2022(10)LCX0173(AAR)

Brightpoint India 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/32/2022
In
Application No. CAAR/CUS/APPL/59/2022-O/o Commr-CAAR-MUMBAI

Ruling

    M/s Brightpoint India Pvt Ltd. (hereinafter, the applicant) situated on the 5th Floor, Building A, Empire Plaza, LBS Marg, Vikhroli West, Mumbai-400083 and having IEC No. 0503077411, filed an application dated 11.08.2022 seeking advance rulings on the classification of Zebra technologies portable computers viz. vehicle mount mobile computer, rugged wearable voice and data mobile computer. enterprise tablet, rugged tablet. mobile computers, a mobile computer with integrated handheld UHF RFID reader and touch computers:-

2. The applicant is a distributor of Information technology and telecommunication products. The applicant intends to import the above-mentioned types of portable computers. the essential features of which are listed below: –

     The applicant stated that each type of portable computer is available with SIM and without SIM connectivity. Communication functions, if any, are generally performed by these portable computers using Wi-Fi or wireless connectivity. Only when such wireless interne is unavailable, the devices can use the cellular network to function (if devices have SIM card capability and have been fitted with the SIM card). Thus, the cellular network is used sparingly in cases such as during last-mile delivery, when Wi-Fi is not readily available etc. In fact, the calling function provided in products with SIM is a supplementary function since the same has been provided as an additional mode of connectivity apart from Bluetooth, Wi-Fi and GPS.

2.1 The applicant has submitted that the portable computers proposed to be imported by them are classifiable under heading 8471 as automatic data processing, (ADP) machines. for the following reasons:

a. These devices satisfy the criteria set out in heading 8471 to be classified as ADP machines;

b. The principal function performed by these devices is that of processing data, and thus, they merit classification as suggested.

c. The proposed imports are commercially known as “Vehicle Mount Mobile Computer”, “Rugged Wearable Voice and Data Mobile Computer”, “Enterprise Tablet”. “Rugged Tablet”. “Mobile Computers”, Mobile Computer with Integrated Handheld UHF RFID Reader and “Touch Computers” and not as phone/communication devices/mobile phones.

2.2 As per the applicant, to qualify as an ADP machine, goods have to satisfy all the conditions mentioned in Note 6(A) to Chapter 84 and should not be covered by Note 6(D) and 6(E) ibid. The applicant has submitted that the portable computers in question comply with the above requirements, and therefore, are classifiable as ADP machines under CTH 84.71 as tabulated below:-

     As per the applicant’s contention, Chapter notes 6(C), 6(D) and 6(E) are not applicable to the impugned devices as the products are in itself ADP machines. Thus, the proposed imports satisfy all the conditions to be fulfilled by ADP machines.

2.3 The applicant further stated that without prejudice, even if it is assumed that these devices viz. vehicle mount mobile computer, rugged wearable voice and data mobile computer. enterprise tablet, rugged tablet, mobile computers, a mobile computer with integrated handheld UHF RFID reader and touch computers models proposed to be imported are capable of performing more than one function, i.e., capable of functioning other than as an ADP machine, the function of the ADP machine is the principle function and therefore, shall be treated as an ADP machine in terms of Note 3 to Section XVI. The proposed imports are marketed to businesses for ease of logistics and not as a substitute for a communication device. That the portable computer is used to transmit other data, apart from the inventory-related data, the function is only an incidental function and the classification is to be based as if the principal function were the sole purpose. Commercially too, the products are known as ‘-computers- and not as “phone/communication devices”. As per the trade parlance, the proposed imports are known in the market as “vehicle mount mobile computer, rugged wearable voice and data mobile computer, enterprise tablet, rugged tablet, mobile computers, a mobile computer with integrated handheld UHF RFID reader and touch computers” and not as smartphones or telephones.

