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2022 (12) TMI 1471 - AAR - CustomsEligibility for BCD exemption rate of 25% vide Notification No. 50/2017-cus dated 30-6-2017 Sl. No. 524 - import of dump trucks designed for off-highway use in CKD form, with the engine and alternator, control cabinet and wheel motor (i.e., alternate technology used in place of gearbox and transmission system) in pre-assembled condition but not mounted on a chassis in a completely knocked down form - HELD THAT - The Motor Vehicles for the transport of goods are classified under CTH 8704. Further, there is a specific entry for Dumpers designed for off-highway use under CTH 8704 10. Therefore, the Dump truck proposed to be imported as CKD kit will merit classification under the CTH 8704. Further, the subject dump truck is not an electrically operated vehicle. The dump truck shall be built with an electrical AC drive system where power is supplied from the engine to the alternator to produce electricity and drive the three-phase induction motor. In this electrical AC drive system, the control cabinet and wheel motor play the role of the gearbox and transmission system. Hence, it shall not comprise of a gearbox and transmission system, and this would instead be replaced by the alternate technology explained above, i.e., a control cabinet and wheel motor - In the instant case, the subject dump truck proposed to be imported in CKD form shall continue to be driven by fuel only and no electrical energy is derived from any external source or from batteries to run such dump trucks. This truck does not operate solely on electrical energy to be called electrically operated vehicle. Whether the goods imported as Completely Knocked Down (CKD) kit by the applicant contains all the necessary components, parts or sub-assemblies, for assembling a complete vehicle with engine or gearbox or transmission mechanism in pre-assembled form but not mounted on a chassis or a body assembly? - HELD THAT - In the present case, the role of a gearbox and transmission system is performed by an alternate technology in the subject motor vehicle. The dump truck shall be built with an electrical AC drive system, wherein power is supplied from the engine to the alternator to produce electricity and drive the three-phase induction motor - In this case, the function of a traditional gearbox and transmission system is being achieved through other components such as alternator, control cabinet and wheel motor, although a gearbox and transmission system - the eligibility of concessional rate should be determined on the basis of the functions and characteristics of the key components and mere fact that one of the internal systems uses an alternate technology should not impact the benefit available. It is not mandatory to import gearbox and transmission system, in view of technological advancement leading to replacement of these parts by parts based on different technology, to qualify for the concessional rate of duty provided under Sl. No. 524(1)(b) of the Notification as long as the essential items are imported. Applicant itself has submitted that the role of a gearbox and transmission system is performed by an alternate technology in the subject motor vehicle. In order to qualify for the concessional rate of duty as provided under Sl. No. 524(1)(b) of the Notification, it is only mandatory that the product is imported in CKD form comprising the essential components, sub-assemblies, etc.; and at least one of the three key components (i.e., engine or gearbox or transmission system) is imported in pre-assembled form but not mounted on a chassis - The CKD kit proposed to be imported, as described in para 3.1 of this ruling, satisfies the test laid down by the CBEC Circular from F. No. 5281/128/97 Cus - TRU, dated 5-12-1997 that the components mentioned in this kit will bring into effect a motor vehicle. Thus, applicant are eligible to claim concessional rate of basic Custom duty at 25% on import of dump truck designed for off-highway use in CKD form, with the engine and alternator, control cabinet and wheel motor (i.e., alternate technology used in place of gearbox and transmission system) in pre-assembled condition but not mounted on a chassis, as per Sl. No. 524(1)(b) of the Notification No. 50/2017-Customs dated June 30, 2017.
Issues Involved:
1. Eligibility for concessional rate of basic customs duty at 25% on import of dump trucks in CKD form. 2. Classification of dump trucks under the HSN 87041010. 3. Interpretation of the term "necessary components" for CKD kits under Notification No. 50/2017-Customs. Issue-wise Detailed Analysis: 1. Eligibility for Concessional Rate of Basic Customs Duty at 25%: The applicant sought a ruling on whether they are eligible for a concessional rate of basic customs duty at 25% on the import of dump trucks designed for off-highway use in CKD form, with the engine and alternator, control cabinet, and wheel motor in pre-assembled condition but not mounted on a chassis, as per Sl. No. 524(1)(b) of Notification No. 50/2017-Customs dated June 30, 2017. The applicant argued that the role of a gearbox and transmission system is performed by an alternate technology, and the essential components imported in CKD form meet the conditions stipulated in the notification. The Commissionerate of Customs, Import I, New Custom House, Mumbai, and Nhava Sheva contended that the CKD kits do not contain all necessary components and do not meet the conditions of the notification. However, the Authority held that the CKD kit proposed to be imported contains all necessary components, parts, or sub-assemblies for assembling a complete vehicle, satisfying the conditions of the notification. 2. Classification of Dump Trucks under HSN 87041010: The applicant proposed to classify the imported goods under HSN 87041010 (Motor Vehicles for the Transport of Goods) of the Customs Tariff Act, 1975. The Authority confirmed that the dump trucks designed for off-highway use in CKD form merit classification under CTH 8704, specifically under the entry for Dumpers designed for off-highway use. 3. Interpretation of the Term "Necessary Components" for CKD Kits: The applicant argued that the CKD kit comprises all the essential components required for assembling the dump truck, including the engine and alternator, chassis, control cabinet, wheel motor, rear and front axles, and suspension cylinders. The Commissionerate of Customs, Import I, New Custom House, Mumbai, contended that the dump body, rim, and tyres are also necessary components, and without these, the CKD kit cannot be considered a complete vehicle. The Authority referred to Rule 2(a) of the General Rules of Interpretation and CBEC Circular F. No. 528/128/97 Cus-TRU dated December 5, 1997, which clarified that essential components such as the engine, gearbox, chassis, transmission assembly system, body/cab, suspension system, and axles are sufficient to bring into effect a finished motor vehicle. The Authority held that the CKD kit proposed to be imported by the applicant contains the essential components to make a complete vehicle, and the absence of certain parts like the dump body, rims, and tyres does not disqualify the kit from being considered a CKD kit under the notification. Conclusion: The Authority ruled that the applicant is eligible to claim a concessional rate of basic customs duty at 25% on the import of dump trucks designed for off-highway use in CKD form, with the engine and alternator, control cabinet, and wheel motor in pre-assembled condition but not mounted on a chassis, as per Sl. No. 524(1)(b) of Notification No. 50/2017-Customs dated June 30, 2017. The CKD kit contains all necessary components required for assembling a complete vehicle, satisfying the conditions of the notification.
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