TaxTMI 
TaxTMI 
2026 (1) TMI 904
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.....1 The application is being preferred by the Applicant. company having its registered office at 5th floor, Caddie Commercial Tower Aerocity (DIAL). New Delhi - 110037. 1.2 The Applicant is proposing to enter into the business of provision of internet distribution service in India and sale of Starlink Kits and related accessories to be used for Starlink Satellite Internet for identified customers. 1.3 In furtherance to its proposed activity. the Applicant will import Racks for captive consumption at its gateway site. Racks are being imported for the purpose of distribution of electricity to the equipment installed at the gateway site. Further, Racks will be imported by the Applicant from Air Cargo Complex and Nhava Sheva, Mumbai. 1.4 The said proposed activity is duly stated in the object clause of Memorandum of Association of the Applicant. The relevant excerpt of the Memorandum of Association is reproduced below: "To establish, build, lease, finance, promote, participate, market, deal, distribute, engage in, and carry on the business of telecommunication services including satellite broadband internet services, satellite services, satellite phones,...." 1.5 In....
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....o safeguard the antenna from overcurrent situations during power distribution. These circuit breakers automatically disconnect the power supply in case of an overload or short circuit. thereby protecting the Antenna from over current and potential damage at the time of power distribution. Power Distribution to Networking Equipment 1.12 Electricity is provided to the networking equipment with the help of PDU and UPS system mounted on the Rack. Two separate PDUs are connected to two separate UPS systems. The PDU distributes AC mains power supply to the networking equipment which is sourced from the respective UPS system. 1.13 Further, the UPS system is connected to the utility outlet from which it sources direct AC mains supply. As a double conversion UPS system, it first converts incoming AC power to DC and then converts it back to AC before supplying it to PDU. This process ensures stable power supply to the networking equipment thereby protecting it from power fluctuations and interruptions. 1.14 Additionally, as an ancillary function, the PDU and UPS system work together to ensure that continuous power is supplied to the networking equipment in cases of power outage a....
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.... questions in respect of which an advance ruling may be sought by an applicant. Section 28H of the Customs Act reads as under: "28H. Application for advance ruling - (1) An applicant desirous of obtaining an advance ruling under this Chapter may make an application in such form and in such manner and accompanied by such fee as may be prescribed, stating the question on which the advance ruling is sought. (2) The question on which the advance ruling is sought shall be in respect of, - (a) classification 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 ori....
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....its case, the application shall be accepted for hearing on merits by the Hon'ble CAAR. 1.27 The Applicant wishes to obtain the advance ruling on the question listed down in form CAAR -1 (as also appearing in Annexure II). Hence, the Applicant has proceeded to file this application before the Hon'ble CAAR, New Delhi for kind consideration. 1.28 The Applicant humbly submits that the Hon'ble CAAR may kindly grant an opportunity of personal hearing at earliest convenient and issue the advance ruling addressing the questions of law raised in the present application at an early date. 1.29 The Applicant reserves its rights to add, delete, modify, withdraw any of the above submissions. The Applicant shall be pleased to provide any additional documents/ information in support of the submissions if required by your good office. STATEMENT CONTAINING APPLICANT'S INTERPRETATION OF LAW AND/ OR FACTS, AS THE CASE MAY BE, IN RESPECT OF THE QUESTION(S) ON WHICH ADVANCE RULING IS REQUIRED 1.30 The Applicant is proposing to enter into the business of provision of internet distribution service in India and sale of Starlink Kits and related accessories used for Starl....
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....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: 1. 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 the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the following provisions ... " 1.39 The Larger Bench of the Hon'ble Tribunal in the matter of Saurashtra Chemical, Porbandar vs. Collector of Customs, 1986 (23) E.L.T. 283 (Tri. - Del.) had held that the tariffs must be interpreted in the light of relevant Section and Chapter Notes which are statutorily binding like the Headings themse....
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.... of a good, in addition to the GRI and corresponding Chapter Notes and Section Notes. 1.44 In the light of above legal provisions, to analyze the classification of above product following needs to be kept in mind: a. General Rules of Interpretation (GIR). b. Heading/sub-heading of the First Schedule in conjunction with Section/Chapter/Explanatory notes. c. Principal function of the subject good. 1.45 Hence, upon application of GIR 1, since the nature of the Racks appears to be electrical in nature, the Applicant submits that Chapter 85 of the Customs Tariff is relevant for the classification of Rack. The relevant heading of the Chapters has been reproduced below: Chapter 85: "Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories of such articles." Analysis of Chapter 85 1.46 The Applicant submits that on an analysis of the various headings of Chapter 85, primarily the following headings appear relevant for reaching to the appropriate classification of Rack: * Heading 8504 -'Electrical Transformers, Static Converter....
