Case Law Details

Case Name : In re Amazon Seller Services Pvt. Ltd. (CAAR Mumbai)
Appeal Number : Ruling No. CAAR/Mum/ARC/54-57/2021
Date of Judgement/Order : 04/10/2021
Related Assessment Year :

In re Amazon Seller Services Pvt. Ltd. (CAAR Mumbai)

Classification of four different devices, namely, Audio Receiver (Echo Link) having model no. SXP16E, Audio Transceiver and Amplifier (Echo Link Amp) having model no. K9Y29E, Media Transmission Device (Echo Auto) having model no. BP39CN, and Echo Flex having model no. C77A68.

Audio Receiver (Echo Link) having model no. SXP16E, Audio Transceiver and Amplifier (Echo Link Amp) having model no. K9Y29E, Media Transmission Device (Echo Auto) having model no. BP39CN, and Echo Flex having model no. C77A68 merit classification under sub-heading 85176290 of the first schedule to the Customs Tariff Act, 1975; and also that the devices Echo Auto and Echo Flex are eligible for exemption extended under the Notification No. 57/2017-Cus., dated 30.06.2017; as amended.

Audio Receiver/Transceiver & Amplifier merit classification under sub-heading 85176290

FULL TEXT OF THE ORDER OF CUSTOMS AUTHORITY OF ADVANCE RULING, MUMBAI

The present proceedings deal with four applications filed by M/s. Amazon Seller Services Pvt. Ltd. before the Authority for Advance Rulings (Central Excise, Customs and Service tax), New Delhi; on various dates in 2019. These applications seek classification of four different devices, namely, Audio Receiver (Echo Link) having model no. SXP16E, Audio Transceiver and Amplifier (Echo Link Amp) having model no. K9Y29E, Media Transmission Device (Echo Auto) having model no. BP39CN, and Echo Flex having model no. C77A68. No rulings were passed in respect of these applications by the erstwhile AAR, and after the appointment of Customs Advance Ruling Authorities under Section 28EA of the Customs Act, 1962; these applications were transferred to CAAR, Mumbai. Communications were sent to the applicant from the secretariat of the CAAR, Mumbai to inform whether they are still desirous of receiving advance rulings in respect of these pending applications. The applicant, vide their communication in February, 2021; informed that they are still interested in receiving the advance rulings and also that they will submit the applications in the revised format in due course. Thereafter, the applications were revived by the secretariat in July, 2021, which was followed by physical submission of the applications on 10.08.2021.

2. In the original applications, the applicant had requested that the CBEC be requested to appoint a Principal Commissioner/Commissioner as provided under the erstwhile regulations. Accordingly, the Board had appointed the Principal Commissioner (Import), Air Cargo Complex, New Delhi for the said purpose. In the new applications filed in August, 2021; however, the applicant has mentioned the four air cargo complexes at New Delhi, Mumbai, Chennai and Bangalore, as well as the seaports of Chennai and Nhava Sheva as the ports through which they wish to import the aforementioned items. Accordingly, these four applications were sent to all the aforementioned customs authorities. However, comments have only been received from the Commissioner of Customs (Import), Chennai port. The comments from the Commissioner have been shared with the applicant.

3. The items for which advance rulings have been sought are as follows: –

(i) Audio Receiver (Echo Link) Model No. SXP16EThe device is used for streaming Hi-Fi music to any stereo system. In other words, it upgrades stereo system with high fidelity streaming music and Alexa. A user can connect echo link to the stereo and supported echo devices to play music throughout the home. When an Echo link is connected to Echo speaker as an input device and multiple existing speakers as output devices, the user may give command to Echo speaker (the input device), through Alexa, to play the preferred music in all the rooms or only certain rooms/areas though Echo Link. Echo Link would then connect to the respective speakers or all speakers (which acts as output device/s) as the case may be, to perform its function.

