Case Law Details

Case Name : In re Blue Star Limited (CAAR Delhi)
Appeal Number : Ruling No. CAAR/Del/Blue Star/32/2023/587
Date of Judgement/Order : 05/12/2023
Related Assessment Year :

In re Blue Star Limited (CAAR Delhi)

Introduction: Blue Star Limited filed an application with the Customs Authority for Advance Rulings (CAAR Delhi) seeking a classification ruling for the “ODU Controller PCB” under the Customs Tariff Act. The article delves into the details of the case, the applicant’s claims, and the response from the concerned Commissionerate.

Detailed Analysis:

1. Applicant’s Proposal: Blue Star Limited, engaged in manufacturing air conditioners, applied for a ruling on the classification of the “ODU Controller PCB” under the Customs Tariff Act. They import this component, currently classifying it under Sub-heading 84159000.

2. Nature of ODU Controller PCB: The applicant describes the “ODU Controller PCB” as a board/panel with various components facilitating the control and distribution of electricity in split air conditioners. The components include SMD capacitors, transformers, resistors, microcontrollers, and more.

3. Classification Arguments: Blue Star Limited argues for the classification under CTH 85371000, citing that it falls under “Boards, Panels, Consoles, Desks, Cabinets” equipped with apparatus for electric control or distribution. They reference relevant US Customs cross rulings and an earlier CAAR Mumbai ruling.

4. Commissionerate’s Comments: The concerned Commissionerate suggests classification under Sub-heading 84159000, considering the specific use of “ODU Controller PCB” in air conditioners. They refer to Section Note 2(b) of Section XVI, emphasizing parts suitable for use with a particular machine.

5. Personal Hearing and Re-joinder: A personal hearing was conducted, where Blue Star Limited reiterated their classification arguments. The applicant submits a rejoinder, countering the Commissionerate’s interpretation and referencing relevant precedents.

Conclusion: After thorough analysis and considering the arguments from both parties, CAAR Delhi rules that the “ODU Controller PCB” should be classified under Sub-heading 84159000 of the Customs Tariff Act. The decision takes into account the nature of the component, its specific use in air conditioners, and the applicable classification provisions.

This ruling emphasizes the importance of understanding whether an item can function independently and its distinct role in the overall machinery. The case highlights the complexities involved in classifying components that are integral to larger machines, providing clarity on the applicable tariff heading for the “ODU Controller PCB.”

FULL TEXT OF ORDER OF CUSTOMS AUTHORITY FOR ADVANCE RULINGS, DELHI

Blue Star Limited. E-44/12. Okhla Industrial Area. New Delhi- 110020, having IEC number 0880214S4 and PAN – AAACI344871) (applicant, in short) has filed an application dated 13.07.2023, received in this office on 24.08.2021. seeking advance ruling under section 28-H of the Customs Act. 1962, before the Customs Authority for Advance Rulings. New Delhi (CAAR New Delhi in short). The application was accordingly registered under Serial No. 21/2023 dated 24.08.2023.

2. The applicant has proposed to import “ODU Controller PCB” and they have sought ruling on the classification under the Customs Tariff Act. 1975, of the goods which arc proposed to be imported.

3. The applicant has stated that. they arc engaged in the business of manufacturing of air conditioners, air purifiers & water coolers; in the course of manufacturing of air conditioners. which primarily consists of an indoor and outdoor unit, many inputs arc required. which they are either procuring domestically or importing from foreign suppliers; they arc currently importing “ODU Controller PCB” after classifying the same under Sub­heading 84159000 treating the said goods as part of an air conditioner; they are approaching this Authority, seeking advance ruling qua the good as mentioned above, since they are regularly importing the same and hence would like to have a proper understanding and classification of the said goods. The applicant has further stated that the air conditioning unit primarily consists of an Indoor and an Outdoor Unit; these units are an assembly of various parts and components which function individually and collectively; one such part is “ODU Controller PCB”, which further consists of several components, which inter alia includes:

Components/Input of ODU Controller PCB CTH
SMD capacitor 8532
Ceramic capacitors 8532
Transformer 8504
Inductor 850450
Resistor 8533
SMD Resistor 8533
Microcontroller 8542
Integrated Circuit (IC) 8542
IPM (Intelligent power module) PIM 8504
PCB (Printed Circuit Board) 8342
Heal Sink 8316
Bridge Rectifier 83044021
Rise 8536
Diode 85411000
SMD Diode 8541
MOV 8533
Voltage Regulator 85044040
Transistor 8541
Relay 8536

