2025(01)LCX0413(AAR)

Apple Operations International Limited

decided on 23-01-2025

CUSTOMS 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]
DIN-20250174OR0000999CE7

Present

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

F. No. VIII/CAAR/Delhi/Apple Operations (Bengaluru)/164/2024

The day of 23^rd January, 2025

Ruling No. CAAR/Del/Apple/13/2025/2466 to 2472/23/01/2025

In application No. 145/2024 dated 09.10.2024

Ruling

    M/s Apple Operations International Limited ('Applicant') a company having its registered head office located at Hollyhill Industrial Estate Hollyhill, T23 YK84, Ireland. The Applicant is engaged in the business of electronics consumer goods under the brand name of 'Apple'. The Applicant in furtherance of its business activities will be exporting mobile phone parts, namely, Back Glass Subassembly, Housing Module. Cover Glass Module, etc to India. In this regard, the Applicant's request is to obtain clarity from the Customs Authority for Advance Ruling for classification of "Back Glass Subassembly" ('product'), which shall be exported by the Applicant to the various importers based in India.

I. Overview of the Back Glass Subassembly exported by the Applicant to India

1.1. The Back Glass Subassembly is a structural and functional component of a mobile phone consisting of rear glass panel along with associated elements which enables wireless charging, microphone and flashlight functions. The Back Glass Subassembly provides both protection and functionality to the mobile phones. The housing of the Back Glass Subassembly comprises of the following components -

a. Back Glass
b. Back Glass Flex (consisting of charging coil, flashlight, and microphone)
c. Magnets

1.2. Back Glass - The Back Glass supports and houses the Back Glass subassembly. It performs the mechanical function of providing structural support and protection to the internal components of the mobile phone. The Back Glass provides resistance from physical damage, dust, moisturise, etc. thereby acting as a protective enclosure to the mobile phone and components thereof.

1.3. Back Glass Flex (consisting of charging coil, flashlight, and microphone)- The Back Glass Flex is the flexible printed circuit board ('FPCBA'), a key component in the Back Glass Subassembly which connects it to the Main Logic Board ('MLB') of the mobile phone. The Back Glass Flex is assembled onto the Back Glass Subassembly through an advanced adhesive application process. It comprises of the following components:

a) Charging Coil- Back Glass Flex consists of an inductive charging coil which enables the transfer of power from the charging pad to the battery of the mobile phone wirelessly. The inductive charging coil in the Back Glass Flex functions in conjunction with the magnets to support MagSafe wireless charging. This set up enables the mobile phone to charge wirelessly with optimal magnetic alignment and efficient charging.

b) Flashlight - Back Glass Flex also consists of a strobe or flash that enables the flashlight function.

c) Microphone- The microphone is also embedded in the Back Glass Flex which enables audio input for calls, recordings, and similar functions.

1.4. Magnets - Magnets in the Back Glass subassembly are used in conjunction with the inductive charging coil to support MagSafe wireless charging. The Magnets securely attaches and aligns the mobile phone with the charging pad thereby enhancing charging efficiency.

1.5. The Back Glass, Back Glass Flex, and Magnets are bonded together to form the Back Glass Subassembly through an advanced adhesive application process. After importation, Black Glass subassembly is integrated into the MLB of the mobile phone through the FPCBA.

1.6. Here it is also pertinent to mention that the Back Glass subassembly may comprise of additional parts which may be added to provide structural integrity to the subassembly and will assist in the integration of the subassembly in the mobile phone or maybe used as a placeholder for other parts of mobile phone. Thus, these additional component or parts will not alter the principal function of the subassembly.

1.7. Therefore, it can be said that the Back Glass Subassembly carries out varied functions, such as, firstly, it provides the structural support to the phone and prevents it from contamination from any foreign matter. Secondly, it provides flashlight utility (through flashlight), wireless charging compatibility (through charging coil and magnets), and capability to receive the sound (through microphone).

1.8. Thus, it can be summarized that the Back Glass subassembly performs multiple functions by integrating various components within itself.

II. The Applicant qualifies as an 'applicant' under Section 28E(c) of the Customs Act, 1962 ('Customs Act')

1.9. 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 7 of 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 28H;"

1.10. As discussed earlier, the Applicant will be exporting the inputs and parts of mobile phones to various importers in India. Thus, the Applicant is rightly covered under the definition of 'applicant' as provided under Section 28E(c)(ii) of the Customs Act for making this application.

III. Question raised in the application for advance ruling by the Applicant squarely falls within the ambit of Section 28H(2)(a) of the Customs Act

1.11. Section 28H of the Customs Act provides for the questions in respect of which an advance ruling may be sought by an applicant. Section 28H of the Customs Act reads as under -

'28H. Application for advance ruling -

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

(2) The question on which the advance ruling is sought shall be 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 for 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 force 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 matters relating thereto.

(f) any other matter as the Central Government may by notification, specify."

1.12. The Applicant wishes to obtain the advance ruling on questions relating to classification and applicability of exemption notification 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), 28H(2)(b) and 28H(2)(d) of the Customs Act.

1.13. Hence, the application for advance ruling is being filed in conformity with the provisions of Section 28H of the Customs Act.

IV. Question raised under the present advance ruling application is not before any officer of customs, the Appellate Tribunal or any Court.

