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AUTHORITY FOR ADVANCE RULINGS
(CENTRAL EXCISE, CUSTOMS & SERVICE TAX)
NEW DELHI
PRESENT
Hon'ble Mr.Justice Syed Shah Mohammad
Quadri (Chairman)
Mr.Somnath Pal (Member)
Dr.B.A.Agrawal (Member)
Ruling Nos. AAR/05&06(Cus)/2006
In
Application No.AAR/44/39(Cus)/2005
Application No.AAR/44/38(Cus)/2005
Applicant |
M/s
Alcatel India Ltd.
Plot
No. 25, Sector 18
Gurgaon-122015
Haryana,
India |
Commissioner
designated |
Commissioner
of Customs,
Air
Cargo Complex
New
Custom House
New
Delhi-110037 |
Present
: for the applicant |
Mr.
Charles A. Barber
Director
(Customs & Supply Chain)
Alcatel,
London, UK
Mr.
Steve Gaikwad
Client
Partner,
Vantis
Custom House
London,
UK |
For
the Commissioner
designated |
Mr.
A.K. Roy, Joint CDR
CESTAT,
New Delhi |
R U L I N G
( By Mr. Somnath Pal, Member )
In the first application - AAR/44(Cus)/39/2005 - the following question
has been posed by the applicant for an advance ruling :-
"Whether 1696 Optinex Metro Span Telecommunications Equipment proposed
to be imported into India, is classifiable under Heading No. 8517 50 99 of the
First Schedule of the Customs Tariff Act, 1975" .
2.
In Annexure-II to the application read with the Customs Technical
Document furnished by the applicant and in the verbal submissions of their Ld.
Representatives during the hearing before us, it has been stated that this
product is a hybrid of optical,
electronic and mechanical systems that
forms part of a telecommunication system for use in transmission of aggregate
data. It functions utilizing
specifically the Optical (Transmission) Amplifier cards by optimizing the
amplification performance of aggregate data transmission.
It is a metro DWDM (Dense
Wavelength Division Multiplexing) telecommunication platform (up to 32
telecommunication channels) supporting a broad range of aggregate data rates for
application in (i) Non-Amplified Telecommunication Systems (ii) Intra-City
Telecommunication Networks (iii) Amplified Telecommunication Systems for large
Metropolitan Networks. This
equipment supports variable rate transmission (optical) interfaces, capable of
accepting a broad range of data rates, from 100 Mb/s up to 10 Gb/s. The system transports a wide variety of SDH (Synchronous
Digital Hierarchy) and data signals, such as STM-1, STM-4, ATM, FDDI, Fibre
Channel, digital video etc. It has
been further submitted by the applicant that the Optical (Transmission)
Amplifier cards function within the Alcatel 1696 Metro Span Telecommunication
Unit. This Unit provides both
wavelength add/drop and optical ring restoration.
This enables the Alcatel 1696 Metro Span to extend the type of protection
and flexibility that today is available through SDH and other protocols, without
the added expense of these systems. Any
transmission signal from 100 Mb/s to 10 Gb/s will be able to traverse a 1696
Metro Span ring with terminal equipment only at the add-and-drop sites.
An internal wavelength switching matrix, makes the equipment able to
provide the network topology and protection scheme best suited to match the
system requirement. This
telecommunication equipment, it is submitted, functions as a dedicated unit for
the transmission of aggregate data.
3.
In the second application - AAR/44(Cus)/38/2005 - ruling is sought by the
applicant on a related question as to whether Alcatel 1696 Optical Amplifier
Card which functions within the Alcatel 1696 Metro Span Telecommunication Unit
would be classifiable under Heading No. 8517 50 99 of the First Schedule to
Customs Tariff Act, 1975. It has been submitted that typically the Optical
Amplifier Card provides up to + 17 dBm output power for 32 wavelengths in the
C-band. Output at + 20dBm can be achieved by adding a further pump.
This Card contains two independent stages : a booster and a pre-amplifier or two
boosters or two amplifiers. To allow for gain flatness, an optical
attenuator is present. In operation the Optical Amplifier Card extends the
transmission capacity of the telecommunication system. In the Customs
Technical Document attached to the application the block diagram of the Optical
Amplifier Card has been given which depicts various elements of this Card like
monitor, SPV filter, optical receiver, pump and alarm & control unit.
It has been further mentioned therein that the Alcatel Optical (Transmission)
Amplifier Card functions as a dedicated unit for the transmission of aggregate
data.
Referring to the Rule 1 of the General Rules for Interpretation of the
First Schedule of the Customs Tariff Act, 1975 it has been contended by the
applicant that the goods involved in both the questions are clearly
telecommunication apparatus and being part of the transmission chain in the
telecommunication system, would accordingly fall under the tariff heading 8517
and more precisely under the tariff item 8517 50 99 under the sub-heading 8517
50 which covers "other apparatus, for carrier-current line systems or for
digital line systems". For the
Optical Amplifier Card, the applicant has also referred to the Information
Technology Agreement (ITA) Schedule from India to WTO as per which amplifiers
used in telecommunications are classified under heading 8517.
4.
In his initial comments as well as during the hearing before us the stand taken
by the Commissioner in regard to the Alcatel 1696 Metro Span
Telecommunication Unit is also the same as that of the applicant, namely, that
the equipment in question will be appropriately classifiable under
tariff item 8517 50 99. As regards the Optical Amplifier Card, though in
his initial comments the Commissioner took the stand that the product in
question, being an amplifier part would more specifically be covered under
tariff item 8543 90 00 which is sought to be supported by application of Rule
3(c), the Ld. Joint CDR appearing for the Commissioner during the hearing before
us, however, submitted that having regard to the technical details furnished by
the applicant and further explained by them during the hearing as well as the
rulings of the Authority in the applicant's case on the question of
classification of 'Equalizers' and 'Repeaters', the goods in question
would be more appropriately classifiable under tariff item 8517 50 99.
