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2021 (10) TMI 1416 - AAR - CustomsClassification of goods sought to be imported - data centre switch router models - applicability of Sr. No. 13N of Notification No. 24/2005- Customs dated 01.03.2005 and Sr. No. 20 of Notification No. 57/2017-Customs dated 30.06.2017 - HELD THAT - Switching fabric and the routing component together make up the composite platform/system. Section Note 3 to Section XVI provides guidance for the classification of composite machines/multifunction machines; the said Section Note 3 states Unless the context otherwise requires composite machines consisting of two or more machines fitted together to form a whole and other machines designed for the purpose of performing two or more complementary or alternative functions are to be classified as if consisting only of that component or as being that machine which performs the principal function . The said products are principally used as a noncarrier ethernet switch as evident from the product catalogue. Therefore the said products are classifiable as switches - It is a settled position of law that notification should be read and construed strictly. It is apparent that notification benefit is only available to routers. The services and standards of carrier ethernet have been defined by the Metro Ethernet Forum (MEF). From the product catalogue it is clear that the instant products lack some essential features such as MPLS-TP E-LAN services MEF certification etc. Carrier-class ethernet switches are generally used in telecommunication networks while non-carrier ethernet switches are used at homes/enterprises. From the product catalogue it appears that the impugned devices lack most of these essential features - As per the Department of Telecommunication classification of ethernet switches into carrier ethernet switch and enterprise ethernet switch would be difficult as there may be overlapping features and that they may be classified based on the ultimate user. Therefore if the impugned products are intended to be used as enterprise switches then they are eligible for benefit under Sr. No. 20 of Notification No. 57/2021-Customs. The imported goods are classifiable under sub-heading 85176290 of the first schedule to the Customs Tariff Act 1975 and would be eligible to avail benefit of Sr. No. 20 of Notification No. 57/2021-Customs dated 30.06.2017 however benefit under Sr. No. 13N of Notification No. 24/2005-Customs dated 01.03.2005 is not available.
Issues Involved:
1. Classification of Data Centre Switch Router models (DCS-7280CR2K-60-F and DCS-7816R3-BND Series) under the Customs Tariff of India. 2. Eligibility for benefits under Sr. No. 13N of Notification No. 24/2005-Customs, dated 01.03.2005. 3. Eligibility for benefits under Sr. No. 20 of Notification No. 57/2017-Customs, dated 30.06.2017. Detailed Analysis: 1. Classification of Data Centre Switch Router Models: The applicant, M/s Ingram Micro India Private Limited, sought to classify their imported Data Centre Switch Routers (DCSRs) under tariff item 8517 62 90. The DCSRs, capable of performing both switching and routing functions, are classified under sub-heading 851762, which covers machines for the reception, conversion, and transmission or regeneration of voice, images, or other data, including switching and routing apparatus. The ruling concluded that these devices, primarily used as switches in an ethernet network, merit classification under sub-heading 85176290. 2. Eligibility for Benefits under Sr. No. 13N of Notification No. 24/2005-Customs: The applicant argued that the DCSRs should be eligible for benefits under Sr. No. 13N of Notification No. 24/2005-Customs, which exempts routers of sub-heading 85176290. However, the ruling emphasized that although the DCSRs have routing capabilities, they function predominantly as non-carrier ethernet switches. The product datasheets identified the devices as switching apparatuses used in data centers. Based on Section Note 3 to Section XVI, which guides the classification of composite machines, the principal function of the DCSRs is switching. Therefore, the devices are classified as switches and are not eligible for the exemption granted to routers under Sr. No. 13N of Notification No. 24/2005-Customs. 3. Eligibility for Benefits under Sr. No. 20 of Notification No. 57/2017-Customs: The applicant also sought benefits under Sr. No. 20 of Notification No. 57/2017-Customs, which provides a concessional rate of customs duty for goods falling under sub-headings 85176290 or 85176990, excluding certain specified goods. The ruling noted that the impugned devices do not possess features of carrier ethernet switches, such as MPLS-TP, E-LAN services, and MEF certification. The Department of Telecommunication's clarification indicated that classification could be based on the ultimate user. Since the applicant intended the products to be used as enterprise-class switches, they do not fall under the exclusion list specified in Sr. No. 20 of Notification No. 57/2017-Customs and are eligible for the concessional rate of duty. Conclusion: The ruling concluded that the imported Data Centre Switch Routers are classifiable under sub-heading 85176290 of the Customs Tariff Act, 1975, and are eligible for benefits under Sr. No. 20 of Notification No. 57/2017-Customs, dated 30.06.2017. However, they are not eligible for benefits under Sr. No. 13N of Notification No. 24/2005-Customs, dated 01.03.2005.
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