2024(05)LCX0154(AAR)

Denso Haryana Private Limited

decided on 30/05/2024

CUSTOM AUTHORITY FOR ADVANCE RULINGS
O/o THE CHIEF COMMISSIONER OF CUSTOMS
NEW CUSTOM HOUSE, NEAR IGI AIRPORT, NEW DELHI-110037

[Email:cus-advrulings.del@gov.in]

Present

Samar Nanda (Customs Authority for Advance Rulings, New Delhi)

F.NO. VIII/CAAR/Delhi/Denso/19/2024/918

The day of 30th MAY, 2024

Ruling NO. CAAR/Del/Denso/21/2024

Application no. 14/2024 dated 26.03.2024

Ruling

M/s. Denso Haryana Private Limited (`Applicant’), holding IEC 0599001356, are having the registered office at B-1/ D-4, Ground Floor. Mohan Co-operative Industrial Estate, Mathura Road. New Delhi 110048. It is submitted that the application for advance ruling in Form No. CAAR -I along with the relevant annexures and documents as per the provisions of Section 28H of the Customs Act, 1962 has been filed before the Customs Authority for Advance Rulings, New Delhi (CAAR, in short). The said application was received in the secretariat of the CAAR, New Delhi on 26.03.2024 along with their enclosures in terms of Section 28H (I) of the Customs Act, 1962 (hereinafter referred to as the ‘Act’). The enclosed application is submitted to seek confirmation whether-

a. the classification adopted by the Applicant under the Customs Tariff Heading 8517 62 90 of the First Schedule of the Customs Tariff Heading 8517 62 90 of the First Schedule of the Customs Tariff Act. 1975 in relation to import of the product ” Telematics Control Unit” is correct, and

b. the Applicant is eligible to avail concessional rate of Basic Customs Duty under SI. No. 666 of the Notification No. 69/2011-Customs dated 29.07.2011.

1. The application is being preferred by M/s. Denso Haryana Private Limited ('Applicant’) a company incorporated in India tinder the provisions of the Companies Act, 1956 and having its registered head office located Id at New Delhi.

2. Copy of certificate of Incorporation, Articles of Association and Memorandum of Association (as submitted with the Registrar Companies in India) is enclosed herewith as Appendix I (Colly).

3. The Applicant is presently engaged in the business of manufacturing and trading of parts of automobiles. For its trading business, the Applicant infer cilia imports automotive parts in finished form for further supply of these automotive parts to the manufacturers of motor vehicles in India.

4. For the purposes of the present application, the applicant proposes to import Telematics Control Unit (`TCU’/ ‘subject good’) from Denso Corporation Japan (`Denso Japan’). The subject good is to-be imported in finished form and upon its arrival into India the same will be sold to its customers (i.e., automotive companies) in as is condition. The description, technical features, characteristics, and functions of the products are briefly discussed below.

About the subject good -

5. Subject good is a device that enables communication and data exchange between a vehicle and external networks or services. It uses cellular network through which signals are transmitted to the server and eventually to the agent or the specified person. It comes with in-built antenna. The automobile manufacturers use the subject good in motor vehicles to perform the following operations:

a. Connect to cellular, satellite, to transmit and receive data, voice, or multimedia messages.

b. Access and process information from various sensors, or other devices on the vehicle. such as GPS, speed, fuel level, tire pressure, engine status, diagnostics, etc.

c. Provide services or features to the driver, passengers, or fleet managers, such as navigation. emergency assistance, remote control, security, vehicle health, etc.

d. Integrate with other vehicle systems, such as the infotainment system, the engine control unit, the body control module, the anti-lock braking system, etc., to share data or control functions.

e. Store and manage data locally or in the cloud, using encryption, authentication, or other security measures.

6. The above functionality of the subject good in the motor vehicles add to the following features, (which may vary depending on the vehicle model and country) and aids the end user in emergency situations like below

• Vehicle probe/ crash detection/Auto collision notification

• Roadside assistance/ emergency assistance/ information call

• Security/ speed alert etc.

• Stolen vehicle notification

• Geo-fencing

• Remote vehicle commands (Car finder, remote door lock/ unlock, remote ei,10tt:st-),:,

• Virtual dashboard

• Wipe personal data

• Over the air updates

7. To perform the above operations, the good has the capability to interact with the inside of the system of motor vehicle i.e., to receive signal/ information from the various sensors and pass on the information to the server and eventually to the end user through the cellular network. Further the subject good can also remote commands from in-phone application or web-portal and view vehicle maintenance and status from such in-phone application or web portal. Picture of the subject good in as imported condition is extracted hereunder for ease of reference.

8. Copy of the data sheet of the subject good indicating working of the of the subject good in different situations is annexed with this application as Appendix 2.

9. Subject good may consist of various components, such as a microprocessor, a memory. a SIM card. network access device, an antenna, a connector interface, etc., depending on the design and specifications. A TCU may be installed as a standalone device, integrated into another vehicle system, or connected to a smartphone or tablet or other interfaces.

10. The subject good comes embedded with the Network Access Device (NAD) and E-sim which provides it with the capability to interact and pass on the received information to the server and subsequently to the end consumer and vice versa, in as imported condition.

11. When the subject good receives signal from different parts of the motor vehicle, it converts such signal to Radio frequency (`RF’) signal and transmit such signal to the server by way of the connection established through NAD and E-Sim. From the above, it appears that the principal function of the subject good is to act as transmission, conversion, and reception apparatus and to provide further the information or data it receives from the input’s end to the output’s end.

12. The Applicant qualifies as an ‘applicant’ under Section 28E(c) of the Customs Act, 1962 (`Customs Act’)

13. Section 28E(c) of the Customs Act reads as under:

“(c). “applicant” means any person -

(i) holding a valid Importer-exporter Code Number granted under section the foreign) Trade (Development and Regulation) Act, 1992; or

(ii) exporting any goods to India; or

(iii) with a justifiable cause to the satisfaction of the Authority,
who makes an application for advance ruling under section 281-1; “

14. The Applicant is a company registered in India and is holding a valid Importer-Exporter Code (`IEC’) Number 0599001356 and PAN Card bearing Number AAACD6817F. In this regard. a copy of the IEC certificate and copy Pan Card are enclosed herewith as Appendix 3. Thus. the Applicant is rightly covered under the definition of ‘applicant‘ as provided under Section 18E(c)(i) of the Customs Act for making this application.

Question raised for advance ruling by the Applicant squarely falls within the ambit of Section 28142)(a) of the Customs Act

15. Section 2811 of the Customs Act Provides for the quest ions in respect of which an advance ruling may be sought by an applicant , Section 281 I of the Customs Act reads as under

“28H. Application for advance Ruling

(1) An applicant desirous of obtaining cut advance ruling under this Chapter may make an application in such from and in such manner and accompanied by such fee as may he prescribed, stating the question on which the advance ruling is sought.

(2) The question on which the advance ruling is sought shall he in respect of -

(a) classification of goods under the Customs Tariff Act, 1975 (51 of 1975);

(b) applicability of a notification issued under sub-section (1) of section 25, having a bearing on the rate of duty;

(c) the principles to be adopted fur the purposes of determination of value of the goods under the provisions of this Act.

(d) applicability of notifications issued in respect of tax or duties under this. Act or the Customs Tariff Act, 1975 (51 of 1975) or any tax or duty chargeable under any other law for the time being in farce in the same manner as duty of customs leviable under this Act or the Customs Tariff Act;

(e) determination of origin of the goods in terms of the rules notified under the Customs Tariff Act, 1975 (51 of 1975) and mutters relating thereto.

(f) any other mailer as the Central Government may, by notification, specify.”

(Emphasis supplied)

16. The Applicant wishes to obtain the advance ruling on questions relating to classification of subject 2,00d and applicability of exemption notification on import of subject good under Section 25(1) of Customs Act as detailed out in Annexure II. Therefore, the questions raised by the Applicant falls within the purview of the provisions of Section 28H(2)(a) and 28H(2)(b) of the Customs Act. Hence. application for advance ruling is being filed in conformity with the provisions of Section 28H of tile Customs Act.

Question raised under the present advance ruling_ application is not before any officer of Customs, the Appellate Tribunal or any Court.

17. As per Section 281 (2)(a) of the Customs Act with regard to procedure on advance ruling application, no application for advance ruling will be accepted if the question raised in the application is already pending before any forum. Relevant extracts of the provision are reproduced below:

“281. Procedure on receipt of application. -

(1) ……

(2) The Authority may, after examining the application and the records called for. by order, either allow or reject the application:

Provided that the Authority shall not allow the application where the question raised in the application is -

(a) already pending the applicant’s case before any officer of customs, the Appellate Tribunal or any Court,

(b) the same as in a mailer already decided by the Appellate Tribunal or any Court,’

(Emphasis supplied)

QUESTION 1: CLASSIFICATION OF THE SUBJECT GOOD

18. For the subject good, the proposed classification and applicant’s interpretation proposed classification is discussed as uncle”.

