APRIL 17, 2020

By Rachit Jain and Ashwani Bhatia

THE MeitY ¹, in exercise of powers under the then section 10(1)(p) ² of the Bureau of Indian Standards Act, 1986 and Rule 13(fa) ³ of the then Bureau of Indian Standard Rules, 1987, notified the Electronics and Information Technology Goods (Requirement for Compulsory Registration) Order, 2012 ('CRO')  for the first time vide Notification dated 07.09.2012 ⁴ for fifteen (15) electronic goods. Another fifteen (15) and thirteen (13) electronic goods were added by the MeitY to the CRO vide Notification dated 07.11.2014 ⁵ and 17.08.2017 ⁶ , respectively. The CRO since then, is progressively being applied to increasing product categories of electronic items and is mandatory to follow under law. As per the CRO, no person shall manufacture or store for sale, import, sell or distribute goods which do not conform to the Indian Standard specified in the CRO. ⁷

Objective of this article: To sensitize the importers and manufacturers on the scope of CRO and to highlight the ambiguities in the CRO due to which it is vital for importers/manufacturers to undertake a compliance check if the products imported/manufactured by them are falling under the ambit of CRO .

Coverage under CRO: Products are covered under the CRO by "specific names", such as 'mobile phones', 'smart watches', 'scanners', 'wireless keyboards', 'laptops', etc. There are also products covered by name in CRO but their scope is subject to lot of deliberations internally and externally. For e.g., as 'Automatic Data Processing Machine (ADPM)', 'visual display units' are falling under the latter category.

Various meetings of the TAC ⁸ have been held to deliberate on the scope of the 'ADPM'. It was concluded in the third meeting ⁹ of the TAC held on 05.02.2013 that data preparation equipment, data processing equipment, data storage equipment and personal computers ¹⁰ fall under the ambit of ADPM.

Wide and ambiguous scope of ADPM: The scope is wide enough to cover most of the electronic items. For instance, data processing equipment, as the name suggests, may cover all equipment which processes data. On one hand or other, directly or indirectly, most of the electronic items process data in some or the other form. For instance, electronic meeting room projectors ¹¹ are also considered as data processing equipment. Therefore, the moot question that arises is whether all the electronic items which undertaken any amount data of processing would be covered under the CRO. If such importers/manufacturers are not complying with the CRO, implication may follow considering the fact that legislations like the BIS Act, 2016 ¹², Environment Protection Act, 1986 etc. are aimed at safety /welfare of the users and the Government and Courts always consider the safety of consumers at highest pedestal.

Ambiguity continued: Infact, in the sixth Meeting ¹³ of the TAC held on 02.04.2013, the question was that "ADP is a very ambiguous term and is causing lot of confusion to the Industry in the absence of a clear definition of ADP. In the absence of clear definition of ADP in the Order or specific list of equipment of ADP, any Electronic or IT Equipment which has any computing, printing, networking capability may be deemed to be ADP". However, unfortunately in that meeting also, this ambiguity was not addressed appropriately and the confusion continues till date.

ADP in Customs Law: At this juncture, it is important to refer to the scope of the phrase ADPM under the Customs law. Chapter Note 5 ¹⁴ to Chapter 84 under Schedule I to Customs Tariff Act, 1975 defines ADPM as follows:

For the purposes of heading 8471, the expression "automatic data processing machine" means machine capable of (i) storing the processing programme or programmes and at least the data immediately necessary for the execution of the programme;(ii) being freely programmed in accordance with the requirements of the user; (iii) performing arithmetical computations specified by the user; and (iv) executing, without human intervention, a processing programme which requires them to modify their execution, by logical decision during the processing run.

In view of the definition, the following pertinent questions may arise. Firstly, if a product is classifiable under heading 8471, then whether CRO must also be complied with by the importer of such product? In our view, the answer is in positive unless the product is specifically exempted from the coverage under the CRO, such as Desktop computers which are exempt.

