TaxTMI 
TaxTMI 
2025 (3) TMI 1569
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.... to as 'other than leather bands'). In addition to the above, the Applicant seeks clarity on classification of 'leather bands' under CTH 4205 00 90. 2. Submission by the Applicant: 2.1 The Applicant is a company having its registered head office located at 13th Floor, Prestige Minsk Square, Municipal No. 6, Cubbon Road, Bengaluru, Karnataka - 560001. The Applicant is a company incorporated under the Companies Act, 2013 and is engaged in the business of importing electronic consumer goods under the brand name 'Apple' such as iPhones, iPads, iPods, Mac Book (laptops), Apple Watch, bands of Apple Watch and computers for selling the same in India through online sales portal, channel partners and distributors located in India. They further submitted that Applicant is a wholly owned subsidiary Indian Company holding valid IEC Number 0796001839. Thus, the Applicant is rightly covered under the definition of 'applicant' as provided under Section 28E(c)(i) of the Customs Act, 1962 for making this application. 2.2 The applicant submitted that they had obtained an Advance Ruling from the Authority of Advance Rulings (Central Excise, Customs and Service....
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....shall remain in force for three years from the date on which the Finance Bill, 2022 received assent of the President. 2.4 Therefore, the Applicant requested to obtain clarity from the Hon'ble CAAR, Mumbai for the renewal of the Advance Ruling bearing Order No. AAR/CUS/12/2016 dated March 18, 2016 read with corrigendum dated April 06, 2016 in relation to the classification of Apple Watch under CTH 8517 62 90 and parts of the Apple smart watch, namely bands (other than leather bands) under CTH 8517 79 90 and for classification of leather bands under CTH 4205 00 90. 2.5 Overview of Apple Watch and its parts, namely bands: Apple Watch hereinafter referred to as the 'device', is designed for the exclusive use with the Apple iphone ('iPhone'). The device is essentially an extension of the iPhone and designed to be worn on the user's wrist. The features of the device can only be activated once the device is paired with an iPhone as the full functionality of the device requires an active connection to an iPhone. 2.5.1 The device functions as an extension of the iPhone, providing various features that enhance user interaction. When connected, it allows acces....
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.... Near Field Communication. 2.5.4 The applicant submitted that the device is a machine for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus as demonstrated by the above functions and features. The Applicant submitted the product brochure and technical specifications of 'the device', known as the Apple Watch for reference. 2.6 Apple Watch Bands: The bands secure 'the device' onto the user's wrist, enabling full functional capability of the device to be accessible by the user. The attachment of bands is essential for facilitating optimal functionality and enhancing the overall user experience. The bands of the device are made up of fluoroelastomer or stainless steel or leather or of any other material. 2.7 The Applicant reiterated that they had obtained an Advance Ruling from CAAR, New Delhi bearing Order No. AAR/CUS/12/2016 dated March 18, 2016, read with corrigendum dated April 06, 2016, in relation to the classification of Apple Watch and its bands. In compliance with the provisions of Section 28J of the Customs Act, the Applicant filed the present advance ruling applica....
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....aterials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods. (b) Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to (a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable. (c) When goods cannot be classified by reference to (a) or (b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration. 3.4 The applicant submitted that given their understanding of 'the device', the following CTH of Chapter 85 and 91 appear to be relevant: CTH Description 8517 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, includi....
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....y, telegraphy, radio-telephony, radio-telegraphy, local and wide area networks. 3.5.2 Relevant Notes for CTH 9102: Note 3 to Chapter 91 provides that for the purposes of this Chapter, the expression "watch movements" means devices regulated by a balance-wheel and hairspring, quartz crystal or any other system capable of determining intervals of time, with a display or a system to which a mechanical display can be incorporated. Further, as per Explanatory Notes to Chapter 91, this Chapter covers certain apparatus designed mainly for measuring time or for effecting some operation in relation to time. It includes timepieces suitable for carrying on the person (watches and stop-watches), other timepieces (ordinary clocks, clocks with watch movements, alarm clocks, marine chronometers, clocks for motor vehicles, etc.), and also time recording apparatus, time interval measuring instruments and time switches. The Explanatory Notes further provide that the classification of clocks and watches combined with some other object (an article of furniture, a lamp, inkstand, paperweight, writing pad, tobacco jar, cigarette or cigar lighter, handbag, powder compact, cigarette case, propelling-pe....