1.14. As per Section 28I (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 in the applicant's case before any officer of customs, the Appellate Tribunal or any Court,

(b) the same as in a matter already decided by the Appellate Tribunal or any Court."

1.15. The Applicant submits that questions raised in the application (as in Annexure II) are not already pending before any officer of Customs, the Appellate Tribunal or any Court, to the best of our knowledge. Further, the questions raised in the present case, have not already been decided by the Appellate Tribunal or any court in the Applicant's case.

1.16. Accordingly, the present application should not be considered as pending before any Court as neither the show cause notice has been issued to the Applicant nor the bill of entries has been provisionally assessed.

1.17. Thus, relying on the above the facts of the current case. Applicant submits that in its case, the application shall be accepted for hearing on merits by the Hon'ble CAAR.

1.18. The questions in respect of which an advance ruling from the Hon'ble CAAR, New Delhi has been sought by the Applicant are:

a. Whether the Back Glass Subassembly exported by the Applicant to India merits classification under CTH 8517 79 90 of the Customs Tariff?

b Whether benefit of concessional rate of BCD under Sr. No. 6J of the Notification No. 57/2017 is available to such Back Glass Subassembly exported to third-party manufacturers engaged in manufacture of mobile phones in India?

1 QUESTION 1: CLASSIFICATION OF BACK GLASS SUBASSEMBLY

1.19. For the Back Glass Subassembly to be exported by the Applicant to India, the proposed classification and Applicant's interpretation to reach to the proposed classification is discussed as under.

1.20. The import and export of goods into and out of India is regulated by the Customs Act. 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.

1.21. Section 2 of the Customs Tariff 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 Customs Tariff deals with the applicable duty structure on import of goods and the Second Schedule deals with the applicable duty structure on export of goods.

1.22. To determine the said rates of BCD applicable on the imported good it is important to identify the tariff heading in which the good would fall under the First Schedule of the Customs Tariff.

1.23. Classification of goods covered under the Customs Tariff is done as per the General Rules of Interpretation ('GIR'). GIR 1 to 5 lay down the principles for determining classification of goods under a specific Heading whereas GIR 6 is applicable if the objective is to determine the classification of goods in the Sub-headings of a Heading.

1.24. GIR 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 1 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 ..."

1.25. 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 (Tri. -Del.) 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

1.26. 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.

1.27. 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.

1.28. It was held by the Hon'ble Supreme Court in L.M.L Limited vs. Commissioner of Customs, 2010 (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 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 vs. Gujarat Perstorp Electronics Ltd., [(2005)7 SCC 118, (2005) 186 E.L T. 532 (3-member S.C. bench)];

ii. CCE vs. Phil. Corporation Ltd, [(2008) 223 E.LT. 9 (S.C.)]

1.29. Therefore, the HSN Explanatory Notes are an important aid for ascertaining the classification of a good, in addition to the GRI and corresponding Chapter Notes and Section Notes.

1.30. In the light of above legal provisions, to analyze the classification of above product following needs to be kept in mind:

a. General Rules of Interpretation (GIR).

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

c. Principal function of the subject good.

1.31. Hence, upon application of GIR 1, since the Back Glass Subassembly is used in mobile phone the Applicant submits that the most specific entry at the four-digit level under which the Back Glass Subassembly may be classified is CTH 8517 which covers "Telephone sets, including telephones for cellular networks or for other wireless networks; other apparatus for the transmission or reception of voice, images or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network), other than transmission or reception apparatus of heading 8443. 8525, 8527 or 8528". Therefore, it is pertinent to analyze classification of Back Glass Subassembly under the said entry.

ANALYSIS OF CTH 8517:

1.32. In the present case, as the Back Glass Subassembly is used as a part during the manufacture of the mobile phones which are classified under CTH 8517, it becomes pertinent to analyze the classification of the Back Glass Subassembly under CTH 8517. CTH 8517 is further subdivided into various entries. The entries at single dash level under CTH 8517 have been extracted as follows:

1.33. Upon perusal of the above entries, there is only one relevant single dash entry wherein the product may be classified, viz.,

1.34.

1.35. The Applicant submits that the Back Glass Subassembly is to merit classification as 'parts'. To support its understanding, the Applicant makes the following submissions.

A. The Back Glass Subassembly is for specific use with mobile phone

1.36. At the outset, the Applicant submits that the Back Glass Subassembly exported are specific for use with mobile phone. The product is specifically designed for integration with other parts of mobile phone in order to constitute a functional mobile phone. This product does is not capable of functioning with any other device Hence, it is submitted that the Back Glass Subassembly is a product which is tailor made for use in the mobile phone.

B. The Back Glass Subassembly is not classifiable under any specific heading at four-
digit level

1.37. The Applicant submits that Back Glass Subassembly is not classifiable under any specific heading at four-digit level as it does not have a clearly defined function or principal function of its own. As discussed in Annexure I Back Glass Subassembly carries out varied functions, such as, firstly, it provides the structural support to the phone and prevents it from contamination from any foreign matter. Secondly, it provides flashlight utility (through flashlight), wireless charging compatibility (through charging coil and magnets), and capability to receive the sound (through microphone) Hence, the Back Glass Subassembly does not have a principal function of its own and various sub-components thereof perform individual functions. Further the Back Glass Subassembly is tailored for use solely and principally with mobile phones. Therefore, the Back Glass Subassembly merits classification as parts of the machines.

