2022(10)LCX0168(AAR)

Audio Distribution House Pvt. Ltd

decided on 10-10-2022

CUSTOMS AUTHORITY FOR ADVANCE RULINGS

NEW CUSTOM HOUSE, BALLARD ESTATE, MUMBAI - 400 001

E-MAIL: cus-advrulings.mum@gov.in

The 10^th of October, 2022
Ruling No. CAAR/Mum/ARC/31/2022
In
Application No. CAAR/CUS/APPL/46/2022-0/o Comtnr-CAAR-MUMBAI

Ruling

    M/s. Audio Distribution House Pvt. Ltd. (hereinafter referred to as 'the applicant', in short) filed an application for advance ruling before the Customs Authority for Advance Rulings, Mumbai (CAAR, in short). The said application was received in the secretariat of the CAAR. Mumbai on 20.07.2022 along with its enclosures in terms of Section 28H (1) of the Customs Act, 1962 (hereinafter referred to as the 'Act'). The applicant is seeking advance ruling on the classification of Viewsonic Creative Touch Interactive Flat Panels (IFP - model numbers specifically mentioned in Table-A) which they intend to import.

Table-A

2. The applicant has submitted that they propose to import 'Creative Touch Interactive Flat Panels' (IFP) (hereinafter referred to as the 'subject item'). The subject item is an all-in-one (AIO) computer system, functions like a large size tablet computer, and has an inbuilt Mother Board, MT9950 (Quad Core A73) Micro Processor (CPU), Quad- core Mali G52 Graphics Card, 4GB RAM and 32 GB SSD storage. It also has an embedded Android system pre-loaded with Android 9.0 (Oreo) Android Operating System (OS). The applicant is of the view that the subject item is classifiable under customs tariff entry 84718000 or 84714190. They intend to import the said goods from Vietnam through Nhava Sheva port. Accordingly, comments from the jurisdictional Pr. Commissioner of Customs, NS-V, JNCH, Nhava Sheva, Dist. Raigad were invited. However, no response has been received from the jurisdictional Commissioner.

3. The applicant has submitted that 'Creative Touch Interactive Flat Panel (IFP)' is described as an Automatic Data Processing (hereinafter referred as ADP) machine consisting of an integrated system with Central Processing Unit, Mother Board, Graphic Card, Memory (RAM + Storage), graphic processing unit, touch screen as virtual key board as an input device and video display unit as an output device, all in one place, within the display's body. The subject item typically come loaded like a tablet computer system, with a mobile operating system and touch screen display processing circuitry, and can be used with either of the operating systems, i.e., mobile operating system like Android 9.0 (OS) and/or desktop operating systems like Microsoft Windows, Apple Mac and Chrome OS. It has been suggested that the subject item merits classification under sub heading 84718000 as it satisfies 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.

3.1 It is submitted that since ADP machine consisting of an integrated system with Central Processing Unit, Mother Board, Graphic Card, Memory (RAM + Storage), graphic processing unit, touch screen as virtual keyboard as an input device and video display unit as an output device, all in one place, within the display's body and articles thereof are specifically classifiable under the chapter 84, the subject goods, namely, 'Creative Touch Interactive Flat Panel (IFP)' ought to be classified under the Chapter 8471: 'Automatic data processing machines and units thereof, magnetic or optical readers, machines for transcribing data on to data media in coded from and machines for processing such data, not elsewhere specified or included' but the issue is "whether they are classifiable under the CTH 84714190 or under the CTH 84718000".

The subject goods consist of the following characteristics:

i. An Integrated System with Central Processing Unit,

ii. Mother Board,

iii. Graphic Card,

iv. Memory (RAM + Storage),

v. Graphic Processing Unit,

vi. Touch Screen as Virtual Key Board as an input device, and

vii. Video Display unit as an output device.

3.2 For legal purposes, classification shall be determined according to the following:

• Terms of the headings; and

• Any relative section or Chapter Notes.

