CAAR Mumbai Ruling on Delmon Solutions: Handheld Mobile Computers Classification

In re Delmon Solutions Private Limited (CAAR Mumbai)

Introduction: The Customs Authority for Advance Rulings, Mumbai (CAAR), recently issued a comprehensive ruling on the classification of Handheld Mobile Computers, pertaining to an application filed by M/s. Delmon Solutions Private Limited. The ruling, dated 25th September 2023, addresses the classification under the Customs Act, 1962, and provides insights into the intricacies of importing ten specific models of Handheld Mobile Computers through the Air Cargo Complex, Mumbai.

Detailed Analysis: The applicant, engaged in industrial TOT solutions and importing Handheld Mobile Computers since 2018, sought an advance ruling on the classification of specific models. The devices, collectively referred to as “handheld mobile computers,” are designed for tasks such as barcode scanning and data processing, enhancing efficiency in functions like inventory management.

The Handheld Mobile Computers share common features, including Qualcomm Snapdragon processors, Android 10 operating systems, front and rear cameras, Gorilla Glass, and various connectivity options. The applicant emphasized the industrial nature of these devices, showcasing rugged design, water and dust resistance, and functionality in harsh environments.

The applicant argued for the classification of these devices under Heading 84.71 of the Customs Tariff Act, specifically under sub-Heading 8471.30. The devices were presented as Automatic Data Processing (ADP) Machines, meeting the conditions specified in Note 6(A) to Chapter 84. The analysis highlighted the devices’ ability to store and process data, being freely programmable, performing arithmetical computations, and executing processing programs without human intervention.

The applicant also addressed the definition of smartphones under Heading 85.17, emphasizing that the Handheld Mobile Computers are primarily ADP Machines with additional features, not intended as substitutes for smartphones. The analysis invoked Circular No. 20/2013, where tablet computers were classified as ADP Machines, drawing parallels with the nature and functions of the Handheld Mobile Computers.

Conclusion: The CAAR Mumbai ruling on Delmon Solutions brings clarity to the classification of Handheld Mobile Computers, affirming their categorization as Automatic Data Processing Machines under Heading 84.71. The decision underscores the industrial utility of these devices, distinguishing them from conventional smartphones. Importers and businesses dealing with similar technologies should take note of this ruling, ensuring compliance with the specified customs classification and associated regulations. The comprehensive analysis provided by the CAAR sheds light on the nuanced interpretation of tariff classifications in the context of evolving technological products.

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

M/s. Delmon Solutions Private Limited (having IEC No. 3116915334 and hereinafter referred to as ‘the applicant’, in short) filed an application (CAAR-1) for advance ruling before the Customs Authority for Advance Rulings, Mumbai (CAAR in short). The said application was received in the secretariat of the CAAR, Mumbai on 25.09.2023 along with its enclosures in terms of Section 28H (1) of the Customs Act, 1962 (hereinafter referred to as the ‘Act’ also). The applicant is seeking advance ruling on the classification of Handheld Mobile Computers of the following ten (10) models for imports through the Air Cargo Complex, Mumbai:

a. Mobile Computer RK95 (without SIM);

b. Mobile Computer RS35;

c. Mobile Computer RS35 (without SIM);

d. Mobile Computer RS51;

e. Mobile Computer RS51 HSWO (without SIM);

f. Mobile Computer RS36;

g. Mobile Computer RS36 (without SIM);

h. Mobile Computer RS26;

i. Mobile Computer RS26 (without SIM); and

j. RK 25 (without SIM).

2. Applicant has stated following facts in support of the questions framed:

That the applicant is engaged in providing industrial TOT solutions, IOT cloud data platform, RFID/ Barcode/ Mobility /AIDC solutions etc. and importing Handheld mobile computers since 2018 and is now proposing to import new models of Handheld mobile computers along with the models already being imported by them. The aforesaid devices of ten (10) models mentioned above are collectively referred to as “handheld mobile computers” which are computers used for scanning barcode and processing data in order to increase efficiency of functions such as inventory management etc. The products in question are to be sold further to the Applicant’s distributors/consumers.

