2025(03)LCX0136(AAR)

APPLE INDIA (P) LTD

decided on 10-03-2025

Customs Authority for Advance Rulings

New Custom House, Ballard Estate. Mumbai - 400 001

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

F.No. CAAR/CUS/APPL/l47,l48/2024 - O/o Commr-CAAR-Mumbai                                                                                                                                                                                               Date : 10.03.2025

N.B.:

A copy of this order made under sub-section (2) of Section 281 of the Customs Act. 1962 is granted to the concerned free of charge.

Any officer authorised by the Board, by notification or the applicant may file an appeal before the High Court of concerned jurisdiction against any ruling or order passed by the Authority, within 60 days from the date of the communication of such ruling or order.

The Principal Commissioner or Commissioner shall be authorised to file appeal against the advance ruling in terms of sub-section (1) of section 28KA.

The advance ruling pronounced by the Authority under Section 28 -1 shall remain valid for three years or till there is a change in law or facts on the basis of which the advance ruling has been pronounced, whichever is

Where the Authority finds that the advance ruling was obtained by the applicant by fraud or misrepresentation of facts, the same shall be declared void ab initio

Advance Ruling

1. Apple India Private Limited (IEC No. 0796001839) (hereinafter referred as "The Applicant") filed an application for advance ruling in the Office of Secretary, Customs Authority for Advance Ruling, Mumbai. The said application was received in the secretariat of the CAAR, Mumbai on 18.11.2024, along with its enclosures in terms of Section 28H (I) of the Customs Act, 1962 (hereinafter referred to as the 'Act'). The applicant is seeking renewal of the Advance Ruling bearing Order No. AAR/CUS/12/2016 dated March 18, 2016 read with corrigendum dated April 06, 2016 in relation to classification of different range of Apple Watch and parts namely bands which arc made of fiuoroelastomer or stainless steel or any other material (hereinafter referred to as 'other than leather bands'). In addition to the above, the Applicant seeks clarity on classification of "leather bands' under CTH 4205 00 90.

2. Submission by the Applicant:

2.1 The Applicant is a company having its registered head office located at 13th Floor, Prestige Minsk Square, Municipal No. 6, Cubbon Road, Bengaluru, Karnataka - 560001. The Applicant is a company incorporated under the Companies Act, 2013 and is engaged in the business of importing electronic consumer goods under the brand name 'Apple' such as iPhones, iPads, iPods, Mac Book (laptops). Apple Watch, bands of Apple Watch and computers for selling the same in India through online sales portal, channel partners and distributors located in India. They further submitted that Applicant is a wholly owned subsidiary Indian Company holding valid [EC Number 0796001839. Thus, the Applicant is rightly covered under the definition of 'applicant' as provided under Section 28E(c)(i) of the Customs Act. 1962 for making this application.

2.2 The applicant submitted that they had obtained an Advance Ruling from the Authority of Advance Rulings (Central Excise, Customs and Service Tax), New Delhi bearing Order No. AAR/CUS/12/2016 dated March 18, 2016, read with corrigendum dated April 06, 2016, in relation to the classification of Apple Watch and its bands. Vide the said order, the Hon'ble AAR held that the Apple Watch shall be classifiable under CTH 8517 62 90 and parts of the Apple watch (namely bands etc.) shall fall under CTH 8517 79 90. Relevant extract of the order is reproduced hereinbelow:

''...

In fact, even the reply shows (hat the parties are agreeing on the classification to CTH-8517 62 90 and in one matter CTII-8517 70 90 in favour of the applicant. In view of this, we dispose of the application. "

2.3 The applicant further submitted that according to Section 28J of the Customs Act, 1962 as amended, the advance ruling shall remain valid for a period of three years or till there is a change in law or facts on the basis of which the advance ruling has been pronounced, further, it is provided that the advance ruling (in force on the date on which the Finance Bill, 2022 receives the assent of the President) shall be valid for a period of three years from the date on which the said finance Bill receives the assent of the President. Relevant extract of Section 28 J reads as under:

"28J. Applicability of advance ruling-

(1) The advance riding pronounced by the Authority under section 28-1 shall be binding only -

(a) on the applicant who had sought it; '
(b) in respect of any matter referred to in subsection (2) of section 2811;
(c) on the Principal Commissioner of Customs or Commissioner of Customs, and the customs authorities subordinate to him, in respect of the applicant.

(2) The advance ruling referred to in subsection (1) shall remain valid for three years or till there is a change in law or facts on the basis of which the advance ruling has been pronounced, whichever is earlier:

    Provided that in respect of any advance ruling in force on the date on which the Finance Bill, 2022 receives the assent of the President, the said period of three years shall be reckoned from the date on which the said Finance Bill receives the assent of the President. "

    Accordingly, the Advance Ruling bearing Order No. AAR/CUS/12/2016 dated March 18, 2016, read with corrigendum dated April 06. 2016, in relation to the classification of Apple Watch and its bands shall remain in force for three years from the dale on which the finance Bill, 2022 received assent of the President.

2.4 Therefore, the Applicant requested to obtain clarity from the Hon'ble CAAR, Mumbai for the renewal of the Advance Ruling bearing Order No. AAR/CUS/12/2016 dated March 18, 2016 read with corrigendum dated April 06, 2016 in relation to the classification of Apple Watch under CTH 8517 62 90 and parts of the Apple smart watch, namely bands (other than leather bands) under CTH 8517 79 90 and for classification of leather bands under CTH 4205 00 90.

2.5 Overview of Apple Watch and its parts, namely bands: Apple Watch hereinafter referred to as the 'device', is designed for the exclusive use with the Apple iPhone ('iPhone'). The device is essentially an extension of the iPhone and designed to be worn on the user's wrist. The features of the device can only be activated once the device is paired with an iPhone as the full functionality of the device requires an active connection to an iPhone.

2.5.1 The device functions as an extension of the iPhone, providing various features that enhance user interaction. When connected, it allows access to information stored on the iPhone through a "glances" feature, which enables the rapid display of relevant data, such as calendar events, weather updates, and messages, on a compact interface. Additionally, the Smart Reply function integrates the device into a wireless network, facilitating the transmission and reception of data, voice, and images. This allows users to respond to messages directed to the iPhone by composing text messages using frequently utilized options, dictating messages, or employing emojis for communication.

2.5.2 The device supports hands-free communication by utilizing its built-in speaker and microphone for brief conversations when paired with the iPhone. Users can seamlessly transfer calls to a car speaker or Bluetooth headset for added convenience. The device also features an alert notification system designed for wrist attachment, which delivers notifications to the user through gentle taps, signalling incoming messages on the connected iPhone. The device offers functionalities including timekeeping, photo storage and viewing, and music playback, all requiring prior pairing with an iPhone. Once paired, it displays lime independently, although accuracy may diminish over time if not connected with an iPhone (thereby reflecting its usage to the consumer as an extension of the iPhone). Users can wirelessly download a limited photo library from the iPhone, allowing viewing on the device even when not connected.

2.5.3 The device is an advanced communication tool that enables peer-lo-peer interaction through digital touch functionality, allowing features like taps, voice messages, heartbeat sharing, and sketches via a paired iPhone. It also supports Apple Pay transactions using near field communication. It is an activity tracker that can measures calories, heart rate, steps, and distance, sharing data with compatible iPhone applications. The device is equipped with a customized design chip, the device features a digital crown for navigation, a retina display with a touch sensor for varying pressure inputs, and a contacts button for quick communication access. Its heart rate sensor uses infrared technology, while haptic feedback from the linear actuator provides notifications. The device activates its display through wrist movement and leverages the paired iPhone's GPS capabilities, transmitting data via Wi-Fi, Bluetooth, or Near Field Communication.

