Case Law Details

Case Name : In re Flextronics Technology India Private Limited (CAAR Mumbai)
Appeal Number : Advance Ruling No. CAAR/Mum/ARC/32/2021
Date of Judgement/Order : 12/08/2021
Related Assessment Year :

In re Flextronics Technology India Private Limited (CAAR Mumbai)

Classification of import components required for assembly of flowmeter “Sensus iPERL smart meter

The applicant had informed vide email dated 05.08.2021 that they may import excess components over and above required for assembly of “iPERL”. For classification of such parts and accessories relevant Chapter and Section notes are required to be referred. General Explanatory Note 1 (f) to Chapter 90 excludes parts of general use, as defined in Note 2 to Section XV, of base metal (Section XV) or similar goods of plastics (Chapter 39). Further General Explanatory Note 2 of Chapter 90 states that `Subject to Note 1 above, parts and accessories for machines, apparatus, instruments or articles of this Chapter are to be classified according to the following rules : (a) Parts and accessories which are goods included in any of the headings of this Chapter or of Chapter 84, 85 or 91 (other than heading 84.87, 85.48 or 90.33) are in all cases to be classified in their respective headings; (b) Other parts and accessories, if suitable for use solely or principally with a particular kind of machine, instrument or apparatus, or with a number of machines, instrument or apparatus of the same heading (including a machine, instrument or apparatus of heading 90.10, 90.13 or 90.31) are to be classified with the machines, instruments or apparatus of that kind; (c) All other parts and accessories are to be classified in heading 90.33′. Therefore, subject to Chapter Note 1, parts or accessories identifiable as suitable for use solely or principally with the machines, appliances, instruments, or apparatus of Chapter 90 are classified with those machines, appliances, etc. However, this general rule does not apply to: (1) Parts or accessories which in themselves constitute articles falling in any particular heading of Chapter 90 or of Chapter 84, 85 or 91 (other than the residual heading 84.87, 85.48 or 90.33). For example, transformers, electro-magnets, capacitors, resistors, relays, lamps or valves, etc., remain classified in Chapter 85; the optical elements of heading 90.01 or 90.02 remain in the headings cited regardless of the instruments or apparatus to which they are to be fitted; (2) Parts or accessories suitable for use with several categories of machines, appliances, instruments or apparatus falling in different headings of this Chapter 90 are classified in heading 90.33, unless they are in themselves complete instruments specified in another heading as mentioned above. Therefore, subject to General Explanatory Notes 1 and 2 to Chapter 90, separately presented parts, and accessories of “iPERL” under heading 90.26 will remain classified under heading 90.26.

In view of my above mentioned discussions, I hold that the “Senses iPERL smart meter” merit classification under heading 90.26 and more specifically, under subheading 90261010 of the first schedule to the Customs Tariff Act, 1975.

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

M/s Flextronics Technology India Private Limited filed an application on 30.04.21 (received on 09.05.21), seeking an advance ruling for classification of components for the assembly of iPERL flowmeter.

2. The applicant intends to import components required for assembly of flowmeter

“Sensus iPERL smart meter”. These are solid-state smart meters to measure the rate of flow of water per unit time (litres/ hour), with integrated bi-directional communications capability. The data captured and communicated by a “Sensus iPERL smart meter” provides accurate information to identify and help manage network issues proactively and efficiently. The main function of the device is to measure the flow rate (quantity per unit of time) applying Faraday’s law of electromagnetic induction. The measuring sensor (iPERL) generates an electrically usable signal from the flow, which is read and processed.

The measuring principle of these flowmeters uses the separation of moving charges in a magnetic field (Hall effect). The electronic information gained from the flow rate measurement is also used to produce other additional data, such as backflow detection, empty pipe detection, alongside leakage and broken pipe alerts. Such alerts enable a water network utility company to monitor the flowrate across their network and use the data to help ascertain the cause of the flow to increase or decrease around the section of network.