The applicant has submitted following Details/ common features of the products in question

-Hard Keys: Volume up/down key, left/right scan, power, reset.

-Soft Keys: Three touch keys (Back, Home, Menu)

-Qualcomm Snapdragon processor

-Operating System – Android 10

-Front and Rear Cameras

-Gorilla Glass

-Multi touch capacitive

-Equipped with battery

-Sim card enabled

-Micro USB 2.0 (communicates to PC, supports adaptor/USB charging.

-Motion Sensor

-GPS enabled -Bluetooth enabled

-Wireless Radio

The applicant has stated as follows with regard to the Functions of a Handheld mobile computer in general:

A mobile computer is a combination of Personal Computer and scanner, largely utilized by field service personnel. The product carries a processing ability of a laptop and functionality of a scanner in a single wireless device. They essentially perform ID and 2D barcode scanning and additionally have features like Wi-Fi/Bluetooth connectivity, data transfer etc. The predominant use of these devices is in warehousing/logistics/inventory operations for data capturing/storage and its transmission for allied functions. Many models of Handheld mobile computers do not have feature of connecting to a cellular network and they operate on wireless LAN connectivity to fulfil their functions. However, some models may have such cellular network connectivity feature in addition to wireless LAN connectivity. Some models covered under this Application have feature to connect to cellular network whereas some of them do not possess such a feature. The Handheld mobile computers function on wireless LAN connectivity. Most functions are done on wireless connectivity. Only when the wireless LAN is not available, the devices which have the functionality of a cellular connection use this function. Thus, cellular network is used rarely in cases such as during last mite delivery, when wi-fi is not readily available etc. In fact, calling function provided in Products with SIM. is purely a supplementary function since the same has been provided as an additional mode of connectivity apart from Bluetooth, Wi­n and GPS.

The applicant has stated that following design aspects of physical features of these Handheld mobile computers are relevant:

-Rugged design

-Fall proof

-Water Resistant

-Dust Resistant

-Working environment (harsh usage and temperature range of -20°C to 50°C)

-Screen can be read even in sunlight

-Extended Battery Life

-Bar Code Scanner for reading Ill and 2D bar codes, apart from reading QR codes. The advantage is the reduction in scanning time. This scanner can scan 500 to 1000 codes per hour.

-The laser can read short, mid and long range scanning capability;

-No separate audio-jack; for voice communication, it is generally advised to have earphone.

-It is primarily designed for scanning application and processing of scanned data and not for voice communication.

-Specialized applications are developed to run on the mobile computers, which are not/ cannot run on android based mobile phones;

-The physical key-hoard is akin to what is found on a conventional computer;

-Extra keys provided for scanning and for performing other data processing function;

-User not free to update the android system, unless otherwise confirmed by Cipherlab;

3. Statement containing the applicant’s interpretation of law and/or facts, as the case may be, in respect of the aforesaid question(s) (i.e., applicants view point and submissions on issues on which the advance ruling is sought):

The Applicant submits that the Handheld mobile computers in question in the present application are classifiable under Heading 84.71 of the Tariff as Automatic Data Processing (ADP) Machine, for the following reasons:

Heading 84.71 of the First Schedule to the Customs Tariff Act, 1975 covers “Automatic data machines and units thereof magnetic or optical readers, machines for transcribing data on to data media in coded dorm and machines for processing such data, not elsewhere specified or included”. The HSN Explanatory Notes released by the WCO aid in the interpretation of the Headings of the Tariff and may be used as a safe guide for the same. It has been held so by the Hon’ble Supreme Court in the case of CC Vs. Business Forms – 2002 (142) ELT 18 (SC). As per Rule 1 of the GRI, classification of the products shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the remaining Rules of the GRI.