2.5.4 The applicant submitted that the device is a machine for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus as demonstrated by the above functions and features. The Applicant submitted the product brochure and technical specifications of 'the device', known, as the Apple Watch for reference.

2.6 Apple Watch Bands: The bands secure 'the device' onto the user's wrist, enabling full functional capability of the device to be accessible by the user. The attachment of bands is essential for facilitating optimal functionality and enhancing the overall user experience. The bands of the device are made up of fluoroelastomer or stainless steel or leather or of any other material.

2.7 The Applicant reiterated that they had obtained an Advance Ruling from CAAR, New Delhi bearing Order No. AAR/CUS/12/2016 dated March 18, 2016, read with corrigendum dated April 06, 2016, in relation to the classification of Apple Watch and its bands. In compliance with the provisions of Section 28J of the Customs Act, the Applicant filed the present advance ruling application for renewal of the abovementioned order In addition, the Applicant also sought clarity on classification of leather bands under CTH 4205 00 90.

3. Applicants Interpretation of Law/Facts:

3.1 The applicant reiterated that they had obtained an Advance Ruling from the Authority of Advance Rulings (Central Excise, Customs and Service Tax), New Delhi bearing Order No. AAR/CUS/12/2016 dated March 18, 2016, read with corrigendum dated April 06, 2016, in relation to the classification of 'the device' and its bands. Vide the said order, the Hon'ble AAR held that the Apple Watch shall be classifiable under CTH 8517 62 90 and parts of the Apple watch (namely bands etc.) shall fall under CTH 8517 79 90. Thus, the applicant reiterated the classification and their interpretation to reach to the classification as under.

3.2 THE DIFFERENT RANGE OF APPLE WATCH MERITS CLASSIFICATION UNDER CTH 8517 62 90 CONSIDERING ITS DESCRIPTION AND FUNCTIONALITY - The applicant submitted that the classification of goods is based upon Harmonized Commodity Description and Coding System (referred as 'HSN') developed by the World Customs Organization (referred as 'WCO'). The General Rules of Interpretation (referred as 'GRI') and General Explanatory Notes along the lines of HSN aid in determining the classification of goods. Further, reliance can also be placed upon the WCO Explanatory Notes, Sixth Edition (2017) (referred as 'Explanatory Notes') issued by the WCO during the relevant period for guidance on understanding the scope of a CTH. In light of the above, for determining the classification of 'the device' imported by the Applicant, the following needs to be kept in mind -

• GR1 to HSN system
   

• CTH / sub-heading / Tariff Item of the First Schedule to CTA in conjunction with Section / Chapter / Explanatory Notes.
   

• Principal function of Apple Watch

3.3 Rule 1 of GRI specifies that classification is to be determined according to the 'terms of the headings'. As per Rule 3 of GRI, when 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 (h), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration.

3.4 The applicant submitted that given their understanding of "the device', the following CTH of Chapter 85 and 91 appear to be relevant:

3.5 The applicant further discussed the relevant Section Notes, Chapter Notes and applicable Explanatory Notes for the purposes of classification of Apple Watch.

3.5.1 Relevant Notes for CTH 8517 - Chapter heading 8517 pertains to telephone sets, including smartphones and other telephones for cellular networks or for other wireless networks and 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. Note l(n) to Section XVI of Chapter 85 provides that this Section docs not cover clocks, watches or other articles of Chapter 91. Further, as per Section Note 3 to Section XVI of Chapter 85, the principal function of the product is the primary factor for determining the classification of the product. Composite machines consisting of two or more machines or appliances of different kinds, fitted together to form a whole, consecutively or simultaneously performing separate functions which are generally complementary and are described in different headings of Section XVI, are also classified according to the principal function of the composite machine. The said section note read as under:

"Unless the context otherwise requires, composite machines consisting of two or more machines fitted together to form a whole and other machines designed for the purpose of performing two or more complementary or alternative functions are to be classified as if consisting only of that component or as being that machine which performs.: the principal function. "

Further, explanatory notes to CTH 8517 provide that it covers 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 by electro-magnetic waves in a wireless network. The signal may be analogue or digital. The networks, which may be interconnected, include telephony, telegraphy, radio-telephony, radio-telegraphy, local and wide area networks.

3.5.2 Relevant Notes for CTH 9102: Note 3 to Chapter 91 provides that for the purposes of this Chapter, the expression "watch movements" means devices regulated by a balance-wheel and hairspring, quartz crystal or any other system capable of determining intervals of time, with a display or a system to which a mechanical display can be incorporated. Further, as per Explanatory Notes to Chapter 91, this Chapter covers certain apparatus designed mainly for measuring time or for effecting some operation in relation to time. It includes timepieces suitable for carrying on the person (watches and stop-watches), other timepieces (ordinary clocks, clocks with watch movements, alarm clocks, marine chronometers, clocks for motor vehicles, etc.), and also time recording apparatus, time interval measuring instruments and time switches. The Explanatory Notes further provide that the classification of clocks and watches combined with some other object (an article of furniture, a lamp, inkstand, paperweight, writing pad, tobacco jar, cigarette or cigar lighter, handbag, powder compact, cigarette case, propelling-pencil, walking-stick, etc.) is governed by the Rules for the Interpretation of the Nomenclature.

    Explanatory Notes to CTH 9102 clarify that this covers mechanical and electrical (mostly electronic) timekeeping instruments with case and movement, of a kind intended to be worn or carried and designed to function in all positions, which indicate the time or measure intervals of time, regardless of the thickness of the movement. These include wrist-watches, rocket-watches, fob-watches, watches for carrying in handbags, watches mounted in brooches, rings, etc. It is further clarified in the explanatory notes that CTH 9102 covers not only watches with simple movements but also those with complex systems (i.e.. incorporating extra elements in addition to those for simply indicating hours, minutes and seconds), for example, chronograph watches, alarm watches, repeaters and striking watches, automatic watches, calendar watches and watches indicating the working reserve. The heading includes fancy or special-feature watches, such as watertight, shock-proof or antimagnetic watches; eight-day watches; self-winding watches; watches with luminous dials and hands; watches with centre-seconds hands or special dials; handless watches; sports watches (e.g., watches for skin divers, with built-in depth indicator); Braille watches^

3.6 Classification of 'the device', i.e., Apple Watch, basis its operations and functionality: 'The device', i.e., Apple Watch imported by the Applicant, is a device which transmits and receives information between the device and its host device (i.e. iPhone). As per GRI 3(a), when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods, 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. Thus, in terms of GRI 3(a), CTH 8517 as well as CTH 9102 appear applicable for G Watch.

    In this regard, to determine the correct classification, resort must be had to GRI 3(b) as per which composite goods made up of different components, shall be classified as if they consisted of the material or component which gives them their essential character.

3.7 As discussed hereinabove, CTH 8517 covers inter alia apparatus for the transmission or reception of speech or other sounds, images or other data between two points in a wireless network. Whereas, as per Explanatory Notes to Chapter 92 and CTH 9102, watches covered thereunder may have certain special features, however, they should essentially be designed for measuring time or undertaking some operation in relation to time.

3.8 The Applicant reiterated that 'the device' acts as an extension to the iPhone as it executes the transmission of voice, images or other data between the device and iPhone, that forms the essential character of the device, since it must be paired with the iPhone in order to function. It performs the function of transmitting and receiving information between the device and its host device (i.e. iPhone), as it is through this host device that all the capabilities of the device may be fully realized. Consequently, the principal function of the device is an apparatus for the communication in a wireless network of voice, images and other data. The device interacts within a wireless network transmitting and receiving speech or other sounds, images and other data in the following ways.