1.38. In this regard reference is made to Section Note 2 to Section XVI (covers Chapter 84 and Chapter 85) which deals with classification rules for parts of machines. Relevant portion of Section Note 2 to Section XVI is mentioned hereunder for ease of reference -

"2. Subject to Note 1 to this Section, Note 1 to Chapter 84 and to Note 1 to Chapter 85, parts of machines (not being parts of the articles of heading 8484, 8544, 8545, 8546 or 8547) are to be classified according to the following rules :

(a) pads which are goods included in any of the headings of Chapter 84 or 85 (other than headings 8409, 8431, 8448, 8466, 8473, 8485, 8503, 8522, 8529, 8538 and 8548) are in all cases to be classified in their respective headings;

(b) other parts, if suitable for use solely or principally with a particular kind of machine, or with a number of machines of the same heading (including a machine of heading 8479 or 8543) are to be classified with the machines of that kind or in heading 8409, 8431, 8448, 8466, 8473, 8503, 8522, 8529 or 8538 as appropriate. 2[However, parts which are equally suitable for use principally with the goods of headings 8517 and 8525 to 8528 are to be classified in heading 8517, and parts which are suitable for use solely or principally with the goods of heading 8524 are to be classified in heading 8529];

(c) all other parts are to be classified in heading 8409, 8431, 8448, 8466, 8473, 8503, 8522, 8529 or 8538 as appropriate or, failing that, in heading 8485 or 8548."

1.39. Section Note 2 to Section XVI provides for rules which are applicable to classification of parts of machines in order of sequence thereof. Therefore, part of machine is required to be classified based on Section Note 2(a) to Section XVI. If Section Note 2(a) is not applicable only then Section Note 2(b) becomes applicable and only when both Section 2(a) and Section Note 2(b) are not applicable, Section Note 2(c) becomes applicable to such parts of machines.

1.40. Therefore, it is pertinent to rule out the applicability of Section Note 2(a) to ascertain classification of Back Glass Subassembly and ascertain classification thereof as 'parts of mobile phones'. Based on the functionality of Back Glass Subassembly the following entries may appear relevant:

1.41. As discussed, the function of Back Glass Subassembly is not limited to any one of the specific functions stated in the table above. None of the above entries cover the complete functionality of the Back Glass Subassembly which consists of various sub-components. Therefore, Back Glass Subassembly cannot be classified as goods under any separate tariff heading in terms of Section Note 2(a) to Section XVI.

C. The Back Glass Subassembly is a 'part' of mobile phone in terms of Section Note 2 (b) to Section XVI

I. Back Glass Subassembly is a part' of mobile phone

1.42. Considering that the Back Glass Subassembly is a component which is solely designed for use in mobile phones, the most relevant single dash entry under CTH 8517 is the entry which covers "parts of mobile phone". In view of the above, it becomes pertinent to analyze whether the Back Glass Subassembly can be considered as a 'part' of mobile phones.

1.43. The term 'parts' has not been defined in the HSN Explanatory Notes or the Customs Tariff. Hence, reliance must be made to the Hon'ble Supreme Court's Ruling in the case of CCE, Delhi Vs. Insulation Electrical (P) Ltd., [ 2008 (224) E.L.T. 512 (S.C.)]. In this case, the Apex Court while relying on various other earlier rulings has defined the term "parts" as "an essential component of the whole without which the whole cannot function".

1.44. A similar ruling has been made in the case of Electrosteel Castings Vs. CCE, [1989 (43) E.L.T. 305 (Tribunal)] which has been maintained by the Hon'ble Supreme Court in [1996 (83) ELT A48 (Supreme Court)].

1.45. In the present case, as stated in the facts in Annexure-I, the product under consideration is a Back Glass Subassembly which enables wireless charging, microphone and flashlight functions of the mobile phone thereby contributing to the phone's overall functionality and performance. Further, without the Back Glass Subassembly, the mobile phone cannot be said to be complete for sale in the commercial market. It is only after the back glass sub assembly is housed with the rest of the mobile phone that the entire housing of the mobile phone is complete. Moreover, the back glass subassembly does not only provide with the structural support and completeness, but also allows reception of sound (as it comes with microphone embedded in it), this enabling the mobile phone to carry out the basic function of calling/ answering the calls which is the most essential feature of a mobile phone.

1.46. In view of the above facts, the Applicant submits that the Back Glass Subassembly of the mobile phone is an essential component of the mobile phone allowing the mobile phone to function in an efficient manner. Accordingly, the Applicant submits that the Back Glass Subassembly should be considered as a 'part' of the mobile phone. Accordingly, the product will be covered within the single dash entry of parts' under CTH 8517.

1.47. Further, Section Note 2(b) clearly mentions that parts which are suitable for use solely or principally with a particular kind of machine, or with a number of machines of the same heading (including a machine of heading 8479 or 8543) are to be classified with the machines of that kind. Since the Back Glass Subassembly is suitable for use solely with mobile phone (given the specific design, structure and its usage with the mobile phone), it must be classified with the mobile phone as its part. In this light, since the mobile phones are covered under heading 8517, more specifically under CTH 8517 1300, the Back Glass Subassembly shall also merit classification as part of the mobile phone under CTH 8517.

