Case Law Details
In re HID India Private Limited (CAAR Mumbai)
In a recent ruling concerning the classification of the HID Signo Reader, the Customs Authority for Advance Ruling (CAAR), Mumbai, has addressed the issue of the proper tariff classification for the device under the Customs Tariff Act, 1975. The ruling specifically pertains to the classification of the Signo Reader under Chapter 84, which deals with automatic data processing machines, and Chapter 85, which covers electrical machinery and apparatus.
Background of the Case
The applicant, HID India Pvt Ltd, sought clarity on the appropriate classification of its “Signo Reader” to be imported into India. The device is integral to a Physical Access Control System (PACS) used for authentication in secure environments. The Signo Reader is a contactless device that uses RFID and Bluetooth technologies to verify access credentials. It is typically mounted next to doors and grants or denies entry based on authentication signals received from physical RFID cards or mobile devices.
The primary function of the Signo Reader is to act as an input/output device within an access control system, processing data from credentials to either allow or restrict access. The device is equipped with a variety of features, including a microcontroller, a secure access microcontroller (SAM), RFID interfaces (both high and low-frequency), and Bluetooth capabilities.
Ruling on the Classification
The first key question for the CAAR was whether the Signo Reader should be classified under HS Code 8471, which is designated for “automatic data processing machines,” or whether it fits under another category such as HS Code 8543 or 8517, which deal with electrical machines and telecommunication devices, respectively.
The CAAR observed that the Signo Reader functions as a “unit” within an automatic data processing system. While the device itself does not qualify as a complete data processing machine, it forms an essential part of the larger access control system, which is designed to authenticate identities and grant access based on data processed through various credential types.
Criteria for Classification under HS Code 8471
According to Chapter Note 6(A) of Chapter 84 of the Customs Tariff Act, 1975, “automatic data processing machines” are defined as devices capable of executing arithmetic computations and modifying their execution autonomously without human intervention. However, the CAAR noted that the Signo Reader does not independently execute computations but serves as a key component in a broader system that performs data processing functions.
To classify the Signo Reader under HS Code 8471, the CAAR examined whether the device met the following criteria for being considered a “unit” of an automatic data processing machine, as outlined in Chapter Note 6(C):
- Principal Use in Data Processing Systems: The Signo Reader is primarily used in access control systems, which are integral to automatic data processing systems.
- Connection to Central Processing Units (CPUs): The device is connectable to the CPU of the access control system, which processes the data for access management.
- Data Acceptance and Delivery: The Signo Reader is capable of receiving and transmitting data (in coded signals) that is processed by the central system.
Since the Signo Reader meets all these criteria, it was classified under HS Code 8471, as it functions as a peripheral or unit of an automatic data processing machine.
Rationale for Exclusion from HS Code 8543 and 8517
The CAAR further clarified that the Signo Reader does not fall under HS Code 8543, which pertains to electrical machines and apparatus with individual functions. This classification is typically used for telecommunication devices and other electrical equipment that do not perform data processing. Although the Signo Reader involves electrical components, its primary function is data processing and access control, which aligns better with HS Code 8471.
Similarly, the device does not fall under HS Code 8517, which covers telephony or telegraphy equipment. The Signo Reader does not transmit voice, image, or other data over telecommunication networks, thus excluding it from this category as well.
Conclusion
Based on the functionality and the detailed examination of its role within the physical access control system, the CAAR ruled that the HID Signo Reader is classified under HS Code 8471. This classification reflects the product’s function as part of an automatic data processing machine, focusing on its ability to process and transmit data for authentication in secure environments. The ruling clarifies the proper tariff heading for similar devices involved in access control systems and highlights the importance of understanding the product’s specific role within a broader technological framework.
FULL TEXT OF THE ORDER OF CUSTOMS AUTHORITY OF ADVANCE RULING, MUMBAI
M/s. HID India Private Limited (hereinafter referred to as ‘the applicant’) filed an application 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 04.06.2024, along with its enclosures in terms of Section 28H (1) of the Customs Act, 1962 (hereinafter referred to as the ‘Act’). The applicant is seeking advance ruling on (i) the classification of “HID Signo Reader” (hereinafter referred to as ‘Signo Readers or the subject goods’) proposed to be imported and (ii) applicable Rate of duty on import of said Signo Readers.
2. Submission by the Applicant:
2.1 The Applicant is a company incorporated in India having its registered office at Unit No. 101, 1st Floor Tower B, The Millenia Towers, Murphy Road, Ulsoor, Bengaluru and is engaged in the import, sales, and distribution of HID brand products, including access control cards, readers, and printers. The present application has been filed by the applicant seeking clarification in relation to the classification of the product “HID Signo Reader”
2.2 The applicant intends to import the subject products “HID Signo Reader” from HID Global Corporation, USA, and HID Asia Pacific Ltd, Hong Kong.
2.3 The Applicant has been importing the said product in the past with classification under Custom Tariff Item (CTI) 8517 62 90. They have provided a sample Bill
of Entry and Commercial Invoice in respect of past imports for reference.
