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AUTHORITY FOR ADVANCE RULINGS
(CENTRAL EXCISE, CUSTOMS & SERVICE TAX)
Ruling Nos. AAR/15-17(Cus)/2005
R U L I N G
( By Mr. Somnath Pal, Member )
The following three applications have been filed by M/s Alcatel India Ltd., Plot No. 25, Sector-18, Gurgaon, Haryana, India (hereinafter to be referred to as "the applicant") under section 28H of the Customs Act, 1962 (for short "the Act") as a wholly owned subsidiary Indian company of M/s Alcatel, France. The questions raised in these three applications for advance ruling are also indicated below against the corresponding application Nos :-
(a) Application No. AAR-44(Cus)/13/2005 - "Whether Submerged passive tilt equalizer R4 proposed to be imported into India is classifiable under Heading No. 8517 50 99 of the First Schedule of the Customs Act, 1975" (apparently a printing error for Customs Tariff Act, 1975).
(b) Application No. AAR-44(Cus)/12/2005 - "Whether Submerged Adjustable slope equalizer Unit R3 to be imported into India, is classifiable under Heading No. 8517 50 99 of the First Schedule of the Customs Tariff Act, 1975."
(c) Application No. AAR-44(Cus)/11/2005 - "Whether Submerged Passive Equalizer Unit R2 proposed to be imported into India, is classifiable under Heading No. 8517 50 99 of the First Schedule of the Customs Tariff Act, 1975".
We have clubbed these three applications for advance ruling since they contain the common question of classification of "Equalizer", though, in finer details, the three items under consideration function as equalizer for equalization of three different parameters, namely, "tilt", "slope" and "shape" of the gain/wavelength needed to optimize the overall transmission through the submerged cable.
2. In respective Annexure-II to the three applications, the applicant, after giving brief description of the goods in question and referring to the General Interpretative Rule 1 of the First Schedule to the Customs Tariff Act has stated that the equalizers under consideration are clearly telecommunication apparatus. These, according to the applicant, are classifiable under tariff heading 8517 50 99 which reads "other apparatus, for carrier-current line systems or for digital line systems". The applicant has enclosed alongwith these applications copies of the rulings given by the U.K./the U.S.A./Australian Customs all of whom have classified these products under tariff sub-heading 8517 50.
3. The designated Commissioner, namely, the Commissioner of Customs, Air Cargo Exports, New Custom House, IGI Airport, New Delhi (hereinafter to be referred to as "the Commissioner") in his comments has, however, contended that the classification of the three equalizers under consideration would be under tariff heading item 8543 89 99. According to the Commissioner, the tariff heading 8543 appears more appropriate because it covers all electrical appliances and apparatus, not falling in any other heading of Chapter 85, nor covered more specifically by a heading on any other Chapter of the Nomenclature, nor excluded by the operation of a Legal Note to Section XVI or to the Chapter 85 from heading 8543. The electrical appliances and apparatus of this heading must have individual function. Tariff item 8543 89 81 covers graphic equalizers. The equalizers in question are similar equipment and having an independent function and not covered more specifically by a heading of any other Chapter of the Nomenclature, nor excluded by the operation of a legal note to Section XVI or to Chapter 85. They therefore merit classification under tariff item 8543 89 99.
4. Despite repeated opportunities given to the applicant by postponing the hearing in the months of August, September and October, 2005 as requested by them, nobody appeared before the Authority on behalf of the applicant for the hearing on the rescheduled dates. The Commissioner was however, represented by the Joint CDR who appeared before us and reiterated the view expressed by the Commissioner.
5. In response to the comments of the Commissioner suggesting classification of these Equalizers under tariff item 8543 89 99, the applicant however reacted and sent their comments drawing attention to the technical information already furnished by them in respect of these three items and contending that these products are not independent units but are specifically designed for use in the submerged telecommunications systems. Referring to the rulings given by the UK, the USA and Australian Customs and to the General Interpretative Rule 1, they reiterated that the three "Equalizers" in question are appropriately classifiable under tariff item 8517 50 99.
6. We have carefully examined the matter in the light of the three questions posed before us. On the technical front, as per the details furnished by the applicant in respective Annexure-II to the three applications and the related Customs Technical Document, the common features of the three Equalizers in question are :-
(i) They are designed for telecommunications systems utilizing submerged equipment.
(ii) They form part of a submarine telecommunication system for use in transmission of aggregate data.
(iii) They are of Alcatel generic design and include features that allow their configuration to suit a given system.
(iv) They function as dedicated units for the transmission of aggregate data.
(v) They are all modular in construction.
