacy [2023 (5) TMI 191 - SUPREME COURT]. In this case also the manufacturer had asserted that notwithstanding the product being styled as a ‘hair oil’, it was liable to be classified as a ‘medicament’ where it was held that substance of the matter remains that in common parlance, the product in question would be approached essentially for its claimed medicinal qualities and not as another hair oil. It is thus evident from the aforenoted principles as enunciated by the Supreme Court that the mere description of the product as a ‘hair oil’ or ‘shampoo’ would not be conclusive for the purposes of classification under the CTH. The decisions in Sarvotham Care [2015 (8) TMI 250 - SUPREME COURT]] and Ashwani Homeo [2023 (5) TMI 191 - SUPREME COURT] thus clearly explain the legal position to be that nomenclature alone would not constitute a defining basis for the purposes of answering a question of classification. When the aforesaid principles are applied to the facts at hand, it becomes clear that merely because the appellant or others had chosen to describe the products as smart speakers, the same could have neither been accepted as being conclusive of the issue that arose nor could the description of the products detracted from the right of the appellant to urge the AAR to examine the issue of classification by applying the dominant function test. The tests evolved by courts in connection with the issue of classification such as nomenclature, common parlance, principal function, primary and incidental purpose are all aids and rules of guidance liable to be cumulatively borne in consideration in order to ascertain the true character of a product. While none of those tests are accorded preeminence, it is ultimately for the authorities to ascertain which of those rules would merit adoption and represent an accurate understanding of the nature of the product. As is evident from the explanation of the unique features of the products in question, they were principally designed to act as mediums for reception and transmission of data and could additionally and as an aside also be used as a speaker. However, since these were essentially reception and transmission devices which could analyze data and perform the varied functions noticed above, they were rightly described by the appellant as being communication devices and thus answering the requirement of machines for the reception, conversion and transmission or regeneration of voice, images or other data as contemplated under Tariff Entry 8517 62 90. The impugned devices perform a host of functions including reception, conversion and transmission of voice or other data to produce the requisite final output warranting their classification under CTH 8517 - merely because these devices could if so chosen by the user also be used as mere speakers, the same would not justify us recognising their primordial attribute to be that of a speaker alone. The eleven devices are correctly classifiable under CTH 8517 and more particularly under Tariff Entry 8517 62 90. Echo Show 5, Echo Dot 4th Generation and Echo Dot 4th Generation with Clock are held eligible to claim exemptions in accordance with SI. No. 20 of the Notification dated 30 June 2017, as amended vide Notification dated 01 February 2021 - the impugned order set aside. Issues Involved:1. Correct classification of the 11 Echo Family Devices under the Customs Tariff Heading (CTH).2. Eligibility for exemption under Notification No. 57/2017-Cus dated 30.6.2017 for specific devices.Summary of Judgment:Issue 1: Classification of Devices1. Principal Question: Whether the subject devices should be classified under CTH 8517, which includes apparatus for transmission or reception of voice, images, or other data, or under CTH 8518 (microphones, loudspeakers) or CTH 8528 (monitors and projectors).2. AAR's Decision: - Echo 4th Generation Devices: Classified as speakers under CTH 8518 due to their principal function of sound reproduction. - Echo Show Devices: Classified under CTH 8528 as monitors/displays. - Echo Flex: Classified under CTH 8517 as a communication device. - Echo Studio: Classified as a smart speaker under CTH 8518. - Echo Link and Echo Link Amp: Classified under CTH 8517 due to their primary function of reception, conversion, and transmission of voice or other data.3. Appellant's Argument: The devices should be classified under CTH 8517 as they are essentially communication devices designed for the transmission, reception, and conversion of data, and not merely as speakers or monitors.4. Court's Analysis: - Principal Function Test: Emphasized that the principal function of the devices should be the determining factor for classification. - Versatility of Devices: Recognized the multifunctional nature of the devices, which include capabilities such as controlling smart home appliances, browsing the internet, and acting as a calling and messaging platform. - Legal Precedents: Referred to the Supreme Court's decisions in similar cases, emphasizing the importance of the principal function over the nomenclature of the product. - Global Classification Practices: Considered international practices and the Harmonized System of Nomenclature (HSN) for consistency in classification.5. Court's Conclusion: The seven devices (Echo 4th Generation, Echo Dot 4th Generation, Echo Dot 4th Generation with Clock, Echo Show 5, Echo Show 8, Echo Show 10, and Echo Studio) should be classified under CTH 8517, specifically under Tariff Entry 8517 62 90, as their principal function is the transmission and reception of data.Issue 2: Eligibility for Exemption1. AAR's Decision on Exemption: Denied exemption benefits to Echo Show 5, Echo Dot 4th Generation, and Echo Dot 4th Generation with Clock, as they were not classified under CTH 8517.2. Court's Conclusion: Since the devices are now classified under CTH 8517, they are eligible for exemption under Notification No. 57/2017-Cus dated 30.6.2017, as amended.Final Judgment:- The order of the AAR dated 20 July 2021 is set aside to the extent it denied classification under CTH 8517 and exemption benefits.- The eleven devices are correctly classifiable under CTH 8517, specifically under Tariff Entry 8517 62 90.- Echo Show 5, Echo Dot 4th Generation, and Echo Dot 4th Generation with Clock are eligible for exemption in accordance with the relevant notification.