Vodafone Idea Limited vs New Delhi(Icd Tkd) on 20 September, 2022

[Cites 7, Cited by 0]

Custom, Excise & Service Tax Tribunal

Vodafone Idea Limited vs New Delhi(Icd Tkd) on 20 September, 2022

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH
CUSTOMS APPEAL NO. 52287 OF 2019
(Arising out of Order-in-Original A. O. No. 04/2019/MKS/Pr. Commr. /ICD-
Import/TKD dated 27.03.2019 passed by the Principal Commissioner of Customs
(Import), ICD, Tughlakabad, New Delhi)

M/s. Vodafone Idea Limited ...Appellant
(Previously M/s. Idea Cellular Limited)

VERSUS

Principal Commissioner of ...Respondent
Customs (Import),
ICD, Tughlakabad, New Delhi

APPEARANCE:
Shri B.L. Narasimhan, Shri Harshit Khurana, Shri Yashisht Shrivastava and
Ms. Nupur Maheshwari, Advocates for the Appellant
Shri Ajay Jain, Special Counsel and Shri Rakesh Kumar, Authorized
Representative for the Department

CORAM: HON'BLE MR. JUSTICE DILIP GUPTA, PRESIDENT
HON'BLE MR. P.V. SUBBA RAO, MEMBER (TECHNICAL)

Date of Hearing: 06.07.2022
Date of Decision: 20.09.2022

FINAL ORDER NO. 50874/2022

JUSTICE DILIP GUPTA:

This appeal seeks the quashing of the order dated 27.03.2019

passed by the Principal Commissioner of Customs (Imports), New

Delhi 1 , by which the product "Router Line Cards" 2 imported by the

appellant has been directed to be classified under Customs Tariff Item 3

8517 69 90 of the Customs Tariff Act, 1965 4 instead of CTI 8517 70

90, as claimed by the appellant. Accordingly, the demand of Rs.

1. the Principal Commissioner
2. the Product
3. CTI
4. the Tariff Act
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60,11,615/- under section 28(4) of the Customs Act, 1962 5 for the

three Bills of Entry, each dated 22.12.2017, with interest has been

directed to be recovered from the appellant.

2. The issue that arises for consideration in this appeal relates to

classification of the Product imported by the appellant through the

three Bills of Entry. The appellant described the Product in the Bills of

Entry as MP071025 CISCO BOQ-19 4*10G PRE-AGG 1B Router Line

Card (Part of Router) (Non-WPC) (For Cellular Telephony Network) and

claimed classification under CTI 8517 70 90. The appellant also

claimed exemption from payment of duty under serial no. 5 of the

notification no. 57/17-Cus dated 30.06.2017 6.

3. A show cause notice dated 04.10.2018 was, however, issued to

the appellant inter alia proposing to re-classify the Product under CTI

8517 69 90 and consequently, differential customs duty of Rs.60, 11,

615/- was proposed to be demanded under section 28(1) of the

Customs Act. The show cause notice mentions that the imported

'Product' is a communication apparatus in itself and, therefore, would

not be classifiable as parts of Router under CTI 8517 70 90.

4. The Principal Commissioner held that the imported Product is

classifiable under CTI 8517 69 90 for the reason that though the line

cards cannot function on their own and infact work as a component to

extend the functionality of Router, but as these cards are used for

providing network connectivity to the Router, they act as an interface

between the network and the Router and, therefore, would be covered

under the category of 'other communication apparatus' explained in

5. the Customs Act
6. the notification
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7
the Harmonized System of Nomenclature Explanatory Notes to

Heading 85.17. The Principal Commissioner further held that even if

the Product is in the nature of a Populated Print Circuit Board 8

assembly, it would be an essential part of the Router and cannot be

classified as 'parts' as it would be covered under 'other apparatus' and

classifiable under CTI 8517 69 90.