2.4 The applicant has contended that the product is an automatic data processing machine that cannot be classified under the heading 8517. The proposed imports are not primarily meant for communication purposes. Communication abilities like that of a traditional telephone/mobile telephone are only auxiliary functions that these portable computers perform. The applicant highlighted the following differences between conventional cellular phones/communication devices and impugned portable computers:-

    The applicant contends that the products in question are not classifiable as smartphones under subheading 85171300 as the proposed imports are essentially ADP machines which have an additional feature of cellular connectivity. It is also to be noted that 18 out of the 30 models of portable computers (para. 1) do not have the cellular calling function and thus do not have the capability to accommodate a cellular network system. The way the proposed imports are built, it is evident that it is meant for rugged use and is not sleek or delicate like smartphones available in a similar price range. The proposed imports also don’t have most of the features which are there in smartphones of a similar price range. Furthermore, smartphones of the same price range like the price range of the impugned product are marketed as luxury items for personal use whereas these products are used purely for industrial/trade activities and not as luxury items. Their designs are not sleek or sophisticated like that of smartphones and are rather designed to be used in arduous environments and are made to withstand harsh environments.

2.5 In support of their contention, the applicant submitted Circular No. 20/2013 dated 14.05.13 wherein it was held that the difference between a “smartphone” and a “tablet computer”, is not based on whether the product has a voice calling function or not, but on the principal features that a producer has intended for the device when designing and developing it. Accordingly, the tablet computers are more appropriately classifiable in heading 8471, subheading 847130, by application of General Rules for Interpretation (GRI) of Import Tariff. 1 [Note 3 to Section XVI and Note 5(A) to Chapter 84J and 6″. The Circular also reaffirms the ruling of the World Customs Organisation, regarding tablet computers. The applicant also relied upon the case of Commissioner of Customs (ACC & Import) v. Samsung India Electronics P. Ltd. reported in 2019 (4) TMI 915 – CESTAT MUMBAI, where it was held that the tablets imported were more suited for the purpose of working/reading rather than for the purpose of telephony. specifically as a mobile device, and thus were classifiable under heading 8471 and not heading 8517.

2.6 Contesting the decision of the 68th Session of the World Customs Organization in respect of the classification of RFID readers/ bar scanners having inter-alia SIM capability as classifiable under heading 8517, the applicant stated that the opinions of WCO are not applicable to the products proposed to be imported for the following reasons:

a. Unlike the ruling on tablet computers, which has been expressly accepted by CBIC, no similar circular has been issued accepting and adopting the above ruling.

b. The proposed imports are portable computers and not merely RFID readers.

c. The ruling on tablet computers is more appropriately applied to the proposed imports.

2.7 Further, Vide Ruling dt. 2.6.2022 the Customs Authority for Advance Ruling (CAAR), Mumbai held that similar portable computers imported from the supplier Honeywell International Inc. by the applicant were classifiable under Tariff entry 8471 3090.

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

1. Whether portable computers, viz., vehicle mount mobile computer, rugged wearable voice and data mobile computer. enterprise tablet. rugged tablet. mobile computer. mobile computers with integrated handheld UHF RFID reader and touch computer to be imported by the applicant are classifiable under the subheading 84713090?

2. If the answer to the above question is negative, then what would be the correct classification of portable computers, viz., vehicle mount mobile computer, rugged wearable voice and data mobile computer, enterprise tablet, rugged tablet, mobile computer, mobile computers with integrated handheld UHF RFID reader and touch computer under the Tariff of India?

3. The applicant in their CAAR- 1 form declared that they intend to import the impugned devices from the Air Cargo Complex, Mumbai. Their application. therefore, was forwarded to the jurisdictional commissioner of customs for comments on 18.08.2022. However, no reply has been received, though a reminder has also been sent on 30.08.2022.

3.1 In their CAAR-1 application form the applicant has stated that the questions raised are not pending in their case before any officer of customs, appellate tribunal or any court of law. In response to the question of Whether a similar matter as raised in the question(s) by the applicant has already been decided by the Appellate Tribunal or any Court, the applicant has stated that the classification of a similar product from a different supplier has been decided by the Customs Authority of Advance Ruling, Mumbai and held to be classifiable under CTH 84713090.