2.4 The applicant further informed that the Irish Customs on the basis of their application classified the Signo Reader under Customs Tariff Sub-Heading (CTSH) 8471 90. In light of this ruling, the applicant is seeking to establish a uniform classification for the product “Signo Reader” under CTSH 8471 90 globally and has filed this application to adopt the same classification for future imports in India.
Product description
2.5 The Signo Readers are proposed to be imported from HID Global Corporation, USA, and HID Asia Pacific Ltd, Hong Kong. These readers are integral to Physical Access Control Systems, which authenticate access to specified individuals through electronic credentials (i.e., access authority).
2.6 The said Physical Access Control System is essentially comprised of the following components —
a physical access credential reader — usually mounted on a wall next to the door. (i.e., the Signo Reader for which the current advance ruling is sought by the Applicant),
b. a physical access controller – a device which stores a list of people authorized to enter the building or room and upon receiving the digital credential from the reader, makes the decision of whether or not to grant access. If access is granted, the controller sends a signal to the door’s electronic lock to open.
c. the device/media storing the personal digital credential, e.g., RFID smart card, key fob or smart phone, and
d. an electronic door lock mechanism, e.g., an electric strike lock or magnetic door lock which based on the decision of the physical access controller, opens the door.
e. A host computer for configuring the access controller (reader mode, credential format, card holder access level, etc.), reporting (transaction logs, events/alarms, binary card data, denied counts, room occupancy, system status, etc.), card read validations (e.g., when monitoring anti-passback situations) and supporting firmware updates in the access controller and 10 modules.
2.6 An image of Physical Access Control System is enclosed for ease of reference
2.8 The Applicant imports contactless access readers known as “HID® Signo TM Readers, which are one of the integral components of a physical access control system. The product literature is also provided by the Applicant. The HID Signo Reader is a line of contactless access readers that come in various models, including those with keypads for PIN authentication and is imported under the following descriptions / models viz.
| Sr. No |
Models | Description | Type of Reader |
| 1 | 20 | HID® Signo TM Reader 20 | Contactless (RFID and Bluetooth) |
| 2 | 20K | HID® Signo TM Keypad Reader 20K | Contactless (RFID and Bluetooth) with keypad for PIN authentication |
| 3 | 40 | HID® Signo TM Reader 40 | Contactless (RFID and Bluetooth) |
| 4 | 40K | HID® Signo TM Keypad Reader 40K | Contactless (RFID and Bluetooth) with keypad for PIN authentication |
2.9 In the future, in addition to the above models, HID will be introducing an RFID only version of the Signo Reader under the following part number (PN) prefixes:
| Sr. No | PN Prefix | Description | Type of Reader |
| 1 | 20TKS1 | HID® SignoTM Reader 20, LF/HF | Contactless (RFID) |
| 2 | 20TKS3 | HID® SignoTM Reader 20, HF | Contactless (RFID) |
2.10 The Signo Reader acts as a digital credential physical access reader and, in some models, includes a keypad for PIN authentication as an additional method of authentication.
2.11 The Signo Reader is typically wall-mounted next to a building entrance such as a door equipped with an electronic lock and comes in 2 different sizes e.g., Model 20 and Model 40. The Signo Reader also offers an option that includes a keypad, providing dual factor authentication: Model 20K and Model 40K. The sample image of the product is enclosed for ease of reference
2.12 The Signo Reader comprises of followings parts —
a. Core MCU (microcontroller)
b. Secure access microcontroller (SAM)
c. High Frequency Front end RFID Interface – 13.56MHz
d. Low Frequency Front end RFID Interface – 125kHz
e. Bluetooth Low Energy Front-End Interface — 2.4GHz
f. Keypad (optional — based on the model)
g. Connectors for interfacing access controller.
Technology used in Signo Reader
2.13 They are configured with two kinds of contactless technologies:
i. Passive RFID Technology and
ii. Bluetooth Technology to authenticate access.
2.14 Passive RFID Technology is utilized by the Signo Reader to interact with RFID smart cards, which operate at either 125kHz (low frequency) or 13.56 MHz (high frequency). These smart cards are termed “passive” because they lack an internal power source such as a battery. Instead, they derive power from the magnetic radio frequency waves generated by the Signo Reader. The power is used to activate the card’s embedded chip just long enough to transmit a digital credential, which is a unique identification number (UID).
2.15 The process of transferring the digital credential from the passive RFID smart card to the Signo Reader is achieved through a technique known as “Inductive Coupling.” This involves the RFID components of the Signo Reader—specifically the RFID radio chip and antenna—creating a magnetic field. The smart card’s antenna coil picks up this magnetic field, inducing a voltage that powers the chip. The chip, which contains modulation circuitry and non-volatile memory (such as EEPROM), stores the digital credential. When powered, the chip modulates the amplitude of the magnetic field’s radio waves through a process called Amplitude-shift keying (ASK). ASK is a form of modulation that encodes digital data as variations in the amplitude of a radio wave.
2.16 The Signo Reader detects these variations in the magnetic field, which represent the digital credential data, and converts them back into binary data through demodulation. This binary data is then sent to the access controller of the Physical Access Control System. The access controller compares the received credentials against its database and decides whether to grant or deny access. If access is granted, the controller sends a signal to the electronic door lock to open, allowing entry to the cardholder.
