Case Law Details
In re Samsung India Electronics Private Limited (CAAR Mumbai)
M/s Samsung India Electronics Private Ltd (IEC No.: 0595032818/33) (hereinafter referred to as the ‘Applicant’) filed an application for advance ruling in the Office of Secretary, Customs Authority for Advance Ruling (CAAR) Mumbai on 08.01.2024. The applicant seeks as to whether the Assy Cover Display for Refrigerator are classifiable under the Custom Tariff Item (CTI) 85371000 or otherwise.
Submission by the Applicant:
2.1 M/s. Samsung India Electronics Private Ltd (hereinafter referred to as “the Applicant”), is a private limited company registered in India under Companies Act, 1956. The Applicant is engaged in the manufacture and trading of mobile phones, tablets, televisions, home appliances and computers. The Applicant is, inter alia, engaged in the manufacture of refrigerators and are importing “Assy Cover Display: RS8000CCH, SG, F-HUB 7” (Model No. DA.97- 20810Y) (hereinafter referred to as “subject goods”) for use in assembly/manufacture of refrigerators.
2.2 The Assy Cover Display is an assembled unit with sub parts such as LCD display, Touchscreen, PCB-ASSEMBLY, Sensor, microphone, speaker and inbuilt WIFI+Bluetooth module. The subject goods are used as parts on the front side of the Applicant’s SBS (Side by Side) model refrigerator door. It is a premium feature of SBS refrigerator. It can be used by the customer for additional multimedia and entertainment needs as well.
2.3 The subject goods have the following specifications.
a) 27.5″ Glass and a touch panel which is 21.5″ FHD LCD.
b) Wi-fi bluetooth, etc.
c) 2Mic for voice recognition and recording function.
d) 2mp ultrawide camera for imaging inside the refrigerator
e) speaker for listening to high quality music.
f) a USB port and an LCD reset switch.
g) CPU-S922 x(SOC)-Quad Core-1.7 GHz
h) Operating System
i) Memory 16 GB eMMC, 3.0 GB LPDDR4
2.4 Based on the above specifications, the subject goods have the following features:
a) Temperature Control of Freezer/Fridge Compartment Setting up of the cooling temperature (Increase or Decrease). Without Assy Cover Display, cooling temperature set point cannot be setup or changed. Temperature control is the most important features for these types of Refrigerators, considering its size and capability to store goods. Similar refrigerators which do not come with Assy Cover Display, will have separate Assy Cover Control which will be affixed in fridge to control the temperature.
b) Multimedia (Video, Music, Drawing, Viewing Images).
c) Access through mobile app (Samsung – Smart Things App) which helps the user to control and monitor the fridge remotely, receive notifications and interact with other smart homes.
d) Viewing error logs and troubleshooting of the refrigerator.
2.5 The features and specifications of the subject goods along with photograph are provided herein below:
| Display | 21.5″ Full HD(1080*1920), SOFT KEY BUTTON |
| TOUCH | 215 Capacitive Sensing(40, Three fingers) |
| CPU | S922x(SOC), Quad core, 1.7GHz |
| Memory | 16GB eMMC, 3.0GB LPDDR4 |
| Sound | SPEAKER (25W) |
| Connectivity | WiFi + BT Combo B to B module (2.4 GHz/5GHz) |
| Etc | Digital MIC 2EA |
| Input voltage | DC 12V |
| MAX A | 4A(MAX Volume/Brightness) |
2.6 In addition to the various interactive features enumerated above, the subject goods are used in SBS Refrigerator to principally control/set the temperature of Freezer/Fridge Compartment. It does not have an inbuilt self-cooling function but provides the signal to the Control Board to operate/set the desired temperature in the SBS refrigerator. The control PBA is assembled on the rear side of SBS refrigerator, and it provides signals through Micro controller ICs with the help of relevant software. Hence Refrigeration cycle operations will be processed as per Control PBA. operations in Refrigerator and not through Assy Cover Display. The subject goods are thus used to provide the control signals to the Control PBA for setting the desired temperature.
2.7 The predominant function of the subject goods is as a Fridge Manager. On the home screen of the subject goods, there is a Fridge Manager Application which can help set the desired temperature or modes for each compartment (Freezer & Ref). Also, it has some special functions mentioned below:
2.8 The display screen is touch sensitive and permit other input devices to be connected through various ports, thereby exhibiting the functions of an ‘interactive display’.
3. Applicants interpretation of Law/Facts:
3.1 The Applicant submitted that classification of goods is done in accordance with GRI 1 i.e., through the primacy of terms of headings and Section Notes and Chapter notes. When the nature and description of goods match the terms of headings in a chapter and further the goods fall within the scope of Section notes and Chapter Notes of the Customs Tariff, such goods are classifiable as per Rule I of GRI.
3.2 In the case of Commissioner of Customs vs. Wood Craft Products Ltd., (1995) .77 ELT 23 (S.C.) the Hon’ble Supreme Court of India held that in case of doubt, FISN is a safe guide for ascertaining true meaning of any expression used in the Act, unless there is an express different intention indicated in the Customs Tariff itself. The same view has been taken by the Hon’ble Supreme Court in the case of Collector of Customs, Bombay v. Business Forms Ltd. Mr. 0.L., 2002 (142) E.LT. 18 (S.C.). Therefore, to further interpret the relevant Headings, Sub-Headings and Section Notes under the First Schedule of the Customs Tariff, reliance can also be placed on the Explanatory Notes to the HSN.
