Classification of SFP Transceivers in Customs Ruling

In re Cisco Commerce of India Pvt. Ltd. (CAAR Mumbai)

The ruling concerns the classification and duty eligibility of Small Form Factor Pluggable (SFP) Transceivers under the Customs Tariff. The applicant sought an advance ruling on whether these transceivers should be classified under CTI 85176290 and if they qualify for a concessional duty under Notification No. 57/2017-Cus. The applicant explained that SFP Transceivers combine transmission and reception functions, converting optical and electrical signals, and are used in networking devices like switches and routers. After examining legal provisions and HSN notes, the ruling determined that the transceivers should be classified under subheading 8517 6290, as they perform the function of converting signals, a category under “other machines for the reception, conversion, and transmission of data.” Regarding concessional duty eligibility, the ruling concluded that optical SFP Transceivers, used in optical transport systems, fall under the exclusion categories of Notification No. 57/2017-Cus., disqualifying them for concessional duty. However, electrical SFP Transceivers, which operate with copper cables, may not be subject to the same exclusions.

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

M/s. Cisco Commerce India Private Limited (IEC No.: 0711019673) (hereinafter referred to as ‘the Applicant’) filed an application (CAAR-1) for advance ruling in the Office of Secretary, Customs Authority for Advance Ruling (CAAR) Mumbai. The said application was received in the secretariat of the CAAR, Mumbai on 11.09.2024 along with its enclosures in terms of Section 2811(1) of the Customs Act, 1962(hereinafter referred to as the ‘Act also’). The applicant is seeking advance ruling on the following issues:

a) Whether the product i.e. Small-Form Factor Pluggable (SFP) Transceiver is classifiable under CTI 85176290 as other machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus or otherwise?

b) If the product is classifiable under CTI 85176290, then whether the product is eligible for concessional rate of duty under Sr. No. 20 of Notification No. 57/2017-Cus. Dated 30.06.2017 or otherwise?

2. Submission by the Applicant:

2.1     M/s Cisco in  Commerce India Private Limited (‘the Applicant’), is a company is engaged in developing, importing and selling of networking hardware, software, telecommunications  equipment other high-technology services and products.

2.2 The company is engaged in regular import of goods into India since the year 2012.  Amongst other products, the Company is importing transceivers (hereinafter referred to as consideration’/’Product’) from Cisco System Inc, USA.

2.3 The Product under consideration is a Transceiver, which are of two categories, i.e., avers and electrical transceivers. They are of different type modules, mentioned as follows:

• Small Form-Factor Pluggable (SFP) transceivers modules (including SFP+ modules, XFP modules).
• CPAK transceivers modules.
• Quad Small Form-Factor Pluggable (QSFP) transceivers modules (including P+, QSFP28 modules.
• C Form-Factor Pluggable (CFP) transceivers module (including CFP2 modules).

2.4 It is pertinent to highlight that irrespective of the technical distinction between the two eivers, their customs classification remains the same. These Transceivers are uses that can be inserted into various networking devices such as switches and re used in high-bandwidth data communications applications, and as the name sceiver combines the functions of a transmitter and a receiver, handling the erosion, and transmission of signals. Amongst others, transceivers can be used in g apparatus such as line cards, network modules, servers, firewalls as well. The n of transceivers, depending upon its type can be listed as follows:

• Optical transceivers: Their primary function is to convert optical signals from the to electrical signals and vice versa.
• Electrical  transceivers: Their primary function is to convert electrical type signals.

2.5  They afire versatile devices used in various types of communication networks to interface network devices, such as Ethernet switches, routers, etc. In other words, these transceivers a plugged into network devices like routers, Ethernet switches, and network interface cards etc. to transmit and receive data to and from the network, effectively linking these devices o the network. They are designed to support a wide range of communication standards, tran ceivers can operate in various types of networks, including LANS, WANs, and data center ne works, where they interconnect servers, storage devices, and other network equipment.