2.17 In contrast, Bluetooth Technology enables the Signo Reader to communicate with Bluetooth-enabled mobile devices such as smartphones, tablets, and wearables. These devices actively transmit digital credentials to the reader using a 2.4 GHz radio frequency. The term “actively” is used to highlight that these devices have their own power source—a battery—which allows them to initiate communication with the reader. The Signo Reader receives the Bluetooth signal and demodulates it into binary data, which is then processed by the access controller in a similar manner to the RFID process.
2.18 The key difference between the two technologies is the power source for the transmission of the digital credential. Passive RFID smart cards rely on the reader’s magnetic field for power, while Bluetooth devices use their own battery to actively transmit data. Both methods, however, result in the Signo Reader converting RF signals into binary data, which is then used by the access controller to verify and grant or deny access based on the credentials.
2.19 To summarize, when a person presents an RFID smart card or Bluetooth device to the Signo Reader, it retrieves the UID and converts the RF signals into binary data. This data is then verified by the access controller against an authorized list. If verified, the controller unlocks the door and signals the reader to indicate access has been granted. Despite the different interaction technologies, the process of converting RF signals into binary data and verifying credentials is similar. The working principle behind each technology might be different however the function it provides are the same. The Signo Reader forms an integral part of a contactless credential-based physical access control system without which a contactless smart card or Bluetooth mobile device cannot be used to grant access to a location.
3.1 The applicant has further submitted that the classification of the goods under the Tariff is governed by the principles as enumerated in the General Rules of Interpretation (‘GRI) set out in the First Schedule to the Customs Tariff. As per Rule 1 of the GRI, classification of the imported 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 io the remaining Rules of the GRI. As per General Explanatory Notes, in the First Schedule to the Customs Tariff, when the description of a product under a heading is preceded by “2, the said product would be a sub-classification of the description of products covered by the said heading, when the description of a product is preceded by “–” the said product would be a sub-classification of the immediately preceding description of product under “2 when the description of a product is preceded by “—” or “—-“, the said product shall be taken to be a sub-classification of the immediately preceding description of “”or “—“.
3.2 The product (Signo Reader) for which classification is sought is a machine which uses magnetic field / radio frequency to interact with RFID smart cards/Bluetooth mobile devices respectively; and then interprets digital credentials in the binary data form, which is then used by the physical access controller to decide as to whether to grant access to the user. Therefore, it would be apt to conclude that the Signo Readers shall fall under classification under Section XVI of the Customs Tariff which reads “Machinery And Mechanical Appliances; Electrical Equipment; Parts Thereof; Sound Recorders And Reproducers, Television Image And Sound Recorders And Reproducers, And Parts And Accessories Of Such Articles”.
3.3 It is imperative to note here that the principal function of the Signo Reader is to process the data retrieved from the RFID smart cards and/or received from the Bluetooth devices by converting the data (i.e., UID) into another medium (i.e., binary bit stream) for further processing, in order to grant physical access to the user. Though, the technology used to receive the data might be different, however, the purpose for which the machine is used is the same.
3.4 The Applicant submits that in case of determining the classification of an article it is pertinent to take into account the basic character and purpose of the machine. Classification of a product cannot be determined solely on the basis of one of the components. Thus, the basic character of the machine and the purpose for which it is used is required to be considered. Applying the same rationale in the instant case, it would be pertinent to look into the basic character of the ‘Signo Reader’ as a whole.
The Applicant relies on the decision of the Hon’ble Tribunal in the case of Mitutronics V. Collector— 1990 (46) E.L.T. 500 (Tribunal).
3.5 Consequently, it is concluded that the Signo Reader is a machine whose principal function / purpose is to process data by converting the same from one medium to another. Further, that merely using different technology in machine would not change the basic principle function of the machine and thus, the product would appropriately fall under the heading 8471 which heading covers “Machines for transcribing data on to data media in coded form and machines for processing such data, not elsewhere specified or included”.
