AUTHORITY FOR ADVANCE RULINGS
(CENTRAL EXCISE, CUSTOMS & SERVICE TAX)
NEW DELHI
PRESENT
Justice Syed Mohammed
Quadri
(Chairman) |
Mr. Somnath Pal
(Member) |
Dr. B.A.Agrawal
(Member |
Ruling No. AAR/14(Cus)/2005
In
Application No.AAR/44(Cus)/14/2005
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 |
None |
for the Commissioner
designated |
Shri A.K. Roy, Joint CDR
CESTAT, New Delhi
|
R U L I N G
( By Mr. Somnath Pal, Member )
M/s Alcatel India Ltd., Plot No. 25,
Sector-18, Gurgaon, Haryana, India (hereinafter to be referred to as "the
applicant") has filed this application under section 28H of the Customs Act,
1962 (for short "the Act") as a wholly owned subsidiary Indian company of M/s
Alcatel, France. The question raised in this application for advance ruling is
:
"whether Submerged Repeater Generic R4 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 the
applicant, after briefly describing the goods in question and referring to the
General Interpretative Rule 1 of the First Schedule to the Customs Tariff Act,
has expressed the view that the product under consideration is clearly a
telecommunication apparatus. According to the applicant, the goods are
classifiable under sub-heading 8517 50 which reads "other apparatus, for
carrier-current line systems or for digital line systems". They have suggested
that the proper classification would be under tariff item 8517 50 99. Copies of
the rulings issued by UK Customs, USA Customs and Australian Customs have also
been enclosed alongwith the application, all of whom have classified this
product under tariff sub-heading 8517 50.
The designated Commissioner, namely,
the Commissioner of Customs, Air Cargo Exports, New Custom House, IGI Airport,
New Delhi (hereinafter to be referred to as "the Commissioner") in his comments
has, however, expressed the view that the classification of this item would be
under tariff item 8543 89 79 on the ground that the repeater is an amplifier
having an independent function and is not covered more specifically by a heading
of any other Chapter of the Nomenclature, nor is it excluded by the operation of
a legal note of Section XVI or to the Chapter 85. The tariff item 8543 89 79
would therefore be the appropriate classification of the repeater under
consideration as a high or intermediate frequency amplifier mentioned at Sl. No.
9 of the items included in the heading. He has referred to the Explanatory
Notes, Volume 4, Section XVI-XXI, Chapter 85-97 (page no. 1519) in this
context. Reliance has also been placed by the Commissioner on Rule 3 (c) of the
General Rules for the Interpretation of First Schedule according to which also
the tariff heading 8543 would be more appropriate since this heading occurs
later in numerical order than 8517 in the Schedule.
3. Despite repeated opportunities given
to the applicant by postponing the hearing in the month of August, September and
October, 2005 as requested by them, nobody appeared before the Authority on
behalf of the applicant for the hearing on the rescheduled dates. The Joint
CDR, however, appeared on behalf of the Commissioner and reiterated the view
expressed by the Commissioner.
4. We have carefully considered the
question raised by the applicant in this application. As per "Customs Technical
Document" submitted by the applicant for the goods in question, namely, "Alcatel
Submerged R4 Repeater", this "is a hybrid of optical, electronic and mechanical
systems that forms part of a submarine telecommunication system for use in
transmission of aggregate data". While describing this product, it has been
stated that "the repeater provides amplification of digital transmission signals
in the c-band amplification window around 1550 nm. The repeater can be equipped
for use with cables having from one to eight fibre pairs. The mechanical
arrangement is compatible with all types of Alcatel submarine cables used in
repeatered systems. The different cable types are terminated in the cable
extremity boxes of the repeaters.
The repeater's powering circuitry is
compatible with reversible power feed current.
Each fibre is a data transmission
path and is associated with a single erbium-doped fibre amplifier. Each fibre
pair has two amplifiers, one for each direction of transmission. These two
amplifiers (called an amplifier pair) are mounted on one amplifier module and
are connected to 980 nm pump units, control circuit, supervisory circuit and a
power supply circuit.