    In the case of Commissioner of Central Excise, Nagpur v Simplex Mills Co. Ltd. - 2005 (181) ELT 0345(SC) the Hon'ble supreme court has held that:

//...classification "shall be determined according to the terms of the headings and any relevant section or Chapter Notes". If neither the heading nor the notes suffice to clarify the scope of a heading, then it must be construed according to the other following provisions contained in the Rules. Rule-I gives primacy to the Section and Chapter Notes along with terms of the headings. They should be first applied If no clear picture emerges then only can one resort to the subsequent rules. The appellants have relied upon Rule 3. Rule 3 must be understood only in the context of sub-rule (b) of Rule 2 which says inter alia that the classification of goods consisting of more than one material or substance shall be according to the principles contained in Rule 3. Therefore, when goods are prima facie, classifiable under two or more headings, classification shall be effected according to sub-rules (a), (b) and (c) of Rule 3 and in that order. The sub-rules are quoted:• -

(a) The heading which provides the most specific description shall be preferred to heading providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods.

    3.3 Applicant is of the view that the goods under consideration may fall either under the CTH/HSN 84718000 or 84714190 since the subject goods are ADP Machine consisting of an integrated system with Central Processing Unit, Mother Board, Graphic Card, Memory (RAM + Storage), graphic processing unit, touch screen as virtual key board as an input device and video display unit as an output device, all in one place. The Bureau of Indian Standards has categorised the subject goods under product category 'AUTOMATIC DATA PROCESSING MACHINE' in the BIS registration certificate issued under IS 13252 (Part1); 2010 / IEC 60950-1;2005. Thus, likely CTH appears to be 84718000 since the subject goods are ADP Machine with all the contents as stipulated under Note 5A of Chapter 84 of Customs Tariff. The importer gets Basic duty exemption benefit under the CTH/HSN 84718000 since the subject goods are ADP Machine consisting of an integrated system with Central Processing Unit, Mother Board, Graphic Card, Memory (RAM + Storage), graphic processing unit, touch screen as virtual key board as an input device and video display unit as an output. Two of these units (input and output units, for example) may be combined in one single unit. Two or more of these systems may be interconnected, thus constituting, e.g., a local area network (LAN). These systems may include remote input or output units in the form of data terminals. Such systems may also include peripheral units, apart from the input or output units, designed to increase the capacity of the system, for instance, by expanding one or more of the functions of the central unit. The subject goods are equipped with hardware and software that allow it to perform, without artificial constraints, general computing tasks, where users are free to add or remove applications of their choice. From the above considerations, it certainly comes out that the conditions of Note 5 (A) to Chapter 84 of Customs Tariff Act, 1975 are fulfilled. Thus, the applicant sums up that in their view point the subject item namely, "Viewsonic Creative Touch Interactive Flat Panels", model numbers specifically mentioned in Table-A, merits classification under the CTH/HSN 84718000.

4. Personal hearing in the matter was held on dtd. 21.09.2022 in the virtual mode. Advocate Shri. K.S. Nara represented the case- CAAR-1 of M/s Audio Distribution House Private Ltd.- through web-based-hearing. He explained the factual matrix- product description, BIS certification of Vietnam based exporter, note 5(A) in the Tariff and one Supreme Court ruling on the issue of general rules of interpretation. He finally requested to decide correct classification to bring clarity in the taxability of proposed imports to avoid avoidable litigations and associated costs.

4.1 Applicant, vide their letter dtd. 28.09.2022, has made additional submissions with respect to BIS certification. It is stated that they have submitted a list of 21 models of subject items in their application for advance ruling whereas only 15 of these models are included in the BIS certificate. It is submitted that since BIS certification is mandatory requirement for import of these goods, all the models will be imported only after obtaining necessary certificate from BIS authorities. They have undertaken to produce the requisite BIS certificate at the time of import. Further, it is clarified that due to typographic error it has been erroneously mentioned that "the applicant intends to import the said goods from China....". It is requested that in respect of country 'China' may be ignored and it may be read as 'Vietnam' as they intend to import the said goods manufactured by `M/s Amtran Vietnam Technology Company Limited, Vietnam'.

5. I have gone through the written as well as oral submissions made before and during personal hearing. In absence of comments on this subject from the jurisdictional authority on the impugned subject item, I proceed to pronounce ruling on the issue on the basis of information available on record. The subject item for which advance ruling has been sought, its characteristics, functionality and utility etc., are broadly discussed in the foregoing paras.