II. Back Glass Subassembly satisfies the twin test of what is considered to be a "part"

1.48. To ascertain whether Back Glass Subassembly should classify under a separate heading or as part of the main machine, reference is made to the judgment of the Hon'ble CESTAT Delhi in the matter of M/s. Vodafone Idea Limited Vs. Principal Commissioner of Customs (Imports), Final Order No. 50874 / 2022 dated 20.09.2022 wherein the Hon'ble Bench laid down the twin test for determining whether an item is classifiable under the separate heading or as part of the main machine:

a) Test 1: No separate identifiable function of its own.

b) Test 2: Incapable of operating independently of the main machine.

1.49. In view of the above conditions, unless an article does not satisfy both the conditions of the twin test, it cannot be classified under a separate heading falling under its own appropriate heading and the same shall merit classification as parts of the main machine.

1.50. In view of the twin test laid above, since the Back Glass Subassembly only becomes functional after being connected with the MLB of the mobile phone and cannot operate independently of the mobile phone. Furthermore, the back glass subassembly is not even cross compatible with devices of other manufacturers and are to be used solely for the pre-determined purpose for which they are designed viz. for use as parts of mobile phone. To this extent, it does not qualify the conditions of the twin test and hence Back Glass Subassembly shall not merit classification under the separate heading in terms of Section Note 2(a) to Section XVI and shall merit classification only as 'part of the mobile phone' in terms of Section Note 2(b) to Section XVI.

1.51. Coming to classification at eight-digit level, the single dash entry of "parts" under CTH 8517 is

1.52. As mentioned above, CTH 8517 71 00 covers "Aerials and aerial reflectors of all kinds". In the present case, the product under consideration, i.e., Back Glass Subassembly is excluded from the purview of this entry owing to its functionality.

1.53. Further, since the product under consideration is not a printed circuit board, hence, it is excluded from CTH 8517 79 10. Therefore, the Back Glass Subassembly is classifiable under the residuary entry of 'Other' parts under CTH 8517 79 90 which reads as "Telephone sets, including smartphones and other telephones for cellular networks or for other wireless networks: Other apparatus for the transmission or reception of vice, images or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network), other than transmission or reception apparatus of heading 8443, 8525, 8527 or 8528- Pads—Other—Other", in terms of GIR 1.

QUESTION 2: APPLICABILITY OF EXEMPTION UNDER S. NO. 6J OF THE NOTIFICATION  NO. 57/2017

1.54. The Applicant will be exporting the Back Glass Subassembly to the third-party manufacturers of mobile phones and accordingly wishes to seek clarity on eligibility of availing exemption benefit by the third-party manufacturers in India (i.e., importers) under Sr. No. 6J of Notification No 57/2017.

1.55. The Central Government in terms of Section 25(1) of the Customs Act has issued Notification No. 57/2017 which intends to provide concessional exemption benefit to the import of machinery items, electrical appliances and its parts and accessories covered in the notification.

1.56. In this regard, Notification No. 57/2017 vide its Sr. No. 6J provides exemption from BCD to "all goods for use in manufacture of cellular mobile phone" which are covered under CTH 8517 79 90. This exemption is available subject to compliance with the procedure set out in the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017 [as amended by Customs (Import of Goods at Concessional Rate of Duty or for Specified End Use) Rules, 2022] ('IGCR Rules 2022). For ease of reference, the aforementioned entry under Notification No. 57/2017 has been extracted as follows:

1.57. Thus, by virtue of Sr. No. 6J, BCD at the rate of 10% is applicable for all goods for use in manufacture of cellular mobile phone" which are covered under CTH 8517 79 90.

1.58. In view of the above, considering that the Back Glass Subassembly which is to be exported by the Applicant is classifiable under CTH 8517 79 90 and is an essential part of mobile phone, as discussed above, the Applicant submits that the benefit of concessional rate of duty under Sr. No. 6J should be available at the time the import of Back Glass Subassembly, subject to compliance with IGCR Rules, 2022.

1.59. Therefore, the Applicant humbly submits that the Hon'ble Authority may kindly issue the advance ruling as prayed at an early date.

1.60. In the light of the above, a ruling is sought from the Hon'ble CAAR as follows:

A. The Back Glass Subassembly to be exported by the Applicant to India is correctly classifiable under CTH 8517 79 90 of the First Schedule of the Customs Tariff at the time of import; and

B. The concessional BCD vide Sr. No. 6J of Notification No. 57/2017 is available to the Back Glass Subassembly exported by the Applicant to third party manufacturers engaged in mobile phone manufacturing in India.

1.61. The Applicant craves leave to alter, amend or modify any of the aforesaid grounds or submissions made herein this application and make such additional submissions without prejudice to the submissions made herein, at the time of hearing of the said application.

1.62. The Applicant also craves leave to produce and provide any such further additional documents in support of its submissions at the time of hearing and before conclusion of the proceedings.

1.63. The Applicant further prays for an opportunity of being heard in person.

Comments of the Port Commissionerate

2. As per the provision of CAAR Regulation, 2021, the complete application of the applicant was provided to the concerned Custom Port, and requested to furnish the requisite comments in the instant matter. The port authority vide letter dated 19.12.2024 furnished its comments as follows :-

2.1. Para3(i)

Eligibility in terms of Section 28E(c) of the Customs Act, 1962: Eligible;

2.2. Para 3(H)

Proviso (1)(a) of Section 28I (2) of the Customs Act, 1962: No application
from the Applicant pending before this office;
Proviso (1)(b) of Section 28I (2) of the Customs Act, 1962: No.

