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of <h1>SFP transceiver modules' customs classification: treated as telecom parts under CTH 8517 79 90, not standalone machines 8517 62 90</h1> SFP and similar transceiver modules were assessed for classification under CTH 8517 62 90 as 'machines for the reception, conversion and transmission or ... Classification of SFP transceivers - to be classifiable under heading 85176290 or under heading 85177990? - eligibility for concessional/nil rate of Basic Customs Duty (BCD) under N/N. 57/2017-Cus., dated 30.06.2017 - HELD THAT:- It is observed that sub-heading 8517 62 includes apparatus such as modems, multiplexers, routers and similar machines that can transmit or receive signals on their own and perform conversion/regeneration functions independently. The Notes also emphasise that where a product has no independent function and operates only as a component of the host apparatus, it is to be treated as a part. The applicant has explained that the subject transceivers do not possess the functionality of a modem, router, or switching apparatus. They are not capable of reception, conversion and transmission or regeneration of data independently. On examination of the product specifications, it is observed that the transceivers only convert electrical signals from the host equipment into optical signals for transmission over fibre (and vice versa) but do so entirely under the control of the host device. It is also noted that the modules cannot transmit or receive data unless connected to the host networking equipment. They have no independent software, user interface, or control logic to configure or manage network transmission. The dependence on host power and firmware makes them incapable of functioning as stand-alone machines. It is observed that classification under sub-heading 8517 62 90 requires that the goods be 'machines for the reception, conversion and transmission or regeneration of data'. The wording implies the capability to perform such operations independently, in the manner of a modem or a router. As the subject goods cannot perform these functions on their own, they do not satisfy the description of 'machines' under this sub-heading - the subject goods are not appropriately classifiable under 8517 62 90. Applicability of sub-heading 8517 79 90 which covers 'Other parts' - HELD THAT:- The subject transceivers do not have a separable, independent function. Their sole purpose is to act as an interface within the host equipment. They do not transmit or receive data independently nor do they perform switching or routing. Further, they cannot operate independently of the host equipment, as they require power and firmware from the host device. Accordingly, both questions are answered in the negative, and the modules must be regarded as parts - the subject transceiver modules are correctly classifiable under tariff item 8517 79 90 of the First Schedule to the Customs Tariff Act, 1975. Applicability of N/N. 57/2017-CUS [Sr. No.5] - HELD THAT:- On perusal of the Serial No. 5 of Notification No. 57/2017-Cus., dated 30.06.2017, it is evident that the same prescribes nil rate of BCD for goods falling under tariff items 8517 71 00 and 8517 79 90, other than parts of cellular mobile phones and wrist wearable devices and Inputs or sub-parts for use in manufacture of parts - In this case, it is observed that the subject transceivers are neither parts of cellular mobile phones or wrist wearable devices nor Inputs or sub-parts for use in manufacture of parts of these goods. They are designed exclusively for network switches, routers and other enterprise networking equipment. Hence, they clearly fall within the scope of Serial No. 5 of the No. 57/2017-Cus., dated 30.06.2017 - thus, the subject goods, being classifiable under 8517 79 90, are eligible for nil rate of BCD under Serial No. 5 of Notification No. 57/2017-Cus., dated 30.06.2017. The goods under consideration, viz. transceiver modules including SFP/SFP+, QSFP/QSFP-DD, CFP/CFP2 and other similar variants, are classifiable under tariff item 8517 79 90 of the First Schedule to the Customs Tariff Act, 1975 as 'Other parts' of apparatus of heading 8517 - The said goods are covered under serial number 5 of Notification No. 57/2017-Cus dated 30.06.2017 and are accordingly eligible for nil rate of basic customs duty, subject to the exclusions specified therein which are not applicable in the present case. Issues: (i) Whether the SFP and similar pluggable transceiver modules imported by the applicant are classifiable under tariff item 8517 62 90 as machines/apparatus or under tariff item 8517 79 90 as parts; (ii) If classifiable under 8517 79 90, whether such goods are eligible for nil rate of basic customs duty under Serial No. 5 of Notification No. 57/2017-Cus., dated 30.06.2017.Issue (i): Whether the transceiver modules are machines/apparatus (8517 62 90) or parts (8517 79 90).Analysis: The two-fold test from Vodafone Idea (whether the item has a separate identifiable function and whether it can operate independently) and the HSN/WCO Explanatory Notes to heading 8517 were applied to the technical description and product literature. The modules are hot-pluggable, require power, control software/firmware and timing/signalling from host networking equipment, lack independent switching or routing capability, and are proprietary (not cross-compatible). They cannot perform reception, conversion, transmission or regeneration of data independently in the imported condition and function only when integrated into host devices.Conclusion: The transceiver modules fail both independence tests and are classifiable as parts under tariff item 8517 79 90 (in favour of the assessee).Issue (ii): Whether goods classifiable under 8517 79 90 qualify for nil rate of BCD under Serial No. 5 of Notification No. 57/2017-Cus., dated 30.06.2017.Analysis: Serial No. 5 of Notification No. 57/2017-Cus. prescribes nil BCD for goods falling under 8517 71 00 or 8517 79 90, excluding parts of cellular mobile phones and wrist wearable devices and inputs/sub-parts for manufacture of such parts. The transceiver modules are not parts of mobile phones or wrist wearable devices and are designed for network switches, routers and other enterprise networking equipment. Judicial precedents addressing identical goods support extension of the notification benefit to such modules.Conclusion: The transceiver modules classified under 8517 79 90 are eligible for nil rate of basic customs duty under Serial No. 5 of Notification No. 57/2017-Cus., dated 30.06.2017 (in favour of the assessee).Final Conclusion: The Authority rules that the SFP and similar pluggable transceiver modules are parts of heading 8517 and are classifiable under tariff item 8517 79 90 and, accordingly, qualify for nil basic customs duty under Serial No. 5 of Notification No. 57/2017-Cus.Ratio Decidendi: Where an item cannot perform an independent identifiable function and cannot operate independently of host equipment, it is to be treated as a part and classified under the parts sub-heading (here 8517 79 90) rather than as a standalone machine sub-heading (8517 62 90); goods so classified fall within the scope of Serial No. 5 of Notification No. 57/2017-Cus. unless expressly excluded.
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