Sponsored
    Follow Us:

Case Law Details

Case Name : In re Sharp Business Systems (India) Pvt. Ltd. (CAAR Delhi)
Appeal Number : Advance Ruling No. CAAR/Del/Sharp/05/2022
Date of Judgement/Order : 19/04/2022
Related Assessment Year :
Courts : CAAR
Become a Premium member to Download. If you are already a Premium member, Login here to access.
Sponsored

In re Sharp Business Systems (India) Pvt. Ltd. (CAAR Delhi)

M/s Sharp Business Systems (India) Pvt. Ltd., First Floor, Plot No. 51, Okhla Industrial Area, Phase-3, Near Modi Mill, New Delhi-110020, a private limited company having IEC number 0500002941 and PAN AAECS2980A (M/s Sharp, in short), has filed an application dated 17.07.2019 seeking advance ruling under section 28-H of the Customs Act, 1962 before the Authority for Advance Rulings (Central Excise, Customs and Service Tax), New Delhi (AAR, in short). The said application was received in the O/o AAR on 25.07.2019.

2. The application has been filed for determination of classification of Sharp Professional LCD monitors (of specified models and size), which they intend to import and applicability of serial number 17 of Notification No. 024/2005-Customs dated 01.03.2005, as amended on import of the these goods. In the application for advance ruling filed by the applicant, it is also stated inter-alia that the subject goods support landscape and portrait view mode, include SD card slot, D-sub input, DVI-D input/output, HDMI input and USB port; monitors can read and reproduce video from USB memory device and SD card; the monitor is not cathode-ray monitor and do not contain television tuner or any television reception capabilities; these are not only capable of connecting to and designed for use with an Automatic Data Processing (ADP) machine of heading 8471 but also used solely or principally in ADP machine of heading 8471. In light of the submissions, the applicant has raised following questions for advance ruling:

(i) Whether prospective import of Sharp professional LCD monitors (of specified model and size) are classifiable under sub-heading 8528 5200 or 8528 5900 of the First Schedule to the Customs Tariff Act?

(ii) Whether serial number 17 of Notification No. 24/2005-Customs dated 01.03.2005, as amended is applicable on import of Sharp Professional LCD monitor and whether import of subject goods is exempt from levy of the whole of duty of Customs leviable thereon under the First Schedule of the Customs Tariff Act?

3. The said application was being processed in terms of section 28-I ibid by the O/o AAR. In the meanwhile, consequent to the amendments to Chapter V-B of the Customs Act, 1962 relating to Advance Rulings and upon the appointment of Customs Authority for Advance Rulings (CAAR, in short) in New Delhi and Mumbai with effect from 04.01.2021, the said application was transferred to CAAR, New Delhi in terms of section 28-F (3) ibid and regulation 31 of CAAR Regulations, 2021.

4. In handling the legacy cases transferred from the erstwhile AAR, New Delhi, this Authority had held that in view of the time limit of three months for pronouncing its advance rulings from the date of receipt of the application prescribed under section 28-I (6) ibid, the aforesaid application received in the 0/u AAR, New Delhi on 25.07.2019 had become time barred For this Authority.

5. However, on constructive interpretation of the powers vested with this Authority, vide letter dated 18.06.2021, the applicant was advised to intimate whether they continued to he interested in obtaining ruling of this Authority, and if so either resubmit their application in the Form CAAR-1 appended to Customs Authority 101′ Advance Rulings Regulations, 2021, or simply affirm that the declarations made in the earlier application remain valid and unchanged, at the earliest to this Authority. It was also informed that the date of receipt of such resubmitted application or affirmation, as the case may be, shall be taken as date of receipt of their application under regulation 8(4); and no separate payment of the prescribed fee under regulation 6 (6) of CAAR Regulations, 2021 is required to be made.

