Case Law Details
In re Socomec India Private Limited (CAAR Delhi)
Recent ruling by the Customs Appellate Authority for Advance Rulings (CAAR) in Delhi concerning the classification and exemption of Uninterrupted Power Supply (UPS) under Notification No. 25/2005.
Applicant’s View and Applicability of Notification: The applicant believed that the UPS they intended to import should be classified under Sub-heading 85044090 based on judicial pronouncements and CBIC Circular No. 104/2003-Cus. They sought to ascertain the applicability of serial number 4 of Notification No. 25/2005 on the import of UPS.
Interpretation of Notification: After careful examination of the application, comments from the concerned Commissioner, additional submissions, and the personal hearing, it was noted that the exemption from duties under Notification No. 25/2005 applies only to static converters for automatic data processing machines and telecommunication apparatus (excluding static converters for cellular mobile phones). The applicant’s argument that the UPS could be considered within the scope of the notification was found to be unfounded.
Information Technology Agreement (ITA) and Exemption: The explanatory letter and provisions of the ITA indicated that the Notification No. 25/2005 was issued to give effect to the ITA of the World Trade Organization. The agreement covers automatic data processing machines for specific functions, and machines performing other functions or working in conjunction with data processing machines are not covered. The interpretation of the notification should align with the provisions of the ITA.
Previous Judicial Order: The applicant submitted a catalog of ‘Uninterrupted Power Supply’ from M/s. Socomec Innovative Power Solutions. It was observed that a writ appeal related to the disallowance of exemption under serial number 4 of Notification No. 25/2005 had been dismissed by the Hon’ble High Court. This suggests that the issue of applicability has already been decided.
Conclusion: Based on the ruling, UPS meant for automatic data processing machines and telecommunication apparatus (excluding cellular mobile phones) are eligible for exemption from Basic Customs Duty under serial number 4 of Notification No. 25/2005. However, static converters for healthcare machines, infrastructure sectors, or those indirectly considered as ADP machines are not eligible for this exemption.
FULL TEXT OF THE ORDER OF CUSTOMS AUTHORITY OF ADVANCE RULING, MUMBAI
Limited, 756, Pace City – II, Sector 37, Gurgaon –122001, Haryana, having IEC No. 0500013420 and PAN-AAECS2270D (applicant, in short) has filed an application dated 19.12.2022, received in this office on 20.12.2022 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. 28/2022 dated 20.12.2022.
2. The applicant vide the aforesaid application, has sought ruling on the following question: Whether ‘Uninterrupted Power Supply’ proposed to be imported by them meriting classification under Sub-heading 85044090 of the First Schedule to the Customs Tariff Act, 1975, under Category I- Machines which itself qualifies as an ADP machines, Category 2- Machines which can indirectly be considered as ADP machine (i.e Machines where ADP machines are an integral part of such machine, without which such machines cannot function); Category 3-Telecommunication apparatus other than static convertors for cellular mobile phones, and Category 4-Other machines, are eligible to take benefit of zero rate of Basic Customs Duty under serial number 4 of Notification No. 25/2005-Cus. dated 01.03.2005?
3.1 The applicant has stated inter-alia that, they propose to import various variants of ‘Uninterrupted Power Supply’ (subject goods, in short) such as single phase UPS, three phase UPS, industrial and transformer based UPS; it is understood that the said UPS intended to be imported is a combination of both electrical and electronics systems designed to provide a total continuity of AC power even in the absence of mains power; UPS draws AC power from the commercial line and processes it to a required condition and at the same time charges the battery which is connected to it; even if the AC mains fail, it provides an output voltage (without any interruptions) from the battery sources; for the purpose of determining the correct classification of UPS, they have followed the General Rules of Interpretation of Import Tariff (GRI, in short); UPS is a combination of rectifier, a battery charger, and an inverter; as per HSN Explanatory Notes, electrical static converters are used to convert electrical energy in order to adapt it for further use; a UPS is essentially a static converter only; in reference to HSN explanatory notes, it can be derived that UPS is essentially included in the category of static converters. The applicant has relied upon the judgment of the Larger Bench of the Tribunal in the case of Luminous Electronics Pvt. Ltd. Versus Commr. of C. Ex., New Delhi reported at 2001 (3) TMI 131, wherein it was held that UPS would be classified under heading 850440 only and this view is affirmed by the Hon’ble Supreme Court in the case of JK. Synthetics Ltd. versus Commissioner of Central Excise, Jaipur reported at 2003 (152) E.L.T. 35 (SC). The applicant has further stated that, CBIC Circular No. 104/2003-Cus. dated 09.12.2003 made it clear that the UPS system merits classification under heading 8504 of the Customs Tariff Act, 1975; it is settled that the UPS merits classification under Chapter heading 8504 and more specifically under Sub-heading 85044090 and it can be called as a static converter of a type having rectifier, inverter, battery and a bypass switch mainly to convert AC current from mains to DC current which charges battery and then at the time of power cut from mains, inverter will convert it to AC current and will supply the machines with which it is attached.