3.6 The Applicant further submits that the Heading 8471 covers “Automatic data processing machines and units thereof; Magnetic or Optical readers, Machines for transcribing data on to data media in coded form and machines for processing such data, not elsewhere specified or included” and the relevant sub-headings and tariff items under Heading 8471 are given as below:
| 8471 | AUTOMATIC DATA PROCESSING MACHINES AND UNITS THEREOF; MAGNETIC OR OPTICAL READERS, MACHINES FOR TRANSCRIBING DATA ON TO DATA MEDIA IN CODED FORM AND MACHINES FOR PROCESSING SUCH DATA , NOT ELSEWHERE SPECIFIED OR INCLUDED | |
| 8471 30 | – | Portable digital automatic data processing machines, weighing not more than 10 kg, consisting of at least a central processing unit, a keyboard and a display |
| 8471 30 10 | — | Personal computer |
| 8471 30 90 | — | Others |
| – | Other automatic data processing machines | |
| 8471 41
|
— | Comprising in the same housing at least a central processing unit and an input and output unit, whether or not combined: |
| 8471 41 10 | Micro computer | |
| 8471 41 20 | — | Large or main frame computer |
| 8471 41 90 | — | Other |
| 8471 49 00 | — | Other, presented in the form of systems |
| 8471 50 00 | Processing units other than those of sub-headings 8471 41 or 8471 49, whether or not containing in the same housing one or two of the following types of unit : storage units , input units , output units | |
| 8471 60
|
Input or output units , whether or not containing storage units in the same housing | |
| 8471 60 10 | Combined input or out put units | |
| Printer | ||
| 8471 60 24 | – – | Graphic printer |
| 8471 60 25 | – – | Plotter |
| 8471 60 29 | —- | Other |
| 8471 60 40 | — | Keyboard |
| 8471 60 50 | — | Scanners |
| 8471 60 60 | — | Mouse |
| 8471 60 90 | — | Other |
| 8471 70 | – | Storage units |
| 8471 70 10 | — | Floppy disc drives |
| 8471 70 20 | — | Hard disc drives |
| 8471 70 30 | — | Removable or exchangeable disc drives |
| 8471 70 40 | — | Magnetic tape drives |
| 8471 70 50 | — | Cartridge tape drive |
| 8471 70 60 | — | CD-ROM drive |
| 8471 70 70 | — | Digital video disc drive |
| 8471 70 90 | — | Other |
| 8471 80 00 | – | Other units of automatic data processing machines |
| 8471 90 00 | – | Other |
3.7 It is submitted that the heading 8471 consists of two parts, as indicated by the use a “semicolon”, viz., –
a. Automatic data processing machines and units thereof
b. Magnetic or Optical readers, Machines for transcribing data on to data media in coded form and machines for processing such data, not elsewhere specified or included.
3.8 The first part includes “Automatic data processing machines and units thereof…”. The definition of term “automatic data processing machines” is provided under Chapter Note 6(A) of Chapter 84 which defines it as a 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;
3.9 However, it would be imperative to mention that the product Signo Reader is not a freely programmable automatic data processing machine and thus, does not fall under the first part of heading 8471 as an ‘Automatic data processing machine’.
3.10 Further, the first part of the heading also includes term “units thereof of an automatic data processing machine. In this regard, Applicant submitted that Chapter Note 6(C) of Chapter 84 defines the conditions that a device must meet to be considered a “unit” of an ADP as listed below:
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.
3.11 The Applicant wishes to submit that the Signo Reader is designed to be used as a part of a physical access control systems. Physical access control systems have been held to be classifiable as “Automatic Data Processing Machines or units thereof’ by the Hon’ble Customs Excise Service Tax Appellate Tribunal (CESTAT) in the case of Invixim Access Pvt Ltd Vs CC, Ahmedabad in Customs Appeal No.10233 of 2021. In this case the product imported “IXM Micro FP3 (Biometric Access Control System) was held classifiable under CTI 8471. In the case of STJ Electronics 2016 337 ELT 140 fingerprint readers were held to be classifiable under CTH 8471 as units of Automatic Data Processing System. Therefore, Applicant submits that the Signo Readers will be classifiable under CTH 8471 as units of Automatic Data Processing (ADP) machine and more particularly under CTI 8471 6090 as units of ADP machine.
3.12 Alternatively, Applicant submits that the product Signo Readers will also fall for classification in the second part of the heading 8471. The Applicant wishes to submit, that the second part of the heading 8471 consists of two groups viz., –
a. Magnetic & Optical Readers
b. Machines for transcribing data onto media in coded form and machines for processing such data.
3.13 A perusal of the Explanatory Notes of Chapter 84, provides that a Magnetic or optical readers read characters, generally in a special form, and convert them into electric signals (impulses) which can be directly used by machines for transcribing or processing coded information. Magnetic Readers reads the data printed with a special magnetic ink whereas in Optical readers, reads the data directly by a series of photoelectric cells. The relevant extract of the Explanatory notes is enumerated for your ready reference as below:
“Magnetic or optical readers read characters, generally in a special form, and convert them into electric signals (impulses) which can be directly used by machines for transcribing or processing coded information.
1. Magnetic readers. In this type of appliance, the characters, printed with a special magnetic ink, are magnetised and then converted into electric impulses by a magnetic reader head. They are subsequently identified either by comparison with data registered in the storage units of the machine or by means of a numeric code, usually binary.
2. Optical readers. These do not require the use of special ink. The characters are read directly by a series of photoelectric cells and translated on the binary code principle. This group also includes bar code readers. These machines generally use photosensitive semiconductor devices, e.g., laser diodes, and are used as input units in conjunction with an automatic data processing machine, or with other machines, e.g., cash registers. They are designed for working in the hand, for placing on a table or for fixing to a machine.”
3.14 In the instant case of the Applicant, it is submitted that Signo Reader uses radio chips (RFID IC and Bluetooth IC) and respective antennas incorporated in the reader to be able to “read” the digital credential stored in the passive RFID smart card or Bluetooth mobile device. Thus, it is evident that the function used by product Signo Reader is different from the function used by Magnetic or Optical reader and does not fall under the definition of ‘Magnetic or Optical Reader’.
3.15 Furthermore, under the second group i.e., ‘Machines for transcribing data onto media in coded form and machines for processing such data’, as per the WCO (World Customs Organization) Explanatory Notes the said group covers –
a. Machines for transferring coded information from one medium to another.
b. Machines for introducing fixed programs into integrated circuits (programmers)
c. Machines for processing the data transcribed per a and b above.
