2022(10)LCX0169(AAR)

Nokia Solutions And Networks India Private Limited

decided on 19-10-2022

CUSTOMS AUTHORITY FOR ADVANCE RULINGS

NEW CUSTOM HOUSE, BALLARD ESTATE, MUMBAI - 400 001

E-MAIL: cus-advrulings.mum@govin

The 19^th of October, 2022
Ruling No. CAAR/Mum/ARC/34/2022
In
Application No. CAAR/CUS/APPL/45/2022-O/o Commr-CAAR-MUMBAI

Ruling

    M/s. Nokia Solutions and Networks India Private Limited (having PAN no. AACCN3871F) filed an advance ruling application on 18.07.2022 on the classification of Nokia 7210 SAS products and the applicability of Sr. No. 13N of Notification No. 24/2005 Customs dated 01.03.2005 on the said products.

2. The applicant is engaged in the business of manufacturing and trading telecommunication network equipment both within and outside India, network design, installation and commissioning, providing support services to major telecom and internet service provider and developing software. The applicant has proposed to import "Nokia 7210 SAS" products in India for selling the same domestically. They are presently importing the components of the goods at Chennai port and classifying the essential components of the subject goods individually for discharging basic customs duty (BCD) at applicable rates.

2.1 The applicant stated that the Nokia 7210 SAS Router family comprises several models of modular and fixed routers, identical in functioning, but different in specifications, to meet different customer requirements. The applicant has specified the following models in the application:

2.2 As per the applicant, the impugned products are IP routers and are used in a telecom network. These devices provide service providers with IP routing and carrier ethernet demarcation, access, and aggregation for mobile backhaul, business, and residential service delivery. Further, for enterprise and mission-critical network operators, the 7210 SAS addresses stringent requirements for high network resiliency, deterministic network performance, and scalability. These products employ Nokia Router Operating System (SR OS) and the Nokia Network Services Platform (NSP) for service and operational consistency. The products are stated to perform switching functions also. The applicant enlisted the following features of the product:

2.3 The applicant has stated that the goods under question are complete routers which are imported by the applicant and sold to its customer for addressing their routing requirements. Switching being a subset of the routing function is performed as well by all routers. They have pointed out that the price of the impugned devices is much higher than normal switches which are installed to perform the limited function of switching. The applicant has stated that in general and commercial parlance too, the subject goods are referred to as IP routers, and are installed to perform routing functions. Accordingly, the applicant has suggested subheading 85176290 of the Customs Tariff Act, 1975 for the classification of the goods.

2.4 Sr. No. 13N of Notification No. 24/2005- Customs, as amended, exempts router under subheading 85176290 from 100% BCD. The applicant has stated that the goods under consideration are eligible to avail of this exemption as the goods are complete routers. The switching function performed by these devices is a subset of router functions. Therefore, the subject goods remain complete routers capable of performing switching functions. Referring to note 3 to Section XVI, they have stated that the classification of a machine designed for performing two or more complementary or alternative functions ought to be made with respect to its principal function. In the present case, the principal function is routing and the switching function is ancillary. Accordingly, the subject goods are routers and they are eligible for the exemption under the said notification.

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

Commissioner of Customs (Import), Mumbai Vs. Dilip Kumar and Company arid Ors [MANU/SC/0789/2018]

Xerox India Ltd. Vs. Commissioner of Customs, Mumbai

Twenty-First Century Printers vs. CC [2003(162) ELT 1045 (Tri-Dei.)]

2.6 In relation to the above-mentioned goods, the questions on which advance rulings have been sought are as follows: -

A. Whether the 7210 SAS products imported by the Applicant are classifiable under the tariff entry 85176290 of the Customs Tariff of India?

B. If the answer to the above question is negative then what would be the correct classification of the 7210 SAS product under the Customs Tariff of India and the applicable effect BCD rate?

C. If the answer to question no. (a) above is positive, then whether the 7210 SAS products are eligible for claiming benefit under Sr. No. 13N of Notification No. 24/2005 Customs dated 1st March 2005 (also referred to as "the exemption notification") as amended on 30th December 2019 vid Notification No. 36 / 2019 - Customs?

