Case Law Details
In re Qualcomm India Pvt Ltd. (CAAR Delhi)
CAAR held that that classification of the proposed items of import, Augmented Reality (AR) Device namely, Qualcomm heading X-Reality (QXR) version 1 (QXR v1) and version 2 (QXR v2) will be under Sub- 90318000 of the first schedule to the Customs Tariff Act, 1975.
FULL TEXT OF ORDER OF CUSTOMS AUTHORITY FOR ADVANCE RULINGS, DELHI
developing better product, while they are also capable of being marketed to general consumers in its present form.
5. Further, the applicant has stated that, they had imported a few samples on ‘Free of Cost’ basis, for use in product development and feature enhancement purposes; the subject good is designed for development of augmented reality (AR) technologies; Extended reality or XR, an umbrella category that covers a spectrum of newer, immersive but diverse technologies, including virtual reality, augmented reality and mixed reality; XR has enabled people to create, collaborate and explore in computer-generated environments like never before; virtual, augmented and mixed reality while being elements of XR technology, have distinct technologies and use cases; virtual reality puts users inside a virtual environment; VR users typically wear a headset that transports them into a virtual world —one moment they’re standing in a physical room, and the next they’re immersed in a simulated environment; the latest VR technologies push these boundaries, making these environments look and behave more like the real world; they’re also adding support for additional senses, including touch, sound and smell; with VR, gamers can become fully immersed in a video game, designers and customers can review building projects to finalize details prior to construction, and retailers can test virtual displays before committing to a physical one; augmented reality is when a rendered image is overlaid onto the real world; the mobile game Pokernon GO, famously brought AR to the mainstream by showing computer-rendered monsters standing on lawns and sidewalks as players roam their neighborhoods; AR graphics are visible through cell phones, tablets and other devices, bringing a new kind of interactive experience to users; navigating directions, for example, rather than following a 2D map, a windshield can super impose directions over one’s view of the road, with simulated arrows directing the driver exactly where to turn; in this technology, it is a transparent display that presents data to the user’s screen in front of their eyes, hence the user need not look away from their usual viewpoints; additional data displayed could be routes, location, plans, black spots, chats with other device users, and even 3D images and videos; Augmented Reality glasses based on this technology display 3D holograms overlaid on the real world where the user is located to render a mixed reality experience to the user; the hologram image is generated using light diffraction techniques; AR smart glasses are wearable computer-capable glasses that add extra information-ideally 3D images and information such as animations and videos to the user’s real-world scenes by overlaying the computer-generated or digital information on the user’s real-world; it can retrieve information from computers, smartphones, or other devices and can support WiFi, Bluetooth, and GPS; Mixed reality is a seamless integration of the real world and rendered graphics, which creates an environment in which users can directly interact with the digital and physical worlds together; with MR, real and virtual objects blend, are presented together within a single display; users can experience MR environments through a headset, phone or tablet, and can interact with digital objects by moving them around or placing them in the physical world; there are two types of MR: Mixing virtual objects into the real world — for instance, where a user sees the real world through cameras in a VR headset with virtual objects seamlessly mixed into the view, Mixing real-world objects into virtual worlds; the subject device is designed to showcase a form factor accurate representative of a commercial available AR that can be worn as an headset/goggles which has enabling features and this product is under constant development, for enhancing the available features; development activities include the device being worn either by an individual test user or a mechanized mannequin to track head movement and reactivity; the
network, headphone, earphone, camera, dual display etc. and these are capable of in wireless performing multiple functions of chapter 84 and 85 and different components performing different function are not presented separately but form an integral part of the subject gods, presented in conjunction with each other and none of them present to be the essential feature; the subject goods have features specified under various Chapter headings however these are self-contained devices presented as wearable device using headband/goggle comprising of, a snapdragon processor, PCB assembly, lenses, sensors, cameras, microphones, speakers, debug board, will/ network antenna, RAM, storage etc.; the Hon’ble Supreme Court in the case of H V Industrial Private Limited Vs. CCE&C, on deciding classification of ‘power controller’ held that the machine/ apparatus manufactured by the appellant is for controlling or regulating the electric current/power so as to feed the required quantum of current to the other equipment connected to the circuits. Apparatus “power controller” is capable of controlling the current/power in the circuit and therefore, definitely performs the individual function. Such machine or apparatus would fall under residuary entry 85.43 and not under 85.36; in the instant case, the applicant submits that heading 8543 includes Electrical Machines and Apparatus having individual functions, not specified or included elsewhere in this chapter, hence the subject good having Individual functions of various heading of Chapter 85 ought to be classified under 8507099, which is a residual entry., however, reference here may also be made to the USN Explanatory Notes to heading 85,43 which clearly mentions that in order to classify product under heading 85.43, the product should be electrical appliance and apparatus but not falling in any other heading of Chapter 85 and also it should not be covered more specifically by a heading of any other chapter of the nomenclature.
6.3 The applicant has also referred to ruling in the ease of Amazon Kindle device, wherein the Authority, in the case of Amazon Seller Services Pvt. Ltd, has analysed various tariff heading for classification and finally concluded that the said apparatus ought to be classified as device having individual functions under 8543; drawing reference to the EU BTI Ruling No. DEBTI 11350/20-1 dated 13-Jul-2020 wherein while classifying augmented reality system under 8543, it has held that, “Augmented reality system-consists of a device to be worn on the head with two transparent color displays, several cameras, motion and position sensors, a microphone and two loudspeakers, with one that can be connected via a cable, processing unit consisting of a processor, main memory and memory, graphics controller, Bluetooth and WLAN radio module in a housing with a battery, control element and USB connection as well as a wireless control unit, together with accessories (chargers, cables, tether, foam inserts) in a common retail case, the augmented reality system determines the character of the whole as “Electrical apparatus having its own function, not elsewhere specified or included in Chapter 85, not covered by codes 8543100000 to 8543709095”. The applicant has further stated that similarly, invocation and application of interpretative Rule 3 of the Rules of Interpretation to the Customs Tariff Act, is also not appropriate in this case, where the rule gets invoked when the goods are prima facie classifiable under two or more headings; heading 85.43 is residuary in nature covering; in as much the subject goods has individual features but none of which describes the essential feature and accordingly, the most appropriate classification, ought to be heading 8543.
7.1 Comments in the matter have been received from the concerned Commissionerate of Customs, wherein, it is inter-alia stated that, the applicant has concluded that the subject goods are classifiable under Sub-heading 85437099 which does not seem appropriate as on plain reading heading 8543 appears to cover Electrical Machines and apparatus which are having individual functions however the goods in question are not an electrical machine, the device is an electronic device using data services to perform functions like display, play video, make & receive phone call, navigation assistance etc.; the electrical device generally uses copper and aluminum wires for the flow of electrical current whereas electronic devices use semi-conductor material; therefore as per description of heading 8543, the subject goods do non appear to be classifiable under heading 8543. The comments of the concerned Commissionerate further stated that the subject goods uses data services to performed the functions through the applications installed in the product; the applicant has contest the classification under heading 8517, 8518, 8525 or 8528 on the basis that the subject goods has functionalities that are presented in a composite manner in conjunction with each other; as the machine is a composite machine, the classification will be determined on the basis of principal function as per Note 3 of Section XVI; the device functions in accordance with the machines covered in CTH 851762 as the device also receive and transmit the data, the device while playing video and audio regenerates voice, images
8.1 Personal hearing in the matter was held on 04.10.2023 wherein the authorized representative started with explaining the nature of work done by the applicant, in the field of electronics. He also briefed about the various features of the goods in question and mentioned that they anticipate difficulty in classification of the goods in question however it was stated that they have already imported these goods as a sample consignment and the same have been classified under heading 9004 and 8517. He further mentioned that in view of the constituents, functionality, it appears to them that goods in question merit classification under heading 8543. The authorized representative also reiterated the submissions made in the application for advance ruling. However, he was asked to submit the details of the constituents in one set of the goods, which the applicant intends to import, write-up on technical feature and functioning of the goods in question; and copy of Bills of Entry in respect of previous imports of the goods in question.