3.2 The applicant has also stated that, the subject goods will be ultimately supplied to data centers, healthcare sector, infrastructure, telecommunication and for industrial applications etc.; subject goods can be broadly classified into 4 categories based on their use; an indicative list of machines, based on broad categories depending on where the imported UPS will be used is as below:‑
Category 1- Machines which itself qualifies as an Automatic Data Processing Machine, namely Large Scale & Hyperscale Data Centers (Servers): E-Commerce and digitalization has increased enormously over these few years and implemented in various applications even in our daily routines; Internet of Things (IoT) has further added to the data in real-time, particularly in customer service & security applications; all these generates data in Terabytes which needs to be processed with high speed, accuracy and needs to be stored for E-Commerce; High-end Servers and ADP machines are deployed for 24×7 operation with stringent compliances for uptime; servers are undisputedly a computer or device on a network that manages network resources; for example, a file server is a computer and storage device dedicated to storing files; any user on the network can store files on the server; a print server is a computer that manages one or more printers, and a network server is a computer that manages network traffic; a database server is a computer system that processes database queries; therefore, it can be concluded that Large Scale & Hyperscale Data Centers (Servers) qualifies as an ADP Machines as all the essential characteristics of an ADP machine have been fulfilled and the same are classifiable under Sub-heading 84715000 as ADP Machines which is undisputed.
Category2- Machines which can indirectly be considered as ADP machines (i.e. Machine where ADP machines are an integral part of such machine, without which such machines cannot function), namely MRI & CT Scan Machines: In an MRI & CT Scan Machine, scanning is done using variable electromagnetic fields and X-Rays to generate 2D & 3D images of internal body parts of the patient for medical analysis; data is collected by the scanners, transducers, sensors and processed using complex algorithms embedded in digital signal processors to generate various visual and tabular reports for medical decisions; therefore, it is apparent that MRI & CT Scan Machine has an ADP machine incorporated in itself which forms an integral part without which these machines cannot function, and thus the condition of the exemption Notification is satisfied in so far as the exemption notification stipulates use of static converters for automatic data processing machines and “units thereof”. Further, the applicant submitted that, without prejudice to the exclusion provided under Note SE to Chapter 84, while a general-purpose data processing machine is classifiable under Chapter Heading 84.71 the special purpose data processing machine incorporated or acting in conjunction with a machine is classified on merits by virtue of Note SE to Chapter 84; special purpose data processing machines do not cease to be data processing machines merely because by virtue of special rules of classification embodied for such machines in Note SE to Chapter 84, they are classified under headings other than 8471.; this view has been endorsed by Hon’ble Tribunal in the matter of Vodafone Essar Gujarat Ltd. v. Commr. of Cus. (Imports), Mumbai reported at (2009) 237 ELT 458; it can be concluded that though MRI & CT scan machines themselves are not classifiable as ADP machines, they work in conjunction with ADP machines which are integral to their functioning and in absence of the inbuilt machines, MRI and CT scan machines cannot function; in other words, MRI & CT scan machines are ADP machines which are capable of performing the function of an ADP machine and other functions; the Exemption Notification nowhere mandates that the subject goods under Chapter heading 850440 shall be solely and principally be used for ADP Machines which merit classification under CTH 8471 or Telecommunication apparatus; such narrow interpretation that serial number 4 of the exemption Notification is applicable only to those goods under Chapter heading 850440 which are solely and principally to be used only for ADP machines which merit classification under CTH 8471, is uncalled for and defeats the purpose of a beneficial notification; that the exemption notification is applicable for all ADP machines irrespective of the classification of the same under heading 8471 or any other heading of the Customs Tariff; thus, even if the HS classification of the machines like MRI & CT Scan machines is not 8471, given the integral use of ADP for the functioning of such machines, MRI & CT Scan machines are also considered as ADP machines and hence eligible for aforesaid exemption.