(ii) Audio Transceiver & Amplifier (Echo Link Amp) Model No. K9Y29E – It is used for streaming Hi-Fi music to any stereo system to upgrade stereo system with high fidelity streaming music and Alexa. A user can connect it to a stereo system and supported echo devices to play music throughout the user’s home. It performs all the functions which an Echo Link performs, but has an additional inbuilt amplifier. Thus, it also amplifies the audio signals that are streamed through it. The user is not required to use an external amplifier, in case the user is using passive speakers as output speakers. The feature of amplification, however, may not be used when the signals get transmitted through RCA cables and in such a case, Echo Link Amp would transmit the audio signals to output speakers as are received by it from the input devices (subject to conversion, if required). If an Echo Link Amp is connected to Echo speaker as an input device and multiple existing speakers as output devices, the user can give command to Echo speaker (which acts as an input device), through Alexa, to play the preferred music in all the rooms or specified room/s or areas though Echo Link Amp and the device would connect to the chosen speakers or all speakers (which acts as an output device/s) to perform its function of streaming and amplification of streamed signals.

(iii) Media Transmission Device (Echo Auto) Model No. BP39CNIt is a hands-free Alexa-enabled device meant for use in a motor vehicle. It allows its users to connect their smartphone to the device via Bluetooth and use Alexa services in their vehicle. Echo Auto has an in-built speaker for use only during initial device setup. The device can connect to the audio system of the vehicle via Bluetooth or auxiliary input. For its functioning, Echo Auto is connected to its user’s smartphone for accessing internet and also the audio system of the vehicle for accessing its speakers. Echo Auto receives voice inputs and sends the same to the cloud via the smartphone. The response received from the cloud is played by the device on the audio system of the vehicle. The Echo Auto can be charged through the car’s USB port or cigarette lighter port and can be mounted on to the dashboard for convenience. With the help of this device, a user can perform various functions such as voice interaction, music playback, making to-do lists, setting alarms, streaming podcasts, playing audiobooks, providing weather, traffic and other real time information and controlling smart devices. Echo Auto uses the data services of the smartphone connected to it to access the cloud and perform its functions. It is not capable of connecting to the internet by itself. Echo Auto is similar to other Echo Family devices. However, Echo Auto does not have a screen or speakers for playing output media as the in­built speaker is only for initial device setup. The device also cannot connect to the cloud on its own, but accesses the same via a smartphone through the Alexa app.

(iv) Echo Flex with Model No. C77A68It is a hands-free cordless Alexa enabled device which can directly be plugged into the power socket for functioning. The device has a USB-A port for phone charging and for providing support to accessories like night light, clock display, air-freshener, sensors, etc. The device is compatible with Fire OS, Android, and iOS devices and is accessible via web browser, i.e., Alexa App. It supports Wi-fi and Bluetooth connectivity. With the help of this device, a user can perform various functions such as voice interaction, music playback, making to-do lists, setting alarms, streaming podcasts, playing audiobooks, charging phone, providing weather, traffic and other real time information and controlling smart devices. It is a part of the Echo family devices, which are communication devices in the form of speaker with Alexa technology built in it. These devices respond to the name `Alexa’, which is commonly known as the ‘wake word’. This ‘wake word’ can be changed by the user to either “Amazon”, “Computer” or “Echo”. The device is pre-programmed to catch the wake word through the in-built microphones. Once, the device analyses these words, it becomes operative and starts recording the user’s voice. When the user finishes speaking, the device sends this recording over the internet to Amazon. The service that processes this recording is called Alexa Voice Services. When the user finishes speaking, the device converts this voice data into radio frequency signals to be sent to AVS. AVS converts the RF signals into commands that it interprets. Thereafter, it analyses the command and sends back the results to the Echo device in question. The Echo device, in turn, converts the results into electric signals played as audio output on internal speakers for the user to hear them.