19. The import and export of goods into and out of India is regulated by the Customs Act, 1962, Section 12 of the Customs Act is the charging section which stipulates that duties of customs shall be levied on all goods imported into India or exported out of India at such rates as may be specified under the Customs Tariff Act, 1975 (`Tariff Act’).

20. Section 2 of the Tariff Act Provides that the rates at which BCD shall be levied under the Customs Act are specified in two schedules, namely, the First Schedule and the Second Schedule. First Schedule of the Tariff Act deals with the applicable duty structure on import of goods and the Second Schedule deals with the applicable duly structure on export of goods. To determine the said rates of BCD applicable on the imported good it is important to identify the tariff item under which the good would fall under the First Schedule of the Tariff Act.

21. Classification of goods covered under the Customs Thrill is done as per the General Rules of Interpretation (‘GRI’). GRI 1 to 5 lay down the principles determining classification of goods under a specific Heading Whereas GRI 1 to 5 is applicable if the objective is to determine the classification of goods in the Sub-headings ail Heading.

22. GRI 1 stipulates that the goods under consideration should be classified in accordance with the terms of the Headings and any relevant Section or Chapter Notes. These Section or Chapter Notes and Sub-Notes give detailed explanation as to the scope and ambit of the respective Sections and Chapters. These Notes have been given statutory backing and have been incorporated at the beginning of each Section / Chapter. For ready reference, Rule I is extracted herein below:

“Classification of goods in this Schedule shall be governed by the following principles:

1. 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 and, provided such headings or Notes do not otherwise require, according to the following provisions …”

23. The Larger Bench of the Hon’ble Tribunal in the matter of Saurashtra Chemical, Porbandar vs. Collector of Customs, 1986 (23) E.L.T. 283 (Trt -LB) had held that the tariffs must be interpreted in the light of relevant Section and Chapter Notes which are statutorily binding like the Headings themselves. Thus, the Section and Chapter Notes have an overriding force on the respective Headings. This judgment was approved by the Hon’ble Supreme Court of India in the case of Saurashtra Chemicals vs. Collector of Customs, 1997 (95) E.L.T. 455 (S. C.).

Harmonized System of Nomenclature

24. The Customs Tariff in India is based on Harmonized Commodity Description and Coding System, generally referred to as Harmonized System of Nomenclature (`HSN’) developed by the World Customs Organization (`WCO’) which is applied uniformly by more than 137 countries of the world. Under the HSN, various goods are classified under different headings, sub-headings and tariff items. For the purposes of the uniform interpretation of the HSN, the WCO has published detailed explanatory notes to HSN which have long been recognized as a safe guide to interpret the Tariff Schedule.

25. In the case of O. K. Play (India) Ltd. vs. C.C.E. Delhi III, 2005 (180) E.L.T. 300 (S.C), a 3-member bench of the Hon’ble Supreme Court of India made the following observations:

(a) There cannot be a static parameter for correct classification; (b) HSN along with the explanatory notes provide a safe guide for interpretation of an Entry; (c)Functional utility. design, shape and predominant usage have also got to be taken into account while determining the classification of an item; (d) Aforementioned aids and assistance are more important than the names used in the trade or common parlance in the matter of correct classification.

26. It was held by the Hon’ble Supreme Court in L.M.L Limited vs. Commissioner of Customs 10 (258) E.L.T. 321 (S.C.) that in order to resolve a dispute on tariff classification internationally accepted nomenclature emerging from HSN Explanatory Notes is a safe guide further HSN Explanatory Notes are also guide Further HSN Explanatory Notes are also dependable guide for interpretation of Customs Tariff some other judicial pronouncements wherein this proposition was also affirmed, upheld and followed have been enumerated below:

i. CC Gujarat vs Perstorp Electronics Dd., (2005)7 SCC 118, (2005) 186 ELT. 532 (3_member S.C. bench);

ii. CCE vs. Phil. Corporation Lid, (2008) 223 E.L.T. 9 (S C.)

27. Therefore, the HSN Explanatory Notes are an important aid for ascertaining the classification good, in addition to the 00 and corresponding Chapter Notes and Section Notes. In the light of above facts, to analyse the classification of above product Following needs to be kept in mind:

a. General Rules of Interpretation (GRI): b Heading/Sub-Heading of the First Schedule in the conjunction with Section Chapter Explanatory notes; Principle function of the Subject good.

28. To ascertain the classification and by application of GRI I, the following Customer Tariff Heading (CTH) require attention i.e CTH 8517 and CTH 8708.

Analysis of Chapter 85

29. Given the above, CTH 8517 merits consideration, which provides for “other apparatus for the transmission or reception of voice, images, or other data”. As stated in Annexure I above. the subject good imported by the Applicant is a networking device which is going to be used in the motor vehicles.

30. As per Rule I of the OR!, subject good should be classified in accordance with the terms of the headings and any relevant and Section or Chapter Notes.

31. CTH 8517 corers apparatus used for transmission or reception of voice, images or other data, including apparatus used for communication inn wired or wireless network. The machines whose Principal function is to transmit and / or receive data or communicate in wireless network are classified under this heading,

32. Upon reading of the HSN Explanatory Notes to the CTH 8517, it is understood as below -

“This heading corers apparatus for the transmission or reception of speech or other sounds, images or other data between two points by variation of an electric current or optical wave .flowing in a wired network or hi. electro-magnetic waves in a wireless network. The signal mar be analogue or digital. The networks, which may be interconnected, include telephony, telephony, radio-telephony, radio-telegraphy, local and wide area networks.”

33. In view of the above extracted portion of the HSN explanatory notes, it appears that CTH 8517 covers such apparatus which is used in transmission and reception of data and wherein the data is transmitted by way of electromagnetic waves in a wireless network. As discussed in Annexure 1 of this application, where the subject good provides for transmission and reception of data in the RF form in the wireless network, by application of the GRI Rule I and considering the HSN explanatory notes. the subject good appears to merit classification under CTH 8517 at four-digit level.

34. It is pertinent here to note that the capability of subject good to perform transmission and reception function in wireless mode is there at the time of import. This is evident from the fact that at the time of import, the subject good comes embedded with the NAD and E-sim which provide the subject good with the capability to transmit and receive the data in the wireless network. This is established from the fact that the subject good in as imported condition has the IMEI number (for the NAD) and ICCID Number (for the E-sim) mentioned on the subject good (refer picture of TCU in as imported form below). This goes on to show that the TCU in as imported condition is capable to perform transmission and reception function, and hence merits classification at CTH 8517 at the four-digit level.

35. Given the above, the Applicant now needs to ascertain the classification at the six-digit and eight-digit level.

36. At six-digit level, CTH 8517 62 covers “machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus”. From the plain reading of the tariff sub heading, it appears that only those machines which independently perform all three functions of reception, conversion and transmission are covered under CTH 8517 62. Hence, in case a product only performs one or two of such aforesaid functions, it will not be covered under the purview of CTH 8517 62. In this regard, reliance is placed on the decision of the Hon’ble Bombay Tribunal in the case of CCE vs. Reliance Jio 1nfocom Ltd., 2019 (369) E.L.T. 1713 (Tri - Born) wherein while determining the classification of ‘Antenna’ the court held that all the three functions of reception, conversion and transmission are required to be performed by a machine to fall under CTH 8517 62.

37. As discussed in Annexure 1 above, signals received by the subject good from other parts of ‘the motor vehicle are first converted into RF signals for transmission in wireless mode, and then the RF signals are transmitted to the server and subsequently to the end user by way of connection established through the usage of NAD and E-sim.

38. In a similar manner, in case the user intends to provide any of the specified comma! through the smart phone/web portal, the command initiated by the user is first sent t server passes the command through telecom network to the subject good. Upon command is converted into form of RF signals and the same is passed on t part/component of the motor vehicle for execution.

39. In view of the functionality of the subject good discussed above, it is evident that the subject good performs transmission, conversion, and reception of signals in a wireless network and hence, merit classification under CTH 8517 62 at the six-digit level. Since the subject good is not specifically covered under any specific tariff entry at the eight-digit level, it merits classification in the residual category of ‘Others’ at eight-digit level i.e., CTH 8517 62 90.

