CESTAT Mumbai: LCD Monitors Used With Medical Equipment Qualify as Computer Monitors Under CTH 8528 52 00

Overview of the Dispute

A significant customs classification dispute involving Philips India Limited came to rest before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Mumbai, which delivered its verdict in favour of the assessee. The core controversy revolved around whether LCD monitors imported for deployment with medical imaging systems — including ultrasound machines, X-Ray equipment, and CT Scan systems — ought to be classified under CTI 8528 5200 (monitors capable of directly connecting to and designed for use with an Automatic Data Processing machine) or under CTI 8528 5900 (other monitors), and the consequential determination of the appropriate rate of Integrated Goods and Services Tax (IGST) applicable under Notification No. 01/2017-Integrated Tax (Rate) dated 28.06.2017.

The imports in question were made through the Air Cargo Complex, Mumbai, spanning the period 29.07.2017 to 26.02.2022. The assessee had self-assessed the goods under CTI 8528 5200 and paid IGST at 18%, treating them as computer monitors under Serial Nos. 383C and 384 of Schedule III to the notification. The Revenue, however, insisted that these monitors were purpose-built for medical equipment and should be reclassified under CTI 8528 5900, attracting IGST at 28% under Serial No. 154 of Schedule IV.

Background and Departmental Action

How the Dispute Originated

The Central Intelligence Unit (CIU) of Air Cargo Customs authorities conducted a 100% physical examination of goods imported under a Bill of Entry filed in January 2022. The examining officers found that the goods — described as "21.5 inch system displays" — were used as display units for sonography machines and were fitted with dedicated connectors and functions that, according to the department, rendered them unsuitable for use with any other computer. Based on statements recorded from a senior employee of the assessee, the goods were seized under panchanama proceedings dated 24.01.2022. Subsequent imports filed in February 2022 were similarly examined and seized under panchanama dated 09.03.2022.

Following an extended investigation covering all past imports, the department issued a Show Cause Notice dated 26.07.2022, proposing:

  • Reclassification of imported monitors from CTI 8528 5200 to CTI 8528 5900
  • Recovery of differential IGST (from 18% to 28%) under Section 28(4) of the Customs Act, 1962
  • Levy of interest on the differential duty
  • Confiscation of goods in certain cases
  • Imposition of penalties under the Customs Act, 1962

The Commissioner of Customs (Import), Air Cargo Complex, Sahar, Andheri (East), Mumbai, confirmed all proposals through Order-in-Original No. CAO No.CC-GSS/10/2023-24 Adj.(I) ACC dated 21.07.2023. Aggrieved by this order, the assessee approached CESTAT Mumbai.

Contentions of the Assessee

The assessee advanced a multi-pronged argument in support of its classification and the IGST rate claimed:

  • The LCD monitors in question were equipped with input ports including DVI-D, VGA, and DP, enabling direct connection to ADP machines, CPUs, and laptop computers, as clearly specified in the user manuals.
  • The monitors did not incorporate television tuners and, therefore, could not be treated as television or video monitors.
  • The medical equipment — such as ultrasound systems and CT scanners — to which these monitors were connected, themselves contained internal computers or ADP machines.
  • A Chartered Engineer's certificate dated 10.11.2023 confirmed that the monitors could be physically connected to the CPU of a desktop computer and functioned identically to a standard computer monitor in such a configuration.
  • The presence of additional DICOM (Digital Imaging and Communications in Medicine) features, which enhanced the monitors' utility for medical environments, did not strip them of their fundamental character as computer monitors.
  • Customs authorities in Chennai had, in the assessee's own case, arrived at a favourable classification through Order-in-Original No. 07/2024-AIR dated 12.01.2024, holding the monitors to be computer monitors attracting 18% IGST under Serial No. 384, relying on CBIC Circular No. 33/2007-Customs and HS Explanatory Notes.
  • It was also argued that the demand in the Show Cause Notice was revenue neutral and that employee statements alone could not be determinative of classification.

Contentions of the Revenue

The department raised several objections to counter the assessee's position: