2025 (1) TMI 267 - AAR - Customs

Telematics Control Unit classified under CTH 8517 62 90 eligible for 0% customs duty under Notification 69/2011

IN RE : DENSO HARYANA PVT. LTD.

AAR Delhi ruled that Telematics Control Unit (TCU) is correctly classified under CTH 8517 62 90 of the Customs Tariff Act, 1975, applying General Rules of ... Classification of imported goods - Telematics Control Unit (TCU) - to be classified under the Customs Tariff Heading 8517 62 90 of the First Schedule of the Customs Tariff Act, 1975 or not - eleigibility to avail concessional rate of Basic Customs Duty under Sl. No. 666 of the N/N. 69/2011-Customs, dated 29-7-2011. Classification of goods - HELD THAT:- Classification of goods covered under the Customs Tariff is done as per the General Rules of Interpretation (‘GRI’). GRI 1 to 5 lay down the principles determining classification of goods under a specific Heading whereas GRI 6 is applicable if the objective is to determine the classification of goods in the Sub-headings of a Heading. The Larger Bench of the Hon’ble Tribunal in the matter of Saurashtra Chemical, Porbandar v. Collector of Customs [1985 (8) TMI 183 - CEGAT, NEW DELHI-LB] had held that the tariffs must be interpreted in the light of relevant Section and Chapter Notes which are statutorily binding like the Headings themselves. It appears that CTH 8517 covers such apparatus which is used in transmission and reception of data and wherein the data is transmitted by way of electromagnetic waves in a wireless network. As discussed in Annexure 1 of this application, where the subject good provides for transmission and reception of data in the RF form in the wireless network, by application of the GRI Rule 1 and considering the HSN explanatory notes, the subject good appears to merit classification under CTH 8517 at four-digit level. It is apparent that all the electrical machinery or equipment covered under Chapter 85 are not regarded as “parts or accessories” of motor vehicles classifiable under Chapter 87, as they stand excluded from the purview of Section XVII. Applicability of the benefit of the notification - HELD THAT:- The benefit provided under the notification is subject to the condition that the goods being imported from Japan should be originating in Japan and the provisions laid down in Customs Tariff (Determination of Origin of Goods under the Comprehensive Economic Partnership Agreement between the Republic of India and Japan) Rules, 2011 are complied with. So long as the imported goods are rightly classifiable under CTH 8517 62 90 and are originating in Japan, the Applicant is eligible to avail concessional duty benefit @ 0% BCD. Conclusion - The subject goods i.e. ‘Telematics Control Unit (TCU)’ is rightly classifiable under Customs Tariff Heading (CTH’) 8517and more specifically under 8517 62 90 - The applicant is eligible to avail concessional rate of Basic Customs Duty on import of the subject goods as per SI. No. 666 of Notification No 69/2011 - Customs, dated 29-7-2011. 1. ISSUES PRESENTED AND CONSIDERED 1. Whether the imported Telematics Control Unit (TCU), a device that transmits, converts and receives vehicle data via cellular/satellite networks and comes with embedded Network Access Device and e-SIM, is classifiable under Customs Tariff Heading (CTH) 8517 62 90 (other apparatus for transmission or reception of voice, images or other data) of the First Schedule to the Customs Tariff Act, 1975, or as parts/accessories of motor vehicles under CTH 8708. 2. Whether the applicant is eligible for concessional Basic Customs Duty (BCD) @0% under Notification No. 69/2011-Cus. (entry for CTH 8517) on import from Japan, subject to satisfaction of origin criteria under the India-Japan origin rules. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Classification of the TCU under CTH 8517 62 90 versus CTH 8708 Legal framework: - Classification governed by General Rules of Interpretation (GRI) 1-6, Section and Chapter Notes, and HSN Explanatory Notes; principal function and statutory notes control. - Section/Chapter Notes and Section XVI Note 2(a) (parts of Chapters 84/85 to be classified in those Chapters) and Section XVII Note 2(f) (electrical machinery/equipment of Chapter 85 excluded from being 'parts or accessories' of Section XVII) are operative. Precedent treatment (general): - Judicial and tribunal authority treat Section and Chapter Notes as statutorily binding aids to classification and endorse HSN explanatory notes as safe guides. - Post-decisional administrative guidance recognises a three-condition test for classifying parts under Section XVII: (a) not excluded by Note 2; (b) suitable for sole or principal use with vehicles; and (c) not more specifically included elsewhere in the Nomenclature. Administrative instructions were issued to reconcile divergent practices after a Supreme Court decision