2.3. Para 3(iii)

Claim of the applicant regarding the nature of their activity: Correct.

2.4. Para 3(iv)

Comments on the merits of the question raised: As in the succeeding paras;

2.5. The item "Back Glass Subassembly" ('product)" as per the submissions given by the applicant is a structural and functional component of a mobile phone consisting of rear glass panel along with associated elements which enables wireless charging, microphone and flashlight functions. The housing of the Back Glass Subassembly comprises of the following components -

a) Back Glass

b) Back Glass Flex (consisting of charging coil, flashlight, and microphone)

c) Magnets

2.6. The Back Glass, Back Glass Flex, and Magnets are bonded together to form the Back Glass Subassembly through an advanced adhesive application process. After importation, Black Glass subassembly is integrated into the MLB of the mobile phone through the FPCBA. Therefore, it can be said that the Back Glass Subassembly carries out varied functions, such as, firstly, it provides the structural support to the phone and prevents it from contamination from any foreign matter. Secondly, it provides flashlight utility (through flashlight), wireless charging compatibility (through charging coil and magnets), and capability to receive the sound (through microphone).

2.7. From the submissions given by the importer, the item "Back Glass Subassembly" ('product)" has varied components with different/dedicated functions. As such, based on its components and functions, the item has assumed the characteristic of a part of a Cell phone. To be classified under a specific heading or tariff item, the item as a whole does not have a singular function, but has multiple functions. Hence, the item could not be classified under any of the headings under Chapter 84 or 85. Furthermore, these are specifically manufactured to work with a particular model number of cellular mobile phone and not with any other model of cellular mobile phone manufactured by the same company.

2.8. As per the note 2(b) to Section XVI the "parts, if suitable for use solely or principally with a particular kind of machine, or with a number of machines of the same heading (including a machine of heading 84.79 or 85.43) are to be classified with the machines of that kind or in heading 84.09, 84.31, 84.48, 84.66, 84.73,85.03, 85.22, 85.29 or 85.38 as appropriate" the item is appropriately classifiable under the heading 8517 as parts of cellular mobile phone. Under the heading 8517, the item is appropriately classifiable under the tariff item 8517 7990 which provide for other parts.

2.9. With regard to the applicability of benefit of notification no. 57/2017-cus dated 30.06.2017 Sl.no. 6J (as amended), for reference the same is reproduced below for reference:

2.10. As the item under consideration is a part of cellular mobile phone and is used in the manufacturing of the cellular mobile phone, the subject notification benefit is applicable for the item under consideration on fulfilment of condition no. 1 given to the Notification no. 57/2017-cus.

2.11. In light of the above, the item "Back Glass Subassembly" ('product)"is appropriately classifiable under the tariff item 8517 7990 and is eligible for the benefit of notification no. 57/2017-cus dated 30.06.2017 Sl.no. 6J (as amended) with effective rate of BCD being 10%.

Personal Hearing

3. The personal hearing in the matter was conducted on 16.01.2025 wherein the port authorities and the authorized representative of the applicant attended the same. During the personal hearing, the authorized representative reaffirmed the points that had already been presented in the applicant's initial submission. Likewise, the port authorities reiterated the arguments and details previously outlined in their formal response.

Additional Submissions

4. M/s Apple Operations International Limited through letter dated 15.01.2025 submitted that:-

4.1. The Back Glass Subassembly is for specific use with mobile phone -

a. The Back Glass Subassembly is specifically designed for use in mobile phones and cannot function with any other device. It is tailor-made for integration with other mobile phone components to form a fully functional phone.

4.2. The Back Glass Subassembly is not classifiable under any specific heading at four-digit level -

a. The Back Glass Subassembly cannot be classified under any specific four-digit tariff heading under Chapter 84 or 85 as it does not have a single, clearly defined or principal function. Instead, it serves multiple roles, such as providing structural support to the phone, enabling wireless charging, supporting flashlight functionality, and receiving sound through a microphone. Hence, as the subassembly's various components perform distinct functions, it does not fit under any specific classification under Chapter 84 or Chapter 85.

b. Furthermore, the Back Glass Subassembly is designed exclusively for use in mobile phones, hence it should be classified as a part of machines, as per the rules outlined in Section Note 2 to Section XVI.

4.3. The Back Glass Subassembly is a "part" of mobile phone in terms of Section Note 2 (b) to Section XVI -

Back Glass Subassembly is a 'part' of mobile phone

a. The term "parts" is defined as essential components without which the whole cannot function [CCE, Delhi Vs. Insulation Electrical (P) Ltd. & Electrosteel Castings Vs. CCE].

b. The Back Glass Subassembly of a mobile phone enables wireless charging, microphone and flashlight functions of the mobile phone thereby contributing to the phone's overall functionality and performance. Without the Back Glass Subassembly, the mobile phone cannot be said to be complete for sale in the commercial market. It is only after the back glass sub assembly is housed with the rest of the mobile phone that the entire housing of the mobile phone is complete. Thus, it ought to be considered as a part of mobile phone classified under CTH 8517.

c. Further, as the Back Glass Subassembly is tailor-made for mobile phones it satisfies the "sole and principal use" test. Further, as there is no specific entry for the Back Glass Subassembly in Chapter 84 or 85, it falls under CTH 8517 as "parts" of mobile phone in terms of Section Note 2(b).