3.8.1 From an iPhone: via Bluetooth or Wi-Fi connection, data may be transmitted from an iPhone to the device. These alerts may occur, depending on the individual user settings of the device, in situations such as when:

• A text message, call or email is received by the iPhone
   

• An alarm or text on the iPhone is triggered
   

• An app on the iPhone requires the user's attention

3.8.2 To an iPhone: via Wi-Fi or Bluetooth connection, data may be transmitted from the device to an iPhone. Examples include:

• A user, through Siri, may dictate a text message to be sent from the iPhone
   

• Phone conversations instigated on the device may be seamlessly transferred to the iPhone during the call.
   

• A user will be able to respond to messages and emails from the device to an iPhone.

3.9 The Applicant submitted that even though the name of the device is Apple watch, however, watch is only an additional feature of the device as the function of time keeping will only be working if the device has been previously paired with an iPhone. It was also mentioned that the device will continue to display the time independent of the iPhone after pairing and when not in range of the iPhone or not connected to an iPhone, will lose accuracy in the timekeeping over time. A high level of time keeping accuracy is only attained through the use of multiple technologies when the device is connected to the iPhone.

3.10 The Applicant further submitted that the device, i.e.. Apple Watch is not marketed by the Company as a watch, instead it is advertised as a device through which the user can receive and respond to notifications in an instant, track user's daily activity, control music using your voice. Thus, the customers of the device buy the same for availing and utilising its numerous features, which acts/performs as an apparatus for the communication [transmit and receive information between the device and its host device (i.e. iPhone)] in a wireless network of voice, images and other data.

3.11 In this context, Applicant submits that there are several examples in general trade where one can find that the product is being classified based on its principal feature.

3.12 The applicant further brought the notice the Circular No. 17/2007-Customs dated 19 April 2007 issued by the Central Board of Excise and Customs, New Delhi which had clarified that cellular/mobile phones may contain certain facilities such as storage of contact information such as phone numbers (dialed/received /missed call), names and addresses, to-do list, notes, appointment, E-mail address, facility for Short Message Service (SMS)/Multimedia Messaging Service (MMS), calculator, alarm clock, calendar, games and other similar facilities as a standard feature. These facilities assist the user to make calls to desired person, identify the caller, keep track of his calls, send/receive messages and enhanced use of communication using any of the above facility. Such cellular/mobile phones remain classified in sub-heading 8517 12, as the principal function of these equipment remain as 'telephony'.

3.13 Applicant further submitted that the Central Board of Excise and Customs vide Circular No. 20/2013- Customs, dated May 14, 2013, while considering the classification of 'Tablet Computers', has clarified as below:

''...It is also held that the products at issue have essentially the same functionality as a laptop. The function as an Automatic Data Processing Machine (ADP) is the main function of the product, while other functionalities of said machines are not different from the auxiliary functions that could be seen on any computer, such as desktop or laptop computers. The mobile phone calling function could be provided by the products only as a supplementary function because it could not be activated without running an operating system of the "Tablet Computer ", and in order to use the function a headset had to be used.

....Therefore, it is decided that machines commercially referred to as "Tablet Computers" are more appropriately classifiable in heading 8471, subheading 847130, by application of General Rules for Interpretation (GRI) of Import Tariff, 1 (Note 3 to Section XVI and Note 5(A) to Chapter 84 and 6 ".

3.14 The applicant submitted that basis the above circulars and the explanatory notes, it is evident that for classification of the goods, the primary functions and features of the product shall take precedence over supplementary features for determining the CTH classification.

3.15 The applicant further placed reliance on the following rulings which lay down the clear jurisprudence that the classification of the product is to be determined on the basis of the principal function of the product. The Hon'ble Supreme Court in the case Xerox India Ltd. v. Commissioner of Customs, Mumbai [2010 (260) E.L.T (161)] while determining the classification of a multi-function machines imported by the appellant, which is capable of performing the functions of printers, fax machine, copier and/ or scanner held as below:

"It is not in dispute that the Multifunctional Machines in question, Xerox Regal 5799 has about 85% of the its total parts and components along with manufacturing cost allocated to printing, as does 74% of the Xerox XD155df model. This clearly shows that the printing function emerges as the principal function and gives the Multi-Functional Machines its essential character. Having such a nature, it also clearly meets the three-fold requirement of chapter note 5(B), as it is to be used principally in ADPM, it is connect able to the Central Processing Unit, and it is able to accept data in a form (codes or signals) which can be used by the system. Further, there would be no application of chapter note 5(E) as correctly pointed out by the learned counsel for the appellants, as the Multi-Functional Machines are presented independently. Moreover, since predominant components are relating to printing function, chapter note 5(D) also becomes relevant which includes printers under heading 84.71. We are also satisfied with the contention of the appellants that based on the nature of the functions they perform, the Multi-functional Machines would serve as input and output devices of an ADPM (computer) and thus serve as unit of an ADPM, which on. a reading of chapter note 5(C), clearly classifies them as falling under heading 84.71.60 of the Act. "

3.16 The applicant submitted that the principal function of 'the device', i.e., Apple Watch is not timekeeping as the device is capable of performing different functions like that of transmission of data, payment mechanisms, GPS capabilities etc. thereby showcasing that timekeeping is just an additional feature of the device and not the sole function. Thus, in view of the above, it is thus evident that the device merits classification under CTH 8517 of the Custom Tariff. The relevant extract of the CTH is reproduced below for the ease of reference for determining classification under 8-digit level of HSN:

3.17 The applicant submitted that Apple Watch qualifies as a machine for reception, conversion and transmission or regeneration of voice, images or other data of Sub Heading 8517 62. Tariff Item 8517 62 10 to 8517 62 70 describe specific machines which are not applicable in the instant case. Thus, 'the device', i.e., Apple Watch is classifiable under Tariff Item 8517 62 90 of the Custom Tariff. This view is also upheld by the Delhi Tribunal in the case of M/s L.G. Electronics India Private Limited v. Principal Commissioner of Customs, New Delhi 2023 (12) TMI 263- CESTAT New Delhi, wherein one of the issues pertained to the classification of LG Watch W7, whether the LG watch must be classified under CTH 91021900 or CTH 85176290. It was held by the Hon'ble Tribunal that "once admittedly the impugned goods work on internet, it is not acceptable that the essential character of the impugned goods remains that of time keeping only. Thus, we hereby hold that section notes and chapter notes of Chapter 85 are most relevant for the purpose of classifying imported G-Watch (Smart Watch), it being a device capable of transferring data and even making or receiving phone calls which have not been the intent of the section notes and chapter notes of Chapter 91. Hence, first point of adjudication stands decided in favour of Revenue holding the right classification for the impugned imported product is 8517 6290. "

3.18 The applicant submitted that similar view was also taken by U.S.'Customs and Border Protection (referred as 'CBP') in CROSS Rulings HQ H260060 and HQ H257947, wherein ; Apple Watch' and 'Samsung Gear Live Android Smartwatch', respectively, were classified under CTH 8517 basis the reason that such watches were primarily designed to display, manipulate, and store data via the use of apps that communicate wireiessly with Internet-connected smart phones. The fact that these watches we're worn like conventional wrist watches of Chapter 91 merely indicates a different physical configuration of an article that is, prima facie, designed to extend the functionality of a '"paired" mobile device for the convenience of the user. Thus, such watches substantially differed from the articles described by CTH 9102. The CBP observed that without wireless connection to a "paired" Internet-connected smart phone, the watches operated with substantial functional limitations that rendered them unable to perform many of the tasks for. which they were marketed. Accordingly, it was the radio transceiver that was indispensable 10 the core, essential condition of the device, because the radio transceiver facilitated the display, manipulation, and storage of data between these watches and paired smart phones.

