Face-Recognition Systems Classify as Automatic Data Processing Machines Under Tariff Heading 8471: CESTAT [Read Order]

The Kolkata Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT), has held that face-recognition access control systems qualify as Automatic Data Processing Machines (ADP Machines) under Tariff Heading 8471, thereby setting aside the customs duty demands and confiscation orders issued against the importers.

The Appellant, M/s Face IT Systems LLP imported “Access Controller Face Recognition System” from Hanwang Technology Co. Ltd., China. The dispute arose after the consignment, declared as “Data Collection Terminal (based on face recognition),” was intercepted and alleged to be mis-classified under Tariff Heading 8471 6090, attracting a NIL duty benefit under Notification No. 24/2005–Customs dated 01.03.2005.

The authorities claimed that the goods should instead fall under Tariff Heading 8543, attracting 7.5% basic customs duty. The Show Cause Notice (SCN) included demands relating to 48 past consignments and proposed penalties and confiscation. After the Commissioner confirmed the demands, the appellant approached the Tribunal. Identical issues also arose in other connected appeals involving M/s Fortuna Impex Pvt. Ltd. and related parties.

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The appellant through Consultant S. C. Ratho submitted that the goods were correctly classifiable under Tariff Heading 8471 as the devices performed automatic data processing functions as described in Chapter Note 6(A) to Chapter 84 of the Customs Tariff Act, 1975. It was argued that the system possessed RAM, storage, a Linux-based operating system, facial image conversion to Base-64 coding, and executed authentication functions without human intervention.

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Further, contended that the description “Data Collection Terminal” could not be treated as mis-declaration, since synonymous descriptions do not constitute mis-representation. The appellant relied on technical reports from STQC IT Service (ERTL-East) and Jadavpur University, both affirming that the device had all the characteristics of an ADP Machine.

The appellant also argued that the extended limitation period could not be invoked since the dispute was one of classification. Additionally, penalties imposed on the Director and the Customs House Agent (CHA) were argued to be unsustainable, as no suppression or intent to evade duty existed.

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Judicial Member R. Muralidhar and Technical Member K. Anpazhakan, presiding over the matter, held that the face-recognition terminal fulfilled all four requirements of an ADP Machine under Chapter Note 6(A) to Chapter 84 of the Customs TariffAct, 1975.

Relying heavily on the technical evaluation by STQC and the expert report from Jadavpur University, the Bench noted that the device had independent memory, processing capability, embedded operating system, facial data conversion, and automatic execution of authentication functions. The Tribunal clarified that such features could never fall within the scope of electrical machinery under Chapter 85.

The Bench also cited and followed earlier decisions such as STJ Electronics Pvt. Ltd. v. CC (2016) and Invixim Access Pvt. Ltd. v. CC (2024), both of which held that biometric processing devices are classifiable under Tariff Heading 8471.

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Consequently, the Tribunal ruled that classification under Tariff Heading 8543 was incorrect and set aside the duty demands, confiscation, and penalties. For Face IT Systems LLP, the confirmed demands for 48 past consignments were quashed as time-barred because extended limitation could not be invoked in matters involving interpretational disputes.

All appeals were accordingly allowed with consequential relief.

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