3.16 As per the Explanatory notes, the said sub-group includes those machines which can be used either to transfer coded information from one type of data medium to a different type or to transfer it to another medium of the same type.
3.17 It is submitted that the product under consideration i.e., ‘Signo Reader’ is admittedly a machine which converts data (radio frequency / magnetic field) into binary data and transfer it further to the access controller for further processing. Thus, it is evident that the product falls under the group ‘Machines for transcribing data onto media in coded form and machines for processing such data’.
3.18 Without prejudice to above submissions, in order to substantiate its claim of classification under 8471 90 00, the Applicant places reliance on the Advance Ruling No. NY184081 dated 02 August 2002, issued by the Director, National Commodity Specialist Division wherein a similar product ‘Proximity 2000 Hands Free’ was taken into consideration. The Proximity 2000 Hands Free Reader used contactless technology that transmits a 132-kilohertz RF (Radio Frequency) signal that activates an “active” proximity card. When the active proximity cards are within range of the Proximity 2000, the card receiver picks up the signal from the reader to activate the card. Once activated, the card responds by transmitting a unique identification code at 66-kilohertz back to the reader. The lithium battery provides a strong output signal from the card to the reader. This technology provides active proximity cards with two to three times greater range than that of passive proximity cards. Thus, the product Proximity 2000 and the Signo Reader works with the similar principle and thus classifiable under sub-heading 8471 90 00 of Harmonized Tariff Schedule of the United States (“HTSUS”). While the said ruling is not binding on the Indian Customs, the same will certainly have persuasive value.
3.19 Reliance is also placed on the Advance Ruling of No. NY h86797 dated 10 January 2002, issued by the Director, National Commodity Specialist Division wherein four products were imported. Out of the four products, product — ‘800002 Smart Trading Card Reader’ was imported. The aforesaid product performs similar function to the product (Signo Reader) imported in the present case. By placing the Smart card on the reader, the athlete’s information is read from the smart card and is transferred to the website which is connected with a computer, where it is further processed. After reviewing the function, the Director of National Commodity Specialist Division classified the 800002 Smart Trading Card Reader under 8471.90.0000 HITUS.
3.20 Reliance is also placed on the binding tariff ruling BTI reference given in Applicants own case IEBTI 21NT-14-1079-Dec wherein identical product is held classifiable under 8471.90.
3.21 Notwithstanding and without prejudice to the above, according to the Applicant the product cannot fall under Chapter 85 more specifically under CTH 8517.
3.22 In light of the above principle and the submission made hereinabove, the product under consideration is covered under heading entry 8471 rather than heading 8517. Therefore, for the reasons explained above, the product would fall under Entry 8471 60 90 or 8471 90 00.
3.23 In view of preceding submissions, it is submitted that in accordance with the Applicant, the product i.e., “Signo Reader” of various models proposed to be imported should be free from BCD as per the Tariff Rate prescribed for Tariff Item 8471 60 90 OR 8471 90 00, in addition to other levies as brought out hereinafter.
3.24 The relevant entry has been reproduced for your kind perusal as below:
| Tariff Item | Description of Goods | Unit | Rate of Duty | |
| Standard | Preferential Areas |
|||
| (1) | (2) | (3) | (4) | (5) |
| 8471 | AUTOMATIC DATA PROCESSING MACHINES AND UNITS THEREOF; MAGNETIC OR OPTICAL READERS, MACHINES FOR TRANSCRIBING DATA ON TO DATA MEDIA IN CODED FORM AND MACHINES FOR PROCESSING SUCH DATA , NOT ELSEWHERE SPECIFIED OR INCLUDED | |||
| 8471 60 90 OR 8471 90 00 | Other | u | Free | – |
Social Welfare Surcharge
3.25 It is submitted that as the product in the present case is free from BCD, no Social Welfare Surcharge shall be applicable on the imported goods.
IGST
3.26 It is submitted that as per the Applicant, IGST on the subject goods is payable @ 18% under SI. No. 360 of Schedule-III of Notification No. 01/2017- Integrated Tax Rate dated 28 June 2017.
| S.No. | Chapter or Heading or Sub- heading or Tariff Item |
Description of Goods |
| 360 | 8471 | Automatic data processing machines and units thereof; magnetic or optical readers, machines for transcribing data onto data media in coded form and machines for processing such data, not elsewhere specified or included |
3.27 To summarize, the following levies would be payable on “Signo Reader” of all variants sought to be imported by the Applicant.
| Sr No. | Particulars | Rate |
| 1 | Basic Customs Duty | Free |
| 2 | Social Welfare Surcharge | 0% |
| 3 | IGST | 18% |
| Notes | ||
| 1 | IGST rate is as per SI. No. 360 of Schedule-III to Notification No. 01/2017-Integrated Tax (Rate) dated 28 June 2017 | |
3.28 In the light of aforementioned, the Applicant has asked whether “Signo Reader” proposed to be imported by the Applicant is classifiable under Tariff Item 8471 60 90 OR 8471 90 00 of the First Schedule to the Customs Tariff Act, 1975, and if the answer to the question is in the negative, then what would be the correct classification of “Signo Reader” under First Schedule to the Customs Tariff Act, 1975 and what would be the rate of duty applicable on the import of “Signo Reader”.
