Tribunal Upholds Classification of Face Recognition Systems as Data Processing Machines

Customs Excise and Service Tax Appellate Tribunal Rules in Favor of M/s. Face IT Systems LLP on Classification Dispute

The Customs Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata Eastern Zonal Bench, has delivered a significant judgment in the case of M/s. Face IT Systems LLP versus the Commissioner of Customs (Airport & ACC). The Tribunal has ruled that the "Access Controller Face Recognition System" imported by M/s. Face IT Systems LLP and Fortuna Impex Pvt Ltd should be classified under Customs Tariff Heading (CTH) 8471 as Automatic Data Processing Machines, rather than under CTH 8543 as Electrical Machinery.

The judgment, delivered by members Shri R. Muralidhar and Shri K. Anpazhakan, overturns the Revenue's classification, which had resulted in demands for customs duty, interest, and penalties on the importers. The Tribunal found that the imported systems possess the capabilities of storing and processing data, performing computations, and operating without human intervention, thus qualifying them as Automatic Data Processing Machines under Chapter Note 6(A) of Chapter 84.

The Tribunal also addressed the issue of extended period of limitation invoked by the Revenue for past consignments. It held that the extended period cannot be applied as the issue pertains to the interpretation of classification, and there was no suppression of facts by the importers. Consequently, the demand for the extended period was set aside.

Moreover, the Tribunal quashed the confiscation and redemption fine imposed on excess items found in one consignment, as the appellant provided satisfactory evidence that these items were sent for repair and included in the consignment by the exporter. Penalties imposed on the Director and Customs House Agent (CHA) were also annulled since the Tribunal upheld the importers' classification under CTH 8471.

The judgment referenced several previous rulings, including the Delhi Tribunal's decision in STJ Electronics Pvt. Ltd. and the Ahmedabad Bench's ruling in Invixim Access Pvt Ltd, both supporting the classification of similar systems under CTH 8471.

This decision not only provides relief to the appellants but also clarifies the classification of technologically advanced systems like face recognition terminals, setting a precedent for future cases involving the classification of data processing machines.

Bottom Line:

Classification of imported goods under Customs Tariff - "Access Controller Face Recognition System" held as Automatic Data Processing Machine under CTH 8471 and not as Electrical Machinery under CTH 8543.

Statutory provision(s): Customs Act, 1962

M/s.Face IT Systems LLP v. Commissioner of Customs (Airport & ACC), (CESTAT)(Kolkata Eastern Zonal Bench) : Law Finder Doc Id # 2822065