2023 (4) TMI 16 - AAR - Customs

Classification of imported goods - imports of all parts of air-conditioner in CKD/SKD (except capacitors), which will be assembled to make complete air-conditioner in India - whether air-conditioners kits, without capacitors have acquired the primary characteristics of an air-conditioner? - whether capacitors and ODS gas are essential or non-essential components of air-conditioners? - HELD THAT - On cursory reading of technical literature available in public domain suggests that capacitors are essential component of an air-conditioner, which provide the initial jolt of electricity to the air-conditioner s motors needed to run successfully and a bad capacitor prevents the exterior unit from properly functioning, which hinders the cooling process as a whole. Be that as it may, notwithstanding the role of capacitors in air-conditioners, the larger contention is accepted that the air-conditioner kit, as described by the applicant have acquired the characteristics of an air-conditioner and are classifiable as air-conditioners when presented together. It is concluded that imported air-conditioner kits in CKD/SKD condition, as described above have acquired the essential characteristics of an air-conditioner and therefore, when presented together at the stage of assessment under common invoice and bill of entry would merit classification under Heading 8415 and specifically under sub-heading 8415 10 or 8415 81 or 8415 82 or 8415 83, as the case may be depending upon the configuration and model type - an incomplete machine having the features of the complete machine presented unassembled and hence the indoor and outdoor units presented together in CKD/SKD forms are to be classified under Heading 8415 10/8415 81/8415 82/8415 83, as applicable. When the parts of IDU/ODU or Cooler/Condenser Heat Exchange Units (HEX) are imported in CKD/SKD condition, would the same also to be treated as parts of air-conditioners inasmuch as such parts are specifically designed for use in the assembly of HEX (IDU/ODU or Cooler/Condenser), which is an integral part of an air-conditioner; and therefore, eligible to be classified under sub-heading 8415 90 00 as parts of a part of air-conditioner? - HELD THAT - As per the applicant assembly of Heat Exchange Units (HEX) would consist of assembly of IDU or ODU/cooler or condenser. It is indisputable that in the instant case such HEX are component/part of air-conditioners. Therefore, the IDU or ODD/cooler or condenser as parts of air-conditioner would merit classification under sub-heading 8415 90 00 as parts. However, when HEX units are presented together as air-conditioner kit, it would merit classification as air-conditioning machine under Heading 8415 10/8415 81/8415 82/8415 83, as applicable. It is noted that Heat Exchange Units are independently classifiable under sub-heading 8419 50; and they can be so classified if imported on standalone basis, not as parts of air-conditioners. Classification of parts of HEX for air-conditioning machines - HELD THAT - In cases where air-conditioner kits containing all essential parts/components of the assembly, including cooler or condenser or evaporator are presented together in CKD condition for assessment and clearance, as per Rule 2(a) of GRI such kits in CKD condition, including parts of evaporator or condenser would merit classification as air-conditioning machine under Heading 8415 10/8415 81/8415 82/8415 83, as applicable. However, in the event of parts of HEX units being presented together for assessment, but not as part of air-conditioning kit, noting that these parts of HEX (cooler or condenser or evaporator) are designed specifically to be used in an air-conditioner, these parts would merit classification under sub-heading 8415 90, in accordance with Rule 2(a) of GRI.

Issues Involved:
1. Classification of air-conditioner parts imported in CKD/SKD condition.
2. Classification of air-conditioner parts imported under different Bills of Entry.
3. Classification of parts of cooler/condenser (HEX) imported separately.

Issue-wise Detailed Analysis:

1. Classification of Air-Conditioner Parts Imported in CKD/SKD Condition:
The applicant sought to classify air-conditioner parts imported in CKD/SKD condition (except capacitors) under sub-heading 8415 10 10 or other relevant sub-headings by invoking Rule 2(a) of the General Rules of Interpretation (GRI) to the Customs Tariff Act, 1975. The applicant argued that as per Rule 2(a) of GRI, incomplete or unfinished articles that have the essential character of the finished article when presented together should be classified as the complete article. This view was supported by various case laws, including the Supreme Court's ruling in the Procal Electronics India Ltd. case. The applicant proposed to classify the CKD/SKD parts under sub-heading 8415 10 10 or 8415 81 10/90 or 8414 82 10/90, depending on the configuration and model type.

The Authority agreed with the applicant's contention and concluded that imported air-conditioner kits in CKD/SKD condition, as described, have acquired the essential characteristics of an air-conditioner. Therefore, when presented together at the stage of assessment under a common invoice and bill of entry, they would merit classification under Heading 8415 and specifically under sub-heading 8415 10 or 8415 81 or 8415 82 or 8415 83, depending upon the configuration and model type.

2. Classification of Air-Conditioner Parts Imported Under Different Bills of Entry:
The applicant sought to classify parts of air-conditioners imported under different Bills of Entry as 'parts of air-conditioners' under sub-heading 8415 90 00 by invoking Section Note 2(b) of Section XVI of the Customs Tariff Act, 1975. The applicant argued that parts which are goods included in any of the headings of Chapter 84 or 85 should be classified in their respective headings. The applicant listed various parts and their proposed classifications, stating that parts solely or principally designed for use with air-conditioners should be classified under sub-heading 8415 90 00.

The Authority agreed with the applicant's contention, noting that parts of air-conditioners that are designed and solely used with air-conditioners should be classified under sub-heading 8415 90 00. However, parts that are goods covered under specific tariff headings/sub-headings should be classified under those respective headings.

3. Classification of Parts of Cooler/Condenser (HEX) Imported Separately:
The applicant sought to classify parts of cooler/condenser (HEX) imported together under a separate invoice as 'parts of heat exchange units' under sub-heading 8419 90 90 or as 'parts of air-conditioners' under sub-heading 8415 90 00. The applicant argued that parts of HEX should be classified under sub-heading 8415 90 00 as they are specifically designed for use in air-conditioners.

The Authority concluded that parts of HEX, when imported and presented together as part of an air-conditioner kit in CKD condition, should be classified under Heading 8415 10/8415 81/8415 82/8415 83, as applicable. However, if parts of HEX are imported separately and not as part of an air-conditioner kit, they should be classified under sub-heading 8415 90 00, as they are designed specifically for use in air-conditioners.

Conclusion:
The Authority ruled that:
1. Air-conditioner kits in CKD/SKD condition, when presented together, should be classified under Heading 8415 and the relevant sub-headings based on the configuration and model type.
2. Parts of air-conditioners imported under different Bills of Entry should be classified under sub-heading 8415 90 00 if they are solely or principally designed for use with air-conditioners, or under their respective tariff headings if covered by specific headings.
3. Parts of HEX, when imported as part of an air-conditioner kit in CKD condition, should be classified under Heading 8415, but if imported separately, should be classified under sub-heading 8415 90 00.

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