TaxTMI 
TaxTMI 
2022 (9) TMI 1600
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.... 28(4) of the Customs Act, 1962 the Customs Act for the three Bills of Entry, each dated 22.12.2017, with interest has been directed to be recovered from the appellant. 2. The issue that arises for consideration in this appeal relates to classification of the Product imported by the appellant through the three Bills of Entry. The appellant described the Product in the Bills of Entry as MP071025 CISCO BOQ-19 4*10G PRE-AGG 1B Router Line Card (Part of Router) (Non-WPC) (For Cellular Telephony Network) and claimed classification under CTI 8517 70 90. The appellant also claimed exemption from payment of duty under serial no. 5 of the notification no. 57/17-Cus dated 30.06.2017 the notification. 3. A show cause notice dated 04.10.2018 was, however, issued to the appellant inter alia proposing to re-classify the Product under CTI 8517 69 90 and consequently, differential customs duty of Rs.60, 11, 615/- was proposed to be demanded under section 28(1) of the Customs Act. The show cause notice mentions that the imported 'Product' is a communication apparatus in itself and, therefore, would not be classifiable as parts of Router under CTI 8517 70 90. 4. The Principal Commissioner h....
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.... b. Indcheom Electronics vs. Commissioner of C.Ex., Chennai 1997 (95) E.L.T. 580 (Tri.-Mad); c. Vintron Electronics vs. Commissioner of C.Ex., Delhi 2012 (279) E.L.T. 161 (SC); and (vii) Analogy drawn in the show cause notice and the impugned order between the aforementioned Router Line cards and Network Interface Cards NIC is incorrect and is not supported by the technology driving them. 6. Shri Ajay Jain, learned special counsel appearing for the Department, however, submitted that the contention of the appellant that the line cards should be classified as parts of HSN Sub-Heading 8517.70 is not correct for the reason that they have independent function, more in the nature of an accessory than as a part. Learned special counsel made the following submissions; (i) The line cards are specifically meant to provide network connectivity to the Router and they act as interface between network and Router. These allow the Router to connect to the network and receive the data packets which are again forwarded to the destination network by the Router using the line cards again for connecting to the network. The contention of the appellant that the cards sho....
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....s classification under CTI 8517 70 90 or in the alternative under CTI 8517 70 10, while the Department claims classification of the Product under 8517 69 90. 9. The relevant tariff entries are reproduced below : Tariff Item Description of goods Unit Rate of Duty (1) (2) (3) (4) (5) 8517 8517 11 8517 11 10 8517 11 90 8517 12 8517 12 10 8517 12 90 8517 18 8517 18 10 8517 18 90 8517 61 00 8517 62 8517 62 10 8517 62 20 8517 62 30 8517 62 40 8517 62 50 8517 62 60 8517 62 70 8517 62 90 8517 69 8517 69 10 8517 69 20 8517 69 30 8517 69 40 8517 69 50 8517 69 60 8517 69 70 8517 69 90 8517 70 8517 70 10 8517 70 90 Telephone sets, including telephones for cellular networks or for other wireless networks; other apparatus for the transmission or reception of voice, images or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network), other than transmission or reception apparatus of heading 8443, 8525,8527 or 8528 - T....
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....r instance, through optical fibre cables). A Router has the following components: (i) Routing processor: The Routing Processor is where the CPU of the Routing function resides. The routing processor runs a software where functions such as IP Lookups are invoked. This leads to the creation of a routing table which is based on the routing-protocols implemented in the software. The routing processor is in the nature of a PCB. It is plugged into a slot in the router's chassis from where it sources power and intelligence; (ii) Line cards/ Input & Output ports: These Line Cards are also in the nature of a PCB. It houses the socket or port into which the transceivers are plugged. It is itself plugged into a slot in the router's chassis from where it sources power and intelligence; (iii) Switch processor board: The switch processor board is a fixed component of the complete router chassis. Its function is to interface multiple line cards including the routing processor within the router. It is plugged into a slot in the router's chassis from where it sources power and intelligence; and (iv) Transceivers: A transceiver is an integral and critical part of ....
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....MAN) and Wide Area Networks (WAN), whether proprietary or open architecture. This group includes: (1) Network interface cards (e.g., Ethernet interface cards). (2) Modern (combined modulators-demodulators). (3) Routers, bridges hubs, repeaters and channel to channel adaptors. (4) Multiplexers and related line equipment (e.g., transmitters, receivers or electro-optical converters). (5) Codecs (data cimpressors/decompressors) which have the capability of transmission and reception of digital information. (6) Pulse to tone converters which convert pulse dialed signals to tone signals." 18. What has to be determined in this appeal is as to whether line cards of Router are parts/components of a Router or apparatus of Heading 85.17. According to the appellant Router Line Cards are parts/components of a Router and are not apparatus of Heading 85.17. 19. It would also be useful to refer to Note 2 of Section XVI of the Tariff Act which provides for rules to be followed while classifying 'parts of machines' falling under Chapters 84 and 85. It provides that parts which are goods included in any of the Heading of Chapters 84....
