TaxTMI 
TaxTMI 
2025 (1) TMI 267
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....classification adopted by the Applicant under the Customs Tariff Heading 8517 62 90 of the First Schedule of the Customs Tariff Act, 1975 in relation to import of the product. 'Telematics Control Unit (TCU)' is correct, and (b) the Applicant is eligible to avail concessional rate of Basic Customs Duty under Sl. No. 666 of the Notification No. 69/2011-Customs, dated 29-7-2011. STATEMENT OF RELEVANT FACTS HAVING A BEARING ON THE QUESTION(S) ON WHICH ADVANCE RULING IS REQUIRED 1. The application is being preferred by M/s. Denso Haryana Private Limited ('Applicant') a company incorporated in India under the provisions of the Companies Act, 1956 and having its registered head office located at New Delhi. 2. Copy of Certificate of Incorporation, Articles of Association and Memorandum of Association (as submitted with the Registrar of Companies in India) is enclosed herewith as Appendix 1 (Colly). 3. The Applicant is presently engaged in the business of manufacturing and trading of parts of automobiles. For its trading business, the Applicant inter alia imports automotive parts in finished form for further supply of these automotive parts to the manufacturers of....
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....air updates 7. To perform the above operations, the subject good has the capability to interact with the inside of the system of motor vehicle i.e., to receive signal/information from the various sensors and pass on the information to the server and eventually to the end user through the cellular network. Further, the subject good can also rethote commands from in-phone application or web- portal and view vehicle maintenance and status from such in-phone application or web portal. Picture of the subject good in as imported condition is extracted hereunder for ease of reference : 8. Copy of the data sheet of the subject good indicating working of the of the subject good in different situations is annexed with this application as Appendix 2. 9. Subject good may consist of various components, such as a microprocessor, a memory, a SIM card, network access device, an antenna, a connector interface, etc., depending on the design and specifications. A TCU may be installed as a standalone device, integrated into another vehicle system, or connected to a Smartphone or tablet or other interfaces. 10. The subject good comes embedded with the Network Access Device (NAD) and E-sim w....
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....ication of goods under the Customs Tariff Act, 1975 (51 of 1975); (b) applicability of a notification issued under sub-section (1) of section 25, having a bearing on the rate of duty; (c) the principles to be adopted for the purposes of determination of value of the goods under the provisions of this Act; (d) applicability of notifications issued in respect of tax or duties under this Act or the Customs Tariff Act, 1975 (51 of 1975) or any tax or duty chargeable under any other law for the time being in force in the same manner as duty of customs leviable under this Act or the Customs Tariff Act; (e) determination of origin of the goods in terms of the rules notified under the Customs Tariff Act, 1975 (51 of 1975) and matters relating thereto; (f) any other matter as the Central Government may, by notification, specify." [Emphasis supplied] 16. The Applicant wishes to obtain the advance ruling on questions relating to classification of subject good and applicability of exemption notification on import of subject good under section 25(1) of Customs Act as detailed out in Annexure II. Therefo....
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....tem under which the good would fall under the First Schedule of the Tariff Act. 21. Classification of goods covered under the Customs Tariff is done as per the General Rules of Interpretation ('GRI'), GRI 1 to 5 lay down the principles determining classification of goods under a specific Heading whereas GRI 6 is applicable if the objective is to determine the classification of goods in the Sub-headings of a Heading. 22. GRI 1 stipulates that the goods under consideration should be Classified in accordance with the terms of the Headings and any relevant Section or Chapter Notes. These Section or Chapter Notes and Sub-Notes give detailed explanation as to the scope and ambit of the respective Sections and Chapters. These Notes have been given statutory backing and have been incorporated at the beginning of each Section/Chapter. For ready reference, Rule 1 is extracted herein below: "Classification of goods in this Schedule shall be governed by the following principles : I. The titles of Sections, Chapters and Sab-Chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings....
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....n the proposition into also affirmed, upheld and followed have been enumerated below : (i) CC v. Gujarat Perstorp Electronics Ltd., (2005) 7 SCC 118 (3-member S.C. bench); (ii) CCE v. Phil. Corporation Ltd., 2008 (223) E.L.T. 9 (S.C) 27. Therefore, the HSN Explanatory Notes are an important aid for ascertaining the classification of a good, in addition to the GRI and corresponding Chapter Notes and Section Notes. In the light of above facts, to analyze the classification of above product following needs to be kept in mind : (a) General Rules of Interpretation (GRI); (b) Heading/sub-heading of the First Schedule in conjunction with Section/Chapter/Explanatory notes; c. Principal function of the subject good. 28. To ascertain the classification and by application of GRI 1, the following Customs Tariff Heading ('CTH') require attention i.e., CTH 8517 and CTH 8708 : CTH Description of Goods 8517 Telephone sets, including Smartphone and other telephones for cellular networks or for other wireless networks : other apparatus for the transmission or reception of voice, images or other data, including ....
