Laser Imagers Are Accessories, Not Diagnostic Apparatuses For Customs Duty Purposes: Supreme Court

The Supreme Court has recently ruled that a laser imager used to print images generated by MRI, CT, X-ray and other diagnostic machines cannot itself be treated as a “diagnostic apparatus” for determining customs duty.

“Admittedly, the laser imager has no diagnostic skill or capability of its own and must necessarily receive inputs from diagnostic equipment to carry out its function of printing films. In effect, it is an 'accessory' to the diagnostic equipment from which it receives inputs, as it then transfers the same onto films.... As the laser imager has no diagnostic capabilities of its own, it cannot per se be classified under this heading” a bench of Justice Sanjay Kumar and Justice Sanjeev Sachdeva observed.

The court was hearing an appeal by Carestream Health India Pvt. Ltd., the importer of “Dryview 6850 Laser Imagers W/3D”. Carestream had classified the laser imagers as diagnostic instruments and apparatus, while customs authorities treated them as accessories for machines, instruments, and apparatus covered by Chapter 90.

The difference in the applicable customs duty was 2.5%, resulting in a differential duty demand of ₹5,21,616.

The laser imager is a printer that uses photo thermographic, or dry-laser, technology to develop images on film. It interfaces with digital diagnostic machines, including MRI, CT, full-field digital mammography, digital radiology, and other systems. The court noted that it does not possess any independent diagnostic skill or capability.

Carestream argued that the imager was an apparatus used for diagnostic purposes and should be classified along with medical diagnostic equipment. Customs authorities contended that it could also be used with machines falling outside that category and should instead be treated as an accessory.

The court rejected Carestream's contention that the laser imager was a diagnostic apparatus in its own right. Since it only receives inputs from diagnostic equipment and transfers them onto film, it functions as an accessory to that equipment, the court held.

The medical equipment carrying out the diagnostic function is complete in itself and can perform that function without the laser imager, the court observed. The imager does not augment the performance of those machines; its role is limited to transferring diagnostic data onto film for preservation or further use by medical professionals.

The court then considered whether the accessory could nevertheless be classified along with the medical equipment.

Under the customs rules, accessories suitable for use solely or principally with a particular kind of machine, or with several machines falling under the same tariff classification, can be classified along with those machines. Other parts and accessories fall under the residuary category for Chapter 90.

In this case, the laser imagers were compatible with several types of medical equipment, including ultrasound scanners and MRI apparatus. But they could also be used with CT apparatus and X-ray machines, which fall under a different tariff classification.

The court agreed with the Revenue that the rules distinguish between accessories suitable for machines under the same tariff classification and those that can be used with machines falling under different classifications. Since the laser imagers could be used with both kinds of equipment, the court held that the provision allowing accessories to be classified with machines under the same tariff classification did not apply. They instead fell under the residuary provision for accessories.

The court upheld the tribunal's interpretation, holding that accessories suitable for use with machines under the same tariff classification can be classified with those machines, but accessories that can also be used with machines under a different tariff classification have to be classified under the residuary provision for accessories.

The court accordingly upheld the classification of the laser imagers under the residuary provision for accessories and dismissed Carestream Health India's appeal.

For Appellants: Advocates Charanya Lakshmikumaran, L. Badri Narayanan, Neha Choudhary, Nitum Jain, Medha Sinha, Swastik Mishra, Adithya Nair, Yashovardhan Singh; Advocate-on-Record Charanya Lakshmikumaran.

For Respondents: Advocates Raghvendra P. Shankar, B.K. Satija, Adarsh Kumar Pandey, Pallavi Mishra, Rajeshwari Shankar; Additional Solicitor General Raghvendra P. Shankar; Advocate-on-Record Gurmeet Singh Makker.