5.
In so far as the Alcatel 1696 Metro Span Telecommunication Unit is concerned,
based on the description and design details, as well as the functional
characteristics of the equipment in question as seen from the technical write up
furnished by the applicant and as further explained before us during the
hearing, we have no doubt in our mind that it would merit classification under
tariff item 8517 50 99. The Commissioner has also accepted the
classification proposed by the applicant.
6.
Turning now to the other item namely, the Alcatel 1696 Optical Amplifier Card,
from the information furnished by the applicant in the application and from
their submissions during the hearing before us on the exact role and function of
the goods in question, we notice that it functions within the Alcatel 1696 Metro
Span Telecommunication Unit by optimizing the amplification performance of
aggregate data transmission. This it does irrespective of the number of
communication channels being operated or the variation in signal integrity which
are normally experienced over the communication link. Through this
mechanism, constant amplification performance is achieved based upon the
configuration of the telecommunication system. In this way it extends the
transmission capacity of the system. From the block diagram of this item
given in the Customs Technical Document supplied by the applicant alongwith the
application it appears that the Optical Amplifier Card has various elements like
monitor, SPV filter, optical receiver, pump and alarm & control unit.
It is noticed that to allow for gain flatness, a variable optical attenuator (VOA)
is also present. VOA is a device which can be adjusted to block different
fractions of light passing through it. What needs to be noted is that the
Card in question is not performing a pure and simple amplification function but
its role is to 'optimize' the amplification performance of aggregate data
transmission. As per Concise Oxford Dictionary, 'Optimize' means
"make the best or most effective use of". In the context before us, it
would imply that this Card ensures "constant amplification performance" at
the best or most effective level. On the basis of the technical details
made available to us we are therefore satisfied that the goods under
consideration are not a type of apparatus that can fall within the ambit of
tariff heading 8543 whose scope we have already examined in detail in our
earlier Ruling No. AAR/14(Cus)/2005 dated 24.11.2005. At the same time it
is also apparent that they are designed to function as a part of the 1696 Metro
Span Telecommunication Unit. That it is a part in the transmission chain
of a telecommunication system does not override or alter its basic identity and
character of a 'part' of a telecommunication apparatus. The Optical
Amplifier Cards being admittedly and evidently 'part' of an apparatus
falling under tariff heading 8517, the moot point for consideration is - what
would be the classification of such a 'part' under the First Schedule to the
Customs Tariff Act, 1975? To answer this question, we need to refer to
section Note 2(a) & 2(b) of section XVI of the First Schedule of the Customs
Tariff Act, 1975 read with the guidelines given in the HSN Explanatory Notes to
section XVI on classification of 'parts'. The section Note
2 of section XVI reads as under :-
"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. 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;
(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."
For
the sake of clarity, section note 5 states that for the purposes of these Notes,
the expression "machine" means any machine, machinery, plant, equipment,
apparatus or appliance cited in the headings of Chapter 84 or 85.
A
conjoint reading of these provisions in our limited context would show that
(a)
in general, parts which are suitable for use solely or principally with
particular machines of Chapter 85 are classified in the same heading as those
machines, subject of course to the exclusions mentioned in Note 1 to section XVI
and in Note 1 to Chapter 85;
(b)
the above rule does not apply to parts which in themselves constitute an
article covered by a heading of section XVI [other than headings specified in
Note 2(a)]; these are in all cases to be classified in their respective headings
even if specially designed to work as part of a specific machine;
(c)
examples of what is meant by "parts which in themselves constitute an
article covered by a heading of section XVI", have been given in HSN
Explanatory Note to section XVI to make the position clear.
Limiting to chapter 85, a few examples can be cited as (i) electric
motors of heading 85.01; (ii) electric heating resistors of heading 85.16; (iii)
electrical apparatus for switching, protecting etc. of heading 85.35 and (iv)
insulators of any material (heading 85.46).
Reference to these headings would at once clarify that the coverage has
to be specific by name.
Applying the above propositions, we find that the Optical Amplifier Cards
are undoubtedly suitable for use solely with 1696 Metro Span Telecommunication
Unit; that they are not covered specifically by any other heading of section
XVI; that they are also not covered by the exclusions mentioned in Note 1 to
section XVI and in Note 1 to Chapter 85. Therefore,
they are to be appropriately classified in the same heading as that of the
apparatus of which it is a part, namely, heading 8517.
Under this heading, there is a specific sub-heading 8517 90 for
'parts' of goods falling under the heading 8517 which would thus be the
proper sub-heading for our purpose. As the tariff item
8517 90 10 under this sub-heading is not applicable to the goods in
question, the proper classification would therefore be under the residuary
tariff item 8517 90 90 of the sub-heading 'parts'.
7.
In view of the foregoing, our rulings on the two aforementioned questions
are as follows :-
(a)
Application No. AAR/44(Cus)/39/2005 -
The item 1696 Optinex Metro Span Telecommunications Equipment is
classifiable under tariff item 8517 50 99 of the First Schedule of the Customs
Tariff Act, 1975.
(b)
Application No. AAR/44(Cus)/38/2005 - The item Alcatel 1696 Optical
Amplifier Card is classifiable under tariff item 8517 90 90 of the First
Schedule of the Customs Tariff Act, 1975.
Pronounced
in the open Court of the Authority on this 5th day of January, 2006.
Sd/-
Sd/-
Sd/-
(B.A.Agrawal) (Justice
S.S.M.Quadri)
(Somnath
Pal)
Member
Chairman
Member
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