Case Law Details

Case Name : In re Amazon Digital Services Pvt. Ltd. (CAAR Mumbai)
Appeal Number : Ruling No. CAAR/MUM/ARC/65/2021
Date of Judgement/Order : 09/11/2021
Related Assessment Year :

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

CAAR held that  that networking devices model nos. DSN87C (rooftop node or RT node) and D5N87D9 (customer premise node or CP node) are classifiable under sub-heading 85176290; and passive antennas, one high gain and one low gain, having model no. 14D3T2A are classifiable under sub-heading 85177090 of the first schedule to the Customs Tariff Act, 1975.

FULL TEXT OF ORDER OF CUSTOMS AUTHORITY FOR ADVANCE RULINGS

M/s. Amazon Digital Services Private Limited proposes to import networking device model no. D5N87C (rooftop node or RT node), networking device model no. D5N87D9 (customer premise node or CP node), antenna (passive) model no. HD3T2A (one high gain and one low gain) which will form part of a network that will be created by the applicant to render services to customers in India. The questions on which advance rulings have been sought are related to classification of these devices. The application of advance ruling was received in the secretariat of the erstwhile Authority for Advance Rulings (Central Excise, Customs and Service Tax), New Delhi on 20.09.2019. However, since no rulings were issued by the said authority, the pending application was transferred to the Customs Authority for Advance Rulings, Mumbai in February, 2021. 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 the pending application. The applicant, vide their communication dated 25.02.2021 informed that they are still interested in receiving the advance rulings and also that they will re-submit the application in the revised format in due course. Thereafter, the application was e-mailed by the applicant on 14.07.2021, which was followed by physical submission of the application on 10.08.2021.

2. The applicant proposes to import these devices for providing services to various individual customers in India. The devices in question will be installed at customer locations or buildings but will not be owned by the customer as the ownership of these devices would remain with the applicant. The networking devices to be imported are stated to be non-portable. The RT node has two 5 GHz radios while the CP node has one 5 GHz and one 2.4 GHz radio. These devices would be used in conjunction with a Fire TV stick also provided by the applicant to the customers for providing access to audio-video content like movies, series, etc. The Fire TV sticks are provided to customers as part of the service and are to be returned by the customers on termination of service. The Fire TV sticks provided to customers are not the same as the ones that are available in the market as the software of these Fire TV sticks is modified to provide only a limited amount of the content otherwise available.

3. The applicant has explained the working of the devices in question, which is as follows: –

(i) The RT node would be installed on the rooftop of a building and would receive access to internet via local area network LAN cable from a third-party Internet service provider (1SP). Further, the RT node is connected to an external hard disc drive(HDD) via USB cable. This HDD stores cached content to be provided to customers for viewing on demand. When a customer makes a request on the Fire TV stick to view any particular content, the same is first searched in the HDD connected to the RT node installed on the rooftop of the building. I f the content is not found in the HDD, the content is retrieved by the RT node from the Amazon cloud via the LAN cable by accessing internet. The RT node has two internal 5 GHz radios for transmission and reception of content (data) in the form of signals. The RT node receives data from HDD in the form of digital signals and transmits content in the form of RF electric signals (analog) to the HG antenna via coaxial cables for further transmission. The RT node is MIMO enabled.

(ii) The HG antenna is a down facing passive antenna installed on the rooftop to which the RT node is connected via coaxial cables. This antenna receives RF electric signals and further radiates the same to the LG antenna.

(iii) The LG antenna is installed in each customer premise within the building where the service is to be provided. The LG antenna is connected via coaxial cables to the CP node also installed in the customer premise. It is an up facing passive antenna. The RF signals received by the LG antenna from the HG antenna are transmitted to the CP node via coaxial cable in the form of RF electric signals.

(iv) The CP node is installed in each customer premise within the building where the service is to be provided. The CP node receives RF electric signals and transmits the same wirelessly in the form of radio waves to the Fire TV stick connected to the customer’s television. The CP node is MIMO enabled.