4. In their applications, the applicant has communicated their opinion that all the above- mentioned devices merit classification under sub-heading 85176290 of the Indian customs tariff. The applicant is also of the opinion that they are eligible to claim benefit of exemption under Sr. No. 20 of Notification No. 57/2017-Cus, dated 30.06.2017, as amended by Notification No. 2/2019, dated 29.01.2019 in respect of the four products. In his comments, the Commissioner of Customs, Chennai port has opined that the audio receiver, Echo Link is rightly classifiable under sub-heading 85184000 as the device performs as a part of the music system and amplifies the sound. On similar grounds, the suggested classification for Echo Link Amp is 85185000. In respect of Echo Auto, the Id. Commissioner has concurred with the applicant’s view regarding classification as well as eligibility for exemption, though no reasons have been provided for such views. Finally, w.r.t. Echo Flex, the suggested classification is 85198990 on the ground that the device receives command, processes it, and then reproduces sound as per given command. I also find that the Customs Authority for Advance Rulings, New Delhi; in his Ruling No. CAAR/Del/Amazon/17/2021, dated 20.07.2021, in the case of M/s. Amazon Wholesale India Pvt. Ltd., came to consider all the above mentioned four devices, among others, and reached the conclusion that all these four devices merit classification under sub-heading 85176290. However, he has ruled that only Echo Auto and Echo Flex are eligible for exemption under the Sr. No. 20 of the Notification No. 57/2017-Cus., dated 30.06.2017 as amended vide Notification No. 03/2021-Cus., dated 01.02.2021. In reaching the conclusion w.r.t. the classification of these four devices, the CAAR, New Delhi has considered the product details submitted by the applicant, the description of these devices on the website www.amazon.in, the rules 1 and 3 of the General Rules for Interpretation of Import Tariff, the possible classification entries etc. The relevant paragraphs for the said ruling, in the same order that these devices are listed in the present proceedings, are reproduced below:

`13.5 The device Echo Link streams hi-fi music to stereo system; upgrade stereo system and stream music in superior hi-fi sound,. Echo Link easily fits into stereo system,. the inputs and outputs provide compatibility with existing digital and analogue audio. The Echo Link takes streaming music and instantly improves the quality. It is seen that this device does not have full-fledged speaker for rendering high quality audio, rather it is an accessory to a (high quality) speaker. Therefore, its principal function is of reception, conversion and transmission or regeneration of voice or other data. Echo Link accordingly merits classification under heading 8517 of the Import Tariff,• and more specifically under sub-heading 85176290 as other machines for the reception, conversion and transmission of voice, images or other data.

13.6 The last device Echo Link Amp is similar to Echo Link device, except that the former has an additional built-in amplifier. Thus, it also amplifies the audio signals that are streamed through it. The user is not required to use an external amplifier, in case the user is using passive speakers as output speakers. However, the feature of amplification may not be used when the signals get transmitted through RCA cables and in such case, the device will transmit the audio signal to output speakers, as are received from the input devices. Therefore, for determining the classification of this device, the question that needs to be answered is role/significance of the built-in amplifier, since audio frequency electric amplifiers’ merit classification under sub­heading 851840 00. On careful consideration of the product description, I find that the built-in amplifier is an additional feature of the device, not the principal determining feature, with the device having relevance even without the use of amplification feature. Therefore, holding that the principal function of Echo Link Amp is also of reception, conversion and transmission or regeneration of voice or other data, I find that the device merits classification under heading 8517 of the Import Tariff. and more specifically under sub-heading 85176290 as other machines for the reception, conversion and transmission of voice, images or other data.

13.4 The device Echo Auto is a blue tooth enabled device, taking voice command which are converted into radio frequency waves, this device enabling the user to do variety of things by simple voice command like voice call, listening to music, knowing location etc., making it convenient to operate various devices, while driving. On the Amazon website, it is described as “Add Alexa to your car”. Therefore, Echo Auto is a smart communication device. It merits classification under heading 8517 of the Import Tariff; and more specifically under sub heading 85176290 as other machines for the reception, conversion and transmission of voice, images or other data.

13.2 The next device Echo Flex is a blue tooth enabled device, taking voice command which are converted into radio frequency waves, this device enabling the smart home device to function without physical contact. It has been described by the applicant as plug-in device for smart home control which lets you use your voice to control compatible smart home devices and get help from Alexa in more places in your home. On the website <www. amazon. in> Echo Flex is described as “Plug-in Echo for smart home control.” Further, the website informs that “this plug-in Echo device lets you use your voice to control compatible smart home devices and get help from Alexa in more places in your home.” Therefore, Echo Flex is a communication device, akin to apparatus covered under heading 8517 of the Import Tariff. It is therefore classifiable under heading 8517; and more specifically under sub-heading 85176290 covering other machines for the reception, conversion and transmission of voice, images or other data.’