3.29 No comments or submission have been given by the Jurisdictional Commissioner of Customs, in respect of the subject application.
3.30 The personal hearing in the matter was concluded on 29.07.2024 in the office of CAAR, Mumbai. During the personal hearing the authorised representatives of M/s. HID India Pvt Ltd., Shri Sanjeev Nair, Advocate and Mr Raghavanag of the applicant company reiterated their submission filed with the application. They contended that the product Signo Reader merits classification under CTI 8471 60 90 OR 8471 90 00. They also relied upon (a) Foreign Advance Ruling No. NY184081 dated 02 August 2002, (b) Advance Ruling of No. NY h86797 dated 10 January 2002, and (c) Applicant’s own Irish Advance Ruling in case IEBTI 21NT-14-1079-Dec and STJ Electronics reported in 2016 337 ELT 140. That the Applicant submits that the Signo Reader is designed to be used as a part of a physical access control systems. Physical access control systems have been held to be classifiable as “Automatic Data Processing Machines or units thereof’ by the Hon’ble Customs Excise Service Tax Appellate Tribunal (CESTAT) in the case of Invixim Access Pvt Ltd Vs CC, Ahmedabad in Customs Appeal No.10233 of 2021. In this case the product imported “IXM Micro FP3 (Biometric Access Control System) was held classifiable under CTI 8471. In the case of STJ Electronics 2016 337 ELT 140 fingerprint readers were held to be classifiable under CTH 8471 as units of Automatic Data Processing System. Therefore, it was submitted that the Signo Readers will be classifiable under CTH 8471 as units of Automatic Data Processing (ADP) machine and more particularly under CTI 8471 6090 as units of ADP machine. Alternatively, it is submitted that the product under consideration i.e., ‘Signo Reader’ is admittedly a machine which converts data (radio frequency / magnetic field) into binary data and transfer it further to the access controller for further processing. Thus, it is evident that the product falls under the group ‘Machines for transcribing data onto media in coded form and machines for processing such data’. Therefore, for the reasons explained above, authorised representative submitted that the product would fall under Tariff Entry 8471 60 90 or 8471 90 00.
4. I have taken into consideration all the materials placed before me in respect of the subject goods including all the submissions and citations made by the applicant during the personal hearing. Accordingly, I proceed to pronounce a ruling on the basis of information available on record as well as existing legal framework having bearing on the classification of the goods in question under the first schedule of the Customs Tariff Act, 1975, specifically Chapter 84 & 85, its corresponding Chapter notes, supplementary notes and relevant HSN explanatory notes.
4.1 The first question requires ruling on classification of the goods i.e Signo Reader to be imported. At the outset, we find that the issue raised in the first question is squarely covered under Section 28H(2)(a) of the Customs Act, 1962 being a matter related to classification of goods under the provisions of this Act.
4.2 To determine the correct tariff classification for HID Signo Readers, it’s important to first identify the specific nature and function of the product. As per the submissions of the applicant, the Physical Access Control System is used to identify and grant access or entry to only specified employees, contractors or such visitors after electronically authenticating their credentials (i.e. access authority).
4.3 The impugned product i.e Signo Reader is a physical access credential reader which is a part of the Physical Access Control System. It is usually mounted on a wall next to the building entrance such as door. The Signo Reader comprises of the following parts :
a. Core MCU (microcontroller)
b. Secure access microcontroller (SAM)
c. High Frequency Front end RFID Interface – 13.56MHz
d. Low Frequency Front end RFID Interface – 125kHz
e. Bluetooth Low Energy Front-End Interface — 2.4GHz
f. Keypad (optional — based on the model)
g. Connectors for interfacing access controller.
4.4 The Signo Readers are contact less readers mounted on a wall, without any lock mechanism incorporated to it and configured into two kinds of contactless technologies : Passive RFID Technology (Radio Frequency Identification) (e.g., contactless “smart cards”) and Bluetooth Technology (e.g., smart phones, tablets and wearables). They are designed for identity verification for access control system.
HID Signo Reader is an access control device which is a complete, self-contained product designed to read and process the data to authenticate a person’s identity in an access control context. It operates as an input/output device for computer or the access control system. It often includes embedded software and hardware to perform a specific designed task.
4.5 In this regard, I find that the product in question is a digital credential physical access reader. It has the capability of functioning on the Bluetooth as well as RFID Technology. The RFID technology capability comes into play when the reader retrieves information from a physical card which is presented/shown to it for grant of access and the Bluetooth technology comes into play when such digital access is retrieved / or sent to the reader via mobile phones etc.
4.6 Chapter Note 6(A) of Chapter 84 of Customs Tariff Act, 1975 defines ‘automatic data processing machines’ as devices capable of storing programs and data, executing user-specified arithmetic computations, and autonomously modifying its execution based on logical decisions during the processing run without human intervention. The Signo readers themselves do not constitute an automatic data processing machine, however it forms a part/ unit of the overall physical access control system. It satisfies all three conditions stipulated in Chapter Note 6(C) of Chapter 84 of Customs Tariff Act, 1975 to be classified as a unit of a data processing machine viz
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.
