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TMI Blog2023 (6) TMI 907X X X X Extracts X X X X X X X X Extracts X X X X ..... els of data centre switches from tile U.S.-based manufacturer M/s Arista Networks: Sr. No. Series Models 1 7500R3 DCS-7504R3-XXX-XX DCS-7508R3-XXX-XX DCS-7512R3-XXX-XX 2 7500R DCS-7504R-XXX-BND DCS-7508R-XXX -BND DCS-7512R-XXX -BND DCS-7516R-XXX -BND 3. 7280R3 DCS-7280PR3-XX-X DCS-7280PR3K-XX-X DCS-7280DR3-XX-X-XXX DCS-7280DR3K-XX-XXX-X DCS-7280CR3K-XXXX-XXX-X DC S-7280CR3-XXXX-X-XXX DCS-7280SR3-XXXXX-X DCS-7280SR3K-XXXXX-X 2.1 The aforementioned devices are called data centre switch routers (hereinafter referred to as DCSRs). The Data Centre Switch Routers of models 7500R, 7500R3 and 7280R3 are devices used to deliver to the needs of large-scale data centres/enterprise networks and are equipped with large routing tables allowing for internet peering, interconnection and inter-Data Center networking. The product is a combination of a network switch and a router. A network switch connects devices on a computer network by using packet switching to receive and forward data. They connect multiple devices such as computers, wireless access points, printers, and servers. A switch enables connected devices to share information and interact with each other. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hernet switch as evidenced by the product catalogue and its non-carrier ethernet characteristic. 2.3 As per the applicant, impugned devices are eligible for benefits under Sr. No. 13N of Notification No. 24/2005-Customs, dated 01.03.2005 or Sr. No. 20 of Notification No. 57/2017-Customs, dated 30.06.2017. 2.4 Sr. No. 13N of Notification No. 24/2005-Customs, dated 01.03.2005 exempts routers of sub-heading 85176290. The applicant submits that the above exemption is based on the functionality of the goods. This can be seen from the fact that the CTH 85176290 includes a routing apparatus. Thus, any apparatus that performs the function of routing will be covered under the said tariff item. DCSRs under consideration in the present application are capable of performing routing functions. The fact that the DCSRs can also perform the function of switches would not disentitle them from the exemption granted. The applicant further stated that it is a settled legal position that when an exemption is granted for a machine performing a function, it cannot be denied merely because the machine is capable of performing other functions also. In support of the above, they have sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he exemption. 3) The impugned products are LAN/WAN information products and therefore, covered under the Information Technology Agreement (ITA). India is a signatory to ITA, which aims to lower all taxes and tariffs on information technology products to zero. The World Trade Organisation (WTO) has always considered network switches within the scope of the IT products which can avail the benefit of the ITA. 2.5.2 Further, the Department of Telecommunication has issued clarifications regarding the classification of carrier and non-carrier ethernet switches, in the context of Customs duty exemption, vide office letter bearing F. No. TEC/IT/TecDisc/2015, dated 03.05.2016 and office memorandum no. 18-33/2013-IP, dated 18.11.2016. It was clarified that there is no definite technical bifurcation between carrier ethernet switches and enterprise ethernet switches based on features or services supported as there could be overlapping features. Classification can only be ascertained based on the purchase order from the ultimate consignee. They can be classified based on the usage of such devices by TSP/ISP or the customer location where these devices will be used. In the above clarifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of case basis after ascertaining the end-use of the imported goods. As far as the issue of the benefit of Sr. No. 13 N of Notification No. 24/2005-Customs, dated 01.03.2005 on the import of subject goods is concerned, it appears that the said benefit is applicable only to the Router classifiable under CTH 85176290, whereas, in the instant case, the goods although classifiable under CTH 85176290 are "Ethernet Data Switches" and not "Routers", hence the benefit of Notification 24/2005 Sr. No. 13N cannot be allowed. 3.2 In their CAAR-1 application form, the applicant has stated that the questions raised are not pending in their case before any officer of customs, appellate tribunal or any court of law. In response to a similar matter as raised in the question(s) by the applicant has already been decided by the Appellate Tribunal or any Court, the applicant has stated that there is no decision covering products under consideration 4. An opinion on the products under consideration was sought from Telecommunication Engineering Centre (TEC), Department of Telecommunication vide letter dated 13.09.2022. TEC vide their letter dated 23.09.2022 opined that, as per data shee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of MEF certification they have stated that the MEE is recognised by the stakeholders in the telecom sector, which is also recognised by TEC as a relevant standard that telecom service providers need to comply with. Therefore, MEF Certification is an important factor to decide whether a switch is a carrier ethernet itch or a non-carrier ethernet switch. In respect of the difference between MPLS and MPLS-TP, they have claimed that only carrier ethernet switches can make use of MPLS-TP technology and the product in question cannot. Further, they have submitted that the multifunction devices are entitled to duty exemptions available to any one of the functions covered under such exemption. For the above contention, they have cited case laws of Andhra Patrika, Madras v. Collector of Customs reported in 1983 (13) E.L.T. 1103 (CEGAT), Collector of Customs v. Blue Star Ltd. reported in 1990 (50) E.L.T. 186, Twenty-First Century Printers v. Collector of Customs Bombay 2003 (162) E.L.T. 1045 (Tri. - Del.). They have further submitted that the undertaking should be considered to determine the nature of the product as is usually done with respect to the products, the determination of whose end ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epeaters, converters, concentrators, bridges/switches and routers. Rule I of the General Interpretation Rules (GIR) lays down that the titles of sections, chapters and sub-chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes. 5.1 CTH 8517 covers 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. The second one-dash subheading of heading 8517 covers 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). 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in clauses (a) and (e) are not relevant. Therefore, we need to examine whether the products can function as a carrier ethernet switch. Carrier Ethernet is an application of ethernet technology that allows network providers to offer ethernet services to their customers and to use ethernet technology. It enables internet access and communication among local area networks (LANs) of business, academic, private and government organizations. The TEC in their technical opinion has stated that these products are capable to be used as carrier ethernet switches. As the goods under consideration can function as carrier-class ethernet switches, they are excluded from the said notification. 6.1 The applicant has stated that the intended use and the undertaking of the applicant for the same should be considered for the notification benefit. The Delhi Tribunal in the case of Guest Keen William 1987 (29) ELT 68 has observed that it is an accepted position that a notification should be interpreted on the basis of the language used therein and not on the basis of intendment or by supplying words or ignoring them. Further, in the case of Commissioner of Cus. (Import), Mumbai versus Dilip Ku ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned and it was clarified that no words must be added or deleted while construing any legal provision and there is no room for any intendment. In the present case, the entry describes goods as "Routers". It does not specify indentation, conditions or capacity and capability for such routers. It does not bar the routers used by telecom networks, support service providers and data centres. It does not exclude routers capable of performing secondary functions. The impugned goods, on the application of GIR I and Note 3 to Section XVI read with the technical opinion of the TEC merit classification as routers based on their principal function of routing. Therefore, the goods under consideration appear to be covered by the said notification. Accordingly, they are eligible to claim benefits under the above-mentioned notification. 8. In view of the foregoing discussions, I rule that the Data Centre Switch Router models specified in para 2 are classifiable under sub-heading 85176290 of the first schedule to the Customs Tariff Act, 1975 and are eligible to avail the benefit under Sr. No. 13N of Notification No. 24/2005-Customs, as amended. However, they are not eligible to avail benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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