3. The “iPERL” flowmeter works using the magnetic field generated. Magnetic flowmeters are based on Faraday’s law of induction. Faraday’s law describes the operating principle of the electromagnetic flowmeter; ‘If a conductor is moved at right angles through a magnetic field, the voltage induced in the conductor is proportional to the speed of the conductor.’ From the outside, a magnetic field oriented perpendicular to the direction of flow is applied by means of coils (for measurement by means of magnetic fields). An electrical signal is measured when ionized water flows through a magnetic field. The charge carriers, ions or charged particles present in the conductive liquid are deflected by the magnetic field; the positive charge carriers, for example, to the left, the negative ones to the right. A voltage is generated at the measuring electrodes arranged perpendicular to the magnetic field as a result of the charge separation, which is recorded by a measuring instrument (evaluation unit). The level of the measured voltage is proportional to the flow velocity of the charge carriers. Voltage is linearly proportional to speed and as water speed increases, voltage increases and the measure of volume increases. There is no mechanical measuring element inside the flow chamber. The “iPERL” also uses the flowrate measurement to produce a figure for the average volume of water that has flown through the meter. This calculation is made over very short intervals of time, approximately two times per second. Further, it utilises patented ‘Remanent’ magnetic field technology, that helps solve the power demands of traditional magnetic meter technology. Remanent field technology, in conjunction with magnetic metering technology, requires far less energy than traditional magnetic meters and pettnits much greater accuracy, even at intermittent or very low flows. The “iPERL” flowmeter is enabled with fixed wireless communication that enables meters to be read and even monitored and managed from a remote, central location. All measurements, including flow rate, calculated volume and flow rate dependent alerts are not simply displayed on an integrated LCD display, but are also included in an integrated radio communication data packet. This radio communication data packet can be used by an auxiliary device to help measure, monitor and manage the network more effectively. Based on above mentioned technical specifications and working principle, features of “iPERL” can be summarised as: low flow measurement, use of Remnant magnetic field technology, data at 15 second intervals, solid state meter with no moving parts, and collection and communication of data.

4. The applicant has proposed that they intend to import subject goods through the Air Cargo Complex, Chennai. The application was forwarded to the jurisdictional Principal Commissioner of Customs for comments on 21.05.2021. On non-receipt of any reply a reminder was sent on 22.06.2021. However, no reply has been received till date.

5. The application was listed for hearing on 03.08.2021. The applicant was represented by Shri. P. Shridharan, advocate and others. The applicant was asked whether all the components required for assembly of the flowmeter would be imported together. It was also requested to clarify whether any other components would be procured domestically and whether imported goods will undergo any further process. The applicant was asked whether components in excess of the requirement for assembly of the flowmeter would be imported. It was clarified by the applicant vide email dated 05.08.2021 that the applicant will import all the components required for assembly of a complete flowmeter for phase 1. From phase 2 onwards additional parts/components will be sourced from domestic market. The applicant has assured that the process involved in phase 1 is only of assembly and no imported component will undergo any further process. As such, excess components over and above required for assembly will not be imported. However, excess component may be imported to fulfill minimum order quantity/ standard packaging quantity and to handle any defects/ damages. It was also informed by the authorised representative that there is an US Customs cross ruling that has classified iPERL under heading 90.28. However, they stated that the cross ruling is not correct and appropriate heading for the impugned product is 90.26. The applicant has relied on the expert opinion of Prof. Schindler in regard to their assertion that the “iPERL” is a flowmeter. The applicant has also submitted the legal opinion provided by law firm the Baker & McKenzie dated 29.04.2019 on the classification of iPERL flowmeter under tariff entry 9026 1010.