Back Glass Subassembly satisfies the twin test of what is considered to be a "part"

a. The Back Glass Subassembly qualifies as a "part" of a mobile phone based on the twin test established by the Hon'ble CESTAT Delhi in the M/s. Vodafone Idea Limited Vs. Principal Commissioner of Customs (Imports) case [The test has been discussed above in submissions for Receiver Upper Antenna Subassembly, which for the sake of brevity is not being re-iterated]. Here, it is pertinent to mention that while the Back Glass Subassembly has a distinct function (enables wireless charging, microphone and flashlight functions of the mobile phone), it cannot operate independently of the mobile phone. It only becomes functional when integrated with other components of the phone. Therefore, it meets both conditions of the twin test and hence it cannot be classified under a separate heading as an apparatus and must be classified as part of the mobile phone under CTH 8517.

4.4. Applicability of concessional BCD under S. No. 6J of Notification No. 57/2017 -

S. No. 6J of Notification No. 57/2017 provides for concessional BCD at 10% for goods used in the manufacture of cellular mobile phones, classified under CTH 8517 79 90. As the Cover Glass Module is classified under CTH 8517 79 90 and is an essential part of a mobile phone, it should qualify for the concessional rate of duty under Sr. No. 6J of the notification, provided the necessary compliance with the IGCR Rules, 2022 is met during its import.

Analysis and Conclusion

5. The Back Glass Subassembly is a structural and functional component of a mobile phone consisting of rear glass panel along with associated elements which enables wireless charging, microphone and flashlight functions. The Back Glass Subassembly provides both protection and functionality to the mobile phones. The housing of the Back Glass Subassembly comprises of the following components -a. Back Glass; b. Back Glass Flex (consisting of charging coil, flashlight, and microphone); c. Magnets. The Back Glass, Back Glass Flex, and Magnets are bonded together to form the Back Glass Subassembly through an advanced adhesive application process. After importation, Black Glass subassembly is integrated into the MLB of the mobile phone through the FPCBA. Here it is also pertinent to mention that the Back Glass subassembly may comprise of additional parts which may be added to provide structural integrity to the subassembly and will assist in the integration of the subassembly in the mobile phone or maybe used as a placeholder for other parts of mobile phone. Thus, these additional component or parts will not alter the principal function of the subassembly.

5.1 Therefore, it can be said that the Back Glass Subassembly carries out varied functions, such as. firstly, it provides the structural support to the phone and prevents it from contamination from any foreign matter. Secondly, it provides flashlight utility (through flashlight), wireless charging compatibility (through charging coil and magnets), and capability to receive the sound (through microphone). Thus, it can be summarized that the Back Glass subassembly performs multiple functions by integrating various components within itself.

5.2 Classification of goods covered under the Customs Tariff is done as per the General Rules of interpretation (GIR'). GIR 1 to 5 lay down the principles for determining classification of goods under a specific Heading whereas GIR 6 is applicable if the objective is to determine the classification of goods in the Sub-headings of a Heading. GIR 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 1 is extracted herein below:

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

3. 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 ..."

5.3 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 (Tri. -Del.) 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.).

5.4 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.

5.5 It was held by the Hon'ble Supreme Court in L.M.L Limited vs. Commissioner of Customs, 2010 (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 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 vs. Gujarat Perstorp Electronics Ltd., [(2005)7 SCC 118, (2005) 186 E.L. T. 532 (3-member S.C. bench)];

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

Therefore, the HSN Explanatory Notes are an important aid for ascertaining the classification of a good, in addition to the GRI and corresponding Chapter Notes and Section Notes.

5.6 Hence, upon application of GIR 1, since the Back Glass Subassembly is used in mobile phone that the most specific entry at the four-digit level under which the Back Glass Subassembly may be classified is CTH 8517 which covers "Telephone sets, including telephones for cellular networks or for other wireless networks; other apparatus for the transmission or reception of voice, images or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network), other than transmission or reception apparatus of heading 8443, 8525, 8527 or 8528". Therefore, it is pertinent to analyze classification of Back Glass Subassembly under the said entry.

ANALYSIS OF CTH 8517:

5.7 In the present case, as the Back Glass Subassembly is used as a part during the manufacture of the mobile phones which are classified under CTH 8517, it becomes pertinent to analyze the classification of the Back Glass Subassembly under CTH 8517. CTH 8517 is further subdivided into various entries. The entries at single dash level under CTH 8517 have been extracted as follows:

5.7.1 Upon perusal of the above entries, there is only one relevant single dash entry wherein the product may be classified, viz.,

5.7.2 The Back Glass Subassembly is thus merits classification as 'parts'.

The Back Glass Subassembly is for specific use with mobile phone

5.8 At the outset, the Back Glass Subassembly exported are specific for use with mobile phone. The product is specifically designed for integration with other parts of mobile phone in order to constitute a functional mobile phone. This product does is not capable of functioning with any other device Hence, it is submitted that the Back Glass Subassembly is a product which is tailor made for use in the mobile phone.