3. The applicant in their CAAR-I form declared that they intend to import the impugned devices from the Air Cargo Complex (ACC), Chennai and New Delhi. The application was forwarded to the jurisdictional commissioners of customs for comments on 18.07.2022. However, no reply has been received, though reminders have also been sent on 29.08.2022 and 22.09.2022.

3.1 A technical opinion of the Telecommunication Engineering Center (TEC), Department of Telecommunication was requested vide letter dated 13.09.2022, which they submitted vide letter dated 23.09.2022. As per TEC, Nokia 7210 SAS family consists of various products. These products are capable of working as both carrier-class ethernet switches as well as routers. However, TEC specified that from the product specification these products primarily appear to be routers.

4. A personal hearing was held on 21.09.2022 at 12:00 PM. S/Shri Vishal Gupta, Kunal Chaudhary and Rahul Agarwal appeared on behalf of the applicant. No one appeared on behalf of the jurisdictional commissionerate. The applicant explained factual, technical and legal perspectives on the basis of which the CAAR-I application was submitted. The applicant agreed to submit a few sample invoices of the products under question (received by them from the sellers/ or from any other buyer) in support of their claim for classification and subsequent notification benefit. They explained various tariff entries-viz. 85176290 and 85176930 (erstwhile) during their presentation. The applicant was requested to explain how their products covered under the CAAR-I application differed from carrier-class ethernet switches. They explained the difference in technical language, however, representative Shri Vishal Gupta agreed to submit the write-up. The technical opinion of the TEC was shared with the applicant for their comments on the same.

4.1 Vide email dated 07.10.2022, the applicant made additional submissions. They reiterated their original submissions made in the CAAR-I application. An ethernet switch is a layer-2 device of the Open System Interconnection (OSI) model and uses a MAC address to forward the data. The main function of the switch is to connect various devices together at a location. A router on the other hand connects multiple switches and their respective networks to form a large network. A router works as an intelligent and aware dispatcher, directing traffic by choosing the most efficient route from multiple routes for data transfer. It also protects information from security threats and decides the priority of devices/ services. Accordingly, the layer-2 switching function is a subset of the layer-3 routing function. In respect of the TEC's opinion, the applicant stated that the view taken by the TEC is in alignment with that of the applicant. These devices are capable of performing both switching and routing functions, though routing is the primary function.

5. I have considered all the materials placed before me in respect of the subject devices. I have gone through the submissions made by the applicant during the personal hearing. No reply has been received from the jurisdictional commissioners. Therefore, I proceed to pronounce my rulings on the basis of information available on record. The issue before me is the classification of Nokia 7210 SAS products and their eligibility to avail of exemption under Sr. No. 13N of Notification no. 24/2005, as amended. The goods under consideration are networking devices. Nokia 7210 SAS product family provides service providers with IP routing and carrier ethernet demarcation, access, and aggregation for mobile backhaul, business, and residential service delivery. For enterprise and mission-critical network operators, the 7210 SAS products address stringent requirements for high network resiliency, deterministic network performance, and scalability. The goods principally work as routers along with carrier ethernet switches. These products are Layer-3 routers running IP protocols, segment routing, BGP, etc. These devices provide Layer-3 IP-VPN, EVPN, Internet Enhanced Services (IES) and Layer-2 services like VPLS and VLL. They also provide sophisticated Quality-of-Service (QoS), rich operation management and security features, typically required for routed carrier grade networks.

5.1 Rule I of the GI Rules lays down that the titles of sections, chapters and sub-chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes. CTH 8517 covers Telephone sets, including telephones for cellular networks or for other wireless networks: other apparatus for the transmission or reception of voice, images or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network), other than transmission or reception apparatus of heading 8443, 8525, 8527 or 8528. CTH 8517 is further subdivided into three I-dash sub-headings. The second one-dash subheading covers other apparatus for transmission or reception of voice, images or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network). This group includes apparatus which allows for the connection to a wired or wireless communication network or the transmission or reception of speech or other sounds, images or other data within such a network. Communication networks include within, inter alia, carrier-current line systems, digital-line systems and combinations thereof. They may be configured, for example, as the public switched telephone networks, Local Area Networks (LAN), Metropolitan Area Networks (MAN) and Wide Area Networks (WAN), whether proprietary or open architecture. This group includes ( 1 ) Network interface cards (e.g., Ethernet interface cards) (2) Modems (combined modulators; demodulators) (3) Routers, bridges, hubs, repeaters and channel-to-channel adaptors (4) Multiplexers and related line equipment (e.g., transmitters, receivers or electro-optical converters) (5) Codecs (data compressors/decompressors) which have the capability of transmission and reception of digital information (6) Pulse to tone converters which convert pulse dialled signals to tone signals.

