TaxTMI 
TaxTMI 
2022 (9) TMI 1698
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....17.08.2021 and was accordingly registered under Serial No. 14/2021-Delhi dated 17.08.2021. 2.1 The applicant proposes to import Echo Buds (2nd Gen) Model No. P6WE58 (Left bud) and P6WE57 (Right bud) as a complete product (with charging case, 4 ear tips, and 2 wing tips) and sell the same to the distributors and retailers in India. The applicant will also be importing Echo Buds in pair or single piece (Left/Right) on a stand-alone basis, Charging Case Model No. P6WE59 (wireless) and Charging Case Model No. P6WE56 (wired), Ear tips and Wing tips on a stand-alone basis, i.e. separately as spares. Pictures of the Echo buds, Echo Buds with charging Case, Ear tips and Wing tips are provided below for ready reference: 2.2 It is further described in the application that Echo family devices are voice command devices with multiple functions, including answering questions, playing music, reading news/ audio-books, providing traffic, weather and other real-time information; the Echo Family devices are communication devices in the form of speaker or headphone with Alexa Technology built in it. 2.3 The brief description of devices is summarized below on the basis of information containe....
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.... Case contains Lithium-ion rechargeable batteries for charging the earbuds. Two models of Echo Buds Charging cases, namely Echo Buds Charging case Model No. P6WE59 (wireless) and Echo Buds Charging Case Model No. P6WE56 (wired), are proposed to be imported. The primary function of both these Echo Buds Charging Cases is to house the buds and charge them when they are placed inside the case. Ear tips and Wing tips For the best and comfortable fit of Echo Buds in the ears, import of ear tips and wing tips in different sizes for a secure fit, has been proposed. The ear tips and wing tips are made of silicon material. 2.4 The applicant has stated that they intend to know classification and rate of Basic Customs Duty applicable on import thereof and is thus filing the present application; till now, they have not imported Echo Buds with charging case, spare echo buds, Echo Buds charging case, ear tips and wing tips through any of the ports in India. The applicant has sought advance ruling on the following questions- * Whether Echo Buds with charging case and spare Echo Buds proposed to be imported by the applicant are classifiable under Custom Tariff Item 8517 62 90? ....
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....ulti-function machines'. The said Section Note 3 states, "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." Thus, machines which performs two or more complementary or alternative functions are to be classified as being the machine which performs the principal function. In the present case, Echo Buds can perform multiple functions like: - act as wireless Bluetooth earbuds (earphones) for playing songs stored on the connected device or being played on the device using internet; - act as Hands-free and on-the-go Alexa accessory for playing music, making calls, advanced Fitness functionality and setting reminders - in this case, songs will be played via AVS/ amazon cloud and the output will be routed to Echo Buds; - act as communication devices for communicating with Amazon cloud/AVS via the connected source device like smartphone for performing vo....
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....rument cases, necklace cases and similar containers, specially shaped or fitted to contain a specific article or set of articles, suitable for long-term use and presented with the articles for which they are intended, shall be classified with such articles when of a kind normally sold therewith. This rule does not, however, apply to containers which give the whole its essential character;". Therefore, as per rule 5(a), cases that are specially shaped or fitted to contain a specific item and such case is meant for long-term use and is imported & presented with such item, such case shall be classified with such device. This rule applies provided the case does not give essential character to the whole. Echo buds charging case is designed specially to house echo buds and is meant for long-term use and such case is normally presented with wireless ear buds. Considering the functions performed by the Echo buds, Echo buds gives essential character to the whole device (Echo buds with charging case). The Echo buds charging case is merely to house the echo buds and to charge them when placed inside the case. It also performs the function of initial pairing and factory reset, if required. ....
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....t, i.e., a single (monaural) over-the-ear earphone combined in the same housing with a microphone and radio reception/ transmission apparatus, enabling the headset to communicate wirelessly with other apparatus such as a telephone for cellular networks. According to the WCO classification opinion and Circular No. 36/2013-Customs, wireless headphones/ earphones are classifiable under CTH 8517 considering the principal function to be communication function for mobile telephony and by application of Section Note 3 to Section XVI which requires classification of multi-function machine as being the machine that performs the principal function. 3.5 The applicant also refers to WCO ruling [Harmonized System Committee (55th Session-March 2015)], wherein smart watches with a display, processor, main memory, etc. can fulfil several other functions, such as receiving, converting and sending or regenerating sounds, pictures or other data and hence by applying Section Note 3 to Section XVI, it merits classification under CTH 8517. Thus, it was held that smart watches by their functions go much beyond a simple watch and is acting as an extension of a phone; therefore, the principal function w....