4. Personal hearing was held on 21.09.2022 at 01:30 PM. SiShri Vishwanathan T., Blase D’Souza. Chandrashekhar Thakur, Omkar Chaudhary, Sanjay Nare and Ms Tridipa Banerjee appeared on behalf of the applicant. No one appeared on behalf of the jurisdictional commissionerate.. The applicant explained the products covered under their CAAR-1 application one by one. They categorically mentioned earlier advance rulings on many of the products covered under their application but imported from another manufacturer. Further. they stated that the products merit classification under CTH 84713090. They also stated that the products do not merit classification under Chapter 85 (smartphones) as they satisfy the conditions mentioned in note 6(A) of Chapter 84. They finally requested to issue the ruling in their favour. Finally, they submitted a copy of the CAAR ruling in the case of M/s Rishi Enterprises Pvt. Ltd. as well as a copy of the Advance Ruling issued by the Singapore authority.

5. I have considered all the materials placed before me in respect of the subject devices. I have also gone through the submissions made by the applicant during the personal hearing. No reply has been received from the jurisdictional commissionerate. Therefore, I proceed to pronounce my rulings on the basis of information available on record. The issue before me is the classification of vehicle mount mobile computer, rugged wearable voice and data mobile computer, enterprise tablet, rugged tablet, mobile computers, a mobile computer with integrated handheld UHF RFID reader and touch computers. These are portable devices used in enterprise environments to run mobile apps, capture barcodes, take photos and videos. and provide voice and data communications for workers and managers. These devices combine personal computer and scanning functions in a single device that can be outfitted with off-the ­shelf or custom software applications that perform everyday tasks, such as monitoring deliveries, tracking assets, and managing inventory. Because they run on familiar operating systems such as Windows/Android, they offer the same functionality as a desktop computer or laptop. These processors are also equipped with a barcode scan engine and act as their own host, which means one can instantly update and edit information as it is captured. The applicant has suggested heading 8471 as an appropriate classification for these devices. GRI 1(General Rules of Interpretation) of Customs Tariff Act, 1975 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, GRls 2 through 6 may be applied in order. . In order to merit classification under heading 8471, it is clear, that these devices need to satisfy the requirements of note 6(A) to chapter 84, the said chapter note is reproduced below: –

For the purposes of heading 8471, the expression “automatic data processing machines, means machine capable of

(i) storing the processing programme or programmes and at least the data immediately necessary for the execution of the programme;

(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 programme which requires them to modify, their execution, by logical decision during the processing run.

    Therefore, there is a need to examine whether the features and specifications of the devices under consideration meet the criteria as laid down in the relevant chapter note reproduced above. The impugned devices, as seen in para 2.2, appear to be able to satisfy the requirements of an ADP machine. 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 devices, it appears that these are not units of ADP machines, but ADP machines themselves. Note 6(D) to chapter 84 lists certain separate]) 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. As the impugned devices, as described by the applicant, appear to be akin to ADP machines performing capturing of data and its further processing. notes 6(D) and 6(E) do not appear to have application in this case.    

5.1. In respect of possible alternate heading 8517, there is a need to examine the features of these devices in the context of note 3 to section XVI of the Tariff. Heading 8517 covers telephone sets, including smartphones and other telephones ibr 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 84.43, 85.25, 85.27 or 85.28. As the devices also have communication capabilities, including cellular connectivity in 12 out of 30 devices, the classification under heading 8517 needs to be examined. Note 3 to section XVI of the tariff stipulates that, “Unless the context otherwise requires, composite machines consisting of two or more machines fitted together to form a whole and other machines designed.* 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”. From the note, it is clear that a composite machine performing various functions is to be classified according to the principal function performed by such a device. In the instant case. these devices combine computing and scanning functions for monitoring deliveries, tracking assets, and managing inventory. They also have communication capabilities. However. for the products under consideration, automatic data processing appears to be the main function. while other functionalities of said machines are not different from auxiliary functions that could be seen on any computer, such as desktop or laptop computers. In Circular No. 20/2013 dated 14.05.13, clarification has been given by the Central Board of Excise and Customs (CBEC) regarding the classification of “tablet computers” under heading 8471 stating that. “… The mobile phone calling function could he provided by the products only as a supplementary function because it could not be activated without running an operating system of the devices…. These devices are not intended to be a substitute for a mobile phone to make voice calls, but, according to its main technical features is designed as a substitute for laptops. The difference between a “smartphone” and “tablet computer”, is not based on whether the product has a voice calling function or not, but on the principal features that a producer has intended for the device when designing and developing it”. Thus, as per the said circular, tablet computers are classifiable under heading 8471 and not under heading 8517 despite the fact that the product is having cellular connection functionality, considering its principal function as automatic data processing. Similarly, in this case, the principal function of the impugned devices is barcode scanning and data processing for monitoring deliveries, tracking assets and managing inventory. Therefore, these devices appear to merit classification under heading 8471 and not under heading 8517.

