AAR Customs Advance Rulings on Classification

· The key propositions are: specific heading has been preferred over general heading; functionality / application a critical parameter; where multiple functionalities are available, principal function shall prevail.

· Touch 5-series Interactive Flat Panel (“IFP") from China. These goods are all-in-one (“AIO") computer systems

· Goods would merit classification under CTI 8471 41 90 as claimed by the appellant and not under CTI 8528 52 00 as claimed by the department

· Drone

· Applicable customs duty and IGST

· Drones are essentially unmanned aircraft which can be controlled by users using their smartphones or remote controlling device. Users can fly the drones from the ground. All the drones are equipped with a rechargeable battery.

· The drones also have built-in sensors which alert the user about any obstacles which are present in the path of flight.

· The Hon’ble Authority ruled, as follows:

· Tello drone merits classification under subheading 9503

· AGRAS T16 drone merits classification under subheading 8806 2400

· Mavic Air 2 drone merits classification under subheading 8806 2200

· Dji Mini 2 drone merits classification under subheading 8806 2100

· Phantom 4 Pro drone merits classification under subheading 88062200

· Data projectors

· The goods are designed to enable them to function in well-lit places

· Additional features cannot dis-entitle the impugned goods from classification under sub-heading 8528 6200.

1. Customs Authority for Advance Rulings, in the matter of M/s Compuage Infocom Ltd (Ruling No. CAAR/Mum/ARC/15/2022, dated 03 June 2022)

The applicant proposed to import Creative Touch 5-series Interactive Flat Panel (“IFP") from China. These goods are all-in-one (“AIO") computer systems, functioning like a large size tablet computer, and have an inbuilt Mother Board, MT9950 (Quad Core A73) Micro Processor (CPU), Quad-core Mali G52 Graphics Card, 4GB RAM, and 32 GB SSD Storage. These also have an embedded Android system pre-loaded with Android, .9.0 (Oreo) Android Operating System (OS). The applicant was of the view that the goods are classifiable under CTH 8471 4190, since, these satisfy all the requirements as mandated under Note 5(A) to Chapter 84 of Customs Tariff Act, 1975 i.e. the machine is capable of:

(i) storing the processing program necessary for the execution of the program;

(ii) being freely programmed in accordance with the requirements of the user;

(iii) performing arithmetical computations specified by the user; and

(iv) executing without human intervention, a processing program which requires them to modify their execution, by logical decision during the processing run.

Placing reliance on : a similar matter, in which the Principal Bench of CESTAT, New Delhi, in Final Order No. 50076-50077/2022 in Customs Appeal No. 50708 of 2021 with Customs Appeal No. 50709 of 2021 [2022-VIL-87-CESTAT-DEL-CU] [appeal filed by M/s. Ingram Micro India], held that goods would merit classification under CTI 8471 41 90 as claimed by the appellant and not under CTI 8528 52 00 as claimed by the department: the Hon’ble Authority upheld the classification proposed by the applicant.

2. Customs Authority for Advance Rulings, in the matter of M/s Ingram Micro India Pvt Ltd (Ruling No. CAAR/Mum/ARC/11/2022, dated 10 May 2022)

Issue pertained to determination of classification of Tello drone, AGRAS T16 drone, Mavic 2 drone, Diji mini 2 drones and Phantom 4 Pro drone, along with the rate of applicable customs duty and IGST.

Drones are essentially unmanned aircraft which can be controlled by users using their smartphones or remote controlling device. Users can fly the drones from the ground. All the drones are equipped with a rechargeable battery. This ensures that users have an unhindered experience of the flying capabilities offered by the drones. Further, the drones also have built-in sensors which alert the user about any obstacles which are present in the path of flight.

The Hon’ble Authority ruled, as follows:

a) Tello drone merits classification under subheading 9503 0010 of the Customs Tariff Act, 1975 and would attract basic customs duty @60% adv. and IGST@ 18%;

b) AGRAS T16 drone merits classification under subheading 8806 2400 of the Customs Tariff Act, 1975 and would attract basic customs duty @2.5% adv. and IGST@ 5%;

c) Mavic Air 2 drone merits classification under subheading 8806 2200 of the Customs Tariff Act, 1975 and would attract basic customs duty @10% adv. and IGST@ 18%;

d) Dji Mini 2 drone merits classification under subheading 8806 2100 of the Customs Tariff Act, 1975 and would attract basic customs duty @10% adv. and IGST@ 18%;

e) Phantom 4 Pro drone merits classification under subheading 88062200 of the first schedule to the Customs Tariff Act, 1975 and would attract basic customs duty @10% adv. and IGST@ 18%.

3. Customs Authority for Advance Rulings, in the matter of M/s Audio Distribution House Pvt Ltd (Ruling No. CAAR/Mum/ARC/16/2022, dated 08 June 2022)

Issue pertained to classification of data projectors Optoma X309ST, Optoma X319ST, Optoma W319ST, Optoma ZW350, Optoma ZX300 and applicability of Sr. No. 17 of Notification No. 24/2005-Customs, dated 01 March 2005.

The goods are data projectors used in schools, business meetings, and conferences, and are principally meant for use with an automatic data processing system.

They are designed to function in places like conference rooms, business meetings, financial institutions, etc., with a connection to a computer or a laptop. In other words, the goods are designed to enable them to function in well-lit places. The model ZW 350 has a resolution of 1280 x 800 (WXGA), while all other models have a native resolution of 1280 x 768 (XGA). These products support various computer display standards like XGA and WXGA. The products under consideration have brightness specifications in the range of 3500-4000 ANSI lumens. The contrast ratio of the projectors ranges from 20000:1 to 25000:1. The native aspect ratio of the products in question is 4:3. The applicant stated that though in respect of the models, W319ST, ZW350 and ZX300, the aspect ratio can be enhanced to 16:9 or 16:10, the default aspect ratio for its effective functioning is 4:3 and the enhancement capability is only superficial. These devices support connections such as HDMI, VGA-in/out, composite, audio-in/out, USB-A and RS232. The applicant proposed CTH 8528 6200 as an appropriate classification, which mentions projectors capable of connecting to an automatic data processing system.

In support of the above, the applicant submitted the following case laws:

· Epson India Pvt. Ltd. vs. Commissioner (366) ELT 847 (Tri-Chennai) [2018-VIL-160-CESTAT-CHE-CU];

· Commissioner of Customs vs. M/s. Epson India Pvt. Ltd. [ELT A173 (SC)];

· Commissioner of Customs vs. Vardhman Technology Pvt. Ltd. [(301) ELT 42 - 2013-VIL-132-CESTAT-MUM-CU];

· M/s. Casio India Co. Pvt. Ltd vs. Commissioner of Customs, (Tribunal Delhi) [2016-VIL-914-CESTAT-DEL-CU];

· Sony India Pvt. Ltd vs. Commissioner of Customs and Central Excise, New Delhi [(370) ELT 1774 (Tri-Del)].

The Hon’ble Authority ruled that, the presence of additional features cannot dis-entitle the impugned goods from classification under sub-heading 8528 6200. Reliance was placed upon Commissioner of Customs v. Vardhman Technology Pvt. Ltd. [(301) ELT 42 - 2013-VIL-132-CESTAT-MUM-CU], where it was held that the projectors merely having additional function cannot be denied classification under CTH 8528 6100 (erstwhile tariff heading for projectors capable of directly connecting to and designed for use with an automatic data processing system of heading 8471). Therefore, the goods under consideration were ruled to be classifiable under sub-heading 8528 6200.