40. In addition to above, it is also imperative to refer Note 2 (a) of Section XVI which provides for classification of parts of machines. II states that parts which arc goods orally heading of Chapter 84 or 85 ;ire in ;ill eases to he classified in the respective headings. Relevant extract of Section Note has been reproduced below for ease of reference -

“(a) parts which are goods included in any of the headings of Chapter 84 or 85 (other than headings 8409, 8431, 8448, 8466, 8473, 8487, 8503, 8522, 8529, 8538 and 8548) are in all cases to be classified in their respective headings; “

(Emphasis supplied)

41. Therefore, upon bare reading of the above stated Section Note, it can be construed that TCU which is an identifiable machine/ good as a whole and is going to be used in the motor vehicle merits classification under the Chapter 85 only. Analysis of Chapter 87

42. At this juncture, the Applicant also considers it relevant to discuss heading of Chapter 87 under Section XVII of the Customs Tariff which covers vehicles (other than railway or tramway rolling stock) and parts and accessories thereof. The parts and accessories of motor vehicles are covered under CTH 8708. To understand the coverage of parts and accessories of motor vehicles, it is important to refer to Section notes of Section XVII.

43. In terms of Section Note 2(f) to Section XVII, electrical machinery and equipment are not regarded “parts or accessories” of the goods of Section XVII even if they are identifiable for use with these goods. Note Section 2(f) to Section XVII is extracted hereunder for reference purposes.

“2. The expressions -parts” and ‘parts and accessories” do not apply to the following articles, whether or not they are identifiable as for the goods of this Section: (f) electrical machinery or equipment (Chapter 85);” (Emphasis supplied)

44. The Section Note 2 (f) of Section XVII thus explicitly excludes the electrical machinery or equipment of Chapter 85 from the purview of Section XVII. Further, reference is made to Note 3 to Section XVII which provides that references in Chapter 86 to 88 to the “parts” or “accessories” do not apply to parts or accessories which are not suitable for use solely or principally with the articles of those Chapters. A part or accessory which answers to a description in two or more of the headings of those Chapters is to be classified under that heading which corresponds to the principal use of that part or accessory. In the instant case, the product is principally used for the purposes of transmission, conversion, and reception of data from any part of the motor vehicle to the end user or vice versa.

45. While Note 3 prescribes that a part or an accessory to merit classification under CTH 8708 should be suitable for use solely or principally with motor vehicles, Note 2(f) states that even such a part. which is suitable for use with motor vehicles, will not be regarded as part or an accessory classifiable under Chapter 87, if such a part is an electrical machinery or equipment of Chapter 85.

46. Further, the HSN explanatory notes under Section XVII explain the scope of the terms “parts and accessories” for the purpose of Section XVII. Relevant portion is extracted hereunder -

III) PARTS AND ACCESSORIES

It should be noted that Chapter 89 makes no provision for parts other or accessories of ships, boats or floating structures. Such parts and accessories every identifiable as being for ships etc., are therefore classified in other respective headings. The other Chapters of this Section each provide for the classification of parts and accessories of vehicles, aircraft or equipment concerned. It should, however be noted that these headings apply only to those parts or accessories which comply with all three of the following conditions:

It should , however be noted that these headings apply only to those parts or accessories which comply with all three of the following conditions:
They must not be excluded by the terms of Note 2 to this Section (see Paragraph (A) below),

They must be suitable for use solely or principally with the article of Chapter 86 to 88 (see paragraph (B) below , and

They must not be more specifically included elsewhere in the Nomenclature (see paragraph (C) below:

(A) Parts and accessories excluded by Note 2 to Section XVII
This Note excludes the following parts and accessories , whether or not they are identifiable for as for the article of this Section.
(7) Electrical machinery or equipment of Chapter 85, for example:
(Emphasis supplied)

47. From the above, it is apparent that all the electrical machinery or equipment covered under Chapter 85 are not regarded as “parts or accessories” of motor vehicles classifiable under Chapter 87, as they stand excluded from the purview of Section XVII in view of the above.

Specific entry to prevail over general entry by virtue of GRI 3(a)

48. Without prejudice to the discussion above, reference is made to Rule 3(a) of the GRI which provides that the heading that provides the most specific description of the goods shall be preferred to headings providing a more general description. In this regard, Rule 3 of the GRI is extracted as below: -

“3. When by application of rule 2(b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows :

(a) The heading which provides the most specific description shall be preferred to headings 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 put up for retail sale, 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.

(b) Mixtures, .composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to (a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable.

(c) When goods cannot be classified by reference to (a) or (b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration.” (Emphasis supplied)

49. Reliance in this regard is placed on the case of Mauri Yeast India Pvt. Ltd. vs. State of UP, 2008 (225) E.L.T. 321 (S.C.) wherein it was held by the Hon’ble Supreme Court that if there is a conflict between two entries one leading to an opinion that it comes within purview of tariff entry and another the residuary entry, the former should be preferred.

50. Further, in the case of Dunlop India Ltd. & Madras Rubber Factory Ltd. vs. Union of India and Ors., 1983 (13) E.L. 1566 (S.C.), it was held by the Hon’ble Supreme Court draw. classifiable under specific item cannot be classified under residuary Item.

51 . Further, reliance is placed on the decision of Hon’ble Tribunal, Mumbai bench in the case of Sarthi Superware India Ltd. v. Comm of Customs, Nhava Sheva-Ill, 2020 (371) E. Mumbai), where the Tribunal observed that it is general principle of classification that Specific entry should be preferred over the general entry.

52. it is submitted that where the goods satisfy the requirements of a specific entry, that entry should cover the goods rather than the residual heading. In view of GRI 3(a) and the judicial precedents cited ;Move, where there is a specific heading for the subject good under Chapter 85 (i.e.. CTH 8517), it will not merit classification in the residuary heading as parts of motor vehicles under CTH 8708,

Legal developments after the decision of Hon’ble Supreme Court in the matter of M/S Westinghouse by Farmer LTD. and its application in the present case

53. in the decision Westinghouse Saxby Former Ltd. vs. Commissioner of Central Excise, Calcutta- :2021 (3) -Supreme Court, while deciding upon classification of relays used for railway signaling system, the I Hon’ble Supreme Court has held that those parts which are suitable for use slouch or principally with an article of Chapter 8() cannot be taken to a different Chapter as the same would negate the very objective of group classification. In the above decision, the Hon’ble Supreme Court does not discuss the WCO General explanatory Notes to Section XVII and XV, which indicate that if the goods are specifically exeluded under Note 2 or if’ the goods have a specific classification under another heading, the goods cannot he classified as parts and accessories, irrespective of whether the goods are used along with such goods.

54. With regard to the above. kind attention is invited to the Clarification on the classification of parts and accessories of motor vehicles issued by the Office of the Commissioner of Customs (Import) Air Cargo Complex, Sahar, Andheri (E), Mum bai vide F. No. S/3-Misc-03/2019-20/GrVB/ACC dated 21st May 2019 (annexed as Appendix 4). To streamline the assessment of parts and series of automobiles, the Office of Commissioner issued the said Note wherein legal position was explained in the following manner.

“As per explanatory notes to Section XVII of the HSN, parts and accessories of the vehicles, aircraft or equipment concerned should be classified under headings of section XVII, only if they comply with following conditions,.

(a) They must not be excluded by the terms of Note 2 to Section XVII

(b) They must be suitable for use solely or principally with the articles of Chapters 86 to 88 and

(c) They must not be more specifically included elsewhere in the Nomenclature.- "

55. In the instant case, the product under consideration has specifically been excluded by the working of Note 2 (0 of Section XVII (covering Chapter 86 to 89) which provides that the expressions -parts.” and “parts and accessories” do not apply to the electrical machinery or equipment (Chapter 85). Furthermore, there is a more specific CTH as against general CTH under Chapter 87. Therefore, the product under consideration cannot be classified under the Chapter 87 in view of the conditions at point (a) and (c) of the aforementioned circular issued by the Commissioner’s office.

56. The principal of classification discussed in the Hon’ble Supreme Court’s decisions can be summarized as under.

a. In the Westinghouse judgment (supra), the end use test to determine the classification has been preferred over the exclusion provided under Note 2(t) to Section XVII.

b. The judgment of the Supreme Court in the matter of Commissioner of Central Excise, Aurangabad Videocon Industries Limited (2023-TIOL-25-SC-CUS) has emphasized on the exclusion note over the sole/ principal use test.