Category 3- Telecommunication apparatus other than static converter for cellular mobile phones, namely instruments used in Air Traffic Control towers: Globally at any busy airport, an ATC tower has to accurately manage the intervals between landing and take-offs of perpetual flights using the common airstrip or runway; at times these intervals are even less than a minute at airports during peak hours; similarly, ATC also monitors and recommends flying altitudes to all incoming aircrafts on its radar to ensure safety from accidental collisions; the ground data is collected via communication equipment and the airborne data using transmitter-receivers; all this data is processed, analyzed using algorithms in real time with excellent accuracy for generating flight instructions to respective aircrafts; therefore, it can be concluded that instruments used in Air Traffic Control towers qualifies as Telecommunication apparatus and also as ADP machines as it collects, stores, processes and produces data basis installed programmers and algorithms; hence this category is directly covered by the exemption notification.
Category 4- Other machines, these would include machines which do not qualify in the above 3 categories – subject goods have multiple use, depending upon the industry/sector where they will be put to use; thus, there may be instance where the subject goods while capable of being used as ADP or telecommunication apparatus but will be put to use (by the customer of the applicant) along with machines which do not qualify in the above mentioned 3 categories of machines; in the present case, it is undisputed that subject goods are UPS classifiable under Sub-heading 85044090; these UPS systems are designed primarily to be used with ADP machines or with machines in which ADP machine are an integral part, but they also have the capability to be connected to multiple devices; this can be verified by analyzing the built specification of such UPS and the type of ports and the output voltage range and other parameters; however, merely because the UPS system have a capability of use in both ADP machines and non-ADP machines cannot be a basis for deciding whether they are eligible for exemption or not; serial number 4 of exemption notification states ‘static converter for automatic data processing machines …’; it does not state that the goods shall be solely and principally be used with ADP machine unlike Notification 24/2005 dated 01.03.2005 (which provided exemption to specified goods to Chapter 38, 84, 85 and 90 and all goods for the manufacture thereof-), where at serial number 17 and 18 it is specifically mentioned `solely and principally used in an automatic data processing system’; had it been the intention of the legislature to restrict the scope of serial number 4 of exemption Notification No. 25/2005 only to those static converters which are actually used or solely and principally to be used with ADP machines, the phraseology used in the exemption notification would have been different as, for example, “goods actually used” or “goods used” or “solely and principally to be used” or similar language as used in Notification No. 24/2005, since both being issued on the same date; however, this is not the case in the exemption notification and therefore an interpretation limiting the scope of serial number 4 only to those static converters which are actually used with ADP machines is incorrect; there is a fine distinction between ‘intended for use’ and ‘actual use’; this distinction has to be kept in mind in view of the fact that it is settled law that the classification of a particular good cannot depend upon the actual use to which it is put to, by the end-user; the goods intended or meant to be used for a particular purpose, may be actually used for a completely different purpose by some end-users; that the importer cannot be made to suffer on the basis of what the end-user does with the product, distinction between ‘Actual Use’ and ‘Intended to be Used’ can be substantiated by reliance on the judgment of Hon’ble Supreme Court in the case of M/S. BPL. Limited versus Commissioner of Central Excise, Cochin-II Commissionerate reported at 2015 (319) E.L.T. 556 (SC); furthermore, without prejudice, even if there is a specific mention of the phrase ‘solely and principally’, the possibility of other usage of the product cannot be ruled out; reliance is placed on the judgment in the case of Commr. of Cus. & C. Ex., Hyderabad-II vs. Aveco Viscomm Private Ltd reported at 2011 (263) E.L.T. 420 (Tri. -Bang.) and in the matter of Commissioner of Customs (I), ACC, Mumbai v. Vardhaman Technology P. Ltd. reported at [2014 (301) E.L.T, 427 (Tri. -Mumbai)]; that in the present case, the exemption notification itself does not mandate any sole or principal use with ADP Machines; the fine distinction between meant to be used and actually used should be kept in mind and accordingly, the applicant is eligible for the duty benefit under serial number 4 of exemption Notification No. 25/2005-Cus.; without prejudice to the above, it is trite in law that wherever end use is contemplated, the notification necessarily has to provide a mechanism for the same; the applicant has placed reliance on the Supreme Court judgement in the case of State of Haryana v. Dalmia Dadri Cement Ltd, reported at 1988 (14) ECR 292 (SC) and on the judgement of the Hon’ble Tribunal in the matter of Collector of Central Excise, Ahmedabad v. Maize Products, reported at 1997 (94) E.L.T. 651 (Tri).