The Heading 8471 also includes portable ADP machines that do not require an external electrical output for functioning. The relevant entries of Heading 84.71 of are extracted below:

To qualify as an ADP Machine, the goods have to satisfy all the conditions mentioned in Note 6(A) to Chapter 84 and should not be covered by Note 6(D) and 6(E) ibid. The Applicant submits that the Handheld mobile computers in question comply with the above requirements and therefore, are classifiable as ADP Machined under CTH 84.71 as tabulated below:

Thus, the goods in question satisfy all the conditions to be fulfilled by an ADP Machine. Thus, they are indeed ADP Machines. Further, the USN Explanatory notes for Heading 84.71 state that a complete automatic data processing unit must comprise of at least the following three units, namely, Central processing Unit, Input Unit and an Output Unit. The Handheld mobile computers in question in the present application contain all three of the above units, i.e., input units in the form of a scanner, a central processing unit (inbuilt) in the form of processor and an output unit (the screen). Therefore, all the requirements to be an ADP machine are satisfied in the present case. Thus, in terms of Rule 1 of the GIR, the Handheld mobile computer models in question are correctly classifiable under Heading 84.71 only. More specifically the products arc ought to classified under Tariff Item 8471 30 90 since they qualify the description given under sub-Beading 8471.30 i.e., they are portable automatic data processing machines, weighing not more than 10 kg, consisting of at least a central processing unit, a keyboard and a display and are not personal computers. Further, the features have specific professional grade scanners in built into the device which feature emphasise how the scanning and processing function for the device is the primary function. This is what sets the device apart from the conventional phone/communication devices available in the market.

Note 6(C) of Chapter 84 states that a unit can be treated as part of ADP system if the conditions mentioned therein arc satisfied. However, this is subject to the Chapter Notes 6(D) and 6(E) ibid. The relevant portion of the Chapter Notes 6(C) arc extracted below:

Chapter Note 6 ‑

(C) Subject to paragraphs (D) and (E) below, a unit is to be regarded as being part of an automatic data processing system if it meets all of the following conditions: “It is of a kind solely or principally used in an automatic data processing system; It is connectable to the central processing unit either directly or through one or more other units; and it is able to accept or deliver data in a form (codes or signals) which can be used by the system”.

Separately presented units of an automatic data processing machine are to be classified in heading 84,71″.

It can be seen that the above Note is applicable only for units of ADP Machine. In the present case, the Handheld mobile computers in question are ADP Machines themselves. Therefore, the above Note is not applicable to the Handheld mobile computers in question.

Similarly, it is submitted that Chapter Note 6(D) is not applicable to ADP Machines but is instead only applicable to Units of ADP Machine. Therefore, even this Chapter Note is not applicable to the Handheld mobile computers in question.

As far as Note 6(E) is concerned, it states that: “(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”.

The aforesaid Note also will not apply in case of the handheld mobile computers in question as they are ADP Machines themselves and not machines incorporating or workin^g in conjunction with an ADP Machine. The above classification is also supported by the Ruling of the Singapore Customs dated 16.02.2022 (under the amended HSN introduced w.e.f. 01.01.2022) wherein one of the similar mobile computer was held to be classifiable under Tariff Item 8471 30 90.

Without prejudice, even if it is assumed that the Handheld mobile computer models in question are capable of performing more than one function, i.e., capable of functioning other than as an ADP machine, the function of ADP machine is the principal function and therefore, they shall be treated as an ADP machine in terms of Section Note 3 of Section XVI of the Customs Tariff “3. Unless the context otherwise requires, composite machines consisting of two or more machines fitted together to form a whole and other machines designed for the purpose of performing two or more complementary or alternative functions are to be classified as if consisting only of that component or as being that machine, which performs the principal function.”

This is also supported by Para 7 of the HSN Explanatory Notes to Chapter 84 on Page no. XVI-84-3 which states that ‘A machine which is used far more than one purpose is, for the purposes of classification. to be treated as if its principal purpose were its sole purpose.”

The Handheld mobile computers in question are marketed to businesses for ease of logistics and not as a substitute as a communication device. Even if the Handheld mobile computer, is used/can be used to transmit other data, apart from the inventory related data, this function is only an incidental function, and the classification is to be based as if the principal function were the sole purpose. The rugged build of the device, the cost of the device all show that it is not a replacement for a phone but is a replacement of a computer. In trade parlance, the products in question are also known in the market as ‘Mobile Computer/Touch Computer’ and not as smartphones or telephones.