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....k. " 1.50 However, in the instant case, no network connection is established by Racks in as imported condition. Thus, at the time of importation, the said Racks cannot perform any networking function. To this extent, classification of subject good is not possible under CTH 8517. Classification to be determined based on the form and condition of goods at the time of import 1.51 Further, as discussed above, post-importation, certain networking equipment may be installed in the Racks. However, it is a settled principle of law that classification is to be determined based on the form and condition of the goods at the time of import. 1.52 In this regard, reliance is placed on the decision of Hon'ble Supreme Court in Dunlop India Ltd. vs. Union of India [1983 (13) E.L.T. 1566 (S.C.)] wherein it was held that the condition of the article at the time of importing is a material factor for the purpose of classification. The relevant extract of the judgement is reproduced as under: "30. The relevant taxing event is the importing into or exporting from India. Condition of the article at the time of importing is a material factor for the purpose of classification as to ....
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....ove judgements, it can be deduced that the classification of imported goods should be determined on the basis of the condition or state in which the products are presented for clearance. In the instant matter, at the of importation Racks cannot perform any networking function nor will it have any networking equipment installed. Hence, Racks cannot merit classification under Heading 8517. 1.56 Now, we proceed to discuss the relevant Headings in the order of sequence as mentioned in Para 17 above to appropriately determine the classification of the Racks. Racks do not merit classification under the heading 8504 as 'static converters' 1.57 Heading 8504 covers 'Electrical transformers, static converters (for example, rectifiers) and inductors'. 1.58 Reference is made to Section XVI of the CTA which covers CTH 8504. This Section provides for 'Machinery and mechanical appliances; electrical equipment; parts thereof; sound recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories of such articles.' 1.59 Since Racks consists of UPS system which is a static converter it becomes relevant to analyse this h....
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....B), as it is to be used principally in ADPM, it is connectable to the Central Processing Unit, and it is able to accept data in a form (codes or signals) which can be used by the system. Further, there would be no application of Chapter Note 5(E) as correctly pointed out by the learned counsel for the appellants, as the Multi-Functional Machines are presented independently. Moreover, since predominant components are related to printing function, Chapter Note 5(D) also becomes relevant which includes printers under Heading 84.71." [Emphasis supplied] 1.63 Further, reliance is also placed in the decision of Hon'ble Supreme Court in case of OK Play Case (supra) wherein a 3-member bench of the Hon'ble Supreme Court of India held that "Functional utility, design, shape and predominant usage have also got to be taken into account while determining the classification of an item." 1.64 In the instant matter, UPS system is one of the many components of the Racks which performs the ancillary function as a static converter to provide power back up to the networking equipment. Its ancillary nature is also established from the fact that the UPS only provides backup to the netwo....
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....85. However, given the fact that the whole Racks are imported as a complete unit and basis the Note 3 to Section XVI, the Racks merit classification in heading appropriate to its principal function i.e., power distribution. 1.69 Given the above, the Applicant submits that CTH 8537 appears to be the most appropriate heading for classification of the Racks. From bare reading of the description of heading 8537, it appears that CTH 8537 covers boards, panels, consoles, cabinets, etc. provided such a product satisfies the following three conditions: a) Equipped with two or more apparatus of heading 8535 or 8536; b) Product is meant for electric control or the distribution of electricity; and c) Should not be switching apparatus of Heading 8517. 1.70 Equipped with two or more apparatus of Heading 8535 or 8536 (Condition a) (i) CTH 8535 and 8356 covers electrical apparatus for switching or protecting electrical circuits, or for making connections to or in electrical circuits. The difference in Heading 8535 and 8536 is that electrical apparatus for a voltage exceeding 1000 Volts is covered under Heading 8535 and electrical apparatus for a voltage n....