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....e classifiable under its own appropriate heading. It would, therefore, have to be seen whether a Router Line Card can be considered to constitute an article covered by Heading 85.17. To appreciate this, reference can be made to HSN Explanatory Notes to Heading 84.79 which deals with machines having individual functions. The inference that can be drawn from the above is that HSN itself considers an article which has an individual function as an 'independent machine' and not as a 'part'. This is clear from the examples provided therein. In the case of a carburetor for an internal combustion engine, it is explained that the function performed by carburetor is distinct from that of the engine. However, the said function is not an individual function as the operation of the carburetor is inseparable from that of the engine. Hence, the carburetor is considered as a part of the engine as opposed to an independent machine. 22. It, therefore, transpires that the true test for determining whether an item is classifiable as parts/components is as follows: (i) Whether the item has a separate identifiable/individual function of its own, when compared to the main machine; and ....
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.... dedicated and proprietary slots into which alone the said cards/modules must be inserted. Thus, there is no individual and separable function performed by line cards. 25. In this connection reference can be made to the decision of the Tribunal in Commissioner of Cus., Bangalore vs. Modicom Network Pvt. Ltd. 2005 (185) E.L.T. 333 (Tri. - Bang.). The Tribunal examined whether modules can be considered as an apparatus or parts. It was held that the modules on their own do not have an independent function and each module remains as part of the Main Switching Centre. The relevant portion of the decision is reproduced below: "2. This issue relates to the classification of modules (Main Switching Centre Hardware Upgrades) imported by the respondents. The original authority classified the goods under 8517.90 as 'Parts'. However, Revenue held the view that the goods should be classified under 8517.80 as 'Other apparatus'. The Commissioner (Appeals) rejected Revenue's appeal with the following observations. "To be classified as apparatus, the goods must have a separate identifiable function on its own. These being components going into switching centers, cannot be treat....
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....h module with display elements, with controls and access to front connectors. The PCBs of the modules are of multi layer design and the components with which they are equipped are mainly surface mounted devices. The Main Switching Center is a machine with the provision for expansion. The modules are inserted as essential parts to attain a particular capacity. The modules on their own do not have any independent function and they cannot be dis-assembled further. Even though the numbers of modules are variable depending on capacity, each module remains as a part of the main machine, i.e. Main Switching Center. In view of the above, the Original Authority's finding that the modules cannot be considered as apparatus is correct. Hence there is no infirmity in the Order-in-Appeal confirming the Original order. Therefore the appeal of the Revenue is devoid of any merit. Hence we reject Revenue's appeals." 26. There is, therefore, no difficulty in holding that Router Line Cards are classifiable under CTI 8517 70 90 in view of Note 2 (b) of Section XVI of the Tariff Act. 27. Learned counsel for appellant, in the alternative, submitted that even otherwise imported Router Line Cards are....
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.... also called printed circuit board assembly. 31. HSN Explanatory Notes to Heading 85.34 cover 'Printed Circuits' as follows: "Circuits on which mechanical elements or electrical components have been mounted or connected are not regarded as printed circuits within the meaning of this heading. They generally fall to be classified in accordance with Note 2 to Section XVI or Note 2 to Chapter 90, as the case may be." 32. Explanation (b), below Notification No. 57/17-Cus dated 30.06.2017 as amended on 02.02.2018, is as follows: (b) "Printed Circuit Board Assembly (PCBA)" means printed circuit board assembled with electronic components such as resistors, capacitors, diodes, inductors, ICs and mechanical components such as contact springs or connectors of charger or adapter of cellular mobile phones.'. (emphasis supplied) 33. Populated PCBs have connectors embedded, making them ready for use. Thus, a fully functional and ready to use Populated PCB with connectors is also a Populated PCB. 34. Router Line Cards are Populated PCBs as they are printed circuit boards mounted with various active and passive electronic elements. Therefore, these cards can b....
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.... acquisition modules, allowing them to communicate with each other. A network interface module is used to connect to a network for distributed control applications. It interconnects measuring instruments to a PC by sending and receiving messages from the two units. Thus, each I.O. Module is tailored to a specific function and is therefore a part of regulating and controlling apparatus. Handling of information under the HSN Notes is separate and distinct from regulating and measuring temperature, pressure etc." (emphasis supplied) 36. Learned special counsel for the Department, however, submitted that Router Line Cards are Network Interface Cards (NIC). 37. Newton's Telecom Dictionary defines 'Network Interface Cards' as: Network interface card: Also called a NIC card. A printed circuit board comprising electronic circuitry for the purpose of connecting a workstation to LAN. NIC usually is in the form of a card that fits into one of the expansion slots inside a PC. Alternatively, it can fit into a slot of a MAU (multi-station access unit), which serves multiple and attached devices such as workstations and printers. In the context of IEEE standards, NICs oper....