The New Delhi Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has rejected the importer’s claim that flat panel display modules qualify as parts/accessories of automatic data processing machines, while pointing out that the classification must rest on objective identity at the time of import, not intended application. The CESTAT held that where imported goods satisfy the specific description of “flat panel display modules” under CTH 8524 and are not integrated into any other apparatus at the time of import, the importer cannot take shelter under the general heading for “parts and accessories” of computers under CTH 8473 merely because the intended end-use is with laptops.
Applying GRI 1 and GRI 3(b) sequentially, and placing reliance on Commissioner of Customs (Import) vs. Welkin Food reported as [226 (38) CENTAX 104. S.C.], the Tribunal held that the last heading in numerical order among equally meriting headings prevails, making CTH 8524 the correct classification. The technical distinction between LCD and LED panels was held to be of no consequence at the point of import.
The Division Bench comprising Dr. Rachna Gupta (Officiating President) and Hemambika R. Priya (Technical Member) observed that the classification disputes in the HSN era require careful consideration of the General Rules of Interpretation (GRI). The Supreme Court has held that GRIs must be applied sequentially, with GRI 1 being the non-negotiable starting point that gives primacy to the headings and notes. The official interpretation of HSN as provided in the explanatory notes published by the World Customs Organization forms the foundation for interpreting the HSN.
The Tribunal noted that for any article to be classified under CTH 8473, it has to be a part or accessory of automatic data processing machines and units thereof or such other machines of heading 8471. On the other hand, CTH 8524 specifically covers flat panel display modules, whether or not incorporating touch sensitive screens, which may be of LCD, LED, or OLED display technologies. The Tribunal observed that the appellant impressed upon the goods to be laptop monitors which are admittedly flat display modules, but denied them to be classifiable under 8524. The only reason for denial was that the goods were specifically to be used with computers as computer display panels.
The Tribunal relied on the Welkin Food case to hold that when the tariff heading contains the specific (EO NOMINI) description of the good, the importer cannot rely upon the end use thereof to change the classification. The co-nominee identity of the imported goods, whether seen from the appellant’s own statement under section 108 of the Customs Act or from the Chartered Engineer’s report, continued to remain that of flat panel display module. The imported goods were not integrated into the computer and were capable of being presented separately, for which sole reason they came out of the scope of being called as part or accessory of the computer.
The Tribunal further observed that Chapter Note ii of CTH 8524 clearly states that flat panel display modules that are not integrated into other apparatus and presented separately are classified under heading 8524 rather than the heading in which the finished products with flat panel display modules are classified. The Tribunal noted that certain flat panels have been excluded from the scope of 8524, including flat panel display modules with video-converting components, visual signaling apparatus, measuring or checking apparatus, musical instruments, and goods of Chapter 95.
The goods in question did not fall under any of these excluded categories. Chapter Note 7 of Chapter 85 was found to be most relevant, which defines “flat panel display modules” as devices or apparatus for the display of information, equipped at a minimum with a display screen, designed to be incorporated into articles of other headings prior to use. It was the appellant’s own admission that the imported goods were not equipped with components for converting video signals like scalar IC, decoder IC, or application processor. This observation was sufficient to hold that the more appropriate classification for the goods in question is under CTH 8524 and not under CTH 8473, added the Tribunal.
Briefly, the appellant, M/s N.R. Computech, is an importer who allegedly imported goods by claiming wrong exemption benefits. Intelligence gathered by the department revealed that the importer had imported a consignment of 100 pieces via Airway Bill No. 2728987800, describing the goods as “laptop, LCD Panel”. The goods were classified under tariff item 84733099 of the First Schedule of the Customs Tariff Act, 1975, attracting nil Basic Customs Duty (BCD). However, the department formed an opinion that the goods were classifiable under tariff item 85241100, which attracts 15% BCD ad valorem. The goods were kept on hold by the Special Intelligence and Investigation Branch (SIIB) for examination.
The commercial invoice dated July 18, 2022 was called from the custodian, and the value of the goods was found to be on the lower side. The importer submitted that the goods were meant for resale to dealers and retailers of laptops for replacing faulty LCD screens, and that the goods were not equipped with components for converting video signals such as scalar IC, decoder IC, or application processor. The department observed that the imported goods had LED backlight instead of fluorescent backlight, making them LED/LCD displays without any video signal converting components.
A customs-approved chartered engineer confirmed through a report that the goods appeared to be LED displays. A show cause notice was issued proposing re-determination of value at Rs. 6000/- per piece, with a total re-determined value of Rs. 2.70 crores for the live consignment plus 16 past consignments. Short levied duty of Rs. 94.22 lakhs was proposed to be recovered. The value of the live consignment was proposed to be re-determined at Rs. 60 lakhs, with duty of Rs. 22.48 lakhs proposed to be recovered. Penalties were proposed under section 112(a)(ii) and section 114AA of the Customs Act, 1962. The Order-in-Original confirmed duty of Rs. 7.75 lakhs for the 16 past courier bills and Rs. 5.83 lakhs on the live consignment, along with penalties. The bank guarantee of Rs. 25 lakh was ordered to be encashed.