3.19 • In CROSS Ruling HQ H282905, the CBP classified 'Fossil Q Hybrid Smartwatch" under CTH 8517 basis the reason that data transmission and reception was an absolute prerequisite to this watch's use as a timekeeping device, or as anything else of utilitarian value. The CBP observed that most functions of this watch could not be conducted without data transmission and reception with paired mobile device. The CBP further observed that other hybrid smartwatches were previously classified by it under CTH 9102 (CROSS Rulings HQ H271909 and HQ H268657) on the basis that their essential character Was derived from their timekeeping capability and physical resemblance to traditional analog watches. However, in instant watch, it was ultimately the Bluetooth transceiver which proved to be both an indispensable component and the component which plays the greatest role with relation to the watch's use.

3.20 The applicant staled that as 'the device' performs different functions as it acts as a communication tool, has GPS capabilities, etc., it showcases that timekeeping is not the sole feature of the device and thereby it should be rightly classified under the CTH 8517 62 90.

3.21 Therefore, in view of the above, the applicant submitted that the device is rightly classified under CTH 8517 62 90, as machines for reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus. Applicant submits that the device is not covered under any of the goods falling under CTH 8517 62 10 to 8517 62 70 considering the principal functions and the features of the device.

3.22 The applicant further submitted that the above classification of the device has been accepted by the WCO Harmonized System Committee at its 55th Session held on March 16, 2015. WCO Harmonized System Committee observed that wearable battery-operated device, also known as smart watch, capable of receiving and transmitting data and designed to be worn on the wrist, incorporated inter alia touch screen display, RAM, internal memory, camera, speaker, microphone, gyro-sensor, accelerometer etc. and had a radio transceiver which utilized an open wireless technology to communicate wirelessly with other devices. Once paired with a host device, it was capable of performing a variety of functions such as displaying time and date information, recording and reproducing sound, taking and recording digital photographs and videos, alarm, timer, stopwatch, pedometer, making and receiving phone calls over the host device by speaking directly into the wearable device, receiving and viewing emails, notifications, receiving and sending SMS messages via voice commands and operating the music player functions of the host device. Thus, at this meeting, WCO came to an overwhelming majority agreeing that different range of Apple Watch and similar devices were rightly classifiable under CTH 8517 62. The ruling of WCO has been accepted by other member countries too.

3.23 The applicant submitted that on taking into consideration the above-mentioned functions of the device and the case laws, the Authority of Advance Rulings (Central Excise, Customs and Service Tax), New Delhi had accepted the contentions of the Applicant in relation to the classification of Apple Watch under CTH 8517 62 90 basis its principal function of transmission of voice, images or other data between the device and iPhone vide order bearing Order No. AAR/CUS/12/2016 dated March 18,2016 read with corrigendum dated April 06,2016. The Applicant requested for renewal of the abovementioned order for classification of Apple Watch under CTH 8517 62 90.

3.24 CLASSIFICATION OF APPLE WATCH BANDS (OTHER THAN LEATHER BANDS) UNDER CTH 8517 79 90: The applicant submitted that the bands of the device are made up of fiuoroclastomer or stainless steel or any other material other than of leather ('bands, other than leather bands'). The bands are unique in nature and cannot be used any where else. The bands secure the device onto the user wrist, enabling full functional capability of the device to be  accessible by the user. The unique and custom design integrated lug that will only fit the customized groove on the device to be accessible by the user. The unique and custom design integrated lug that will only fit the customized groove on the device and no other products.

3.25 The applicant submitted that the classification of goods covered under the Tariff Act is done as per the GIR of the First Schedule of Tariff Act, GIR 1 to 5 lays 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: 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 ..."

Therefore, the HSN Explanatory Notes are an important aid for ascertaining the classification of a good, in addition to the GIR and corresponding Chapter Notes and Section Notes. Further, in terms of Rule 3(a) of the GIR of the First Schedule of Tariff Act, in case the goods are classifiable under two or more headings, classification shall be according to the heading which provides the most specific description preferred over heading providing a more general description.

3.26 The applicant submitted that the bands arc the parts of device and can only be used with the device. Section Note 2 (b) to Chapter 85 of Tariff Act provides for classification of the parts of machines classified under Chapter 85. 'I Tie relevant extract of the note is as below -

"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 85 J 7 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] "

3.27 In view of the provisions of Section Note 2(b), the applicant submitted that since the bands for Apple Watch is a part of the device, the same are rightly classifiable under 8517. Further, the CTH 8517 specifically covers 'parts' of the goods falling under CT11 8517. Further, CTH 8517 71 00 covers aerials and aerial reflectors of all kinds. CTH 8517 79 10 covers populated, loaded or stuffed printed circuit boards. All other parts in respect of the goods falling under CTH 8517 are to be classified under CTH 8517 79 90. Since the bands of the device arc made for use principally with the device and can only be used with 'the device', the bands imported by the Applicant are "part' of 'the device' and hence must be classified under CTH 8517 79 90. In reference to the above, the applicant placed reliance on the case of CC vs Modi Xerox Limited [1993 (67) ELT (303)] has held that:

"Rule 3(a) thereof lays down that when goods are, prima facie, classifiable under two or more headings, classification shall be effected by following the principle that the heading which provides (he most specific description shall be preferred to heading providing a more general description.

.....

Applying Rule 3(a) of the Interpretative Rules to (he Tariff sub-heading 9009.90 is most specific to the goods imported because the goods imported is rear cover which is part of SADH which is an accessory to a photo-copier. Parts and accessories of photo-copying apparatus are covered by this sub-heading. "

3.28 The applicant further placed its reliance in the case of Commissioner of Central Excise, Nagpur v Simplex Mills Co. Ltd., [2005J 2 S.C.R.44I: (2005) 3 SCC 51 where the Apex Court held that the Rules for the interpretation of the Schedule to the Central Excise Tariff Act, 1985 are framed pursuant to the powers under Section 2 of that Act.

" Rule 3 must be understood only in the context of sub-rule (b) of Rule 2 which says inter alia (hat the classification of goods consisting of more than one material or substance shall be according to the principles contained in Rule 3. Therefore, when goods are prima facie, classifiable under two or more headings, classification shall be effected according to sub-rules (a), (b) and (c) of Rule 3 and in that order. "

3.29 The applicant submitted that in view of the above, the Authority of Advance Rulings (Central Excise, Customs and Service Tax), New Delhi had accepted the contentions of the Applicant in relation to the classification of bands as parts of the device, i.e.. Apple Watch under CTH 8517 70 90 vide order bearing Order No. AAR/CUS/12/2016 dated March 18, 2016. read with corrigendum dated April 06, 2016.

3.30 The applicant further mentioned that the said entry of CTH 8517 70 90 has now been amended and split into two new entries, i.e., CTH 8517 79 10 and CTH 8517 79 90, basis the amendment in the Customs Tariff Act, 1975 to align with the HS 2022 issued by WCO and the previous entry of CTH 8517 70 90 has been deleted. The relevant extract of the new entries is as below -

Thus, as is evident from the above, the parts of Apple Watch, namely bands (other than leather bands) previously classified under CTH 8517 70 90 arc now classifiable under CTH 8517 79 90, due to the deletion of the previous entry.