3.3 In O.K. Play (India) Ltd v CCE, 2005 (180) E.LT. 300 (S.C.) the Hon’ble Supreme Court made the following observations:
a) There cannot be a static parameter for correct classification.
b) HSN along with the explanatory notes provide a safe guide for interpretation of an Entry.
c) Functional utility, design, shape and predominant usage have also got to be taken into account while determining the classification of an item.
d) Afore-stated aids and assistance are more important than the names used in the trade or common parlance in the matter of correct classification.
Classification of parts of machinery/ appliances of Chapter 84
3.4 The Applicant submitted that the subject goods are used as a part in Side-By-Side door refrigerator. Schedule I to the Tariff Act is divided into various sections, which are in turn divided into various chapters. Section XVI covers “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”. Chapter 84 falls under Section XVI and covers “Nuclear reactors, boilers, machinery and mechanical appliances; parts thereof’.
3.5 Classification of parts of machinery/appliances of Chapter 84 must be done in accordance with the stipulations in Note 2 to Section XVI. It is apparent that parts which are specifically covered under any of the Heading of Chapter 84 or 85 must be classified in their respective headings as per Note 2(a) to Section XVI. Only those parts which are not classifiable under Note 2(a) will be classified in terms of Note 2(b) and Note 2(c).
3.6 It is settled position of law that classification of parts can be made in terms of Note 2(b) or to Section XVI only if classification of such part cannot be made as per Note 2(a) to Section XVI. Thus, Clauses (a), (b) and (c) of Note 2 are to be applied in a sequential manner. The said position has also been affirmed by the Hon’ble Supreme Court in CCE v. Delton Cables Lfcl, 2005 (181) E.LT. 373 (S.C.) wherein, it was held that one cannot therefore directly jump over to Note without exhausting the possibility of Note 2(a).
Classification of the subject goods as controlling apparatus under CTI 8537 1000
3.7 Schedule 1 to the Tariff Act is divided into various sections, which are in turn divided into Various chapter. Section XVI covers “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”.
3.8 Chapter 85 is placed under Section XVI and covers “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”. Under Chapter 85, CTH 8537 specifically covers “Boards, panels, consoles, desks, cabinets and other bases, equipped with two or more apparatus of CTH 8535 or 8536. for electric control the distribution of electricity, including those incorporating instruments or apparatus of chapter 90, and numerical control apparatus, other than switching apparatus of CTH 851 7″. Relevant portion of the Chapter Heading 8537 is extracted hereunder for ease of reference:
| Tariff item |
|
Description | |
| 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 | ||
| 8537 10 00 | — | For a voltage not exceeding 1,000 V | |
| 8537 20 00 | — | For a voltage exceeding 1,000 V | |
3.9 A detailed explanation of products covered under CTH 8537 with examples are given in HSN Explanatory Notes which is reproduced below.
“These consist of an assembly of apparatus of the kind referred to in the two preceding headings (e.g., switches and fuses) on a board, panel, console, etc., or mounted in a cabinet, desk, etc. They usually also incorporate meters, and sometimes also subsidiary apparatus such as transformers, valves, voltage regulators, rheostats or luminous circuit diagrams. The goods of this heading vary from small switchboards with only a few switches, fuses. etc. (e.g., for lighting installations) to complex control panels for machine-tools, rolling mills, power stations, radio stations, etc., including assemblies of several of the articles cited in the text of this heading. The heading also covers:
(1) Numerical control panels with built-in automatic data processing machine, which are generally used to control machine-tools.
(2) Programmed switchboards to control apparatus; these permit variations in the choice of operations to be followed. They are normally used in domestic electrical appliances, such as washing machines and dish washers.
(3) “Programmable controllers” which are digital apparatus using a programmable memory for the storage of instructions for implementing specific functions such as logic, sequencing, timing, counting and arithmetic, to control, through digital or analog input/output modules, various types of machines. The heading does not cover cnitotnatic controlling apparatus of heading 90.32.”
3.10 It can be seen that the tariff Heading (CTH) 8537 covers apparatus for control and distribution of electricity. It also specifically covers numerical control panels with built in automatic data processing machines. Similarly, programmed switchboards to control domestic appliances are covered under this heading.
3.11 The subject goods are an assembled unit with sub parts such as LCD display, Touchscreen, PCB-ASSEMBLY, Sensor, microphone, speaker and inbuilt WIFI+Bluetooth module. It has multiple fictions of Touch Screen & Wi-fi-Bluetooth Connectivity, temperature control, multimedia, access through mobile app and view error logs and troubleshooting of the refrigerator. As could be seen from the technical features of the subject goods, it is used predominantly as a Fridge Manager to control various operations in the refrigerators and even among these features, the temperature control is the primary function of the subject goods. Thus, amongst all the functions managed, the primary/essential function of the subject goods is to control/ set temperature of the 1:ridge/Freezer compartment of the refrigerator. The subject goods mainly contain the control panel to set/control temperature of the Fridge/Freezer compartment incorporated into a Flat panel display. It is apparent from the HSN Explanatory Notes cited supra that the control panel used to control various parameters with in-built automatic data processing machines or programmed switchboard to control the apparatus are classifiable under CTH 8537. The essential character of the subject goods is rendered by the controlling feature, as the temperature inside the fridge cannot be changed beyond those given in the default option. Thus, the subject goods which are primarily used to control the temperature correctly merit classification under CTI-1 8537.
3.12 Further, as the subject goods are a composite machine consisting of LCD display, control panel, sensor, speaker etc., reliance is placed on Note 3 to Section XVI. The relevant portion of the Section Notes is reproduced below for ease of reference:
“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.
3.13 From the above, it can be seen that composite machines designed for the purpose of performing complimentary or alternative functions are to be classified on the basis of the principal function of the said machine. In the present case, the principal function of the subject goods is to control the temperature of the refrigerator. Thus, on the basis of principal function stated supra, the subject goods are to be classified as a controlling apparatus. Therefore, by application of Note 3 to Section XVI the subject goods merit classification under CTH 8537 as a controlling apparatus.