In the case at hand, the subject import goods “Signo Reader” essentially transcribes the data onto media in coded form and performs the function of data processing. They are exclusively employed in physical access control systems, are inter-operable with a central processing unit, and are able to receive and transmit data that is utilized by the system. The schematic representation of the physical access control system presented in paragraph 2.7 unequivocally demonstrates that the product can be regarded as a constituent of an automatic data processing machine.
4.7 Based on the submissions of the applicant I find that the key argument for classifying Signo Readers under HS Code 8471 hinges on their role as a “unit” of an automatic data processing machine. The Signo Reader, by itself, might not be a complete data processing machine. However, when integrated into a larger system, it performs a crucial data processing function. The Signo Reader is primarily designed for use in access control systems. It can be connected to a central processing unit, often through a network. It can read and transmit data in a format compatible with the system. The Explanatory Notes to HS Code 8471 emphasize the inclusion of “units” of automatic data processing machines. The Signo Reader, as part of the access control system, fulfills the criteria to be considered a unit. Considering the above points and the specific context of the access control system, I find that the Signo Readers are classifiable under HS Code 8471 as it is a specialized component that contributes to the overall data processing capabilities of the system. It functions by reading data and processes the input and communicates the data to a system, which aligns with the concept of an input/output device. As it is a part of an integrated access control system that includes data processing equipment, therefore it is classified as a peripheral or unit of such data processing machines under Customs Tariff Heading 8471.
4.8 The applicant has relied upon the judgement of the Hon’ble Customs Excise Service Tax Appellate Tribunal (CESTAT) in Final Order No. 10856 of 2024-WZB/AHD in Customs Appeal 10233 of 2021 in the matter of Invixim access Pvt. Ltd. Vs. C.C. Ahmedabad. The observation and findings of the Hon’ble Tribunal is reproduced below:
“CTH 8471 specifically covers magnetic or optical readers. Chapter Note 5(C) (D) and (E) to Chapter 84 read as under:
(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 (i) and (iii) above, are in all cases to be classified as units of heading 8471.
(D) Heading 8471 does not cover the following when presented separately, even if they meet all of the conditions set forth in the paragraph (C)
i. printers, copying machines, facsimile machines, whether or not combined;
ii. 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);
iii. loudspeakers and microphones;
iv. television cameras, digital cameras and video camera recorders;
v. monitors and projectors, not incorporating television reception apparatus.
(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”.
It is clear that the impugned item is of a kind solely or principally used in an automatic data processing system, it is connectable to the central processing unit and is able to accept or deliver data in a form (codes or signals) which can be used by the system. The exclusions contained in Chapter Note 5(D) do not cover the impugned item and it is not the case of Revenue either that it does. Revenue referred to Chapter Note 5(E) quoted above. We find that Chapter Note 5(E) refers to machines incorporating or working in conjunction with an automatic data processing machine and performing a specific function other than data processing. In the present case the machine essentially performs data processing function in as much as it processes the data relating to fingerprint with the finger print data in the motherboard/Centre processing unit (CPU). Thus, it does not have any specific function other than data processing. The impugned goods are therefore not eased out of CTH 8471 by the provisions of Chapter Notes 5(D) & 5(E) CTH 85,43 covers electrical machines and apparatus having individual functions, not specified or included elsewhere in Chapter 85. Thus, this heading is a sort of residuary heading for the goods otherwise covered under Chapter 85. As the impugned goods are found to be covered under CTH 8471 as per above analysis, they are obviously out of chapter 85 and hence out of CTH 85.43 too.
6. In the light of aforesaid analysis, we are of the view that the impugned goods are classifiable under CTH 8471……….
3. We find that the goods in the instant case are practically identical to the goods involved in the case of STJ Electronics Private Limited. In the instant case also the goods imported by the appellant are capable of connection to the Automatic Data Processing Machine (ADP machine). This devices are capable of storing data in the Automatic Data Processing Machine. The device takes input in the form of finger print scan and after processing the information, the said processed information is sent to Automatic Data Processing Machine which collects data for making reports of attendance and timing and for entry and exit. The devices also operate lock of the gate on the basis of the data captured by the said device and processed by Automatic Data Processing Machine.
Chapter note 5 (C) to chapter 84 readers as follows:-
“2. The Chapter Note 5(C) to Chapter 84 reads as follows –
(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.”
4. It is noticed that the device imported by the appellant is used solely or principally in automatic data processing system whereby access and exit is controlled automatically. The said device is connected to central processing unit and captures the data in the form of scan image in digital format. The said scan image is there after used by the system to validate/record entry or exit. In this background we do not find any merit in the claim of revenue goods are not classified under heading 8471. Once goods are classifiable under heading 8471 the same cannot be classified under Entry 8543.