57. Further post the judgement of the Hon'ble Supreme Court in the case of Westinghouse Saxby (supra), the CBIC on 5th January 2022 issued instruction No. 01/2022-Customs with subject " "Implication of the judgement of the Hon'ble Supreme Court in the case of M/s Westinghouse Saxby Farmer Ltd. Vs Commissioner of Central Excise, Calcutta reg". (annexed as Appendix 5). This was to align with the divergent practice being followed on assessment of parts aftèr the Westinghouse Saxby judgment (supra) was issued. In the said instructions while making a reference to the judgement of the Hon'ble Supreme Court in the case of M/s Intel Designs Systems (India) P. Ltd. Vs Commissioner of Customs & Central Excise, among others the CBIC, has Instructed as follows -

“3. In the context of the divergent practices arisen, it is noted that the classification of ‘parts’ of goods falling under Section XVII of the Customs or Central Excise Tariff’ is a complex issue. Further, apparently, the section notes have been suitably applied in relevant judgements of the Hon’ble Supreme Court on issues of classification of parts and accessories. Thus, the collective wisdom o/ these judgments’ indicates the manner in which such classification issues’ are to be approached Few of such judgments’ are illustrated in succeeding paragraph:

3.1 of M/S Intel Design Systems (India) P. Ltd. Vs Commissioner of Customs & C. Ex-2008

A. Apart from the reliance on the section notes and the chapter notes the court in this judgment also considered the HSN explanatory notes wherein three conditions that need to be fulfilled for goods tobe classified under section XVII are mentioned namely -

a. They must not be excluded by the terms of Note 2 to Section XVII and

b. They must be suitable for use solely  or principally with the articles of chapter 86 to 88 and

c. They must not be more specifically included elsewhere in the nomenclature

B. While relying on these conditions, the Hon’ble Supreme Court held - “The items, therefore, manufactured by the appellants are identifiable or are in the nature of goods falling under Chapter 8536. Since these fall under the category of excluded goods under chapter notes, even though they are used specifically solely or principally with the armoured vehicles of Chapter Heading 8710, they are classifiable under chapter heading 853690 only as held by the adjudicating authority.”

C. By taking cognizance of the conditions mentioned in the HSN explanatory notes the exclusionary clause under Note 2 has been given precedence over the sole or principal use of the items. It was recognized that since one of the conditions i.e. of the exclusions mentioned in Note 2 (condition (a)) was not met, the said goods could not be classified under Chapter 87.”

58. Taking cognizance of the rationale laid down in the judgement in the matter of M/s Intel Design Systems (India) P. Ltd. Vs Commissioner of Customs & Central Excise and the instructions issued by the CBIC as discussed above, for goods to be classified under the chapters of Section XVII. fulfilment of the three-layer test postulated “Under the Sub-heading (iii, Parts and Accessories” of the explanatory notes to Section XVII as issued by the WCO is imperative. It is only when all these three conditions are met that a particular item would be classified under the Chapters of Section XVII.

59. In other words, the shape/ design/ specification of a product is not a determinant of principal or sole use. Further, Note 3 of Section XVII cannot be applied blanketly and needs to be construed narrowly otherwise the exclusion under Note 2 would become superfluous. To this extent, the Videocon judgment is particularly important, and it is also aligned with the WCO classification principles as propounded in the CBIC Circular (supra).

60. It may be added here that the CBIC had issued a further clarification on the issued vide Instruction 25/2022-Cus. dated 03.10.2022 (annexed as Appendix 6), clarifying that the law continues to remain the same and hence the aforesaid instruction would remain valid without any changes.

61. In this context, additional reliance is also placed on the judgment of Hon’ble Delhi Tribunal, in case of Kafila Forge Ltd. v. Principal Commissioner of Customs, (import) 1CD TKC, Customs 12023 (7) TMI 1251- CESTAT New Delhi Delhi’, where the Tribunal has held that parts of transmission shafts fall under 8483 and not under 8708. In this case, the revenue relied upon Westinghouse judgment to classify the goods under heading 8708 based on sole or principal use. While the bench did not discuss the applicability of Westinghouse judgment but independently evaluated the classification based on section notes and chapter notes and a few other rulings. The bench observed that on comparison of both the heading 8483 and 8708, the impugned goods i.e., Universal Joint Parts to be used in transmission shaft are more specifically covered under sub heading 8483 60 90 whereas nothing specific is found in respect of these goods under the heading 870

62. This ruling is of importance since it is passed post Westinghouse judgment and contention of the Revenue to classify the item based on sole or principal use as laid down in the Wasting use case has not been considered. This ruling effectively reiterates that classification based on section and chapter notes would still prevail despite Westinghouse judgment (although this ruling is not explicitly discussed by the bench).

63. To sum up, it is submitted in the present ease that the subject good being electrical equipment falling under Chapter 85. does not satisfy the very first condition of three-layer test, as these are covered under the exclusion in Note 2 (11 of the Notes to Section XVII. On the other hand, coverage under chapter 85 is dead) supported through the principles of classification viz. GRI and the explanatory notes, as discussed supra.

64. According, it is the humble submission of the Applicant that the subject good should merit classification under the specific tariff line available for TCU i.e., CTH 8517 62 90.

QUESTION 2: APPLICABILITY OF NOTIFICATION NO 69/2011-CUSTOMS DATED 29,0-.2011,

65. The Central Government vide Notification No. 69/2011-Cus dated 29.07.2011 has exempted all the goods falling under CTH 8517 from the whole of BCD leviable under the First Schedule of Customs Tariff Act, 1975 when the goods are imported from the Japan. The Notification further provides that the exemption of import of goods notified shall only be available when the origin of such goods is from Japan and the provisions laid down in Customs Tariff (Determination of Origin of Goods wider the Comprehensive Economic Partnership Agreement between the Republic of India and Japan) Rules, 2011 are complied with. The relevant extract of the entry is reproduced hereinbelow and copy of notification is enclosed as Appendix 7:

66. It is the understanding of the Applicant that the benefit provided under the notification is subject to the condition that the goods being imported from Japan should be originating in Japan and the provisions laid down in Customs Tariff (Determination of Origin of Goods under the Comprehensive Economic Partnership Agreement between the Republic of India and Japan) Rules, 2011 are complied with. So long as the imported goods are rightly classifiable under CTH 8517 62 90 and are originating in Japan, the Applicant is eligible to avail concessional duty benefit @ 0% BCD. To this extent, it is humbly requested before the Hon’ble Authority that the above understanding of the Applicant may be accepted.

PRAYER

In the light of the above, a ruling is sought from the Hon’ble Authority as follows:

A. The subject good is correctly classifiable under Customs Tariff Heading 8517 62 90 of the First Schedule of the Tariff Act

B. The Applicant is concessional rare of BCD @0% as per No. 666 to NN 69/2011 dated 29.07.2011 on import of subject good subject to satisfaction of origin criteria that the goods are originating from Japan.

2. The Comments of the Air Cargo Imports (Customs) Commissionerate,  New Delhi Delhi wit regard to points raised in the application are furnished as under:

(i) Para 3 (i) Eligibility of the applicant, in terms of Section 28E(c) of the Cust seek such advance ruling:

Yes, M/s Denso Haryana Pvt. Ltd. is a valid applicant within the meaning of Sect! of the Customs Act, 1962, having IEC Code 0599001356.

(ii) Para 3 (ii) Applicability of proviso (I) of section 28-I (2) of the Customs Act, 1962 regarding the question raised in the application:

As per records available in the Section no application for !he advance ruling of the applicant is pending with any officer of the Customs, other Appellate trilemma or any Court as per proviso of Section 28(1)(2) of Customs Act, 1962

(iii) Para3 Specify whether the claim of the applicant regarding the nature of activity, i.e, it is ongoing ‘proposed is correct:

As pet Section :281: (b)) “advance ruling” means a written decision on any of the questions referred to in Section. 28H raised by the applicant in his application in respect of any goods prior to its importation or exportation".

It is clear from the plain reading of the above that there should be a written decision of “advance ruling” on the questions referred by the applicant in respect of any goods prior to its importation. However. the applicant in its application has already submitted that they are already involved in importation of the rebind goods i.e. “Telematics Control Unit”.

Therefore, the applicant is seeking advance ruling for the classification of the goods under CTH $5176290 and the a\ ailment of benefit on BCD in terms of notification No. 69/2011 SI. No. 666 i.e. COO benefit for the goods imported from Japan. It appears that the applicant does not fulfil the provisions of Section 2SE(b) of the Customs Act, 1962 to seek advance ruling in respect of the goods which are already being imported by them in commercial quantity before any written decision of the authority. In view of the above, it. appears that the application filed by M/s Denso Haryana Pvt. Ltd. (hereinafter referred to as the ‘importer’) merits rejection in terms of Section 28E (b) of the Customs Act, 1962.

3. The point wise comments to para 3 (iv) of the aforementioned letter issued by the CAAR,  New Delhi Delhi is as under:

• The matter is examined and it is found that the basic issue as involved in the said application for advance ruling under Section 28H of the Customs Act, 1962 as filed by the importer pertains to the Question of Law/fact that whether the said goods i.e. “Telematics Control Unit” are rightly classifiable under CTH 85176290 is maintainable or otherwise. In this regard, as per the technical literature as submitted by the importer, the said goods have the ability to perform the said operations such as to transmit and receive data/voice or multimedia message; access and process information from various sensors; features such as navigation, emergency assistance, remote control etc; share data and control functions and to store and manage data locally. Further, the said goods are employing the cellular network which is 4G/5G based and therefore falls under the category of 4G/5G LTE products which in terms of Board’s Circular 08/2023 dated 13.03.2023 falls under the CTH 85176290.