The Heading 85.17 covers “Telephone sets, including telephones far cellular networks or tar other wireless networks; other apparatus for transmission or reception of voice Una es or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network) other than transmission or reception apparatus of heading 8443, 8525, 8527 or 8528.” The relevant extract of Heading 85.17, w.e.f. 01.01.2022, is reproduced below:

The applicant further submitted that definition of smartphone as Note 5 to Chapter 85 is “5. For the purposes of heading 85.17, the term “smartphones” means telephones for cellular networks, equipped with a mobile operating system designed to perform the functions of an automatic data processing machine such as downloading and running multiple applications simultaneously, including third-party applications, and whether or not integrating other features such as digital cameras and navigational aid systems.” HSN Explanatory notes to Heading 85.17 on Page no. XV1-8517-1 states that: “This heading covers apparatus for the transmission or reception of speech or other sounds, images or other data between two points by variation of an electric current or optical wave flowing in a wired network or by electro‑magnetic waves in a wireless network.” Further, the HSN Explanatory notes for Heading 85.17 on Page XVI-8517-3 covers “Other Apparatus Or 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)”, where various types of devices that are covered under this entry are provided.

The products in question are not classifiable under Heading 85.17 because the products in question are not primarily meant for communication purposes. Communication abilities like that of a traditional telephone/mobile telephone is only an ancillary function that these mobile computers perform; The fact that Handheld mobile computer is different from conventional cellular phones, is evident from below:

The applicant further submitted that vide Finance Act, 2021; a new Custom Tariff Item has been introduced w.e.f. 01.01.22 i.e., Tariff Item 8517 13 00 which will cover “Smartphones”. As per the definition given, the way it is worded, it is understood that the product (smartphone) is a telephone for cellular network, having additional features of ADP Machine and some few more features and the above amendment shall not be applicable to the products in question in the present application for the following reasons

The definition itself shows that smartphones’ are telephones with few additional features of ADP machine. Unlike `smartphones’ the products in question are essentially ADP Machine which have an additional feature of cellular connectivity. Thus, the principal and ancillary functions in the products in question and smartphones, arc diametrically opposite. The way the products in question arc built, it is evident that it is meant for rugged use and is not sleek like smartphones in similar price range. The products in question also don’t have most of the features there in smartphones of similar price range. Furthermore, smartphones of the same price range as the products in question, are marketed as luxury items for the personal use whereas the products in question arc purely used industrially. Their designs arc not sleek or sophisticated like that of smartphones and are rather designed to be used in arduous environment and are made to withstand hardy environment. As per the trade parlance, the products in question are known in the market as ADP Machines (mobile computers) and not as smartphones or telephones. Conventionally also, the products considered as smartphones are different from the products in question. Further, as mentioned supra, the handheld mobile computers may or may not have sim slot. In the present case also, few of the models (RK95, RS35WO etc) do not have sim slots and hence, they do not have cellular connectivity. In view of the above, the applicant submits the handheld mobile computers in question are not `smartphones’ as defined under Note 5 to Chapter 85 supra. Therefore, they cannot be classified under Tariff Item 8517 13 00. Tariff Items 8517 62 90/8517 69 90 are residuary entries and will only apply to products not classified elsewhere. As explained above in detail, the imported Handheld mobile computers are classifiable under Heading 84.71, more specifically under sub-Heading 8517.30. Thus, these products cannot he classified under the residuary entry of 8517 62 90/8517 69 90.

The applicant has further submitted that vide Circular No. 20/2013 dated 14.05.13, CBIC had issued a clarification on the issue regarding classification of ‘Tablet Computers’. Some of the models of Handheld mobile computers in question are similar in nature and functions of such tablet computer, with differences in the size of screen, dimensions etc. Board analysed the functions of a Tablet Computer and held that its principal function is that of a computer, and communication is merely incidental and therefore, the same is classifiable as an ADP Machine. Thus, the Circular likens the product to a laptop or computer and holds that as it satisfies the requirements under Note 6(A) to Chapter 84, it will be classified as an ADP Machine. The Circular also reaffirms the ruling of World Customs Organisation, regarding Tablet Computer. Thus, the Circular so issued in respect to ‘Tablet Computers’ will apply to these models of mobile computers as well. The relevant portion of the said circular is reproduced below:

“3. A Tablet Computer is designed to be primarily operated by using its touchscreen. It can process data, execute programs, and connect to the Internet via a wireless network in order to, for example, exchange and manage e-mails, exchange or download files, download software applications, conduct video or VoIP (“Voice over Internet Protocol”) communications, etc. In addition, it can also be connected to a cellular network to make voice calls.