3 31 CLASSIFICATION OF APPLE WATCH BANDS MADE OF LEATHER UNDER CTH 4205 00 90: In addition to Apple Watch bands made up of fluoroelastomer or stainless steel or other material, the Applicant is importing Apple watch bands made up of leather ('leather bands'). The leather bands are unique in nature and cannot be used anywhere else. The bands secure the device onto the user wrist, enabling full functional capability of the device to be accessible by the user.

3.32 The applicant submitted that GIR I stipulates that the goods under consideration shouId be classified in accordance with the terms of the Headings and any relevant Section or Chapter notes. Upon application of GIR 1, the competing entries at the four-digit level under which the leather bands for Apple Watch may be classified are as follows:

3.33 The applicant submitted that classification of "'parts" of the devices classified under CTH 8517 is to be done in terms of Section Note 2(b). However, the provisions of Section Note 2 are subject to the exclusions mentioned in Section Note 1 to Chapter 85. Section Note 1 to Chapter 85 specifically excludes, the articles of, leather or of the composition of leather (covered under heading 8402) used in machinery or mechanical appliances, or .for other technical uses from classification under Chapter 85. The relevant extract is as below -

"1 This Section does net cover :

(h) articles of leather or of composition leather (heading 4205) or of furskin (heading 4303), of a kind used in machinery or mechanical appliances or for other technical uses;

3.34 ,.On the basis of the above Section Note, the applicant submitted that the leather bands of the device. are not classifiable under the CTH 8517, the reason being that Section Note 1 explicitly excludes the, articles of leather from the ambit of classification under CTH 8517.,

3.35 Chapter 42 of Custom Tariff covers' articles of leather, saddlery and harness; travel goods, handbags and similar containers; article's of animal gut (other than silkworm gut). Further, Section Note 1 to Chapter 42 clarifies that the term 'leather' includes chamois (including combination chamois) leather, patent leather, patent laminated leather and metallised leather. Given the above, the Applicant submitted that Apple Watch bands imported by them are made of leather or composition leather and hence shall be classified under CTH 4205 which covers 'other articles of leather or of composition leather'. The relevant headings of Chapter 42 are tabulated below -

3.36 The applicant submitted that since leather bands are not explicitly mentioned in other subheadings of Chapter 42, they shall fall under the "Other" category under CTH 4205 as an article of leather. Therefore, the applicant submitted that the leather bands imported by them for specific use with Apple Watch are to be classified under CTH 4205. further, other articles of leather or of composition leather under CTH 4205 arc further bifurcated and categorized as under

3.37 The applicant submitted that CTH 4205 00 11 and CTH 4205 00,19 covers straps other than for machinery or harness and CTH4205 00 20 covers leather sofa covers. All other articles of leather or of composition leather (including used for machine classified under CTH 85! 7) shall be classified under CTH 4205 00 90. The applicant further submitted that the classification of leather bands/straps has been addressed in various rulings. In support of the above, the applicant drew the reference to the following case laws -

3.37.1 In the ruling for Nokia Inc. (NY KS3372 dated March 1, 2004), a leather wrist strap imported from Turkey was classified under subheading 4205.00.4000, which covers "other articles of leather or of composition leather, straps and strops." This ruling emphasized that the leather wrist strap, when imported in bulk, falls under this specific, subheading due to its material composition.

3.37.2 In another ruling for RedKat Sourcing Inc. (N025889 dated April 17, 2008), various items of leather including leather wrist and ankle straps, were classified under subheading 42.05.00.8000 having description "other articles of leather or of composition leather, other". The ruling provided a detailed description of the items, including their composition of split leather coated with polyurethane. The classification under this subheading was based on the specific characteristics of the leather items.

3.38 Thus, given the above, the applicant submitted that the parts of Apple Watch, namely bands made up of leather, i.e., leather bands, imported by the Applicant, are rightly classified under CTH 4205 00 90 as 'other articles of leather or of composition leather, other

4. Rejoinder filed by the Applicant

4.1 The applicant vide email dated 10.01.2025 submitted the letter dated 08.01.2025 wherein they reiterated the contents of the application.;! hey further-reiterated that the issue raised in the instant application is already covered vide the Advance Ruling bearing order No. AAR/CUS/12/2016 dated 18.03.2016, which was passed by the Authority of Advance Rulings (Central Excise, Customs and Service Tax), New Delhi. They further reiterated that due to change in the law vide the Finance Act 2022, which defined the validity of the advance ruling, the above referred advance ruling is applicable only for a period of three years. The Finance Act 2022 clarified that any advance ruling in force on the date on which the Finance Bill, 2022 receives the assent of the President, the said period of three years shall be reckoned from the date on which the said Finance Bill receives the assent of the President. Since the Finance Act. 2022 was enacted on 30th March, 2022, the validity period of the 2016 ruling is only up to 29th March 2025. Thus, they filed an application again for obtaining the ruling in the present matter i.e., the classification of Apple Watch under Customs Tariff Heading ('CTH') 8517 62 90 and Apple Watch Bands (non-leather) under CT11 8517 79 90 and Apple Watch Bands (leather) under CTH 4205 00 90.

4.2 The applicant reiterated the features of the product as under:

Apple Watch

• Designed for exclusiye use with the Apple iPhone.
• Functions as an extension of the iPhone, providing various features that enhance user interaction.
• Capable of receiving and transmitting data,, voice, and images.
• Supports hands-free communication, alert notifications, timekeeping, photo storage, and music playback.
• Equipped with a customized design chip, digital crown, retina display with touch sensor, heart rate sensor, and. haptic feedback.

Apple Watch Bands

• Secure the device onto the user's wrist, enabling full functional capability.
• Made up of fluoroelastomer,- stainless steel, leather, or any other material.
• Essential for facilitating optimal functionality and enhancing the overall user experience.

4.3 The applicant further reiterated that since that the principal function of the Apple watch is as an apparatus for the communication in a wireless network of Voice, images or other data the same merits classification under CTH 8517 62 90. Further, the Apple Watch Bands (non-leather) being solely and principally for use with the Apple Watch, are parts of Apple Watch and merit classification under CTH 8517 79 90.With respect to Apple Watch' Bands made of leather, basis the Section Note 1 (b), articles of leather are excluded from the Chapter 85 and therefore appropriately classified under CTH 4205-00 90.

4.4 . Receipt of Show Cause Notice post filing of Application: The applicant submitted that post submitting the application for advance ruling, they received a Show Cause Notice dated 27.12.2024 ('the SCN') issued ,by Additional Commissioner, of Customs, ACC, Mumbai on 03.01.2025 challenging the classification of the Apple Watch Bands under. CTH 8517 70 90 (which was amended vide Finance Act, 2021 and split into two new entries, CTH 8517 79 10 and CTH 8517 79 90). The Applicant submitted that vide' the SCN, it is alleged that the Apple Watch Bands merit classification under CTH 9113 which covers "Watch Straps. Watch bands, and watch bracelet, and parts thereof" for imports undertaken during the period 01 04-.2021 to 22.12.2021. • 1 - •

4,5. No impact of the SCN on the instant matter: The applicant submitted that since the SCN -is issued to the Company post submitting the application, the application .filed in the instant matter is eligible to be entertained as there was no matter pending before any officer of Customs at the time of filing the application in terms of proviso to Section 281 of the Customs Act, 1962. The applicant farther submitted mat the SCN will have no impact on the classification of Apple Watch Bands since the Advance Ruling dated 18.03.2016 is already in place wherein it was ruled that Apple Watch Bands merit classification under CTH 8517 79 90.