8.2 Thereafter, the applicant vide letter dated 14.10.2023 replied to the questions raised during the personal hearing and submitted a brief write up of technical feature and functioning of smart augmented reality device namely Qualcomm (QXR) version 1 and version 2, wherein it is inter-alia stated that, Qualcomm’s Augmented Reality (XR) viewer’s devices are form factor reference designs that are specially built to facilitate Qualcomm engineers in the development and testing of AR software and hardware technology; these devices will help in testing Augmented Reality hardware, software and fine tune the user experience to help Qualcomm customers accelerate their go-to-market strategy; Augmented Reality development platform contains hardware and software designed to support the functionalities of an Augmented Reality viewer to provide next generation hardware and software technology and tools to accelerate the development and testing of Augmented Reality devices; the device features a Qualcomm chipset that is engineered to deliver functionality for the development, testing, deployment and visual augmentation of the real world; it also allows to develop, test and measure products used for device development and is ideal for comparative testing of
9. I note that the applicant has been engaged in import of the goods in question, whereas in terms of Sub-section (b) of section 28E of the Customs Act, 1962, “Advance Ruling” means a written decision on any questions referred to in section 28H raised by the applicant in his application in respect of any goods prior to its importation or exportation. The present application has posed a question for advance ruling related to on-going activity however, I note that CAAR, New Delhi, had issued an Advance Ruling dated 05.10.2021 in the application for Advance Ruling filed by M/s. Spraytec India Ltd. wherein, while noting that the goods in question have been imported in the past, the Authority had also observed that the application for advance ruling relates to the on-going activity. However, a ruling by the Authority shall impart certainty to the issue of appropriate classification, provided that the jurisdiction of this Authority is not ousted by proviso to section 28-I (2) of the Customs Act, 1962. Thus, for certainty in the matter of classification of goods, I intend to issue ruling in the instant application recognizing the fact that the subject goods had earlier been imported as sample consignment.
10. Finding that the application is valid in terms of the provisions of the Customs Act and the CAAR Regulations, 2021, having heard the applicant, and recognizing the importance of timely pronouncement of rulings, I proceed to examine the question on merits. In this regard, it is also felt that reference to Harmonized Commodity
11.2 The Heading 8517 of the Import Tariff, which has been suggested by the concerned Commissionerate for classification of the goods in question, covers telephone sets, smartphones and other Telephone 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. However, it is the contention of the applicant that the subject goods do not have transmission or reception capability on its own; it obtains the transmission and reception capability, when connected with the mobile device/companion device; while reception, conversion and transmission of voice, images or other data is one of the functions performed by the said device, it also has multiple other primary functions.
11.3 I also note that the augmented reality technology relies on several advanced technologies including specialized hardware and software. It is also gathered as to how an augmented reality application works, depends on the sensory modality used for the computer-generated input and visual input is the most common augmented reality modality. From the literature available in the public domain on the Internet, it is also gathered that, sensors collect data about the environment, a software algorithm creates a virtual map of the environment, digital content is placed within the virtual map. In today’s environment when convergence of technology is the norm, every other device is multifunctional, and characteristics of these devices are such that they do not fit in the scope of a particular tariff heading. Moreover a number of functions performed by these device appears to be important and essential; the subject goods are also multifunctional devices however nature of goods and functions performed by various, components of the subject goods is such that it may not be feasible to say that any
tariff entries, based on specific functionality but no entry encompassing or detailing the item, based on specific description. It is also gathered that the applicant is of the view that the relevant tariff headings for classification of the subject goods are 8471 or 8517 or 8518 or 8525 or 8528 or 8543 or 9004. however, I have also noted that the applicant has rightfully observed that in the subject goods different components performing different function are not presented separately but form an integral part of the subject goods, presented in conjunction with each other and none of them present to be the essential feature; the subject goods have features which are specified under various Chapter headings. The Explanatory notes of heading 9031 inter-alia provides that the heading includes measuring or checking instruments, appliances and machines, also covering optical type measuring and checking appliances and instruments. Thus, it is beyond doubt that the subject goods are performing functions of measuring, checking, image generation using light diffraction technique etc., and devices performing such functions merit classification under heading 9031. Thus, heading 9031 is also one of the relevant heading for classification of such goods. In the event of inapplicability of rule 3(a) and 3(b) of GRI for classification of the subject goods, thus taking recourse to rule 3(c) of GRI, goods merit classification under the heading which occurs last in the numerical order.
12. Keeping in view the foregoing, I am of the view that classification of the proposed items of import, Augmented Reality (AR) Device namely, Qualcomm heading X-Reality (QXR) version 1 (QXR v1) and version 2 (QXR v2) will be under Sub- 90318000 of the first schedule to the Customs Tariff Act, 1975.
13. I rule accordingly.