6. In respect of the present legacy application, no response was initially received from the applicant despite attempts by this Authority. Thereafter, following the principles of natural justice, the applicant was given an opportunity to appear for personal hearing before the Authority, including by way of issue of a Notice letter dated 28.09.2021 informing the applicant date and time for the personal hearing; hosting of Notice dated 28.09.2021 on the official website of the department, www.cbic.gov.in and reminder dated 05.10.2021. Thereafter, the applicant’s representative vide their letter dated 08.10.2021 sought adjournment of personal hearing to 12.10.2021, which was accepted.

7. Shri Rajnish Kumar, Chartered Accountant and Shri Chandrakesh Dwivedi attended the personal hearing on 12.10.2021. Shri Rajnish Kumar informed about the continued interest of the applicant in obtaining ruling on question of classification and eligibility for concessional rate of duty for their product under the relevant notification. He informed that they propose to import the said Automatic Data Processing (ADP) monitor after obtaining clarification regarding Customs duty implications for the same. He explained that owing to changes in the HS nomenclature, Customs Import Tariff had also undergone some amendments; as per HS 2017 edition, under Other monitors: sub-heading 8528 5200 reads as — capable of directly connecting to and designed for use with an automatic data processing machine of heading 8471; whereas in HS 2012 edition, under Other monitors: sub-heading 8528 5100 read as — Of a kind solely or principally used in automatic data processing system of heading 8471 and 8528 5900 as — Other. He also cited reference to an advance ruling in the U.S.A. holding that the goods are classifiable under sub-heading 8528 5200. He requested for ruling on applicability of exemption from duty vide Notification No. 024/2005-Cus. As regards, applicability of notification, Shri Rajnish stated that the language of the notification has not undergone change even after changes have been introduced in the Customs Import Tariff. In this regard, the Authority asked him as to whether the product which they intend to import is of a kind solely or principally used in an pi’ system of heading 8471? While stating in the affirmative, Shri Rajnish sought a few days’ time to furnish written reply on behalf of the applicant, which was allowed by the Authority.

8. The applicant vide their letter dated 16.12.2021 submitted inter-alia that they are regular importer of IDP LCD Monitors and other products and have sought ruling on classification and exemption on prospective import of Sharp professional LCD Monitor of various size and model of PN series having characteristics, features, descriptions etc. as enclosed in the catalogue (catalogues of ten models PN-HW861, PN-HW551, PN-HW751, PN-HW501, PN-HW651, PN-HW431, PN-R903A, PN 86HC1, PN75HC I and PN7OHCIE have been annexed with letter dated 16.12.2021). It has been stated that their products of import (viz. the said ten model) are other than Cathode-Ray Tube (CRT) Monitor not incorporating television reception apparatus; and hence post amendment in 2017, the classification of the product should be under either sub-heading 8528 5200 or 8528 5900 as the products are not only capable of directly connecting to and designed for use with an Automatic Data Processing machine of heading 8471 but principally and mainly used with automatic data processing machine; their products are having feature like VGA, DVI, USB ports, high resolution, receive RGB signals etc. which make them capable of directly connecting to ADP machine and ensure that they are designed for use with an ADP machine of 8471; therefore, these goods are classifiable under sub-heading 8528 5200; their monitors have brightness of 400 cd/m2 or less and such monitors should be classified as ADP monitor in line with Circular No. 33/2007-Customs dated 10.09.2007 of the Central Board of Indirect Taxes and Customs; they also placed reliance on Ruling No. CAAR/Mum/ARC/63/2021 dated 28.10.2021 Re — M/s Audio Distribution House Pvt. Ltd. of the Customs Authority for Advance Rulings, Mumbai. Lastly, it is requested for ruling to classify the prospective import of LCD monitors having brightness of 400 cd/m2 or less under sub-heading 85285200 and allow exemption under Serial number 17 of Notification No. 024/2005-Cus.

9.1 In the application dated 17.07.2019, the applicant had mentioned “Commissioner of Customs, Chennai Customs” as the concerned Commissioner of Customs. It was noted that the jurisdictional Commissioner for imports through Chennai port and Air Cargo complex are Commissioner of Customs Chennai- II and Commissioner of Customs Chennai — VII respectively. Therefore, upon confirmation by the applicant that he wishes to have a ruling applicable to both Chennai seaport and ACC, comments of both Commissioner of Customs Chennai- II and Chennai- VII have been obtained.