4.6 The applicant further submitted that the Apple Watch Bands merit classification under CTH 8517 79 90 because of the following reasons:

• The Apple Watch Bands are parts of the device and can only be used with the device.
• Section Note 2 (b) to Chapter 85 of the Tariff Act provides for the classification of parts of machines to be done under Chapter 85 where the machines are themselves classified under Chapter 85.
• The bands arc unique in nature and cannot be used anywhere else.
• The bands secure the device onto the user's wrist, enabling full functional capability of the device to be accessible by the user.

4.7 The applicant further submitted that the Apple Watch Bands are specifically designed for Apple Watches (which are classifiable under CTH 8517) and these bands cannot be used or fitted with other regular watches. The Applicant further submitted that since the Apple Watch Bands docs not perform any function of the watch rather is an essential part of the Apple Watch which serves solely to keep the Apple Watch affixed to the user's wrist, it cannot merit classification under CTH 9113.

4.8 The applicant further submitted that the proposed classification in the SCN is an afterthought of the authorities as in 2015 the ACC Mumbai had held that Bands are righty classified under CTH 8517 7090 vide its comments dated 28.10.2015 to the Hon'ble Authority for Advance Rulings, Central Excise, Customs and Service 'fax, Ministry of Finance, further, as per Section 28(J) of the Customs Act, the advance ruling is binding on the Principal Commissioner of Customs or Commissioner of Customs, and the customs authorities subordinate to him, in respect of the applicant. Hence, the Advance Ruling bearing order No. AAR/CUS/12/2016 dated 18.03.2016 is also binding on ACC Mumbai who has issued SCN to the Company challenging classification of Apple W7atch Bands. The Applicant further submitted that since the Advance Ruling on the very same issue is already in favor of the applicant, the SCN issued does not stand a valid chance, and hence the classification adopted by the applicant is valid.

5. Port of Import and reply from Jurisdictional Commissionerate

5.1 The applicant in their CAAR-1 indicated that they intend to import the subject goods i.e. Apple Smart Watch and its bands at the jurisdiction of office of the Principal Commissioner of Customs (III), (Import), Air Cargo Complex, Sahar, Andheri (East), Mumbai 400099 and at the jurisdiction of office of the Principal Commissioner of Customs, Airport & Air Cargo Complex, Air India Sats, Air Freight Terminal, Kempagowda, Bengaluru - 560 300. In terms of Provisions of the Section 28-1(1) of the Customs Act, 1962 read with the Sub-regulation No. (7) of the Regulation No. 8 of the Customs Authority for Advance Rulings Regulations, 2021, the application was forwarded to the office of the Principal Commissioner of Customs (III), (Import), Air Cargo Complex, Sahar, Andheri (East), Mumbai 400099 and to the office of the Principal Commissioner of Customs, Airport & Air Cargo Complex, Air India Sats, Air Freight Terminal, Kempagowda, Bengaluru - 560 300 on 28.11.2024 as indicated by the applicant at Sr. No. 13 of their CAAR-1 Forms calling upon them to furnish the relevant records with comments, if any, in respect of the said application. Further reminders were also sent on 17.12.2025 and 06.01.2025 to both the concerned jurisdictional commissionerates. The concerned import Commissionerate, Air Cargo Complex, Sahar, Andheri (East), Mumbai replied vide letter dated 09.01.2025. A third reminder letter dated 23.01.2025 was issued to the concerned Bangalore Commissionerate, Airport and Air Cargo Complex. Bengaluru, however, no comments till date has been received.

5.2 The concerned import Commissionerate, Air Cargo Complex, Sahar, Andheri (Hast), Mumbai vide its letter dated 09.01.2025 submitted that as "Apple smartwatches" support communication (via Bluetooth, Wi Fi, or cellular connectivity), transmit and receive data, such as phone calls, messages, or health monitoring data, they may be considered as telecommunication devices because of their primary capability to sync and communicate with smartphones or other networks. Hence, the goods appear to be rightly classifiable under CTH code 85 176290.

5.2.1 It was further submitted in regards to the classification of parts, namely bands made up of fluoroelastomer or stainless steel or any other material other than of leather (i.e. bands, other than leather bands) for different range of Apple Watch classifiable under CTH 8517 7990 of the First Schedule of the Customs Tariff Act, 1975 that the Watch Bands that are simple bands designed to hold the Watch on the user's wrist appears to be not characterized as electrical machinery and equipment or parts thereof, that are assembled together into a watch or clock movements, or into articles suitable for use solely or principally as parts of such movements. Thus, the Watch Bands having the-mentioned basic and decorative characteristics, appears to be not excluded from classification under Chapter 91 of lTC (HS) by virtue of Note 1 (g). Notes 1 (g) to Chapter 91 of lTC (HS) provides:

1. This Chapter dogs not cover: (g) Articles of Chapter 85, not yet assembled together or with other components into watch or clock movements or into articles suitable for use solely of principally as parts of such movements (Chapter 85).

5.2.2 It was further mentioned that the Explanatory Note to Heading 9113 clarifies that the Heading covers watch straps, watch bands and watch bracelets and all devices for fastening watches to the wrist. Furthermore, they may be of any material and may provide decorative character. The Heading also includes parts of. watch straps., bands and bracelets. It was further submitted, that the bands that fasten the, watch to the user's wrist, composed of various materials that can provide decorative character and do not-perform the function of a watch op do not assist the watch in. any way in performing the functions of watch, appears to be classifiable under Tariff Heading, 9113.

5.2.3 Based on Audit observations, it was further submitted that the importer has availed the undue duty benefit under Sr., No.5 of Notification No. 57/2017, by mis-classifying the goods under 85177010, an SCN dated. 27.12.2024 has been issued to the applicant.

5.2.4 In regards to parts of Apple Watch, namely bands made of leather (''leather bands"), it was submitted that the. same appears to be; classifiable, under CTH 9113 in view of the submissions made above.

5.3 Further, vide letter dated 14.01.2025, additional submissions were made by the concerned Import commissionerate, Air Cargo Complex, Sahar, Andheri '(East), Mumbai. The additional submissions made are as under: '

i. On perusal of the application filed by the applicant, it is noticed that applicant has referred to various Rulings issued by the US Customs Authorities in the matter of classification of Smart Watch' in the cases of applicants namely M/s Apple Inc. (Ruling dated '14.07.2015), M/s Samsung Electronics of America Inc. (Ruling dated  14.07.2015). M/s Fossil Group Inc. (Ruling dated 30.04.2018).

ii.. However, while perusing the referred Rulings', this Office came across a Ruling dated 03.0! 2017, by the US Customs on classification of "Bands for Apple Watches'*, wherein the Authority has concluded the proceedings with the pronouncement that Apple Watch Bands / Straps of modal, modal sports bands of bovine leather and plastic respectively are classifiable under Chapter heading 9113. It is noticed that the . ^ • , applicant has not referred the subject Ruling pertaining to their own goods, which is specific about the classification of Apple Watch Bands.

iii. On perusal of CAAR's.. order No. AAR/CU.S/12/2016 dated 18.03.2016 and Corrigendum dated 06.04.2016 (as enclosed, by the applicant in their application), it was noted that the Order states about the classification of Apple Watch (85176290) and its' Parts (85177090). But, the present application has been made for review of the mentioned 'CAAR's orders, making it more specific about the Watch, Watch Bands (made of fluro-elastomer. stainless stce! or any other material other than Leather) and Leather Bands.

iv. The department has recently issued a Protective demand dated 27.12.2024, based on the CRA's Observations with respect to mis-classification of "Apple Watch Bands" conveyed in the year 2023, which was escalated to the level of SOF (Statement of Facts). The SCN is a way to convey the Audit's objection to the applicant and the applicant has to reply to the Adjudicating Authority. Therefore, it can be said that the SCN is not a confirmed demand and a deliberated decision shall be taken by the adjudicating authority after giving the due opportunity to the importer.

v. To arrive at a decision before issuance of SCN, the NlDB import data of Watch Bands was retrieved and it is found that in case of approx. 2000 Bills of Entry, Watch Band were declared under the Tariff Heading 9113, whereas only in case of six Bills, of Entry (including three B/Es of the applicant). Watch Bands were declared under Tariff Heading 8517.

vi. The issuance of SCN has duly been conveyed / furnished before the CAAR vide previous submissions dated 09.01.2025.