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....oard, panel, etc. The product may also incorporate articles of other Headings such as transformers, voltage regulators etc. The Heading covers small switchboards for lighting installations to complex control panels for radio stations, etc. 1.76 In view of the HSN Explanatory Notes, the product under consideration squarely falls within Heading 8537. The Racks are an assembly of electrical apparatuses of Headings 8535 or 8536 including articles of other Headings such as UPS System (static converter). Further, this is not a simple switch board rather a complex power distribution system for providing electricity to the networking equipment and antenna at the gateway site. 1.77 In this regard reliance is placed in the decision of collector of Central Excise, Cochin Vs. BPL Systems & Projects Ltd. [1994 (69) E.L.T. 688 (Tribunal)] affirmed by the Hon'ble Supreme Court in the Collector v. BPL Systems & Projects Ltd. - 1996 (84) E.L.T. A50 (S.C). The issue pertained to classification of Power Line Carrier Communication Equipment (PLCC). Basis the predominant and general use of the PLCC panel, the Tribunal held that it is for electric control and only the distribution of electrici....
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....rs located on the face of the panel boards. Additionally, each panel distribution board provides status lights and alarms to alert when a circuit disruption occurs. The power distribution panels are manufactured in various configurations depending on the complexity, product features and the number of devices they will distribute power to. The panels are rated for a maximum voltage of 48 Volts (V) and 350 Amps (A). ... ... ... ... The applicable subheading for the GMT, KLM/KTK, TPA and TPC Fuse Panels will be 8537.10.9050, HTSUS, which provides for "Boards, panels, consoles ... and other bases, equipped with two or more apparatus of heading 8535 or 8536, for electric control or the distribution of electricity ...: For a voltage not exceeding 1,000 V: Other: Other: Panel boards and distribution boards." The general rate of duty will be 2.7 percent ad valorem." 1.79 Further, reliance is placed on US CROSS Ruling No. NY 187330 dated 15.11.2002 wherein electrical distribution panel were classified under HTSUS 8537.10.9070. The relevant extract of the ruling is reproduced below: "The applicable subheading for the electrical distribution panel (Models CJ-10H-....
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....3 and Heading 8479 it is understood that for a product to fall under Heading 8543, all the above 3 conditions are to be met. In the instant case, though conditions (a) and (b) are fulfilled, condition (c) is not satisfied. As per condition (c) (i) the product should not be classified in any particular heading of Chapter 85 since no other heading covers it by reference to its function, description or type. However, as already discussed in detail above, the primary function of the product is distribution of electricity, and such products are specifically covered under Heading 8537. Since condition (i) of (c) is not fulfilled, it is immaterial discuss the other two points of condition (c). 1.86 In view of the above, it is clear that the Racks cannot merit classification under CTH 8543 as it is covered under a particular heading of Chapter 85 i.e., 8537 by reference to its function. 1.87 In this regard, reliance is placed on Xerox India Case (supra) wherein the Department sought to place the machines under Heading 8479 (which is similar to Heading 8534) being the residual entry as opposed to the assessee which claimed the product to be a part of Heading 8471-Automatic Data Proces....
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....ing 8537 and accordingly it merits classification thereunder and not under residuary Heading 8543. Classification of the Racks at six and eight-digit level under heading 8537 1.92 In the backdrop of the above facts, since the Applicant has submitted that the classification at four-digit level is under heading 8537, the tariff classification of the Racks at the six and eight-digit level is discussed below. CTH 8537 covers the following subheadings and tariff items: 8537 Boards, Panels, Consoles, Desks, Cabinets and Other Bases, Equipped with Two Or More Apparatus of Heading 8535 Or 8536, For Electric Control or the Distribution of Electricity, Including Those Incorporating Instruments or Apparatus of Chapter 90, And Numerical Control Apparatus, Other Than Switching Apparatus of Heading 8517 853710 - For a voltage not exceeding 1,000 V: 85371010 --- For use in goods of Chapter 88 or 89 or 93 85371090 --- Other 85372000 - For a voltage exceeding 1,000 V 1.93 The output voltage of the Racks is 200 - 240 VAC which is below 1000 Volts. Hence, the Racks merit classification under sub-heading 853710. Further, at eight-digit level, the Racks merit clas....
