Delhi High Court Allows Exemptions Claim Of Amazon On Echo Show 5, Echo Dot 4th Generation Under Customs Notification

The Delhi High Court has held that Echo Show 5, Echo Dot 4th Generation, and Echo Dot 4th Generation with Clock are eligible to claim exemptions in accordance with SI. No. 20 of the Notification dated June 30, 2017.

The bench of Justice Yashwant Varma and Justice Dharmesh Sharma has observed that merely because these devices could, if so chosen by the user, also be used as mere speakers, the same would not justify recognizing their primordial attribute to be that of a speaker alone.

The appellant/assessee, Amazon Wholesale India, has assailed the correctness of the views expressed by the Customs Authority for Advance Rulings (CAAR). The CAAR held that the 11 devices are classifiable under Customs Tariff Headings 8518 and 8528.

The appellant asserts that the devices in question are correctly classifiable under CTH 8517, and more particularly, Tariff Entry 8517 62 90. The 11 devices are asserted to fall in the category of “Echo Family Devices," which the appellant claims to be essentially communication devices with an inbuilt speaker.

The issue raised was whether the subject devices were liable to be placed in CTH 8517, CTH 8518, or CTH 8528.

CTH 8517 includes “apparatus for transmission or reception of voice, images, or other data, including apparatus for communication in a wired or wireless network." CTH 8518 essentially deals with microphones, loudspeakers, headphones, and earphones. CTH 8528 is concerned with monitors and projectors, not incorporating television reception apparatus, reception apparatus for television, whether or not incorporating radiobroadcast receivers, or sound or video recording or reproducing apparatus.

The AAR held that the principal function of the three Echo 4th generation devices appears to be the reproduction of sound, making them liable to be classified as speakers. It has been held that while these devices may be voice-enabled and compatible in a WI-FI environment, those features would, at best, lead one to recognize them as "smart speakers” and thus retain their principal attribute, namely, of being a speaker as generally understood. The AAR concluded that they are classifiable as “smart speakers” under CTH 8518, and more particularly Tariff Entry 8518 22.00.

As far as Echo Show Devices are concerned, the AAR has taken the view that the primary function of these devices is to act as a display or monitor, thus enabling the playback of videos from web channels to display video content during video calling as well as for viewing motion pictures. It thus proceeded to hold that those devices are monitors or displays not incorporating television reception apparatus and thus liable to be placed under CTH 8528, and more specifically, Tariff Entry 8528 59.00.

The assessee contended that the inbuilt speakers and screens merely act as an output medium for the information sought or the video or audio content requested. The principal function of the Echo devices is thus liable to be recognized as being that of transmission, reception, and conversion of data, be it in the form of voice or images. The subject devices should consequently be acknowledged as “convergence devices” and thus classifiable under CTH 8517, and more particularly under Tariff Entry 8517 62 90, which extends to machines for the reception, conversion, transmission, or regeneration of voice, images, or other data.

The department contended that Echo 4th generation devices and the Echo Studio accepting voice commands with WI-FI capability would at best qualify as smart speakers and that those devices would thus be classifiable as hearable devices as per the Notification No. 12/2022-Customs dated February 1, 2022, issued by the Ministry of Finance.

The court noted that neither CTH 8518 nor 8528 employ the expression hearable devices. The expression formulated to describe a particular range of products is used only in the exemption notification.

The court found that devices perform a host of functions, including reception, conversion, and transmission of voice or other data, to produce the requisite final output warranting their classification under CTH 8517.

The court opined that merely because the devices could, if so chosen by the user, also be used as mere speakers, the same would not justify us recognizing their primordial attribute to be that of a speaker alone.

“We have found ourselves unable to uphold the view taken by the AAR denying the classification of Echo Show 5, Echo Dot 4th Generation, and Echo Dot 4th Generation with Clock under CTH 8517, and more particularly Tariff Entry 8517 62 90 or 8517 69 90. The denial of exemption benefits to those products would also not be sustained,” the court said.

Counsel For Petitioner: V. Lakshmikumaran

Counsel For Respondent: Satish Kumar

Case Title: AMAZON WHOLESALE INDIA PRIVATE LIMITED Versus CUSTOMS AUTHORITY OF ADVANCE RULING, NEW DELHI & ANR.

Citation: 2023 LiveLaw (Del) 1271

Case No.: CUSAA 76/2022 & CM APPL. 23914/2022 (Stay)

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