Thermal Printers Used With MRI, CT Scans Classifiable Under Chapter 90 As Medical Instruments: CESTAT
Pranav B Prem
The Delhi Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that thermal printers imported for medical diagnostic purposes are classifiable as medical instruments under Chapter 90 of the Customs Tariff and not as ordinary printers under Chapter 84. The Bench comprising Justice Dilip Gupta (President) and Hemambika R. Priya (Member Technical) set aside the order of the adjudicating authority and allowed the appeals filed by M/s AGFA Healthcare India Pvt. Ltd. and its Manager, Customer Operations, Mr. Yogesh More.
The dispute arose out of imports made by AGFA during the period from July 1, 2017 to March 31, 2019 of various models of “Drystar” thermal printers, including Drystar 5301, 5302, 5503 and Axys. The company classified the goods under Customs Tariff Item (CTI) 9018 90 99 as instruments and appliances used in medical, surgical, dental or veterinary sciences, and paid Basic Customs Duty at 7.5% after claiming the benefit of Notification No. 50/2017-Customs dated June 30, 2017, along with IGST at 12%.
The Directorate of Revenue Intelligence, however, took the view that the printers were correctly classifiable under CTI 8443 32 90, which covers other printers capable of connecting to an automatic data processing machine or network. According to the department, the thermal printers did not perform any diagnostic function and merely printed images generated by CT or MRI machines. A show cause notice was issued proposing reclassification, recovery of differential duty under Section 28(4) of the Customs Act, confiscation under Sections 111(d) and 111(m), and imposition of penalties under Sections 112(a) and 114AA on the company. A separate penalty of Rs. 10 lakh was proposed against Mr. Yogesh More under Section 112(a).
The Additional Director General (Adjudication) confirmed the demand. In the impugned order, it was observed that the thermal printers were capable of connecting to automatic data processing machines or networks and were “not an essential part of any medical apparatus.” The adjudicating authority further held that the printers did not themselves perform any diagnostic function and that medical professionals could read images directly from the system without requiring printed films. It was also alleged that the importer had misdeclared the classification under the self-assessment regime, justifying invocation of the extended period of limitation under Section 28(4).
Challenging the order, AGFA contended that the printers were specially designed for medical diagnostic use and were capable of printing high-resolution, diagnostic-quality grayscale images on heat-sensitive medical films. The company relied upon product brochures, a white paper on diagnostic printing in the digital era, declarations from specialist radiologists, and a certificate from a Chartered Engineer.
The Tribunal examined the relevant tariff entries. CTI 9018 covers “Instruments and appliances used in medical, surgical, dental or veterinary sciences,” while CTI 8443 covers printing machinery, including printers capable of connecting to automatic data processing machines. Referring to the Harmonised System of Nomenclature (HSN) explanatory notes to Heading 9018, the Bench noted that the heading covers a wide range of instruments used in professional medical practice and includes articles clearly identifiable for medical or surgical use by reason of their special design or construction.
The Tribunal observed that the decisive criterion for classification under Heading 9018 is whether the instrument is specifically designed or clearly identifiable for professional medical use. It noted that the brochure for Drystar 5302 described it as a “direct digital imager” delivering “diagnostic quality grayscale hardcopies of the highest standard.” The white paper relied upon by the appellant stated that “Medical hardcopy film is, in many situations, the primary medium for the doctor’s diagnosis” and that the most important consideration in selecting a printer for diagnostic printing is its ability to produce images with diagnostic quality suitable for primary reading by a radiologist.
The declarations placed on record by specialist doctors and the Chartered Engineer were also taken into account. One declaration stated that “Agfa Drystar range of Thermal Printers are capable of printing diagnostic quality medical x ray images on Medical X ray films only, which are used in medical diagnosis which cannot be achieved by simply printing these images on paper or only viewing them on monitor.” The Chartered Engineer opined that the thermal printer “is an integral part of the diagnostic process” and should not be equated with ordinary media printers.
After considering the material on record, the Tribunal found that the Drystar printers were used with MRI scanners, CT scanners, digital X-ray and ultrasound systems, and were capable of producing diagnostic-quality images on heat-sensitive medical film. It held that while thermal printing technology is used in various industries such as retail, shipping and banking, thermal printers specially designed for use in medical sciences cannot be classified under Heading 8443 merely because they employ a thermal print process.
The Bench emphasised that the burden to prove reclassification lies on the department. Relying on the Supreme Court’s decision in H.P.L. Chemicals Ltd. v. Commissioner of Central Excise, it reiterated that if the Revenue seeks to classify goods under a heading different from that claimed by the assessee, it must adduce proper evidence and discharge the burden of proof. In the present case, the department had not placed any evidence to show that the imported printers were not used for medical diagnostic purposes, whereas the appellant had produced expert certificates establishing their medical use.
The Tribunal also noted that by virtue of Section Note (1)(m) to Section XVI of the Customs Tariff, articles of Chapter 90 are excluded from Chapter 84. Once the printers were found to fall under Heading 9018 as instruments used in medical sciences, they stood excluded from Heading 8443.
Holding that the thermal printers were correctly classifiable under CTI 9018 90 99, the Tribunal concluded that the finding of the adjudicating authority classifying them under CTI 8443 32 90 could not be sustained. Consequently, the demand of differential duty, interest and penalties imposed on the appellant was set aside. As the order confirming the demand and penalties against the company was annulled, the penalty of Rs. 10 lakh imposed on Mr. Yogesh More under Section 112(a) was also set aside.
The Tribunal, therefore, set aside the order dated February 17, 2020 passed by the Additional Director General (Adjudication) and allowed both appeals, granting complete relief to the appellants.
Cause Title: M/s. AGFA Healthcare India Pvt. Ltd. Versus The Additional Director General (Adjudication)
Case No.: Customs Appeal No. 50795 of 2020
Coram: Justice Dilip Gupta (President) and Hemambika R. Priya (Member Technical)