5. Shri B.L. Narasimhan, learned counsel for the appellant

challenged the findings recorded by the Principal Commissioner and

made the following submissions:

(i) Line Cards of Routers are parts/components and not

apparatus of HSN Heading 85.17. Therefore, they are

correctly classifiable under Sub-Heading 8517.70 which

covers 'parts';

(ii) HSN Explanatory Note 2 of Section XVI states that an

item will not be considered as a 'part' if, on a standalone

basis, it can be considered as an article classifiable under

its own appropriate heading. In this connection reliance

has been placed on the decision of the Tribunal in

Commissioner of Cus., Bangalore vs. Modicom

Network Pvt. Ltd. 9;

(iii) Line Cards do not have separate identifiable / individual

function from that of a Router and are incapable of

operating independently. Therefore, they are only parts /

component of a Router;

7. HSN
8. PCB
9. 2005 (185) E.L.T. 333 (Tri.-Bang.)
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(iv) Even otherwise, the Product is in the nature of a PCB and,

therefore, correctly classifiable under CTI 8517 70 10;

(v) In fact, PCB is specifically mentioned under Sub-Heading

8517.70 which covers Parts. PCB appears in the Customs

Tariff at CTI 8473 30 30, 8517 70 10 and 9027 90 20. All

the above Tariff Items are entries for parts. Hence, it is

clear that PCB is considered as parts;

(vi) Matter of classification of cards/modules is concluded by

various decisions in favour of appellant in:

a. Commissioner of Custom0073 vs. N.I. Systems
(India) P. Ltd. 10;
b. Indcheom Electronics vs. Commissioner of
C.Ex., chennai 11;
c. Vintron Electronics vs. Commissioner of C.Ex.,
Delhi 12; and

(vii) Analogy drawn in the show cause notice and the

impugned order between the aforementioned Router Line

cards and Network Interface Cards 13 is incorrect and is

not supported by the technology driving them.

6. Shri Ajay Jain, learned special counsel appearing for the

Department, however, submitted that the contention of the appellant

that the line cards should be classified as parts of HSN Sub-Heading

8517.70 is not correct for the reason that they have independent

function, more in the nature of an accessory than as a part. Learned

special counsel made the following submissions;

10. 2010 (256) E.L.T. 173 (SC)
11. 1997 (95) E.L.T. 580 (Tri.-Mad)
12. 2012 (279) E.L.T. 161 (SC)
13. NIC
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(i) The line cards are specifically meant to provide network

connectivity to the Router and they act as interface

between network and Router. These allow the Router to

connect to the network and receive the data packets

which are again forwarded to the destination network by

the Router using the line cards again for connecting to the

network. The contention of the appellant that the cards

should be classified as parts in HSN Heading 8517.70 is,

therefore, not correct;

(ii) Reliance on Explanatory Notes of a specific HSN Heading

84.79, which covers 'machines and mechanical appliances

having individual functions, not specified or included

elsewhere in this Chapter' to interpret the scope of

Heading in a different Chapter i.e. 85 is incorrect;

(iii) Straightway taking recourse to Section Note 2 (b),

without exhausting Section Note 2 (a) to claim

classification under CTI 8517 70 10 is also not correct;

(iv) In arriving at classification of a particular item, HSN to be

followed. HSN Explanatory Notes of Heading 8517

indicate a particular scheme of classifying goods covered

under this Heading. The Indian Customs Tariff has

essentially followed this scheme in terms of HSN

Explanatory Notes. These line cards get covered by the

group of cards which result in Network interface. The

Ethernet interface card is only a type. All cards which are

similar in function to Network interface cards will get

covered by the category 'Other communication

apparatus', which also includes 'Routers';
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(v) The contention of the appellant that NIC mentioned in

HSN Explanatory Notes is different from line cards is not

correct. The functions of NIC and that of a line card are

almost identical. Both provide a connection between the

network and the device (computer or the Router as the

case may be). These work at physical layer as well as

data link layer. Both are put in expansion slot of the main

machine. Bother convert the data received into format

understood by the network. Both derive their power and

intelligence from the main device;

(vi) The contention of the appellant that a computer or a

printer can work independent of NIC while Router cannot,

is again fallacious; and

(vii) Even if line cards are in the nature of PCB assembly, they

cannot be classifiable as parts in as much as these are

goods covered by other apparatus and classifiable under

CTI 8517 69 90. In the Bills of Entry, the appellant had

declared these goods as 'Router Line Cards or Router Line

Cards with Mother Boards (Part of Router)' and not as

populated PCBs.