Reliable operation is ensured by
equipping pump units in pairs, with their output energy combined and then
divided via a coupler to pump the amplifiers in both directions. The control
circuits operate to regulate the amplifier outputs, so that any decline in the
output of one pump unit can be compensated by an increase of output from the
other."
5. While giving their response to the
comments of the Commissioner, the applicant has reiterated the technical
information already supplied as annexure to the application and has contended
that the function of repeater is to amplify the signal for transmission in a
local/wide area network. It is not an independent unit but is part of the
transmission chain. It has been further submitted by them that the
classification of repeaters was discussed at the World Customs Organization and
it was agreed that repeaters for local area networks would properly fall under
heading 8471 while repeaters for wide area networks are classifiable under the
heading 8517. Furthermore, the Schedule submitted by
India to the World Trade Organization in respect of ITA (Information
Technology Agreement) clearly indicates that these products are classified under
heading 8517. The applicant has also submitted that the rulings already issued
in other countries are based on the common understanding/principles of the World
Customs Organization of which
India is a
member. Though they appreciate that there are differences in the interpretation
of rules but they hope that the rulings issued by this Authority are in line
with the general interpretation world-wide. According to the applicant, these
products are all covered by the ITA and hence these goods should be classified
under headings which do not incur any customs duties. They have therefore
requested this Authority to give consideration to the rulings already issued for
these products by other countries.
6. From the technical literature
supplied by the applicant alongwith this application, there is no doubt that the
product under consideration is clearly a part of a submarine telecommunication
system for use in transmission of aggregated data. It is also clear that this
product provides amplification of digital transmission signals. The moot point
for consideration is therefore, whether the repeater in question would be more
specifically covered by the heading 8543 89 79 as an "amplifier", as contended
by the Commissioner, than the heading 8517 50 99 falling under the category
"other apparatus, for carrier-current line systems or for digital line systems",
as suggested by the applicant. Apparently, the Commissioner has gone by the
General Interpretative Rule 3(a) as per which the heading which provides the
most specific description shall be preferred to headings providing a more
general description.
7. In order to examine the contention of
the Commissioner, it is necessary to refer to the tariff heading 8543. This
heading reads as under :-
"Electrical machines and apparatus having
individual functions, not specified or included elsewhere in this Chapter"
Under this heading there is a
specific category "amplifier" which has the following tariff items under it :-
Tariff Item |
|
Description of goods |
Unit Rate of duty
Standard Preferential
Areas |
(1) |
|
(2) |
(3) (4) (5) |
8543 89 71
8543 89 72
8543 89 79 |
---
----
---- |
Amplifier :
Broadcast amplifier
Limiting amplifier, video distribution amplifier and
stabilising amplifiers
Other |
u 15%
-
u 15% -
u 15% -
|
For any goods to fall under tariff
heading 8543, it has to fulfil three requirements, namely, (a) it has to be an
electrical machine or apparatus (b) it must have individual function and (c) it
must not be specified or included elsewhere in Chapter 85.
The HSN Explanatory Notes to heading
8543 provide inter alia that :-
"The electrical appliances and
apparatus of this heading must have individual functions. The introductory
provisions of Explanatory Note to heading 84.79 concerning machines and
mechanical appliances having individual functions apply, mutatis mutandis,
to the appliances and apparatus of this heading.
Most of the appliances of this
heading consist of an assembly of electrical goods or parts (valves,
transformers, capacitors, chokes, resistors, etc.) operating wholly
electrically. However, the heading also includes electrical goods incorporating
mechanical features provided that such features are subsidiary to the electrical
function of the machine or appliance".
The introductory provisions of
Explanatory Note to heading 84.79 explains what has to be regarded as having
"individual functions". The following two categories have been indicated
therein :-
"(A) Mechanical devices, with or without
motors or other driving force, whose function can be performed distinctly from
and independently of any other machine or appliance.
--- --- --- --- ---
--- ---
--- --- --- --- ---
--- ---
(B) Mechanical devices which cannot
perform their function unless they are mounted on another machine or appliance,
or are incorporated in a more complex entity, provided that this function :
(i)
is distinct from that which is
performed by the machine or appliance whereon they are to be mounted, or by the
entity wherein they are to be incorporated, and
(ii)
does not play an integral and
inseparable part in the operation of such machine, appliance or entity.