6. I have considered all the materials placed before me for the subject product. I have gone through the submissions made by the applicant during personal hearing. In the absence of any comment from the jurisdictional Principal Commissioner/ Commissioner of Customs, on the impugned subject matter, I proceed to render an advance ruling within the statutory period of limitation as prescribed. The item for which advance ruling has been sought, their characteristics, functions etc. are already mentioned in the first three paragraphs of this ruling. In this case, I am confronted with two different possible headings for classification of the impugned components of the device/instrument, i.e.,

90.26 ‘INSTRUMENT OR APPARATUS FOR MEASURING OR CHECKING THE FLOW LEVEL, PRESSURE OR OTHER VARIABLE OF LIQUID OR GASES (FOR EXAMPLE FLOWMETERS, LEVEL GAUGES, MANOMETERS, HEAT METERS,) EXCLUDING INSTRUMENT AND APPARATUS OF HEADING 9014,9015, 9028 OR 9032’

or

90.28. Which is for ‘GAS, LIQUID OR. ELECTRICITY SUPPLY OR PRODUCTION METERS, INCLUDING CAIBRATING METERS THEREFOR. ‘

7. From the product catalogue, it appears that this flowmeter measures the mass flow of liquid. The flowmeter appears to be capable of measuring the value and the measured parameter(s) are displayed visually or provided as digital output. Hence, this instrument appears to match the description for goods covered under heading 90.26, as instrument and apparatus for measuring or checking the flow, level, pressure or other variable of liquid or gases. I find that the heading 90.26 specifically mentions flowmeter. The HSN Explanatory Notes for heading 90.26 states that, “This heading covers instruments and apparatus for measuring or checking the flow, level, pressure, kinetic energy or other process variables of liquids or gases. The instruments and apparatus of this heading may be fitted with recording, signalling or optical scale-reading devices or transmitters with an electrical, pneumatic, or hydraulic output. Measuring or checking apparatus generally incorporates an element sensitive to variations in the quantity to be measured (e.g., Bourdon tube, diaphragm, bellows, semiconductors) moving a needle or a pointer. In some devices the variations are converted into electrical signals.” The “iPERL” fits this description. It measures the flow of liquid. The measurement is made by using magnetic field. It is fitted with recording and signalling device with an electrical output. The different measurements of the “iPERL” are converted into electrical signals that are shown on a display incorporated in the “iPERL” and can be transmitted to an external display. These notes include apparatuses such as flowmeter which is an instrument that indicate the rate of flow (in volume or weight per unit of time) and are used for measurement of flow both through open channels (rivers, waterways, etc.) and through closed conduits (pipings, etc.). Further the notes specifically refer to flowmeters which operate by using magnetic fields, ultrasound, or heat. This heading, however, excludes apparatus which merely indicate the total amount of liquid delivered over a period, which are classified as supply meters in heading 90.28. From above discussions it appears that the subject goods, a) measure the flow of water using a magnetic field, b) fitted with recording, signalling or transmitters with an electrical output, and c) are not used to merely indicate the total amount of liquid delivered over a period. Applying the Rule l of the General Rules for Interpretation of the Import Tariff, “..for legal purposes, classification 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 …”, it appears that considering the nature of the device/instrument involved in this proceedings, heading 90.26 is a more appropriate classification. The applicant intends to import components required for assembly of “iPERL” flowmeter, which is an instrument that measures mass flow of liquid. Applying Rule 2(a) of the General Interpretation Rule of Interpretation of the Import Tariff, “any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as entered, the incomplete or unfinished article has the essential character of the complete or finished article. It shall also include a reference to that article complete or finished (or falling to be classified as complete or finished by virtue of this rule), entered unassembled or disassembled.” The second part of GRI 2 (a) provides that complete or finished articles presented unassembled or disassembled (which may occur for reasons related to the packing, handling, or transportation of the articles) are to be classified in the same heading as the assembled article. Therefore, I am convinced that the classification of components to be imported for assembly of “iPERL” will be classified under same heading as the “iPERL.”