Alternatively, the subject goods are classifiable under CTH 8471.
3.14 CTH 8471 optical readers, processing such 71 covers “Automatic data processing machines and units thereof; magnetic or machines for transcribing data on to data media in coded form and machines for data, not elsewhere specified or included”.
3.15 In order to determine the classification of the subject good under Chapter 84, reference is made to Note 6 to Chapter 84. The relevant portion of the same is extracted below for ease of reference:
“6. (A) or the purposes of heading 8471, the expression “automatic data processing machine ” means machine capable of
(i) storing the processing programme or programmes and at least the data immediately necessary for the execution of the programme
(ii) being freely programmed in accordance with the requirements of the user;
(iii) performing arithmetical computations specified by the user; and
(iv) executing, without human intervention, a processing programme which requires them to modify their execution, by logical decision during the processing run;
(B) Automatics data processing machines may be in the form of systems consisting of a variable number of separate units.
(D) Heading 8471 does not cover .the following when presented separately, even if they meet all of the conditions set forth in paragraph (C):
(i) printers, copying machines, facsimile machines, whether or not combined;
(ii) 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);
(iii) loudspeakers and microphones,
(iv) television cameras, digital cameras and video camera recorders;
(v) monitors and projectors, not incorporating television reception apparatus.
(E) MacInnes incorporating or working in conjunction with an automatic data processing machine nd performing a specific function other than data processing are to be classified in the hidings appropriate to their respective functions or, failing that, in residual headings “
3.16 Further, the HSN Explanatory Notes to CTH 8471 are also extracted below:
“(1) AUTOMATIC DATA PROCESSING MACHINES AND UNITS THEREOF Data processing is the handling of information of all kinds, in pre-established logical sequences and for a specific purpose or purposes.
Automat data processing machines are machines which, by logically interrelated operation performed in accordance with pre-established instructions (program) furnish data which can be used as such or, in some cases, serve in tum as data ,for other data process operations.
This hear mg covers data processing machines in which the logical sequences of the operation can be changed from one job to another, and in which the operation can be automatic, that is to say with no manual intervention for the duration of the task. These machines mostly use electronic signals but may also use other technologies. They may be self-contained, all the elements required for data processing being combined in the same housing, or they may be in the form of systems consisting of a variable number f separate units. This heading also covers separately presented constituent units of automatic data processing systems described above.
However, the heading excludes machines, instruments or apparatus incorporating or working in conjunction with an automatic data processing machine and performing a specific function Such machines, instruments or apparatus are classified in the headings appropriate to their respective functions or, failing that, in residual headings (See Part (E) of the General Explanatory Note to this Chapter).
(A) AUTOMATIC DATA PROCESSING MACHINES
The automatic data processing machines of this heading must be capable of simultaneously the conditions laid down in Note 5 (A) to this Chapter. That is to say, they must be capable of:
(1) Storing the processing program or programs .and at least the data immediately necessary for the execution of the program:
(2) Being freely programmed in accordance with the requirements of the user:
(3) Performing arithmetical computations specified by the user,. and
(4) Executing, without human intervention, a processing program which requires them to modify their execution, by logical decision during the processing run. Thus, machines which operate only on fixed programs, i.e., programs which cannot be modified by the user, are excluded even though the user may be able to choose between a number of such fixed programs.”
3.17 It can be seen from above that certain conditions need to be satisfied for a machine to be treated as an Automatic Data Processing machine of CTH 8471. The subject goods contain a Quad Core processor with memory and an operating system. These can perform the function of a multimedia computer by playing music, displaying images, recording audio etc. Moreover, these goods are freely programmable (though not the end user i.e., the customer) by people skilled in art (trained personnel) and have a stored program that executes automatically without human intervention. Furthermore, the subject goods logically perform the operations in accordance with the pre-‘eqablished set of instructions (program) to execute the same without human intervention. There is an input unit, processing unit and an output unit .all in-built into one. Therefore, it appears that these products satisfy the conditions prescribed for a machine to be treated as-an-Automatic Data Processing (ADP) machine.
3.18 In this context, it becomes relevant to see if the subject goods arc covered under any of the exclusions in terms of Note 6(1)) and 6(E) to Chapter 84 which are reproduced below:
“(D) Heading 8471 does not cover the following when presented separately, even U. they meet all of the conditions set forth in paragraph (C):
(1) printers, copying machines, facsimile machines, whether or not combined,.
(ii) apparatus for the transmission or reception of voice, images or other data, including apparat s for communication in a wired or wireless network (such as a local or wide area network)
(iii) loudspeakers and microphones;
(iv) television cameras, digital cameras and video camera recorders;
(v) monitors and projectors, not incorporating television reception apparatus.
(E) Machines incorporating or working in conjunction with an automatic data processing machine and performing a specific function other than data processing are to be classified in the headings appropriate to their respective functions or, failing that, in residual headings.”
3.19 In the present case, neither are the subject goods principally meant for transmission or reception of voice, images or other data in a network, nor are they communication equipment. While the touch screen, voice commands etc. act as input devices, the processor and the display act as CPU and output units combining into an ADP system. Therefore, these goods are not hit by the exceptions contained under Note 6(D).
3.20 Note 6(E) provides that “Machines incorporating or working in conjunction with an automatic data processing machine and performing a specific function other than data processing are to be –classified in the headings appropriate to their respective functions or, failing that, in residual headings”.