In light of the foregoing submissions, the applicant has submitted that, in the present case the exemption notification must be considered liberally, and the benefit thereof should not be denied by taking recourse to a narrow interpretation; it is settled law that a person claiming benefit of an exemption notification must show that he satisfies the eligibility criteria once, post that if it is found that the exemption notification is applicable, the same should be construed liberally; that in the present case as well, the applicant is eligible for the exemption notification as explained; it is undisputed that the subject goods are classified under Sub-heading 850440 and will be used with machines ultimately qualifies as ADP machines or a machine in which ADP machine is an integral part and telecommunication apparatus, and the exemption notification does not mandate subject goods to be used “solely and principally” for ADP machines and therefore UPS can be used with other machines as well including the specified machines; subject goods clearly fulfil both criteria of the exemption notification; therefore, the exemption Notification itself provides for the products in respect of which the exemption would not be available and the goods intended to be imported does not fall under such exclusion; hence, they are eligible for the benefit of the exemption Notification.
4. Furthermore, the applicant has submitted that the subject goods will not only provide power backup feature but also be used for protection of Automatic Data processing machines disturbances such as voltage surges, voltage sags/swells, voltage spikes/transients etc. It is further submitted that, at this juncture, it is also necessary to refer to the catalogue which substantiates that that the subject goods have multiple uses; depending upon the nature of industry that they will be put to use, the subject goods can be used in data centers, healthcare sector, infrastructure, telecommunications, industrial applications etc.
5. Comments in the matter have been received from the concerned Commissionerate of Customs, ICD Patparganj & others ICDs, Delhi, wherein, it has been inter-alia stated that, the items in question i.e Uninterrupted Power Supply Systems (UPSS), is correctly classifiable under CTH 85044010; with regard to the definition of an ADP machine, in order to import a machine which would render it to be classifiable as an ADP; it must satisfy the criterion as laid out in the Chapter Note 6 of Chapter 84; the machine should be able to satisfy the definition as per Chapter Note 6(A); the nature of distribution as defined in Chapter Note 6(B); and the essential conditions as specified in Chapter Note 6(C); the exemptions and the specificity conditions specified in chapter Notes 6(D) and 6(E) respectively should also be strictly adhered to when classifying any machine as ADP machine; for example an X-Ray machine is classified under its own CTH, even when it satisfies the necessary criteria of storing and processing information. Further, they submitted that the Nil BCD exemption under serial number 4 of Notification 25/2005-Cus. dated 01.03.2005 can only be extended to those items where the description of the goods is in accordance with the description as set out in the impugned notification; in case any deviation, the benefit of the impugned notification cannot be extended to the items; when the goods are being imported under the said notification, the importer should possess technical literature/write-up and /or end use certification, which clearly established the fact that the imported items are exclusively used in ADP machines, as defined in serial number 6 of the Notes under Chapter 84 of the Customs tariff; it is imperative to state that the declarations made by the importer at the time of filing of bill of entry will be subjected to regular examinations as per the RMS Instructions/Examination order.