6. . Records of Personal Hearing

6.1 A persona! hearing was held on 10.0 i.2025 at 3:00 PM in the office of the CAAR, Mumbai. Shri Anurag Sehgal, Shri Gautam Khattar. Ms. Amisha Bhasin and Mr. Annan Khan (Price Waterhouse & Co. LLP), all Authorised Representatives (ARs) appeared for the online hearing on behalf of the applicant and Ms. Medba Tiwari, Deputy Commissioner, Air Cargo Complex Group VA, Sahar, Andheri. (East), Mumbai appeared for the online hearing on behalf of the concerned Import Commissionerate, Air Cargo Complex, Sahar, Andheri (East), Mumbai. The ARs reiterated the contention of the applicant filed with the application. They sought renewal of the Advance Ruling bearing Order No. AAR/CUS/12/2016 dated March 18,2016 read with corrigendum dated April 06,2016 in relation to classification of different range of Apple Watch and parts namely bands which-are made of fluoroclastomer or stainless steel or any other material (except .leather) and sought a classification ruling for parts namely bands made of leather in terms of provisions of Section 28J of the Customs Act, 1962. They contended that based on the technical specifications and as per Section Note 3 to Section XVI of Chapter 85, the apple watch merit classification under CTI 85176290. They submitted that no change in the law has been made in this matter. They also referred that the ACC Mumbai Commissionerate, also agrees with the proposed classification of the Apple Watch. They added that as far as the Band is concerned, it is a part of Apple Watch and there is specific entry for parts of Heading 8517 i.e. CTI 85177990, and therefore, the said Apple watch bands merits classification under CTI 85177990. They further submitted that in terms of Note 2(b) of Section XVI, parts which can solely or principally be used with the main product are to be classified as parts of that product only and therefore, the Apple Watch Bands merits classification under Heading 8517 only. They further informed that the earlier Advance ruling order where the Apple watch and its pails, namely bands were classified under CTH 8517 was not challenged and was still in effect at the time of Personal hearing in terms of Section 28J(2) of the Customs Act, 1962 which prescribes a time limit of three years on validity of the Advance Rulings issued. They further Informed that the applicaton for renewal of advance ruling was filed by them in November, 2024 and they received the Show Cause Notice dated 27.12.2024 only on 03.01.2025 wherein they have been asked to justify the classification of Apple Watch Bands under Heading 8517 instead of Heading 9113. They further contended that the Apple Watch Bands made of Leather merits classification under Heading 4205 as these arc specifically excluded from Chapter 85 in terms of Chapter Note 1 (b) which excludes articles of Leather or of Composition Leather.

The Departmental representatives contended that there is no issue vis-a-vis classification of Apple Watch under Heading 8517 and agreed with the proposed classification under Heading 8517 for the Apple Watch. She, however, contended that the Apple Watch bands merits classification under Heading 9113 as Watch Bands as it is a specific heading for Watch bands. She also informed that a Protective demand dated 27.12.2024, based on the CRA's Observations with respect to mis-classification of "Apple Watch Bands'* conveyed in the year 2023 has been issued to the applicants. She also informed that they will submit a detailed response in a week time.

7. Discussions and Findings

7.1 I have considered all the materials placed before me in respect of the classification of subject goods. I have gone through the submissions made by the applicant during the personal hearing. Therefore, I proceed to pronounce a ruling on the basis of information available on record as well as existing legal framework.

7.2 The applicant has sought advance ruling in respect of the following questions:

a. . Renewal of Advance Ruling bearing Order.No. AAR/CUS/12/2016 dated March 18. 2016 read with corrigendum dated April 06, 2016, for classification of Apple Watch under Custom Tariff Heading 0CTIT) 8517 62 90 of the First Schedule of the Customs Tariff Act, 1975 attracting Basic Customs Duty (BCD) at 20% rate.

b. Renewal of Advance Ruling bearing Order No. AAR/CUS/12/20I6 dated March 18,2016 read with corrigendum dated April 06,' 2016 for classification of parts, namely bands made up of fluoroelastomer or stainless steel or any other material other than of leather (i.e.. bands, other than leather bands) for different range of Apple Watch classified* under CTH 8517 79 90 of the First Schedule of the Customs Tariff Act, 1975 attracting BCD at 15% rate (As per the previous advance ruling, the parts to Apple watch (i.e., bands) were classified under CTH 8517 70 90.However, the entry has been omitted and split into two new entries, i.e., CTH 8517 79 10 and CTH 8517 79 90 pursuant to the amendment in the Customs Tariff Act. 1975 to align, with the HS 2022 issued by the World Customs Organisation. The entry under CTH 8517 79 90 is coterminous with old CTH 8517 70 90).

c. Whether the parts of Apple Watch, namely bands made of leather ('leather bands') are classified under CTH 4205 00 90 of the First Schedule of the Customs Tariff Act, 1975 attracting BCD'at10% rate?

7.3 At the outset, I find, that the issue raised at the Sr. No. 08 in the CAAR-1 form is squarely covered under Section 2811(2) of the Customs Act, 1962 being a matter related to the classification of goods.

    Further, I find that Section 28E (c) defines the 'Applicant' as any person holding a valid Importer-exporter Code Number granted under section 7 of the Foreign Trade (Development and Regulation) Act, 1992; or exporting any goods to India; or with a justifiable cause to the satisfaction of the Authority, who makes an application for advance ruling under Section 28H. In this matter, the applicant holds a valid importer-exporter Code Number and satisfies one of the criterions mentioned under the definition of the Applicant under Section 28H and therefore, is a valid applicant for filing application under Section 2811 of the Customs Act 1962.

7.4 The applicant are seeking renewal of Advance Ruling bearing Order No. AAR/CUS/12/2016 dated March 18, 2016 read with corrigendum dated April 06, 2016, for classification of Apple Watch under Custom Tariff Heading ('CTH') 8517 62 90 of the First Schedule of the Customs Tariff Act, 1975 and for classification of parts, namely bands made up of fluoroelastomer or stainless steel or any other material other than of leather (i.e., bands, other than leather bands) for different range of Apple Watch classified under CTH 851.7 79 90 of the First Schedule of the Customs Tariff Act. 1975. The applicant, submitted that the Apple Watch is essentially an extension of the iPhone-and designed to be worn on the user's wrist. The applicant further submitted that the Apple watch is an advanced communication tool that enables peer-to-peer interaction through digital touch functionality, allowing features like taps, voice messages, heartbeat sharing, and sketches via a paired iPhone. Further, the applicant submitted that the Apple watch bands secure The Apple Watch' onto the user's wrist, enabling full functional capability of the device to be accessible by the user. They further submitted that the attachment of bands is essential for facilitating optimal functionality and enhancing the overall user experience. The bands of the device are made up of fluoroelastomer or stainless steel or leather or of any other material.