    In so far as factual position is concerned, from the submission of applicant as well as the available information, the subject item termed as Viewsonic Creative Touch Interactive Flat Panels (IFP), is described as an ADP machine, consists of an integrated system with Central Processing Unit, Mother Board, Graphic Card, Memory (RAM + Storage), graphic processing unit, touch screen as virtual key board as an input device and video display unit as an output device, all in one place, within the display's body. The subject item comes loaded like a tablet computer system, with a mobile operating system and touch screen display processing circuitry, and can be used with either of the operating systems, i.e., mobile operating system like Android 9.0 (Oreo) and/or desktop operating systems like Microsoft Windows, Apple Mac and Chrome OS. It has been suggested by applicant that the subject item merits classification under CTH 84718000 as it satisfies all the requirements as mandated under Note 5 (A) (later on referred as 6 (A)) to Chapter 84 of Customs Tariff Act, 1975.

6. The issue involved is "whether the impugned goods, namely Viewsonic Creative Touch Interactive Flat Panel', merits classification under CTH 84714190 or under the CTH 84718000". Let me turn to these two sub-headings one by one.

6.1 Heading 8471 reads as: Automatic data processing machines and units thereof: magnetic or optical readers, machines for transcribing data on to data media in coded form and machines for processing such data, not elsewhere specified or included.

    Further the tariff at six-digit level i.e., 8471. 41 reads as -- Comprising in the same housing at least'a central processing unit and an input and output unit, whether or not combined. The digital data processing machines of this heading must be capable of fulfilling simultaneously the conditions laid down in Note 6 (A) to this Chapter. That is to say, they must be capable of:

(i) Storing the processing program or programs and at least the data immediately 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 rim.

On the other hand, the tariff entry 8471.80 at six-digit level reads as - "Other units of automatic data processing machines". Based on the description given in these two alternate sub-headings the question to be answered is whether the goods under consideration are ADP machines or other units of ADP machine. GRI 1 of General Rules of Interpretation (GM) provides that the classification of goods shall be "determined according to the terms of the headings and any relative section or chapter notes". In the event that the goods cannot be classified solely on the basis of GRI 1, and if the headings and legal notes do not otherwise require, GRIs 2 through GRI 6 may be applied in order. In order to merit classification under heading 8471, it is clear, that subject item needs to satisfy the requirements of note 6(A) to chapter 84. Therefore, there is a need to examine whether the features and specifications of the subject item under consideration meet the criteria as laid down in the relevant chapter note reproduced above.

6.2 The digital data processing (ADP) machines have storage capability and also stored programs which can be changed as per requirement of performance of tasks. Digital machines process data in coded form. A code consists of a (mite set of characters (binary code, standard six-bit ISO code, etc.). The data input is usually automatic, by the use of data media such as magnetic tapes, or by direct reading of original documents, etc. There may also be arrangements for manual input by means of keyboards or the input may be furnished directly by certain instruments (writing instruments e.g., stylus etc.). The input data are converted by the input units into signals which can be used by the machine, and stored in the storage units. Part of the data and program or programs may be temporarily stored in auxiliary storage units such as those using magnetic discs, magnetic tapes. etc. But these machines must have a main storage capability which is directly accessible for the execution of a particular program and which has a capacity at least sufficient to store those parts of the processing and translating programs and the data immediately necessary for the current processing run. Digital data processing machines may comprise in the same housing the central processing unit, an input unit (e.g., a keyboard or a scanner) and an output unit (e.g., a visual display unit), or may consist of a number of interconnected separate units. In the latter case, the unit forms a "system" when it comprises of at least the central processing unit, an input unit and an output unit (see Subheading Note 2 to this Chapter). The goods under consideration termed as Viewsonic Creative Touch Interactive Flat Panels (IFP), consists of an integrated system with Central Processing Unit, Mother Board, Graphic Card, Memory (RAM + Storage), graphic processing unit, touch screen as virtual key board as an input device and video display unit as an output device, all in one place, within the display's body. The subject item typically comes loaded like a tablet computer system, with a mobile operating system and touch screen display processing circuitry, and can be used with either of the operating systems, i.e., mobile operating system like Android 9.0 (Oreo) and/or desktop operating systems like Microsoft Windows, Apple Mac and Chrome OS. It is observed that the subject item satisfies all the requirements as mandated under Note 6 (A) (previously referred as 5(A)) to Chapter 84 of Customs Tariff Act, 1975.