emphasizing 'sole or principal use.' Interpretation and reasoning: - At the 4-digit level CTH 8517 covers 'other apparatus for the transmission or reception of voice, images or other data' used in wired or wireless networks; HSN notes define apparatus transmitting/receiving data via electromagnetic waves. - The TCU, as described, (i) receives signals from vehicle sensors, (ii) converts them to RF for transmission, and (iii) transmits/receives via embedded NAD and e-SIM; the device in as-imported condition possesses IMEI/ICCID identifiers and is capable of wireless transmission/reception. - Applying GRI 1 and HSN notes, the TCU's principal function is transmission, conversion and reception of data in a wireless network, bringing it within CTH 8517 at the 4-digit level. - At the 6-digit level, CTH 8517 62 covers 'machines for the reception, conversion and transmission or regeneration of voice, images or other data.' The TCU independently performs reception, conversion and transmission functions; therefore it fits CTH 8517 62. - No specific 8-digit entry otherwise describes the TCU; it thus falls into the residual 'other' at CTH 8517 62 90. - Chapter 87 (CTH 8708) covers parts and accessories of motor vehicles but Section XVII Note 2(f) excludes electrical machinery/equipment of Chapter 85 from being treated as 'parts or accessories' even if identifiable for use with vehicles. The WCO explanatory notes for Section XVII require satisfaction of all three conditions for classification under Section XVII; failure of any condition (notably exclusion under Note 2(f) or more specific inclusion elsewhere) precludes classification under CTH 8708. - GRI 3(a) mandates preference for the most specific heading. Here, CTH 8517 is the specific heading describing apparatus for transmission/reception of data; therefore it prevails over a general parts heading. Ratio vs. Obiter: - Ratio: The dispositive legal principle is that an identifiable machine whose principal functions are reception, conversion and transmission of data and which is covered by Chapter 85 is classifiable under the specific heading of Chapter 85 (CTH 8517 62 90), not under Chapter 87, because Section XVII Note 2(f) excludes electrical machinery/equipment and because GRI 3(a) favours the specific heading. - Obiter: Discussion of wider jurisprudential tension between the 'sole/principal use' test and the exclusionary force of Section Notes, and reference to administrative instructions reconciling divergent practices, are explanatory and contextual but not essential to the immediate classification decision beyond application of the Section Notes and GRI. Conclusions: - The TCU is rightly classifiable under CTH 8517 62 90 as a machine for reception, conversion and transmission of data; it is not a part/accessory classifiable under CTH 8708 because Chapter 85 electrical machinery/equipment is excluded from Section XVII and because a more specific heading (CTH 8517) applies. Issue 2 - Applicability of Notification No. 69/2011-Cus. (concessional BCD @0% for CTH 8517 imports from Japan) Legal framework: - Notification grants zero BCD rate for goods falling under CTH 8517 when imported from Japan, subject to origin criteria under the Customs Tariff (Determination of Origin under CEPA India-Japan) Rules, 2011. Precedent/administrative practice: - Concessional notification benefits apply where classification and origin requirements are both satisfied; administrative practice and rules require documentary proof of origin and compliance with CEPA origin rules. Interpretation and reasoning: - Having determined that the TCU falls within CTH 8517 62 90, the tariff classification pre-condition for the notification is met. - The notification's concessional rate is contingent on origin: the goods must be originating in Japan and must satisfy the applicable origin rules/procedural requirements (certificates, documentation) under the India-Japan rules. Ratio vs. Obiter: - Ratio: Eligibility for the concessional BCD rate follows from correct classification under CTH 8517 and satisfaction of origin criteria under the India-Japan origin Rules; classification alone does not dispense with origin proof. - Obiter: None beyond reiteration that origin compliance is a statutory/administrative precondition. Conclusions: - The applicant is eligible to claim concessional BCD @0% under the notification for imports of the TCU from Japan provided the goods are originating in Japan and the origin documentation and procedural requirements under the India-Japan origin rules are complied with. Cross-references and final determination - The classification conclusion under Issue 1 directly determines the availability of the notification benefit under Issue 2: CTH 8517 62 90 classification is the essential tariff precondition; origin compliance is the consequent requirement for the concessional rate.