Case Law Details

Case Name : In re  Amazon seller services Pvt Ltd (CAAR Mumbai)
Appeal Number : Ruling No. CAAR/Mum/ARC/66/2021
Date of Judgement/Order : 10/11/2021
Related Assessment Year :

In re  Amazon seller services Pvt Ltd (CAAR Mumbai)

From the functionality perspective, the product under consideration, therefore, appears to perform the function of reception, conversion and transmission in all three different scenarios described above. The first rule of interpretation of customs tariff is that goods under consideration should be classified in accordance with the terms of the heading or relevant section or chapter notes. Since, the applicant, as well as the Principal Commissioner/Commissioner of Customs of ACC(Import), Delhi; ACC (Import), Mumbai, ACC, Chennai; and Sea Port, Chennai all suggest that the heading 851762 is an appropriate classification entry for the device under consideration, I proceed to examine the said tariff entry first. Tariff Item 8517 includes ‘Telephone sets, including telephones for cellular networks or for other wireless networks; 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), other than transmission or reception apparatus of heading 8443, 8525, 8527 or 8528.’ The six-digit tariff entry 851762 under the said heading contains within its ambit ‘Machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus.’ Under the above tariff entry, the sub-heading 8517 62 90 is a residual entry titled as ‘Others.’ The relevant explanatory notes to HSN to heading 8517 provides that ‘This heading covers 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 wireless network. The signal may be analogue or digital. The networks, which may be interconnected, include telephony, telegraphy, radio-telephony, radio telegraphy, local and wide area networks.’ The explanatory notes further clarify that ‘These apparatus (apparatus for telegraphic communication other than facsimile machines of heading 8443) are essentially designed for converting characters, graphics, images or other data into appropriate electrical impulses, for transmitting those impulses, and at the receiving end, receiving these impulses and converting them either into conventional symbols or indications representing the characters, graphics, images or other data or into characters, graphics, images or other data themselves.’ The applicant has also placed reliance on US Cross Ruling N027719 which classifies D-Link AirPlus Xtreme 2.4GHZ wireless access points as a communication device which is utilized within switches, routers, access points within a network and has a synchronous random-access memory (SDRAM) chips soldered onto a printed circuit board. It was held to be a complete networking device and classified under 851762, and also on the UK Customs tariff which classifies networking devices under sub heading 851762. In the Advance Ruling No. CAAR/Mum/ARC/59/2021, dated 08.10.2021, I had an occasion to examine the specifications and functions of other types of networking devices and on the basis of available information, had reached the conclusion that the said networking devices merit classification under sub-heading 85176290. In that ruling, considering the fact that the utility of the devices under consideration ultimately lies in their ability to provide content for view on a television set, the alternate tariff entry for these goods can be 8525 (TRANSMISSION APPARATUS FOR RADIO-BROADCASTING OR TELEVISION, WHETHER OR NOT INCORPORATION RECEPTION APPARATUS OR SOUND RECORDING OR REPRODUCING APPARATUS; TELEVISION CAMERAS, DIGITAL CAMERAS AND VIDEO CAMERA RECORDERS), was also examined, but rejected in view of the fact that the network devices under consideration do not transmit radio/video broadcast signals. On the contrary, their function is to extract the content from the hard disk drive or Amazon cloud/internet as per the demand of the user. The same line of reasoning would remain equally applicable in this case. Considering the functional aspects of the Networking Device Model No. D5N83A, discussed in detail in the preceding paragraphs, I agree with the suggestion of the applicant, as well as the views of the Principal Commissioner/Commissioner of Customs of ACC(Import), Delhi; ACC(Import), Mumbai; ACC, Chennai; and Sea Port, Chennai.

In view of the discussions as above, my ruling is as under: –

‘Networking Device Model No. D5N83A is correctly classifiable under sub-heading 85176290 of the first schedule to the Customs Tariff Act, 1975.’