6. Personal Hearing in the matter was held on 19.04.2023, wherein the Authorized Representative (AR) started with explaining usage of goods in question i.e ‘Uninterrupted Power Supply’ (UPS) and mentioned that it has wide usage including for ADP machines, Telecommunication Industry/Apparatus etc.; as regards industrial usage of the goods in question, AR explained that like for healthcare, these goods may be used for MRI machines, which per se may not be classified as ADP machine of 8471, as MRI machine merits classification under Chapter 90; however, without ADP machine, these MRI machines cannot function on a stand-alone basis; thus, ADP machine is an integral part of any MRI machine; however, at the time of import, the applicant will not be able to give `end-use certificate’ as they are not aware as to who would their customers be and according to them submission of ‘end-use certificate’ at the time of import is not mandatory; referring to comments of the concerned Commissionerate, AR stated that they differ as to possession of end use certificate by the importer when the goods are being imported under the notification in question and further, according to them, submission of end -use certificate is not mandatory; it is not mandatory to prove that ADP Machine referred to in the notification in question should be the ADP Machine as per Note 6 under Chapter 84 of the CTH 1975. The AR also mentioned that the phrase for use in’ means intending to be used and there is no doubt about the UPS which they intend to import can be used for ADP Machine. The AR also reiterated that submission with regard to various case laws as referred in their compliance and stated that the onus is on the department to prove that goods in question cannot be used in ADP Machine and further the end-use certificate is not required as per the Notification in question. The AR also invited attention towards the judgment on interpretation of notification and emphasized that they fulfil the condition of notification for claim of exemption.
7. The applicant also gave additional submissions wherein as regards comments of the concerned Commissionerate, the applicant has stated inter-alia that the view of the concerned Commissionerate that at the time of import, end use certificate should be provided which establishes the fact that the imported items are exclusively used in ADP machines as defined in Note 6 of Notes under Chapter 84 of the Customs Tariff, is erroneous as:-
the exemption notification nowhere mandates that the subject goods under heading 850440 shall be solely and principally be used for ADP machines which merit classification under heading 8471 or telecommunication apparatus; such narrow interpretation that serial number 4 of the exemption notification is applicable only to those goods under Chapter heading 850440 which are solely and principally to be used only for ADP machines which merit classification under CTH 8471 is uncalled for and defeats the purpose of a beneficial notification;
-Chapter Note 6(A) of Chapter 84 only defines the expression, ‘automatic data processing machine’ for the purposes of heading 8471 which means that the term, ‘automatic data processing machine’ is defined in the said Chapter Note only for the purposes of classification under heading 8471 and the meaning assigned in the Chapter Note 6 of Chapter 84 cannot be extrapolated to the wordings used in the exemption notification;
the subject goods are intended to be used in operation of machines which either ultimately qualify as Telecommunication apparatus or ADP machine or ADP machine is an integral part of that whole machine/system and the exemption notification does not mandate subject goods to be used ‘solely and principally’ for ADP machines and therefore imported goods can be used with other machines as well including the specified machines; thus, on import, subject goods are eligible for exemption from BCD under the exemption notification;
without prejudice to the exclusion provided under Note 5E to Chapter 84, while a general-purpose data processing machine is classifiable under heading 8471, the special purpose data processing machine incorporated or acting in conjunction with a machine is classified on merits by virtue of Note 5E to Chapter 84. Further, special purpose data processing machine do not cease to be data processing machine merely because by virtue of special rules of classification embodied for such machines in Note 5E to Chapter 84, they are classified under headings other than 8471;
-exemption notification nowhere mandates that the subject goods under heading 850440 shall be solely and principally be used for ADP machines which merit classification under heading 8471 or telecommunication apparatus; such narrow interpretation that serial number which 4 of exemption notification is applicable only to those goods under heading 850440 which are solely and [principally to be used only ADP machines which merit classification under CTH 8471 is uncald for and defeats the purpose of a beneficial notification;
-exemption notification is applicable for all ADP machines irrespective of the classification of the same under heading 8471 or any other heading; thus, even if classification of the machines like MRI & CT scan machines is not 8471, given the integral use of ADP machine for the functioning of such machines; MRI & CT scan machines are also considered as ADP machines and hence eligible for exemption under the said notification;
-in the present case, it is undisputed that the subject goods are UPS classifiable under Sub-heading 85044090; these UPS system are designed primarily to be used with ADP machines or with machines in which ADP machines are an integral part, but they also have the capability to be connected to multiple devices; this can be verified by analysing the built specification of such UPS and the type of ports and output voltage range and other parameters;
-however, merely because the UPS system have a capability to be used in both ADP machines and non-ADP machines cannot be a basis for deciding whether they are eligible for exemption or not;
