Case Law Details
In re Apple India Private Limited (CAAR Mumbai)
Customs Authority for Advance Rulings (CAAR), Mumbai, addressed Apple India Private Limited’s application for renewing an earlier advance ruling on the classification of Apple Watch and its bands under the Customs Tariff Act, 1975. The applicant sought to classify the Apple Watch under Heading 8517 62 90, attracting a Basic Customs Duty (BCD) of 20%, and the watch bands under Heading 8517 79 90 for non-leather bands and Heading 4205 00 90 for leather bands, attracting BCD rates of 15% and 10%, respectively. The ruling reaffirmed the classification of the Apple Watch under Heading 8517 62 90 due to its primary function as a communication device, aligning with global classifications under the Harmonized System of Nomenclature (HSN). However, the classification of watch bands remained contentious due to an ongoing dispute raised by the customs authorities.
The authority emphasized that the validity of advance rulings is governed by Section 28J of the Customs Act, which limits rulings to three years or until changes in law or facts. Since a Show Cause Notice (SCN) challenging the classification of bands was issued before the current application, the authority ruled the application inadmissible for the disputed matter under Section 28H(2). This decision highlights the interplay between advance rulings, ongoing disputes, and legislative amendments in determining tariff classifications. The ruling provides clarity on the classification of the Apple Watch but underscores the need for further deliberations on the classification of its accessories.
FULL TEXT OF THE ORDER OF CUSTOMS AUTHORITY OF ADVANCE RULING, MUMBAI
7. Discussions and Findings
7.1 I have considered all the materials placed before me in respect of the classification of subject goods: I have; gone through. the Submissions made by the applicant during the personal hearing. Therefore, I proceed to. pronounce a ruling on the basis of information available on record.as well as existing legal frarriework.
7.2 The applicant has Sought advance ruling in respect of the following questions:
a. Renewal of Advance Ruling bearing Order. No.. AAR/CUS/12/2016 dated March 18, 2016 read with. corrigendum dated April 06, 2016, for classification of Apple Watch under Custom Tariff Heading, (`CTH’) 8517 62 90. of the First Schedule of the Customs Tariff Act, 1975 attracting Basic Customs Duty (BCD) at 20% rate.
b. Renewal of Advance Ruling bearing Order No. AAR/CUS/12/2016 dated March 18, 2016. read with–corrigendum, dated April 06; 2016. for classification .of parts, namely bands made – up of fluoroelastomer or stainless steel or .any other. material other than .of leather (i.e., bands, other than leather bands) for different range of Apple Watch. classified: under .CTI7.1 8517 79 90 of the First Schedule of the Customs Tariff Act, 1975 attracting BCD at 15% rate (As per the previous advance ruling, the parts to Apple watch (i.e., bands) were classified tinder CTH 8511 70 90. .However, the entry ‘has been omitted arid split into two new entries, CTI-1 85.17 79 10 and CTH 8517 .79 90 pursuant to the amendment in the Customs Tariff Act, 1975 to ‘align With the AS.2022 issued by the ‘World Customs Organisation. The. Entry under. CTH .8517 79..90 is coterminous with old C1171.8517 70.90).
c. Whether the parts of Apple Watch’, namely bands made of leather (‘ leather bands’) are classified under c:TH 4205 00 90 of the First Schedule of the Customs Tari ET Act, 1975 attracting BCD of 10% rate?*
7.3 At the outset,. I find, that the issue raised.at the. Sr. No. 08 in the CAAR-.-1 form is squarely covered under ‘Section 28H(2) of the Customs Act, 1962 being a matter related.to. the. classification of goods.
Further, I find that Section 28E’ (c). defines the’ Appliance as any- person ‘holding– a–valid Importer-exporter Code Number granted under section 7 of the Foreign Trade (Development and.
Regulation) Act, 1992;. or exporting any goods to India ; with a justifiable cause to the satisfaction of the Authority, who makes’a.n application for advance rang under Section 28H. ‘In this matter, the applicant holds a:valid importer-exporter Code Number and satisfies.one of the criterions mentioned under the definition of the. Applicant under Section„28E and., therefore, is a valid applicant for filing application under Section *281-I of the Customs Act, 1962.
