Classification dispute of MSO CBM (EMBALLE PAR 40) FINGER PRINT READER - SCANNER – whether it will fall under chapter heading 8471 or 8543.

PJ/CASE LAW/2016-17/3204

Case-STJ ELECTRONICS PVT. LTD. Versus COMMISSIONER OF CUSTOMS (I&G), NEW DELHI

Citation-2016 (337) E.L.T. 140 (Tri. - Del.)

Issue-Classification dispute of MSO CBM (EMBALLE PAR 40) FINGER PRINT READER - SCANNER – whether it will fall under chapter heading 8471 or 8543.

Brief Facts-Appeal is filed against order-in-appeal dated 16-11-2009 in terms of which the impugned goods namely MSO CBM (EMBALLE PAR 40) FINGER PRINT READER - SCANNER were held to be classifiable under Customs Tariff Heading 8543, as against the classification claimed by the appellant under CTH 8471 on the ground that the goods were optical readers and hence clearly covered under CTH 8471.

Appelants Contention-The appellant has contended that:
(i)         As per the manufacturer’s pamphlet the goods are described as High-performance optical sensor which works on the proprietary optical technology. It reads the finger prints and transmit it through the signals to the computer or the motherboard for matching with fingerprints already stored in the computer/motherboard and the adjudicating authority admits that the impugned goods are optical reader that read finger print pattern.
(ii)        The impugned goods are without housing and cable and are fitted in a housing and with cable which connects the module to the computer in a case of stationery system. In the case of hand held system, the housing has motherboard and the impugned item is connected to the motherboard through a cable. When a finger is put on the screen of the impugned item the finger print is transmitted through signals to the computer or the motherboard.
(iii)       Thus, the imported item acts as an input unit to a system and functions on optical technology. These goods are classified under Heading 8471 at other Custom Houses in India as is evident from the printout submitted. They cited Chapter Note 5(C) to Chapter 84 in support of its contention.

Respondents Contention-Ld. DR on the other hand stated that the impugned goods are parts of electrical machines and apparatus having individual functions not specified or included elsewhere in Chapter 85 and referred to Chapter Note 5(E) to Chapter 84.

Reasoning Of Judgement-The tribunal have considered the contentions of both sides and perused the records. As the issue involved is classification of the impugned goods, whether under CTH 8471 or CTH 8543, both these headings are reproduced below for convenience.
Chapter heading 8471 reads as under :
“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”.
Chapter heading 8543 reads as under :
“Electrical machines and apparatus having individual functions, not specified or included elsewhere in this Chapter”.
From the pamphlets relating to the impugned goods, it is evident that the impugned goods are fingerprint reader which work on optical technology and involve flat optical sensor for compact design. Its technical specifications indicate that it comprises thin optical sensor. CTH 8471 specifically covers magnetic or optical readers. Chapter Note 5(C), (D) and (E) to Chapter 84 read as under:
“(C) Subject to paragraphs (D) and (E) a unit is to be regarded as being part of an automatic data processing system if it meets all of the following conditions:
(i)         it is of a kind solely or principally used in an automatic data processing system;
(ii)        it is connectable to the central processing unit either directly or through one or more other units; and
(iii)       it is able to accept or deliver data in a form (codes or signals) which can be used by the system.

Separately presented units of an automatic data processing machine are to be classified in heading 8471.
However, keyboards, X-Y co-ordinate input devices and disk storage units which satisfy the conditions of (ii) and (iii) above, are in all cases to be classified as units of heading 8471.
(D) Heading 8471 does not cover the following when presented separately, even if they meet all of the conditions set forth in the paragraph (C)
(i)         printers, copying machines, facsimile machines, whether or not combined;
(ii)        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);
(iii)       loudspeakers and microphones;
(iv)       television cameras, digital cameras and video camera recorders;
(v)        monitors and projectors, not incorporating television reception apparatus.
(E) Machines incorporating or working in conjunction with an automatic data processing machine and performing a specific function other than data processing are to be classified in the headings appropriate to their respective functions or, failing that, in residual headings”.
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 exclusions contained in Chapter Note 5(D) do not cover the impugned item and it is not the case of Revenue either that it does. Revenue referred to Chapter Note 5(E) quoted above. Tribunal find that Chapter Note 5(E) refers to machines incorporating or working in conjunction with an automatic data processing machine and performing a specific function other than data processing. In the present case the machine essentially performs data processing function inasmuch as it processes the data relating to fingerprint with the finger print data in the motherboard/Centre processing unit (CPU). Thus, it does not have any specific function other than data processing. The impugned goods are therefore not eased out of CTH 8471 by the provisions of Chapter Notes 5(D) & 5(E) CTH 85.43 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 85.43 too.
In the light of aforesaid analysis, they are of the view that the impugned goods are classifiable under CTH 8471; that they are so classified in some Customs Houses like Bombay and Chennai as per the data given by the appellant only reaffirms that those customs houses are correctly classifying the same. Accordingly, tribunal set-aside the impugned order and allow the appeal.

Decision-Appeal allowed

Comment-It is clear that the MSO CBM (EMBALLE PAR 40) FINGER PRINT READER - SCANNER is of a kind solely or principally used in an automatic data processing system, it is connectable to the CPU and is able to accept or deliver data in a form (codes or signals) which can be used by the system. The exclusions contained in Chapter Note 5(D) do not cover such item whereas the Chapter Note 5(E) refers to machines incorporating or working in conjunction with an automatic data processing machine and performing a specific function other than data processing.
But, since in the present case the machine essentially performs data processing function Thus, it does not have any specific function other than data processing. Therefore MSO CBM (EMBALLE PAR 40) FINGER PRINT READER - SCANNER not eased out of CTH 8471 and hence classified under the chapter heading 8471 and not under Heading 8543.

Prepared By-Neelam Jain

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PJ/CASE LAW/2016-17/3204

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