4. It is seen that “Tablet Computers” can be programmed in a variety of ways thereby qualifying as machines capable of being freely programmed in accordance with the requirements of the user, as required by Note 6(A)(ii) to Chapter 84. It is also held that the products at issue have essentially the same functionality as a laptop. The function as an Automatic Data Processing Machine (ADP) is the main function of the product, while other functionalities of said machines are not different from the auxiliary functions that could be seen on any computer. such as desktop or laptop computers. The mobile phone calling function could be provided by the products only as a supplementary function because it could not be activated without running an operating system of the “Tablet Computer” and in order to use the function a headset had to be used. The size of such machines when exceeding the dimensions mentioned in Note 8 to Chapter 84 relating to the “pocket-size” machines of heading 8470, is too big to be used principally for making voice calls. The tablet computers are not intended to be a substitute for a mobile phone to make voice calls, but, according to its main technical features is designed as a substitute for laptops. The difference between a “Smartphone” and a “Tablet Computer”, is not based on whether the product has a voice calling function or not, but on the principal features that a producer has intended for the device when designing and developing it.

5. In view of the fore^goin^g, it is held that products at issue meet all the requirements stipulated in Note 6(A) to Chapter 84. Therefore, it is decided that machines commercially referred to as “Tablet Computers” are more appropriately classifiable in heading 8471, sub­heading 8471 30, by application of General Rules for Interpretation (GRI) of Import Tariff, 1 [Note 3 to Section XVI and Note 6(A) to Chapter 84] and 6. This decision is consistent with WCO IISC decision to classify certain machines commercially referred to as “Tablet Computers” in heading 8471, sub-heading 847130.”

The applicant has submitted that Handheld mobile computers are similar to Tablet Computers. These similarities are evident from the following:

a. Both devices are marketed with focus on their data processing function;

b. Both devices arc available for sale with SIM Slot or without SIM Slot.

c. Neither of the products are marketed as a replacement to a conventional device like cellular phones or mobile phones.

d. Both devices are portable alternatives to laptops and computers.

Further, Handheld mobile computers combine PC and scanning functions into a single device that can be outfitted with off-the-shelf or custom software applications that perform everyday tasks, such as monitoring deliveries, tracking assets, and managing inventory. Further, because they run on familiar operating systems such as Windows, Android, they offer the same functionality as a desktop computer or laptop. These processors are also equipped with a barcode scan engine and act as their own host, which means one can instantly update and edit information as it is captured. Thus, the Circular applies to Mobile Computers as well and supports its classification under Heading 84.71.

The applicant submits that WC() Ruling on RFID Readers is not applicable. During its 68^th Session, World Customs Organization considered RFID readers having inter-alia SIM capability, and has held that the same is classifiable under Heading 85.17. The decision is not applicable to the present case for these following reasons: unlike the Ruling on Tablet Computer, which has been expressly accepted by CBIC, no similar Circular has been passed accepting and adopting the above ruling; the mobile computers in question are Handheld mobile computers and not merely REID Readers; the Ruling has not considered Heading 84.71 and therefore is not applicable to the mobile computers in question; the Ruling on Tablet Computer is more appropriately applicable to the products in question.

4. A personal hearing in the matter was conducted on 15.01.2024 in office of the CAAR, During the personal hearing the authorized representatives of’ M/s. Delmon Solutions Private Limited, Shri. Akhilesh Kangasia and Shri Siddarth Sen, both Advocates reiterated their earlier written submissions made in the application to CAAR, Mumbai. Further, they submitted a compendium of relevant provisions and cited case laws viz. M/s. Senate Solutions Pvt. Ltd., M/s. Brightpoint India Pvt. Ltd., M/s, Rashi Peripherals Pvt. Ltd., M/s. RET-Tech Pvt. Ltd. and contended that the product in question is rightly classifiable under sub-heading 8471 3090. Nobody appeared from the concerned jurisdictional Commissionerate i.e. Air Cargo Complex (Import), Sahar, Mumbai either in person or through online e-hearing. This office has also not received any relevant records/comments from the jurisdictional commissionerate till date.

