Router Components Are ‘Parts’, Not Network Interface Cards; CESTAT Quashes Customs Duty Demand on Bharti Airtel

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi, has set aside a major customs duty demand against Bharti Airtel Limited, ruling that key components of Juniper routers imported by the telecom major are “parts of routers” and not independent “network interface cards” (NICs). The bench of Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) has observed that the imported MPCs, MICs, switch control boards and switch fabric boards do not perform any independent function and cannot operate outside a router chassis. They merely assist in setting up a routing system and derive power and intelligence from the router. Hence, they are parts of routers and not independent machines or apparatus. The case arose from the import of Modular Port Concentrators (MPCs), Modular Interface Cards (MICs), Fixed Configuration MPCs, Switch Fabric Boards and Switch Control Boards by Bharti Airtel during the period 7 April 2017 to 9 March 2018. Airtel classified these items under Customs Tariff Item (CTI) 8517 70 90 as “parts” of routers and claimed the applicable NIL rate of duty. However, the Principal Commissioner rejected Airtel’s classification, reclassified the items under CTI 8517 62 90 as “machines for reception, conversion and transmission of data, including switching and routing apparatus”, treated them as Network Interface Cards, and raised a demand under Section 28(4) of the Customs Act, 1962 along with interest and penalties. The Department argued that the imported items were Level 1 and Level 2 devices under the OSI model, providing physical network interfaces and data link functions, and therefore qualified as NICs. It relied on HSN Explanatory Notes and held that these goods had independent functionality and were classifiable as communication apparatus under Heading 8517. The Commissioner also invoked the extended period of limitation, alleging willful misstatement and intent to evade duty. Bharti Airtel contended that the imported items were integral, inseparable and interdependent components of Juniper routers, incapable of functioning on their own. The company explained the architecture of a router, highlighting that it consists of routing processors, line cards, switch fabric, control boards and transceivers, all of which must work together for the router to function. A crucial piece of evidence was a certificate from Juniper Networks, the original equipment manufacturer, which categorically stated that the imported items were “parts of routers”, had no independent functional utility, and could not be used in any system other than a router. Airtel also relied heavily on the earlier CESTAT decision in Vodafone Idea Ltd. v. Principal Commissioner of Customs (Import), where router line cards used in Cisco routers were held to be classifiable as “parts” under CTI 8517 70 90. Airtel submitted a comparative chart showing that Juniper router components were functionally and structurally identical to Cisco components examined in that case. The Bench comprising Justice Dilip Gupta (President) and P.V. Subba Rao (Member – Technical) undertook a detailed examination of Section Note 2 to Section XVI of the Customs Tariff and the HSN Explanatory Notes. The Tribunal reiterated that an item cannot be treated as a “part” only if, on a standalone basis, it constitutes an independent article with its own identifiable function. The Tribunal strongly rejected the Department’s attempt to classify the goods as NICs. It relied on standard telecom dictionaries and its earlier ruling in Vodafone Idea to explain that a NIC is a standalone card enabling a computer to connect to a network and can function independently with different devices. In contrast, router line cards and modules are custom-designed, slot-based components that cannot function without the router chassis. The Bench observed that merely because these components operate at Layer 1 or Layer 2 of the OSI model does not make them NICs. Accordingly, the classification under CTI 8517 62 90 was held to be erroneous. On the issue of limitation, the Tribunal found that the Commissioner’s reasoning—that self-assessment and alleged misclassification automatically justify extended limitation—was legally untenable. Citing Supreme Court and Tribunal precedents, the Bench held that mere non-payment or wrong classification is not enough; there must be deliberate suppression or intent to evade duty. Since the dispute involved interpretation of tariff entries and Airtel had consistently disclosed its classification, the extended period under Section 28(4) could not be invoked. Allowing the appeal, the CESTAT set aside the order dated 04.10.2023 passed by the Principal Commissioner of Customs. The Tribunal held that the imported items are classifiable as “parts” of routers under CTI 8517 70 90, and consequently quashed the demand of differential customs duty, interest and penalties. Case Details Case Title: Bharti Airtel Limited Vs Principal Commissioner Of Customs Case No.: CUSTOMS APPEAL NO. 50033 OF 2024 Date: 06.01.2026 Counsel For Appellant: Shashi Mathew Counsel For Respondent: Shiv Shankar Click Here To Read Order Read More: Bus Operations Not ‘Tour Operator’ Services: CESTAT Quashes Major Service Tax Demands on RSRTC

Router Components Are ‘Parts’, Not Network Interface Cards; CESTAT Quashes Customs Duty Demand on Bharti Airtel

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Router Components Are ‘Parts’, Not Network Interface Cards; CESTAT Quashes Customs Duty Demand on Bharti Airtel

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