In a ruling on customs classification of imported ‘Dryview 6850 Laser Imagers’, the Supreme Court upheld classification under the residuary CTH 9033 00 00, holding that accessories usable with machines falling under different tariff headings must necessarily be classified under the residuary heading and cannot be brought under CTH 9018 90 19.
The Apex Court clarified that where imported goods are sought to be classified as accessories under a particular tariff heading by virtue of Rule 2(b) of Note 2 to Chapter 90 of the Customs Tariff Act, 1975, such classification is permissible only when the accessories are suitable for use solely or principally with machines falling under the same tariff heading. Further, where the accessories are compatible with machines falling under different tariff headings carrying different rates of duty, Rule 2(c) alone applies and the goods must be classified under the residuary CTH 9033 00 00.
The true test is the function that the accessory achieves in the use of the principal equipment, and an accessory that merely performs a supplementary function of printing or transferring data without contributing to the diagnostic exercise itself cannot be treated as a diagnostic apparatus under CTH 9018 90 19, added the Court.
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A Two-Judge Bench comprising Justice Sanjay Kumar and Justice Sanjeev Sachdeva observed that the laser imager admittedly has no diagnostic skill or capability of its own and must necessarily receive inputs from diagnostic equipment to carry out its function of printing films, making it an ‘accessory’ to such diagnostic equipment rather than a diagnostic apparatus in its own right. Since CTH 9018 90 19 applies only to ‘other diagnostic instruments and apparatus’, the laser imager cannot per se be classified under this heading.
The Court further observed that Notification No. 12/2012 dated March 17, 2012, which prescribes a 5% customs duty on goods falling under CTH 9018, 9019, 9020, 9021 or 9022 required for medical use, cannot be relied upon by the appellant since it was raised for the first time before the Supreme Court without establishing foundational compliance with the conditions stipulated in the annexure. The Court then turned to Note 2 of Chapter 90, which governs the classification of parts and accessories, and noted that Rule 2(a) does not apply as the laser imagers are not goods included in any of the headings of Chapter 90 or Chapters 84, 85 or 91. The question therefore narrowed to whether Rule 2(b) or Rule 2(c) would apply.
The Court observed that the laser imagers are not ‘parts’ of the diagnostic machines but are ‘accessories’ thereto, as they carry out the supplementary function of printing data received from such machines onto films. Referring to the McGraw-Hill Dictionary of Scientific and Technical Terms and the New International Webster’s Comprehensive Dictionary, the Court noted that an ‘accessory’ is a part, subassembly, or assembly that contributes to the effectiveness of a piece of equipment without changing its basic function. Citing the 3-Judge Bench decision in Annapurna Carbon Industries Company vs. State of Andhra Pradesh [(1976) 2 SCC 273], the Court cautioned that accessories are not necessarily confined to the particular machines for which they may serve as aids, as the same item may be an accessory of more than one kind of instrument.
The Court noted that the laser imagers are compatible with machines falling under CTH 9018 (such as Linear Ultrasound Scanners under CTH 9018 12 10, MRI apparatus under CTH 9018 13 00, Echo Cardiograph under CTH 9018 19 20, and ultra-violet or infra-red ray apparatus under CTH 9018 20 00) as well as with machines falling under CTH 9022 (such as CT apparatus under CTH 9022 12 00, X-ray generators and apparatus under CTH 9022 14 10, Portable X-ray machines under CTH 9022 14 20, and apparatus based on ionising radiation under CTH 9022 21 00). The Court further noted that the tariff duty for machines under CTH 9018 was 7.5%, while for CT apparatus under CTH 9022 12 00 it was 10% per unit and for X-ray generators under CTH 9022 14 10 it was 15% per unit.
Briefly, Carestream Health India Pvt Ltd., the appellant, imported ‘Dryview 6850 Laser Imagers W/3D’ from China under a Bill of Entry and sought to classify them under Customs Tariff Heading (CTH) 9018 90 19 in Chapter 90 of the First Schedule to the Customs Tariff Act, 1975, treating them as ‘other diagnostic instruments and apparatus’ – The Assistant Commissioner of Customs rejected this classification and reclassified the laser imagers under the residuary CTH 9033 00 00 as accessories not specified or included elsewhere in Chapter 90 – The Commissioner of Customs (Appeals) affirmed this view and the CESTAT also dismissed the appellant’s appeal. The differential duty demand arising from the higher rate under CTH 9033 00 00 was Rs. 5.21 lakhs with the rate difference being 2.5% at the relevant time.
The imported laser imager is essentially a printer that uses photo thermographic (dry laser) technology to develop images on film, interfacing with digital diagnostic machines such as MRI, CT, Full-Field Digital Mammography (FFDM), Digital Radiology (DR), Computed Radiography (CR), Picture Archiving and Communication System (PACS), and Digital Fluoroscopy. The appellant contended that the laser imager is an ‘apparatus’ used for diagnostic purposes and, being compatible with machines classified under CTH 9018, should fall under the residuary clause CTH 9018 90 19. The Revenue, on the other hand, argued that since the laser imager is also usable with machines falling under CTH 9022 (X-ray and ionising radiation apparatus), it must be classified under the residuary CTH 9033 00 00.