3.21 According to Note 6(E) supra, goods which not only incorporate an ADP machine but also perform a specific function which is other than data processing, are to be classified in the headings appropriate to their respective functions. In view of the same, the subject goods could be considered as performing specific function of controlling the temperature of the fridge and could be classifiable under CTH 8537 as controlling apparatus as already submitted above. However, if the subject goods cannot be treated as a controlling apparatus classifiable under CTH 8537, then the subject goods can be treated as an ADP machine classifiable under 8471. Thus, the Applicant is of the view that the subject goods are alternatively classifiable under CTH 8471 as an ADP machine if the same are not classifiable as controlling apparatus under CTH 8537.
3.22 Further, since the subject goods are imported as parts used in SBS refrigerator and are in the form of flat panel display, it is relevant to see if they can be classified as parts of refrigerators under CTH 8418, flat panel display modules under CTH 8524 and as monitors under CTH 8528.
Classification of subject goods as parts of refrigerators under CTH 8418.
3.23 The Applicant is of the view that the subject goods cannot be classified as parts of refrigerators under CTH 8418 due to the application of Note 2 to Section XVI cited supra. The subject goods are squarely covered by Note 2(a) to Section XVI. The relevant note is extracted below:
“Parts which are goods included in any of the headings of Chapter 84 or 8_5: (other than headings 84.09, 84.31, 84.48, 84.66, 84.73, 84.87, 85.03, 85.22, 85.29, 85.38 and 85.48) are in all cases to be classified in their respective headings”.
3.24 Therefore, the subject goods are classifiable as controlling apparatus under CTI–I 8537 and Note 2(b) to Section XVI is not applicable in the instant case.
Classification of subject goods as Flat panel Display modules under CTH 8524.
3.25 CTI-I 8524 covers “Flat panel display modules, whether or not incorporating touch-sensitive screens”. Further, the Chapter Note 7 that describes the scope of heading 8524 states,
“For the purposes of heading 8524, ‘flat panel display modules” refer to devices or apparatus for the display of information, equipped at a minimum with a display screen, which are designed to be incorporated into articles of other headings prior to use. Display screens for flat panel display modules include, but are not limited to, those which are flat, curved, flexible, foldable or stretchable in form. Flat panel display modules may incorporate additional elements, including those necessary for receiving video signals and the allocation of those signals to pixels on the display. However, heading 8524 ewes not include display modules which are equipped with components for convening video signals (e.g., a scaler IC, decoder IC or application processer) or have otherwise assumed the character of goods of other headings.
For the classification of flat panel display modules defined in this Note, heading 8524 shall take precedence over any other heading in the Nomenclature.
3.26 It can be seen that while “flat panel display modules” of CTH 8524 cover displays which are designed to be incorporated into articles of other headings, it does not include display modules equipped with additional components for converting video signals and application. processor. In the present case, the subject goods incorporate components for receiving Bluetooth signals from other systems such as mobile phones and smart home apps and also comes with an inbuilt application processor. Therefore, the Applicant is of the view that the subject goods dc not merit classification as “flat panel display modules” under CTH 8524.
Classification of subject goods as Monitors under CTH 8528
3.27 CTH 8528 covers “Monitors and Projectors, not incorporating television reception apparatus, reception apparatus for television, whether or not incorporating radio-broadcast receivers or sound or video recording or reproducing apparatus.” The relevant l-ISN Explanatory Notes for the said heading are extracted below:
“(B) MONITORS OTHER THAN THOSE CAPABLE OF DIRECTLY CONNECTING TO AND DESIGNED FOR USE WITH AN AUTOMATIC DATA PROCESSING MACHINE OF HEADING 84.71
This group includes monitors which are capable of receiving signals when connected directly to the video camera or recorder by means of composite video, s-video or co- axial cables, so that all the radio frequency circuits are eliminated. They are typically used by television companies or for closed-circuit television (airports, railway stations, factories, hospitals etc.). They can, moreover, have separate inputs for red (R), green (G) and blue (B), or b s coded in accordance with a particular standard (NTSC, SEC AM, PAL, D-M4C, etc.). For reception of coded signals, the monitor must be equipped with a decoding device covering (the separation of) the R, G and B signals. They are not fitted with connectors characteristic of data processing systems, and they do not incorporate tilt, swivel and height adjusting mechanisms, glare-free surfaces, flicker-free display, and other ergonomic design characteristics to facilitate prolonged periods of viewing at close proximity to the monitor. They do not incorporate a channel selector or video tuner.
3.28 Based on the above HSN Explanatory Notes, it can be concluded that the subject goods cannot be classified under CTH 8528 as Monitors, as these perform functions more than merely that-of displaying images. Moreover, these do not incorporate separate R/G/B analog inputs, are not coded for NTSC/SECAM/PAL/D-MAC standards and do not have any decoding device for reception of coded signals. The subject goods do not have any inputs to receive these signals in the first place which are the functions of a TV Monitor. Thus, for these reasons, the Applicant is of the view that the subject goods do not merit classification as Monitors under CTI-1 8528.
3.29 Therefore, in view of the aforementioned, the Applicant is of the bona fide view that tariff Item 8537 1000 is the most suitable classification for the subject goods.
4. Port of Import and reply from jurisdictional Commissionerate:
4.1 The appli6ant in their CAAR-1 indicated that they intend to import the subject goods i.e.
Assembly Cover Display at the jurisdiction of Office of the Commissioner of Customs, Import-II, Chennai. The application was forwarded to the Office of the Commissioner of Customs, Import-Il, Chennai Customs for their comments on 17.01.2024. The Chennai Import Customs Commissionerate vide their letter dated 01.03.2024 submitted that the subject goods do not primarily function as a control panel and(or) switchboard and does not appear to be rightly classifiable under CTH 8537. Further, the main function of the subject goods is interaction through display. Essentially, it acts as a display monitor, meaning that you can select to view documents. pictures, videos and even web links on a large scale. Thus, the subject goods cannot be considered as an Automatic Data Processing machine under CTH 8471. The principal function of the item is to interact through display and hence the goods appears to be classifiable under Chapter Heading 8528 which deals! With other monitors.
