CAAR Ruling: Applicability of Duty Rates for X-Ray Tube & Spare Parts

 In re Siemens Healthcare Pvt. Ltd. (CAAR Mumbai)

Introduction: In a recent ruling by the Customs Authority of Advance Ruling (CAAR) in Mumbai, M/s Siemens Healthcare Pvt. Ltd. sought clarification on the applicability of customs duty rates for X-Ray tubes and spare parts used in medical equipment. This article delves into the details of the ruling and its implications for the import of these crucial components.

Detailed Analysis: M/s Siemens Healthcare Pvt. Ltd., a company specializing in the sales and services of life-saving medical equipment, including Computerized Tomography (CT) Scanners and X-Ray machines, filed an application with CAAR Mumbai. They sought clarification on the applicability of Sr. No. 563A of Notification No. 50/2017-Customs, which pertains to customs duty rates.

The applicant imports X-Ray tubes and spare parts used in medical equipment, including CT Scanners and other X-Ray-based machines. These components are classified under various HSN codes, with X-Ray tubes falling under 90223000 and spare parts under 90229090.

The interpretation of amended customs notifications, specifically No. 02/2022 and No. 17/2023, was central to the applicant’s request. The notifications introduced changes in the applicability of customs duty rates for these components.

The applicant highlighted that X-Ray tubes and spare parts are essential for the maintenance and support of medical equipment in various healthcare facilities, including private hospitals, government hospitals, and diagnostic centers.

Customs Notification No. 02/2022 and No. 17/2023 brought modifications to Sr. No. 563A of Notification No. 50/ 2017 dated 30.06.17. These changes affected the duty rates for specific goods.

According to the applicant’s interpretation, the amended notifications implied a 7.5% basic customs duty rate for goods classified under HS Code 9022 (excluding 90229010) and covered X-Ray tubes (HS 90223000) and spare parts (HS 90229090) used in CT Scanners and other X-Ray-based machines.

However, it was crucial to note that the benefits of this notification did not extend to X-Ray machines for medical, surgical, dental, or veterinary use and certain specified spare parts.

Conclusion: The ruling from the Customs Authority of Advance Ruling clarified the applicability of customs duty rates for X-Ray tubes and spare parts used in medical equipment. As per the ruling, the exemption benefit under Sr. No. 563A of Notification No. 50/ 2017 dated 30.06.17 is not applicable to X-Ray tubes (90223000) and certain spare parts (90229090) if they are intended for use in the manufacture of X-Ray machines for medical, surgical, dental, or veterinary use (90221420 or 90221490).

This ruling has implications for importers and manufacturers in the healthcare industry, as it affects the duty rates for critical components used in diagnostic and medical imaging equipment. Understanding the classification and duty rates is essential for compliance and cost considerations in the import of such goods.

Please note that the interpretation of customs notifications and their impact on specific cases can be complex, and it is advisable to seek professional guidance for precise compliance with customs regulations.

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

Ruling

M/s Siemens Healthcare Pvt. Ltd. (IEC No.: 0315054191) (Herein after will be referred to as ‘Applicant’) filed an application for advance ruling in the Office of Secretary, Customs Authority for Advance Ruling (CAAR) Mumbai 19.05.2023 seeking applicability of Sr. No. 563A of Notification No. 50/2017-Customs, dated 30.06.2017, as amended.

2. Submission by the Applicant:

2.1 The applicant has informed that they are in the business of sales and services of Life saving Medical Equipments (Computerized tomography (CT) Scan & other X-Ray based machine, etc.), its spare parts/consumable/re-agents (drugs) throughout the country. They provide essential supplies and services to Private Hospitals, Government/Semi Government hospitals and diagnostic Centers/Labs.

2.2 As per application they seek understanding towards applicability of Customs Notification No. 50/ 2017 dated 30.06.17 Sr. No 563A with latest amendment vide Customs Notification No 02/2022 dated 01.02.20222 & Notification No 17/2023 dated 29.03.2023 for:-

i. Applicability of basic duly rate on Import of X-Ray Tube classified under CTH 90223000 &

ii. Applicability of basic duty rate on import of spare part classified under CTH 90229090.

2.3 Background submitted by Applicant:

2.3.1 . The applicant imports Computer Tomography (CT) scan & other X-Ray base Machine and it’s components & spare parts.

2.3.2 . Applicant submits that the X-Ray tube is one of the important components used in these Machine classified under CTH 90223000 and spare part are classified under the HSN 90229090 irrespective of machine they put you use to as per the details given below:

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2.3.3 Interpretation of amended Customs Notification No 02/2022 dated 01.02.2022 & Notification No 17/2023 dated 29.03.2023 for Sr. No 563A of Notification No 50/2017 dated 30.06.2017 and applicable rate of duly for below mentioned components & spare part used in Computerized tomography (CT) scan (HS Code 90221200) & scan & other X-Ray based machine 90221490.

2.3.4 The above mentioned X-Ray Tube & spare parts are imported for support function and& maintenance (Machine down time) activity of computerized tomography (CT) & other X- Ray based machine installed at various private hospitals government/semi government hospitals and Diagnostic Center.

2.3.5 Below is the snip of Customs Notification No 02/2022 dated 01.02.2022 & Notification No 17/2023 dated 29.03.2023 for Sr. No 563 A of Notification No 50/2017 dated 30.06.2017:

2.3.6 Applicant submits that post reading their interpretation/ understanding of the said notification is as below:

1. It says all goods of HS Code 9022 (except 90229010 or 90229010) applicable BCD is 7.5% so it covers X-Ray tubes (HS 90223000) & Spare Part (ITS 90229090) used in computerized tomography (CT) Scan (IIS 90221200) and scan & another X-Ray based Machine (90221490).

2. Benefit of said notification is not applicable to X-Ray Machine for Medical, Surgical dental or veterinary use (HS 90221420 or 90221490) condition (ii) and the spare part (for Manufacture) list given in said notification condition (ii).

2.3.7 After submitting above details the applicant requested for help in understanding on the applicability of said notification & basic duty rate applied ‘X-Ray lube (90223000) & Spare Part (HS 90229090).

3. Additional information submitted by Applicant:

3.1 X Ray Tube used in X-Ray machine: The X-Ray lube serves the function of creating X-Ray photons from electric energy supplied by the X-Ray generator.

3.1.1 As with any vacuum tube, there is a cathode, which emits electrons into the vacuum and an anode to collect the electrons, thus establishing a How of electrical current, known as the beam, through the tube. In a high voltage power source, the X-Ray spectrum depends on the anode material and the accelerating voltage.

3.1.2 Electrons from the cathode collide with the anode material, usually tungsten, molybdenum or copper, and accelerate other electrons, ions and nuclei within the anode material. About 1% of the energy generated is emitted/radiated, usually perpendicular to the path of the electron beam, as X-rays. The rest of the energy is released as heat. Over time, tungsten will be deposited from the target onto the interior surface of the tube, including the glass surface. This will slowly darken the tube and was thought to degrade the quality of the X-ray beam. Vaporized tungsten condenses on the inside of the envelope over the “window” and thus acts as an additional filter and decreases the tube’s ability to radiate heat. Eventually, the tungsten deposit may become sufficiently conductive that at high enough voltages, arcing occurs. The are will jump from the cathode to the tungsten deposit, and then to the anode. This arcing causes an effect called “crazing” on the interior glass of the X-ray window. As time goes on, the tube becomes unstable even at lower voltages, and must be replaced. At this point, the tube assembly (also called the “tube head”) is removed from the X-ray system, and replaced with a new tube assembly. The old tube assembly is shipped to a company that reloads it with a new X-ray tube.

3.1.3 The range of photonic energies emitted by the system can be adjusted by changing the applied voltage, and installing aluminium filters of varying thicknesses. Aluminium filters are installed in the path of the X-ray beam to remove “soft” (non-penetrating) radiation. The number of emitted X-ray photons, or dose, are adjusted by controlling the current flow and exposure time.

3.2 CT and X-Ray Tube functionality; The X-ray Tube serves the function of creating X-ray photons from the electric energy supplied by the X-Ray generator. The major X-Ray tube components are the cathode and anode assemblies, the tube envelope, the rotor and stator (for rotating anode systems), and the tube housing. The design of the X-Ray tube determines the basic characteristics of the X-Ray beam such as focal spot size, X-Ray field uniformity, and the X-Ray energy spectrum. These X-Ray resolution, image contrast, and the patient dose.

3.3 X Ray Tube function in CT: As with any vacuum tube, there is a cathode to emit electrons into the vacuum and an anode to collect the electrons, thus establishing a flow of electrical current through the tube. A high voltage power source is connected across cathode and anode, for example 30 to 150 kilovolts (kV), such that the voltage can be quickly switched on, then off, for precise amounts of time, e.g. 0.001 to 1.00 seconds and the current flow, often in the 1.0 to 1000 milliampere range, once started, can be controlled.

4.1 The applicant in their CAAR-1 indicated that they intend to import the impugned goods from the jurisdiction of Office of Commissioner of Customs (NS-V) Nhava Sheva, Raigad Maharashtra 400 707. The application was forwarded to the jurisdictional Commissioner of Customs & Commissioner of Customs, Nhava Sheva for their comments on 08.06.2023.

4.2 The Customs Commissionerate, Nhava Sheva sent the comments vide letter dated 07.06.2023. No comments were received from other jurisdictional Commissionerates. The comments received from Customs Commissionerate, Nhava Sheva are summarized below:

4.2.1 The submission of the applicant was scrutinized in view of amended Notification. In this regard, it is to mention that both the amended Notification are as under: –

4.2.2 From perusal of the Notification No. 050/2017-Cus dated 30.06.2017 (as amended from lime to time), it is evident that the said Notification exempts “the goods of the description specified in column (3) read with the relevant fist appended, as the case may be, and falling within the Chapter, heading, sub-heading or tariff item of the First Schedule to the said Customs Tariff Act, as are specified in the corresponding entry in column (2) of the said Table, when imported into India.”

