2025 (12) TMI 1560 - AAR - Customs

Stylus pen for touchscreen use treated as X-Y coordinate input unit, classified under Heading 8471 (CTSH 8471 60 90)

The dominant issue was whether a stylus pen for use with a device screen was classifiable as an ADP machine unit under Heading 8471. Applying Chapter Note ... Classification of goods - S-Pen - to be classified as Automatic data processing machines and units thereof; magnetic or optical readers, machines for transcribing data on to data media in coded form and machines for processing such data, not elsewhere specified or included under Tariff entry 8471 or not - HELD THAT:- As per Chapter note 6(C), X-Y co-ordinate input units should satisfy the conditions (ii) and (iii). The Stylus Pen satisfies the conditions (ii) and (iii) as the Stylus Pen are connectable to the CPU through the Digitizer (Screen) and they are capable to deliver 'data'. Hence, it appears that the Stylus Pen is classifiable under CTSH 8471 60 -Input or output units, whether or not containing storage units in the same housing. It is settled law that all new products, new variations and new components introduced by technological advancements must necessarily be taken into account while understanding and interpreting the import tariffs and exemption notifications. In Collector of Customs & Central Ex. vs. Lekhraj Jessumal & Sons, [1996 (2) TMI 135 - SUPREME COURT], where the Apex Court has held that it is unreasonable to give a static interpretation to words used in a tariff schedule ignoring the rapid march of technology. As per the Hon'ble Supreme Court, due consideration should be given to technological development while interpreting tariff entries under Customs Tariff. Further, it is also noted American Customs Ruling in the case of Microsoft Corp., case no. N288967, ruling dated 25.08.2017, where the Surface Pen which is a battery operated bluetooth Stylus Pen was classified under 84716090 by considering it is not binding but having persuasive value. Thus, Stylus Pen is rightly classifiable under Sub-heading 84716090 of the first schedule to the Customs Tariff Act, 1975. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether the imported stylus pen merits classification as an 'X-Y co-ordinate input device' and therefore as a unit of an automatic data processing system under tariff heading 8471, specifically sub-heading 84716090. (ii) Whether the stylus pen satisfies the conditions prescribed in the relevant Chapter Note for classification of separate units of heading 8471, and is not taken out of that heading by the applicable exclusions. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i): Classification of the stylus pen under heading 8471 as an X-Y co-ordinate input device (sub-heading 84716090) Legal framework: The Court applied the General Rules for Interpretation referred to in the decision (GRI 1: classification by terms of headings and relevant Section/Chapter Notes) and relied on Chapter Note 6(C) to Chapter 84 as the operative test for separately presented units of an automatic data processing system, including the specific rule that 'X-Y co-ordinate input devices' satisfying conditions (ii) and (iii) are in all cases to be classified as units of heading 8471. Interpretation and reasoning: On the facts recorded, the stylus pen is an electronic accessory used to provide precise input on compatible touchscreen devices and operates on Electro Magnetic Resonance (EMR) technology to locate touch with reference to X-Y co-ordinates and transmit signals/data to the host device. The Court treated this functional role-locating touch position and sending signals/data-as placing the product in the category of X-Y coordinate input devices. The Court further reasoned that, for such X-Y coordinate input units, Chapter Note 6(C) requires satisfaction of conditions (ii) and (iii). It found these satisfied because the stylus pen is connectable to the CPU through the digitizer/screen and is capable of delivering data (codes/signals) usable by the system. Conclusion: The stylus pen was held to be classifiable under heading 8471 as an input unit, and specifically under sub-heading 84716090. Issue (ii): Satisfaction of Chapter Note conditions for separate units of heading 8471 and applicability of exclusions Legal framework: The Court examined Chapter Note 6(C) to Chapter 84 as the governing standard for treating a device as part of an automatic data processing system, and applied its special rule for X-Y co-ordinate input devices. The Court also considered tariff interpretation principles recognising technological advancement when construing tariff entries, as expressly relied upon in the reasoning. Interpretation and reasoning: The Court determined that the stylus pen is designed to be used 'solely and principally' with an automatic data processing machine and therefore aligns with Note 6(C) requirements. It further reinforced its conclusion by referring to a prior ruling classifying a similar stylus device under the same sub-heading, and by adopting the approach that tariff interpretation must account for technological developments rather than applying a static meaning to entries. Conclusion: The Court concluded that the stylus pen satisfies the applicable Chapter Note requirements for classification as a unit of heading 8471 and should be classified under CTH 8471 60 90.