5. Details of Personal Hearing:
5.1 A personal hearing was held on 28.05.2024 at 11:30 AM. Shri Rohan Muralidharan, (Advocate) and Shri Suresh K., Manager (Customs Compliance), Samsung appeared for the hearing. They reiterated the contention filed with their application. They mainly contended that the subject import good is “Assembly Cover Display” with smart functioning. It contains CPU, Storage Capacity RAM a d operating system, mainly to be used in refrigeration control panel. They submitted that th subject goods merit classification under CTI 8537100. Alternately, they also suggest the subject goods may fall under the chapter heading 8471. Nobody appeared from the department side for PH.
Additional Submission
6.1 The Applicant vide their additional submission letter dated “NIL” has submitted that that the subject goods satisfy the conditions prescribed under Note 6 to Chapter 84 and are classifiable under Tariff Heading 8471 by application of GIR 1 to the First-Schedule. Further, the Ld, Authority has in the past considered the classification of similar products and held that 1:he goods are classifiable under Tariff Heading 8471 41 90. Reliance in this regard is placed on IN RE: M/s. Brightpoint India Pvt. Ltd. [2023 (6) TMI 657 – AUTHORITY FOR ADVANCE RULINGS CUSTOMS, MUMBAIJ. In the said Ruling, the Interactive Display Systems were classified under Tariff Heading 8471. They also placed reliance on the following decisions of the Ld. Authority:
a. M/s. Supertron Electronics Pvt. Ltd, [2023 (6) TMI 652 – AUTHORITY FOR ADVANCE RULINGS CUSTOMS, NEW DELHI]
b. M/s. Audio Distribution House Pvt. Ltd. [2022-VIL-02-AAR-CUJ
c. M/s. Compuage Info corn Ltd. [2022-VIL-57-AAR-CUJ
d. Ingram Micro India Ltd. Versus Principal Commissioner of Customs (import) — [(2023) 2 Centax 62 (Tri.-Del.)J
e. In Re: Lenovo India Pvt. Ltd. [2023 (386) E.L.T. 794 (A.A.R.- Cus.- Mum.)]
DISCUSSION AND FINDINGS
7.1 I have considered all the materials placed before me in respect of the subject goods. I have gone through the submissions, additional submission and submission made by the applicant during the personal hearing. I have also gone through the response received from the Chena Customs Commissionerate. Therefore, I proceed to pronounce a ruling on the basis of information, available. on record as well as ‘existing legal framework.
7.2 The Applicant has sought advance ruling in respect of the–following questions:
a. Whether the product `Assy Cover Display’ is classifiable under CTI 8537.000 or otherwise?
7.3 At the outset, i find that the issue raised in the Form CAAR-1 is squarely covered under Section 28H(2) of the Customs Act, 1962 being a matter related to classification of goods under the provisions of this Act.
7.4 The applicant submitted that the subject goods i.e. Assy Cover Display is an assembled unit with sub parts such as LCD display, Touchscreen, PCB-ASSEMBLY, Sensor, microphone, speaker and inbuilt WIFI+Bluetooth module. The subject goods are used as parts on the front side of the Applicant’s SBS (Side by Side) model refrigerator door. It is a premium feature of SBS refrigerator. It can be used by the customer for additional multimedia and entertainment needs as well. The subject goods are used in SBS Refrigerator to principally control/set the temperature of Freezer/Fridge Compartment. It does not have an inbuilt self-cooling function but provides the signal to the Control. Board to operate/set the desired temperature in the SBS refrigerator. The control PBA is assembled on the rear side of SBS refrigerator, and it provides signals through Micro controller Cs with the help of relevant software. Hence Refrigeration cycle operations will be processed as er Control PBA operations in Refrigerator and not through Assy Cover Display. The subject goods. are thus used to provide the control signals to the Control PBA for setting the desired temperature. The predominant function of the subject goods is as a Fridge Manager.
7.5 Before deciding on the issue, let me deliberate on the legal framework prescribed in Customs Tariff Act, 1975, Chapter/ Section notes along with HSN explanatory notes. As per Rule 1 of GRI, 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.
7.6 I find that the applicant has proposed that the subject goods i.e. Assy Cover Display can be classified under CTI 85371000. However, I also find that the applicant has, also submitted competing Tariff Heading 8471, 8528 and 8418.
7.7 Now, .1 take up issue to examine the aspects of classification of the product i.e. Assy Cover Display under CT[ 85371000 as proposed by the applicant. The applicant has submitted that the goods in question as “Assy Cover Display” which is an assemble unit with subparts such as LCD Display, Tocuh Screen, PCB Assembly, Sensor, Microphone, Speaker and inbuilt WIFI+Bluetooth module which will be used to control the temperature inside the refrigerator as major function and for some entrainment purpose. I note that the applicant has proposed to classify the goods in question under Chapter Heading 8537 which specifically covers “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″. The applicant has also stated that the Assy Cover Display has specific use for control of temperature inside the refrigerator as a part of the refrigerator.
7.7.1 I note that, the Explanatory Note for CTH 8537 provides that,
8537.10 -For a voltage not exceeding 1,000 V
8537.20 -For a voltage exceeding 1,000 V
These consists of an assembly of apparatus of the kind referred to in the two preceding headings (e.g., switches and flues) on a board, panel, console, etc., or mounted in a cabinet, desk, etc. They usually also incorporate meters, and sometimes also subsidiary apparatus such as transformers, valves, voltage regulators, rheostats or luminous circuit di grams.
The good of this heading vary from small switchboards with only a few switches, fuses, etc. e.g., for lighting installations) to complex control panels for machine tools, rolling mills, power stations, radio stations, etc., including assemblies of several of the articles cited in the text of this heading.
The heading also covers:
(1) Numerical control panels with built-in automatic data processing machine, which are generally used to control machine-tools.
(2) Programmed switchboards to control apparatus; these permit variations in the choice of operations to be followed. They are normally used in domestic electrical appliances, such as washing machines and dish washers.
(3) “Programmable controllers” which are digital apparatus using a programmable memory for the storage of instructions for implementing specific functions such as logic, sequencing, timing, counting and arithmetic, to control, through digital or analog input/output modules, various types of machines.
The heading does not cover automatic controlling apparatus of heading 90.32.
PARTS
Subject to the general provisions regarding the classification of parts (see the General Explanatory Note to Section XVI), parts of the goods of this heading are classified n heading 85.38.
On plain reading of the above Explanatory Note, it is apparent that the heading 8537 covers individual apparatus/instrument when it is used solely or on standalone basis for control and/or distribution of electricity. However, as per technical specification and details- provided by the applicant about the product, the primary function of the product i.e. Assy Cover Display is to control the temperature inside the refrigerator.
7.7.2 The applicant also stated that it does not have an inbuilt self-cooling function but provides the signal to Control Board to operate/set the desired temperature in refrigerator and the Control Board is assembled on the rear side of the refrigerator. Thus, it is evident that Assy Cover Display cannot function on their own. In fact, the subject goods are used to provide the control signals to the Control Board for setting the desired temperature.
In light of the above, I note that the goods in question is not stand-alone item/apparatus rather these are goods to be used only as parts of the main apparatus/equipment i.e. Refrigerator. Moreover, it appears. that functioning of “Assy Cover Display” is .dependent upon functions performed.by other parts/components of the Refrigerator. Thus, the goods in question would merit classification as parts and not as apparatus falling under its own appropriate heading.
7.7.3 The Explanatory Notes to CTH 8537 also provides that “parts of the goods of this
arc to be classified heading 85.38″. Thus, it is more clear that the heading 85.37 covers only apparatus/equipment for control and distribution of electricity and not the parts of the goods as parts of its heading are also classifiable under heading 85.38. Therefore, it can be concluded that the subject goods being a part of the refrigerator which will be used for control of temperature inside the refrigerator, cannot be classifiable under CTI4 8537 as these heading covers only apparatus/equipment for control or distribution of electricity.
7.7.4 The Applicant contended that subject goods are squarely covered by Note 2(a) to Section XVI and there re, the subject goods is rightly classifiable under CTH 8537. The relevant Note 2(a) is extracted below:
parts -w rich are goods included in any of the headings of Chapter 84 or 85 (other than headings 8409, 8431, 8448, 8466, 8473,8487, 8503, 8522, 8529, 8538 and 8548) are in all cases to be classified in their respective headings;
In view of above, Note 2(a) provides that the parts which are goods included in any of the
headings of Chapter 84 or 85 are to be classified in their respective headings. Therefore, condition to classify any part in its respective heading is that, it should be goods which is included in any heading of Chapter 84 or 85 which means it should be clearly listed in Chapter 84 or 85.For example, Gas Compressor is a part of Air Conditioning Machine, however, as per Note 2(a), as it is included the headings of Chapter 84 , it is rightly classifiable under chapter heading 8414 which covers “Air or Gas Compressors”. However, as discussed above, the impugned goods i.e. “Assy Cover Display” are not included in any of the headings of Chapter 84 or 85 and hence could not be classifiable as per above Note 2(a).
7.7.5 It is evident that Chapter 8537 covers assembly of apparatus of the kind referred to Chapter 8535 and 8536 (e.g. switches and fuses) on a board, panel, console, etc., or mounted in a cabinet, desk, etc. for electric control or distribution of electricity. Further, as discussed above, it is evident that that this heading deals with goods vary from small switchboards with only a few switches, fuses, etc. to complex control panels for machine tools, rolling mills, power stations, radio stations. etc. Therefore, in conjunction reading of the above, it is evident that the goods covered in Chapter 8537 and the impugned goods i.e. “Assy Cover Display” .which is used to control the temperature inside the refrigerator compartment are quite different. Further, there is no specific entry in chapter heading 8537 for the subject goods i.e. “Assy Cover Display” which is actually a part of the refrigerator embedded with various component like touch panel, Bluetooth, camera, speaker, USB port, sensor along with operating system. Hence, the impugned goods i.e. Assy Cover Display does not appear classifiable under Chapter Heading 8537.
7.8 Now, I take up issue to examine the aspects of classification of the product i.e. Assy Cover Display under CTH 8471 of the Customs Tariff Act, 1975.
7.8.1 I note that CTH 8471 covers, “Automatic data processing machines and units thereof magnetic or optical readers, machines for transcribing data onto data media in coded form and machines for processing such data, nut elsewhere specified or included”.
Further, Chapter Note 6 (E) to Chapter 84 states that, “Machines incorporating or working in conjunction with an automatic data processing machine and performing a specific function other than, data processing are to be classified in the headings appropriate to their respective functions”.
7.8.2 The Applicant contended that subject goods contain an operating system and same can perform logical operations with the pre-established set of instructions without human intervention. Th subject goods contains input unit, processing unit And, out put unit, therefore, it can be considered as an Automatic Data Processing (ADP) machine and same can be classifiable under CTH 8471 as an ADP machine.
