PCB cards used as parts of OTN equipment are classifiable under CTI 8517 70 90

Fiberhome India Private Limited Vs Principal Commissioner of Customs (CESTAT Delhi)

CESTAT Delhi held that Populated/Loaded/Printed Circuit Boards [PCB] cards are used as parts of OTN equipment and hence are classifiable under CTI 8517 70 90 and not under CTI 8517 62 90.

Facts- The appellant manufactures ‘Optical Transport Network’ equipment for supply to the Indian Telecom Operators, including BSNL. The appellant imported the Populated/Loaded/Printed Circuit Boards cards and classified the same under CTI 8517 70 10 as according to the appellant these imported PCB cards are used as parts of the OTN equipment. The appellant also imported modules, other than PCB, which the appellant claims are also used as parts of the OTN equipment and classified them under CTI 8517 70 90.

The department has classified the cards and the modules imported by the appellant as apparatus/ machine/ equipment under CTI 8517 62 90. The appellant also imported routers and classified them under CTI 8517 69 30. The department has classified the routers under CTI 8517 62 90 as apparatus/ machine/ equipment.

Conclusion- Held that in Commissioner Reliance Jio Infocomm Ltd. the Tribunal had held that Small Factor Pluggable (SFP) Modules are classifiable under CTI 8517 70 90 and not under CTI 8517 62 90 as held by the customs department. For goods to be classified as “apparatus” under CTI 8517 62 90, they must be complete machines capable of independent operation for reception, conversion, transmission, or regeneration of voice, images, or other data. This is not so in the present case.

The routers are classified under CTI 8517 69 30 during the period from 2016 to 2019. It is with effect from 01.01.2020 that this entry was omitted by Finance Act, 2019. The classification adopted by the appellant, therefore, for the period from 2016 to 2019 is correct. The Principal Commissioner, therefore, committed an error in holding that routers based on optical network are included in CTI 8517 62 90.

FULL TEXT OF THE CESTAT DELHI ORDER

M/s Fiberhome India Private Limited¹ has challenged the order dated September 27, 2023 passed by the Principal Commissioner adjudicating the show cause notice dated May 29, 2020. The Principal Commissioner has rejected the classification of the goods in the self-assessed Bills of Entry and classified the goods imported by the appellant under Customs Tariff Item² 8517 62 90 of the Customs Tariff Act, 1965³ as a result of which the benefit of the Exemption Notification has been denied to the appellant with a direction to pay the customs duty at the rate of 10%/20%, as per the period involved. Accordingly, the differential customs duty has been confirmed with interest.

2. The appellant manufactures ‘Optical Transport Network’⁴equipment for supply to the Indian Telecom Operators, including BSNL. The appellant imported the Populated/Loaded/Printed Circuit Boards⁵ cards and classified the same under CTI 8517 70 10 as according to the appellant these imported PCB cards are used as parts of the OTN equipment. The appellant also imported modules, other than PCB, which the appellant claims are also used as parts of the OTN equipment and classified them under CTI 8517 70 90. The department has classified the cards and the modules imported by the appellant as apparatus/ machine/ equipment under CTI 8517 62 90. The appellant also imported routers and classified them under CTI 8517 69 30. The department has classified the routers under CTI 8517 62 90 as apparatus/ machine/ equipment.

3. The demand raised in the show cause notice relates to 133 Bills of Entry which were either provisionally assessed or finally assessed at IGI, Delhi and ICD, Tughlakabad. The details of the Bills of Entry as provisionally assessed or finally assessed at the two ports are as follows :

4. It would be seen that whereas the appellant claimed that the cards and modules were required as parts for the assembly and operation of the OTN system, the department proposed to reclassify the cards and modules as machines for reception, conversion and transmission or regeneration of voice, images or other data under CTI 8517 62 90.

5. According to the appellant the cards/modules can function only when they are installed in the specified slots of the OTN equipment and cannot function independently by themselves. The appellant also claims that the routers imported by the appellant have been classified under heading specifically provided for routers.

6. The imported products have been categorized into three groups by the show cause notice and the impugned order in the following manner :

5. The issue that arises for consideration in this appeal is whether the cards and modules imported by the appellant would be classifiable as parts/ components of the OTN equipment or as apparatus/ machine/ equipment. For determining this issue, twin tests, namely, (i) No Separate Identifiable/ Individual Function; and (ii) Incapable of Independent Operation have been laid down by the Courts from time to time.