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.... images or other data between two points in a wireless network. Whereas, as per Explanatory Notes to Chapter 92 and CTH 9102, watches covered thereunder may have certain special features, however, they should essentially be designed for measuring time or undertaking some operation in relation to time. 3.8 The Applicant reiterated that 'the device' acts as an extension to the iPhone as it executes the transmission of voice, images or other data between the device and iPhone, that forms the essential character of the device, since it must be paired with the iPhone in order to function. It performs the function of transmitting and receiving information between the device and its host device (i.e. iPhone), as it is through this host device that all the capabilities of the device may be fully realized. Consequently, the principal function of the device is an apparatus for the communication in a wireless network of voice, images and other data. The device interacts within a wireless network transmitting and receiving speech or other sounds, images and other data in the following ways. 3.8.1 From an iPhone: via Bluetooth or Wi-Fi connection, data may be transmitted from an i....
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....orage of contact information such as. phone numbers (dialled/received /missed call), names and addresses, to-do lists. notes, appointments, E-mail address, facility for Short Message Service (SMS)/Multimedia Messaging Service (MMS), calculator, alarm clock, calendar, games and other similar facilities as a standard feature. These facilities assist the user to make calls to desired person, identify the caller, keep track of his calls, send/receive messages and enhanced use of communication using any of the above facility. Such cellular/mobile phones remain classified in sub-heading 8517 12, as the principal function of these equipment remain as 'telephony'. 3.13 Applicant further submitted that the Central Board of Excise and Customs vide Circular No. 20/2013- Customs, dated May 14, 2013, while considering the classification of 'Tablet Computers', has clarified as below: " .... It is also held that the products at issue have essentially the same functionality as a laptop. The function as an Automatic Data Processing Machine (ADP) is the main function of the product, while other functionalities of said machines are not different from the auxiliary function....
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....er note 5(D) also becomes relevant which includes printers under heading 84.71. We are also satisfied with the contention of the appellants that based on the nature of the functions they perform, the Multi-Functional Machines would serve as input and output devices of an ADPM (computer) and thus serve as unit of an ADPM, which on a reading of chapter note 5(C), clearly classifies them as falling under heading 84.71.60 of the Act." 3.16 The applicant submitted that the principal function of 'the device', i.e., Apple Watch is not timekeeping as the device is capable of performing different functions like that of transmission of data, payment mechanisms, GPS capabilities etc. thereby showcasing that timekeeping is just an additional feature of the device and not the sole function. Thus, in view of the above, it is thus evident that the device merits classification under CTH 8517 of the Custom Tariff. The relevant extract of the CTH is reproduced below for the ease of reference for determining classification under 8-digit level of HSN: Tariff Item Description of goods Unit Rate of duty Standard Preferential Areas (1) (2) (3) (4) (5) 8517 ....
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.... boards u 20% 8517 79 90 - - - Other u 15% - 3.17 The applicant submitted that Apple Watch qualifies as a machine for reception, conversion and transmission or regeneration of voice, images or other data of Sub Heading 8517 62. Tariff Item 8517 62 10 to 8517 62 70 describe specific machines which are not applicable in the instant case. Thus, 'the device', i.e., Apple Watch is classifiable under Tariff Item 8517 62 90 of the Custom Tariff. This view is also upheld by the Delhi Tribunal in the case of M/s L.G. Electronics India Private Limited v. Principal Commissioner of Customs, New Delhi 2023 (12) TMI 263- CESTAT New Delhi, wherein one of the issues pertained to the classification of LG Watch W7, whether the LG watch must be classified under CTH 91021900 or CTH 85176290. It was held by the Hon'ble Tribunal that "once admittedly the impugned goods work on internet, it is not acceptable that the essential character of the impugned goods remains that of time keeping only. Thus, we hereby hold that section notes and chapter notes of Chapter 85 are most relevant for the purpose of classifying imported G-Watch (Smart Watch), it being a devic....