 9.2 The concerned Commissioner of Customs, Chennai —II vide letter dated 28.01.2022 has mentioned that there are multiple models mentioned in Annexure-IV of the application for advance ruling under the category of Monitors, whereas model-wise technical specifications have not been mentioned; however, details have been obtained from the official website (http://global.sharp) of the applicant in respect of a few models and scrutinized; models listed in Annexure IV are with different specifications and provisions and cannot be considered under single application;

accordingly, classification has been suggested in respect of a few models in view of technical specifications, built-in facilities and additional features. The concerned Commissioner of Customs has suggested classification under sub-heading 8528 5200, 8471 5000 and 8471 4190 in respect of model nos. PN-80TH5, PN-HB851 and PN-85TH1 respectively. It has also been commented that the model numbers PN-80TH5, PN-HB851 and PN-85TH1 have been identified as monitors without processor/CPU, monitors with processor/ CPU and monitors with processor/ CPU & with touch screen accessibility respectively. As regards applicability of notification, it is commented that Basic Customs Duty exemption vide Serial Number 17 of Notification No. 24/2005 is applicable to model No. PN-80TH5 only.

9.3 The other concerned Principal Commissioner of Customs, Chennai-VII, vide letter dated 10.02.2022, has stated inter-alia that as per catalogue uploaded by the applicant, these monitors are not only capable to be connecting to and are designed for use with ADP machine of heading 8471 but also used solely or principally in ADP machine of heading 8471 and the LCD monitors have an integrated RGB analogue working with NTSC (3.58 Mhz, 4.43 Mhz SECAM, PAL, D-MAC); various models of LCD monitors in the series of `PN-HW…..’ which comes with 4K resolution have a built-in USB media player, which can be used even without a PC for display of media content like photos, videos, music etc.; the usage of the monitor is also very wide, where it can be used for a setting in retail, hospitality or any business setting, for e.g. it can be used in public places, stores, offices and other commercial locations; it is noticed that out of the several models initially claimed, the importers want to import only about 10 models; the catalogues for PN HW 861, 551, 751, 501, 651, 431 states, they are between 46 to 83 inches, of high resolution and have a built in USB media player; it can be programmed to play photos and videos automatically; they are therefore capable of use without any connected PC or even a set top box for display of high resolution photos and videos; they are capable for use for signage for hospitals, commercial and retail settings like stores, institutions etc. as electronic posters or video output devices; therefore they can be used for large display purposes and not meant to be a simple output device for computer in these applications; it is meant for 16 hour continuous applications in rugged environment; in addition, the PN R903A model is capable of playing simultaneous AV and PC modes on screen in a picture in picture mode and upto 25 of these devices can be connected in daisy chain mode of uniform display and are ruggedized for continuous 24 hour applications; as regards PN 85HC1, PN75HC I and PN7OHC1E models, these are capable of use without a PC as they have a touch screen and can be used for classroom display like a White Board and where the program can be launched, interrupted and used as a writing board and even without a PC, overlay annotations to photos, documents and videos; it has open pluggable spec controller modes designed specifically to run without connecting to a PC; they also have a facility to plug in external storage via SD card mode; they can be used as an output device even for a mobile phone wireless and has a built-in media player for slide shows and videos without a PC; since these monitor can also be used solely or principally in ADP machine of heading 8471 and considering all the-paints these LCD monitors are rightly classifiable under sub-heading 85285900. As regards the applicability of serial number 17 of Notification No. 24/2005-Customs dated 01.03.2005, it is commented that the item in question i.e. monitor is not eligible for claim of exemption vide Custom Notification No 24/2005 ( serial number 17) as this benefit is eligible only for CTH 852842, 852852 and 852862.

