2024 (9) TMI 1767 - AT - Customs

Classification of imported goods - Relays - to be classified under Customs Tariff Item entry 85364900 or under Customs Tariff Item entry 85364100 of the Customs Tariff Act 1975? - HELD THAT - The impugned item i.e. Relays are capable of being used in voltages below 60V and above 60V. The Respondent as classified the impugned imported goods under Customs Tariff Item Entry 85364100 which reads as Relays-for Voltages not exceeding 60V and the appellant classified them under Customs Tariff Item Entry 85364100 which reads as Relays-others . Therefore the Relays which operate only at voltages not exceeding 60V are classifiable under Customs Tariff Item Entry 85364100 whereas as per the finding and the technical literature of the product of the impugned goods the impugned Relays are capable of being operated at Voltages above and below 60V. Therefore the classification under 85364100 as confirmed by the Respondent is not appropriate for the reason that the impugned Relays are capable of being operated above 60V what is covered in the Customs Tariff Item entry 85364100 are Relays which operate up to voltages of 60V therefore relays which operate from a range below 60 Volts to above 60 Volts cannot be classified under Customs Tariff Item entry 85364100. Therefore the impugned goods are classifiable under 85364900 under Relays- others . The appellant has contended that where there two competing entries for classification of an item as per the General Rules of Interpretation the entry which comes later will be the appropriate Customs Tariff Item entry. However in this case it is found that the classification confirmed by the Respondents is for Relays which operate only up to Voltages of 60V. Since the impugned imported Relays operates below 60 Volts and above 60 Volts the classification has to be under Customs Tariff Item entry 85364900 as Relays-others . Appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal were:

• Whether the imported goods described as 'Relays' are correctly classifiable under Customs Tariff Item entry 85364100, which pertains to "Relays for voltages not exceeding 60V," as held by the Respondent authorities;
• Or whether the 'Relays' should be classified under Customs Tariff Item entry 85364900, which covers "Relays - others," as contended by the appellant;
• How to apply the General Rules of Interpretation of the Customs Tariff when an item is capable of classification under two competing tariff entries;
• Whether the technical specifications and operational voltage range of the 'Relays' support classification under one entry over the other;
• The proper application of precedents and interpretative rules in resolving classification disputes involving overlapping tariff headings.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Correct Classification of the Imported 'Relays' under Customs Tariff Entries 85364100 or 85364900

Relevant Legal Framework and Precedents: The classification of goods under the Customs Tariff Act, 1975 is governed by the Harmonized System Nomenclature and the General Rules of Interpretation (GRI) to the Customs Tariff. The relevant entries are:

• 85364100: Relays for voltages not exceeding 60V;
• 85364900: Relays - others (catch-all category for relays not covered by specific voltage limits).

Precedents cited by the appellant include:

• A Supreme Court decision emphasizing that when goods are classifiable under two entries, the one beneficial to the appellant should be adopted;
• A Tribunal decision stating that where classification is ambiguous between two entries, the entry occurring later in numerical order among those equally meriting consideration should be preferred.

Court's Interpretation and Reasoning: The Tribunal examined the technical specifications and the operational voltage range of the impugned 'Relays.' Both the Adjudication Authority and Commissioner (Appeals) found that the relays are capable of operating at voltages below 60V. However, the appellant demonstrated, supported by product literature and technical data, that these relays are also capable of operating at voltages exceeding 60V.

The Tribunal noted that the Customs Tariff Item 85364100 is explicitly limited to relays "for voltages not exceeding 60V." Since the impugned goods can operate both below and above 60V, they do not fall exclusively within the scope of entry 85364100.

Accordingly, the Tribunal held that classification under 85364100 was inappropriate, as it would exclude the relays' capability to function above 60V. Instead, the goods are more accurately classified under 85364900, which covers "Relays - others," a residual category for relays not restricted by voltage limits.