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.... the Bluetooth transceiver which proved to be both an indispensable component and the component which plays the greatest role with relation to the watch's use. 3.20 The applicant stated that as 'the device' performs different functions as it acts as a communication tool, has GPS capabilities, etc., it showcases that timekeeping is not the sole feature of the device and thereby it should be rightly classified under the CTH 8517 62 90. 3.21 Therefore, in view of the above, the applicant submitted that the device is rightly classified under CTH 8517 62 90, as machines for reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus. Applicant submits that the device is not covered under any of the goods falling under CTH 8517 62 10 to 8517 62 70 considering the principal functions and the features of the device. 3.22 The applicant further submitted that the above classification of the device has been accepted by the WCO Harmonized System Committee at its 55th Session held on March 16, 2015. WCO Harmonized System Committee observed that wearable battery-operated device, also known as smart watch, c....
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....will only fit the customized groove on the device and no other products. 3.25 The applicant submitted that the classification of goods covered under the Tariff Act is done as per the GIR of the First Schedule of Tariff Act. GIR 1 to 5 lays down the principles for determining classification of goods under a specific Heading whereas GIR 6 is applicable if the objective is to determine the classification of goods in the Sub-headings of à Heading. GIR 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: The titles of Sections, Chapters and Sub-Chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of t....
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.... Limited [1993 (67) ELT (303)] has held that: "Rule 3 (a) thereof lays down that when goods are, prima facie, classifiable under two or more headings, classification shall be effected by following the principle that the heading which provides the most specific description shall be preferred to heading providing a more general description. ..... Applying Rule 3(a) of the Interpretative Rules to the Tariff, sub-heading 9009.90 is most specific to the goods imported because the goods imported is rear cover which is part of SADH which is an accessory to a photo-copier. Parts and accessories of photo-copying apparatus are covered by this sub-heading." 3.28 The applicant further placed its reliance in the case of Commissioner of Central Excise, Nagpur v Simplex Mills Co. Ltd., [2005] 2 S.C.R.441: (2005) 3 SCC 51 where the Apex Court held that the Rules for the interpretation of the Schedule to the Central Excise Tariff Act, 1985 are framed pursuant to the powers under Section 2 of that Act. "..........Rule 3 must be understood only in the context of sub-rule (b) of Rule 2 which says inter alia that the classification of goods consisting of more than....
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....ple Watch may be classified are as follows: CTH Heading Description 4205 Other articles of leather or of composition leather 8517 Telephone sets, including smartphones and other telephones for cellular networks or for other wireless networks: Other apparatus for the transmission or reception of vice, 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 3.33 The applicant submitted that classification of "parts" of the devices classified under CTH 8517 is to be done in terms of Section Note 2(b). However, the provisions of Section Note 2 are subject to the exclusions mentioned in Section Note I to Chapter 85. Section Note 1 to Chapter 85 specifically excludes the articles of leather or of the composition of leather (covered under heading 8402) used in machinery or mechanical appliances or for other technical uses from classification under Chapter 85. The relevant extract is as below -- "1. This Section does not cover : ........ (b) articles of leather or of composition leather ....
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....they shall fall under the "Other" category under CTH 4205 as an article of leather. Therefore, the applicant submitted that the feather bands imported by them for specific use with Apple Watch are to be classified under CTH 4205. Further, other articles of leather or of composition leather under CTH 4205 are further bifurcated and categorized as under - Tariff Item Description of goods Unit Rate of duty Standard Preferential Areas (1) (2) (3) (4) (5) 4205 OTHER ARTICLES OF LEATHER OR OF COMPOSITION LEATHER 4205 00 - Other articles of leather or of composition leather : --- Straps other than for machinery or harness : 4205:00 11 Welt Kg. 10% 4205 00 19 --- Other kg. 10% 4205 00 20 --- Leather sofa cover kg. 10% 4205 00 90 --- Other. kg. 10% 3.37 The applicant submitted that CTH 4205 00 11 and CTH 4205 00 19 covers straps other than for machinery or harness and CTH 4205 00 20 covers leather sofa covers. All other articl....