6. In respect of the aforesaid twin tests, the appellant has contended that both the twin tests stand satisfied for the cards and modules imported by the appellant in the following manner:

I. No Separate Identifiable/Individual Function

9. The cards and modules imported by the appellant do not possess distinctive functions independent of the OTN equipment. These units such as 100G Line Interface Cards, Service Interface Cards, WSS Cards serve only as constituent elements necessary for the OTN equipment to realize its complete functionality. In fact, each card has a specific slot in the main equipment wherein it has to be installed and the slots cannot be interchanged. Each card is designed to contribute a specific task within the broader signal transmission and switching architecture and these cards are not capable of any independent role analogous to a finished apparatus. This would be clear from the following facts:

i. Integrated Role within the OTN: Like in the decision of the Tribunal in M/s Vodafone Idea Limited vs Principal Commissioner of Customs (Import), New Delhi⁶, where the “router line cards” only function when slotted into the main router chassis, the cards and modules imported by the appellant are not stand-alone products. They are manufactured and programmed to be housed within the OTN chassis, drawing upon shared hardware resources, backplanes, and proprietary supervisory control.

ii. Functional Interdependence: The functionality of cards and modules materializes only when they are interconnected with other system components such as power supplies, system controllers, and interface units, clearly marking them “parts” for the purposes Customs Tariff classification.

II. Incapable of Independent Operation

10. The cards and modules imported by the appellant are engineered in such a way that in their imported state it is impossible for them to perform communication, transmission, or other telecom functions in isolation. This has been explained in the following manner:

i. Lack of Autonomy: Unlike market interface equipment such as Network Interface Cards (NICs), which are specified in the Explanatory Notes as being able to operate with diverse external devices, the cards and modules imported by the appellant lack the capability to function as independent units. Each draws power and core logic from the OTN chassis, and cannot initiate, receive, or process signals by itself.

ii. Dependence on Chassis and Software: The hardware of each card and module is inert without the embedded firmware and network management software of the OTN equipment. For instance, a service interface card cannot perform switching or signal modulation unless the master controller of the system provides requisite timing, configuration, and routing information.

iii. Physical Compatibility: These cards use proprietary connectors and are designed to slot only into the designated chassis, preventing their use in any generic telecom application or device. This is analogous to the “proprietary line cards” in Vodafone-I, which the Tribunal found unequivocally to be “parts” and not complete apparatus in themselves.

11. The appellant has provided a table showing the goods as detailed in the show cause notice, the relevant details provided in the show cause notice, the factual position and the compliance of the twin tests in the following manner:

CiTRANS 650 – Classified by appellant under CTI 8517 70 10 and CTI 8517 70 90

ROUTERS – – Classified by appellant under CTI 8517 69 30

12. Shri Arjun Raghvendra M., learned counsel for the appellant assisted by Shri Aditya Dhull, Shri Jayant Kumar, Shri Aditya Sarin and Ms. Manjunath made the following submissions:

(i) The imported cards and modules are correctly classifiable as parts under CTI 8517 70 10 and CTI 8517 70 90 respectively. In support of this contention, learned counsel placed reliance upon the following decision of the Tribunal:

a. Vodafone Idea Limited Principal Commissioner of Customs, ACC (Import), New Delhi⁷;

b. Vodafone-I;

c. Ciena Communications India Pvt. Ltd. vs Principal Commissioner of Customs (Import)⁸; and

d. Commissioner of Customs, Mumbai (AIR Cargo Import) Reliance Jio Infocomm Ltd.⁹

(ii) The routers were correctly classified by the appellant under CTI 8517 69 30 during the period 2016-19;

(iii) The extended period of limitation under section 28(4) of the Customs Act, 1962¹⁰ could not have been invoked in the facts and circumstances of the case; and

(iv) The goods could not have been confiscated nor redemption fine could have been imposed nor could penalty have been imposed under sections 112(a) and 114A of the Customs Act.

13. Shri Mihir Ranjan, learned special counsel assisted by Shri Manish Kumar Shukla, learned authorised representative appearing for the department supported the impugned order and made the following submissions :

i. The Principal Commissioner for good and sufficient reasons held that cards and modules are not parts of the OTN system. The classification of the goods is not based on whether the OTN machine would function without these cards, but whether the cards themselves are classifiable under a specific heading by their function;

ii. All network interface cards including optical ones and other line/ tributary interface units performing transmission/ reception/ conversion fall within the ambit of Customs Tariff Heading¹¹8517 62;

iii. The routers are also classifiable under CTH 8517 62;

iv. The extended period of limitation was correctly invoked in the facts and circumstances of the case; and

v. The goods were liable to confiscation and penalties have been correctly imposed.

14. The submissions advanced by the learned counsel appearing for the appellant and the learned special counsel appearing for the department have been considered.

15. To appreciate the contentions, it would be appropriate to refer to the relevant Tariff entries and they are :

16. The contention of the appellant with regard to the cards and modules is that they are essential parts of OTN systems and these cards and modules can function only when they are installed in the specified slots of the OTN equipment and cannot function independently by themselves.