FULL TEXT OF ORDER OF CUSTOMS AUTHORITY FOR ADVANCE RULINGS

M/s. Amazon Seller Services Private Limited proposes to import Networking Device Model No. D5N83A. The application of advance ruling, seeking the classification of the said device, was received in the secretariat of the erstwhile Authority for Advance Rulings (Central Excise, Customs and Service Tax), New Delhi on 02.02.2018. However, since no ruling was issued by the said authority, the pending application was transferred to the Customs Authority for Advance Rulings, Mumbai in February, 2021. Communications were sent to the applicant from the secretariat of the CAAR, Mumbai to inform whether they are still desirous of receiving an advance ruling in respect of the pending application. The applicant, vide their communication dated 25.02.2021 informed that they are still interested in receiving the advance ruling and also that they would submit the application in the revised format in due course. Thereafter, the application was e-mailed by the applicant on 14.07.2021, which was followed by physical submission of the application on 10.08.2021.

2. The said networking device is described by the applicant as a non-portable wireless networking device that seamlessly integrates 2.412-2.472 Ghz or 5.18-5.20 Ghz or 5.30-5.32 Ghz or 5.845-5.865 Ghz wi-fi radios, provides wireless connectivity to client devices to access data using unlicensed wi-fi wireless spectrum. This product contains a central processor unit, 1 Gb of DDR memory, 8Gb of NAND flash memory and 256Gb SSD memory inside the device. Each unit is powered by an AC adaptor and requires to be plugged in to operate. The product has an internal fan to maintain a stable operating temperature and two ethernet ports, one USB 3.0 port and power connector. The product, as a set, consists of 20 devices (19 devices and one master device). The applicant has stated that though the brochure of the product is not available at the time of application, the technical write up shall be submitted at the time of personal hearing. The applicant, however, has provided technical specifications of the product in a tabular format.

3. The applicant has stated that, previously, access devices required an existing wi-fi connection (e.g., a modem) to receive voice, images and other data. However, the product for which the present advance ruling request has been made would not require any wi-fi connection. Instead, the product will provide the network of its own. When a user requests for some data via an access device, the product first searches it from the data stored in the solid-state drive (SSD) of a nearby device. However, in case the data is not available in the nearby device, it gets it from SSD memory of any of the other 19 devices. The product also remains connected to a gateway node and is capable of providing data through external network. Thus, the uniqueness of this product lies in its own network connectivity for provision of content to the user of the device through a standard connection created by the device itself.

4. The applicant had originally requested that CBEC may be requested to appoint a Commissioner of Customs in respect of their application. Accordingly, the Board had appointed the Commissioner of Customs (Import), Air Cargo Complex Delhi for the said purpose. The comments of the Principal Commissioner of Customs, ACC(Import), New Delhi, dated 28.02.2019 are on record. In the said comments, classification of the impugned device has been suggested under sub-heading 85176290. In their communication dated 10.08.2021, the applicant has stated that they wish to import these devices through the air cargo complexes at Delhi, Bangalore, Chennai, and Mumbai as well as the sea ports of Chennai and Nhava Sheva. Accordingly, comments of the concerned Principal Commissioners/Commissioners of Customs were sought. Response has been received from the Commissioner of Customs, Sea Port, Chennai in which the applicant’s view regarding classification of under sub-heading 85176290 have been accepted. The Commissioner of Customs, ACC(Import), Mumbai is also of the view that the device under consideration merits classification under sub-heading 85176290. Though, the Commissioner of Customs, ACC, Chennai has not sent his comments, his representative appeared in the personal hearing and concurred with the view of the applicant regarding the classification.

5. The hearing in this case was fixed for 26.08.2021. However, the applicant sought adjournment on the ground that they have received the comments from the jurisdictional Principal Commissioners/Commissioners of Customs in the evening of 25th August itself. Thereafter, the hearing was again fixed on 09.09.2021. The applicant sought adjournment citing preoccupation of their lead counsel before the Hon’ble High Court of Telangana. The hearing finally took place on 02.11.2021. Ms. Jyoti Pal, advocate, representing the applicant, explained the specifications and functions of the device under consideration. Ms. Pal also mentioned that a ruling has already been issued in respect of other networking devices and the same line of reasoning would also be applicable to the issue under consideration. Shri Prabhakar Nigam, Appraising Officer, representing the Commissioner of Customs, ACC, Chennai concurred with the applicant’s view that the device in question merits classification under sub-heading 85176290.