7. The submissions advanced by the learned counsel for the

appellant as also the learned special counsel for the Department have

been considered.

8. The appellant claims that the Product deserves classification

under CTI 8517 70 90 or in the alternative under CTI 8517 70 10,

while the Department claims classification of the Product under 8517

69 90.
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9. The relevant tariff entries are reproduced below:

Tariff Item Description of goods Unit Rate of Duty

(1) (2) (3) (4) (5)

8517 Telephone sets, including telephones
for cellular networks or for other
wireless networks; 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
- Telephone sets, including telephones for
cellular networks or for other wireless
networks:
8517 11 -- Line telephone sets with cordless handsets:
8517 11 10 --- Push button type u Free -
8517 11 90 --- Other u Free -
8517 12 -- Telephones for cellular networks or for other
wireless networks:
8517 12 10 --- Push button type u 10% -
8517 12 90 --- Other u 10% -
8517 18 -- Other:
8517 18 10 --- Push button type u Free -
8517 18 90 --- Other u Free -
- Other apparatus for 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):
8517 61 00 -- Base stations u 10% -
8517 62 -- Machines for the reception, conversion and
transmission or regeneration of voice, images
or other data, including switching and
routing apparatus:
8517 62 10 --- PLCC equipment u Free -
8517 62 20 --- Voice frequency telegraphy u Free -
8517 62 30 --- Modems (modulators-demodulators) u Free -
8517 62 40 --- High bit rate digital subscriber line system u Free -
(HDSL)
8517 62 50 --- Digital loop carrier system(DLC) u Free -
8517 62 60 --- Synchronous digital hierarchy system(SDH) u Free -
8517 62 70 --- Multiplexers, statistical multiplexers u Free -
8517 62 90 --- Other u 10% -
8517 69 -- Other:
8517 69 10 --- ISDN System u Free -
8517 69 20 --- ISDN terminal adaptor u Free -
8517 69 30 --- Routers u Free -
8517 69 40 --- X 25 Pads u Free -
8517 69 50 --- Subscriber end equipment u Free -
8517 69 60 --- Set top boxes for gaining access to internet u Free -
8517 69 70 --- Attachments for telephones u Free -
8517 69 90 --- Other u 10% -
8517 70 - Parts:
8517 70 10 -- Populated, loaded or stuffed printed circuit u Free -
boards
8517 70 90 -- Other kg 10% -
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10. As the issue relates to classification of the Product, it would be

appropriate to understand what a 'Router' is, before proceeding to

examine the contentions that have been made.

11. A Router is defined in Webster's New World Telecom Dictionary

as 'An intelligent switch capable of deciding where to forward packets

based on a view of the network as a whole. A Router is a

programmable device that works with other Routers, via a routing

protocol, to establish the best path on which to forward a packet with a

given address.'

12. Routers have interfaces (e.g. optical interfaces) which are used

to physically connect with the network (for instance, through optical

fibre cables). A Router has the following components:

(i) Routing processor: The Routing Processor is where the

CPU of the Routing function resides. The routing

processor runs a software where functions such as IP

Lookups are invoked. This leads to the creation of a

routing table which is based on the routing-protocols

implemented in the software. The routing processor is in

the nature of a PCB. It is plugged into a slot in the

router's chassis from where it sources power and

intelligence;

(ii) Line cards/ Input & Output ports: These Line Cards

are also in the nature of a PCB. It houses the socket or

port into which the transceivers are plugged. It is itself

plugged into a slot in the router's chassis from where it

sources power and intelligence;
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(iii) Switch processor board: The switch processor board is

a fixed component of the complete router chassis. Its

function is to interface multiple line cards including the

routing processor within the router. It is plugged into a

slot in the router's chassis from where it sources power

and intelligence; and

(iv) Transceivers: A transceiver is an integral and critical

part of a router, enabling it to interface with the optical

fibre connectivity. Since the routing processor performs

processing in the electrical domain (and not the optical

domain), the router would not be able to function without

a transceiver to connect to the optical fibre network.

