2020 (11) TMI 685 - AT - Customs

Classification of goods - consignment imported under SKD condition - Exemption for the purpose of assessment for countervailing duty - Import of components for manufacturing colour Doppler SSD-4000 Ultra Sound Scanners - HELD THAT - When the goods are presented in SKD condition, Revenue does not have authority of law to separate different parts and components and classify them differently in view of Rule 2(a) of General Rules for Interpretation of the Customs Tariff. If Revenue wants to remove certain parts from the SKD package and classify differently, then Revenue has to establish that remaining parts, if assembled together have essential character of final product. Revenue has not brought forward any such evidence. Further, CBIC issued clarification which is reproduced in foregoing paragraph. The said clarification relies on Chapter Note 2(b) to Chapter 90 and the same is binding on departmental officers. Thus, the impugned orders are not sustainable. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Classification of imported goods under Customs Tariff Item 9018 19 90, Exemption from payment of countervailing duty, Applicability of Chapter Note 2(a) and 2(b) of Chapter 90, Interpretation of SKD condition for imported goods.

Classification under Customs Tariff Item 9018 19 90:
The appellants imported parts and accessories in SKD condition for assembly into Colour Doppler-SSD 4000 Ultrasound Scanners. Revenue disputed the classification of certain components under Chapters 84 & 85, arguing they were not eligible for exemption from countervailing duty. Show cause notices were issued, questioning the classification and exemption claimed by the appellant. The impugned Order-in-Original confirmed the demands and penalties. The appellant contended that all components imported together in SKD condition form the Colour Doppler equipment, classifiable under Tariff Item No. 9018 19 90. They argued that removing certain components for separate classification was not permissible under Rule 2(a) of the Customs Tariff.

Exemption from payment of countervailing duty:
The appellant relied on Rule 2(a) of the Customs Tariff to support their classification under Tariff Item No. 9018 19 90, emphasizing that the incomplete or unfinished article should have the essential character of the final product. They also referenced a circular by CBIC clarifying the applicability of GST on parts suitable for use with medical devices, which supported their classification argument. The subsequent classification of components under 9018 by the Commissioner (Appeals) for other consignments was highlighted as precedent.

Applicability of Chapter Note 2(a) and 2(b) of Chapter 90:
The appellant argued that Chapter Note 2(b) of Chapter 90, which states that parts suitable for use solely or principally with a particular machine should be classified with that machine, supported their classification under Tariff Item No. 9018 19 90. They emphasized the binding nature of the CBIC clarification on departmental officers and the lack of evidence from Revenue to establish the essential character of the final product when certain parts are removed from the SKD package.

Interpretation of SKD condition for imported goods:
The Tribunal noted that Revenue cannot separate different parts and components in SKD condition for separate classification without establishing that the remaining parts, when assembled, have the essential character of the final product. The Tribunal found the impugned orders unsustainable, citing the CBIC clarification and Chapter Note 2(b) of Chapter 90. Consequently, both impugned orders were set aside, and the appeals were allowed with consequential relief for the appellants.