Revenue's Attempt to Reclassify MIKO-3 as 'Toys' Rejected; Assessee Wins Appeal with Consequential Benefits
In a significant judgment, the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Chennai Regional Bench, has ruled in favour of M/s. RN Chidakashi Technologies Pvt. Ltd., upholding the company's classification of its Artificial Intelligence-based robot, MIKO-3, under the Customs Tariff Heading (CTH) 84714190, as an Automatic Data Processing Unit (ADPU). This decision comes in light of the Revenue's attempt to reclassify the product as an electronic toy under CTH 9503, which the tribunal found unwarranted.
The matter revolved around the classification of MIKO-3, a sophisticated AI-based robot with capabilities in data processing, voice recognition, and educational functionalities. The Appellant, RN Chidakashi Technologies, had initially classified the product under CTH 84714190, which was supported by technical descriptions, certifications from the Bureau of Indian Standards (BIS), and the Ministry of Electronics and Information Technology (Meity), as well as an opinion from the Principal Scientific Advisor to the Government of India.
The Revenue authorities, however, challenged this classification, suggesting that the product should be categorized as a toy under CTH 9503, which would subject it to a higher basic customs duty (BCD) of 60%. This contention was based largely on the product's packaging and its appeal to children, rather than the technical specifications and certifications provided.
The tribunal, comprising Mr. P. Dinesha, Member (Judicial), and Mr. Vasa Seshagiri Rao, Member (Technical), found that the Revenue failed to provide sufficient evidence to support its claim. The tribunal emphasized that the classification rules require concrete evidence and authoritative texts to justify any alteration in classification, which the Revenue's conjectures and assumptions did not satisfy.
In their judgment, the tribunal referenced a similar case adjudicated by the Mumbai Bench, which had also ruled in favour of the Assessee for the same product line. The tribunal criticized the Revenue's reliance on superficial assessments and highlighted the importance of technical expertise and authoritative certifications in determining product classification.
Ultimately, the tribunal set aside the orders of the lower authorities, which had imposed penalties and ordered confiscation of the goods, allowing the appeals and granting consequential benefits to the Assessee. This decision is expected to set a precedent for similar cases, emphasizing the importance of adhering to technical classifications supported by evidence and expert opinions.
Bottom Line:
Classification of imported goods - Determination of whether goods are "toys" or "Automatic Data Processing Units" (ADPU) - Classification up
Statutory provision(s): Customs Act, 1962, Customs Tariff Act, 1975, Section 114A, Customs Tariff Heading (CTH) 84714190, CTH 9503.
