AI Drafter 
TaxTMI 
TaxTMI 
2026 (1) TMI 288
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....nt appeal pertains to classification of: a. Modular Port Concentrator [MPC] or Capacity Line Card b. Modular Interface Cards [MIC] or Daughter Card c. Fixed Configuration MPC d. Switch Fabric or Switch Control Board 3. According to the appellant the aforesaid products are all parts of Juniper router and, therefore, were classified under Customs Tariff Item [CTI] 8517 70 90 as 'Other' under the sub-heading pertaining to 'Parts'. 4. The department claims that the said imported items merit classification under CTI 8517 62 90, as 'Other', under the sub-heading pertaining to 'Machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus'. 5. The impugned order holds that the imported items are classifiable as Network Interface Card [NIC], as they are a kind of a reception apparatus (i.e., an interface card) for communication network. It has been concluded that NICs are classifiable under CTI 8517 62 90 by referring to HSN Explanatory Notes. 6. The relevant tariff entries are reproduced below: Tariff Item Description of goods Unit Rate of Duty ....
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.... u Free - 8517 69 40 --- X 25 Pads u Free - 8517 69 50 --- Subscriber end equipment u Free - 8517 69 60 --- Set top boxes for gaining access to internet u Free - 8517 69 70 --- Attachments for telephones u Free - 8517 69 90 --- Other u 10% - 8517 70 -- Parts: 8517 70 10 -- Populated, loaded or stuffed printed circuit boards u Free - 8517 70 90 -- Other kg 10% - 7. The appellant claims to have imported parts of Juniper Routers. It would, therefore, be appropriate to understand what a Router is. 8. A Router is defined in Webster's New World Telecom Dictionary as 'An intelligent switch capable of deciding where to forward packets based on a view of the network as a whole. A Router is a programmable device that works with other Routers, via a routing protocol, to establish the best path on which to forward a packet with a given address.' 9. Routers have interfaces (e.g. optical interfaces) which are used to physically connect with the network (for instance, through optical fibre cables). A Router has the following components: ....
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....nt in the following manner: a. MPCs provide packet forwarding services. b. MICs provide physical interfaces for the router. MICs install into MPCs which provide packet forwarding services. c. Switch Control Board controls power to MPCs, monitor and control system functions such as fan speed and the system front panel, and manage clocking, resets, and boots. d. Routing Engines and Control Boards with Routing Engines provides the software processes that run Junos OS. The routing engine maintains the routing tables, manages the routing protocols used on the router, controls the router interfaces, controls some chassis components, and provides the interface for system management and user access to the router. Each CB-RE is a combined Routing Engine and Switch Control Board in one unit. 12. The appellant has also filed a Certificate issued by the manufacturer of the imported items. In the said certificate, it has been certified that the imported items are 'part' of a router and do not have any independent functionality. The said Certificate is reproduced below: "JUNIPER NETWORKS 27-Jun-22 TO WHOMSOEVER IT MAY CONCERN We....
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....xamining the contesting Tariff Headings, the Explanatory Notes and Section Notes relating to classification of parts and the definition of 'network interface cards' held: "5.6.4 The noticee has submitted that a routing system performs a primary function of forwarding and routing of data through the network and for efficient discharging of such functions, a router necessarily has at least two (2) network interfaces, one at the side of input port (connecting to the local area network), and other at the side of output port (connecting to the wide area network). I find that in their written reply, the noticee has admitted that Modular Interface Card (MIC) and Fixed Configuration Modular Port Concentrators (fixed configuration MPC) imported by them are Level 1 and Level 2 devices in the Router which provides for a physical interface to connect to the network. As discussed above, network interface card is a Layer 1 and Layer 2 device under the OSI Model. In the definition of Network Interface Card as above, it is mentioned that in the context of the OSI reference model, NICs is operated at Layer 1 (Physical Layer) and 2 (Data Link Layer). Thus, it is evident that these imported ....
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....ing distinct function, also referred to by the noticee themselves as Level 1 and Level 2 devices in OSI which falls within the definition of 'Network Interface card' and even if these are parts of router, going by the Note 2(a) of Section XVI of the Tariff Act, they are rightly classifiable in their respective heading viz 8517 6290 of the Tariff." (emphasis supplied) 15. Regarding the invocation of the extended period of limitation, the Principal Commissioner observed: "5.7.3. In this regard, as has already been discussed and found above that the noticee was aware of the correct classification as having known the true nature of the goods. However, the noticee intentionally classified under CTH 85177090 in order to claim NIL rate of duty. Hence, this act clearly points towards the malafide intention on the part of the noticee which amounts to willful mis-statement under section 28(4) of the Customs Act, 1962. Had the Department not found out about such nonpayment of Customs duty as a result of misclassification, this issue would not have come to light resulting in permanent dent to the exchequer. 5.7.4. I note that the provisions of Section 17(1) of the Custo....
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.... the aforesaid decided decision of the Tribunal in Vodafone CISCO ASR Routers were imported; (iii) The Principal Commissioner failed to appreciate the parity between the two and distinguished the decision of the Tribunal in Vodafone for the reason that the Tribunal did not consider the applicability of layer 1 and layer 2 networking. The Routers of CISCO and Juniper are competing products with identical utility in routing architecture; (iv) The items imported by the appellant are neither a 'machine' nor an 'apparatus'; (v) The imported items have no independent functional utility; (vi) The item imported by the appellant is not a Network Interface Card; (vii) The extended period of limitation under section 28(4) of the Customs Act could not have been invoked in the facts and circumstances of the case; and (viii) The imported items are not liable for confiscation. 17. Shri Shiv Shankar, learned authorised representative appearing for the department, however, supported the impugned order and made the following submissions: (i) The Explanatory Notes to HSN Heading 85.17 explicitly include 'network interface cards' and, t....