13. It has further been stated that these components are integral

and inseparable parts of a Router and together form the complete

Router. These components / parts operate and communicate in pure

proprietary format within the box and are interdependent on each

other for their functioning.

14. The HSN Explanatory Notes to Heading 85.17 provide that the

Heading 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.

15. The goods covered under HSN 85.17 have been divided into the

falling two categories:

(I) Telephone sets, including telephones for cellular networks

or for other wireless networks; and
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(II) Other apparatus for 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).

16. The aforesaid category II has further been divided into the

following groups:

(A) Base station;

(B) Entry-phone systems;

(D) Apparatus for telegraphic communication other than

facsimile machines of Heading 84.43;

(E) Telephonic or Telegraphic Switching Apparatus;

(F) Transmitting and receiving apparatus for radio-telephony

and radio-telegraphy; and

(G) Other communication apparatus.

17. The aforesaid Group G relates to "other communication

apparatus" and is reproduced below:

"(G) Other communication apparatus.

This group includes apparatus which allows for the
connection to a wired or wireless communication
network or the transmission or reception of speech or
other sounds, images or other data within such a
network.

Communication networks include, inter alia, carrier-
current line systems, digital-line systems and
combinations thereof. They may be configured, for
example, as public switched telephone networks, Local
Area Networks (LAN), Metropolitan Area Networks
(MAN) and Wide Area Networks (WAN), whether
proprietary or open architecture.
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This group includes:

(1) Network interface cards (e.g., Ethernet interface
cards).
(2) Modern (combined modulators-demodulators).
(3) Routers, bridges hubs, repeaters and channel to
channel adaptors.
(4) Multiplexers and related line equipment (e.g.,
transmitters, receivers or electro-optical
converters).
(5) Codecs (data cimpressors/decompressors) which
have the capability of transmission and reception
of digital information.
(6) Pulse to tone converters which convert pulse
dialed signals to tone signals."

18. What has to be determined in this appeal is as to whether line

cards of Router are parts/components of a Router or apparatus of

Heading 85.17. According to the appellant Router Line Cards are

parts/components of a Router and are not apparatus of Heading

85.17.

19. It would also be useful to refer to Note 2 of Section XVI of the

Tariff Act which provides for rules to be followed while classifying

'parts of machines' falling under Chapters 84 and 85. It provides that

parts which are goods included in any of the Heading of Chapters 84 or

85, other than certain specified Chapter Heading, are in all cases to be

classified in their respective headings. Section Note 2 (b) is to be

applied only in cases where such parts cannot be classified as per

Section Note 2 (a). Rule 2 is reproduced below:

"2. Subject to Note 1 to this Section, Note 1 to
Chapter 84 and 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:
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(a) parts which are goods included in any of the
headings of Chapter 84 or 85 (other than
headings 8409, 8431, 8448, 8466, 8473, 8487,
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 8487 or 8548."

20. The HSN Explanatory Notes to Note 2 of Section XVI are

reproduced below:

"(II) PARTS (Section Note 2)

In general, parts which are suitable for use solely or
principally with particular machines or apparatus
(including those of heading 84.79 or heading 85.43 ), or
with a group of machines or apparatus falling in the
same heading, are classified in the same heading as
those machines or apparatus subject, of course, to the
exclusions mentioned in Part (I) above.
*****

The above rules do not apply to parts which in themselves constitute an article covered by a heading of this Section (other than headings 84.87 and 85.48); these are in all cases classified in their own appropriate heading even if specially designed to work as part of a specific machine."