2.6 The product under consideration performs the function of reception, through switches and routers. with their conversion of data following the instruction that it received through switches and routers. with their functional capabilities, transceivers operate as complete machines in themselves. Transceivers need power supply for their operations, which is obtained from the devices into which the transceivers are inserted. Further, transceivers receive electrical or optical signals from another network device, which they transmit and convert, as required. Given their functional requirement, transceivers are necessarily used with the telecommunication equipment such as routers, switches etc., whether manufactured by CISCO or any other Company. Nonetheless, transceivers are stand-alone in performing their functions, but are not stand-alone in the sense of operating independently. In other words, transceivers are capable of performing their specific functions independently and execute their tasks of transmitting, receiving and converting without external assistance and the fact they need to be inserted into a device, does not change their functional independence. Newton’s Telecom Dictionary, 31st Expanded and Updated Edition, Harry Newton, 2018, defines transceiver as:

“1. Any device that transmits and receives. In sending and receiving information, it often provides data packet collision detection as well. 2. In IEEE 802.3 networks, the attachment hardware connecting the controller interface to the transmission cable. The transceiver contains the carrier-sense logic, the transmit/receive logic, and the collision-detect logic. 3. A device to connect workstations to standard thick Ethernet-style (IEEE 802.3).”

2.7  There are two types of transceivers, optical and electrical, which perform essentially the same function, except that optical transceivers convert optical signals to electrical signals and vice versa, while electrical transceivers convert one format of electrical signal to another format of electrical signal (usually Ethernet electrical signal to a signal recognized by the host).

2.8      However, the applicant has come across the decision of Tribunal in the matter of Commissioner of Customs Vs. Reliance Join Infocomm Ltd. (Final Order No. A/85669­85671/2022) and IBM India Pvt. Limited (Customs Appeal No. 85855 of 2022) wherein it was held that Small Factor Pluggable (SFP) Transceiver are correctly classified under CTI 85177090 and not under CTI 85176290.

3. Applicants interpretation of Law/Facts:

3.1      Tariff Heading 8517 covers “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)”.

3.2      The WCO Explanatory Notes, 2022 Edition (‘WCO Explanatory Notes’) of Tariff Heading 8517 lay down the ambit of the Tariff Heading to include “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 electro­magnetic waves in a wireless network”. Further, the apparatus of the said Tariff heading may communicate in signals, which may be analogue or digital.

3.3      The WCO Explanatory Notes further provide that communication networks included in the scope of said Tariff heading are vast, such as, digital-line systems, and its combination thereof, etc. They may be configured, for example, as public switched telephone networks, Local Area Networks (LAN), Metropolitan Area Networks (MAN) and Wide Area Networks (WAN), whet1 er proprietary or open architecture. It is also specified that the communication apparatus of st ch networks includes —

• Network  Interface Card (e.g., Ethernet interface cards).
• Mode s (combined modulators-demodulators).
• Router , bridges, hubs, repeaters, and channel to channel adapters
• Multiplexes and related line equipment (e.g., transmitters, receivers or electro-optical coveters).
• Codecs (data compressors/decompresses) which have the capability of transmission and reception of digital information,
• Pulse tQ tone converters which convert pulse dialled signals to tone signals.

3.4 Scope f Tariff Sub-heading 8517.62 can further be elaborated upon through reference to the WCO 0 inions Compendium for Subheading 8517.62, which at item 4 lists:

“Optical fiber converters, which convert the limited distance token-ring or other local area n work (LAN) limited distance digital signals on copper wire cables into optical digital signals. These converters are used, for example, when an optical fiber cable is used in a token-ring LAN in order to extend it into a campus environment, or where the replace net of copper cable with optical fiber cable is important to reduce interference.

3.5  Based .on a bare reading of the Tariff Heading and its relevant WCO Explanatory Notes, it appears that for a product to be classified under Tariff Heading 8517, it must meet the following critter

1. It m st be an apparatus for the transmission or reception of voice, images, or other data.

2. Add tonally, it could be an apparatus for communication in a wired or wireless network (such as a local or wide area network).

