Bluetooth Earphones Are Earphones For Customs Classification, Not Data Transmission Devices: CESTAT New Delhi

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT) in New Delhi on Wednesday held that Bluetooth earphones remain earphones for customs classification and do not become data transmission devices merely because they use wireless connectivity.

A bench of President Justice Dilip Gupta and Technical Member P.V. Subba Rao held that the primary function of such devices is sound output, which makes them earphones.

“Bluetooth Wireless Earphones are, objectively and physically, earphones. They produce sound in or near the ears of the user. The Bluetooth/Wireless connectivity is a technology by which audio signal reaches the device. It does not transform an earphone into a “data transmission machine” for classification purposes"

The case arose from imports by G-Mobile Devices Pvt. Ltd. of wireless earphones, earbuds, neckbands, and headphones between February 2020 and January 2022. The importer classified the products under transmission devices and claimed concessional customs duty.

Customs disputed this. It said the products were essentially earphones used for listening to audio and could connect to multiple devices such as phones, laptops and televisions, showing they were not meant principally for mobile telephony.

The Principal Commissioner accepted the department's stand. It denied the exemption benefit, confirmed differential duty with interest, ordered confiscation of goods and imposed penalty.

The tribunal upheld this view on classification. It found that the primary function of the products is audio playback.

“It would be seen that the primary function of the wireless Headsets/ Earbuds is the playback of audio from devices such as Televisions, Laptops and Tablets.”

The tribunal noted that calling and microphone features become operational only when paired with a mobile phone and remain secondary.

“The goods possess additional features such as voice transmission and mobile telephony but these functions can be considered as secondary.”

The Tribunal distinguished earlier rulings cited by the importer, noting that those cases involved devices with independent data communication and computing functions, unlike earphones whose role is limited to sound output.

It held that headphones and earphones are specifically named in the tariff and must be classified on that basis.

“Thus, the goods imported would merit classification under Heading 8518.”

On limitation, the tribunal granted partial relief. It held that the extended period cannot be invoked in the absence of intent to evade duty in a classification dispute.

“Merely because of a wrong belief about classification of a product, it cannot be alleged that the extended period can be invoked.”

The tribunal set aside the demand for the extended period and the penalty. However, it upheld the demand for the normal period and remitted the matter to the adjudicating authority to determine the quantum of duty and interest payable.

For Appellant: Senior Advocate Tarun Gulati, Advocates Rupesh Gupta, Tarun Jain and Kritika Tuli

For Department: Authorised Representatives Ranjan Prakash and Nikhil Mohan Goyal