4.2.3 . In view of the above, the exemption under Notification No. 050/2017-Cus dated 30.06.2017 (as amended from time to time) is applicable only for the items except the goods mentioned in Column 3 of the said Notification. Thus the exemption benefit under Notification No. 050/2017-Cus dated 30.06.2017 (Sr. No. 563A) is not applicable to X-ray tube (9022 3000) & certain spare parts (9022 9090) as mentioned in the amended Notification. However, the Hon’ble Customs Authority for Advance Rulings may decide the case on its merit.

5. A personal hearing was held virtually on 22.08.2023 at 12:00 pm. Shri Manish Soin along with other officials of applicant appeared for the hearing. No one appeared on behalf of the jurisdictional commissionerate. The applicant demonstrated a presentation wherein they reiterated the points submitted in the application and requested for the ruling.

6. I have considered all the materials placed before me in respect of the subject goods. I have gone through the submissions made by the applicant during the personal hearing as well as the response received from the Jurisdictional Customs Commissionerate. Therefore, I proceed to pronounce a ruling on the basis of information available on record as well as existing legal framework. The issue before me is of applicability of exemption benefit under Sr. No 563A of Notification No 50/2017 dated 30.06.2017 as amended on the import of X-Ray lube (ITS 9022 3000) and spare parts (HS 90229090).

6.1 I find that An X-ray tube is a vacuum tube that converts electrical input power into X-rays. The availability of this controllable source of X-rays created the field of radiography, the imaging of partly opaque objects with penetrating radiation. In contrast to other sources of ionizing radiation, X-rays are only produced as long as the X-ray tube is energized.

6.2 I find that X-Ray tube can be used in both X-Ray Machines and CT Scanners. X-ray tubes are used in CT scanners, airport luggage scanners, X-ray crystallography, material and structure analysis, and for industrial inspection. Increasing demand for high-performance Computed tomography (CT) scanning and angiography systems has driven development of very high performance medical X-ray tubes.

6.3 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. I find that there is no ambiguity in the classification of the X-Ray Tubes since they are specifically classified under CTI 9022 3000.

6.4 Relevant portion of CTH 9022 is reproduced below for case of reference:

Notification No 50/2017 dated 30.06.2017 was amended by Notification No 02/2022 dated 01.02.2022. Sr. No 563A as amended as per Notification No 02/2022 dated 01.02.2022 is as below:

(147) against S. No. 563A, –

(a) in column (2), for the entries, the entries “9018 90 99 or 9022 (except 9022 90 10 or 9022 90 30)” shall be substituted with effect from the 1st day of May, 2022;

(b) in column (3), for the entry, the following entry shall be substituted with effect from the 1st day of April, 2022, namely: –

“All goods, other than the following, –

(i) X-ray machines for medical, surgical, dental or veterinary use (9022 14 20 or 9022 14 90);

(ii) The following goods for use in manufacture of goods mentioned at (i) above, namely: –

(a) Static User Interface (9018 90 99);

(b) X-Ray Diagnostic Table (9022 90 40);

(c) Vertical Bucky (9022 90 90);

(d) X-Ray Tube Suspension (9022 90 90);

(e) High Frequency X-Ray Generator (>25KHz, <500 mA) (9022 14 10);

(f) X-Ray Grid (9022 90 90);

(g) Multi Leaf Collimator/ Iris (9022 29 00 or 9022 90 90).”;

Sr. No 563A amended as per Notification No 17/2023 dated 29.03.2023 is detailed as below:

(4) against S. No. 563A, in column (3), in entry (ii), after item (g) and entries relating thereto, the following items and the entries relating thereto shall be inserted with effect from 1st April, 2023, namely: –

“(h) Flat Panel Detector, including Scintillators (9022 90 90);

(i) X-ray Tube (9022 30 00)”;

6.5 I find that the applicant has not specifically informed the usage of X-Ray Tubes and Spare parts. In absence of data regarding the end usage of the product in question exact ruling cannot be given since the benefit under Sr. No 563A of Notification No. 50/ 2017 dated 30.06.17 is conditional.

7. In view of the above, the exemption under Notification No. 50/ 2017 dated 30.06.17. as amended, is applicable only for items except the goods mentioned in column 3 of the said notification. Thus the exemption benefit under Sr. No 563A ofNotification No. 50/ 2017 dated 30.06.17 is not applicable to X-Ray tube (90223000) and certain spare parts (90229090) as mentioned in the amended notification if they are to be used in the manufacture of X-ray machines for medical, surgical, dental or veterinary use (90221420 or 90221490).