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of <h1>Imported electrical distribution racks ruled classifiable under Heading 8537 10 90; concessional BCD under Notification No.45/2025 granted</h1> Dominant issue - Tariff classification: Applying GRI and Note 3 to Section XVI, the AAR analysed whether the imported racks are composite/multi-functional ... Classification of goods - Import of Racks - Applicability of notification concessional rate - General Rules for Interpretation (GIR) - principal function / essential character - composite or multi-functional goods Note 3 to Section XVI - Customs Authority for Advance Rulings (CAAR) - advance ruling under Section 28H of the Customs Act, 1962 - definition of applicant under Section 28E(c) - charging section Section 12 of the Customs Act, 1962 - rates specified in First Schedule Section 2 of the Customs Tariff - concessional Basic Customs Duty under Notification No. 45/2025-Cus (S. No. 281) - Whether the Racks (such as Rack V2.2) merit classification under CTH 8537 10 90 or under Heading 8504 or 8543 or 8517. - HELD THAT:- Since Racks consists of UPS system which is a static converter it becomes relevant to analyse this heading. UPS system inside the Racks performs conversion of electrical energy from AC to DC and then back to AC. Because of conversional capabilities and function of providing power backup, UPS typically qualifies as a static converter under 8504. However, by virtue of Note 3 to Section XVI and HSN Explanatory Notes VII, Racks is a multi- functional or composite machine, and it merits classification basis its principal function i.e., distribution of electricity. As, Racks consist of different parts which simultaneously perform separate functions. These functions are complementary to each other to achieve the principal function of distribution of electricity. In the instant matter, UPS system is one of the many components of the Racks which performs the ancillary function as a static converter to provide power back up to the networking equipment. Its ancillary nature is also established from the fact that the UPS only provides backup to the networking equipment and no double conversion or power backup facility is provided by the Racks for antenna. Whereas all the components and parts come together to contribute to the principal function of power distribution which gives the Racks its essential character. On perusal of Explanatory Notes to Heading 8537, the heading covers assembly of apparatus of Heading 8535 and Heading 8536 such as switches, fuses, etc. mounted on the board, panel, etc. The product may also incorporate articles of other Headings such as transformers, voltage regulators etc. The Heading covers small switchboards for lighting installations to complex control panels for radio stations, etc. Having examined all the headings, find that Heading 8537 provides a more specific description of the subject goods. The principle of Rule 3(a) of GRI dictates that where goods are prima facie classifiable under two headings, the heading giving the most specific description shall prevail over a more general one. Heading 8537, which explicitly mentions 'Boards, Panels, Consoles, Desks, Cabinets and Other Bases, Equipped with Two Or More Apparatus of Heading 8535 Or 8536, For Electric Control,' is clearly more specific than Headings 8504, 8517 or 8543. Additionally, Thus the essential character of the Racks is to distribute electricity to the Antenna and networking equipment which may be installed in the Racks upon importation into India or at the gateway site. It is therefore more appropriately classified as an independent electrical control apparatus. Thus, the Commissionerate has also agreed upon the Racks merit classification under heading 8537. Notification exemption: Whether benefit of concessional rate of BCD @ 7.5% under S.No. 490 of the Notification No. 50/2017 is available to the Racks imported by them. The notification No. 45/2025-Cus, dated 24.10.2025, exemption is available to all goods falling under heading 8537 other than those suitable for use in motor vehicles, motor cars or motor cycles. As per the submission by the applicant Racks are not intended for use in motor vehicles. Thus, benefit is available to applicant for import of Racks. Accordingly, hold that 'Racks (such as Rack V.2) are classifiable under heading 8537, subheading 8537 10, more specifically under tariff item 8537 10 90 ('Other') of the First Schedule to the Customs Tariff Act, 19757. Also, the benefit of Serial No. 281 of Notification No. 45/2025-Cus, dated 24.10.2025 is available to Racks. Issues: (i) Whether the imported Racks (such as Rack V2.2) are classifiable under Tariff Item 8537 10 90 of the First Schedule to the Customs Tariff Act, 1975; (ii) Whether the concessional Basic Customs Duty @ 7.5% under the relevant serial entry of Notification No. 45/2025-Cus (formerly Notification No. 50/2017-Cus) is available on import of such Racks.Issue (i): Whether the imported Racks merit classification under Tariff Item 8537 10 90.Analysis: Application of the General Rules of Interpretation with reference to Chapter 85 and relevant HSN Explanatory Notes; identification of principal function of the imported unit as distribution and control of electricity; consideration of competing headings 8504, 8517 and 8543 and the role of constituent components (UPS, PDU, circuit breakers, connectors) when the article is imported as a complete unit; applicability of Note 3 to Section XVI and GRI 3(a) in preferring the most specific heading.Conclusion: The Racks are classifiable under Heading 8537, subheading 8537 10, tariff item 8537 10 90.Issue (ii): Whether concessional BCD @ 7.5% under the relevant serial entry of Notification No. 45/2025-Cus is available on the Racks.Analysis: Examination of the notification entry covering Heading 8537 and its exclusions (goods suitable for use in specified motor vehicle headings); factual finding that the Racks are for fixed gateway installations and not suitable for use in motor vehicles; consideration of supersession of the earlier notification by Notification No. 45/2025-Cus which provides the concessional rate for goods under Heading 8537.Conclusion: The concessional Basic Customs Duty @ 7.5% under Serial No. 281 of Notification No. 45/2025-Cus is available on the Racks.Final Conclusion: The goods are to be treated, for customs tariff and duty purposes, as boards/panels/cabinets for electric control or distribution of electricity classified under Tariff Item 8537 10 90 and eligible for the specified concessional BCD rate.Ratio Decidendi: Where a composite electrical assembly imported as a complete unit has as its principal function the control or distribution of electricity, it shall be classified under Heading 8537 (and the specific subheading) in accordance with the General Rules of Interpretation and Note 3 to Section XVI, and such specific classification governs eligibility for any concessional duty entries tied to that heading.
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