4. The applicant has also stated that, the ODU Controller PCB is in the nature of a board/panel where several individual apparatus/components are affixed together and as a whole PCB facilitates in controlling and distribution of electricity to the Indoor and Outdoor unit of the split air conditioner; CTH 8537 specifically covers “Boards, Panels, Consoles, Desks. Cabinets and other bases, equipped with two or more apparatus of heading 8535 or 8536, for electric control or the distribution of electricity, including those incorporating instruments or apparatus of chapter 90, and numerical control apparatus, other than switching apparatus of heading 8517; in view of the above, the applicants has requested for appropriate classification of the aforesaid goods stating that the “ODU Controller PCB” being presently imported by the applicant appears to be appropriately classifiable under CTH 85371000 (For a voltage not exceeding 1,000 V). The applicant has also explained that, it is important to note that several components fitted into ODU controller PCB are classifiable under HSN 8535 or 8536; some of the products covered under HSN 8535 or 8586 are Fuses, Circuit Breaker, lightning arrestors, voltage limiters, motor starter for AC and DC motors, Relays, apparatus for protecting electric circuits, etc.; the Explanatory Note for CTH 8537 provides that, ‘These consists of an assembly of apparatus of the kind referred to in the two preceding headings (e.g., switches and fuses) on a hoard, panel, console, etc., or mounted in a cabinet, desk, etc. They usually also incorporate meters., and sometimes also subsidiary apparatus such as transformers, valves, voltage regulators, rheostats or luminous circuit diagrams. The goods of this heading vary from small switchboards with only a few switches, fides, etc. (e.g., far lighting installations) to complex control panels jar machine-tools, rolling mills, power stations, radio stations, etc., including assemblies ofseveral of the articles cited in the text of this heading. ‘; further, Board, Panel, etc. classifiable under HSN 8537 also have apparatus classifiable under Chapter 90; as per Chapter Note 7 of Chapter 90 of the Customs Tariff Act, 1975, “Heading 9032 applies only to: (a) …..; and (b) automatic regulators of electrical quantities, and instruments or apparatus far automatically controlling non-electrical quantities the operation of which depends on an electrical phenomenon varying according to the factor to he controlled, %Ouch are designed to bring this *tor to, and maintain it at, a desired value, stahilized against donirbances, by constantly or periodically measuring its actual value.”: thus. from the description of goods covered under CTH 9032 and Chapter Note 7, it seems that CTH 9032 covers certain instruments or apparatus, which inter alia include automatic regulators used to regulate electrical quantities; a perusal of CTH 9032 shows that the same covers individual apparatus/instrument when it is used solely or on standalone basis and not when the different items/apparatus are fitted as components onto a Board/Panel to achieve the objective of control and/or distribution of electricity Further, the applicant has given following reasons as to why the product should be classified under Sub-heading 85371000 of the Customs Tariff: a) the product is consisting of various components which arc classifiable under HSN 8535 or 8536, the “ODU Controller PCB” performs the function of distribution, regulation and control of electricity for the Air-Conditioners in which it is used; b) CTH 8537 specifically covers “Boards, Panels, Consoles, Desks. Cabinets and other bases, equipped with two or more apparatus of heading 8535 or 8536. for electric control or the distribution of electricity, including those incorporating instruments or apparatus of chapter 90, and numerical control apparatus, other than switching apparatus of heading 8517”. The applicant has also stated that, the US Customs in its Cross-Ruling No. NY N004023 dated 21.12.2006 made the following observations in relation to tariff classification of an electronic control printed circuit board: The Power Port Card PCBs are populated with various terminals, relay sockets, contacts, and other active andor passive components. The PCBs are imported in various configurations, each designed to perform a specific operation such as post purge, priority protection and universal timer pump exercise to quickly customize any system. The Power Port Card PCB.s are rated for a voltage of up to 120 V The applicable subheading for the PC600 Series Power Port Card Printed Circuit Boards will be 8537.10.9070, H7SUS, which provides for “Boards, panels, consoles… and other bases, equipped with two or more apparatus of heading 8535 or 8536, for electric control or the distribution of electricity… For a voltage not exceeding 1,000 V Other: Other: Other.” Reliance is also placed on Cross Ruling No. HQ 963218 dated 24.05.2000 and Cross Ruling No. NY N186343 dated 18.10.20 I 1 by the US Customs, wherein similar product was held to be more appropriately classifiable under CTH 8537. Further, reliance is placed on the Advance Ruling in the matter of M/s Gulf Oil Lubricants India Ltd. passed by the Customs Authority for Advance Ruling, Mumbai [CAAR/Mum/ARC/28/2022], wherein the Hon’ble Authority classified the similar product under CTH 8537.