On the issue of eligibility for exemption extended under Notification No. 57/2017-Cus., dated 30.06.2017 (Sr. No. 20), as amended, the CAAR, New Delhi; taking note of the fact that such exemption is available to all goods classifiable under sub-headings 85176290 and 85176990, except the exclusions mentioned therein and that devices which are MIMO enabled fall in the excluded category, ruled that exemption is available to only two out of four devices under consideration in the present proceedings on the ground that they are not MIMO enabled.

5. The applicant was heard on 28.09.2021. The applicant was represented by Shri Lakshmikumaran, advocate and others. It was informed during the hearing that all the four devices involved in the present proceedings have already been considered by the CAAR, New Delhi and that classification under sub-heading 85176290 has been upheld. It was also informed that they are not seeking exemption benefit in respect of the devices Echo Link and Echo Link Amp, as the CAAR, New Delhi has already held these devices as ineligible on the ground that they are MIMO enabled. The applicant has submitted a compendium consisting of the relevant extracts Customs Act, The CAAR Regulations, General Rules for Interpretation of Import Tariff, the tariff, the HSN Explanatory Notes, as well as a copy of the Ruling No. CAAR/Del/Amazon/17/2021, dated 20.07.2021 of the CAAR, New Delhi.

6. I have considered all the materials, documents, and information made available to me. The questions for determination are classification of four devices, namely, Echo Link/Link Amp/Auto/and Flex, and eligibility for exemption under Notification No. 57/2017-Cus., dated 30.06.2017 as amended. According to the applicant, all the four devices involved in the present proceedings are correctly classifiable under sub-heading 85176990. The CAAR, New Delhi, having concurred with the views of applicant, has also ruled accordingly, as discussed here-in-before. However, in the view of the Commissioner of Customs, Chennai port, while the device Echo Auto is classifiable under the sub-heading suggested by the applicant and confirmed by the CAAR, New Delhi, the devices Echo Link and Link Amp are classifiable under sub­headings 85184000 and 85185000, respectively. The suggested classification for the device Echo Flex is 85198990. In view of the divergence of opinion, it is necessary to examine the alternate tariff entries to arrive at the correct classification entries for the devices under consideration.

  • 8517 TELEPHONE SETS, INCLUDING 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
  • 8517 62 — Machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus:
  • 8517 62 90 — Other
  • 8518 MICROPHONES AND STANDS THEREFOR: LOUDSPEAKERS, WHETHER OR NOT MOUNTED IN THEIR ENCLOSURES: HEADPHONES AND EARPHONES, WHETHER OR NOT COMBINED WITH A MICROPHONE, AND SETS CONSISTING OF A MICROPHONE AND ONE OR MORE LUUDSPEAKERS: AUDIO-FREQUENCY ELECTRIC AMPLIFIERS: ELECTRIC SOUND AMPLIFIER SETS
  • 8518 40 00 – Audio-frequency electric amplifiers
  • 8518 50 00 – Electric sound amplifier sets
  • 8519 SOUND RECORDING OR REPRODUCING APPARATUS
  • 8519 89 90 — Others

The relevant extracts from HSN Explanatory Notes describe other communication apparatus as a group that includes apparatus which allows connection to a wired or wireless communication network or the transmission or reception of speech or other sounds, images or other data within such a network. Communication networks, according the Explanatory Notes, include, inter alia, carrier-current line systems, digital-line systems and combinations thereof. They may be configured, for example, as public switched telephone networks, Local Area Networks (LAN), Metropolitan Area Networks (MAN) and Wide Area Networks (WAN), whether proprietary or open architecture. The examples of such devices include, network interface cards (e.g., ethernet interface cards), modems (combined modulators-demodulators), routers, bridges, hubs, repeaters and channel to channel adaptors; multiplexers and related line equipment (e.g., transmitters, receivers or electro-optical converters); codecs (data compressors/decompressors) which have the capability of transmission and reception of digital information; and pulse to tone converters which convert pulse dialled signals to tone signals.