Secondly, whether CRO must be complied with, only when a product is classifiable under heading 8471? In our view, the answer is in negative. CRO is required to be complied for the products, irrespective of classification adopted under the Customs Tariff Act, 1975. Various products listed under the category ADMP in the CRO, namely, electronic data projectors, electronic cinema projectors, electronic meeting room projectors etc. are not classifiable under heading 8471. Therefore, in our view, scope of the phrase ADPM in the CRO and the Customs Tariff Act, 1975 is independent.

Lastly, whether chapter note 5 to Chapter 85 of the Customs Tariff Act, 1975 can be taken into consideration to analyse the scope of the phrase 'ADPM'. In our view, there cannot be a straight jacket formula to apply this chapter note on CRO as the chapter note specifically states 'for the purposes of heading 8471' and therefore, the scope has been restricted by the chapter note itself. Be as it may, the analysis has to be done on case to case basis and the chapter note may be considered as a guiding principle.

If any importer or manufacturer, who imports/manufactures electronic items, is of view that their product undertaken any kind of processing, data preparation or data storage, then the analysis of CRO must be conducted so as to be legally compliant with the laws. The consequences for not following CRO may result in severe penalties, search or seizures, restrictions on import/manufacturer/sale under the BIS Act, 2016 and/or under CRO and/or under Customs Act, 1962.

Way forward: In this background, it is advisable for importers/ manufacturers/ traders to undertake a compliance check of all the relevant products from BIS and CRO perspective through an expert, before it is too late. In our view, the MeitY either suo-moto or through representation by the trade and industry may define the scope of ADPM in CRO, in future, to remove this ambiguity.

[The authors are Advocates in Lakshmikumaran and Sridharan Attorneys, New Delhi. The views expressed in this article are strictly personal.]

¹ Ministry of Electronics & Information Technology

² Section 10. Functions of the Bureau.-(1) The Bureau may exercise such powers and perform such duties as may be assigned to it by or under this Act and, in particular, such powers include the power to-

… (p) perform such other functions as may be prescribed

³ Rule 13. Other Functions of the Bureau – The Bureau under clause (p) of sub-section (1) of section 10 may also –

… (fa) formulate, implement and coordinate activities relating to registration for self declaration of conformity to the relevant Indian Standard on voluntary or compulsory basis, of articles as may be considered expedient in public interest and so notified through an order by the Central Government after consulting the Bureau.

⁴https://bis.gov.in/MandatoryProducts/QCOrder/SO%20No%202357%20(E).pdf

⁵ https://bis.gov.in/MandatoryProducts/QCOrder/SO%20No%202905%20(E).pdf

⁶ https://bis.gov.in/MandatoryProducts/QCOrder/2742.pdf

⁷ https://meity.gov.in/esdm/standards

⁸ Technical Advisory Committee

⁹https://meity.gov.in/sites/upload_files/dit/files/MoM-TACIII-05_02.pdf

¹⁰ Coverage of the scope of products under the title Automatic Data Processing (ADP). Machines in reference to the notified order was another conscientious with TAC which needed committee's attention. The committee reviewed the definition of ADP as per IEC 60950 -1: 2005 and as provided by Wikipedia for guidance. After detailed evaluation of the definition provided by International Standard and Wikipedia, the committee concluded that: Automatic Data Processing Machines cover - a. Data Preparation Equipment; b. Data Processing Equipment; c. Data Storage Equipment; d. Personal Computer; e. Plotter; f. Printer; g. Scanner; h. VDU.

Out of this list, item 'e' to 'h' are already part of the Gazette notification on "Electronics and Information Technology Goods (Requirements for Compulsory Registration) Order, 2012". The items 'a' to 'd' are, thus, recommended to be treated as Automatic Data Processing Machines.

Note: Desktop Computers are specially exempted from the coverage under the Order

¹¹ FAQ No. 27, Part II, https://meity.gov.in/writereaddata/files/Modified%20FAQs_Feb%202019.pdf

¹² The Bureau of Indian Standards Act, 2016

¹³https://meity.gov.in/sites/upload_files/dit/files/MoM-TACVI.pdf

¹⁴Refer page no. 3 and 4 at http://www.cbic.gov.in/resources//htdocs-cbec/customs/cst1718-020218/Chap-84-01052018.pdf;jsessionid=FF3B94E7402C050E280C658FAC624DAD