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....rom the date on which the said Finance Bill receives the assent of the President. Since the Finance Act, 2022 was enacted on 30th March, 2022, the validity period of the 2016 ruling is only up to 29th March 2025. Thus, they filed an application again for obtaining the ruling in the present matter i.e., the classification of Apple Watch under Customs Tariff Heading ('CTH') 8517 62 90 and Apple Watch Bands (non-leather) under CTH 8517 79 90 and Apple Watch Bands (leather) under CTH 4205 00 90. 4.2 The applicant reiterated the features of the product as under: Apple Watch * Designed for exclusive use with the Apple iPhone. * Functions as an extension of the iPhone, providing various features that enhance user interaction. * Capable of receiving and transmitting data, voice, and images. * Supports hands-free communication, alert notifications, timekeeping, photo storage, and music playback. * Equipped with a customized design chip, digital crown, retina display with touch sensor, heart rate sensor, and haptic feedback. Apple Watch Bands * Secure the device onto the user's wrist, enabling full functio....
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.... of the device and can only be used with the device. * Section Note 2 (b) to Chapter 85 of the Tariff Act provides for the classification of parts of machines to be done under Chapter 85 where the machines are themselves classified under Chapter 85. * The bands are unique in nature and cannot be used anywhere else. * The bands secure the device onto the user's wrist, enabling full functional capability of the device to be accessible by the user. 4.7. The applicant further submitted that the Apple Watch Bands are specifically designed for Apple Watches (which are classifiable under CTH 8517) and these bands cannot be used or fitted with other regular watches. The Applicant further submitted that since the Apple Watch Bands does not perform any function of the watch rather is an essential part of the Apple Watch which serves solely to keep the Apple Watch affixed to the user's wrist, it cannot merit classification under CTH 9113. 4.8 The applicant further submitted that the proposed classification in the SCN is an afterthought of the authorities as in 2015 the ACC Mumbai had held that Bands are righty classified under CTH 8517 7090 vide its co....
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....ents till date has been received. 5.2 The concerned Import Commissionerate, Air Cargo Complex, Sahar, Andheri (East), Mumbai vide its letter dated 09.01.2025 submitted that as "Apple smartwatches" support communication (via Bluetooth, Wi Fi, or cellular connectivity), transmit and receive data, such as phone calls, messages, or health monitoring data, they may be considered as telecommunication devices because of their primary capability to sync and communicate with smartphones or other networks. Hence, the goods appear to be rightly classifiable under CTH code 85176290. 5.2.1 It was further submitted in regards to the classification of parts, namely bands made up of fluoroelastomer or stainless steel or any other material other than of leather (i.e. bands, other than leather bands) for different range of Apple Watch classifiable under CTH 8517 7990 of the First Schedule of the Customs Tariff Act, 1975 that the Watch Bands that are simple bands designed to hold the Watch on the user's wrist appears to be not characterized as electrical machinery and equipment or parts thereof, that are assembled together into a watch or clock movements, or into articles suitable for use s....
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....d 03.01.2017, by the US Customs on classification of "Bands for Apple Watches", wherein the Authority has concluded the proceedings with the pronouncement that Apple Watch Bands/Straps of modal, modal sports bands of bovine leather and plastic respectively are classifiable under Chapter heading 9113. It is noticed that the applicant has not referred the subject Ruling pertaining to their own goods, which is specific about the classification of Apple Watch Bands. iii. On perusal of CAAR's .. order No. AAR/CUS/12/2016 dated 18.03.2016 and Corrigendum dated 06.04.2016 (as enclosed by the applicant in their application), it was noted that the Order states about the classification of Apple Watch (85176290) and its' Parts (85177090). But, the present application has been made for review of the mentioned CAAR's orders, making it more specific about the Watch, Watch Bands (made of fluroelastomer, stainless steel or any other material other than Leather) and Leather Bands. iv. The department has recently issued a Protective demand dated 27.12.2024, based on the CRA's Observations with respect to mis-classification of "Apple Watch Bands" conveyed in the year....