5. I have taken into consideration all the materials placed on record in respect of the subject goods including the submissions made by the applicant during the course of personal I therefore proceed to decide the present application regarding classification of Handheld Mobile Computers on the basis of the information on record as well as the existing legal framework having bearing on the classification of Handheld Mobile Computers under the first schedule of the Customs Tariff Act, 1975.

5.1 On going through the product specification, function and utility it is apparent that the subject goods arc handheld portable devices used in enterprise environments to capture barcodes, run mobile apps, take photos and videos, and provide voice and data communications for workers and managers. These devices combine personal computer and scanning functions in a single wireless device that can be outfitted with off-the shelf or custom software applications that perform everyday tasks such as monitoring deliveries, tracking assets, and managing inventory. Because they run on familiar operating systems such as Windows/Android, they offer the same functionality as a desktop computer or laptop. These processors are also equipped with a barcode scan engine and act as their own host, which means one can instantly update and edit information as it is captured. The applicant has suggested Customs Tariff heading 8471 as an appropriate classification for these devices.

5.2 General Rules of Interpretation (GRI) 1 of the Customs Tariff Act, 1975 provides that the classification of goods shall be “determined according to the terms of the headings and any relative section or chapter notes.” In the event that the goods cannot be classified solely on the basis of GRI 1, and if the headings and legal notes do not otherwise require, GRIs 2 through 6 may be applied in order. In view of the provisions of GRI 1 it is clear that in order to merit classification under heading 8471 these devices need to satisfy the requirements of chapter note 6(A) to chapter 84, the said chapter note is reproduced below: –

6 (A) For the purposes of heading 8471, the expression “automatic data processing machines, 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.

Therefore, there is a need to examine whether the features and specifications of the devices under consideration meet the criterion as laid down in the relevant chapter note reproduced above. The impugned devices, as seen from the technical description submitted by the applicant and reproduced in para 3 earlier, appear to be able to satisfy the requirements of an ADP machine. Note 6(C) to Chapter 84 specifies the conditions for a unit to be classified as being part of an automatic data processing system.

6 (C)Subject to paragraphs (D) and (E), a unit is to be regarded as being part of an automatic data processing system if It meets all of the following conditions:

(i) it is of a kind solely or principally used in an automatic data processing system;

(ii) it is connectable to the central processing unit either directly or through one or more other units; and

(iii) it is able to accept or deliver data in a form (codes or signals) which can be used by the system.

Separately presented units of an automatic data processing machine are to be classified in heading 8471. However, keyboards, X-Y co-ordinate input devices and disk storage units which satisfy the conditions of (ii) and (iii) above, arc in all cases to be classified as units of heading 8471.

However, from the working and features of the impugned devices, it appears that these are not the units of ADP machines, but ADP machines themselves. Note 6(D) to chapter 84 lists certain separately presented products that are to be excluded from heading 8471, even if they can be classified as part of an ADP system. Note 6(E) to chapter 84 mentions that a machine 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. As the impugned devices, as described by the applicant, appear to be akin to ADP machines performing capturing of data and its further processing, notes 6(D) and 6(E) do not appear to have application in this case.

5.3 In respect of possible alternate heading 8517, there is a need to examine the features of these devices in the context of note 3 to section XVI. Tariff Heading 8517 covers, “Telephone sets, including smartphones and other telephones for cellular networks or for other wireless networks; other apparatus for the transmission or reception of voice, images or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network), other than transmission or reception apparatus of heading 84.43, 85.25, 85.27 or 85.28”. As the devices in question also have communication capabilities, including 4 out of 10 having cellular connectivity, the classification under heading 8517 needs to be examined. Note 3 to section XVI of the tariff stipulates that, “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 arc to be classified as if consisting only or that component or as being that machine which performs the principal function”. From the note, it is clear that a composite machine performing various functions is to be classified according to the principal function performed by such a device. In the instant case, these devices combine computing and scanning functions for monitoring deliveries, tracking assets, and managing inventory also communication capabilities, including 4 out of 10 having cellular connectivity. However, for the products under consideration, automatic data processing appears to be the main function, while other functionalities of said machines are not different from auxiliary functions that could be seen on any computer, such as desktop or laptop computers.