8. The HSN Explanatory Notes for heading 90.28 states that,” These meters are generally fitted with a device driven at a speed proportional to the rate of fluid flow or to the electrical quantity being measured. They are often fitted in a bypass or shunt off the main or connected to measuring transfoimers, so that only part of the flow passes through them, but are calibrated so as to indicate the total quantity passing through the service pipes or through the main. The gas or liquid supply or production meters under this heading are used to measure in volumetric units the amount of fluid passing through a pipe. Flowmeters, which measure rate of flow are excluded (heading 90.26).” It could be seen that the type of devices covered under the category liquid supply or production meters are called Positive Displacement meters (PD) and purely mechanical devices, that are generally fitted with a device driven at a speed proportional to the rate of fluid flow or to the electrical quantity being measured. Further these devices invariably have fitted in them, a counter or counting mechanism to enable determination of the quantity of the fluid being measured. These counter mechanisms are operated by the moving mechanical devices e.g., a turbine, a piston, a diaphragm, etc. the mechanism for regulating the admission of fluid to be measured is generally based on slide valves. The transmission of the data is made by an endless screw, camshaft, gears or other system to a recorder or pointer or drum type indicator. The “iPERL” does not meet any of the above-mentioned properties of a basic 90.28 meters, which are designed only to measure in volumetric units the amount of fluid passing through a pipe with the aid of the mechanical devices and the counting mechanisms are not designed to measure the rate of flow. They are designed to merely indicate the total amount of liquid delivered over a period of time and are excluded from the heading 90.26. The “iPERL” flowmeters are designed to continuously measure the rate of flow of water, this instrument cannot be regarded as a ‘mere’ liquid supply or production meter or positive displacement meter. The quantity supplied over a period of item could be determined by the data generated by the “iPERL” flowmeter, but such consumption has to be computed separately on the basis of the data generated. The “iPERL” flowmeter is technically incapable of measuring the consumption on its own as is in the case of meters of the heading 90.28. Therefore, the “iPERL” by design, technology adopted and the function, is fundamentally different from a liquid supply or a production meter, and therefore, cannot be classified under the heading 90.28.

9. The applicant informed during personal hearing that there is an US Customs cross ruling that has classified “iPERL” under heading 90.28. The cross ruling was passed in respect of the review application filed for classification of the Sensus iPERL 100CF Household water meters on 03.04.2015. I have gone through the order passed. The review has emphasised on the principle of essential character of the product to classify “iPERL”, which appears to be the application of General Interpretation Rule 3(b). The heading 90.28 provides for “gas, liquid or electricity supply or production meters, including calibrating meters; parts and accessories thereof.” The supply meters of heading 90.28 include household supply meter. The Sensus iPERL consist of water meters used for household supply meters. Reliance has also been placed on the instructions issued by municipalities of Poway and Olivenhain in respect of usage of the said product. These instructions show that said product measures households’ water consumption per billing cycle and not water’s flow. For above mentioned reasons the authority classified “iPERL” under heading 90.28.

10. The principle of essential character needs to be examined, which was the basis of US Customs cross ruling. The impugned product is intended for use in water supply. However, iPERL is not merely used to measure the volume of the liquid consumed. As discussed hereinbefore, the device measures the rate of flow of liquid, based on which eventually volume of the liquid consumed can be calculated. The application of General Interpretation Rules (1-4) should always be in sequential order. As per Rule 1, classification shall be determined according to the terms of the heading and any relative section or chapter notes. In 0. K. Play(India) Ltd vs CCE Delhi III [2005(180) E.L.T. 300(S.C.)1, the Hon’ble Supreme Court made following observations: (a) There cannot be a static parameter for correct classification, (b) HSN along with the explanatory notes provide a safe guide for interpretation of an entry, (c) Functional utility, design, shape and predominant usage have also got to be taken into account while determining the classification of an item, (d) Afore stated aids and assistance are more important than the names used in the trade or common parlance in the matter of correct classification. Further, the Hon’ble Supreme Court has observed in Westinghouse Saxby Farmer Ltd. Vs Comr. of Central Excise, Calcutta that Rule 3 of GIR deals with the cases where goods are classifiable under two or more sub-headings. But Rule 3 begins with reference to Rule 2(b). In this case, need for application of Rule 3 does not arise as the Sensus iPERL can be classified by applying Rule 1 and Rule 2(a). The features, characteristics of product, relevant section, and chapter notes, along with application of Rule 1 and 2(a) are discussed in paragraph 7. Therefore, I am convinced that appropriate classification of “iPERL” is under heading 90.26 instead of under heading 90.28, as held by the United States Customs and Border Protection Authorities.