The Back Glass Subassembly is not classifiable under any specific heading at four-digit level

5.9 The Back Glass Subassembly is not classifiable under any specific heading at four-digit level as it does not have a clearly defined function or principal function of its own. As discussed in Annexure I Back Glass Subassembly carries out varied functions, such as, firstly, it provides the structural support to the phone and prevents it from contamination from any foreign matter. Secondly, it provides flashlight utility (through flashlight), wireless charging compatibility (through charging coil and magnets), and capability to receive the sound (through microphone). Hence, the Back Glass Subassembly does not have a principal function of its own and various sub-components thereof perform individual functions. Further the Back Glass Subassembly is tailored for use solely and principally with mobile phones. Therefore, the Back Glass Subassembly merits classification as parts of the machines.

5.10 In this regard reference is made to Section Note 2 to Section XVI (covers Chapter 84 and Chapter 85) which deals with classification rules for parts of machines. Relevant portion of Section Note 2 to Section XVI is mentioned hereunder for ease of reference -

"2. Subject to Note 1 to this Section, Note 1 to Chapter 84 and to Note 1 to Chapter 85, parts of machines (not being parts of the articles of heading 8484, 8544, 8545, 8546 or 8547) are to be classified according to the following rules:

(a) parts which are goods included in any of the headings of Chapter 84 or 85 (other than headings 8409, 8431, 8448, 8466, 8473, 8485, 8503, 8522, 8529, 8538 and 8548) are in all cases to be classified in their respective headings;

(b) other parts, if suitable for use solely or principally with a particular kind of machine, or with a number of machines of the same heading (including a machine of heading 8479 or 8543) are to be classified with the machines of that kind or in heading 8409, 8431, 8448, 8466, 8473, 8503, 8522, 8529 or 8538 as appropriate. 2[However, parts which are equally suitable for use principally with the goods of headings 8517 and 8525 to 8528 are to be classified in heading 8517, and parts which are suitable for use solely or principally with the goods of heading 8524 are to be classified in heading 8529J;

(c) all other parts are to be classified in heading 8409, 8431, 8448, 8466, 8473. 8503. 8522, 8529 or 8538 as appropriate or, failing that, in heading 8485 or 8548."

5.11 Section Note 2 to Section XVI provides for rules which are applicable to classification of parts of machines in order of sequence thereof. Therefore, part of machine is required to be classified based on Section Note 2(a) to Section XVI. If Section Note 2(a) is not applicable only then Section Note 2(b) becomes applicable and only when both Section 2(a) and Section Note 2(b) are not applicable, Section Note 2(c) becomes applicable to such parts of machines.

5.12 Therefore, it is pertinent to rule out the applicability of Section Note 2(a) to ascertain classification of Back Glass Subassembly and ascertain classification thereof as parts of mobile phones' Based on the functionality of Back Glass Subassembly the following entries may appear relevant:

5.13 As discussed, the function of Back Glass Subassembly is not limited to any one of the specific functions stated in the table above. None of the above entries cover the complete functionality of the Back Glass Subassembly which consists of various sub-components. Therefore, Back Glass Subassembly cannot be classified as goods under any separate tariff heading in terms of Section Note 2(a) to Section XVI.

The Back Glass Subassembly is a 'part' of mobile phone in terms of Section Note 2 (b) to Section XVI - Back Glass Subassembly is a 'part' of mobile phone

5.14 Considering that the Back Glass Subassembly is a component which is solely designed for use in mobile phones, the most relevant single dash entry under CTH 8517 is the entry which covers "parts of mobile phone". In view of the above, it becomes pertinent to analyze whether the Back Glass Subassembly can be considered as a 'part' of mobile phones. The term 'parts' has not been defined in the HSN Explanatory Notes or the Customs Tariff. Hence, reliance must be made to the Hon'ble Supreme Court's Ruling in the case of CCE, Delhi Vs. Insulation Electrical (P) Ltd., [ 2008 (224) E.L.T. 512 (S.C.)]. In this case, the Apex Court while relying on various other earlier rulings has defined the term "parts" as "an essential component of the whole without which the whole cannot function" A similar ruling has been made in the case of Electrosteel Castings Vs. CCE, [1989 (43) E.L.T. 305 (Tribunal)] which has been maintained by the Hon'ble Supreme Court in [1996 (83) ELT A48 (Supreme Court)].

5.15 In the present case, the product under consideration is a Back Glass Subassembly which enables wireless charging, microphone and flashlight functions of the mobile phone thereby contributing to the phone's overall functionality and performance. Further, without the Back Glass Subassembly, the mobile phone cannot be said to be complete for sale in the commercial market. It is only after the back glass sub assembly is housed with the rest of the mobile phone that the entire housing of the mobile phone is complete. Moreover, the back glass subassembly does not only provide with the structural support and completeness, but also allows reception of sound (as it comes with microphone embedded in it), this enabling the mobile phone to carry out the basic function of calling/ answering the calls which is the most essential feature of a mobile phone.

5.16 In view of the above facts, it can be observed that the Back Glass Subassembly of the mobile phone is an essential component of the mobile phone allowing the mobile phone to function in an efficient manner. Accordingly, the Back Glass Subassembly can be considered as a 'part' of the mobile phone, hence, accordingly, the product will be covered within the single dash entry of 'parts' under CTH 8517.

5.17 Further, Section Note 2(b) clearly mentions that parts which are suitable for use solely or principally with a particular kind of machine, or with a number of machines of the same heading (including a machine of heading 8479 or 8543) are to be classified with the machines of that kind. Since the Back Glass Subassembly is suitable for use solely with mobile phone (given the specific design, structure and its usage with the mobile phone), it must be classified with the mobile phone as its part. In this light, since the mobile phones are covered under heading 8517, more specifically under CTH 8517 1300, the Back Glass Subassembly merits classification as part of the mobile phone under CTH 8517.