In circular no. 20/2013- Cus, dated 14.05.2013, clarification has been given by the Board regarding the classification of “tablet computers” under heading 8471 stating that, “… The mobile phone calling function could be provided by the products only as a supplementary function because it could not be activated without running an operating system of the devices…. These devices arc not intended to be a substitute for a mobile phone to make voice calls, but, according to its main technical features is designed as a substitute for laptops. The difference between a “smartphone” and “tablet computer”, is not based on whether the product has a voice calling function or not, but on the principal features that a producer has intended for the device when designing and developing it”. Thus, as per the said circular, tablet computers arc classifiable under heading 8471 and not under heading 8517 despite the fact that the product is having cellular connection functionality, considering its principal function as automatic data processing. Similarly, in this case, the principal function of the impugned devices is barcode scanning and data processing for monitoring deliveries, tracking assets and managing inventory. Therefore, these devices appear to merit classification under heading 8471 and not under heading 8517.

5.4 In regards to the classification opinion of the 68th session of the Harmonized System Committee, it is observed that the committee has classified RFID/barcode readers with a mobile operating system capable of scanning and cellular connectivity under subheading 8517 13. This subheading covers smartphones. Note 5 to chapter 85 states that “For the purposes of heading 85.17, the term “smartphones” means “telephones for cellular networks, equipped with a mobile operating system designed to perform the functions of an automatic data processing machine such as downloading and running multiple applications simultaneously, including third-party applications, and whether or not integrating other features such as digital cameras and navigational aid systems”.

The note clearly states that these devices are telephones for cellular networks designed to perform the functions of ADP machines. However, the devices under consideration arc principally not telephones for cellular networks. In fact, 6 out of 10 models do not have the functionality of cellular connectivity, which shows that the SIM is not an integral part of these devices, as these devices are able to perform their primary function with or without the SIM card. These devices do not appear to be convenient for the purpose of telephony as a principal function. As per circular no. 20/2013- Cus., dated 14.05.2013, “the difference between a “smartphone” and “tablet computer”, is not based on whether the product has a voice calling function or not, but on the principal features that a producer has intended for the device when designing and developing it”. These devices are essentially ADP machines with additional connectivity capabilities, including cellular connectivity for 4 models. Further, the difference between a smartphone and the devices under consideration, as explained by the applicant, is already reproduced in tabulated form in para 3. The impugned devices have many features such as higher scanning capacity, raggedness and enterprise level security features, which a smartphone for cellular device connection lacks. These devices are used by enterprises to capture data. As already stated the products are used in inventory management, store receiving, order processing, package tracking, tracing delivering etc. These devices use Wi-Fi connectivity and Bluetooth for information sharing. Cellular connectivity is essentially used for GPS and information sharing, where Wi-Fi is not available. Cellular connectivity is also used for making calls. However, essentially these arc not smart phone.

In the recent ruling in the case of M/s. Senate Solutions Pvt. Ltd (Rulin^g Nos. CAAR/Mum1ARC/24,25,26&27/2023 which was passed on the question of classification of the similar product i.e. Mobile Computers, Customs Authorities for Advance Rulings have ruled that the said product is classifiable under sub-heading 8471 3090. I have gone through the observations of the Authority in the case cited above and I am of the view that the Authority in this ease has deliberated upon every aspect to decide the case on merit.

6. On the basis of foregoing discussions and findings, I find that “Handheld Mobile Computers of the models Mobile Computer RK95 (without SIM); RS35; RS35 (without SIM); RS51; RS51 HSWO (without SIM); RS36; RS36 (without SIM); RS26; RS26 (without SIM); and RK 25 (without SIM)” merit classification tinder Custom Tariff Heading 8471, specifically under CTI 8471 3090 of the First Schedule to the Customs Tariff Act, 1975.

7. I rule accordingly.