6. The applicant has explained that the networking device Model No. D5N83A consists of a master device and 19 peripheral/ancillary devices and performs the functions of transmission or reception of images, audio files, video files or other data by electromagnetic waves in a wireless network. For the purpose of providing data to access devices, the product performs the function of conversion of data into signals. Thus, the data is transmitted in the form of electromagnetic waves from the product to the access devices. The applicant has explained that the function of reception, conversion and transmission can be established in three different situations: –

(i) When a user searches for any data in the access device, the product receives the signal from access device, searches the data in its own memory, converts the data into signals and transmits the same again to the access device;

(ii) Secondly, each of the 20 devices connects to each other. In a situation where a user searches for some data which is not available in the nearby device, then, that device will transmit the signal to the other devices. The other devices will receive the signal and search for data in their own memory. Once located, the data would be converted into signals for the purpose of transmission finally to the access device;

(iii) The product also remains connected to gateway node and is capable of providing data through external network.

7. From the functionality perspective, the product under consideration, therefore, appears to perform the function of reception, conversion and transmission in all three different scenarios described above. The first rule of interpretation of customs tariff is that goods under consideration should be classified in accordance with the terms of the heading or relevant section or chapter notes. Since, the applicant, as well as the Principal Commissioner/Commissioner of Customs of ACC(Import), Delhi; ACC(Import), Mumbai, ACC, Chennai; and Sea Port, Chennai all suggest that the heading 851762 is an appropriate classification entry for the device under consideration, I proceed to examine the said tariff entry first. Tariff Item 8517 includes ‘Telephone sets, including telephones for cellular networks or for other wireless networks; 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), other than transmission or reception apparatus of heading 8443, 8525, 8527 or 8528.’ The six-digit tariff entry 851762 under the said heading contains within its ambit ‘Machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus.’ Under the above tariff entry, the sub-heading 8517 62 90 is a residual entry titled as ‘Others.’ The relevant explanatory notes to HSN to heading 8517 provides that ‘This heading covers 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 wireless network. The signal may be analogue or digital. The networks, which may be interconnected, include telephony, telegraphy, radio-telephony, radio telegraphy, local and wide area networks.’ The explanatory notes further clarify that ‘These apparatus (apparatus for telegraphic communication other than facsimile machines of heading 8443) are essentially designed for converting characters, graphics, images or other data into appropriate electrical impulses, for transmitting those impulses, and at the receiving end, receiving these impulses and converting them either into conventional symbols or indications representing the characters, graphics, images or other data or into characters, graphics, images or other data themselves.’ The applicant has also placed reliance on US Cross Ruling N027719 which classifies D-Link AirPlus Xtreme 2.4GHZ wireless access points as a communication device which is utilized within switches, routers, access points within a network and has a synchronous random-access memory (SDRAM) chips soldered onto a printed circuit board. It was held to be a complete networking device and classified under 851762, and also on the UK Customs tariff which classifies networking devices under sub heading 851762. In the Advance Ruling No. CAAR/Mum/ARC/59/2021, dated 08.10.2021, I had an occasion to examine the specifications and functions of other types of networking devices and on the basis of available information, had reached the conclusion that the said networking devices merit classification under sub-heading 85176290. In that ruling, considering the fact that the utility of the devices under consideration ultimately lies in their ability to provide content for view on a television set, the alternate tariff entry for these goods can be 8525 (TRANSMISSION APPARATUS FOR RADIO-BROADCASTING OR TELEVISION, WHETHER OR NOT INCORPORATION RECEPTION APPARATUS OR SOUND RECORDING OR REPRODUCING APPARATUS; TELEVISION CAMERAS, DIGITAL CAMERAS AND VIDEO CAMERA RECORDERS), was also examined, but rejected in view of the fact that the network devices under consideration do not transmit radio/video broadcast signals. On the contrary, their function is to extract the content from the hard disk drive or Amazon cloud/internet as per the demand of the user. The same line of reasoning would remain equally applicable in this case. Considering the functional aspects of the Networking Device Model No. D5N83A, discussed in detail in the preceding paragraphs, I agree with the suggestion of the applicant, as well as the views of the Principal Commissioner/Commissioner of Customs of ACC(Import), Delhi; ACC(Import), Mumbai; ACC, Chennai; and Sea Port, Chennai.

In view of the discussions as above, my ruling is as under: –

‘Networking Device Model No. D5N83A is correctly classifiable under sub-heading 85176290 of the first schedule to the Customs Tariff Act, 1975.’

The advance ruling application dated 10.08.2021 of M/s. Amazon Sellers Private Limited stands disposed of on aforesaid terms.

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