5. Comments in the matter have been received from the concerned Commissionerate wherein, it is inter-alia stated that, the “ODU controller PCB” is basically a populated PCB which is fitted with several apparatus/components viz. capacitors, transformer, inductor, resistor, microcontroller, ICs, IPM, PCB, heat sink, flue, diode, voltage regulator etc. and together its ‘Unction is to control and distribute electricity to the indoor and outdoor unit of the split air conditioner i.e. it is specially designed populated assembled in order to perform the specific role of control and distribution of electricity to the outdoor unit of the split air conditioner only, so its proper classification is under Sub-heading 84159000. In this regard, the concerned Commissionerate has also drawn reference to Section Note 2 (b) of Section XVI of the Customs Tariff Act, 1975 which inter-alia provides that. ‘other parts, suitable fur use solely or principally with a particular kind of machine. or with a number of machines of the same heading. are to be classified with the machine of that kind. It is further commented that upon reading the description 01 heading #537, it is noted that this heading includes hoards, panel, console. desks, cabinets and other bases for electric control or the distribution of electricity II appears that these hoards, panel, console arc used in industries to operate machine-tools, rolling mills, power stations etc. this heading also includes the general switch hoards used for domestic purpose. On the other hand. 01)11 controller P(’11 has a specific use for electricity control and distribution as a part in air conditioners h cannot he used anywhere except air-conditioner Hence. the 01)11 controller PCB Is 1101 classifiable under the heading 8537 and it appears to merit classification under Sub-heading 84159000.

6. Personal hearing in the matter was held on 09.11.2023. The Authorized Representative (AR) of the applicant storied by Poising on the goods to he imported and the corresponding classification of the same. He presented the reasons for classification of the goods in question i.e. “MU controller PCB” under CM 85371000. He also referred to the earlier classification order of the similar goods by the Authority at Mumbai in the matter of MS Gulf Oil Lubricants India Ltd. wherein goods on merit classified under 8537. He reiterated the submissions already made in the application for advance rulings.

7. The applicant has also submitted a Re-joinder dated 09.11.2023 wherein it is inter-alia stated that. the Assistant Commissioner of Customs, Gr.V, NS-V, JNCH has erred in stating that the HSN 8537 applies only to boards, panel, console which are used only in industries to operate machine-tools, rolling mills, power stations, radio station etc. and that the heading also includes general switch boards used for domestic purpose; the “ODU Controller PCB” has a specific use for electricity control and distribution as part in air conditioners. It is further stated in the said Re-joinder that usage of goods under this heading as provided in the Erplanatory Note is inclusive and not conclusive to the use as provided therein. If anything had to be specifically excluded to be covered in the heading, the Explanatory Note would have done so. The Applicant further relies on the decision of the Hon ‘ble Customs Authority for Advance Rulings, New Delhi in the matters of M/s Evans Consoles Corporation (Ruling No. CAAR/Del/Evans/02/2022, dated 13.01.2022), wherein the Hon’ble Authority classified the consoles equipped with two or more apparatus of heading 8535 or 8536 for electrical control or distribution of electricity under heading 8537. The applicant further craves leave to refer to US Customs cross ruling No. NY N186343 dated 18.10.2011 wherein it has been held that the PCB having complete control of the washing machine operation is to he classified under Tariff Entry No. 8537.10.3000. The Explanatory note clearly stales that, these consist of assembly of apparatus of the kind referred to in the two preceding headings (e.g. switches and fuses) on a board, panel, console, etc., or mounted in a cabinet, desk, etc. The product of the applicant is also exactly what the Explanatory note is referring to. Further reference is drawn to Explanatory for Parts. of Section XVI which provides that general rule being part which are suitable for use solely or principally with particular machines or apparatus, or with a group of machines or apparatus lolling in the same heading, are classified in the same heading as those machines or apparatus, do not apply to part which in themselves constitute an article covered by a heading of this’ section; these are in all cases classified in their own appropriate heading even if specially designed to work as part of a specific machine. That, it is further stated that this applies to Hoards, panels, consoles, desks, cabinets and other apparatus for electric’ control or distribution of electricity (heading 85,37), In view of the above, the applicant pray fin’ issue of advance ruling on classification of “ODU CONTROLLER PCB under CTH 853710 00.