The Explanatory Notes states that the heading 851840 includes audio-frequency amplifiers used for the amplification of electrical signals of frequencies falling within the range of the human ear. The great majority are based on transistors or integrated circuits, but some are still based on thermionic valves. They are generally powered by a built-in power pack which may be fed from the mains or, particularly in the case of portable amplifiers, from electric accumulators or batteries. The input signals to audio-frequency amplifiers may be derived from a microphone, a laser optical disc reader, a pick-up cartridge, a magnetic tape head, a radio feeder unit, a film sound track head or some other source of audio-frequency electric signals. Generally speaking, the output is fed into a loudspeaker, but this is not always the case (pre­amplifiers can feed into a succeeding amplifier or be incorporated in an amplifier). Audio-frequency amplifiers may contain a volume control for varying the gain of the amplifier, and also commonly incorporate controls (bass boost, treble lift, etc.) for varying their frequency response. The heading includes audio-frequency amplifiers used as repeaters in telephony or as measurement amplifiers. High or intermediate frequency amplifiers are classified in heading 85.43 as electrical appliances having an individual function. Audio mixers and equalisers are also classified in heading 85.43.

Electric sound amplifier sets of heading 851850, according to the Explanatory Notes, covers amplifier sets consisting of microphones, audio-frequency amplifiers and loudspeakers. This type of equipment is extensively used for public entertainment, public address systems, advertising vehicles, police vehicles or with certain musical instruments, etc. Similar systems are also used on large lorries (particularly those with trailers) for enabling the driver to hear irregular noises or sound signals from behind, which otherwise he could not hear above the sound of the engine.

The heading 851969, as per the Explanatory Notes, includes devices in the nature of record players (apparatus producing sound from records [grooved discs] by electric amplifiers and loudspeakers, mechanical vibrations being converted into electrical vibrations by a sound-head [pick-up cartridge]. They may be fitted with an automatic device enabling a series of records to be played in succession); cinematographic sound recording apparatus (which record sound by photoelectrical methods. Sound may be photoelectrically recorded on film as a strip, either {a} of variable area or {b} of variable density. Cinematographic sound recording apparatus comprises, in addition to the sound recording head, a magazine for holding the film, a motor driving mechanism for synchronising the speed of the film with that of the cinematographic camera working with it, and a film transport mechanism); cinematographic sound reproducers (equipped with a reader which incorporates a photoelectric sound-head and a charge-coupled device); and re-recording apparatus (for cinematography, used, for example, for photoelectric or digital re-recording of sound tracks recorded by other means, e.g., magnetically, optically, or electronically).