• Further, the importer, has also seek the clarification on the matter that whether the said goods as classifiable under CTH 85176290 are eligible for the benefit under Customs Notification No. 69/2011 dated 29.07.2011, SI. No. 666. As such, as per the reading of the said notification which pertain to the exemption on BCD for the goods imported pertaining to country of origin as Japan, the said notification covers all the goods falling under the four digit CTH i.e. 8517 irrespective of the nature and description of the goods.

• Further it is pertinent to mention that as per the statement as submitted by the importer that they are already involved in the import of said goods and the said fact may be examined by the Authority of Advance ruling before which the importer has filed the said appeal.

3. A personal hearing in the matter was conducted on 21.05.2024. During the personal hearing, the authorized representative of the applicant reiterated the submissions already made in their amplicon for advance ruling and submitted additional submission as follows: -

4. ADDITIONAL SUBMISSIONS ON BEHALF OF TILE APPLICANT

 I. Further, the Applicant acknowledges that it is in receipt °idle letter dated 10.05.2024 the Deputy Commissioner of Customs, Technical Branch, ACC NCH, issued to the Deputy Commissioner of Customs, Group-5A & SC, NCH,  New Delhi Delhi (‘Ld. DC, Group 5A&5C’), a copy of which had been forwarded to us by your good office.

II. The Applicant understands that the aforementioned letter has been shared by the Ld. DC, Group 5A&5C, whereby he has expressed his opinion/comments in relation to the Advance Ruling Application tiled by us. The Applicant has perused the letter dated 10.05.2024 and the Applicant understands that the Ld. DC’, (iron’) 5A&SC has opined that the Advance Ruling Application filed by us merits rejection, As per the Id, DC, (intuit 5A8t5C, since the Applicant is already involved in the of importing (product for which the Advance Ruling Application has been filed) in commercial quantity, the Applicant is not eligible to file an Advance Ruling Application in terms of Section 28 E(h) 01. (the Customs Act.

III. Section 28 F (b) provides the definition of ‘advance ruling’ as “a twitter; decision on any of the to in Section 28H raised by the applicant in his application in respect of any goods prior to its importation or exportation.”

IV. The Applicant understands that the I ,d. DC, Group 5A&5C has interpreted the phrase “in tweet of goods prior to its importation or exportation” to mean that an Advance Ruling Application can only be filed for any goods prior to its first importation or exportation. Accordingly, since in the present case the Applicant is already involved in the importation of ICU an advance ruling in respect of this goods is not permissible, as interpreted by the Ld. DC, Group 5.A&SC,

APPLICANT’S RESPONSE TO THE LETTER DATED 10.05.2024:

V. In view of the above, the Applicant wishes to submit that the interpretation of the definition of term “advance rulings” as adopted by the Ld. DC, Group 5A&5C does not seem to be correct. In this regard, the Applicant wishes to put forth its submissions justifying as to why the Advance Ruling Application tiled by the Applicant should not be rejected. The submissions have been discussed in brief in the ensuing paragraphs.

Scope of Customs Advance Ruling over the years:

VI. Advance Ruling under the Customs Law was introduced in the year 1999 with an aim to create an avenue for the importers and exporters to seek correct understanding of tax positions and to prevent any unwarranted tax litigations. Since its inception, the mechanism of Advance Ruling under Customs Law has undergone various changes.

VII. Up until the year 2013, an advance ruling could be sought only in relation to proposed activity of import and export. Advance Rulings Applications for an existing activity of the importer or exporter were precluded from the purview of Customs Advance Rulings. Vide the ruling dated 13.05.2011 in the case of Oracle India Pvt. Ltd., CAAR.  Delhi took the restrictive approach and limited the scope of advance ruling and stated that advance ruling is confined to an activity which is proposed to be undertaken and when an existing activity is sought to be expanded, the applicant was not held eligible to seek an advance ruling on the new line of business it proposed to start during its existing import trade. However, it was clarified that an existing entity, which is not in the import-export business but proposes to start the business of import and export, would not be precluded from approaching CAAR for an advance ruling.

VIII. Thereafter during the period 2013 to 2018, there was a gradual shift and now Advance Rulings could also be sought in relation to new business of import or export proposed to he undertaken by the existing importer or exporter. Consequentially, advance ruling could also he sought in relation to new business of import or export proposed to be undertaken by the existing importer or exporter. For instance, an existing entity engaged in import of Model A mobile phone could now approach CAAR for an advance ruling on the proposed import of Model ,B trite hone.

IX. Thus, up until 2018, an Advance Ruling under Customs Law could only be filed for a particular goods before its first import or export. Hence, the interpretation adopted by the Ld DC Group 5A&5C in relation to eligibility of obtaining advance ruling could only hold the year 2018.

Amendment in law relations to Customs Advance Rulings vide Finance Act, 2018:

X. In the year 2018, major amendments were carried out to the scheme of advance rulings vide the Finance Act, 2018, including the amendment of the definition of “advance ruling”. As per the amended definition, “advance ruling” now meant to be “a written decision on any of the questions referred to in section 2811 raised by the applicant in his application in respect of our goods prior to Its importation or exportation.

Xl. Thus. in view of the amendment vide the Finance Act, 2018, there was a shift in the scope of advance ruling under the Customs Law. Now an applicant could now seek an advance ruling on

a. any of the questions referred to in Section 28H of the Customs Act (for instance, issues like classification, valuation, exemption interpretation, etc.), and

b. in respect any goods prior to its importation or exportation.

XII. Hence, it becomes important to discuss the scope of advance ruling under the revised (and prevailing) Customs law. Upon perusal of the above it is clear that the importer intending to seek an advance ruling, could only seek one prior to importation of goods which become the subject matter of the application, Thus, advance ruling cannot be sought in relation to imports already concluded.

XIII. However, we also need to understand the meaning of the term “its” used in the definition of advance ruling under Section 28 E(b) of Customs Act. This is because the term “its” does not clarify whether advance ruling can only be sought prior to first importation of a particular good which has never been imported or it can also be sought before importation of a good which is. being imported by the Applicant.

XIV. To interpret the term “its” used in Section 28 E (b), reference is to be placed on Section 28 1(2) of Customs Act which bars the Customs Authority for Advance Ruling (‘CAAR’) from entertaining any application for an advance ruling where the question raised in the application is already pending before any officer of Customs, the appellate tribunal or any court. From the aforementioned provision, it can be deduced that any importer shall be eligible to make an advance ruling application for the same goods which have been imported before or in respect of which investigation is initiated except for any case where any is pending before any officer of customs or appellate authority in relation to the same subject matter.

XV. Further, it is trite law that principle of harmonious construction must be kept in mind while construing any statute. This principle enunciates that while interpreting any law, the statute must be read as a whole, and all the legal provisions must be read harmoniously to give effect to each word of the statute. Accordingly, to correctly interpret the intention of the legislation at hand, Section 28E (b) and Section 281 (2) should be read together.

XVI. It is also pertinent to mention that it is a settled law that each import is a separate event as held in the matter of Join Exports Pvt. Ltd. Vs. Union of India, 11987 (29) E.L.T. 753 (Da)/, - approved in (1992 (61) ELT 173 (Supreme Court)/. Thus, usage of ‘its’ only further clarifies that for seeking an advance ruling every import of goods is to be treated as a separate event.

XVII. Accordingly, upon application of principle of harmonious construction and the fact that each import is a separate event, the Applicant is of the considered opinion that an advance ruling can also be sought prior to importation of a good which is being imported by the Applicant (but before the importation in question takes place),

XVIII. In order to buttress its stand, the Applicant places reliance on the judgment dated 11.01. 2023 of the Hon’ble  Delhi High Court in the matter of Directorate of Revenue Intelligence/s. Spraytec India Ltd. 2023-TIOL-I84-HC-DEL-CUS. In this ease, the was whether CAAR could pass a ruling on the subject matter under investigation by DRI in terms of Section 28 I (2). Herein, the Hon’ble  Delhi High Court affirmed the eligibility of the CAAR to pass a ruling on the subject matter under investigation. This judgment indirectly proves that upon conjoint reading of Section 28 E(b) and Section 28 1(2), even the courts have accepted this position of law that any importer shall be eligible to make an advance ruling application for the same goods „hick hay c been imported before or in respect of which investigation is initiated, however no pending,

XIX. Hence in view of the above discussion the Applicant submits that it is eligible to make an application even in cases 1,1 on going activity of imports. where the goods under consideration lime ;dread) been Unrolled. the inlet m such eases will have prospective effect i.e., it will be applicable on imports made alley applicant unveil all implication for seeking an advance ruling and not on the imports ahead) concluded.

