2022 (1) TMI 1344 - AAR - Customs

Classification of imported goods - parts of electronic toy cars i.e. battery driven motor on-off switch small speakers for sound LED indicator lights with its PCB garari (pulley i.e. small plastic wheel with grooved rim) and plastic base - classifiable as Parts of electronic Toy cars under Customs Tariff Head 9503 or under Schedule I to the Customs Tariff Act 1975 - benefit of concessional rate of 5% provided under Serial Number 592 of Notification No. 50/2017-Cus. (Tariff) dated 30-6-2017 - Whether such parts of electronic Toy cars as described above imported in a single consignment would be eligible to be constituted or having the essential character of a complete or finished article as an Electronic Toy Car to fall under the category of Electronic Toy Cars instead of its parts under Customs Tariff Head 9503 attracting a higher rate or duty? HELD THAT - Chapter 95 of Schedule I to the Customs Tariff Act covers Toys Games and Sports Requisites; Parts and Accessories thereof; and Heading 9503 covers Tricycles scooters pedal cars and similar wheeled toys; dolls carriages; dolls; other toys .. Further it is observed that Chapter Note 3 of Chapter 95 provides that subject to Note 1 of Chapter 95 parts and accessories which are suitable for use solely or principally with articles of the Chapter are to be classified with those articles. The goods under reference (as depicted by IMAGE A and IMAGE B above) are parts of electronic toy cars in semi-assembled condition. Though they have not reached the stage of completion to be considered as electronic toy cars these parts in the assembled stage that have been presented have acquired the essential characteristics of electronic toy car. However at this intermediate stage the semi-assembled unit as presented have acquired a new character distinct of the various parts namely battery driven motor on-off switch small speakers for sound LED indicator lights with its PCB garari (pulley i.e. small plastic wheel with grooved rim) and plastic base which have gone into the making of the semi-assembled unit. This semi-assembled unit has acquired sufficient features to be considered as parts of electronic toy car . Therefore the item under import should appropriately be considered as part of a toy and the same is classifiable under Heading 9503 in terms of Chapter Note 3 of Chapter 95. Eligibility of the said parts of electronic toy car for benefit under Notification No. 50/2017-Cus. dated 30-6-2017 - HELD THAT - Serial Number 591 of the said notification provides for concessional rate of duty to parts of electronic toys for manufacture of electronic toys falling under Heading 9503 subject to condition No. 9 viz. if the importer follows the procedure set out in the Customs (Import of Goods at Concessional Rate of Duty) Rules 2017. Therefore having concluded that the parts of electronic toy car as presented are classifiable under Heading 9503 it follows that the said goods would be eligible for concessional rate of duty prescribed under S. No. 591 of Notification No. 50/2017-Cus. dated 30-6-2017 subject to the condition prescribed therein.

Issues Involved:
1. Classification of parts of electronic toy cars under the Customs Tariff.
2. Eligibility for concessional rate of duty under Notification No. 50/2017-Cus.

Detailed Analysis:

Issue 1: Classification of Parts of Electronic Toy Cars
The applicant, a proprietorship firm, sought advance ruling on the classification of parts of electronic toy cars, specifically battery-driven motors, on-off switches, small speakers for sound, LED indicator lights with PCB, garari (pulley), and plastic base. The applicant intended to import these parts in an assembled form and classify them under Customs Tariff Heading 9503.

The applicant argued that the imported parts constitute only 40%-50% of the final product and cannot be used as a complete toy without further assembly. They emphasized that the parts, even when assembled, do not form a complete toy and should be classified as parts of toys under Heading 9503.

The Principal Commissioner of Customs initially commented that the parts would be eligible for classification under Heading 9503 only if imported in assembled form. If imported separately, they would be classified under their respective headings.

During the personal hearing, the applicant clarified that the parts would be imported in an assembled form, integrated through wires and fixed on a plastic base. The Authority noted that the semi-assembled parts had acquired the essential characteristics of an electronic toy car, even though they were not complete. Based on Chapter Note 3 of Chapter 95, which states that parts suitable for use solely or principally with articles of this chapter are to be classified with those articles, the Authority concluded that the parts in their semi-assembled form should be classified under Heading 9503.

Issue 2: Eligibility for Concessional Rate of Duty
The applicant also sought ruling on the eligibility to claim a concessional rate of 5% duty under Serial Number 591 of Notification No. 50/2017-Cus., dated 30-6-2017, for the imported parts.

The Principal Commissioner of Customs concurred that the parts, when imported in assembled form, would be eligible for the concessional rate of duty, subject to compliance with the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017.

The Authority confirmed that since the parts are classifiable under Heading 9503, they are eligible for the concessional rate of duty under Serial Number 591 of Notification No. 50/2017-Cus., provided the importer follows the prescribed procedure.

Ruling:
1. The goods described as "parts of electronic toy car" in semi-assembled form merit classification under Heading 9503 of the First Schedule to the Customs Tariff Act.
2. The "parts of electronic toy car" classifiable under Heading 9503 are eligible for a concessional rate of duty under Serial Number 591 of Notification No. 50/2017-Cus., dated 30-6-2017, subject to the importer following the procedure set out in the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017.

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