7.4 The applicant are seeking renewal of Advance Ruling bearing Order No: AAR/CUS/12/2016 dated March 18, 20.16 read With corrigendum, dated’ April06; 2016; for classification of Apple Watch under Custom Tariff Heading (`GTH’) 8517 62 90 of the First Schedule of the Customs Tariff Act, 1975 and for classification of parts, namely– bands made up of fluoroelastomer or stainless steel or any other material other than of leather (i.e., bands, other than leather bands) for different range of Apple Watch classified under CTLI 851.7 79 90 of the First Schedule of the Customs Tariff Act, 1975. The applicant. submitted that the Apple Watch is essentially, an extension of the iPhone-and designed to* worn on the user’s wrist The applicant further submitted that the Apple watch is an advanced communication tool that enables peer-to-peer interaction through digital touch functionality, allowing features like taps, voice messages, heartbeat sharing, and sketches via a paired iPhone. Further, the applicant submitted that the Apple watch bands secure ‘the Apple Watch’ onto the user’s wrist, enabling full functional capability of the device to be accessible by the user. They further submitted that the attachment of bands is essential ‘for facilitating- optimal functionality and enhancing–the overall user experience’. The bands of the device are made up*of fluoroelastomer or stainless steel or leather or of any other material.
7.5 Before deciding On the issue, let deliberate on the legal framework prescribed in Customs Tariff Act, 1975, Chapter/Section notes along with FISN explanatory notes. Classification of goods in the llarmonized System of Nomenclature (HSN) is governed by the General ‘Rules for the interpretations. Rule I of the General Rules for the Interpretation of the Port Tariff to the Customs Tariff Act; 1975 stipulate that for legal purposes, the classification of the import item shall be determined according to the terms of the headings and any relative Section or Chapter Notes.
7.6 As far as the issue of classification of Apple Watch is concerned, I find that the device i.e. Apple watch has a host’ of functionalities such as timekeeping, storage of data etc.. However, the principal function of the -device is as an apparatus for the communication in a wireless network of voice, images and other data as it works as an extension of paired iPhone. Note 3 to Section XVI of the First Schedule ‘of the Custom’s Tariff Act. 1975 reads as under:
“3. Unless the context otherwise requires, composite machines consisting of two or more machines ;fitted tog ether form a :hole and other machines designed :for the porpoise of fierlbrining 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,”:
Since- the principal function of the device is as an apparatus.. for the. communication -in a wireless network, I find that Heading 8517 “Telephone Sets, Including Smartphones And Other Telephones For .Cellular Networks Or For Other Wireless IVitworky:.0ther Apparatus For The Transmission Or. Reception Of Vice, 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″ aptly covers such apparatuses / devices.
7.7 further find that both the department. (ACC Sahar, Mumbai) and applicant are in agreement over the classification of Apple watch under-Heading 8517 and specifically under Tariff Item 85176290. The relevant text of the Heading, Sub-heading and Tariff Item is as under:
7.8 I further find that WCO Harmonized: Sisters Committee ‘at its 55th Session held on March 16, 2015 ruled with an Overwhelming majority that different range of Apple Watch and similar devices were rightly classifiable under C1’14 8517 62.
7.9 In view of the above, I find that the Apple watches are rightly classifiable under Heading 8517and specifically und er Tariff it= ‘8517 62 90 of the First Schedule of the Customs Tariff Act, 1975 and I see no reason to not renew the earlier order of the erstwhile authority for another three years as far as the classification of Apple Watch is concerned.
7.10 In regards to the classification of Apple Watch Lands, from the submissions made by the department as well as the rejoinder filed by the Applicant, I find that the matter of classification of these goods is now–currently under dispute as an Show Cause Notice (SCN)SCN dated 27.12.2024 has been issued to the applicant in the matter by the Additional Commissioner of Customs, ACC, Mumbai challenging the classification of the Apple Watch Bands under CTH 8517 70 90 (which was amended vide Finance Act, 2021 and split into two new entries, CTFI 8517 79 10 and CTH 8517 79 90). I find it prudent here to examine the Section 281(2) of the Customs Act, 1962. The same is reproduced here for. ease of reference:
“281. Procedure on receipt of application. —
(1)…………….