17. It would be seen from Hardware Description Manual, which was relied upon by the department in the show cause notice, that the OTN equipment (FONST 5000 – U10 model) has different sub racks (FONST sub rack and COPT sub rack in this case). Each of these sub racks has a “card area” with slots for different cards and each slot is designed for a particular kind of card and such positioning is not interchangeable. The cards and modules imported by the appellant are required to be inserted into their designated slots for the OTN equipment to achieve any functional capability.

18. The Supreme Court in Commissioner of Customs, Bangalore vs I. System (India) P. Ltd.¹²held that in cases involving classification dispute of parts as against equipment one has to look at the main equipment holistically and classify the products as parts if they do not have a definite identity and function independent of the main equipment.

19. In Ciena Communications India, the Tribunal held that Hybrid/Matrix Cards and Small Form Factor Pluggable for the OTN equipment are correctly classifiable under CTH 8517 70. The Tribunal also noted that the goods do not perform their function independently, without being fitted in the chassis of the main equipment. It also needs to be noted that while making reference to Section Note 2(b) to Section XVI, the Tribunal held that the goods are classifiable as ‘parts’. The Tribunal also relied upon the decision of the Tribunal in Reliance Jio Infocomm that was decided on 22.06.2022. Civil Appeal No’s. 586-598 of 2023 filed by the department to assail the order of the Tribunal was dismissed by the Supreme Court on 30.01.2023. It also needs to be noted that the Tribunal held, in view of the aforesaid decision of the Supreme Court in Reliance Jio Infocomm, that goods of similar nature like Amplifier Cards, Transponder Cards, Muxponder Cards and Optical Add-Drop Multiplexer Cards used in Dense Wavelength Division Multiplexing (DWDM) machines would be classifiable as parts of DWDM equipment under CTI 8517 70 10. The Division Bench observed that the said cards cannot function without being incorporated in DWDM equipment and accordingly, such cards cannot be considered as independent apparatus.

20. A Division Bench of this Tribunal in Reliance Jio Infocomm, also held in a matter where various cards were imported and such imported cards go into specific slots of the main Dense Wavelength Division Multiplexing Equipment, that since the cards have to be loaded into specific slots of the main equipment for their proper functioning, they would classify as “parts” of the equipment under CTI 8517 70 10 and the classification of the department under CTI 8517 62 90 was set aside.

21. In Commissioner Reliance Jio Infocomm Ltd.¹³the Tribunal had held that Small Factor Pluggable (SFP) Modules are classifiable under CTI 8517 70 90 and not under CTI 8517 62 90 as held by the customs department.

22. In the decision of the Tribunal in Vodafone-I, it was emphasised that where the cards derive their operational capability exclusively from integration with the main machine, they would be classified as ‘parts’.

23. he similarity in facts and classification disputes rendered in Vodafone is directly applicable to the present controversy as can be seen from the chart below:

24. For goods to be classified as “apparatus” under CTI 8517 62 90, they must be complete machines capable of independent operation for reception, conversion, transmission, or regeneration of voice, images, or other data. This is not so in the present case.

25. The contention of the learned special counsel appearing for the department that the products are network interface cards and, therefore, will fall under CTH 8517 62 was considered and rejected by the Tribunal in Vodafone-I.

26. The routers are classified under CTI 8517 69 30 during the period from 2016 to 2019. It is with effect from 01.01.2020 that this entry was omitted by Finance Act, 2019. The classification adopted by the appellant, therefore, for the period from 2016 to 2019 is correct. The Principal Commissioner, therefore, committed an error in holding that routers based on optical network are included in CTI 8517 62 90.

27. It would, therefore, not be necessary to examine the contention raised by the learned counsel for the appellant that the extended period of limitation could not have been invoked in the facts and circumstances of the case.

28. Once the classification of the appellant has been accepted, the issue of imposing any penalty or fine does not arise.

29. Thus, for all the reasons stated above, the impugned order dated September 27, 2023 passed by the Principal Commissioner cannot be sustained and is set aside. The appeal is, accordingly, allowed.

(Order Pronounced on 29.09.2025)

Notes:

¹ the appellant

² CTI

³ the Tariff Act

⁴ OTN

⁵ PCB

⁶ (2025) 27 Centax 100 (Tri.Del) [20.09.2022] – ‘Vodafone I’

⁷ (2025) 28 Centax 387 (Tri.-Del) [01.07.2024] -‘Vodafone II’

⁸ Customs Appeal No. 86992 of 2021 decided on 18.12.2023

⁹ Customs Appeal No. 88479 of 2018 decided on 22.06.2022

¹⁰ the Customs Act

¹¹ CTH

¹² 2010 (256) ELT 173 (SC)

¹³ (2025) 29 Centax 337 (Tri. – Mum.)