-serial number 4 of Notification No. 25/2005-Cus. states ‘Static converters for automatic data processing machines and units thereof, and telecommunication apparatus, other than static converters for cellular mobile phones’; it does not state that the goods shall be solely and principally be used with ADP machine unlike Notification 24/2005-Cus. dated 01.03.2005 (which provided exemption to specified goods to Chapter 38, 84, 85 and 90 and all goods for manufacture thereof), where at serial number 17 and 18, it is specifically mentioned ‘solely and principally used in an automatic data processing system’; had it been the intention of the legislature to restrict the scope of serial number 4 of Notification 25/2005-Cus. only to those static converters which are actually used or solely and principally to be used with ADP machines, the phraseology used in the exemption notification would have been different as, for example, ‘goods actually used’ or ‘goods used’ or ‘solely and principally to be used’ or similar language as used in Notification 24/2005-Cus. dated 01.03.2005 , since both being issued on the same date; however, this is not the case in the exemption notification and therefore an interpretation limiting the scope of serial number 4 only to those static converters which are actually used with ADP machines is incorrect;
-there is a fine distinction between ‘intended for use’ and ‘actual use’; this distinction has to be kept in mind in view of the fact that it is settled law that the classification of a particular good cannot depend upon the actual use to which it is put to, by the end user; the goods intended or meant to be used for a particular purpose, may be actually used for a completely different purpose by some end-users; the importer cannot be made to suffer on the basis of what the end-user does with the product; more importantly, when the exemption notification does not specify production of any end use certificate, the same cannot be insisted upon by Customs at the time of clearance.
In the additional submissions, the applicant has also reiterated case laws in supports of their arguments and further stated that, even if it is assumed that the term, ‘for use in automatic data processing machine’ used in the exemption notification contemplates end use, since no mechanism provided in the notification, the same cannot be insisted upon by Customs; the exemption notification does not mandate any proof of end use criteria being met and the same cannot be read into the exemption notification; exemption notification should be construed strictly only at the threshold for determining eligibility; once assessee falls within the eligibility clause of the exemption notification, further interpretation of the exemption notification should be done liberally. Lastly, the applicant requested that additional submissions be treated as part of their application for advance ruling and requested for advance ruling in the matter.
8. Finding that the application is valid in terms of the provisions of the Customs Act and the CAAR Regulations, 2021, having heard the applicant, and recognizing the importance of timely pronouncement of rulings, I proceed to examine the question on merits.
9. The question posed by the applicant for advance ruling suggests that they are of the view that the Uninterrupted Power supply which they intend to import merit classification under Sub-heading 85044090 based on judicial pronouncements and CBIC Circular No. 104/2003-Cus. dated 09.12.2003. The application for advance ruling has been filed by them to ascertain applicability of serial number 4 of Notification No. 25/2005-Cus. dated 01.03.2005 on import of Uninterrupted Power Supply.
10.1 After going through the application for advance ruling, comments of the concerned Commissioner, additional submissions of the applicant and submissions made during the personal hearing, I note that, the subject goods can be used in multiple sectors viz data centers, healthcare, infrastructure, telecommunication etc.; on plain reading of Notification No. 25/2005-Cus., it is observed that the exemption from duties has been extended only to static converters which are meant for automatic data processing machine and units thereof, and telecommunication apparatus other than static converters for cellular mobile phones; the argument of the applicant in support of their contention regarding applicability of notification does not hold good even if words, ‘solely and principally’ have not been used to describe usage of static converter for applicability of notification; the words and phrases used in the notification are sufficient to suggest and clarify that exemption from Basic Custom Duty is applicable to only those static converters which are meant for automatic data processing machine and units thereof, and telecommunication apparatus other than static converters for cellular mobile phones; the applicant has wrongly interpreted the notification by stating that UPS proposed to be imported by the applicant are intended to be used in operation of machines which either ultimately qualify as Telecommunication apparatus or ADP machine or where ADP machine is an integral part of the whole machine/system; such interpretation which has been done by introduction of new words and phrases in the notification is against the settled law that a notification has to be construed by the etymology used in the notification; the applicant appears to be of the view that the intention behind issue of notification and words used in the notification are linked and an interpretation limiting the scope of serial number 4 of the notification, only to those static converters which are actually used with ADP machine is incorrect and the benefit of serial number 4 of the notification should not be denied by taking recourse to a narrow interpretation. However, I do not see any ambiguity/confusion arising out of the language used in the notification allowing exemption from duties to static converters for automatic data processing machine and units thereof, and telecommunication apparatus other than static converters for cellular mobile phones. Addition of words such as ‘inbuilt’, ‘built-in’ etc. to interpret a notifacation is neither warranted nor permitted considering several judicial pronouncements.
