The Hindu Business Line : The overloaded `other'

Is there a case for tariff to reflect current developments in classification rather than lump critical products under the omnibus `other' category? Read up on the Alcatel rulings.

ON January 5, the Authority for Advance Rulings, New Delhi (Central Excise, Customs and Service Tax) decided many applications from Alcatel India Ltd, a wholly-owned subsidiary of Alcatel, France.

These applications were about the classification of products such as optically post amplifier unit, remote pump, Raman pump unit, optinex metro span telecommunications equipment, and remote optically pumped amplifier jointing box housing.

First, the Fox

Sometime ago, the Authority had decided on the tax treatment of `Alcatel 1640 Fox', which is "a hybrid of optical, electronic and mechanical systems that form part of a telecommunication system for use in transmission of aggregate data." The company had sought clarification about customs duty liability towards "the hardware and optical fibre cables for submarine telecommunication systems." First, the fox, therefore, through a walk of the ruling dated November 24, 2005.

To those foxed by `Fox', there's help on www.alcatel.com. The site explains the abbreviation as `Fiber Optics eXtension'. STM-1/4 multi-service node is "a desktop or wall-mount SDH add-drop multiplexer (ADM) optimised for customer premises," says the company.

Alcatel informed the AAR that the goods:

Were for transmission and cross connection of a wide range of PDH (Plesiochronous Digital Hierarchy) and SDH (Synchronous Digital Hierarchy) telecommunication signals.

Had the capacity to perform functions of a multi-terminal (receiving a variety of signals at differing protocols) or as ADM (selecting and isolating differing signals).

Were very compact shelves that are able to handle wide variety of traffic signals such as 2, 34 and 155 Mbit/s over both electrical and optical (transmission) media.

Could manage data traffic as well, such as Ethernet and GB Ethernet.

Accordingly, the product was classifiable under heading 8517.5099 of Customs Tariff, said the company. The Commissioner of Customs concurred with Alcatel's view.

A key benefit of the product, as mentioned on the company's site is: "Common building blocks concept of the Optical Multi-Service Nodes and Gateways (OMSN and OMSG) product family: unrestricted deployment of hardware items across systems, synergy in spares and spare management, easy repairs and reduced training requirements."

To rule on the matter, the Authority studied the tariff heading 8517. It deals with "electrical apparatus for line telephony or line telegraphy including line telephone sets with cordless hands-sets and telecommunication apparatus for carrier-current line systems or for digital line systems."

And `99' is the residuary subheading under `8517.50', which is titled, `other apparatus, for carrier-current line systems or for digital line systems." Other subheads that should interest the techies are: PLCC equipment, voice frequency telegraphy, modems, high-bit rate digital subscriber line system (HDSL), digital loop carrier system (DLC), SDH, multiplexer/ statistical multiplexer, ISDN terminals, and so on.

Optically Post Amplifier

Alcatel wanted to classify under the same tariff heading, viz. 8517.5099, `Optically Post Amplifier unit (unrepeatered) proposed to be imported into India'. One learns that this product (OPA28C) could be installed in "the Alcatel URW subrack telecommunication equipment when there is a requirement for high power amplification of the transmitted WDM (Wavelength Division Multiplexing) communication signal before it is launched into the submarine telecommunication cable". (No clue about URW, except that www.acronymfinder.com shows `You Are Welcome' and `Un-Remarried Widow' as explanations!)

Strangely, a search for `OPA28C' doesn't yield any result on the company's site. Yet, one can glean a few technical snatches from the ruling. Such as:

It could deliver up to +28dBm aggregate power into the submarine line. (Has to be one of decibel, don't bother me, or divorced black male, that the Acronymfinder suggests!)

The WDM telecommunication signal from the terminal got amplified in this by an Erbium-doped Fibre Amplifier (EDFA), which used a pump laser to give output power.

It was part of the submerged telecommunication system; it basically boosted the signal to ensure there was no distortion or impurities in the signal.

All transmission connections were made by removable connectors. This was spliced directly to the submarine line to ensure satisfactory transmission of the high power signal.

It housed, apart from EDFA, detector, input monitor, output monitor and shutdown logic.

Interestingly, the taxman's `initial comments' were that the product was an amplifier with independent function; and that, therefore, it should fall under tariff heading 8543.8979, as high or intermediate frequency amplifier. However, the Department's final submission before the Authority was that the goods in question "would more appropriately fall under tariff item 8517.5099," as stated by Alcatel, and as held by the Authority in a different application regarding `Equalisers' and `Repeaters'.

Justice Syed Shah Mohammad Quadri (Chairman), and Members Somnath Pal and B.A. Agrawal studied the technical details and the functional parameters of the apparatus. They found the item to be `a combination of optical, electronic and mechanical elements.'

Its function of amplification was "an integral and inseparable part in the overall operation of this product," said the Authority, concurring with the company's stand. "Its various component parts and their functions as depicted in the block diagram and as narrated in the technical write up, clearly show that all these parts put together contribute to the function of transmission of data as a telecommunication apparatus for carrier-current line systems or for digital line systems falling under heading 8517," reads the ruling.

Remote pump, Raman pump

These two pump units (unrepeatered) were the subject matter of a yet another application that Alcatel placed before the AAR. These pump units were of `an Alcatel generic design' and included `features that allow the configuration of the pump units to suit a given system,' said the company.

Though these pumps were used in the telecommunication system when there was requirement of amplification of a traffic signal, they were not `amplifiers' as understood for the purpose of tariff heading 8543, said Alcatel. "Besides the optical `pump' per se, these units also house other components like filter, detectors and shutdown logic. The Raman Pump Unit (RNP1425C) contain, in addition, splice and a combiner," added the company, seeking classification under 8517.5099, once again. The ruling concurred with that view.

Wonder if the tariff has to reflect the current developments in the classification rather than to lump the critical products in question under the omnibus `other' category.

Cases@TheHindu.co.in

Picture by S. Raghunathan

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