5.2 In regards to the classification opinion of the 68th session of the Harmonized System Committee, it is observed that the committee has classified RFID/barcode readers with a mobile operating system capable of scanning and cellular connectivity under subheading 851713. This subheading covers smartphones. Note 5 to chapter 85 states that “For the purposes of heading 85.17, the term “smartphones” means telephones for cellular networks, equipped with a mobile operating system designed to perform the functions of an automatic data processing machine such as downloading and running multiple applications simultaneously, including third-party applications, and whether or not integrating other features such as digital cameras and navigational aid systems”. The note clearly states that these devices are telephones for cellular networks designed to perform the functions of ADP machines. However. the devices under consideration are principally not telephones for cellular networks. In fact, 18 out of 30 models do not have the functionality of cellular connectivity, which shows that the SIM is not an integral part of these devices, as these devices are able to perform their primary function with or without the SIM card. These devices do not appear to be convenient for the purpose of telephony as a principal function. As per Circular No. 20/2013 dated 14.05.13, “the difference between a “smartphone” and “tablet computer”, is not based on whether the product has a voice calling function or not, but on the principal features that a producer has intended for the device when designing and developing it”. The manufacturer is advertising these products as mobile computers/ tablet computers. On their website (https://www.zebra.com/apien/productsimobile-computers.html and https://www.zebra.com/ap/en/products/tablets.html), the manufacturer mentions that “To succeed in today’s digitally-connected business world, you need to give your workers the right tools to complete their unique work tasks faster, smarter and better. Zebra’s portfolio of mobile computing hardware and software tools can help them raise their performance. We offer a range of mobile computer design forms to equip your workers for all use cases—from handhelds and tablets to wearables and vehicle-mounted computers. Whether they run on the Window’s or Android TM operating system, Zebra’s mobile computers feature robust built-in software intelligence that enables your workers to perform at their best, shift after shift”. Therefore, these devices are essentially ADP machines with additional connectivity capabilities, including cellular connectivity for 12 models, as discussed in para. 5.1. Further, the difference between a smartphone and the devices under consideration is already explained in para 2.4. The impugned devices have many features such as higher scanning capacity, ruggedness and enterprise-level security features, which a smartphone for cellular connection lacks. These devices are used by enterprises to capture data. The products are used in inventory management, store receiving, order processing, package tracking, tracing delivering etc. These devices use Wi-Fi connectivity and Bluetooth for information sharing. Cellular connectivity is essentially used for GPS and information sharing, where Wi-Fi is not available. Cellular connectivity is also used for making calls. However, as mentioned earlier. 18 out of 30 models do not have cellular connectivity. In view of forgoing discussion and facts on record, it is my considered opinion that the devices under consideration are not classifiable as smartphones. They merit classification under subheading 84713090.

6. In view of the aforesaid conclusions, I rule that the 30 devices listed in the first paragraph of the ruling are classifiable under heading 8471 and more specifically, under subheading 84713090 of the first schedule to the Customs Tariff Act, 1975.

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

F.No. CAAR/CUS/APPL/59/2022-0/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 Brightpoint India Pvt. Ltd, 5th Floor, Building A, Empire Plaza, LBS Marg, Vikhrolii West, Mumbai — 400083.
Email: brightpoint.impex@ingrammicro.com

2. The Commissioner of Customs (III), Import Air Cargo Complex, Sahar, Andheri (East), Mumbai-400099.
Email: importacc@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: anishguptairs@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