10.2 I note that explanatory letter D.O.F.No.334/1/2005-TRU dated 28.02.2005 of the Joint Secretary (TRU) which had been issued at the time of introduction of Finance Bill, 2005 in the Lok Sabha on 28th February, 2005 states inter-alia that Customs duty has been exempted on specified items covered under the Information Technology Agreement (ITA); with this, all 217 ITA bound items are now fully exempt from customs duty. All goods imported for the manufacture of ITA bound items have also been exempted from customs duty subject to end-use condition. Keeping in view the foregoing, it can be inferred that notification 25/2005-Cus. dated 01.03.2005 had been issued to give effect to the Information Technology Agreement (ITA) of World Trade Organization. Further, the Information Technology Agreement of WTO dated 13.12.1996 states inter-alia that, pursuant to the modalities set forth in the Annex to this Declaration, each party shall bind and eliminate customs duties and other duties and charges of any kind, within the meaning of Article 11:1(b) of the General Agreement on Tariffs and Trade 1994, with respect to the following: (a) all products classified (or classifiable) with Harmonized System (1996) (“HS”) headings listed in Attachment A to the Annex to this Declaration; and (b) all products specified in Attachment B to the Annex to this Declaration, whether or not they are included in Attachment A; Attachment B of the Agreement covers positive list of specific products to be covered by the agreement wherever they are classified in the HS. I note that one of the product as per Attachment B is Computers and the description of the same has been amplified as automatic data processing machines capable of 1) storing the processing program or programs and at least the data immediately necessary for the execution of the program; 2) being freely programmed in accordance with the requirements of the user; 3) performing arithmetical computations specified by the user; and 4) executing, without human intervention, a processing program which requires them to modify their execution, by logical decision during the processing run; the agreement covers such automatic data processing machines whether or not they are able to receive and process with the assistance of central processing unit telephony signals, television signals, or other analogue or digitally processed audio or video signals; machines performing a specific function other than data processing, or incorporating or working in conjunction with an automatic data processing machine, and not otherwise specified under Attachment A or B, are not covered by this agreement. Taking cognizance of the said provisions under the Information Technology Agreement, appears to be the way to interpret the notification within the words and phrases used in the notification. I note that the ITA has unambiguously laid down that machine performing a specific function other than data processing, or incorporating or working in conjunction with an automatic data processing machine, and not otherwise specified under Attachment A or B, are not covered by this agreement. Thus, the manner in which applicant has interpreted the notification is not in accordance with law for the time being in force.
10.3 I also note that, the applicant has submitted a copy of catalogue of ‘Uninterrupted Power Supply’ along with the application for advance ruling. This catalogue pertains to M/s. Socomec Innovative Power Solutions. It is further observed that in Writ Appeal No.425 of 2016 filed by M/s. Socomec Innovative Power Solutions Pvt. Ltd., subsequent to disallowing of exemption vide serial number 4 of Notification No. 25/2005-Cus. dated 01.03.2005 by Chennai Customs, the Hon’ble High Court has ordered that liberty is granted to the appellant to file an appeal, if so advised, under Section 129-A of the Customs Act before the CESTAT, within 3 weeks from the date of receipt of a copy of this order. The Writ Appeal has been dismissed with observations as per the order. The company related to the applicant has not been discussed in the application for advance ruling filed by the applicant. However, it suggests that issue of applicability of serial number 4 of Notification No. 25/2005-Cus. dated 01.03.2005 has already been decided.
11. Keeping in view the foregoing, I am of the view that the subject goods which are meant only for automatic data processing machine and units thereof, and telecommunication apparatus other than static converters for cellular mobile phones are eligible for exemption from Basic Customs Duty under serial number 4 of the Notification No 25/2005-Cus. dated 01.03.2005. Such exemption is not available to static converters meant for machines of healthcare, infrastructure sector etc., machines which can indirectly be considered as ADP machine etc.
12. I rule accordingly.