7.8.3 I note that as per technical specifications and details of the goods, primary function of the product i.e. Assy Cover Display, is to control the temperature inside the refrigerator which is other than data processing. From the wording used in Chapter Note 6 (E) to Chapter 84, it can be safely deduced that if the unit perform specific function other than data processing, then it should be classified in the heading appropriate to their function.
Thus, the subject goods having specific function to control the temperature inside the refrigerator, does not fall within the ambit of Chapter Heading 8471 as per Chapter Note 6(E) to Chapter 84.
7.9 Now, I take up the issue to examine the aspects of classification of the subject goods under CTH 8528 as proposed by the concerned Jurisdiction Commissionerate.
7.9.1 I note that the jurisdictional Commissionerate, Chennai Import-II has contended against applicant’s request to classify the subject goods under Chapter heading 8537 and 8471 and submitted the subject goods are not an ADP machine as it has many inbuilt features with the main purpose being able to interact through display as per the intended use such as viewing videos, listening music, drawing, viewing images etc. The goods are mainly Display devices incorporating arid working in conjunction with an automatic data processing machine i.e., inbuilt CPU. Therefore, the primary function of the goods is to display the given input data/ images/pictures/videos etc. Thus, the department has suggested that appropriate heading for classification of impugned goods shall be Chapter heading 8528.
7.9.2 The relevant heading under CTH 8528 is as under:
Monitors and projectors, not incorporating television reception apparatus; reception apparatus for television, whether or not incorporating radio-broadcast receivers cr sound or video recording or reproducing apparatus.
7.9.3 On careful consideration of all parameters of the case, I find that the subject goods are capable of performing plethora of functions independently and these goods are much more than mere display devices. It can be seen from the technical features of the subject goods that it is used predominantly to control, the temperature inside the refrigerator compartment. In fact, display is only one of the features of the goods but same cannot construed to be its principal function.
Further, Chapter Note 3 to Section XVI states that “Unless the context otherwise requires, composite machines consisting of two or more machines filled to form a whole and other machine 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”. I find that the primary function of the subject goods is to control the temperature inside the refrigerator.
The Hon’ble Supreme Court in the case of Commissioner of Customs, Bangalore Vs. N.L. Systems (India) P. Ltd.-2010 (256) ELT 173(SC) held that PXI Controller which was a computer based instrumentation product and capable of being controlled by a Personal Computer/Laptop but is not a PC/laptop-principal function of controllers is executing, control, algorithms for real-time monitoring and control of devices controller performs functions in addition to data processing what is imported is a system containing on ADPM and if the contention of the importer herein is accepted, it would mean that every machine that contains an element of ADP would be classifiable as an ADP machine under Chapter 84 which would completely obliterate the specific function test and the concept of functional unit, Hon’ble Court upheld the classification of the department and held that goods were rightly classified under Chapter 90. The same principle applies to this case.
It is pertinent to mention here that even Cellular Android Phones do incorporate all the functions of an ADP Machine and also works on Android OS, yet the same is classified under cellular phones as the primary function is communication.
Applying the same analogy, the principal function of the item under question is to control the temperature inside the refrigerator and hence, the impugned goods are not classifiable under CTH 8528 as these perform functions more than merely display of images. Considering these facts, I don’t support the contention of the concerned jurisdiction Commissionerate to classify the subject goods under CTH 8528.
7.10 Now, let me examine the issue of classification of the subject goods under CTH 8418 as parts of refrigerator.
7.10.1 I note that the subject goods is not stand-alone item/apparatus rather these are goods to be used only as parts of the main apparatus/equipment i.e. Refrigerator as discussed herein above. Thus, the goods in question would merit classification as parts of the machinery i.e. refrigerator.
7.10.2 The Tariff Entry under Chapter Heading 8418 reads as under:
8418 Refrigerators, freezers and other refrigerating or freezing equipment, electric or other; heat pumps other than air conditioning machines of heading 8412,5.
It could be seen from above that the Heading 8418 primarily deals with Refrigerators, freezers and other refrigerating or freezing equipment, electric or other; heat pumps other than air conditioning machines of heading 8412.5 and parts thereof The heading is divided into six major sub-headings namely (a) Combined refrigerator-freezers, (b) Refrigerators, household type (c) Freezers of the chest type (d) Freezers of the upright type (e) Other refrigerating or freezing equipment, heat pumps and (I) parts. Thus, it is pertinent to mentioned that Chapter Heading 8418 also covers “parts of the refrigerator, freezer and other refrigerator or freezer equipment’ There could be no dispute in the present case that the items in question is directly usable and identifiable as parts of refrigerator.
7.10.3 is seen that HS Explanatory Notes to headings 8418 as regards parts falling thereon, stipule es that classification of parts of machines of heading 8418 are: “Subject to the general provisions regarding the classification of parts (see the General Explanatory Note to Section XVI)…’
Further, it would also be useful to refer to Note 2 of Section XVI of the Tariff Act, 1975 which provides for rules to be followed while classifying ‘parts of machines’ falling under Chapters 84 and 85. The relevant part of the Section Note 2 is reproduced below:
2. Subject to not 1 to this section Note 1 to this being parts of the articles of heading 8484, 8544, 8545, 8546 or 8547) are to be classified according to the following rules..