(emphasis supplied) 13 C/52287/2019

21. A perusal of the aforesaid would indicate that an item will not be considered as a 'part' if, on a standalone basis, it can be considered as an article classifiable under its own appropriate heading. It would, therefore, have to be seen whether a Router Line Card can be considered to constitute an article covered by Heading 85.17. To appreciate this, reference can be made to HSN Explanatory Notes to Heading 84.79 which deals with machines having individual functions. The inference that can be drawn from the above is that HSN itself considers an article which has an individual function as an 'independent machine' and not as a 'part'. This is clear from the examples provided therein. In the case of a carburetor for an internal combustion engine, it is explained that the function performed by carburetor is distinct from that of the engine. However, the said function is not an individual function as the operation of the carburetor is inseparable from that of the engine. Hence, the carburetor is considered as a part of the engine as opposed to an independent machine.

22. It, therefore, transpires that the true test for determining whether an item is classifiable as parts/components is as follows:

(i) Whether the item has a separate identifiable/individual function of its own, when compared to the main machine;

and

(ii) Whether the item is capable of operating independently of the main-machine on its own.

23. If the answer to both the aforesaid questions is in the negative, the item would be classifiable as parts and in that case the item will 14 C/52287/2019 not be classifiable as an apparatus falling under its own appropriate heading.

24. A perusal of the catalogue of Router Line Cards shows that these cards/modules are only parts of the existing Routers which have already been imported or installed by the appellants. The Router chassis has dedicated slots marked for these line cards, switch cards and router processor cards. The line cards are simply inserted in these slots in the existing Routers. These line cards become functional only when plugged into the said slots in the Router chassis. The line cards source intelligence from control and processor module of the Router. These line cards cannot perform its function on a stand-alone basis in the imported condition. Further, communication between the line cards and the other components of the Router, most importantly, the switch processor board, is in the electrical domain and in completely proprietary data protocols. These facts are decisive to conclude that the line card/modules in question are parts, as they cannot perform independently of the Router because unless and until the said cards/modules are slotted into the dedicated slots into the chassis of the equipment, the said cards/modules cannot function. The cards/modules are dependent on the intelligence (i.e. timing information) provided by the control and timing modules. The timing information provided by the control and timing modules is essential for the proper functioning of these cards. Without connection to the overlying software of the equipment and the control/timing information being provided to them, the said line cards are incapable of operation. The line cards are proprietary of the Original Equipment Manufacturer. These line cards are, therefore, not cross compatible with devices of 15 C/52287/2019 other manufacturers but are only usable for the purpose for which they are designed for e.g., a line card manufactured by Cisco would be usable only in a Cisco Router and nowhere else. In other words, these cards/modules possess no functionality other than when used in the dedicated slot designed for them in the primary equipment chassis. Each primary equipment will possess dedicated and proprietary slots into which alone the said cards/modules must be inserted. Thus, there is no individual and separable function performed by line cards.

25. In this connection reference can be made to the decision of the Tribunal in Commissioner of Cus., Bangalore vs. Modicom Network Pvt. Ltd.14. The Tribunal examined whether modules can be considered as an apparatus or parts. It was held that the modules on their own do not have an independent function and each module remains as part of the Main Switching Centre. The relevant portion of the decision is reproduced below:

"2. This issue relates to the classification of modules (Main Switching Centre Hardware Upgrades) imported by the respondents. The original authority classified the goods under 8517.90 as 'Parts'. However, Revenue held the view that the goods should be classified under 8517.80 as 'Other apparatus'. The Commissioner (Appeals) rejected Revenue's appeal with the following observations.

"To be classified as apparatus, the goods must have a separate identifiable function on its own. These being components going into switching centers, cannot be treated as other apparatus. The Deputy Commissioner Customs has in his order pointed out that the main switching center is a complete machine with a provision for expansion of the switching capacity. The impugned imported goods called modules are basically inserted as essential parts into the main switching center to enhance the capacity for which a provision is always made. These

14. 2005 (185) E.L.T. 333 (Tri. - Bang.) 16 C/52287/2019 modules therefore do not have any independent function, and cannot be treated as an 'Apparatus'. I find merit in the argument of the Deputy Commissioner of Customs. I therefore find that given the facts of the case, the impugned goods called modules are more appropriately classified as 'Parts' under 8517.90 rather than ast 'Other Apparatus' falling under 8517.80. I therefore uphold the order of the Deputy Commissioner of Customs (Air Cargo Complex) and reject the Departmental Appeal."