4. When a user makes a request for a specific content on the Fire TV stick, this request is communicated by the Fire TV stick to the CP node via RF signals. The CP node converts these RF signals into electric RF signals to be transmitted to the LG antenna via coaxial cables. The LG antenna radiates the RF signals to the HG antenna, which in turn transmits the same to the RT node via coaxial cables. The RT node converts the RF analog signals into digital signals. The RT node searches for the content demanded in the cached data in the HDD. If the content is not found on the HDD, then the RT node retrieves the content from the Amazon cloud via LAN cable. On receipt of the content, the RT node transmits the content in the form of RF electric analog signals via coaxial cables to the HG antenna. The HG Antenna radiates the RF signals to the LG antenna at the customer premises. The LG antenna transmits the RF signals to the CP node via coaxial cables in the form of RF electric signals. The CP node converts the RF electric signals into radio signals for transmission to the Fire TV stick for viewing by the customer. The network created by the devices mentioned above enables customers to access content through the Fire TV stick, without owning a data connection as internet is accessed by the RT node, if required.

5. The applicant had originally requested that CBEC may appoint a Commissioner of Customs in respect of their application. Accordingly, the Board appointed the Principal Commissioner of Customs (Import), Air Cargo Complex Delhi for the said purpose. However, in their communication dated 10.08.2021, the applicant has stated that they wish to import these devices through the air cargo complexes at Delhi, Bangalore, Chennai, and Mumbai as well as the sea ports of Chennai and Nhava Sheva. Accordingly, the comments of the concerned Principal Commissioners/Commissioners of Customs were sought. However, response has been received from only from the Commissioner of Customs, Sea Port, Chennai and ACC, New Delhi. The Commissioner of Customs, Chennai has concurred with the applicant’s view regarding classification of networking devices under sub-heading 85176290. However, the classification of antennas is suggested under sub-heading 85291029 as against the sub-heading 85177090 suggested by the applicant. The Principal Commissioner of Customs, ACC, New Delhi has concurred with the views of the applicant regarding the classification of the networking devices under sub-heading 85176290 and also of the antennas under sub-heading 85177090. The Commissioner of Customs, ACC. Chennai has not submitted any comments. However, his representative appeared in the personal hearing and concurred with the views of the applicant.

6. The hearing in this case was fixed for 26.08.2021. However, the applicant sought adjournment on the ground that they have received the comments from the jurisdictional Principal Commissioner/Commissioner of Customs in the evening of 25th August itself. Thereafter, the hearing was again fixed on 23.09.2021. The applicant sought adjournment citing preoccupation of their lead counsel before the Hon’ ble High Court of Telangana. The hearing was finally held on 02.11.2021 and Ms. Jyoti Pal, advocate, appearing on behalf of the applicant, explained the product features and specifications. Ms. Pal also informed that in another case involving networking devices and antennas, advance rulings have already been given, and that the devices in the present application being similar in nature the line of reasoning adopted earlier would also be applicable in this case. Shri Prabhakar Nigam, Appraising Officer, represented the Commissioner of Customs, Chennai ACC in the hearing and concurred with the views of Ms. Pal.

7. In the earlier application referred by Ms. Pal, products similar to the ones involved in the present application were networking device model no. N3XU6S, (ii) networking device model no. N3XU5S, (iii) networking device model no. N3XU7S, (iv) antenna (passive) model no. S8RL4H, and (v) antenna (passive) model no. S8RL4G. The device having model no. N3XU6S is intended to be installed on the rooftop of a building and gets access to internet via LAN cable from a third-party ISP and is connected to an external HDD via a switch placed on the rooftop. This drive stores cached content to be provided to customers for viewing content on demand. When a customer makes a request on the Fire TV stick to view any particular content, the networking device provides content from the HDD installed on the rooftop of the building/nearby building or from the Amazon cloud via the LAN cable by accessing internet. The networking device has an internal 5 GHz radio for transmission and reception of content (data) in the form of signals and receives content through the LAN cable in the form of electrical signals and transmits content in the form of radio signals to the networking device model no. N3XU5S for further transmission. The second device is installed outside each customer premise within the building that is to be served. It has two internal radios of 2.5 Ghz and 5 Ghz and converts the radio signals to electrical signals to be sent over radio frequency cables (coaxial cables) to the antenna. The networking device model no. N3XU7S, which works in a different configuration compared to the first two described above, is installed within the customer premises, i.e., inside each house that is to be served. It has two internal radios of 2.5 Ghz and 5 Ghz. It’s access to internet is via LAN cable connected to a switch placed on the rooftop. It is also connected to an external HDD via a switch placed on the rooftop. The device receives content from the internet/HDD through the LAN cable in the form of electrical signals and transmits content in the form of RF signals directly to the Fire TV for viewing by the customer. All the three devices described above are MIM.O enabled. In that earlier application, there were two passive antennas which were to be placed outside each customer premise within the building that is to be served. Both antennas have RF cables permanently attached to them. While one antenna had two RF cables attached, the second had one RF cable attached to it. These RF cables connect to the networking device and receive electrical RF signals from the same. The antennas radiate these electrical signals to the Fire TV device inside the customer premises.