(2) The Authority may, after examining the application and the records called for, by order,–either allow or reject the application:
Provided that the Authority shall not allow the application where the question raised in the application is —
(a) already pending in the applicant’s case before any officer of customs, the Appellate Tribunal or any Court,
(b) the same as in a matter already decided by the Appellate Tribunal or any Court.”
7 .11 Here, I do not agree with the view of the applicant that since the dispute arose. after thrapple action; therefore application is not barred. Rather, I – find that since the dispute came into existence before the issuance of the ruling, the application is hit by the provision prescribed under Proviso (b) to Section 281(2) of the Customs Act, 1962. The impugned SCN currently is pending before the adjudicating authority in the applicant’s–matter.
7.12 Further, I find it prudent to examine Section 283(2) of the Customs Act,. 1962 ‘which deals with the applicability and validity of the rulings pronounced under the relevant sections. The same is reproduced here for ease of reference.
“Section -28J. Applicability of advance ruling. –
(2) 2[The advance ruling referred to in sub-section’ (1) shall remain valid for three years or till there is a change in law or facts on the basis of which the advance ruling has been pronounced, whichever is earlier:
Provided that in respect of any advance ruling in force on the date on which the Finance Bill 2022 receives the assent of the President, the said period of three years shall be reckoned from the date on which the said Finance Bill receives the assent of the President’.
7.13 Here, I observe that the applicant has not specifically provided the details of any subsequent appeal in terms of Section 28J(2) of Customs Act 1962; against the said Show Cause Notice, before the competent court and/or stay operation thereupon. Therefore I am of the view that as far as the classification of Apple Watch bands is concerned in this instant case, there is bar on pronouncing of Ruling, in terms of Proviso (b) to Section 281(2) of the Customs Act, 1962 However liberty is given to the applicant to approach this office once the dispute is resolved/ SCN is decided and the applicant so desires.
8. In light of the above facts, discussions and observations, my views on the questions raised by the applicant are as under:
a. Renewal of Advance Ruling bearing Order No. AAR/CUS/1/2016 dated March 18, 2016 read with corrigendum dated April 06, 2016, for classification of Apple Watch under Custom Tariff Heading (`CTH’) 8517 62 90 of the First Schedule of the Customs Tariff Act,. 1975 attracting Basic Customs Duty (BCD) at 20% rate.
Ans. My answer is in affirmative for the same and renewal of the Advance Ruling bearing Order No. AAR/CUS/12/2016 dated March 18, 2016 read with corrigendum dated April 06, 2016, for classification of Apple Watch under Custom Tariff Heading (`CTH’) 8517 62 90 of the First Schedule of the Customs Tariff Act, 1975 is warranted accordingly.
b. Renewal of Advance Ruling bearing Order No. AAR/CUS/12/2016 dated March 18,.2016 read with corrigendum dated April 06, 2016 for classification of parts, namely bands made up of fluoroelastomer or stainless steel or any other material other than of leather (i.e., bands, other than leather bands) for different range of Apple Watch classified under CT1-1 8517 79 90 of the First Schedule of the Customs Tariff Act, 1975 attracting 13CD at 15% rate (As per the previous advance ruling, the parts to Apple watch (i.e., bands) were classified under CTH 8517 70 90. However, the entry has been omitted and split into two new entries, i.e., CTH 8517 79 10 and CTH 8517 79 90 pursuant to the amendment in the Customs Tariff Act, 1975 to align with the HS 2022 issued by the World Customs Organisation. The entry under CTH 8517 79 90 is coterminous with old CTI-1 8517 /0 90).
Ans. I do not allow the application on this issue at this point of time in terms of Proviso (b) to Section 281(2) of the Customs Act, 1962 as the matter is currently pending before the Adjudicating Authority in the Applicant’s matter. I refrain from passing order on this issue.
c. Whether the parts of Apple Watch, .namely bands made of leather (leather bands’) are classified under CTH 4205 00 90 of the First Schedule of the Customs Tariff Act, 1975 attracting BCD at 10% rate?
Ans. Same as (b) above.
9. I rule accordingly.
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