4.8 I observe that HS Code 8543 covers a broad range of electrical machines and apparatus with individual functions. While HID Signo readers do involve electrical components, their primary function is not aligned with the specific categories outlined in this code. Signo readers are primarily designed for access control and identification purposes. They are used to read and process data from various credential types (e.g., RFID cards, mobile devices) and transmit the information to a control system. This core function is not directly related to the types of electrical machines and apparatus listed under HS Code 8543. Signo readers perform data processing functions, such as decoding, encryption, and transmission. These data processing capabilities align more closely with the characteristics of automatic data processing machines under HS Code 8471. HS Code 8543 is specifically designed for electrical machines and apparatus with individual functions, such as those used in telecommunications. Signo readers dO not have the specific telecommunication capabilities required for classification under this code. They do not transmit voice, data, or video signals over telecommunication networks. Therefore, while Signo readers may have some electrical components, their primary function and the specific data processing capabilities they offer make them more suitable for classification under HS Code 8471.
4.9 I further observe that HS Code 8517 primarily covers electrical apparatus for line telephony or line telegraphy. While Signo readers might involve some electrical components, their primary function is not related to telecommunications. Signo readers are primarily designed for access control and identification purposes. Their core function is to read and process data from various credential types (e.g., RFID cards, mobile devices) and transmit the information to a control system. Signo readers do not have the specific telecommunication capabilities required for classification under HS Code 8517. They do not transmit voice, data, or video signals over telecommunication networks. Signo readers perform data processing functions, such as decoding, encryption, and transmission. This data processing aspect aligns more closely with the characteristics of automatic data processing machines under HS Code 8471. HID Signo reader does not fall within the category of telecom products, therefore, it is reasonable to conclude that classification under CTH 8517 is ruled out. Hence I find that, while Signo readers may have some electrical components, their primary function and the specific data processing capabilities they offer, make them more suitable for classification under HS Code 8471.
4.10 To determine whether the HID Signo Reader should be classified under Tariff Item 8471 60 90 or 8471 90 00 of the First Schedule to the Customs Tariff Act, 1975, I find it necessary to closely examine the function of the device.
4.11 Signo readers are primarily designed for access control and identification, which involves data processing functions. They can read, decode, and transmit data, aligning with the characteristics of automatic data processing machines. Signo readers are often integrated into larger access control systems, further supporting their classification as units of automatic data processing machines. Signo Readers perform a range of functions beyond simple input and output. They involve: Reading, decoding, and processing data from various credential types, Interfacing with other devices, such as access control systems and security systems. Signo Readers often incorporate advanced technologies like microprocessors, memory, and specialized algorithms to perform their functions. Signo Readers are integral components of larger access control systems, contributing to the overall data processing and security capabilities of the system. They interact with other components like controllers, software, and network infrastructure to provide secure access control. Signo Readers incorporate advanced technology, including microprocessors, memory, and communication interfaces. Further, Signo readers use radio chips (RFID IC and Bluetooth IC) and respective antennas incorporated in the reader to be able to “read” the digital credential stored in the passive RFID smart card or Bluetooth mobile device.
4.12 Tariff item level classification 84716090 specifically refers to “Input or output units, whether or not containing storage units in the same housing: Other.” While Signo Readers do involve input and output operations, their primary function and technological complexity align more closely with a broader category of data processing machines.
4.13 Tariff item level classification 84719000 refers to “other machines for transcribing data onto data media in coded form and machines for processing such data, not elsewhere specified or included.”
4.14 In view of the above facts, I find that, though HS Code 84716090 might seem applicable due to the input/output function, it doesn’t fully capture the broader capabilities of Signo Readers and is not the appropriate classification for Signo Readers. Whereas, HS Code 84719000 is the most accurate classification for Signo Readers, reflecting their role as integral components of a data processing system and due to their complex functionality and integration into larger systems of Physical Access Control.
4.15 The next question requires ruling on the rate of duty applicable on the import of Signo Reader. To determine the exact rate of duty applicable to goods imported into India, we need to know its specific classification under the Harmonized System (HS) code. As discussed above, I am of the view that the Signo Readers are appropriately classifiable under HS Code 84719000. Accordingly, I find that the applicable rate of duty will be determined based on the relevant tariff heading and rates specified in the Customs Tariff Act, 1975.
5. On the basis of my foregoing discussions and findings, the ruling so sought in the present advance ruling application is accordingly answered as under: –
a. Question 1: Whether “Signo Reader” proposed to be imported by the Applicant is classifiable under Tariff Item 8471 60 90 OR 8471 90 00 of the First Schedule to the Customs Tariff Act, 1975?
Ans . HS Code 84719000 is the most appropriate classification for Signo Readers due to its functionality and integration into larger systems as discussed herein above.
b. Question 2: If the answer to the above question is in the negative, then what would be the correct classification of “Signo Reader” under First Schedule to the Customs Tariff Act, 1975?
Ans . Not Applicable
c. Question 3: What would be the rate of duty applicable on the import of “Signo Reader”?
Ans. The applicable rate of duty will be calculated based on the Harmonized System (HS) code assigned to the products and as per the prevailing rates specified in the schedules to the Customs Tariff Act, 1975.
6. I rule accordingly.
(Prabhat K. Rameshwaram)
Customs Authority for Advance Rulings, Mumbai
F. No. CAAR/CUS/APPL/68/2024-0/o Commr-CAAR-Mumbai
Dated: 26.11.2024
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