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....dio-telephony, radio-telegraphy, local and wide area networks." 33. In view of the above extracted portion of the HSN explanatory notes, it appears that CTH 8517 covers such apparatus which is used in transmission and reception of data and wherein the data is transmitted by way of electromagnetic waves in a wireless network. As discussed in Annexure 1 of this application, where the subject good provides for transmission and reception of data in the RF form in the wireless network, by application of the GRI Rule 1 and considering the HSN explanatory notes, the subject good appears to merit classification under CTH 8517 at four-digit level. 34. It is pertinent here to note that the capability of subject good to perform transmission and reception function in wireless mode is there at the time of import. This is evident from the fact that at the time of import, the subject good comes embedded with the NAD and E-sim which provide the subject good with the capability to transmit and receive the data in the wireless network. This is established from the fact that the subject good in as imported condition has the IMEI number (for the NAD) and ICCID Number (for the E-sim) mentioned on....
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....r any specific tariff entry at the eight-digit level, it merits classification in the residual category of 'Others' at eight-digit level i.e., CTH 8517 62 90. 40. In addition to above, it is also imperative to refer Note 2(a) of Section XVI which provides for classification of parts of machines. It states that parts which are goods of any heading of Chapter 84 or 85 are in all cases to be classified in the respective headings. Relevant extract of Section Note has been reproduced below for ease of reference - "(a) parts which are goods included in any of the headings of Chapter 84 or 85 (other than headings 8409, 8431, 8448, 8466, 8473, 8487, 8503, 8522, 8529, 8538 and 8548) are in all cases to be classified in their respective headings;" [Emphasis Supplied] 41. Therefore, upon bare reading of the above stated Section Note, it can be construed that TCU which is an identifiable machine/good as a whole and is going to be used in the motor vehicle merits classification under the Chapter 85 only. Analysis of Chapter 87 42. At this juncture, the Applicant also considers it relevant to discuss heading of Chapter 87 under section XVII of the Customs Tariff which cov....
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.... of ships, boats or floating structures. Such parts and accessories, even if identifiable as being for ships etc., are therefore classified in other Chapters in their respective headings. The other Chapters of this Section each provide for the classification of parts and accessories of vehicles, aircraft or equipment concerned. It should, however be noted that these headings apply only to those parts or accessories which comply with all three of the following conditions : They must not be excluded by the terms of Note 2 to this Section (see Paragraph (A) below), They must be suitable for use solely at principally with the articles of Chapters 86 to 88 (see paragraph (B) below, and they must not be more specifically included elsewhere in the Nomenclature (see paragraph (C) below : (A) Parts and accessories excluded by Note 2 to Section XVII This Note excludes the following parts and accessories, whether or not they are identifiable for as for the articles of this Section. (7) Electrical machinery or equipment of Chapter 85, for example : [Emphasis supplied] 47. From the above, it is apparent that all the electrical ma....
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....me Court that an article classifiable under specific item cannot be classified under residuary Item. 51. Further, reliance is placed on the decision of Hon'ble Tribunal, Mumbai bench in the case of Sirthai Superware India Ltd. v. Commr. of Customs, Nhava Sheva-III, 2020 (371) E.L.T. 324 (Tri. - Mumbai), where the Tribunal observed that it is general principle of classification that specific entry should be preferred over the general entry. 52. Therefore, it is submitted that whew the good satisfy the requirements of a specific entry, that entry should cover the goods rather than the residual heading. In view of GRI 3(a) and the judicial precedents cited above, where there is a specific heading for the subject good under Chapter 85 (i.e., CTH 8517), it will not merit classification in the residuary heading as parts of motor vehicles under CTH 8708. Legal developments after the decision of Hon'ble Supreme Court in the matter of M/s. Westinghouse Saxby Farmer Ltd. and its application in the present case 53. In the decision of Westinghouse Saxby Farmer Ltd. v. Commissioner of Central Excise, Calcutta - 2021 (3) TMI 291, while deciding upon classification of relays used for ....
