TaxTMI 
TaxTMI 
2022 (9) TMI 1600
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....s 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 held that the imported Product is classifiable un....
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....on 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 should be classified as parts in HSN Heading 8517.70 is, therefore, not correct; (ii) Reliance on Explanatory Notes of a specific ....
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....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 - Telephone sets, including telephones for cellular networks or for other wireless networks: -- Line telephone sets with cordless handsets: --- Push button type --- Other -- Telephones for cellular networks or for other wireless netwo....
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....ssor 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 a router, enabling it to interface with the optical fibre connectivity. Since the routing processor performs processing in the electrical domain (and not the optical domain), the router would not be able to function without a transceiver to connect to the optical fibre network. 13. It has further been stated that these components are integral and inseparable parts of a Router and together form the complete Router. These ....
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.... (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 or 85, other than certain specified Chapter Heading, are in all cases to be classified in their respective headings. Section Note 2 (b) is to be applied only in cases where such parts cannot be classified as per Section Note 2 (a). Rule 2 is reproduced below: "2. Subject to Note 1 to this Section, Note 1 to Chapter 84 and Note 1 to Chapter 85, parts of machines (not being parts of the articles of heading 8484, 8544, 8545, 8546 or 8547) are to be classified according to the following rules: (a) parts which are goods included in any of the headings of Chapt....
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....erformed 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 (ii) Whether the item is capable of operating independently of the main-machine on its own. 23. If the answer to both the aforesaid questions is in the negative, the item would be classifiable as parts and in that case the item will not be classifiable as an apparatus falling under its own appropriate heading. 24. A perusal of the catalogue of Router Line Cards shows that these cards/modules are only parts of the existing Routers which have already been imported or installed by the appellants. The Router chassis has dedicated slots marked for these line cards, switch cards and router processor cards. The line cards are simply inserted in these....
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....e 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 treated as other apparatus. The Deputy Commissioner Customs has in his order pointed out that the main switching center is a complete machine with a provision for expansion of the switching capacity. The impugned imported goods called modules are basically inserted as essential parts into the main switching center to enhance the capacity for which a provision is always made. These modules therefore do not have any independent function, and cannot be treated as an 'Apparatus'. I find merit in the argument of the Deputy Commissioner of Customs. I therefore find that given the facts of the case, the impugned goods called modules are more appropriately classified as 'Parts' u....
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....dered 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 in the nature of a PCB and, therefore, classifiable under CTI 8517 70 10 and not CTI 8517 69 90. 28. The term 'printed circuit' is defined in Webster's New World Telecom Dictionary as: Printed Circuit: An electrical circuit, generally of copper foil, printed on a substrate dielectric material. A sheet of copper foil is adhered to the substrate and the unwanted portions of the foil are then removed by a process of silk screen printing, photoengraving, or mechanical milling. The remaining traces of copper foil form the circuit that connects components such as silicon chips mounted on the board. See also printed circuit board. 29. The same dictionary defines the term 'printed circuit board' as : ....
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....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 be classified under CTI 8517 70 10, which covers 'populated, loaded or stuffed printed circuit boards'. It would attract NIL rate of duty. 35. It would be useful, in this connection, to refer to the observations of the Supreme Court in N.I. Systems and they are as follows: "43. On the question of Input-Output (I.O.) Modules and Chassis, the Tribunal has not given any finding whatsoever thereon. However, on-going through the technical material and the demonstration given to us in Court, we are of the view that I.O. Modules and Chassis have also been rightly classified by the Department as parts and accessories of regulating and controlling apparatus classifiable under Chapter 90. In this connection, one needs to examine the nature and function of I.O. Modules and Ch....
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.... 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 operate at the MAC (medium access control) layer. In the context of the OSI reference model, NICs is operated at Layer 1 (Physical Layer) and 2 (Data Link Layer). The basic job of the NIC is to take data from the transmitting workstation, form it into the specific packet format demanded by the LAN protocol you are running (e.g. Ethernet or Token ring), and present it to the shared medium (usually a cable). On the receiving end, the process is reversed, of course. Hard coded into the NIC at the time of manufacture is a MAC address, unique in all the world to that NIC card; the MAC address effectively identifies the LAN attached device with which it is associated. A NIC works with the network software and computer operating system to transmit and receive messages on the network. 38. Thomas' Concise....