9.4 The applicant vide letter dated 07.03.2022 acknowledged receipt of comments of the concerned Principal Commissioner/ Commissioner of Customs, Chennai. In reply, the applicant states that the concerned Commissioner of Customs (Imports), Chennai has suggested classification of monitors with processor/CPU (Eg:PN-80THS) under 85285200, monitor with processor/CPU (Eg.: PN-HB851) in 84715000 and monitors with processor/CPU & touch screen accessibility (Eg: PN-85TH1) under 84714190. As regards the comments of the concerned principal Commissioner (Chennai-VII) that, ‘as per the catalogue uploaded by the applicant, these monitors are not only capable to be connected to and are designed for use with ADP machine of heading 8471 but also used solely or principally in ADP machine of heading 8471’, the applicant states that it is sufficient and appropriate evidence that their product is ADP Monitor and hence classifiable under sub-heading 85285200 and if the classification is allowed under sub-heading 85285200 reply regarding eligibility for exemption benefit would be in affirmative. Further, it is stated that their products having port like VGA, DVI, USB are provided to receive signals from CPU or storage devices and receive RGB signals and marked by high resolution to enable clear and sharp and characterized by low emission standards (brightness of 400 cd/m2 or less) which made it capable of directly connecting to ADP machine and ensure that it is designed for use with an automatic data processing machine of heading 8471, hence classification shall be allowed under tariff 85285200. The applicant has also reiterated the submissions made earlier vide their application for advance ruling.

10. I find that the application is admissible in terms of the provisions of section 28-I and CAAR Regulations, 2021 and, therefore, allow the same.

Sharp monitors are correctly classifiable under heading 8528

11. I have carefully gone through the application dated 17.07.2019, additional submissions made vide their letters dated 16.12.2021 and 07.03.2022, contentions made therein, including reliance placed on US Customs and Border Protection Ruling dated 09.03.2017, CBIC Circular No. 33/2007-Cus. dated 10.09.2007, and CAAR Mumbai Ruling No. CAAR/Mum/ARC/63/2021 dated 28.10.2021, comments of the concerned Principal Commissioner/Commissioner of Customs and have also heard the representatives of the applicant during the personal hearing held on 12.10.2021.

11.1 Before proceeding further with examination of the questions posed for advance ruling on merit, I note that as per original application for advance ruling, ruling has been sought on classification of 59 models of Sharp Professional LCD Monitor, model and size as per Annexure-IV. Thereafter, a question was raised regarding the absence of details in respect of these 59 models by the concerned Principal/Commissioner of Customs, Chennai. In this regard, I find that the applicant has furnished copies of catalogue of LCD Monitor [PN-HW861, PN-HW751, PN-HW651, PN-HW551, PN-HW501, PN-HW431 (6 out of 59 models mentioned in Annexure IV) (having Max. Resolution 3840×2160 pixels)], LCD Monitor [PN-R903A (1 out of 59 models mentioned in Annexure IV) (having Max. Resolution 1920×1080 pixels)] and Touchscreen LCD Monitor [PN-86HC1, PN-75HC1, PN-70HC1E (3 out of 59 models mentioned in Annexure IV) (having Max. Resolution 3840×2160 pixels)]. Further, in the light of the submissions of applicant vide letter dated 16.12.2021 and 07.03.2022, I clarify that this ruling covers the 10 models of Sharp LCD Monitors viz. PN-HW861, PN-HW751, PN-1-1W651, PN-HW551, PN-HW501, PN-HW431, PN-R903A, PN-86HC1, PN-75HC1, PN-70HC1E, which are stated to have port like VGA, DVI, USB to receive signals from CPU or storage devices and receive RCB signals and marked by high resolution to enable clear and sharp and characterized by low emission standards (Brightness of 400 cd/m2 or less).

11.2 Further, as mentioned earlier, in terms of section 28J (1) (c) this advance ruling shall be binding on the Principal Commissioner of Customs, Chennai —VII and Commissioner of Customs, Chennai — II and the Customs authorities subordinate to them, in respect of the applicant.