3.6

3.6      In the instant case, the product under consideration, combines the functions of a a receiver, handling the reception, conversion, and transmission of signals. Function is to convert optical signals from the network to electrical signals and early, the primary function of electrical transceivers is to convert electrical type re pluggable modules that can be inserted into various networking devices such etches, IP routers, modems, network interface card, etc. i.e., it allows connection or. Transceivers can operate in various types of networks, including LANs, WANs, and data center networks, where they interconnect servers, storage devices, and other ent.

he product is an apparatus for . transmission and reception of electrical and signal and squarely meets the description under Multiplexes and related line nt (e.g., transmitters, receivers, or electro-optical converters), it appears to be squarely covered under the scqge Zgriff’ Heading 8517 of Customs Tariff

3.7      A bare perusal of the Tariff heading 8517 62 90 categorically provides that “other machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus” are included within its ambit. In context to the present facts, it is submitted that the transceivers operate as complete machines in themselves and can perform the function of reception, transmission, and conversion of data on its own, per the instructions provided by Switches and routers. It is further submitted that they are squarely covered under the Tariff Heading 8517.62.90 of the Customs tariff, for the following reasons:

• They are categorically listed as a communication apparatus under the WCO Explanatory Notes, hence, by application of GRI 1, they are classifiable under the said Tariff Heading.
• Item 4 of the WCO Opinions Compendium specifically lists optical fiber converters, which perform the function of converting digital signals into optical signals.
• Cross Ruling No. N301717 dated 04.12.2018 has been issued for classification of SFP transceiver and classifies the same under the said Tariff Heading.

3.8      The following judicial pronouncements have determined the appropriate classification of transceivers/SFPs as CTH 8517.79 of the Customs Tariff, on the basis that they cannot function on standalone basis as a machine and can function only when used along with router, switches, or other telecom equipment:

• Reliance Jio Infocom Ltd., (supra), and
• IBM India Pvt Limited.

3.9      In its regard, it is submitted that the nature of functioning on a standalone basis has not been provided in the said judicial pronouncements. In other words, the moot point that merits consideration is what is exactly meant by ability to function on stand-alone basis. Additionally, it is essential to determine whether the capability of functioning on a standalone basis merit more importance than the WCO explanatory notes and GRIS for classification of a product under the Customs Tariff.

3.10 The Company submits that transceivers can undertake the functions relating to reception, conversion, and transmission of electrical or optical signals on stand-alone basis, albeit requiring electrical supply and devices to be plugged in to receive and transmit signals. The product under consideration is performing its designated function with the assistance of electricity and signal generating device. Usage of an external power supply or any other device for signal generation should not be a criterion for disqualification from the definition of machine.

3.11 In the instant case, the product under consideration operates by being plugged into network devices like routers and switches to transmit and receive data to and from the network, effectively linking these devices to the network. It is fulfilling its designated function. It is further submitted that it is a settled proposition of law that classification must be based on principal function performed by a product. Since in the instant case, the product under consideration:

• Is fulfilling its principal function of “receiving” or “transmitting” data.
• Is specifically covered through the WCO Explanatory Notes as a ‘Communication operates
• Is not It is specifically designed or capable or operating only with Company’s switches or

it is appropriately classifiable under Tariff Entry 8517.62.90 of the Customs Tariff by virtue of GRI 1.

3.12 It is further submitted that for classification of the product under consideration, reliance laced on the judicial pronouncement (supra) for the following reasons:

should not be

• Transceivers have been discussed as a product, without providing details on their part , make, etc.,
• The conclusion has been arrived at by placing reliance on other Tribunal judgments discussing the merits.
• In Reliance nee Jio Infocomm (supra), the Hon’ble Supreme Court has not discussed the f the classification, i.e., product capability, contending tariff headings, etc., and d the same as the Revenue has withdrawn their appeal.

3.13 The Applicant  seek ruling on whether the product under consideration should continue under Tariff Entry 8517 62 90 as an apparatus/ a machine or change the consider transceivers as a part of goods covered by Tariff Heading 8517, viz. 8517 79 90. Further, they seek guidance on the appropriate basic customs duty e in light of Notification No. 57/2017 – cus., dated 30.06.2017. If covered under the said Notification, is it hit by the exclusion of Optical Transport Equipment / rt Network products or not.