8. Finding that the application is valid in terms of the provisions of the Customs Act, 1962 and the Customs Authority for Advance Rulings Regulations, 2021, having gone through submissions of the applicant, comments of the concerned Commissionerate and having heard the applicant. I proceed to examine the question on merits.

9.1 1 note that the concerned Commissionerate has opined for classification under the Sub­heading 84159000 drawing reference to Section Note 2 (b) of Section XVI of the Customs Tariff Act, 1975 which inter-alia provides that, ‘other parts, if suitable for use solely or principally with a particular kind of machine, or with a number of machines of the same heading, are to be classified with the machine of that kind.

9.2 I also note that the applicant has described the goods in question as, ‘ODU Controller PCB’ which are in the nature of a board/panel where several individual apparatus/components arc affixed together and as a whole PCB facilitates in controlling and distribution of electricity to the Indoor and Outdoor unit of the split air conditioner. The applicant has proposed to classify the goods in question under heading 8537 which specifically covers Boards. Panels, Consoles, Desks, Cabinets and other bases, equipped with two or more apparatus of heading 8535 or 8536, for electric control or the distribution of electricity, including those incorporating instruments or apparatus of chapter 90, and numerical control apparatus. other than switching apparatus of heading 8517″.

9.3 The applicant has also stated that the ODU Controller PCB has specific use for electricity control and distribution as part in air conditioners.

10.1 In light of the foregoing, I note that the goods in question are not stand-alone items/apparatus rather these are goods to be used only as parts of the main apparatus/equipment i.e air conditioners. Thus, reference to Note 2(b) of Section XVI is relevant and accordingly. it is required that classification be decided on the basis of provisions contained therein.

10.2 As the goods in question arc parts which are suitable for use solely or principally with particular machines or apparatus i.e air conditioners, thus classifying these goods with reference to provisions under Note 2(b) of Section XVI is the appropriate way.

10.3 Moreover, in the instant application, the applicant has placed reliance on the rulings issued by the Customs Authority for Advance Ruling, New Delhi (Ruling No. CAAR/Del/Evans/02/2022, dated 13.01.2022) in the case of M/s Evans Consoles Corporation and ruling issued by the Customs Authority for Advance Ruling, Mumbai (CAAR/Mum/ARC/28/2022) in the case of M/s Gulf Oil Lubricants India Ltd. However, the product in question in the said rulings, already issued by CAAR, New Delhi and Mumbai arc in the nature of stand-alone products and appears to be not for use solely or principally as parts of a machine/equipment or apparatus. Thus, reliance on the said rulings does not appear to be appropriate.

10.4 Further. I note that in the FINAL ORDER NO. 50874/2022 dated 20.09.2022 issued by Principal Bench of CES TAT. in the case of M/s Vodafone Idea Ltd. v. Principal Commissioner of Customs (Import). lCD, Tughlakabad, New Delhi, it is inter-alia observed and laid down that, in the ease of a carburetor for an Internal combustion engine, it is explained that the function performed by carburetor is distinct from that of the engine. However, the said function is not an individual function as the operation of the carburetor is inseparable from  that of the engine. Hence, the carburetor is considered as a part of the engine as opposed to an independent machine. It, therefore, transpires that the true test for determining whether an item is classifiable as parts/components is as follows: (i) Whether the item has a separate identifiable/individual function of its own, when compared to the main machine; and (ii) Whether the item is capable of operating independently of the main-machine on its own. If the answer to both the aforesaid questions is in the negative, the item would he classifiable as parts and in that case the item will not be classifiable as an apparatus Jailing under us awn appropriate heading The goods in question in the instant application for advance ruling i.e “ODU Controller PCB” cannot perform its function on a stand-alone basis in the imported condition. Moreover, it appears that functioning of “ODU controller PCB” is dependent upon functions performed by other parts/components of the air-conditioner. Thus, the goods in question would merit classification as parts and not as apparatus falling under its own appropriate heading.

11. In view of the aforesaid facts and discussion, the goods, namely, `ODU controller PCB’ would merit classification under Sub-heading 84159000 of the First Schedule to the Customs Tariff Act. 1975.

12. I rule accordingly.

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