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....s under : (a) In the Westinghouse judgment (supra), the end use test to determine the classification has been preferred over the exclusion provided under Note 2(f) to Section XVII. (b) The judgment of the Supreme Court in the matter of Commissioner of Central Excise, Aurangabad v. M/s. Videocon Industries Limited [2023-TIOL-25-SCC-US)] has emphasized on the exclusion note over the sole/principal use test. 57. Further, post the judgment of the Hon'ble Supreme Court in the case of Westinghouse Saxby (supra), the CBIC on 5th January 2022 issued instruction No. 01/2022-Customs with subject "Implication of the judgment of the Hon'ble Supreme Court in the case of M/s. Westinghouse Saxby Farmer Ltd. v. Commissioner of Central Excise, Calcutta - Reg". (Annexed as Appendix 5). This was to align with the divergent practice being followed on assessment of 'parts' after the Westinghouse Saxby judgment (supra) was issued. In the said instructions while making a reference to the judgment of the Hon'ble Supreme Court in the case of M/s. Intel Design Systems (India) P. Ltd. v. Commissioner of Customs & Central Excise, among others the CBIC has instructed as f....
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.... for goods to be classified under the chapters of Section XVII, fulfilment of the three-layer test postulated "Under the Sub-heading (iii) Parts and Accessories" of the explanatory notes to Section XVII as issued by the WCO is imperative. It is only when all these three conditions are met that a particular item would be classified under the Chapters of Section XVII. 59. In other words, the shape/design/specification of a product is not a determinant of principal or sole use. Further, Note 3 of Section XVII cannot be applied blanketly and needs to be construed narrowly otherwise the exclusion under Note 2 would become superfluous. To this extent, the Videocon judgment is particularly important, and it is also aligned with the WCO classification principles as propounded in the CBIC Circular (supra). 60. It may be added here that the CBIC had issued a further clarification on the issued vide Instruction 25/2022-Cus., dated 3-10-2022 (annexed as Appendix 6), clarifying that the law continues to remain the same and hence the aforesaid instruction would remain valid without any changes. 61. In this context, additional reliance is also placed on the judgment of Hon'ble Delhi Trib....
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....apan and the provisions laid down in Customs Tariff (Determination of Origin of Goods under the Comprehensive Economic Partnership Agreement between the Republic of India and Japan) Rules, 2011 are complied with. The relevant extract of the entry is reproduced hereinbelow and copy of notification is enclosed as Appendix 7 : S. No. Chapter, Heading, Sub-heading and Tariff item Description Rate in % (unless otherwise specified) 666 8517 All Goods 0 66. It is the understanding of the Applicant that the benefit provided under the notification is subject to the condition that the goods being imported from Japan should be originating in Japan and the provisions laid down in Customs Tariff (Determination of Origin of Goods under the Comprehensive Economic Partnership Agreement between the Republic of India and Japan) Rules, 2011 are complied with. So long as the imported goods are rightly classifiable under CTH 8517 62 90 and are originating in Japan, the Applicant is eligible to avail concessional duty benefit @ 0% BCD. To this extent, it is humbly requested before the Hon'ble Authority that the above understanding of the Applicant may be accepted. PRAYER ....
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.... is adjourned, the applicant or the Principal Commissioner or Commissioner does not appear in person or through an authorised representative when the application is called for hearing, the Authority may dispose of the application ex parte on merits : Provided that where an application has been disposed of under this regulation] and the applicant or the Principal Commissioner or Commissioner, as the case may be, applies within seven days of receipt of a copy of the order or advance ruling and the Authority is satisfied that there was sufficient cause for his non-appearance when the application was called for hearing, the Authority may, after allowing the opposite party a reasonable opportunity of being heard, make an order setting aside the ex parte order or advance ruling and restore the application for fresh hearing." 4. As no comments of the Port Commissionerate has been received, let's look at the original submissions made by the applicant. 4.1 Classification of goods covered under the Customs Tariff is done as per the General Rules of Interpretation ('GRI'). GRI 1 to 5 lay down the principles determining classification of goods under a specific Heading whereas GRI 6 is....
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.... - Machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus: 8517 62 90 - Other As per Rule 1 of the GRI, subject good should be classified in accordance with the terms of the headings and any relevant and Section or Chapter Notes. 4.1.3 CTH 8517 covers apparatus used for transmission or reception of voice, images or other data, including apparatus used for communication in a wired or wireless network. The machines whose principal function is to transmit and/or receive data or communicate in wireless network are classified under this heading. Upon reading of the HSN Explanatory Notes to the CTH 8517, it is understood as below - "This heading covers apparatus for the transmission or reception of speech or other sounds, images or other data between two points by variation of an electric current or optical wave flowing in a wired network or by electro-magnetic waves in a wireless network. The signal may be analogue or digital. The networks, which may be interconnected, include telephony, telegraphy, radio-telephony, radio-telegraphy, local and wide area networks." ....
