VoIP Phones with Video & Data Capabilities Classifiable under CTH 8517 62 90; IBM India Denied Customs Exemption: CESTAT

The Bangalore Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that advanced VoIP phones capable of transmitting voice, video, and data are not mere telephone sets but fall under the category of data transmission apparatus. The bench Dr. D.M. Misra (Judicial Member) and R. Bhagya Devi (Technical Member) upheld the reclassification adopted by the Revenue and denied the benefit of customs exemption notifications. The dispute arose from an Order-in-Original passed by the Principal Commissioner of Customs, Bengaluru, wherein various imported telecom products such as VoIP phones, network interface modules, and telepresence equipment were reclassified under CTH 8517 62 90. IBM had originally classified these goods under CTH 8517 18 90 as telephone sets and claimed exemption under Notification No. 24/2005-Cus and 57/2017-Cus. The Department, however, held that the goods were in the nature of machines for transmission and reception of data, thereby denying the exemption. At the core of the dispute was the classification of VoIP phones. IBM argued that these devices function like traditional push-button telephones and should therefore be classified as telephone sets. However, the Tribunal examined the technical features in detail and found that VoIP phones operate over internet protocol and are capable of handling not just voice communication but also video calls, conferencing, and real-time data transmission. These features, according to the Tribunal, clearly distinguish them from conventional telephones. The Tribunal observed that devices which are capable of transmitting voice, images, and data simultaneously cannot be treated as “simplicitor telephones.” It held that such multifunctional equipment squarely falls under CTH 8517 62 90, which covers machines for the reception, conversion, and transmission of voice, images, or other data. Accordingly, the classification adopted by the Revenue was upheld. While IBM relied on the decision in the case of Ingram Micro India Pvt. Ltd., where IP phones were classified as telephone sets, the Tribunal distinguished the precedent on facts. It noted that the earlier case involved audio-only IP phones without video capabilities, whereas the products imported by IBM had advanced features including video and data transmission. Therefore, the earlier ruling was held to be inapplicable to the present case. On the issue of network interface modules and WAN cards, the Tribunal held that these devices are not merely parts but function as independent communication apparatus facilitating connectivity between network systems. Referring to the HSN Explanatory Notes, it observed that such equipment is specifically covered under apparatus for transmission or reception of data and is rightly classifiable under CTH 8517 62 90. With respect to telepresence and video conferencing equipment, IBM accepted the classification under CTH 8517 62 90 in light of earlier judicial precedents. However, it contested the imposition of penalties and invocation of extended limitation. The Tribunal further held that once the goods are classified under CTH 8517 62 90, the benefit of exemption under Notification No. 24/2005-Cus and 57/2017-Cus is not available, as these notifications are linked to specific tariff entries which do not cover such multifunctional communication devices. The Tribunal noted that disputes involving classification and interpretation of tariff entries do not automatically imply suppression of facts. Relying on settled legal principles laid down by the Supreme Court, it observed that extended limitations and penalties may not be justified in cases involving bona fide interpretational disputes. Case Details Case Title: M/s. IBM India Pvt. Ltd. Versus Commissioner of Customs Citation: JURISHOUR-914-CES-2026(BANG) Case No.: Customs Appeal No. 20599 of 2023 Date: 15.04.2026 Counsel For Appellant: B.V. Kumar, Advocate Counsel For Respondent: M. Sreekanth, Asst. Commissioner (AR) Click Here To Read Order Read More: Service Tax Under RCM Payable on ‘Bonus Payments’ Linked to Performance: CESTAT

VoIP Phones with Video & Data Capabilities Classifiable under CTH 8517 62 90; IBM India Denied Customs Exemption: CESTAT

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