4. Port of Import and reply from jurisdictional Commissionerate:

4. applicant in their CAAR-1 indicated that they intend to import the subject goods ceiver at the jurisdiction of Office of the Commissioner of Customs, ACC, application was forwarded to the Office of the Commissioner of Customs, s for their comments on 15.10.2024.

The commissioner of Customs, ACC, Mumbai vide their letter dated 12.11.2024 has follows:

>It is pertinent to mention here, that the primary function of the product under action (SFP Transceivers) is to enable communication between the networking such as switches, routers and servers, over long distances using fiber optic gee. An SFP transceivers can work on different type of media network such as tic cable or copper cable. The copper SFP module is mainly used for short data transmission. On other hand, an optical interface module, also known as al transceiver or optical _module is a device that converts electrical signals into optical signals and vice versa. As the Nature and function remains the same, both the SPF Transceiver and Optical Transceivers should be treated as independent machine/ apparatus classifiable under CTI 85176290. The applicant has also submitted that the product under consideration performs the function of reception, transmission and conversion of data that it receives through switches, routers and servers and has the capability of performing specific functions independently and execute their tasks of transmitting, receiving and converting without external assistance. As such, the product operates as complete machine in themselves. Further, it is relevant to mention that the HSN Explanatory Notes to the Heading 8517 holds “Transmitters, Receivers or the Electro-optical converters” as ‘Other Communication Apparatus’. Accordingly, the appropriate Customs Tariff Entry for the goods under consideration to be 85176290.

> Further, requirement to categorize the subject goods as Optical Transport Network Products / Optical Transport Equipment (OTN / OTE) or otherwise, arises only for the purpose of extending notification benefit under Notfn. No. 57/2017-Cus. dated 30.06.20174 read with Circular No. 08/2023 dated 13.03.2023. However, neither the Customs Tariff nor I-ISN Explanatory Notes define the Optical Transport Network Product / Optical Transport Equipment anywhere.

a) SFP Transceivers can work on different type of media network such as fibre-optic cable or copper cable, and based on their usage, they could be called “Optical Transceiver” or “Copper SFP Transceiver” or simply “SFP Transceiver” based on other media. The copper SFP module is also called the fibre port convert copper port module. It is a module that support hot plugging and is in the form of SFP. Copper SFP Modules have a limited transmission distance compared to Fibre Optic Modules.

b) On the other hand, an optical interface module, also known as an optical transceiver or optical module, is a device that convert electrical signal into optical signal and vice versa. It is used in optical communication systems to transmit and receive data over fiber optic cables. An Optical Transceiver has electronic components to encode / decode data into light pulses and then send them to the other end as electrical signals. They typically have an electrical interface on the side that connects to the inside of the system and an optical interface on the side that connects to the outside world through a fiber optic cable. Thus, based on the functioning of SFP Optical Transceiver, they are required to convert the electrical signals to optical signals and vice versa for interconnecting two networking equipments functioning with electrical signals or optical signals, as the case may he. Therefore, it is evident that the Optical Transceivers, being capable of converting electrical signal to optical signal and vice versa are equipped to handle and be a part of Optical Transport Network and therefore would be termed as Optical Transport Equipment / Optical Transport Network Products. On the other hand, the Transceivers working on copper cable would be treated as “non OTE / OTN”.

c) In view of above, the SFP Transceivers working with a copper cable may be treated as Non OTE/OTN products and eligible for duty exemption under serial number 20 of the Notfn. No. 57/2017-Cus. dt. 30.06.2017, as amended. Whereas, the SFP Transceivers working with a fiber optic cable, may be treated as OTE / product and would not be eligible for duty exemption under serial number e Noting. No. 57/2017- Cus. dt. 30.06.2017, as amended.

5. Detail of Hearing:

5.1 A hearing was held on 13.11.2024 at 11.30 AM. Sh. Vijay S. Chauhan, Sh. Amit Rajesh Kumar, Sh. Dhanshekharan and Ms. Parul Vivek, representatives on Applicant appeared for the hearing through video conferencing. They contended imports goods are different models of Transceivers i.e. the receivers and hey reiterated the contention filed with application. They contended that the a larger system and merit classification under CT1 85176290. In support of relied upon description, HSN and Explanatory Note, CAAR Delhi Ruling in Nokia wherein the same kind of product was under consideration for hey also relied upon US Customs Cross Ruling. They also reiterated that the Jurisdictional Commissionerate has also supported their view in their written submission/reply. appeared on behalf of the Department for hearing.

