While Quashing Customs Duty against Vodafone idea, the Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) has held that Hybrid/Pure Matrix Cards for PTN Equipment would be classifiable under CTI 8517 70 10 as “parts of goods, and Small Form Factor Pluggable for Packet Transport Network ( PTN ) Equipment would be classifiable under CTI 8517 70 90.
The appellant/assessee, has sought the quashing of the order dated June 29, 2020, passed by the Principal Commissioner of Customs ACC ( Imports ), by which hybrid/pure matrix cards and small form factor pluggable ( SFP ) transceivers imported by the appellant have been classified under Customs Tariff Item 8517 62 90 and not under CTI 8517 70 90, as claimed by the appellant. The demand for duty was confirmed with interest and penalties.
The appellant sought the classification of Hybrid/Pure Matrix Cards for PTN Equipment under CTI 8517 70 10 as parts of goods falling under Heading 8571 and Small Form Factor Pluggable for PTN Equipment under CTI 8517 70 90.
The Principal Commissioner classified the goods under CTI 8517 62 90 and confirmed the proposed duty demand with interest by order dated June 29, 2020. The Principal Commissioner found that, like NIC cards that connect computers over a network in telecommunications, these cards connect OTN equipment over an optical network. Thus, the subject goods are nothing but NIC cards.
The appellant contended that the subject goods that have been imported by the appellant are not machines in themselves but parts of the main equipment, and the subject goods are not NIC cards. The goods are an integral and inseparable part of the main equipment, which together form the complete main equipment.
It was submitted that the goods cannot function on a standalone basis and function only when put in the slot of the main equipment chassis. It is, therefore, the submission that the goods are proprietary to the main equipment. The term “proprietary, as defined in Newton’s Telecom Dictionary, means “something that will only work with one vendor’s equipment.”.
It was further submitted that the main equipment, i.e., PTN, is a network technology used in telecommunications to transport packet-based traffic efficiently and reliably. PTN solutions are typically used in service provider networks to support a variety of services, including voice, data, and video. The chassis of the main equipment has dedicated slots marked for these goods. These goods become functional when plugged into these slots, from where they derive their power and intelligence.
It was noted that the subject goods are like a populated PCB and viewed that the subject goods are not specifically covered under any heading of Chapters 84 or 85. Further viewed that the subject goods do not merit classification as per Note 2(a). Sub-Heading 8517 70 specifically identifies and recognizes populated PCBs as “parts. The subject goods (Hybrid/Pure Matrix Cards) are populated PCB and thus merit classification under CTI 8517 70 10 as “parts” of goods falling under Heading 8517 by virtue of Section Note 2(b) of Section XVI.
The two-member bench of Justice Dilip Gupta (President) and P.V. Subba Rao ( Technical Member ) has observed that NIC is effectively a translator, which allows a computer to communicate with a network by translating the output of the computer into a format understandable by the network and vice versa.
The Tribunal while allowing the appeal set aside the order challenged by the assessee.
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