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....o fall under CTH 8517 62. 4.1.7 As discussed in Annexure 1, signals received by the subject good from other parts of the motor vehicle are first converted into RF signals for transmission in wireless mode, and then the RF signals are transmitted to the server and subsequently to the end user by way of connection established through the usage of NAD and E-sim. 4.1.8 In a similar manner, in case the user intends to provide any of the specified command to its vehicle through the smart phone/web portal, the command initiated by the user is first sent to the server. The server passes the command through telecom network to the subject good. Upon its receipt, such command is converted into form of RF signals and the same is passed on to the concerned part/component of the motor vehicle for execution. In view of the functionality of the subject good discussed above, it is evident that the subject good performs transmission, conversion, and reception of signals in a wireless network and hence, merit classification under CTH 8517 62 at the six-digit level. Since the subject good is not specifically covered under any specific tariff entry at the eight-digit level, it merits classificati....
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....hich answers to a description in two or more of the headings of those Chapters is to be classified under that heading which corresponds to the principal use of that part or accessory. In the instant case, the product is principally used for the purposes of transmission, conversion, and reception of data from any part of the motor vehicle to the end user or vice versa. 4.1.13 Further, the HSN explanatory notes under section XVII explain the scope of the terms "parts and accessories" for the purpose of Section XVII. Relevant portion is extracted hereunder- (III) PARTS AND ACCESSORIES It should be noted that Chapter 89 makes no provision for parts (other than hulls) or accessories of ships, boats or floating structures. Such parts and accessories, even if identifiable as being for ships etc., are therefore classified in other Chapters in their respective headings. The other Chapters of this Section each provide for the classification of parts and accessories of vehicles, aircraft or equipment concerned. It should, however be noted that these headings apply only to those parts or accessories which comply with all three of the following conditions : ....
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....ng which occurs last in numerical order among those which equally merit consideration." [Emphasis Supplied] 4.1.15 The following cases are cited to support the claim : (i) Reliance in this regard is placed on the case of Mauri Yeast India Pvt. Ltd. v. State of UP, 2008 (225) E.L.T. 321 (S.C.) wherein it was held by the Hon'ble Supreme Court that if there is a conflict between two entries one leading to an opinion that it comes within purview of tariff entry and another the residuary entry, the former should be preferred. (ii) Further, reliance is placed on the decision of Hon'ble Tribunal, Mumbai bench in the case of Sirthai Superware India Ltd. v. Commr. of Customs, Nhava Sheva-III, 2020 (371) E.L.T. 324 (Tri. - Mumbai), where the Tribunal observed that it is general principle of classification that specific entry should be preferred over the general entry. Therefore, it is submitted that where the goods satisfy the requirements of a specific entry, that entry should cover the goods rather than the residual heading. In view of GRI 3(a) and the judicial precedents cited above, where there is a specific heading for the subject good ....
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....ers the CBIC has instructed as follows - "3. In the context of the divergent practices arisen, it is noted that the classification of 'parts' of goods falling under Section XVII of the Customs or Central Excise Tariff is a complex issue. Further, apparently, the section notes have been suitably applied in relevant judgments of the Hon'ble Supreme Court on issues of classification of parts and accessories. Thus, the collective wisdom of these judgments indicates the manner in which such classification issues are to be approached. Few of such judgments are illustrated in succeeding paragraphs : 3.1 M/s. Intel Design Systems (India) P. Ltd. v. Commissioner of Customs & C. Ex-2008 A. Apart from the reliance on the section notes and the chapter notes the court in this judgment also considered the HSN explanatory notes wherein three conditions that need to be fulfilled for goods to be classified under section XVII are mentioned namely - (a) They must not be excluded by the terms of Note 2 to Section XVII and (b) They must be suitable for use solely or principally with the articles of chapters 86 to 88 and (c) They mu....
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....he very first condition of three-layer test, as these are covered under the exclusion in Note 2(f) of the Notes to Section XVII. On the other hand, coverage under chapter 85 is clearly supported through the principles of classification viz. GRI and the explanatory notes, as discussed supra. 4.2 As far as the applicability of the benefit of the notification is concerned, the Central Government vide Notification No. 69/2011-Cus., dated 29-7-2011 has exempted all the goods falling under CTH 8517 from the whole of BCD leviable under the First Schedule of Customs Tariff Act, 1975 when the goods are imported from the Japan. The Notification further provides that the exemption of import of goods notified shall only be available when the origin of such goods is from Japan and the provisions laid down in Customs Tariff (Determination of Origin of Goods under the Comprehensive Economic Partnership Agreement between the Republic of India and Japan) Rules, 2011 are complied with. The relevant extract of the entry is reproduced hereinbelow : S.No. Chapter, Heading, Sub-heading and Tariff item Description Rate in % (unless otherwise specified) 666 8517 All Goods 0 4....