Key Evidence and Findings: The key evidence was the technical literature and product specifications showing the voltage ratings of the relays. Both the department and appellant agreed on the capability of the relays to operate below 60V; the appellant additionally proved operation above 60V.

Application of Law to Facts: The Tribunal applied the tariff definitions strictly, emphasizing the voltage limitation in 85364100. The dual voltage capability of the relays precluded classification under the limited voltage entry. The residual entry 85364900 was the proper heading under the Customs Tariff Act.

Treatment of Competing Arguments: The appellant's argument that the relays should be classified under 85364900 was accepted, while the department's reliance on 85364100 was rejected due to the voltage limitation inherent in that entry. The appellant's invocation of the principle that classification beneficial to the appellant should be adopted was noted but not determinative; the Tribunal focused on the technical characteristics and tariff definitions.

Conclusion: The impugned 'Relays' are classifiable under Customs Tariff Item entry 85364900 as "Relays - others," since they operate at voltages both below and above 60V, and thus do not fit the limited voltage entry 85364100.

Issue 2: Application of General Rules of Interpretation and Precedents Regarding Competing Tariff Entries

Relevant Legal Framework and Precedents: The appellant relied on the General Rules of Interpretation (GRI), particularly the rule that where goods are classifiable under two headings equally meriting consideration, the heading occurring later in numerical order should be preferred. Additionally, the principle that in case of doubt, classification favorable to the importer should be adopted was cited.

Court's Interpretation and Reasoning: The Tribunal acknowledged these principles but clarified that they apply only where the goods are equally classifiable under both entries. In this case, the department's classification under 85364100 was found to be factually incorrect because the goods exceeded the voltage limitation of that entry. Therefore, the entries were not equally applicable.

Since the impugned goods did not fit within the voltage limitation of 85364100, the rule favoring the later numerical entry did not arise. The Tribunal emphasized the primacy of the product's technical characteristics and tariff definitions over procedural interpretative rules.

Key Evidence and Findings: The factual finding that the relays operate above 60V was determinative. The Tribunal found no basis to treat the competing entries as equally applicable.

Application of Law to Facts: The Tribunal applied the GRI but found their application unnecessary due to the clear voltage-based exclusion of the first entry. The classification was thus resolved on substantive grounds rather than interpretative rules.

Treatment of Competing Arguments: The appellant's reliance on the GRI and precedents was considered but ultimately not decisive. The Tribunal prioritized the technical and tariff criteria over procedural interpretative preferences.

Conclusion: The General Rules of Interpretation and the principle of adopting the entry beneficial to the appellant were not applicable because the goods did not meet the criteria for classification under the first entry. The classification under 85364900 was therefore upheld.

3. SIGNIFICANT HOLDINGS

The Tribunal held:

"The impugned 'Relays' are capable of being operated above 60V and below 60V. Therefore, the classification under 85364100 as confirmed by the Respondent is not appropriate for the reason that the impugned 'Relays' are capable of being operated above 60V, what is covered in the Customs Tariff Item entry 85364100 are 'Relays', which operate up to voltages of 60V, therefore relays, which operate from a range below 60 Volts to above 60 Volts cannot be classified under Customs Tariff Item entry 85364100."

"Therefore, the impugned goods are classifiable under 85364900 under 'Relays- others'."

Core principles established include:

• Classification under the Customs Tariff must strictly adhere to the technical and descriptive criteria specified in tariff entries;
• When goods fall outside the voltage limitation of a specific tariff entry, they cannot be classified under that entry even if partially meeting some criteria;
• The General Rules of Interpretation and principles favoring the importer's classification apply only where competing entries are equally applicable;
• Residual tariff entries serve as appropriate classification when goods do not fit within more specific entries.

Final determination was that the imported 'Relays' are properly classifiable under Customs Tariff Item entry 85364900 ("Relays - others") and not under 85364100 ("Relays for voltages not exceeding 60V"). The appeal was allowed accordingly, with consequential relief as per law.