On the other hand, as we have already mentioned, the difference amongst the three Equalizers lies only in the nature of the parameter which requires equalization to optimize the overall transmission through the submerged cable. For proper appreciation of this aspect, we find it useful to cull out the relevant technical details given in the above documents which are as follows :-
Sl.No. Application No. Goods and its functional parameters
7. With a view to examining the contention of the Commissioner on the classification of these three types of equalizers, it is necessary to reproduce the relevant portion of the tariff heading 8543. This heading reads as under :-
"Electrical machines and apparatus having individual functions, not specified or included elsewhere in this Chapter"
Under this heading there is a specific category "Graphic equalizer and synthesised receivers". Since the Commissioner has taken the tariff item 8543 89 99 as the appropriate classification, the entire portion of the tariff starting with the category "graphic equalizer and synthesised receivers" and ending with tariff item "8543 89 99 ---- other" is reproduced below for easy reference :-
From the above layout of the Tariff, it is clear that as far as equalizers are concerned there is only one type, namely, "graphic equalizer" which has been specified against tariff item 8543 89 81. There is no specific item for other equalizers under tariff heading 8543. It is not the case of the Commissioner that the equalizers under consideration before us are covered by the specific item, namely, graphic equalizers. In fact, he has indicated that these three equalizers are equipment similar to graphic equalizers. The category "graphic equalizer and synthesised receivers", we observe, specifically covers two items both of which have been individually specified against tariff item 8543 89 81 and 8543 89 82. There is therefore no scope whatsoever of having any third item under this category. The next category is "Other" which is a residual entry for items not covered by any other earlier tariff items up to 8543 89 82. Under this residual category, five types of goods have however been specified and the final residual tariff item is 8543 89 99 which therefore covers any goods which are not covered by any of the tariff items up to 8543 89 95 under the heading 8543. Thus it is apparent that this residual tariff item mentioned by the Commissioner is not a specific item for equalizers. It is a well settled law that before we take resort to a residuary item we must cautiously exclude the possibility of coverage of the goods by any other tariff heading/sub-heading/item. In the case before us, the heading 8543 itself is in the nature of a residuary heading in so far as electrical machines and apparatus having individual functions are concerned. Such machines and apparatus can fall under the heading 8543 only if they are not specified or included elsewhere in Chapter 85. The tariff item 8543 89 99 is thus the residuary tariff item of a residuary tariff heading of Chapter 85 and hence its coverage is very general and far removed from being specific.
8. From the technical details and functional parameters as explained in the annexures to the application it becomes clear that the three products in question are a combination of either optical and mechanical elements or of optical, electrical/electronic and mechanical elements and they play an integral and inseparable part in the transmission of data as a telecommunication apparatus for carrier current line systems or for digital line systems. The heading 8517 includes "telecommunication apparatus for carrier-current line systems or for digital line systems". The coverage of the category "apparatus for carrier-current line systems or for digital line systems" has been indicated in the HSN Explanatory Note to heading 85.17 which reads as follows :-
"These systems are based on the modulation of an electrical carrier-current or of a light beam by analogue or digital signals. Use is made of the carrier-current modulation technique and pulse code modulation (PCM) or some other digital system. These systems are used for the transmission of all kinds of information (words, data, images, etc.)
These systems include all categories of multiplexers and related line equipment for metal or optical-fibre cables. "Line equipment" includes transmitters and receivers or electro-optical converters. Combined modulators-demodulators (modems) are also classified here."
9. It is not the case of the Commissioner that these "Equalizers" are not integral parts of submerged telecommunication systems or they are not telecommunication apparatus. The only contention is that despite being so, they are more specifically covered under heading 8543. We have already examined the scope and coverage of this heading in our another recent ruling in the applicant's case on the question of classification of "Submerged Repeater Generic R4" (vide Ruling No.AAR/14(Cus)/2005, dated 24-11-2005). We are not therefore repeating it again here. Suffice it to say that the Commissioner's contention that the Equalizers in question are more specifically covered by heading 8543 than 8517 is not convincing enough to merit acceptance. In our view they are appropriately classifiable under tariff heading 8517 rather than the very wide and general residuary item 8543 89 99. Since the goods under consideration are not covered by any of the sub-heading/tariff items from 8517 11 up to and including 8517 30 00, it will fall under sub-heading 8517 50 and more precisely under the tariff item 8517 50 99, after excluding rest of the specified items 8517 50 10 to 8517 50 94.
10. For the reasons given above, we rule on the questions raised in the three applications that the goods namely (a) Submerged passive tilt equalizer R4, (b) Submerged Adjustable slope equalizer Unit R3 and (c) Submerged Passive Equalizer Unit R2 are individually classifiable under the tariff item 8517 50 99 of the First Schedule of the Customs Tariff Act, 1975.
Pronounced in the open Court of the Authority on this 24th day of November, 2005.