Nobody appeared on behalf of the Department for hearing.

DISCUSSION AND FINDINGS

6.1  I have considered all the materials placed before me in respect of the subject goods. I have gone thru provided through the submissions made by the applicant during the hearing and comments provided by the concerned jurisdictional Commissionerate in this matter. Therefore, I proceed to pronounce ruling on the basis of information available on record as well as existing legal framework.

6.2 The Applicant has sought advance ruling in respect of the following questions:

a. whether the product i.e. Small-Form Factor Pluggable (SFP) Transceiver is classifiable under CTI 85176290 as other machines for the reception, conversion transmission or regeneration of voice, images or other data, including switching routing apparatus or otherwise?

b. If the  product is classifiable under CTI 85176290, then whether the product is eligible for concessional rate of duty under Sr. No. 20 of Notification No. 57/2017­. Dated 30.06.2017 or otherwise?

6.3 At the outset, I find that the issues raised in the questions in the Form CAAR-1 is squarely cover under Section 28H(2) of the Customs Act, 1962 being a matter related to classification goods and applicability of notification under the provisions of this Act.

6.4  The applicant submitted that the subject goods i.e. Small Form Factor Pluggable (SFP) Transceiver combines the functions of a transmitter and a receiver, handling the reception, conversion, transmission of signals. Their primary function depends upon its type. The primary function of optical Transceivers is to convert optical signals from the network to electrical signals and vice versa. Similarly, the primary function of electrical transceivers is to convert electrical type signals. They are pluggable modules that can be inserted into various networking devices such as Ethernet switches, IP routers, modems, network interface card, etc. i.e., it allows connection to a wired network. Transceivers can operate in various types of networks, including LANs, WANs, and data center networks, where they interconnect servers, storage devices, and other network equipment.

6.5 I observe that Transceivers are devices that transmit and receive signals, commonly used in communication systems. The Transceivers can undertake the functions relating to reception, conversion, and transmission of electrical or optical signals on stand-alone basis. They come in two main types: optical transceivers and electrical transceivers. Optical transceivers use light signals for data transmission, employing fiber optic cables to achieve high-speed communication over long distances with minimal signal degradation. They are widely used in applications like data centers, telecommunications, and high-bandwidth networking due to their immunity to electromagnetic interference. On the other hand, electrical transceivers use electrical signals to transmit and receive data through traditional copper cables, such as Ethernet cables. These are cost-effective, easy to implement, and suitable for shorter distances, although they are more susceptible to interference compared to their optical counterparts. Both types are critical in modern communication technologies, supporting a variety of networking and connectivity needs.

6.6 Transceivers are available in different module types, each tailored to meet specific networking needs, data rates, and system configurations. The most common transceiver modules include SFP (Small Form-Factor Pluggable), CPAK, QSFP (Quad Small Form-Factor Pluggable), and CFP (C Form-Factor Pluggable).

6.7  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. As per Rule 1 of GRI, the titles of Sections, Chapters and sub-Chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes.

6.8  I find that the applicant has contended that the classification of the subject goods i.e. Small Form Factor Pluggable (SFP) Transceiver is justified under Customs Tariff Entry 85176290 as “other machines for the reception, conversion and transmission or regeneration voice, images or other data, including switching and routing apparatus”.

6.9 Now, I take up the issue to examine the aspects of classification of the product i.e. Small Form Factor Pluggable (SFP) Transceiver under CTI 85176290 as proposed by the applicant. As per submission made by the applicant, it is clear that at the Chapter and Heading level i.e. Chapter 85 and Heading 8517, there is no dispute. The FISN Explanatory Notes to Heading 85.17 provide that the Heading covers apparatus for the transmission or reception of speech or other current or optic network. The single dash (-) telephones for transmission communication than transmits divided into the sounds, images or other data between two points by variation of an electric al wave flowing in a wired network or by electro-magnetic waves in a wireless eading 8517 as per the First Schedule to the Customs Tariff Act, 1975, has three entries. Thus, the goods covered under CTH 85.17 (Telephone sets, including cellular networks or for other wireless networks; other apparatus for the r reception of voice, images or other data, including apparatus for in a wired or wireless network (such as a local or wide area network), other ion or reception apparatus of heading 8443, 8525,8527 or 8528) have been following three categories:

I. Telephone sets, including telephones for cellular networks or for other wireless networ s:

II. other aparatus for the transmission or reception of voice, images or other data. includi g apparatus for communication in a wired or wireless network (such as a local or wid area network);

III. Parts

6.9.2 As per groups:

• Base station;
• Entry- phone systems;
• Videophones;
• Apparatus for telegraphic communication other than facsimile machines of Heading
• Telephonic or Telegraphic Switching Apparatus;
• Transmitting and receiving apparatus for radio-telephony and radio-telegraphy; and
• Other communication apparatus.

6.9.3 As per apparatus” and “This group related other Communication appeared” and is  reproduced  below: 

“This group includes apparatus which allows for the connection to a wired or wireless network or the transmission or reception of speech or Other sounds, images or in such a network communions networks include, inter alia, carrier current line systems, digital-line systems and combination thereof. They may be configured, for example, as public switched telephone  Network (man) Area  Networks (LAN), Metropolitan Area Networks (MAN) and Wide Area whether proprietary or open architecture.

(1) Network interfaced cards (e.g., Ethernet interface cards). 

(2) Modem (combined modulators-demodulators).

(3) Routers, bridge hubs, repeaters and channel to channel adaptors.

(4) Multiplex  and related line equipment (e.g., transmitters receivers or electro-optical converters).

(5) codecs (data compressors/decompresses) which have the capability of transmission and reception of digital information.

(6) Pulse to tone converters which convert pulse dialed signals to tone signals.”

6.9.4 As discussed in the preceding paras, the function of Transceiver is to receive the data in electrical form and converts the signal in to optical signal or vice versa, and therefore, the Transceiver would fall under the category of ‘Electro-optical converter’. The Explanatory Notes has categorized the electro-optical converter under the description ‘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)’ . In the Explanatory Notes, Electro-optical converter is termed as an apparatus and not as a part. Since, the item has found mention at the second single dash (-) level under CTH 8517, there exists no necessity to go beyond this single dash and the item should be classified under the subheading/tariff items covered under this single dash entry. If the item were to be treated as parts, the item would have covered under the third single dash (-) entry, which covered the parts. Therefore, the product cannot be classified as parts and would not be covered under CTI 85177990 which cover parts.

6.9.5 In such a scenario, the subject goods should be classified under the sub-headings/tariff items available under the second single dash (-) level under CTI-I 8517. Under the second single dash, there are three double dash (–) entries available as follows.

The entry at the tariff item 8517 6100 is Base station, which is a central communication hub that manages signal communication between mobile devices and the network. A base station is much larger and serves as a communication hub that manages many transceivers and devices within its coverage area. Hence, the subject item is not classifiable here.

The next double dash (–) entry is “Machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus”. It has been concluded in the preceding paragraphs that SFP Transceiver is an apparatus for converting data (conversion data from optical to electrical and vice versa). Since, conversion is specifically covered under the second double dash entry, this item would be undisputedly classifiable under the subheading 8517 62.

Further, the items covered under the subheading 8517 62 are given below:

6.9.6 The subject item, Transceiver is thus not specifically covered under any of the tariff 7 6210 to 8517 6270. Therefore, tic same has to be classified under the residual nder the tariff item 8517 6290. Thus, the product i.e. Small Form Factor ) Transceiver is rightly classifiable under CTI 85176290 (Other) of the First Custom Tariff Act, 1975.