XX. Recording the contention of the Ld. DC Group 5A .5A & 5C,to state that the present Advance Application Ruling tiled by the Applicant is not eligible in terms of Section 28 E (b) and merits reelection since the Applicant is already involved in the importation of ICU, is completely untenable.

XXL. Further, it is also pertinent to highlight that Ld.. DC Group 5A & 5C, in para 3 of the letter dated 10.05.2021, has concurred with the classification adopted by the Applicant and the eligibility of the Applicant to avail exemption benefit under Sr. No. 666 of Notification No. 69/2011 -Cus. dated 20.07.2011.

5. I have taken into consideration of all the materials placed on record in respect of the subject goods including the submissions made by the applicant during the course of personal hearing. I have gone through the response comments received from Air Cargo Imports (Customs) Commissionerate,  New Delhi Delhi. Howe\ cr. as the matter and questions before the Authority being the same, f therefore proceed to decide the present application regarding classification of `Telematics Control Unit’ on the basis of the information on record as well as the existing legal framework having bearing on the classification under the first schedule of the Customs Tariff Act, 1975.

5.1 The Port Commissionerate Air Cargo Imports (Customs),  New Delhi Delhi. The important points of reference being:

• It is clear from the plain reading of the above that there should be a written decision of “advance ruling” on the questions referred by the applicant in respect of any goods prior to its importation. However, the applicant in its application has already submitted that they are already involved in importation of the referred goods i.e. “Telematics Control Unit”.

• Therefore, the applicant is seeking advance ruling for the classification of the goods under CTH 85176290 and the availment of benefit on BCD in terms of notification No. 69/2011 SI. No. 666 i.e. COO benefit for the goods imported from Japan.

• It appears that the applicant does not fulfil the provisions of Section 28E(b) of the Customs Act, 1962 to seek advance ruling in respect of the goods which are already being imported by them in commercial quantity before any written decision of the authority. In view of the above, it appears that the application filed by M/s Denso Haryana Pvt. Ltd. (hereinafter referred to as the ‘importer’) merits rejection in terms of Section 28E (b) of the Customs Act, 1962.

5.1.1 The point wise comments to para 3 (iv) of the aforementioned letter issued by the CAAR,  New Delhi Delhi is as under:

The matter is examined and it is found that the basic issue as involved in the said application for advance ruling under Section 28H of the Customs Act, 1962 as filed by the importer pertains to the Question of Law/fact that whether the said goods i.e. “Telematics Control Unit” art rightly classifiable under CTH 85176290 is maintainable or otherwise. In this regard, as per the technical literature as submitted by the importer, the said goods have the ability to perform the said operations such as to transmit and receive data/voice or multimedia message; access and process information from various sensors; features such as navigation, emergency assistance, remote control etc; share data and control functions and to store and manage data locally. Further, the said goods are employing the cellular network which is 41(1/5(3 based and therefore falls under the category of 4G/SG LTE products which in terms of Hoard’s Circular 08/2023 dated 13.03.2 CTH 85176290.

Further, the importer, has also seek the clarification on the matter that whether the said good as classifiable under CTH 85176290 are eligible for the benefit under Customs Notification No. 69/2011 dated 29.07.2011, SI. No. 666. As such, as per the reading of the said notification which pertain to the exemption on BCD for the pods imported permitting to country of origin as Japan. the said notification covers all the goods thing under the four digit CTH i.e 8517 irrespective of the nature and description of the goods.

Further, it is pertinent to mention that as per the statement f S submitted by the importer that they are already in the import of said goods and the said fact may be examined by the Authority of Advance ruling before which the importer has Bled the said appeal.

6. Having gone through the objections raised by the applicant, let’s look at the original submissions made by the applicant and the responses filed additionally with reference to the observations of’ the Port Commissionerate.

6.1 Classification of goods covered under the Customs Tariff is clone as per the General Rules of Interpretation (`GRI”. GRI I to 5 lay down the principles determining classification of goods under a specific Heading whereas GRI 6 is applicable if the objective is to determine the classification of goods in the Sub-headings of a Heading. The Larger Bench of the Hon’ble Tribunal in the matter of Saurashtra Chemical, Porbandar. Collector of Customs, 1986 (23) E.L.T. 283 (Trl. -LB) had held that the tariffs must be interpreted in the light of relevant Section and Chapter Notes which are statutorily binding like the Headings themselves. In the light of above facts, to analyze the classification of above product following needs to be kept in mind:

i. General Rules of Interpretation (GRI);

ii. Heading/sub-heading of the First Schedule in conjunction with Section/Chapter/Explanatory notes;

iii. Principal function of the subject good.

6.1.1 To ascertain the classification and by application of GRI I, the following Customs Tariff Heading (‘CTH’) require attention i.e., CTH 8517 and CTH 8708.

6.1.2 Given the above, CTH 8517 merits consideration, which provides for “other apparatus fur the transmission or reception of voice, images, or other data”. As stated in Annexure 1 above, the subject good imported by the Applicant is a networking device which is going to be used in the motor vehicles.

As per Rule I of the GR1, subject good should be classified in accordance with the terms or the headings and any relevant and Section or Chapter Notes.

6.1.3 CTH 8517 covers apparatus used for transmission or reception of voice, images or other data. including apparatus used for communication in a wired or wireless network. The machines whose principal function is to transmit and / or receive data or communicate in wireless network are classified under this heading. Upon reading of the HS N Explanatory Notes to the CTH 85 I 7, it is understood as below-

“This heading covers apparatus for the transmission or reception of speech or other sounds, images or other (Iota between two points by variation of an electric current or optical wave flowing in a wired network or by electro-magnetic waves In a wireless network. The signal may be analogue or digital. The networks, which may he interconnected, Include telephony, telephony, radio-telephone, radio-telegraphy, local and wide area networks.”

6.1.4 In view of the above extracted portion of the HSN explanatory notes, it appears that CTH 8517 covers such apparatus which is used in transmission and reception of data and wherein the data is transmitted by way of electromagnetic waves in a wireless network. As discussed in Annexure I of this application, where the subject good provides for transmission and reception of data in the RF form in the w ireless network, by application of the GRI Rule 1 and considering the HSN explanatory notes, the subject good appears to merit classification under CFI-1 8517 at four-digit level.

6.1.5 It is pertinent here to note that the capability of subject good to perform transmission and reception function in wireless mode is there at the time of import. This is evident from the fact that at the time of import, the subject good comes embedded with the NAD and E-sim which provide the subject good with the capability to transmit and receive the data in the wireless network. This is established from the fact that the subject good in as imported condition has the (MEI number (for the NAD) and ICCID Number (for the E-sins) mentioned on the subject good (refer picture of TCU in as imported form below). This goes on to show that the TCU in as imported condition is capable to perform transmission and reception function, and hence merits classification at CTH 8517 at the four-digit level.

6.1.6 Given the above, the Applicant now needs to ascertain the classification at the six-digit and eight-digit level. At six-digit level, CTH 8517 62 covers “machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus”. From the plain reading of the tariff sub heading, it appears that only those machines which independently perform all three functions of reception, conversion and transmission are covered under CTH 8517 62. Hence, in case a product only performs one or two of such aforesaid functions, it will not be covered under the purview of CTH 8517 62. In this regard, reliance is placed on the decision of the Hon’ble Bombay Tribunal in the case of CCE vs. Reliance Jio Infocom La, 2019 (369) EL. T. 1 713 (Tri- Bom) wherein while determining the classification of ‘Antenna’ the court held that all the three functions of reception, conversion and transmission are required to be performed by a machine to fall under CTH 8517 62.

6.1.7 As discussed in Annexure 1, signals received by the subject good from other parts of the motor vehicle are first converted into RF signals for transmission in wireless mode, and then the RF signals are transmitted to the server and subsequently to the end user by way of connection established through the usage of NAD and E-sim.

6.1.8 In a similar manner, in case the user intends to provide any of the specified command to its vehicle through the smart phone/web portal, the command initiated by the user is first sent to the server. The server passes the command through telecom network to the subject good. Upon its receipt. such command is converted into form of RF signals and the same is passed on to the concerned part/component of the motor vehicle for execution. In view of the functionality of the subject good discussed above, it is evident that the subject good performs transmission, conversion, and reception of signals in a wireless network and hence, merit classification under CTH 8517 62 at the eight digit level. Since the subject specifically covered under any specific tariff entity level digit level, it merits classification in the residual category of ‘Others’ at eight-digit level i.e.. CTH 8517 62 90,

6.1.9 In addition to above, it is also imperative to refer Note 2 (a) of Section X for classification of parts of machines. It states that parts which are goods of any head in 84 or 85 are in all cases to be classified in the respective headings. Relevant extract of Section Note has been reproduced below for case of reference -

“(a) parts which are goods included in r run impf the headings of Chapter 84 or 85 (other than headings 8409, 8431, 8448, 8466, 8473, 8487, 8503, 8522, 8529, 8538 and 8548) are in all cases to be classified in their respective headings:” (Emphasis supplied)

Therefore, upon bare reading of the above staled Section Note, it can he construed that TCU which is an identifiable machine/ good as a whole and is going to he used in the motor vehicle merits classification under the Chapter 85 only.

