CAAR Mumbai decided the HSN classification of Apple Brand of Watch & Bands

Apple India Pvt. Ltd. filed an application before the Customs Authority for Advance Rulings (CAAR), Mumbai, seeking a renewal of an earlier advance ruling related to the classification of the Apple Watch and its bands. The original ruling, issued in 2016, classified the Apple Watch under Customs Tariff Heading (CTH) 8517 62 90 and its bands (except leather bands) under CTH 8517 79 90. The applicant also sought a ruling on the classification of leather bands, proposing they fall under CTH 4205 00 90.

Product Overview

Apple Watch: Functions as an extension of an iPhone, enabling wireless communication, hands-free calls, notifications, and fitness tracking.
Apple Watch Bands: Essential for securing the device on the wrist; available in materials like fluoro elastomer, stainless steel, and leather.

Legal Arguments & Classification Justification

Apple Watch Classification under CTH 8517 62 90:

The device primarily functions as a communication tool and relies on a paired iPhone for full operation.
Apple Watch is not primarily a timekeeping device; its primary function aligns with CTH 8517, which covers communication apparatus.
The applicant cited precedents, including World Customs Organization (WCO) rulings, US Customs decisions, and Indian Supreme Court judgments that favor classification based on principal function.

2. Bands (Other than Leather) under CTH 8517 79 90:

The bands are integral to the Apple Watch’s function, designed exclusively for the device.
As per Section Note 2(b) of Chapter 85, parts used solely or principally with a product classified under Chapter 85 must also be classified under the same heading.

3. Leather Bands under CTH 4205 00 90:

Chapter Note 1(b) of Chapter 85 explicitly excludes leather articles, directing their classification to Chapter 42, which covers leather goods.
Apple Watch leather bands, being made of leather, should be classified as “Other articles of leather” under CTH 4205 00 90.

Challenges & Departmental Response

Show Cause Notice (SCN): Issued by the Additional Commissioner of Customs, Mumbai, post-application, challenging the classification of bands under CTH 9113 (covering watch straps and bands).

Import Commissionerate’s View:
- Apple Watch is correctly classifiable under CTH 8517 62 90.
- Non-leather bands should be classified under CTH 9113 instead of CTH 8517 79 90.
- Leather bands should also be classified under CTH 9113 instead of CTH 4205 00 90.

Final Ruling by CAAR

Apple Watch: Rightly classified under CTH 8517 62 90 as a communication device.
Non-leather Bands: Classified under CTH 8517 79 90, aligning with the 2016 ruling.
Leather Bands: Classified under CTH 4205 00 90 as per the Chapter Notes exclusion principle.
Renewal of Advance Ruling bearing Order No AAR/CUS/12/2016 DTD 18.03.2016 was not allowed because the HSN code in question was omitted and amended in 2 parts as per the Customs Tariff Act, 1975. This part of the application was not allowed because of the pending adjudication.

Conclusion

The ruling reaffirmed Apple’s stance that the Apple Watch is a communication device, not a conventional watch. The classification of bands remained a contentious issue, with the customs department arguing for CTH 9113, while Apple successfully defended CTH 8517 79 90 for non-leather bands and CTH 4205 00 90 for leather bands.

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Source: CAAR Mumbai

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