6.10 Let us also examine whether the product under consideration is eligible for sic customs duty under Serial No. 20 of Notification No. 57/2017-Cus., dated 30.06.2017 last amended up to 23.07.2024. The relevant extract of the said notification provided below is for ease of reference:

6.10.2 As discussed in the paras supra, Transceivers come in two main types: optical transceivers and electrical transceivers. Optical SFP Transceiver used in optical communication systems to receive and transmit data over fiber optic cables. An Optical Transceiver has electronic components to encodes/decode data into light pulses and then send them to the other end as electrical signals. They typically have an electrical interface on the side that connects to the inside of the system and an optical interface on the side that connects to the outside world through a fiber optic cable. Thus, based on the functioning of Optical SFP Transceivers, they are required to convert the electrical signals to optical signals and vice versa for interconnecting two networking equipment functioning with electrical signals optical signals, as the case may be. Therefore, it is evident that the Optical SFP Transceivers, being capable of converting electrical signal to optical signal and vice versa are equipped to handle and be a part of Optical Transport Network, and therefore would be termed as Optical Transport Equipment / Optical Transport Network products. Hence, the Optical SFP Transceiver falls under the exclusion category specified in Serial No. 20 of Notification No. 57/2017-Cus., dated 30.06.2017. Consequently, it is not eligible for the benefit of concessional basic customs duty under this notification.

On the other hand, the Electrical SFP Transceiver, which operates with copper cables, is treated as a non-Optical Transport Network (OTN) product and non-Optical Transport Equipment (OTE). It does not fall under the exclusion category specified in Serial No. 20 of Notification No. 57/2017-Cus., dated 30.06.2017. Therefore, the Electrical SFP Transceiver is eligible for the benefit of concessional basic customs duty under this notification.

6.11 The issue of classification of SFP transceivers was considered by the CESTAT, Mumbai vide its final order no. A/85669-85671/2022 dated 29.07.2022 in the case of Reliance Jio Infocomm Ltd. v/s Commissioner of Customs-Mumbai (Air Cargo Import), wherein, it was held that SFP Transceiver is a part classifiable under CT1 85177090. The Departmental appeal against the Tribunal’s order was dismissed and the Tribunal’s order was upheld by the Hon’ble Supreme Court in the judgment rendered on 27.02.2023 in Civil Appeal No.s 1475- 1477 of 2023

Placing reliance on the judgement of the lion’ble Supreme Court in case of Reliance Jio Inibcomm, the CESTAT Mumbai in the matter of IBM India Pvt. Ltd. (Custom Appeal Nos. 85855 of 2022), held that SFP Transceivers modules are correctly classified under CTI 85177090 (now corresponding entry is 85177990) and not under CTI 85176290.

Upon perusal of the said orders, it is observed that the classification of the transceiver has not been conclusively determined by the Hon’ble Supreme Court on the merits of the case. Furthermore, the order lacks reasoning or analysis supporting the classification of the goods under CTI 85177990 as parts. In the instant case, the applicant has demonstrated that the transceiver in question is a pluggable device capable of performing their specific function independently and execute their tasks of transmitting, receiving and converting without external assistance and fact they need to be inserted into a deviced, does not change their functional independence of parts under Rather, it satin device the scheme of in depended  judgment Hon’ble supreme court does not hold relevance in the determining the classification of this transceiver in this particular instance.

The classification of SFP Transceiver under the CTI 8517 6290 could further supported SS Rulings N301401 dated 07.11.2018, N301717 dated 04.12.2018, N302251 19 and N311051 dated 13.04.2020 wherein it was ruled that the same are er the subheading 851762. Thus, it is evident that CTI 8517 6290 is being mprehensively followed at world level for classification of SFP Transceivers.

7. On the basis of foregoing discussions and findings, I reach to conclusion that the all Form-factor Pluggable (SFP) Transceiver merit classification under CTSH ‘nes for the reception, conversion and transmission or regeneration of voice, data, including switching and routing apparatus), more specifically under CTI 851762 (other) of the First Schedule of Customs Tariff Act, 1975.

As far as applicability of exemption/concessional rate of duty is concerned, Optical SFP Transceiver traded as OTE/OTN product is not eligible for the benefit of concessional basic under Serial No. 20 of Notification No. 57/2017-Cus., dated 30.06.2017.  however, electrical SFP Transceiver treated as non OTE/OTN product is eligible for the benefit of concessional basic customs duty under this notification as discussed in paras 6.10 supra).

8. I rule accordingly.