6,1.10 At this juncture, the Applicant also considers it relevant to discuss heading of’ Chapter 87 under Section XVII of the Customs Tariff which covers vehicles (other than railway or tramway wiling stock) and parts and accessories thereof. The parts and accessories of motor vehicles are covered under CTH 8708. To understand the coverage of parts and accessories of motor vehicles, it is important to refer to Section notes of Section XVII.

6.1.11 In terms of Section Note 2(1) to Section XVII, electrical machinery and equipment are not regarded “parts or accessories” of the goods of Section XVII even if they are identifiable for use with these goods. Note Section 2(t) to Section XVII is extracted hereunder for reference purposes. “2.The expressions “parts” and “parts and accessories” do not apply to the following articles, whether or not they are identifiable as for the goods of this Section: (f) electrical machinery or equipment (Chapter 85);” (Emphasis supplied)

6.1.12 The Section Note 2 (f) of Section XVII thus explicitly excludes the electrical machinery or equipment of Chapter 85 from the purview of’ Section XVII. Further, reference is made to Note 3 to Section XVII which provides that references in Chapter 86 to 88 to the “parts” or -accessories- do not apply to parts or accessories which are not suitable for use solely or principally with the articles of those Chapters. A part or accessory which answers to a description in two or more of the headings of those Chapters is to be classified under that heading which corresponds to the principal use of that part or accessory. In the instant case, the product is principally used for the purposes of transmission, conversion, and reception of data from any part of the motor vehicle to the end user or vice versa.

6.1.13 Further, the HSN explanatory notes under Section XVII explain the scope of the terms “parts and accessories” for the purpose of Section XVII. Relevant portion is extracted hereunder -

III) PARTS AND ACCESSORIES

It should be noted that Chapter 89 makes no provision for parts (other than hulls) or accessories of ships, boats or floating structures. Such parts and accessories, even if identifiable cis being for ships etc., are therefore classified in other Chapters in their respective headings. The other Chapters of this Section each provide for the classification of parts and accessories of vehicles. aircraft or equipment concerned.

It should, however be noted that these headings apply only to those parts or accessories which comply with all three of the following conditions:

They must not be excluded by the terms of Note 2 to this Section (see Paragraph (A) be/an’), They must he suitable for use solely or principally with the articles of Chapter 86 to 88 (see paragraph (B) below, and

They must not be more specifically Included elsewhere in the Nomenclature see paragraph below:

(A) Parts and accessories excluded by Note 2 to Section XVII This Note excludes the following parts and accessories, whether or not they are identical foe as  for the article of this section

(7) Electrical nine/vinery or equipment of Chapter 85, fire example:

(Emphasis supplied)

From the above. it is apparent that all the electrical machinery or equipment covered under Chapter 85 are not regarded as “parts or accessories” of motor vehicles classifiable under Chapter 87, as they stand excluded from the purview of Section XVII in view of the above,

6.1.14 Without prejudice to the discussion above, reference is made to Rule 3(a) of the GRI which provides that the heading that provides the most specific description of the goods shall be preferred to headings providing a more general description. In this regard, Rule 3 of the GRI is extracted as below: -

“3 When by application of rule 2(b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows:

(a) The heading which provides the most specific description shall be preferred to headings 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 put up for retail sale, those headings are to be regarded as equally specific in relation to those toads, even if one of them gives a more complete or precise description of the goods.

(b) Mixture, composite goods consisting of different materials• or made up of different components, and goods put up in sets fir retail sale, which cannot be classified by reference to (a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable.

(c) When goods cannot be classified by reference to (a) or (b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration:” (Emphasis supplied)

6.1.15 The following cases are cited to support the claim:

i. Reliance in this regard is placed on the case of Mauri Yeast India Pvt. Ltd vs. State of UP, 2008 (225) E.L.T. 321 (S.C) wherein it was held by the Hon’ble Supreme Court that if there is a conflict between two entries one leading to an opinion that it comes within purview of tariff entry and another the residuary entry, the former should be preferred.

iii. Further, reliance is placed on the decision of Hon’ble Tribunal, Murnbai bench in the case of Sarthi Superware India Ltd. v. Commr. of Customs, Nhava Sheva-Ill, 2020 (371) E.L.T. 324 (Tri - Mumbai), where the Tribunal observed that it is general principle of classification that specific entry should be preferred over the general entry.

Therefore, it is submitted that where the goods satisfy the requirements of a specific entry, that entry should cover the goods rather than the residual heading. In view of GRI 3(a) and the judicial precedents cited above, where there is a specific heading for the subject good under Chapter 85 (i.e., CTH 8517), it will not merit classification in the residuary heading as parts of motor vehicles under CTH 8708.

6.1.16 Legal developments after the decision of Hon’ble Supreme Court in the matter of M/s. Westinghouse Saxby Farmer Ltd. and its application in the present case

In the decision of Westinghouse Saxby Farmer Ltd. vs. Commissioner of Central Excise, Calcutta - 2021(3) TMI 291 - Supreme Court, while deciding upon classification of relays used for railway signalling system, the Hon’ble Supreme Court has held that those parts which are suitable for use solely or principally with an article of Chapter 86 cannot be taken to a different Chapter as the same would negate the very objective of group classification. In the above decision, the Hon’ble Supreme Court does not discuss the WCO General Explanatory Notes to Section XVII and XV, which indicate that if the goods are specifically excluded under Note 2 or if the goods have a specific classification under another heading, the goods cannot be classified as parts and accessories, irrespective of whether the goods are used along with such Goods.

6.1.17 The principal of classification discussed in the Hon’ble Supreme Court’s decision can be summarized as under.

a. In the Westinghouse judgment (supra), the end use test to determine the classification has been preferred over the exclusion provided under Note 2(0 to Section XVIL

b. The judgment of the Supreme Court in the matter of Commissioner of Central Excise, Aurangabad v. M/s. Videocon Industries Limited (2023-TIOL-25-SC-CUS) has emphasized on the exclusion note over the sole/ principal use test.

6.1.18 Further, post the judgement ()I’ the I Hon’ble Supreme Court in the case of Westinghouse Saxby (supra), the Oil(‘ on 5111 January 2022 issued instruction No. 01/2022-Customs with subject “Implication of the judgment of I he I lonely Supreme Court in the case of M/s Westinghouse Saxby Farmer Ltd, Vs Commissioner of Central Excise, Calcutta - reg”. This was to align with the divergent practice being followed on assessment of ‘parts’ after the Westinghouse Sax by judgment (slim) N‘ as issued. In the said instructions while making a reference to the judgement of the Hon’ble Supreme Court ill the case of Mix Intel Design Systems (India) P. Ltd. Vs Commissioner of Customs S Central Excise, among others the C131C has instructed as follows -

“3. in the context of the divergent practices arisen, it is noted that the classification of parts’ of goods under Section XVII of the Customs or Central Excise Tariff is a complex issue. Further, apparently., the’ section notes have been suitably applied in relevant judgements of the Hon ‘b/c’ Supreme Cowl on issues of classification of parts and accessories. Thus, the collective wisdom of these judgments indicates the manner in which such classification issues are to be approached. Few of such judo are illustrated in succeeding paragraphs:

3.1 of M/s Intel Design Systems (India) P. Ltd. Vs Commissioner of Customs & C. Ex-2008 A. Apart from the reliance on the section notes and the chapter notes the court in this judgment also considered the HSN explanatory notes wherein three conditions that need to be fulfilled for goods to be classified under section XVII are mentioned namely -

a. They must not be excluded by the terms of Note 2 to Section XVII and

b. They must be suitable for use solely or principally with the articles of chapter 86 to 88 and

c. They insist not be more specifically included elsewhere in the nomenclature

6.1.19 Taking cognizance of the rationale laid down in the judgement in the matter of Mis Intel Design Systems (India) P. Ltd. Vs Commissioner of Customs & Central Excise and the instructions issued by the CBIC as discussed above, for goods to be classified under the chapters of Section XVII, fulfilment of the three-layer test postulated “Under the Sub-heading (iii) Parts and Accessories” of the explanatory notes to Section XVII as issued by the WCO is imperative. It is only when all these three conditions are met that a particular item would be classified under the Chapters of Section XVII.