(a) parts which are goods included in any of the headings of Chapter 84 or 85 (other than headings 8409, 8431, 8448, 8466, 8473, 8487, 8503, 8522, 8529, 8538 and 8548) are in 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″
7.10.4 It is seen that parts which are goods included in any of the Heading of Chapters 84 or 85, other than certain specified Chapter Heading, are in all cases to be classified in their respective headings as per Note 2(a) of the Customs Tariff Act, 1975. Thus, there is a condition to classify any part in its respective heading that it should be goods which is included in any heading of Chapter 84 or 85 which means it should be clearly listed in Chapter 84 or 85. However, as discussed above the impugned goods i.e. “Assy Cover Display” are not included in any of the headings of Chapter 84 or 85 and hence could not be classified as per above Note 2(a).
7.10.5 1 note that the primary function of the impugned goods is the maintenance of temperature inside the refrigerator and these are to be used in a particular refrigerating machine as a parts of that machine. Further, Section Note 2 (b) is to be applied only in cases where such parts cannot be classified as per Section Note 2 (a). I find that these goods are solely or principally used directly with refrigerating machine or refrigerator and as per Note 2(b) to Section XVI of the Customs Tariff Act, 1975, are to be classified with the machine for which they are solely or principally to be used. As the impugned goods i.e. Assy Cover Display will be used to control the temperature inside the refrigerator as a parts of the refrigerator and the refrigerator is particularly classifiable under Chapter Heading 8418. Thus, classifying the subject goods with a particular kind of machine i.e. refrigerator wider chapter heading 84.18 with reference to provisions under Note 2(b) of Section XVI is the appropriate way.
The Applicant has contended that Assy Cover Display i.e. the subject goods is a premium feature of SBS (Side By Side) Refrigerator. It can be used by the customers for additional multimedia and entertainment needs as well. Without Assy Cover Display, cooling temperature set point cannot be setup or changed. Temperature control is the most important feature for these type of refrigerators. Similar refrigerator which do not come with Assy Cover Display will have separate Assy Cover Control which will be affixed in fridge to control the temperature. It is also observed that the functional utility, design, shape are made in such a way that it suitably fits to the front side of the Applicant’s Side By Side (SBS) Model Refrigerator door.
Apart from controlling the fridge temperature, it is also underlined that the same may also used to get the inside view of the fridge, can be controlled by remote device, identify the error and troubleshooting thereof
7.10.6 I note that description of goods mentioned against CTH 8418 reads, “Refrigerators, freezers and other refrigerating or freezing equipment, electric or other; heat pumps other than air conditioning machines of heading 8412.5”. The Customs Tariff Item 84189100 reads “Parts-Furniture designed to receive refrigerating or freezing equipment” and CTI 8418 99 00 reads “Parts-Other”. Thus,’ I find that the subject goods i.e. Assy Cover Display for refrigerator is classifiable under CTI 84189900 (parts-other) as there is no specific sub heading in the category of the parts of refrigerator and other freezing equipment under Chapter Heading 84.i 8 for the impugned goods.
7.10.7 It is also noted that the Applicant did not come up with any other principal/alternative use of these components and that does not fulfilled to work as independent device: I observed that that Hon’ble Supreme Court in the case of Commissioner of Central Excise Vs. Wockhardt Life Sciences Ltd reported in 2012 (277) ELT 299 (SC) had held that the functional utility and predominant usage of the commodity must be taken into account apart from the understanding in common parlance to determine the correct classification of the product. The Hon’ble Supreme Court in the case of Collector of Customs Vs. Kzimudam Publications [1997 (96) ELT 226 (SC)] has held that “it is not entirely correct to say that the end use or function of the goods is irrelevant to decide the question of classification”. A three Judge Bench of the Hon’ble Supreme Court had also relied upon the function and end use in determining the classification in the case of Indian Tool Manufactures Vs. Asst. Collector of Central Excise, Nasik & Others reported in 1994 (74) ELT 12 (SC).
8. In view of the above, it can be concluded that the subject goods i.e. Assy Cover Display being a part of the refrigerator is classifiable under CTH 8418, more specifically under CTI 84189900 (Parts-Others) of the Customs Tariff Act, 1975 by application of Rule 1 cf GRI, Explanatory Notes to Chapter Heading 84.18 and Note 2(b) of Section XVI of Customs Tariff Act, 1975.
9. The Applicant has contended that the subject goods are classifiable under Tariff Heading 8471 and they also placed reliance on the following advance rulings issued by Customs Authority for Advance Ruling, New Delhi and Mumbai.
a) M/s. Brightpoint India Pvt. Ltd. [2023 (6) TMI 657 – AUTHORITY FOR ADVANCE ULINGS CUSTOMS, MUMBAI.
b) M/s. Supertron Electronics Pvt. Ltd, [2023 (6) TMI 652 – AUTHORITY FOR DVANCE RULINGS CUSTOMS, NEW DELHI]
c) M/s. Audio Distribution House Pvt. Ltd. [2022-VIL-02-AAR-CUI
d) M/s. Compuage Infocom Ltd. [2022-VIL-57-AAR-CUJ
e) M/s. Ingram Micro India Ltd. Versus Principal Commissioner of Customs (Import) — [(2023) 2 Centax 62 (Tri.-Del.)]
f) M/s. Lenovo India Pvt. Ltd. [2023 (386) E.L.T. 794 (A.A.R.- Ctrs.- Mum)]
Ongoing through the said rulings cited by the Applicant, it is observed that the product in question in the said rulings, the goods/product covered in these cases are different and not appears to be for use solely or principally as parts of the Refrigerator. Thus, reliance on the said rulings does not appear to be appropriate to the present case.
10. On the basis of foregoing discussions and findings, I reach to conclusion that the product i.e. Assy Cover Display merit classification under CTH 8418, more specifically under CTI 84189900 (Parts-Others) of the First Schedule of Customs Tariff Act, 1975.
11. I rule accordingly.
(P K Rameshwaram)
Customs Authority for Advance Rulings, Mumbai
