Imported AC-DC and DC-DC power modules for telecom PCBAs classified under CTH 8504; DC-DC modules get nil duty.

Applying GRI 1, WCO-HSN Explanatory Notes and Section Note 2(a) to Section XVI, the AAR held that the imported power modules are "static converters" under CTH 8504: the AC-DC power module, being a rectifier not specifically covered as a bridge rectifier, falls under CTI 85044029 (other rectifiers), and the DC-DC converter power modules fall under CTI 85044090 (other static converters). For exemption under Sl. No. 4 of N/N. 25/2005-Cus, the AAR found the DC-DC converter power modules are for integration into PCBAs used in manufacture of telecommunication apparatus (other than cellular mobile phones); consequently, goods classifiable under 850440 and so used are eligible for nil customs duty.

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Issues: (i) Whether the imported AC-DC power module and DC-DC converter power modules are classifiable under the First Schedule to the Customs Tariff Act, 1975 as static converters / rectifiers under headings 8504 40 29 and 8504 40 90; (ii) Whether such static converters, when used in the manufacture of telecommunication apparatus, are eligible for nil rate of Basic Customs Duty under serial no. 4 of Notification No.25/2005-Customs dated 01.03.2005.

Issue (i): Classification of the specified imported AC-DC and DC-DC power modules under the Customs Tariff Act, 1975.

Analysis: The goods were analysed against the terms of the headings, Section and Chapter notes and the HSN explanatory notes. Rule 1 of the General Rules for Interpretation directs classification by heading terms and notes. The technical specifications and functioning of the items show they convert electrical energy (AC to DC or DC to different DC voltages) and incorporate converting and auxiliary elements. The HSN explanatory notes for heading 8504 encompass rectifiers and direct current converters and state that auxiliary devices do not preclude classification as static converters. Note 2(a) to Section XVI directs that parts included in Chapter 84 or 85 be classified in their respective headings. Prior authorities and tariff structure support classification of such converters under heading 8504 40 and the relevant sub-items.

Conclusion: DPS-500AB-40A AC-DC power module is classifiable under tariff item 8504 40 29 as other rectifiers; the PKU4913D series and the other listed DC-DC converter power modules are classifiable under tariff item 8504 40 90 as other static converters.

Issue (ii): Applicability of serial no. 4 of Notification No.25/2005-Customs (01.03.2005) granting nil rate of Basic Customs Duty to static converters for automatic data processing machines and telecommunication apparatus.

Analysis: Serial no. 4 of Notification No.25/2005 applies to static converters classifiable under heading 8504 40 for automatic data processing machines and telecommunication apparatus (excluding cellular mobile phone converters). The imported modules are shown by technical datasheets and the applicant's declaration to be intended for integration into PCBAs of Wi-Fi receivers, transmitters, uplink cards and data-centre switches, i.e. telecommunication apparatus. Given their classification under heading 8504 40 and intended end-use in telecommunication equipment (other than cellular mobile phones), the statutory exemption condition is satisfied.

Conclusion: The specified AC-DC and DC-DC power modules, when used for manufacture of telecommunication apparatus other than cellular mobile phones, are eligible for nil rate of Basic Customs Duty under serial no. 4 of Notification No.25/2005-Customs dated 01.03.2005.

Final Conclusion: The imported AC-DC and DC-DC power modules are classifiable under tariff items 8504 40 29 and 8504 40 90 respectively, and are entitled to Basic Customs Duty exemption under serial no. 4 of Notification No.25/2005 when used in the manufacture of telecommunication apparatus other than cellular mobile phones.

Ratio Decidendi: Devices that convert AC to DC or convert DC to different DC voltages and incorporate converting elements and auxiliary components fall within heading 8504 40 as electrical static converters; where such static converters are classifiable under 8504 40 and are used in telecommunication apparatus (excluding cellular mobile phones), they qualify for nil Basic Customs Duty under serial no. 4 of Notification No.25/2005-Customs.

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