6.1.20 In other words, the shape/ design/ specification of a product is not a determinant of principal or sole use. Further, Note 3 of Section XVII cannot be applied blanketly and needs to be construed narrowly otherwise the exclusion under Note 2 would become superfluous. To this extent, the Videocon judgment is particularly important, and it is also aligned with the WCO classification principles as propounded in the CHIC Circular (supra). It may be added here that the CBIC had issued a further clarification on the issued vide Instruction 25/2022-Cus. dated 03.10.2022 . clarifying that the law continues to remain the same and hence the aforesaid instruction would remain valid without any changes.

6.1.21 In this context, additional reliance is also placed on the judgment of Hon’ble  Delhi Tribunal, in case of Kafila Forge Ltd. v. Principal Commissioner of Customs, (import) ICD TKC, Customs 12023 (7) TMI 1251 - CESTAT New Delhi], where the Tribunal has held that parts of transmission shafts fall under 8483 and not under 8708. In this case, the revenue relied upon Westinghouse judgment to classify the goods under heading 8708 based on sole or principal use. This ruling is of importance since it is passed post Westinghouse judgment and contention of the Revenue to classify the item based on sole or principal use as laid down in the Westinghouse case has not been considered. This ruling effectively reiterates that classification based on section and chapter notes would still prevail despite Westinghouse judgment (although this ruling is not explicitly discussed by the bench). To sum up, it can be concluded that the subject good being electrical equipment falling under Chapter 85, does not satisfy the very first condition of three-laver test, as these are covered under the exclusion in Note 2 m of the Notes to Section XVII. On the other hand coverage under chapter 85 is clearly supported through the principles of viz. GRI and the explanatory notes, as discussed supra.

6.2 As far as the applicability of the benefit of the notification is concerned, the central Government vide Notification No. 69/2011-Cus dated 29.07.2011 has exempted all the goods falling under CTH 8517 from the whole of BCD leviable under the First Schedule of Customs Tariff Act, 1975 when the goods are imported from the Japan. The Notification further provides that the exemption of import of goods notified shall only be available when the origin of such goods is Trion Japan and the provisions laid clown in Customs Tariff (Determination of Origin of Goods tinder the Comprehensive Economic Partnership Agreement been the Republic of India and Japan) Rides, 2111 I are complied with. The relevant extract of the entry is reproduced hereinbelow:

6.2.1 The benefit provided under the notification is subject to the condition that the goods being imported from Japan should be originating in Japan and the provisions laid down in Customs Tariff determination of Origin of Goods under the Comprehensive Economic Partnership Agreement between the Republic of India and Japan) Rules, 2011 are complied with. So long as the imported goods are rightly classifiable under CTH 8517 62 90 and are originating in Japan, the Applicant is eligible to avail concessional duty benefit @ 0% BCD.

6.3 ADDITIONAL SUBMISSIONS ON BEHALF OF THE APPLICANT

I. The Port Commissionerate has opined that the Advance Ruling Application filed by the applicant merits rejection, since the applicant is already involved in the activity of importing TCU (product for which the Advance Ruling Application has been filed) in commercial quantity, the Applicant is not eligible to file an Advance Ruling Application in terms of Section 28 E (b) of the Customs Act.

II. Section 28 E (b) provides the definition of ‘advance ruling’ as “a written decision on any of the questions referred to in Section 28H raised by the applicant in his application in respect of any goods prior to its importation or exportation.” The Port Commissionerate probably has interpreted the phrase “in respect of any goods prior to its importation or exportation” to mean that an Advance Ruling Application can only be filed for any goods prior to its first importation or exportation. Accordingly, since in the present case the Applicant is already involved in the importation of TCU, an advance ruling in respect of this goods is not permissible. However, in view of the amendment vide the Finance Act, 2018, there was a shift in the scope of advance ruling under the Customs law. Now any applicant could now seek an advance ruling on -

a. any of the questions referred to in Section 28H of the Customs Act (for instance, issues like classification, valuation, exemption interpretation, etc.); and b. in respect of any goods prior to its importation or exportation.

III. Hence, it becomes important to discuss the scope of advance ruling under the revised (and prevailing) Customs law. Upon plain reading of the above, it is clear that the importer intending to seek an advance ruling, could only seek one prior to importation of goods which become the subject matter of the application. Thus, advance ruling cannot be sought in relation to imports already concluded. However, we also need to understand the meaning of the term “its” used in the definition of advance ruling under Section 28 E(b) of Customs Act. This is because the term “its” does not clarify whether advance ruling can only be sought prior to first importation of a particular good which has never been imported or it can also be sought before importation of a good which is being imported by the Applicant.

IV. To interpret the term “its” used in Section 28 E (b), reference is to be placed on _Section 28 I (2) of Customs Act which bars the Customs Authority for Advance Ruling CAAR from entertaining any application for an advance ruling where the question raised in the application is already pending before any officer of Customs, the appellate tribunal or any court From the aforementioned provision, it can be deduced that any importer shall be eligible on make an advance ruling application for the same goods which have been imported before or in respect of which investigation is initiated except for any case where any `its’ is pending before any officer of customs or appellate authority in relation to the same subject matter.

V. Further, it is trite law that principle of harmonious construction must be kept in mind while construing any statute. This principle enunciates that while interpreting any law, the statute must be read as a whole, and all the legal provisions must be read harmoniously to give effect to each word of the statute. Accordingly, to correctly interpret the intention of the legislation at hand, Section 28L (b) and Section 281 (2) should be read together. It is also pertinent to mention that it is a settled law that each import is a separate event as held in the matter of Jain Exports Pvt. Ltd. Union of India, 11987 (29) I. 753 (Del.)I, - approved in [1992 (61) ELT 173 (Supreme Court)I. Thus, usage of its’ only further clarifies that for seeking an advance ruling every import of goods is to be treated as a separate event.

VI. Hence, in view of the above discussion, the Applicant is correctly eligible to make an application even in eases of on-going activity of imports, where the goods under consideration have already been imported. The ruling in such cases will have prospective effect i.e., it will be applicable on imports made after applicant moved an application for seeking an advance ruling and not on the imports already concluded. Accordingly, the contention of the Port Commissionerate to state that the present Advance Application Ruling filed by the Applicant is not eligible in terms of Section 28 E (b) and merits rejection since the Applicant is already involved in the importation of TCU, is completely untenable.

VII. Further, it is also pertinent to highlight that the Port Commissionerate, in para 3 of the letter dated 10.05.2024, has concurred with the classification adopted by the Applicant and the eligibility of the Applicant to avail exemption benefit under Sr. No. 666 of Notification No. 69/201 1-Cus. dated 29.07.2011.

7. The answers to the questions raised by the applicant are as follows:

(a) Question 1: Is application liable to be rejected as the advance ruling is being sought on imports that has already happened?

Answer: No, the contention of the Port Commissionerate to state that the present Advance Ruling Application filed by the Applicant is not eligible in terms of Section 28 E (b) and merits rejection since the Applicant is already involved in the importation of TCU, is completely untenable.

(b) Question 2: Whether the import of Inverter Assembly is correctly classifiable under Customs Tariff Heading 85176290 of the First Schedule of the Customs Tariff Act, 1975?

Answer: The subject goods i.e. `TCU’ is rightly classifiable under Customs Tariff Heading (CTH’) 8517 and (more specifically) under 8517 62 90.

(c) Question 3: Whether the Applicant is eligible to avail concessional rate of Basic Customs Duty (BCD) @0% as per No. 666 to NN 69/2011 dated 29.07.2011 on import of subject good subject to satisfaction of origin criteria that the goods are originating from Japan?

Answer: Yes, the applicant is eligible to avail concessional rate of Basic Customs Duty on import of the subject goods as per SI. No. 666 of Notification No 69/2011 - Customs dated 29.07.2011.

8. I rule accordingly.

(Samar Nanda)
Customs Authority for Advance Rulings.
New Delhi

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

1. M/s Denso Haryana Pvt. Ltd., B-I/ D-4, Ground Floor, Mohan Co-operative Industrial Estate, Mathura Road, New Delhi-110 048

2. The Principal Commissioner of Customs, ACC (Import). New Delhi.

3. The Customs Authority for Advance Rulings, Mumbai, New Custom House. Ballard Estate. Mumbai-400001

4. The Chief Commissioner (AR). Customs Excise & Service Tax Appellate Tribunal (CESTAT), West Block-2,Wing-2, R.K. Puram, New Delhi-110066

5. The Chief Commissioner of Customs, Delhi Customs Zone, New Custom House. IGI Airport Complex. New Delhi-110037.

6. Guard file

7. Webmaster.

(Anamika Singh)
Secretary,
Customs Authority for Advance Rulings. New Delhi