2024 (4) TMI 1278 - AT - Customs

Classification of imported IXM MYCRO FP3 (Bio-metric Access Control System) - to be classiifed under the heading of 8471 6090 or under heading 8543 7099? - HELD THAT - The goods in the instant case are practically identical to the goods involved in the case of STJ Electronics Private Limited. In the instant case also the goods imported by the appellant are capable of connection to the Automatic Data Processing Machine (ADP machine). This devices are capable of storing data in the Automatic Data Processing Machine. The device takes input in the form of finger print scan and after processing the information the said processed information is sent to Automatic Data Processing Machine which collects data for making reports of attendance and timing and for entry and exit. The devices also operate lock of the gate on the basis of the data captured by the said device and processed by Automatic Data Processing Machine. It is noticed that the device imported by the appellant is used solely or principally in automatic data processing system whereby access and exit is controlled automatically. The said device is connected to central processing unit and captures the data in the form of scan image in digital format. The said scan image is there after used by the system to validate/ record entry or exit. In this background there are no merit in the claim of revenue goods are not classified under heading 8471. Once goods are classifiable under heading 8471 the same cannot be classified under Entry 8543. Conclusion - The imported IXM MYCRO FP3 (Bio-metric Access Control System) merits classification under the heading of 8471 6090. Appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal question considered by the Tribunal was the proper classification of the imported goods, specifically whether the biometric access control system (IXM MYCRO FP3) should be classified under Customs Tariff Heading (CTH) 8471 6090 or under CTH 8543 7099. The issue involved interpretation of the Customs Tariff Act provisions and relevant chapter notes to determine the correct heading for the goods based on their nature and function.

2. ISSUE-WISE DETAILED ANALYSIS

Issue: Classification of biometric access control system under CTH 8471 or CTH 8543

Relevant legal framework and precedents: The Tribunal relied heavily on prior authoritative decisions, notably the case of STJ Electronics (2016 337 ELT 140) and Redington (India) Limited (2018 6 TMI 465), which had examined the classification of similar biometric access control systems. The relevant tariff headings were:

• CTH 8471: "Automatic data processing machines and units thereof, magnetic or optical readers, machines for transcribing data on to data media in coded form and machines for processing such data, not elsewhere specified or included."
• CTH 8543: "Electrical machines and apparatus having individual functions, not specified or included elsewhere in this Chapter."

The Tribunal also referred to Chapter Note 5(C), (D), and (E) to Chapter 84 of the Customs Tariff Act, which define criteria for units to be considered part of an automatic data processing (ADP) system and specify exclusions.

Court's interpretation and reasoning: The Tribunal analyzed the technical specifications and functionality of the imported biometric device. It noted that the device is a fingerprint reader working on optical technology with a flat optical sensor, thus fitting the description of a magnetic or optical reader under CTH 8471.

Chapter Note 5(C) was pivotal, requiring that a unit must be (i) solely or principally used in an ADP system, (ii) connectable to the central processing unit (CPU), and (iii) able to accept or deliver data in a form usable by the system. The biometric device met all these conditions as it is used principally in an ADP system, connects to the CPU, and processes fingerprint data in coded digital form.

The Tribunal rejected the Revenue's reliance on Chapter Note 5(E), which excludes machines performing a specific function other than data processing. The biometric device primarily processes data (fingerprint information) and does not perform any other distinct function. Therefore, it did not fall within the exclusions of Note 5(E).

Regarding CTH 8543, the Tribunal noted it is a residual heading for electrical machines with individual functions not specified elsewhere. Since the biometric device is covered under CTH 8471, it cannot be classified under this residual heading.

Key evidence and findings: The Tribunal examined the pamphlets and technical details of the device, confirming its function as a fingerprint reader that processes data and interacts with an ADP system to control access and record attendance. The device's capability to connect to the CPU and transmit processed data was critical in establishing its classification under 8471.

Application of law to facts: Applying the criteria in Chapter Note 5(C) and the definitions of the tariff headings, the Tribunal found that the biometric device fits squarely within the scope of CTH 8471. The device's function as an optical data reader and its integral role in an ADP system precluded classification under CTH 8543.

Treatment of competing arguments: The Revenue argued for classification under CTH 8543, presumably on the basis that the device performs a specific function (access control) and is an electrical machine with an individual function. The Tribunal countered this by emphasizing the device's data processing role and reliance on established precedent, which consistently held similar devices under CTH 8471. The Tribunal also noted that the exclusions in Chapter Note 5(D) did not apply to the device, and that the Revenue failed to demonstrate that the device fell within the exceptions under Note 5(E).

Conclusions: The Tribunal concluded that the biometric access control system is classifiable under CTH 8471 6090. It set aside the impugned order of the Revenue and allowed the appeal, affirming the applicability of the prior precedents and the correct interpretation of the Customs Tariff Act provisions.

3. SIGNIFICANT HOLDINGS

The Tribunal reiterated the legal principle that classification must be guided by the nature and principal function of the goods, supported by tariff chapter notes and authoritative precedent. It held:

"It is clear that the impugned item is of a kind solely or principally used in an automatic data processing system, it is connectable to the central processing unit and is able to accept or deliver data in a form (codes or signals) which can be used by the system."

"The impugned goods are therefore not eased out of CTH 8471 by the provisions of Chapter Notes 5(D) & 5(E)."

"CTH 8543 covers electrical machines and apparatus having individual functions, not specified or included elsewhere in Chapter 85. Thus, this heading is a sort of residuary heading for the goods otherwise covered under Chapter 85. As the impugned goods are found to be covered under CTH 8471 as per above analysis, they are obviously out of chapter 85 and hence out of CTH 8543 too."

"Once goods are classifiable under heading 8471 the same cannot be classified under Entry 8543."

The Tribunal's final determination was that the biometric access control system imported by the appellant is correctly classifiable under CTH 8471 6090 and not under CTH 8543 7099, thereby allowing the appeal and setting aside the Revenue's classification.