3. Shri R.V. Ramakrishnappa, the learned JDR, appeared for the Revenue who is the appellant and Ms. Rukmani Menon, the learned advocate appeared for the respondent.

4. The learned advocate for the respondent stated that the original authority has dealt with elaborately on the issue before coming to a conclusion. Our attention was brought to the decision in Indchem Electronics Ltd. v. CC, Chennai - 1997 (95) E.L.T. 580 (Tribunal), wherein it has been held that Add-on Cards and Mother Boards, which are capable of use only when linked up with certain other components, cannot be classified as automatic data processing machines but parts of machines falling under 84.71 of Central Excise Tariff Act, 1985. On the same analogy the impugned goods, which are in the nature of complete set of PCBs, are only Parts and cannot be treated as Other Apparatus.

5. The learned JDR reiterated the grounds of appeal. According to the grounds of appeal the impugned goods are described as Mobile Telephone Equipment in the invoice. The various kinds of modules imported are meant for functions such as receiving, transmission, message distribution, group processing and line interface, programme execution, input/output processing, signalling, etc.

6. We have gone through the rival submissions. We find that the Main Switching Center consists of various modules in the form of PCBs. Each module will have its own function. The modules are all of standard format. There is a face plate on the front of each module with display elements, with controls and access to front connectors. The PCBs of the modules are of multi layer design and the components with which they are 17 C/52287/2019 equipped are mainly surface mounted devices. The Main Switching Center is a machine with the provision for expansion. The modules are inserted as essential parts to attain a particular capacity. The modules on their own do not have any independent function and they cannot be dis-assembled further. Even though the numbers of modules are variable depending on capacity, each module remains as a part of the main machine, i.e. Main Switching Center. In view of the above, the Original Authority's finding that the modules cannot be considered as apparatus is correct. Hence there is no infirmity in the Order-in-Appeal confirming the Original order. Therefore the appeal of the Revenue is devoid of any merit. Hence we reject Revenue's appeals."

26. There is, therefore, no difficulty in holding that Router Line Cards are classifiable under CTI 8517 70 90 in view of Note 2 (b) of Section XVI of the Tariff Act.

27. Learned counsel for appellant, in the alternative, submitted that even otherwise imported Router Line Cards are in the nature of a PCB and, therefore, classifiable under CTI 8517 70 10 and not CTI 8517 69

90.

28. The term 'printed circuit' is defined in Webster's New World Telecom Dictionary as:

Printed Circuit: An electrical circuit, generally of copper foil, printed on a substrate dielectric material. A sheet of copper foil is adhered to the substrate and the unwanted portions of the foil are then removed by a process of silk screen printing, photoengraving, or mechanical milling. The remaining traces of copper foil form the circuit that connects components such as silicon chips mounted on the board. See also printed circuit board. 18

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29. The same dictionary defines the term 'printed circuit board' as:

Printed Circuit Board (PCB): A substrate of dielectric material on which a printed circuit, silicon chips, and other components are mounted, and to which connectors are affixed so that the board can plug into a system chassis. A PCB serves a defined purpose. In telecommunications systems, for example, a PCB may provide the physical and logical interface to one or 'more digital or analog lines or trunks, may provide voice mail service, or may provide call processing logic. See also printed circuit.

30. A similar definition of PCB Assembly is available on website accessible at https://www.customdesigntechnologies.com/custom- assembly/custom-printed-circuit-board-pcb-assembly-glossary/ as:

a) Printed circuit board assembly: Printed circuit board assembly, also known as PCBA, is the process of soldering or assembly of electronic components to a PCB or printed circuit board.

b) Circuit board assembly: Printed circuit board assembly, also known as printed circuit board assembly (PCBA), is the process of soldering or assembly of electronic components to a PCB or printed circuit board. The electronic components connect with the wirings of printed circuit boards. The traces or conductive pathways engraved in the laminated copper sheets of PCBs are used within a non-conductive substrate to form the assembly.