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....n all cases to be classified in their respective headings; (b) other parts, if suitable for use solely or principally with a particular kind of machine, or with a number of machines of the same heading (including a machine of heading 8479 or 8543) are to be classified with the machines of that kind or in heading 8409, 8431, 8448, 8466, 8473, 8503, 8522, 8529 or 8538 as appropriate. However, parts which are equally suitable for use principally with the goods of headings 8517 and 8525 to 8528 are to be classified in heading 8517; (c) all other parts are to be classified in heading 8409, 8431, 8448, 8466, 8473, 8503, 8522, 8529 or 8538 as appropriate or, failing that, in heading 8487 or 8548." 22. The HSN Explanatory Notes to Note 2 of Section XVI are reproduced below: "(II) PARTS (Section Note 2) In general, parts which are suitable for use solely or principally with particular machines or apparatus (including those of heading 84.79 or heading 85.43 ), or with a group of machines or apparatus falling in the same heading, are classified in the same heading as those machines or apparatus subject, of course, to the exclusions mentioned in Part (I) above.....
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....ic Board mentions: "(a) The above Products are 'Parts' of routers, manufactured by us. (b) These parts do not have any independent functional utility, apart from setting up a routing system. (c) The said parts are not capable of being used in any system, other than a router. (d) Each of these parts, on their own, are not capable to perform the complete function of a router. (e) Apart from the parts mentioned in point (a) above, there are several other components, which are also necessary components to set-up a routing system." 27. It would also be seen that the items imported by the appellant relate to Juniper Routers and the items imported in Vodafone related to CISCO ASR Routers. 28. The appellant has provided the following Chart to substantiate that the components of Juniper Routers imported by the appellant are functionally and structurally identical to CISCO components examined by the Tribunal in Vodafone: Components Vodafone (Cisco Routers) Appellant (Juniper Routers) Router Structure Routers comprise Routing Processor, Input/Output Ports (Line Cards), Switch Processor Board, and Transceivers. Each comp....
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....cated slot they cannot function. In the present case also, the imported items assist in setting up a communication apparatus, but the said function of communication can be achieved only when assembled with several other parts and cannot communicate with other devices independently. The imported parts on a stand-alone basis cannot perform any of the desired function and it is only when the imported parts are configured with other parts that it will produce the desired function. The imported items, therefore, deserve classification under CTI 8517 70 90 and not under CTI 8517 62 90. 30. It will now have to be examined whether the imported items are Network Interface Card. This is for the reason, the Principal Commissioner has held that the imported goods are of the nature of Network Interface Card and would, therefore, be classifiable under CTI 8517 62 90. 31. 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. A....
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....here else. 42. The individual Router Cards perform functions inseparable from that of the equipment. For example, a Router requires a line card to operate as much as the line card requires the power and intelligence of the Router to operate. This is distinct from a NIC, which other than drawing power from the Automatic Data Processing (ADP) machine, operates separately and independently of the ADP machine by performing the sole function of translating the output of the ADP machine. NIC would, therefore, qualify as 'an apparatus'. 43. NIC referred to under the category of 'other communication apparatus' in the HSN Explanatory Notes are those interface cards which can perform on a standalone basis. This is a standard item which can be fitted to any computer, unlike Router Line Cards in dispute which are tailor made for CISCO ASR Routers and can only perform function when plugged into the predetermined slot of the Router chassis. 44. This is supported by illustration of network interface cards provided in the HSN Explanatory Notes. The illustration provided is of an ethernet interface card. These are cards used to provide internet connectivity to desktops/la....
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.... a result of mis-classification, the issue would not have come to light. The Principal Commissioner also held observed that consequent upon introduction of self-assessment scheme, the extended period of limitation would have to be upheld as the selfassessment was contrary to the provisions of the Statute. 41. The aforesaid observations of the Principal Commissioner for invoking the extended period of limitation cannot be accepted. 42. In this connection, reference can be made to the decision of the Tribunal in M/s. Raydean Industries vs. Commissioner CGST, Jaipur [Excise Appeal No. 52480 of 2019 decided on 19.12.2022]. The Tribunal, in connection with the extended period of limitation, observed that even in a case of self-assessment, the department can always call upon an assessee and seek information and it is the duty of the proper officer to scrutinize the correctness of the duty assessed by the assessee. The Division Bench also noted that departmental instructions issued to officers also emphasise that it is the duty of the officers to scrutinize the returns. 43. The view that has been taken by the Commissioner was also not accepted by the Tribunal in M/s G.D. Goenka P....
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....es not justify the invocation of the extended limitation period. Accordingly, the show-cause notice issued by the Department is clearly time-barred. On this ground alone, the impugned order deserves to be set aside." 46. In Commissioner of C. Ex. & Customs vs. Reliance Industries Ltd. [2023 (385) E.L.T. 481 (S.C.)], the Supreme Court held that if an assessee bonafide believes that it was correctly discharging duty, then merely because the belief is ultimately found to be wrong by a judgment would not render such a belief of the assessee to be malafide. If a dispute relates to interpretation of legal provisions, it would be totally unjustified to invoke the extended period of limitation. The Supreme Court further held that in any scheme of self-assessment, it the responsibility of the assessee to determine the liability correctly and this determination is required to be made on the basis of his own judgment and in a bonafide manner. The relevant portion of the judgment is reproduced below: "23. We are in full agreement with the finding of the Tribunal that during the period in dispute it was holding a bona fide belief that it was correctly discharging its duty liability.....