Back Glass Subassembly satisfies the twin test of what is considered to be a 'part"

5.18 To ascertain whether Back Glass Subassembly should classify under a separate heading or as part of the main machine, reference is made to the judgment of the Hon'ble CESTAT Delhi in the matter of M/s. Vodafone Idea Limited Vs. Principal Commissioner of Customs (Imports), Final Order No. 50874 1 2022 dated 20.09.2022 wherein the Hon'ble Bench laid down the twin test for determining whether an item is classifiable under the separate heading or as part of the main machine:

a. Test 1: No separate identifiable function of its own.
b. Test 2: Incapable of operating independently of the main machine.

In view of the above conditions, unless an article does not satisfy both the conditions of the twin test, it cannot be classified under a separate heading falling under its own appropriate heading and the same shall merit classification as parts of the main machine.

5.19 In view of the twin test laid above, since the Back Glass Subassembly only becomes functional after being connected with the MLB of the mobile phone and cannot operate independently of the mobile phone. Furthermore, the back glass subassembly is not even cross compatible with devices of other manufacturers and are to be used solely for the pre-determined purpose for which they are designed viz. for use as parts of mobile phone. To this extent, it does not qualify the conditions of the twin test and hence Back Glass Subassembly shall not merit classification under the separate heading in terms of Section Note 2(a) to Section XVI and shall merit classification only as 'pad of the mobile phone' in terms of Section Note 2(b) to Section XVI.

5.20 Coming to classification at eight-digit level, the single dash entry of "parts" under CTH 8517 is divided into the following entries at eight-digit level.

5.21 As mentioned above. CTH 8517 71 00 covers "Aerials and aerial reflectors of all kinds". In the present case, the product under consideration, i.e., Back Glass Subassembly is excluded from the purview of this entry owing to its functionality

5.22 Further, since the product under consideration is not a printed circuit board, hence, it is excluded from CTH 8517 79 10. Therefore, the Back Glass Subassembly is classifiable under the residuary entry of 'Other' parts under CTH 8517 79 90 which reads as "Telephone sets, including smartphones and other telephones for cellular networks or for other wireless networks: Other apparatus for the transmission or reception of vice, images or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network), other than transmission or reception apparatus of heading 8443, 8525, 8527 or 8528- Pads—Other—Other", in terms of GIR 1.

5.23 The Back Glass Subassembly imported and supplied to the third-party manufacturers of mobile phones is being sought to be eligible of availing exemption benefit by the third-party manufacturers in India (i.e., importers) under Sr. No. 6J of Notification No 57/2017. In this regard. Notification No. 57/2017 vide its Sr. No. 6J provides exemption from BCD to "all goods for use in manufacture of cellular mobile phone" which are covered under CTH 8517 79 90. This exemption is available subject to compliance with the procedure set out in the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017 [as amended by Customs (Import of Goods at Concessional Rate of Duty or for Specified End Use) Rules, 2022] ('IGCR Rules 2022). For ease of reference, the aforementioned entry under Notification No. 57/2017 has been extracted as follows:

Thus, by virtue of Sr. No. 6J, BCD at the rate of 10% is applicable for all goods for use in manufacture of cellular mobile phone" which are covered under CTH 8517 79 90.

5.24 The Port Commissionerate has supported the applicant in agreeing to the item "Back Glass Subassembly" ('product)" to be appropriately classifiable under the tariff item 8517 7990 and is eligible for the benefit of notification no. 57/2017-cus dated 30.06 2017 Sl.no. 6J (as amended) with effective rate of BCD being 10%.

5.25 M/s Apple Operations International Limited through letter dated 15.01.2025 has submitted some additional arguments with reiterating earlier views.

5.26 In view of the above, considering that the Back Glass Subassembly which is to be exported by the Applicant is classifiable under CTH 8517 79 90 and is an essential part of mobile phone, as discussed above, the Applicant is eligible to avail the benefit of concessional rate of duty under Sr. No. 6J under notification no. 57/2017-cus dated 30.06.2017 on import of Back Glass Subassembly, subject to compliance with IGCR Rules, 2022.

6. In the light of the above, a ruling is sought from the Hon'ble CAAR as follows:

a. The Back Glass Subassembly to be exported by the Applicant to India is correctly classifiable under CTH 8517 79 90 of the First Schedule of the Customs Tariff at the time of import; and

b The concessional BCD vide Sr. No. 6J of Notification No. 57/2017 is available to the Back Glass Subassembly exported by the Applicant to third party manufacturers engaged in mobile phone manufacturing in India.

7. I, rule accordingly.

(Samar Nanda)
Customs Authority for Advance Rulings

F. No. VIII/CAAR/Delhi/Apple Operations (Bengaluru)/164/2024         Dated: 23.01.2025

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

1 M/s Apple Operations International Limited, Hollyhill Industrial Estate Hollyhill, T23 YK84. Ireland.

2. The Pr. Commissioner/Commissioner of Customs, Airport & Air Cargo Complex. Air India Sats, Air Freight Terminal, Kempegowda, Bengaluru-560300.

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

6. Guard file.

7. Webmaster.

(Bharti Sharma)
Additional Commissioner & Secretary,
Customs Authority for Advance Rulings, Delhi