12. The first question posed for advance ruling relates to classification of ten different Sharp Professional LCD Monitors which have port like VGA, DVI, USB to receive signals from CPU or storage devices and receive RCB signals, marked by high resolution to enable clear and sharp and characterized by low emission standards (Brightness of 400 cd/m2 or less).

13. On the issue of classification, I note that the applicant has submitted a copy of rulings dated 09.03.2017 issued by the US Customs and Border Protection regarding classification of Sharp Professional LCD Monitors which support landscape and portrait viewing modes, including SD card slot, D-sub input, DVI-D input/output, HDMI input and USB port, and also contain lOW speakers for audio playback, do not contain television tuner or any television reception capability, and are capable to directly connecting to and are designed for use with an ADP machine of heading 8471. The US authorities have held the LCD monitors with aforesaid features, bearing specific model numbers (which are different from those covered by this ruling) under heading 8528.52.

14. I also note that Customs Authority for Advance Rulings, Mumbai in the Ruling No. CAAR/Mum/ARC/63/2021 dated 28.10.2021 regarding the application filed by M/s Audio Distribution House Pvt. Ltd., Mumbai ruled that “data projectors”, which supports connections such as HDMI, VGA-in/out, composite audio-in/out, USB-A, RS232, which are designed primarily to be used with ADP system has held that the goods are classifiable under sub-heading 852862. I find that the goods covered by the said advance rulings cover projectors, which are designed primarily to be used with ADP system, whereas the application before me relate to monitors, which are capable of directly connecting to ADP machine and are designed for use with ADP machine of heading 8471.

15. The applicant has also drawn attention to CBIC Circular No. 33/2007-Cus. dated 10.09.2007 regarding Classification of Digital LCD/Flat Panel Monitor —admissibility of notification benefits, wherein inter alia, it has been advised that consequent to 1-1S 2007 changes, all types of monitors and projectors which are solely or principally used with an ADP machine is covered under sub-heading 852841.

16. Therefore, 1 find that sub-headings 8528 5200, 8471 5000 and 8471 4190 need to be considered carefully.

16.1 While examining various heading/sub-heading for classification of the goods in question, it is observed that heading 8471 covers inter alia automatic data processing machines and units thereof 847141 covers other automatic data processing machines comprising in the same housing at least a central processing unit and an input and output unit, whether or not combined; and sub-heading 8471 4190 is a residual entry “other”, with 8471 4110 covering microcomputer and 8471 4120 covering large/mainframe computers. Further, sub-heading 8471 5000 covers processing units other than those of sub-heading 847141 and 847149.

16.2 Heading 8528 covers Monitors and projectors, not incorporating television reception apparatus; reception apparatus for television, whether or not incorporating radio-broadcast receivers or sound or video recording or reproducing apparatus. This heading covers, inter alia, monitors sub-categorized as cathode-ray tube monitors and other monitors. Sub-heading 8528 52 00 covers other monitors capable of directly connecting to and designed for use with an automatic data processing machine of heading 8471.

16.3 For determining the classification of goods under Chapter 84, it is pertinent to refer to Chapter Notes of Chapter 84 relevant for classification of the goods in question. I find Chapter Note 6(A), as amended to be effective from 01.01.2022, to be relevant for determining whether the goods, viz. Sharp Professional LCD Monitor of ten specified models (LCD monitor, in short) are classifiable under heading 8471 or not. I find that the LCD monitor, prima facie, do not answer to the expression “automatic data processing machines” us mentioned in Chapter Note 6 (A) and (B).