7. In the aforesaid background, the four devices involved in the present application are required to be examined. The device Echo Link is intended to upgrade the existing stereo system of the user with high fidelity streaming music and Alexa. The use of this device would enable a user to stream his preferred sound throughout the home or chosen rooms/areas. It is important to appreciate that Echo Link is to be connected to Echo speaker (input device) as well as multiple existing speakers (output devices). The primary utility of the device is to upgrade any stereo system with high-fidelity streaming music and Alexa, control music selection, sound and playback with compatible Echo device or the Alexa app; connect to stereo (any input audio device) and group with other supported Echo devices to play music throughout the home; provide multiple digital and analog inputs and outputs compatible with existing stereo equipment. It is also significant to note that the device itself does not have microphone and speaker built in it and is required to be connected to a receiver or amplifier if anyone wants to connect it to passive speakers. Considering this factual backdrop, I am unable to concur with the views of the Commissioner of Customs, Chennai port that the device Echo Link merit classification under sub-heading 85184000 as an audio-frequency electric amplifier. On the contrary, the line of reasoning adopted by the CAAR, New Delhi that the device is designed to receive, convert, transport, or regenerate voice, data etc. is based on sound logic and should be accepted. The device Echo Link Amp is similar to the Echo Link and can perform all its functions. Additionally, this device incorporates an amplifier which allows the user not to use an external amplifier along with his passive speakers which are used as output. The feature of amplification, however, is not used when the signals get transmitted through RCA cables and in such a case, Echo Link Amp will transmit the audio signals to output speakers as are received by it from the input devices. In this scenario, it doesn’t appear that the built-in amplifier is so central to the device that the proper classification should be under sub-heading 85185000 as electric sound amplifier sets. On the other hand, I am more inclined to side with the views of CAAR, New Delhi that the built-in amplifier is an additional feature of the device, and not the principal determining feature, with the device having relevance even without the use of amplification feature. Therefore, it is my considered opinion that the device Echo Link Amp falls squarely within those designed for reception, conversion and transmission or regeneration of voice or other data, and consequently, agree with the views of CAAR, New Delhi that the device merits classification under sub-heading 85176290 as other devices for the reception, conversion and transmission of voice, images or other data. The device Echo Auto is a blue tooth enabled device, taking voice command which are converted into radio frequency waves. This device enables the user to do a variety of things by simple voice commands, e.g., make voice calls, listen to music, ascertaining location etc., making it convenient to operate various devices, while driving. Therefore, I agree with the views of the Commissioner of Customs, Chennai and the conclusions of the CAAR, New Delhi that Echo Auto is a smart communication device meriting classification under sub-heading 85176290. The fourth and last device under consideration in the present proceedings is Echo Flex, which, as already described, is a blue tooth enabled device, taking voice commands, converting them into radio frequency waves to send it across to Alexa Voice Services, and when it receives back the information requested by the user from AVS, it reconverts the received RF signals into electrical signals. Thus, the device in question enables the user to achieve a smart home configuration without physical contact. The applicant also describes it as a plug-in device for smart home control which allows the user to control compatible smart home devices in his home or office using his voice for inputting commands. Therefore, Echo Flex is a communication device, akin to apparatus covered under heading 8517 of the Import Tariff. It is, therefore, rightly classifiable under sub-heading 85176290 covering other machines for the reception, conversion and transmission of voice, images or other data. In this respect, I am unable to persuade myself to concur with the views of the jurisdictional Commissioner of Customs that the device merits classification under sub-heading 85198990 as a sound recording or reproducing apparatus, examples of which, according to the Explanatory Notes, are record players, cinematographic sound recorders or reproducers etc., since the device in question is significantly different.

8. To summarise, I hold that all the four Echo family devices under consideration in the present proceedings are voice command devices with multiple functions, including answering questions, playing music, reading newspaper/ audio-books, providing traffic, weather and other real-time information and controlling smart devices. These devices respond to the names “Alexa”, “Amazon”, “Computer” or “Echo” as wake up words. These Echo family devices are capable of voice interaction, music playback, making to-do lists, setting alarms, etc. For the reasons outlined supra, I hold that all these four devices merit classification under sub-heading 85176290. Besides, I also find that the Sr. No. 20 of the Notification No. 57/2017-Cus., dated 30.06.2017; as amended, extends the benefit of concessional rate of duty to goods falling under sub-headings 85176290 and 85176990 subject to listed exclusions. In the list of exclusions fall MIMO devices. The specifications of Echo Auto and Echo Flex, as submitted by the applicant make it clear that they are not MIMO products. In view of this, I hold that these two devices would be eligible for the said exemption. Since Echo Link and Echo Link Amp are MIMO products, they are not eligible for the subject exemption. During the hearing held on 28.09.2021, the applicant has fairly conceded that they no longer are seeking exemption in respect of these two devices.

In view of my conclusions as outlined above, I rule that Audio Receiver (Echo Link) having model no. SXP16E, Audio Transceiver and Amplifier (Echo Link Amp) having model no. K9Y29E, Media Transmission Device (Echo Auto) having model no. BP39CN, and Echo Flex having model no. C77A68 merit classification under sub-heading 85176290 of the first schedule to the Customs Tariff Act, 1975; and also that the devices Echo Auto and Echo Flex are eligible for exemption extended under the Notification No. 57/2017-Cus., dated 30.06.2017; as amended.

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