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.... the electro-chemical action is reversible so that the accumulator may be recharged. They are used to store electricity and supply it when required. A direct current is passed through the accumulator producing certain chemical changes (charging); when the terminals of the accumulator are subsequently connected to an external circuit these chemical changes reverse and produce a direct current in the external circuit (discharging). This cycle of operations, charging and discharging, can be repeated for the life of the accumulator.". The applicant further states that based on the functioning of Echo Buds charging case read with HSN Explanatory Notes to CTH 8507, it can be said that the Echo Buds charging case is a rechargeable battery used for charging the earbuds. Thus, CTH 8507 appears to be the most appropriate classification for Echo Buds charging case; under CTH 8507, Echo Buds charging case does not fall under tariff items 8507 10 00 to 8507 50 00, which cover electric accumulators of a different kind; and Echo Buds charging case imported by the them contains Lithium-ion rechargeable batteries for charging the earbuds; thus at the tariff item level, tariff item 8507 60 00, '....
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.... Echo Buds charging case does not fall in category (ii) which covers Power Bank; moreover, Power bank, as is generally known and understood in common parlance, is a device that is used to charge various electronic devices like phones, tablets, etc .; the Echo Buds charging case imported by them has a rechargeable battery and is used to house the buds and charge them when they are placed inside the case; the Echo Buds charging case imported by them cannot be considered as a power bank merely because it is performing the function of charging the echo buds. It is also stated that if this interpretation is adopted then all goods of CTH 8507 60 00 may be considered as power bank, as all such goods are rechargeable batteries capable of charging other electronic devices. The applicant also states that Echo Buds charging case imported by them is not bought and sold in the market as a Power Bank. It is bought and sold as a charging case, meant specifically for Echo Buds only; unlike Power Bank that can charge various electronic devices, Echo buds charging case is specifically designed to charge only the Echo Buds and no other device; it also performs the function of pairing or resetting the....
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....mmissioners/Commissioners have concurred with the contention. He also stated that if earpiece is considered as noun and 'smart' is seen as an adjective then going by the principle adopted by the authority in previous rulings related to Echo family products, 8518 would be the correct classification for the device; however, smart is not an adjective rather 'Smart Earpiece' in itself is noun; therefore, appropriate classification for the Echo Buds should be 8517; the classification of Echo-Bud with charging case would also be the same since the case does not change the function or nature of the product. 5.2 Shri Laxmikumaran further submitted that Charging case on standalone basis, i.e. without Echo Bud merit classification under 85076000 as an accumulator rather than as static converter under 8504. He also emphasized on the difference between Charging case from a Power bank contending that both are accumulators but the charging case in question can only be used to charge Echo Buds and not used generically as a Power Bank. He also reiterated that Ear tips and Wing tips being made of silicone and not of rubber, merit classification under Chapter 39. 5.3 Written su....
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....hereby covering classification of headphones and earphones, whether or not combined with a microphone and capable of connecting through wireless medium. 6.2 Therefore, revised comments were invited from the applicant and the concerned Principal Commissioner/ Commissioner vide letter dated 18.02.2022. In reply, Principal Commissioner, Air Cargo Complex (Import), New Delhi has commented that the Finance Bill, 2022 had proposed to insert a specific sub-heading 85183011 for True Wireless Stereo Sound Channel not connected by Wire; since a specific heading would be available for wireless headphones/ earphones, Board's Circular dated 05.09.2013 would become redundant and the goods Echo Buds (2nd Gen) Model No. P6WE58 (left bud) and P6WE57 (right bud) as a complete product and Echo Buds on a stand-alone basis when imported separately as a spare item without charging case will be correctly classifiable under 85183011; this classification is supported by rule 3(a) of the General Rules for the Interpretation of Import Tariff, consequently exemption vide Sr. No. 20 of Notification No. 57/2017-Customs would not be applicable on import of these items. The Principal Commissioner of Custom....