8. In respect of the said earlier application involving the issue of classification of three networking devices and two antennas, vide Ruling No. CAAR/Murn/ARC/59/2021, 08.10.2021; I have already ruled that network devices would merit classification under sub-heading 85176290, and antennas under 85177090. In coming to the above decision, I had relied on the facts that so far as the network devices are concerned, their role in the network architecture is to receive a command/signal in either electrical or radio form, convert the electrical signal into radio frequency signal or vice versa, and transmit the signal to the receiver or the Amazon cloud in the acceptable format. In that case, I also considered a possible alternate tariff entry 8525, but from the description of the functions of the three network devices, it was clear that they do not transmit broadcast signals. On the contrary, their function is to extract the content from the hard disk drive or Amazon cloud/internet as per the demand of the user. Therefore, heading 8525 was discarded being an inappropriate classification entry for the said network devices. I had also held therein that the six-digit entry, 851762, which includes ‘Machines for the reception. conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus’ is a specific entry which satisfactorily covers the functions of the three networking devices under consideration. In the present proceedings, the networking device model nos. D5N87C and D5N87D9 have a function not very dissimilar to the three networking devices already considered. These two devices are also designed for use in conjunction with a Fire TV stick for providing access to audio-video content like movies, series, etc. These network devices are also designed to receive a command/signal in either electrical or radio form, convert the electrical signal into radio frequency signal or vice versa, and transmit the signal to the receiver or the Amazon cloud in the acceptable format. Therefore, there is no reason for me to depart from my earlier decision that network devices of the type discussed here merit classification under sub-heading 85176290. Therefore, I propose to concur with the views of the applicant as well as the Id. Principal Commissioner/Commissioner of Customs of ACCOmport), New Delhi/Chennai and seaport, Chennai.

9. So far as the antennas are concerned, their utility in the network architecture appears to be limited to radiating the signals from the Fire TV Stick to the CP Node and on receipt of the desired content from the CP Node, radiate it back for the viewing of the user. Signals are transmitted between two points through a medium. This medium in the case of a wired network is a wire and in the case of wireless network, the medium is electro-magnetic waves. The role of antennas in the network explained by the applicant is limited to transmit the commands of the user in the form of RF signals to CP Node via RF cables and to receive the desired content from CP Node and radiate the signals to the Fire TV for viewing by the customer. In the Ruling No. CAARIMum/ARC/59/2021, dated 08.10.2021; referred supra, after considering CBIC’s Instruction No. 1/2018-Cus., dated 15.01.2021, the decision of the Hon’ble CESTAT in the case of Reliance Jio Infocom reported at 2019 (369) E.L.T. 1713; recommendations of the HS Committee of the WCO in their 62nd session; the changes in customs tariff coming into effect on 01.01.2022, thereby creating a specific tariff entry for aerials and aerial reflectors of all kinds, I had reached the decision that the correct classification for passive antennas is the sub­heading 85177090. Considering the nature and function of the antennas involved in the present proceedings, I see no reason, to depart from my earlier ruling referred supra. For the same reasons, I am unable to concur with the suggestion of the Commissioner of Customs, Chennai that antennas merit classification under heading 8529 since that heading applies to parts suitable for use solely or principally with the apparatus of heading 8525 to 8528.

To summarise, I rule that networking devices model nos. DSN87C (rooftop node or RT node) and D5N87D9 (customer premise node or CP node) are classifiable under sub-heading 85176290; and passive antennas, one high gain and one low gain, having model no. 14D3T2A are classifiable under sub-heading 85177090 of the first schedule to the Customs Tariff Act, 1975.

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