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....ought from the Hon'ble CAAR as follows: A. The Racks to be imported by the Applicant is correctly classifiable under Tariff Item 8537 10 90 of the First Schedule of the Customs Tariff at the time of import; and B. The concessional BCD @ 7.5% vide S. No. 490 of Notification No. 50/2017 is available to the Racks to be imported by the Applicant. C. The Applicant craves leave to alter, amend or modify any of the aforesaid grounds or submissions made herein this application and make such additional submissions without prejudice to the submissions made herein, at the time of hearing of the said application. D. The Applicant also craves leave to produce and provide any such further additional documents in support of its submissions at the time of hearing and before conclusion of the proceedings. E. The Applicant further prays for an opportunity of being heard in person. 2. Comments of Custom Port Commissionerate: 2.1 As per the provision of CAAR Regulation, 2021, the complete application of the applicant was provided to the concerned Custom Port, and requested to furnish the requisite comments in the instant matter. The port authority....
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....the Rack. The panel board serves as the intermediary between the main electrical supply and the antenna, ensuring a direct and efficient power connection. 4.4.1.1 Within the Panel board, there are circuit breakers installed to safeguard the antenna from over current situations during power distribution. The circuit breakers automatically disconnect the power supply in case of an overload or short circuit, thereby protecting the Antenna from over current and potential damage at the time of power distribution. 4.4.2 Power Distribution to Networking Equipment :- Electricity is provided to the networking equipment with the help of PDU and UPS system mounted on the Rack. Two separate PDUs are connected to two separate UPS systems. The PDU distributes AC mains power supply to the networking equipment which is sourced from the respective UPS system. 4.4.2.1 Further, the UPS system is connected to the utility outlet from which it sources direct AC mains supply. As a double conversion UPS system, it first converts incoming AC power to DC and then converts it back to AC before supplying it to PDU. This process ensures stable power supply to the networking equipment....
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....verter falling under Heading 8504, the UPS serves only an ancillary role in providing stable and backup power to the connected equipment. As per the General Rules for Interpretation (GIR) and the Explanatory Notes to Heading 8537 of the Harmonized System, the inclusion of conversion or regulating devices such as rectifiers, UPS, or sensors does not alter the classification when the principal function remains electric control or distribution. 9. Accordingly, applying Rule 3(b) of the General Interpretative Rules, the essential character of the composite assembly is derived from its power distribution and control function performed by the PDU, circuit breakers, and connectors. Therefore, the merit classification goods appears to be under Heading 8537 as "Boards, panels, consoles, desks, cabinets and other bases, equipped with two or more apparatus of heading 8535 or 8536, for electric control or the distribution of electricity. 10. As far as concerned to the Notification benefit of the Sr. No. 490 of the Notification No. 50/2017-Customs dated 30.06.2017, it is observed from the relevant text of the notification said Sr. No. is available to all goods falling under CT....
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.... 24.10.2025. As per Serial No. 281 of Notification No. 45/2025-Cus, dated 24.10.2025, the above goods attract Basic Customs Duty @ 7.5%. 5. Findings, Discussion & Conclusion: 5.1 Having examined the CAAR-1 application, the comments received from the jurisdictional Customs Commissionerate, the record of personal hearing held on 22.12.2025, additional written response of the applicant dated 22.12.2025 and the applicable legal framework, I find the application to be valid in terms of the Customs Act, 1962 and the CAAR Regulations, 2021. I therefore allow the application in terms of Customs Act & CAAR regulations and proceed to determine the classification of the proposed imports on the basis of the information on record. Product Description 5.2 On going through the application, I find that the product under consideration, as described in the application and supporting technical literature, is Racks (such as Rack V2.2) for captive consumption at its gateway site. The Racks to be imported by the Applicant are a hub or power distribution system which will be located outdoor on a specific gateway site of the Applicant. The Racks are housed within an aluminium enclosure. Furthe....
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....ystem. Further, the UPS system is connected to the utility outlet from which it sources direct AC mains supply. As a double conversion UPS system, it first converts incoming AC power to DC and then converts it back to AC before supplying it to PDU. This process ensures stable power supply to the networking equipment thereby protecting it from power fluctuations and interruptions. Additionally, as an ancillary function, the PDU and UPS system work together to ensure that continuous power is supplied to the networking equipment in cases of power outage as well. When the main AC input fails, the UPS system utilizes the DC power stored in its battery (viz. the Eaton Extended Battery Module), converting it into AC power. This converted power is then delivered to the PDU, which in turn powers the networking equipment, maintaining uninterrupted operation even during electrical disruptions. Issue of classification: 5.3 The question for determination before me is whether the Racks (such as Rack V2.2) merit classification under CTH 8537 10 90 or under Heading 8504 or 8543 or 8517. The applicant claims CTH 8537 10 90 which the Department also accepts. The competing tariff he....