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....ed, it is a part of Apple Watch and there is specific entry for parts of Heading 8517 i.e. CTI 85177990, and therefore, the said Apple watch bands merits classification under CTI 85177990. They further submitted that in terms of Note 2(b) of Section XVI, parts which can solely or principally be used with the main product are to be classified as parts of that product only and therefore, the Apple Watch Bands merits classification under Heading 8517 only. They further informed that the earlier Advance ruling order where the Apple watch and its parts, namely bands were classified under CTH 8517 was not challenged and was still in effect at the time of Personal hearing in terms of Section 28J(2) of the Customs Act, 1962 which prescribes a time limit of three years on validity of the Advance Rulings issued. They further informed that the application for renewal of advance ruling was filed by them in November, 2024 and they received the Show Cause Notice dated 27.12.2024 only on 03.01.2025 wherein they have been asked to justify the classification of Apple Watch Bands under Heading 8517 instead of Heading 9113. They further contended that the Apple Watch Bands made of Leather merits clas....
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.... Organisation. The entry under CTH 8517 79 90 is coterminous with old CTH 8517 70 90). c. Whether the parts of Apple Watch, namely bands made of leather ('leather bands') are classified under CTH 4205 00 90 of the First Schedule of the Customs Tariff Act, 1975 attracting BCD at 10% rate? 7.3 At the outset, I find that the issue raised at the Sr. No. 08 in the CAAR-1 form is squarely covered under Section 28H(2) of the Customs Act, 1962 being a matter related to the classification of goods. Further, I find that Section 28E (c) defines the Applicant' as any person holding a valid Importer-exporter Code Number granted under section 7 of the Foreign Trade (Development and Regulation) Act, 1992; or exporting any goods to India; or with a justifiable cause to the satisfaction of the Authority, who makes an application for advance ruling under Section 28H. In this matter, the applicant holds a valid Importer-exporter Code Number and satisfies one of the criterions mentioned under the definition of the Applicant under Section 28E and therefore, is a valid applicant for filing application under Section 28H of the Customs Act, 1962. 7.4 The applicant are seeking....
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....VI of the First Schedule of the Customs Tariff Act, 1975 reads as under: "3. Unless the context otherwise requires, composite machines consisting of two or more machines fitted together to form a whole and other machines designed for the purpose of performing two or more complementary or alternative functions are to be classified as if consisting only of that component or as being that machine which performs the principal function.". Since the principal function of the device is as an apparatus for the communication in a wireless network, I find that Heading 8517 "Telephone Sets, Including Smartphones And Other Telephones For Cellular Networks Or For Other Wireless Networks: Other Apparatus For The Transmission Or. Reception Of Vice, 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" aptly covers such apparatuses/devices. 7.7 I further find that both the department (ACC Sahar, Mumbai) and applicant are in agreement over the classification of Apple watch under Heading 8517 and specifically under Tariff Item....
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....le under CTH 8517 62. 7.9 In view of the above, i find that the Apple watches are rightly classifiable under Heading 8517 and specifically under Tariff Item 8517 62 90 of the First Schedule of the Customs Tariff Act, 1975 and I see no reason to not renew the earlier order of the erstwhile authority for another three years as far as the classification of Apple Watch is concerned. 7.10 In regards to the classification of Apple Watch Bands, from the submissions made by the department as well as the rejoinder filed by the Applicant, I find that the matter of classification of these goods is now currently under dispute as an Show Cause Notice (SCN)SCN dated 27.12.2024 has been issued to the applicant in the matter by the Additional Commissioner of Customs, ACC, Mumbai challenging the classification of the Apple Watch Bands under CTH 8517 70 90 (which was amended vide Finance Act, 2021 and split into two new entries, CTH 8517 79 10 and CTH 8517 79 90). I find it prudent here to examine the Section 281(2) of the Customs Act, 1962. The same is reproduced here for ease of reference: "281. Procedure on receipt of application. - (1) ...... (2) The Authority ma....