Lastly attaching the electronic components with the 19 C/52287/2019 printed circuit boards is the final element before the electronic device is fully operational.

c) PCB board assembly: In PCB board assembly, the bare board is populated (or stuffed) with electronic components to form a functional printed circuit assembly (PCA). Sometimes also called printed circuit board assembly.

31. HSN Explanatory Notes to Heading 85.34 cover 'Printed Circuits' as follows:

"Circuits on which mechanical elements or electrical components have been mounted or connected are not regarded as printed circuits within the meaning of this heading. They generally fall to be classified in accordance with Note 2 to Section XVI or Note 2 to Chapter 90, as the case may be."

32. Explanation (b), below Notification No. 57/17-Cus dated 30.06.2017 as amended on 02.02.2018, is as follows:

(b) "Printed Circuit Board Assembly (PCBA)"

means printed circuit board assembled with electronic components such as resistors, capacitors, diodes, inductors, ICs and mechanical components such as contact springs or connectors of charger or adapter of cellular mobile phones.'.

(emphasis supplied)

33. Populated PCBs have connectors embedded, making them ready for use. Thus, a fully functional and ready to use Populated PCB with connectors is also a Populated PCB.

34. Router Line Cards are Populated PCBs as they are printed circuit boards mounted with various active and passive electronic elements.

Therefore, these cards can be classified under CTI 8517 70 10, which 20 C/52287/2019 covers 'populated, loaded or stuffed printed circuit boards'. It would attract NIL rate of duty.

35. It would be useful, in this connection, to refer to the observations of the Supreme Court in N.I. Systems and they are as follows:

"43. On the question of Input-Output (I.O.) Modules and Chassis, the Tribunal has not given any finding whatsoever thereon. However, on-going through the technical material and the demonstration given to us in Court, we are of the view that I.O. Modules and Chassis have also been rightly classified by the Department as parts and accessories of regulating and controlling apparatus classifiable under Chapter 90. In this connection, one needs to examine the nature and function of I.O. Modules and Chassis which we have already discussed hereinabove. To put it briefly, at the cost of repetition, we may say that the primary function of I.O. Modules (Boards) is to function as a part of measuring and control System. It is for this reason that such Modules are required to be classified as parts and accessories of regulating and measuring System. For this purpose, it is necessary to examine each of the imported items apart from Controllers in order to see whether the hardware coupled with the pre-installed software gives it a definite identity and function. From the catalogue and technological write-ups we find that each and every I.O. Module imported by the assesse is configured with a sensor at one end. This aspect is very important. Take the example of Data Acquisition Boards (DAQ). The purpose of DAQ Boards is to acquire data from external sensor, usually in the form of analog voltage of +/- 10 volts. This data is converted by DAQ Boards into digital signals which the personal computer can understand. On the other hand, Instrument Control Boards which are placed inside the computer allow data required from external sensors to be communicated directly to the computer. This is called as handling of information (see Explanatory Notes of HSN at page 21 C/52287/2019 1575) which is different from controlling temperature, pressure etc. (see Explanatory Notes of HSN at page 1856). On the other hand, we have what is called as Analog Output Boards which are meant for converting signals from external units such as PXI. Similarly, the Chassis provides connectivity and housing for embedded controller and the data acquisition modules, allowing them to communicate with each other. A network interface module is used to connect to a network for distributed control applications. It interconnects measuring instruments to a PC by sending and receiving messages from the two units. Thus, each I.O.

Module is tailored to a specific function and is therefore a part of regulating and controlling apparatus. Handling of information under the HSN Notes is separate and distinct from regulating and measuring temperature, pressure etc."

(emphasis supplied)

36. Learned special counsel for the Department, however, submitted that Router Line Cards are Network Interface Cards (NIC).