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....step down or step up voltages or currents to the level of the connected equipment, e.g., measuring instruments, electricity meters or protective relays. The heading covers all transformers. They vary from ballasts for the control of the amount of current that flows through discharge lamps or tubes, small types used in wireless sets, instruments, toys, etc., to large types enclosed in oil tanks or equipped with radiators, fans, etc., for cooling purposes. The large types are used in electricity stations, stations for interconnecting mains, distributing stations or substations." 5.3.2 The Relevant HSN Explanatory Notes to Tariff Heading 8517 is as follows :- "Telephone Sets, Including Smartphones 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 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'. The term "electrical apparatus for line telephony or line telegraphy" means apparatus for the transmission of speech or ....
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....rts of the goods of this heading are classified in heading 85.38. The heading excludes: (a) Telephone switchboards (heading 85.17). (b) Simple switch assemblies, such as those consisting of two switches and a connector (heading 85.35 or 85.36) (c) Cordless infrared devices for the remote control of television receivers, video recorders or other electrical equipment (heading 85.43). (d) Time switches with clock or watch movement or with synchronous motor (heading 91.07)." 5.3.3 The Relevant HSN Explanatory Notes to Tariff Heading 8543 is as follows :- This heading covers all electrical appliances and apparatus, not falling in any other heading of this Chapter, nor covered more specifically by a heading of any other Chapter of the Nomenclature, nor excluded by the operation of a Legal Note to Section XVI or to this Chapter. The principal electrical goods covered more specifically by other Chapters are electrical machinery of Chapter 84 and certain instruments and apparatus of Chapter 90. The electrical appliances and apparatus of this heading must have individual functions. The introductory provisions of Explanatory Note to hea....
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....er it is required to be assessed as a whole unit consisting of different components. In the instant matter, UPS system is one of the many components of the Racks which performs the ancillary function as a static converter to provide power back up to the networking equipment. Its ancillary nature is also established from the fact that the UPS only provides backup to the networking equipment and no double conversion or power backup facility is provided by the Racks for antenna. Whereas all the components and parts come together to contribute to the principal function of power distribution which gives the Racks its essential character. In this background, Racks do not merit classification under CTH 8504 as UPS which provides ancillary support to the principal function of the Rack. 5.4.2 Heading 8517 covers Telephone Sets, Including Smartphones 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 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 ....
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....n Heading 8535 and 8536 is that electrical apparatus for a voltage exceeding 1000 Volts is covered under Heading 8535 and electrical apparatus for a voltage not exceeding 1000 Volts is covered under Heading 8536. CTH 8535 and 8536 both cover electrical apparatuses such as circuit breakers, optical fiber cables, connectors for optical fibers, plug, etc. The Racks are equipped with all these components. Hence, the first condition, i.e., the product should be equipped with two or more apparatus of Heading 8535 or 8536 is satisfied. Product is meant for electric control or the distribution of electricity. As already discussed above, the principal function of the Racks is that of a power distribution system which provides power supply to the networking equipment and Antenna installed at the gateway site. Hence, the second condition, i.e., the product is meant for electrical control or distribution of electricity is also satisfied. Not a switching apparatus of Heading 8517 As already mentioned above, the product under consideration does not perform any networking function nor is it imported with any networking equipment embedded in it. Hence, it is exc....
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....r Chapter of the Nomenclature, and (c) Cannot be classified in any other particular heading of this Chapter since: (i) No other heading covers it by reference to its method of functioning, description or type, and (ii) No other heading covers it by reference to its use or to the industry in which it is employed. or (iii) It could fall equally well into two (or more) other such headings (general purpose machines). On a conjoint reading of Explanatory Notes to Heading 8543 and Heading 8479, for a product to fall under Heading 8543, all the above 3 conditions are to be met. In the instant case, though conditions (a) and (b) are fulfilled, condition (c) is not satisfied. As per condition (c) (i) the product should not be classified in any particular heading of Chapter 85 since no other heading covers it by reference to its function, description or type. However, as already discussed in detail above, the primary function of the product is distribution of electricity, and such products are specifically covered under Heading 8537. Since condition (i) of (c) is not fulfilled Racks cannot merit classification u....