16.4 However, Chapter Note 6(C) provides that a unit is to be regarded as being part of an automatic data processing system if it meets all the following conditions: (i) it is of a kind solely or principally used in an automatic data processing machine; (ii) it is connectable to the central processing unit either directly or through one or more of the units; and (iii) it is able to accept or deliver data in a form (codes or signals) which can he used by the system. It also mentions that separately presented units of an automatic data processing machine are to be classified under heading 8471. Therefore, prima facie, it appears that it could be possible to classify the said monitors under heading 8471,

16.5 However, on a more careful reading, it is seen that Chapter Note 6(C) is subject to Chapter Note 6(D) and (E), with the former prescribing that “heading 8471 does not cover the following when presented separately, even if they meet all the conditions set forth in paragraph (C)”. Sub-clause (v) provides for the exclusion of “monitors and projectors, not incorporating television reception apparatus.” Moreover, Note 6(E) also provides that machines incorporating or working in conjunction with an automatic data processing machine and performing a specific function are to be classified in headings appropriate to their respective functions or failing that in residual heading.

16.6 Therefore, on complete reading of the guidance provided by Chapter Note 6, it is evident to me that the goods in question, which are monitors, not incorporating television reception apparatus, and are capable of directly connecting to and designed for use with an automatic data processing machine of heading 8471 do not merit classification under heading 8471. Further, in terms of Note 6(E) of Chapter 84, such goods merit classification under the heading appropriate to their respective functions, which in the present case is display of images and videos.

16.7 I find that the appropriate heading for monitors, not incorporating television reception apparatus is 8528. Further, at the sub-heading level, non-cathode ray monitors are classifiable under other monitors, and those that are capable of directly connecting to and designed for use with an automatic data processing machine of heading 84.71 are classifiable under sub-heading 8528 52 00.

17. In view of the above, I conclude that all the 10 model of LCD Monitors or Touchscreen CD Monitors, viz. PN-HW861, PN-HW751, PN-HW651, PN-HW551, PN-HW501, N-HW431, PN-R903A, PN-86HC1, PN-75HC1, PN-70HC1E do not answer to the description of automatic data processing machine of heading 84.71. Further, there is nothing on record to contest the submission of the applicant that these monitors are capable of directly connecting to and designed for use with an automatic data processing machine of heading 84.71. Therefore, these monitors are correctly classifiable under heading 8528; and being non-cathode ray monitor under sub-heading 8528 52 00. In doing so, I note that this sub-heading does not exclude monitors which have a built in USB media player or which are capable of displaying photos and videos.

18. The other question posed by the applicant for advance ruling is regarding applicability of exemption vide serial number 17 of Notification No. 24/2005-Customs dated 01.03.2005, as amended on the proposed import of goods in question. As per the said serial number 17 of the Notification, exemption from ditties as per the Notification is admissible to “all goods of a kind solely or principally used in an automatic data processing system of heading 8471”. The applicant has mentioned, in reply to a question posed during the hearing that the monitors which they intend to import are principally and mainly (emphasis mine) used with automatic data processing machine. Therefore, for determining the eligibility under the notification, it needs to be determined whether the monitors are principally used with ADP machines, since even the applicant has not contended that they are solely used with ADP machines. While it is undeniable that these monitors can be used with ADP machines, presence of a built-in USB media player or display of AV sourced images or writing board function, enable these monitors to be used even without ADP machine for display of media content. In view of these enabling features, it cannot be accepted that these monitors are principally designed to be used in ADP machines, even as I acknowledge the contention of the applicant that they in practice do so. Therefore, following the settled principle of law that provisions of notification benefits must be interpreted restrictively, I conclude that the benefit of exemption vide serial number 17 of Notification No. 24/2005-Cus. dated 01.03.2005 is not admissible to the said monitors which are capable of being used without ADP machines.

19. In view of the above, I rule that the said 10 models of Sharp monitors are correctly classifiable under heading 8528 and more specifically sub heading 8528 52 00. However, in view of the features available in the monitors that allow for the same to be used readily with ADP machine, the benefit of notification No. 24/2005-Cus., as amended is not available to the said goods.

Sponsored

Join Taxguru’s Network for Latest updates on Income Tax, GST, Company Law, Corporate Laws and other related subjects.

Leave a Comment

Your email address will not be published. Required fields are marked *

Sponsored
Sponsored
Ads Free tax News and Updates
Sponsored
Search Post by Date
February 2025
M T W T F S S
 12
3456789
10111213141516
17181920212223
2425262728