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....sified as parts under CTH 8518; Ear tips/ Wing tips are intended to ensure secure and comfortable fit for the user; thus, acting as mere accessories to Echo Buds, accordingly cannot be considered as parts of Echo Buds; therefore, classification of these shall be under CTH 3926. As regards Echo Buds, it is lastly submitted that even if it is held that Echo Buds shall be classifiable under CTH 8518, it is stated that such classification can only be applied for post-amendment period i.e. w.e.f. 01.05.2022. Thereafter, second personal hearing has also been given to the applicant, keeping in view the legislative changes in the Customs Tariff Act brought in through the Finance Act, 2022 that are relevant to determination of question of classification posed for advance rulings. During the passage of the Finance Act, 2022, the process of advance ruling was kept in abeyance. 6.5 During the second personal hearing, Sh. Lakshmikumaran, Advocate submitted that they have already furnished additional submissions post Finance Bill, 2022; as per provisions under the Finance Act, 2022, there does appear to be legislative intent to cover the Echo Buds under heading 8518; however, Customs classifi....
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....y of SI. No. 20 of Notification No. 57/2017-Cus. dated 30.06.2017 (if the product is held to be classifiable in sub-heading 85176290) and applicability of SI. No. 528C of Notification No. 50/2017-Cus. dated 30.06.2017 on import of Echo Buds charging case, if the same is held to be classifiable under Sub-heading 85076000. 7.3 I first take up the issue of classification of Echo Buds as a complete set, consisting of left and right bud with charging case, 4 Ear tips and 2 Wing tips. The applicant has suggested classification under sub-heading 85176290, whereas the other contending classification is sub-heading 85183011, which has been proposed by Principal Commissioner of Customs, ACC (Import), New Delhi. Subsequent to the amendment carried out through the Finance Act, 2022; at the four digit level, heading 8517 covers TELEPHONE SETS, 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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....on of an item which is in the form of a set consisting of single (monoaural) over-the-ear earphone, whereas Echo Bud in question is clearly not such a device. Echo Bud as a device is reflective of transformative technological change resulting in new convergence devices on regular basis. Therefore, while determining the classification of Echo Bud reliance must be placed on the legislative change brought in through the Finance Act, 2022, which clearly provides that such goods wireless headphones and earphones be classified under heading 8518. This sovereign legislative action taken during the current year must also have primacy over WCO technical opinion that is almost a decade old. 7.6 Further, in their additional submission during the second PH, the applicant has contended that amendment at the sub-heading level under heading 8518 change the classification of Echo Buds since no amendment has been carried out at the four and six digit levels. I do not find substance in this argument, since the heading 8518 already covers headphones and earphones, whether or not combined with a microphone. The said description of headphone and earphones under the heading also covers both wired and....
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....l Commissioners/ Commissioners except one have concurred that the charging case containing Lithium-ion rechargeable batteries merit classification under heading/ sub-heading 8507/ 85076000; whereas Commissioner of Customs, Chennai- VII has suggested classification under sub-heading 8504 4090. 7.10 In order to decide the appropriate classification among the two contending heading proposed, I look at heading 8504 which covers ELECTRICAL TRANSFORMERS, STATIC CONVERTERS (FOR EXAMPLE, RECTIFIERS) AND INDUCTORS and heading 8507 which covers ELECTRIC ACCUMULATORS, INCLUDING SEPARATORS THEREFOR, WHETHER OR NOT RECTANGULAR (INCLUDING SQUARE). Since, charging case is a kind of electric accumulator, I find that heading 8507 is more appropriate. Within the said heading, sub-heading 8507 6000 covers lithium-ion type electric accumulators, which is the most appropriate eight digit classification for charging case containing Lithium-ion rechargeable batteries. 7.11 The fourth question relates to classification of Ear tips and Wing tips, which are made of silicone material. They are used for the best and comfortable fit of Echo Buds in the ears, which are of different sizes. The applicant ha....
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....y pack of cellular mobile phones). Issue to be examined, in this regard is as to whether Echo Buds charging case can be called as Power Bank. In this regard, it is observed that the purpose of a power bank is to recharge battery-powered electronics devices when you're on-the-go. A power bank is needed to keep various electronic devices charged. Thus, the name, 'Power Bank' refers to a portable device meant to keep other electronic devices charged so that the other devices are enabled to perform their respective function. In the instant case, Echo Bud charging case is a kind of power bank customized to be used solely for charging a specific device, viz. Echo Bud. I find that such customization of the power bank does not materially alter its primary function as power bank. Further, it is a settled principle of law that scope of exemption notifications must be read conservatively. Therefore, I find that the benefit of exemption vide serial number 528C of Notification No. 50/2017-Cus. dated 30.06.2017 is not admissible on import of Echo Buds charging case, which is a customized power bank. 9. In view of the above, I rule as following: 9.1 Echo Buds (Left and Right ....