6.3 The impugned item, as seen in para 6.2 above, appears to be able to satisfy the requirements of an ADP machine. Note 6 (B) to chapter 84 states Automatic data processing machines may be in the form of systems consisting of a variable number of separate units. Note 6 (C) to chapter 84 specifies the conditions for a unit to be classified as being part of an automatic data processing system. However, from the working and features of the impugned item, it appears that these are not units of ADP machines, but ADP machines themselves. Note 6 (D) to chapter 84 lists certain separately presented products that are to be excluded from heading 8471, even if they can be classified as part of an ADP system. Note 6 (E) to chapter 84 mentions that a machine incorporating or working in conjunction with an automatic data processing machine and performing a specific function other than data processing are to be classified in the headings appropriate to their respective functions or, failing that, in residual headings. The tariff entry 8471.80 at six-digit level provides for — "Other units of automatic data processing machines" and as discussed above the subject items are not 'other units of ADP machines', but 'ADP machines' themselves, and hence they are not classifiable under 8471 8000.

7. From the facts on the record and forgoing discussion, it is observed that the conditions mandated under Note 6 (A) to Chapter 84 of Customs Tariff Act, 1975 are fulfilled by the goods under consideration for which the advance ruling is sought. Technical literature available on record portrays the subject item as an All-In-One (AIO) which is a fully functional ADP machine that operates without restrictions. The AIO is equipped with hardware and software which allow it to perform, without artificial constraints, general computing tasks, where users are free to add or remove applications of their choice. In view of these facts, I rule that Viewsonic Creative Touch Interactive Flat Panel with model numbers specifically mentioned in Table-A merit classification under Heading 8471 and more specifically under sub-heading 84714190 of the first schedule to the Customs Tariff Act, 1975. Further, since BIS certification is a mandatory requirement for import of these goods, necessary certificate from BIS authorities shall be produced before the Customs authorities at the time of import.

(Narendra V. Kulkarni)             
Customs Authority for Advance Rulings,
Mumbai                       

F.No. CAAR/CUS/APPL/46/2022-O/o Commr-CAAR-Mumbai                                                                                                     Dated: 10.10.2022

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

1. M/s Audio Distribution House Pvt., Ltd, Office No. 1 & 2, Al Sabreen CHS, Kama1 Apt., Near Jama Masjid, S.V Road, Bandra (West), Mumbai - 400050
Email: arvind@adhpl.co, kuldeepsnara@gmail.com

2. The Commissioner of Customs (Nhava Sheva -V), Jawaharlal Nehru Customs House, Nhava Sheva, Tal Uran, District Raigad, Maharashtra — 400707
Email: commr-ns5@gov.in

3. The Customs Authority for Advance Rulings, 5^th Floor, NDMC Building, Yashwant Place, Satya Marg, Chanakyapuri, New Delhi-110021.
Email: cus-advrulings.del@gov.in

4. The Principal Chief Commissioner of Customs, Mumbai Customs Zone-I, Ballard Estate, Mumbai -400001.
Email: ccu-cusmuml@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@gov.in

6. The Commissioner (Legal), CBIC Offices, Legal/CX.8A, Cell, 5^th floor, Hudco Vishala Building, C-Wing, Bhikaji Cama Place, R. K. Puram, New Delhi — 110066.
Email: anishgupta.irs@gov.in,commr.legal-cbec@nic.in

7. The Member (Customs), Central Board of Indirect Taxes, North Block, New Delhi-110001
Email: mem.cus-cbec@nic.in

8. The Webmaster, Central Boards of Indirect Taxes & Customs.
Email: webmaster.cbec@icegate.gov.in

9. Guard file.

(P. Vinitha Sekhar)              
Secretary/Additional Commissioner,   
Customs Authority for Advance Rulings,
Mumbai