37. Newton's Telecom Dictionary defines 'Network Interface Cards' as:

Network interface card: Also called a NIC card. A printed circuit board comprising electronic circuitry for the purpose of connecting a workstation to LAN. NIC usually is in the form of a card that fits into one of the expansion slots inside a PC. Alternatively, it can fit into a slot of a MAU (multi-station access unit), which serves multiple and attached devices such as workstations and printers. In the context of IEEE standards, NICs operate at the MAC (medium access control) layer. In the context of the OSI reference model, NICs is operated at Layer 1 (Physical Layer) and 2 (Data Link Layer). The basic job of 22 C/52287/2019 the NIC is to take data from the transmitting workstation, form it into the specific packet format demanded by the LAN protocol you are running (e.g. Ethernet or Token ring), and present it to the shared medium (usually a cable). On the receiving end, the process is reversed, of course. Hard coded into the NIC at the time of manufacture is a MAC address, unique in all the world to that NIC card; the MAC address effectively identifies the LAN attached device with which it is associated. A NIC works with the network software and computer operating system to transmit and receive messages on the network.

38. Thomas' Concise Telecom & Networking Dictionary defines 'Network Interface Card' as follows:

Network interface card (NIC): A network interface device in the form of a circuit card that is installed in an expansion slot of a computer to provide network access. Examples of NICs are cards that interface a computer with an ethernet alien and cards that interface of computer with an FDDI ring network.

39. Thus, the 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. If a computer is not to be connected to a network, there is no need for NIC of computer to function. Computer is complete in itself and does its job of data processing without any need for NIC.

40. The function of a NIC is, therefore, distinct from that of the overall equipment (i.e. computer/data processing machine). Also, the 23 C/52287/2019 said NIC is also clearly separable from the overall equipment.

41. NIC, therefore, satisfies the two tests as they perform a function distinct from that of computer. Furthermore, the NIC is capable of operating on its own in conjunction with a printer, computer, etc. This is in stark contradiction with Router Line Cards, which can be only operated with a Cisco ASR router chassis and nowhere else.

42. The individual Router Cards perform functions inseparable from that of the equipment. For example, a Router requires a line card to operate as much as the line card requires the power and intelligence of the Router to operate. This is distinct from a NIC, which other than drawing power from the Automatic Data Processing (ADP) machine, operates separately and independently of the ADP machine by performing the sole function of translating the output of the ADP machine. NIC would, therefore, qualify as 'an apparatus'.

43. NIC referred to under the category of 'other communication apparatus' in the HSN Explanatory Notes are those interface cards which can perform on a standalone basis. This is a standard item which can be fitted to any computer, unlike Router Line Cards in dispute which are tailor made for CISCO ASR Routers and can only perform function when plugged into the predetermined slot of the Router chassis.

44. This is supported by illustration of network interface cards provided in the HSN Explanatory Notes. The illustration provided is of an ethernet interface card. These are cards used to provide internet connectivity to desktops/laptops. It is quite clear that the main- equipment (i.e. the desktop/laptop) can operate and function even in the absence of a NIC. This is in contrast to line cards which are 24 C/52287/2019 essential for the Routers to operate.

45. Even from the HSN Explanatory Notes to Heading 85.17, Category II (G), NICs have been clubbed in the same category/class of equipments such as modems, routers, hubs, repeaters, multiplexers, etc. These equipments are clearly standalone apparatus which are independently capable of performing their functionality. Thus, sub- units/sub-assemblies of equipments such as modems, routers, hubs, repeaters, multiplexers would not be apparatus and NIC (i.e. a standalone apparatus) cannot be compared with Router Line Cards.

46. The aforesaid discussion would led to a conclusion that Router Line Cards imported by the appellant would be classified under CTI 8517 70 90 and not CTI 8517 69 90.

47. The impugned order dated 27.03.2019 passed by the Principal Commissioner, therefore, cannot be sustained and is set aside. The appeal is, accordingly, allowed.

(Order Pronounced on 20.09.2022) (JUSTICE DILIP GUPTA) PRESIDENT (P.V. SUBBA RAO) MEMBER (TECHNICAL) Shreya

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