11. The applicant had informed vide email dated 05.08.2021 that they may import excess components over and above required for assembly of “iPERL”. For classification of such parts and accessories relevant Chapter and Section notes are required to be referred. General Explanatory Note 1 (f) to Chapter 90 excludes parts of general use, as defined in Note 2 to Section XV, of base metal (Section XV) or similar goods of plastics (Chapter 39). Further General Explanatory Note 2 of Chapter 90 states that `Subject to Note 1 above, parts and accessories for machines, apparatus, instruments or articles of this Chapter are to be classified according to the following rules : (a) Parts and accessories which are goods included in any of the headings of this Chapter or of Chapter 84, 85 or 91 (other than heading 84.87, 85.48 or 90.33) are in all cases to be classified in their respective headings; (b) Other parts and accessories, if suitable for use solely or principally with a particular kind of machine, instrument or apparatus, or with a number of machines, instrument or apparatus of the same heading (including a machine, instrument or apparatus of heading 90.10, 90.13 or 90.31) are to be classified with the machines, instruments or apparatus of that kind; (c) All other parts and accessories are to be classified in heading 90.33′. Therefore, subject to Chapter Note 1, parts or accessories identifiable as suitable for use solely or principally with the machines, appliances, instruments, or apparatus of Chapter 90 are classified with those machines, appliances, etc. However, this general rule does not apply to: (1) Parts or accessories which in themselves constitute articles falling in any particular heading of Chapter 90 or of Chapter 84, 85 or 91 (other than the residual heading 84.87, 85.48 or 90.33). For example, transformers, electro-magnets, capacitors, resistors, relays, lamps or valves, etc., remain classified in Chapter 85; the optical elements of heading 90.01 or 90.02 remain in the headings cited regardless of the instruments or apparatus to which they are to be fitted; (2) Parts or accessories suitable for use with several categories of machines, appliances, instruments or apparatus falling in different headings of this Chapter 90 are classified in heading 90.33, unless they are in themselves complete instruments specified in another heading as mentioned above. Therefore, subject to General Explanatory Notes 1 and 2 to Chapter 90, separately presented parts, and accessories of “iPERL” under heading 90.26 will remain classified under heading 90.26.

In view of my above mentioned discussions, I hold that the “Senses iPERL smart meter” merit classification under heading 90.26 and more specifically, under subheading 90261010 of the first schedule to the Customs Tariff Act, 1975.

(M. R. Mohanty)
Customs Authority for Advance Rulings,
Mumbai

F.No. CAAR/CUS/APPL/15/2021 -0/o Commr-CAAR-MUMBAI

Dated: 12.08.2021

This copy is certified to be a true copy of the ruling and is sent to: –

1. M/s. Flextronics Technology India Private Ltd., Phase-II, SIPCOT Industrial Park DTA Sandavellur C Village, Sriperumbudur, Kanchipuram, Tamilnadu-602 106

Email: [email protected], [email protected] 

2. The Principal Commissioner of Customs (Chennai VII), (Air Cargo Commissionerate), New Custom House, Air Cargo Complex, Meenambakkam, Chennai — 600016

Email: [email protected]

3. The Customs Authority for Advance Rulings, 5th Floor, NDMC Building, Yashwant Place, Satya Marg, Chanakyapuri, New Delhi – 110021.

Email: [email protected]

4. The Principal Chief Commissioner of Customs, Mumbai Customs Zone-1, Ballard Estate, Mumbai- 400001.

Email: ccu-cusmum 1(&nic.in

5. The Chief Commissioner (AR), Customs Excise & Service Tax Appellate Tribunal (CESTAT), West Block-2, Wing-2, R.K. Puram, New Delhi – 110066.

Email: cdrcestat123(&gmail.com, ccar.cestat-delhi wgov.in

6. The Member (L & J), 158-B, 2ndfloor, Central Boards of Indirect Taxes & Customs, North Block, New Delhi-110001

Email: [email protected], [email protected], [email protected]

7. Guard file.

(Ashok Kumar)
Secretary,
Customs Authority for Advance Rulings, Mumbai

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