5.2 Subheading 851762 covers machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus. Nokia 7210 SAS products are capable of performing functions such as reception, conversion and transmission of data. Therefore, the impugned products performing various functions including switching and routing are clearly classifiable under subheading 851762. The applicant in their application has stated that these devices are capable of working as both switches and routers. Note 3 to Section XVI states that "Unless the context otherwise requires, composite machines consisting of two or more machines fitted together to form a whole and other machines designed for the purpose of performing two or more complementary or alternative functions are to be classified as if consisting only of that component or as being that machine which performs the principal function ". The devices under consideration are designed to perform two or more functions. Therefore, the classification is subject to the above-mentioned note. The applicant has emphasised that routing is the primary function of these goods and switching is just an additional utility. The relevant excerpt from the data sheet of the said products is reproduced as follows: "The Nokia 7210 SAS product family provides service providers with IP routing and Carrier Ethernet demarcation, access, and aggregation for mobile backhaul, business, and residential service delivery.....As a member of the Service Router (SR) product portfolio, the 7210 SAS leverages the proven Nokia Service Router Operating System (SR OS) and the Nokia Network Services Platform (NSP)for service and operational consistency across the network". From the above, it is evident that the manufacturer is listing these products under the product portfolio of service routers. Accordingly, in trade parlance, these products are known as routers.

5.3 TEC in their letter dated 23.09.2022 has stated that the impugned products are capable of performing both switching and routing functions. However, they have pointed out that based on the datasheet of these products, their primary function appears to be routing. In light of the above, it appears that the subject goods merit classification under subheading 85176290 as routers.

6. In respect of notification benefit under Sr. No. 13N of Notification Noe 24/2005, as amended, the entry exempts routers from 100% BCD. As discussed in previous paras, based on the datasheet, trade parlance and technical opinion of TEC, the subject goods are routers capable of performing some additional functions. In the case of Commissioner of Customs (Import), Mumbai Vs. Dilip Kumar and Company and Ors [MANU/SC/0789/20181, the Hon'ble Supreme Court observed that " 52. To sum up, we answer the reference holding as under -

(1) Exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification.

(2) When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the revenue. "

    Further, while holding the said principle, the Hon'ble Court, in the above-mentioned case, also relied upon the 'Principles of Statutory Interpretation' by Justice G.P. Singh where in a plethora of cases were examined and it was clarified that no words must be added or deleted while construing any legal provision and there is no room for any intendment. In the present case, the entry describes goods as "Routers". It does not specify indentation, conditions or capacity and capability for such routers. From the foregoing paras, it is clear that the goods under consideration are routers. The notification does not distinguish routers based on intended use or capability. It does not bar the routers used by telecom network and support service providers. Therefore, the goods under consideration appear to be covered by the said notification. Accordingly, they are eligible to claim benefit under the above-mentioned notification.

7. In view of the aforesaid discussion, I rule that the Nokia 7210 SAS products are classifiable under subheading 85176290 as routers and are eligible to avail the benefit under Sr. No. 13N of Notification No. 24/2005-Customs, as amended.

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

F.No. CAAR/CUS/APPL/45/2022-O/o Commr-CAAR-Mumbai                                         Dated: 19.10.2022

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

1. M/s Nokia Solutions and Networks India Pvt.Ltd.Plot No, OZ-8, 19, 20, 21, Hi- Tech Sipcot Industrial Park, Oragadam, Chennai — 602105
Email: varun.narang@nokia.com

2. The Principal Commissioner of Customs, Chennai- VII(Air Cargo) New Customs House, Air Cargo Complex Meenambakkam, Chennai
Email: pcommr7acc-cuschrn@,gov.in

3. The Commissioner of Customs, Import, New Customs house, MI Airport, New Delhi- 110037
Email: commraccimp-cusdel@nic.in

4. 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

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

6. 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

7. 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

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

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

10. Guard file.

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