7.5 Before deciding on the issue, let m 'deliberate on the legal framework prescribed in Customs Tariff Act, 1975. Chapter/Section notes along with HSN explanatory notes. Classification of goods in the Harmonized System of Nomenclature (HSN) is governed by the General Rules for the interpretations. Rule 1 of the General Rules for the Interpretation of the Import Tariff to the Customs Tariff Act; 1975 stipulate that for legal purposes, the classification of the import item shall be determined according to the terms of the headings and any relative Section or Chapter Notes.

7.6 As far as the issue of classification of Apple Watch is concerned, I find that the device i.e. Apple watch has a host' of functionalities such as timekeeping, storage of data etc. However, the principal function of the device is as an apparatus for the communication in a wireless network of voice, images and other data as it works as an extension of paired iPhone. Note 3 to Section XVI of the First Schedule of the Customs Tariff Act 1975 reads as under:

"3. Unless the context otherwise requires, composite machines consisting of two or more machines jilted together to form a whole and other machines designed for the purpose of performing two or more' complementary or alternative functions are to he classified as if consisting only of that component or as being that machine which performs the principal function.

Since the principal function of the device is as an apparatus for the communication in a wireless network, I find that Heading 8517 "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" aptly covers such apparatuses / devices.

7.7 I further find that both the department (ACC Sahar, Mumbai) and applicant are in agreement over the classification of Apple watch under Heading 8517 and specifically under Tariff Item 85176290. The relevant text of the 1 leading, Sub-heading and Tariff Item is as under:

7.8 I further find that WCO Harmonized System Committee at its 55th Session held on March 16, 2015 ruled with an overwhelming majority that different range of Apple Watch and similar devices were rightly classifiable under CT11 8517 62.

7.9 In view of the above, I find that the Apple watches arc rightly classifiable under Heading 8517 and specifically under Tariff Item 8517 62 90 of the first Schedule of the Customs Tariff Act, 1975 and I see no reason to not renew the earlier order of the erstwhile authority for another three years as far as the classification of Apple Watch is concerned.

7.10 In regards to the classification of Apple Watch Bands, from the submissions made by the department as well as the rejoinder filed by the Applicant. I find that the matter of classification of these goods is now currently under dispute as an Show Cause Notice (SCN) SCN dated 27.12.2024 has been issued to the applicant in the matter by the Additional Commissioner of Customs, ACC, Mumbai challenging the classification of the Apple Watch Bands under CTH 8517 70 90 (which was amended vide Finance Act, 2021 and split into two new entries, CTH 8517 79 10 and CTH 8517 79 90). I find it prudent here to examine the Section 281(2) of the Customs Act. 1962. The same is reproduced here for case of reference:

"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 a/ready decided by the Appellate Tribunal or any Court."

7.11 Here, I do not agree with the view of the applicant that since the dispute arose after the application, therefore application is not barred. Rather, I find that since the dispute came into existence before the issuance of the ruling, the application is hit by the provision prescribed under Proviso (b) to Section 281(2) of the Customs Act 1962. The impugned SCN currently is pending before the adjudicating authority in the applicant's matter.

7.12 Further, I find it prudent to examine Section 28J(2) of the Customs Act, 1962 which deals with the applicability and validity of the rulings pronounced under the relevant sections. The same is reproduced here for case of reference.

"Section 28J. Applicability of advance ruling. -
(1) ...

(2) [The advance ruling referred to in sub-section (1) shall remain valid for three years or till there is a change in law or facts on the basis of which the advance ruling has been pronounced, whichever is earlier:

Provided that in respect of any advance ruling in force on the date on which the Finance Bill, 2022 receives the assent of the President, the said period of three years shall be reckoned from the date on which the said Finance BUI receives the assent of the President I.

7.13 Here, I observe that the applicant has not specifically provided the details of any subsequent appeal in terms of Section 28J(2) of Customs Act 1962; against the said Show Cause Notice, before the competent court and/or stay operation thereupon. Therefore I am of the view that as far as the classification of Apple Watch bands is concerned in this instant case, there is bar on pronouncing of Ruling, in terms of Proviso (b) to Section 281(2) of the Customs Act, 1962 However. liberty is given to the applicant to approach this office once the dispute is resolved/ SCN is decided and the applicant so desires.

8. In light of the above facts, discussions and observations, my views on the questions raised by the applicant are as under:

a. Renewal of Advance Ruling bearing Order No. AAR/CUS/12/2016 dated March 18, 2016 read with corrigendum dated April 06, 2016, for classification of Apple Watch under Custom Tariff Heading ('CTH') 8517 62 90 of the First Schedule of the Customs Tariff Act, 1975 attracting Basic Customs Duty (BCD) at 20% rate.

Ans. My answer is in affirmative for the same and renewal of the Advance Ruling bearing Order No. AAR/CUS/12/2016 dated March 18, 2016 read with corrigendum dated April 06, 2016, for classification of Apple Watch under Custom Tariff Heading ('CTH') 8517 62 90 of the First Schedule of the Customs Tariff Act, 1975 is warranted accordingly.

b. Renewal of Advance Ruling bearing Order No. AAR/CUS/12/2016 dated March 18, 2016 read with corrigendum dated April 06, 2016 for classification of parts, namely bands made up of fluoroelastomer or stainless steel or any other material other than of leather (i.e., bands, other than leather bands) for different range of Apple Watch classified under CTH 8517 79 90 of the First Schedule of the Customs Tariff Act, 1975 attracting BCD at 15% rate (As per the previous advance ruling, the parts to Apple watch (i.e., bands) were classified under CTH 8517 70 90. However, the entry has been omitted and split into two new entries, i.e., CTH 8517 79 10 and CTH 8517 79 90 pursuant to the amendment in the Customs Tariff Act, 1975 to align with the HS 2022 issued by the World Customs Organisation. The entry under CTH 8517 79 90 is coterminous with old CTH 8517 70 90).

Ans. I do not allow the application on this issue at this point of time in terms of Proviso (b) to Section 281(2) of the Customs Act, 1962 as the matter is currently pending before the Adjudicating Authority in the Applicant's matter. I refrain from passing order on this issue.

c. Whether the parts of Apple Watch, namely bands made of leather ('leather bands') are classified under CTH 4205 00 90 of the First Schedule of the Customs Tariff Act, 1975 attracting BCD at 10% rate?

Ans. Same as (b) above.

9. I rule accordingly.

(Prabhat K. Rameshwaram)         
Customs Authority for Advance Rulings, Mumbai
 

F.No. CAAR/CUS/APPL/l47,148/2024- O/o Commr-CAAR-Mumbai                  Dated:10-03-2025

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

1. Apple India Private Limited .
13th floor. Prestige Minsk Square, Municipal No 6,
Cubbon Road, Bengaluru, Karnataka - 560001
Email- raduinathl869@appLe.coml

2. Principal Commissioner of Customs (III), (Import),
Air. Cargo Complex. Sahar. Andheri (East), Mumbai 400099
Email - import.acc@gov.in

3. Principal Commissioner of Customs,
Airport & Air Cargo Complex, Air India Sats,
Air freight Terminal, Kempagowda, Bengaluru - 560 300
Email - commrapacc-cusblr@nic.in

4. The Customs Authority for Advance Rulings,
Room No. 24, New Customs I louse,
Near 1G1 Airport. New Delhi-110037.
Email: cus-advrulings.del@gov.in

5. The Principal Chief Commissioner of Customs, Mumbai Customs Zone-1, Ballard Estate,
Mumbai -400001. Email: ccu-cusmuml@nic.in

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

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

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

9. Guard file.

(ViveK Dwivedi)            
Dy. Commissioner & Secretary
Customs Authority for Advance Rulings,
Mumbai