--- --- --- --- ---
--- ---
--- --- --- --- ---
--- ---"
8. As per the technical information
provided by the applicant the product in question is a hybrid of optical,
electronic and mechanical systems. The mechanical characteristics, the
electrical characteristics and the electro-optic characteristics have been
separately narrated in the technical write up submitted by the applicant. It
has been indicated under the heading "Amplifier electro-optic characteristics"
that the transmission of aggregate data within the Alcatel Repeater is a
telecommunication function supported by the following parts :-
(i)
Optical amplifiers
(ii) Amplifier automatic level control
(iii)
Pump control
(iv)
Monitor photodiodes
(v)
Wavelength division couplers
(vi) Monitor coupler
(vii)
Optical isolator
(viii)
Gain flattening filter.
Under the "Electrical
characteristics", it has been indicated that Alcatel repeaters are powered using
constant current of either polarity from a terminal station. Surge protection
is provided against large transients that may arise from fault conditions. It
therefore appears that the function of amplification is performed optically
using erbium doped fibre and optical pumps for the amplification of the line
signal. It is also seen from the technical information supplied by the
applicant that the product under consideration contains, apart from the optical
amplifiers and items listed at Sl. Nos. (ii) to (viii) above, other equipments
like repeater supervisory system and fault location facilities. Thus the
configuration of the product tends to indicate that it is a combination of
optical, electrical/electronic and mechanical elements and the function of
amplification plays an integral and inseparable part in the overall operation of
the product. Keeping in view the HSN Explanatory Notes quoted above, it becomes
difficult to accept the contention of the Commissioner about the coverage of the
goods in question under tariff heading 8543. On the contrary, having regard to
the description of the product, its component parts and their functions as
narrated in the technical write up submitted by the applicant, it appears to us
that all these put together contribute to the function of transmission of data
as a telecommunication apparatus for carrier current line systems or for digital
line systems falling under heading 8517 rather than as an "amplifier" falling
under heading 8543 as suggested by the Commissioner. The coverage of the
category "Apparatus for carrier-current line systems or for digital line
systems" has been indicated in the HSN Explanatory Note to heading 85.17 which
reads as follows :-
"These systems are based on the
modulation of an electrical carrier-current or of a light beam by analogue or
digital signals. Use is made of the carrier-current modulation technique and
pulse code modulation (PCM) or some other digital system. These systems are
used for the transmission of all kinds of information (words, data, images,
etc.)
These systems include all categories
of multiplexers and related line equipment for metal or optical-fibre cables.
"Line equipment" includes transmitters and receivers or electro-optical
converters. Combined modulators-demodulators (modems) are also classified
here."
This supports the view that the
heading 8517 would be the more appropriate classification for the goods in
question than 8543. As the possibility of coverage of the product under heading
8543 stands eliminated, the question of applying Rule 3(c) of the General Rules
of Interpretation, as suggested by the Commissioner, does not arise. Coming to
the heading 8517, since the goods in question are not covered by any of the
sub-headings/tariff item from 8517 11 up to and including 8517 30 00, it will
fall under sub-heading 851750 and more precisely under the tariff item 8517 50
99, after excluding rest of the specified items 8517 50 10 to 8517 50 94.
9. Incidentally, from an authenticated
copy of the Information Technology Agreement and India's schedule as amended,
made available to us, it is noticed that goods bearing description "Electric
amplifiers when used as repeaters in line telephony products falling within this
agreement and parts thereof" are shown in the said schedule as classifiable
under HS sub-headings "8517 50, 8517 90".
10. For the abovementioned reasons, we
rule on the question raised in this application that Alcatel Submerged Repeater,
Generic R4 is classifiable under tariff item 8517 50 99 of the First Schedule of
the Customs Tariff Act, 1975.
Pronounced in the open
Court of the Authority on this 24th day of November, 2005.
Sd/-
(B.A.Agrawal)
Member |
Sd/-
(Justice S.S.M.Quadri)
Chairman |
Sd/-
(Somnath Pal)
Member |
|