2004 (12) TMI 86 - SC - Customs

Whether the CKD packs imported into the country could be considered to be motor cars and not components? Whether M/s. Maruti Udyog Ltd. are entitled to the benefit of Notification No. 29/83? Whether M/s. Maestro Motors Ltd. is entitled to the benefit of Notification No. 72/93? Held that - As per this Interpretative Rule, even though an article is incomplete or unfinished when it is presented for clearance, if that article has the essential character of the complete article and/or even though the complete or finished article is presented in an unassembled or dissembled form the classification must be as a complete article. In this case, it is fairly not being denied that the components were imported in a CKD packs. Thus what was imported was completely knocked down cars. The components imported had the essential character of a complete car even though presented in unassembled form. As per Interpretative Rule 2(a) even though presented unassembled they have to be classified as a complete article. Thus, for purposes of clearance the components had to be classified as a car under Tariff Item 87.02. The finding of the Commissioner (Appeals) to the contrary is clearly erroneous and requires to be and is hereby set aside. It would not be open for the CEGAT to allow M/s. Maruti Udyog Ltd. to produce any new or other certificate which had not already been produced before the Adjudicating Authority. If the certificates as required are available, then M/s. Maruti Udyog Ltd. will be entitled to the benefit of the Notification No. 29/83. If the certificates as required are not available then M/s. Maruti Udyog Ltd. will undoubtedly not be entitled to the benefit of Notification No. 29/83. In that event for purposes of payment of custom duty the components will have to be classified as a car and duty will have to be paid under Tariff Item 82.02. It was submitted that M/s. Maestro Motors Ltd. must be given benefit of those 20 components and parts. We are unable to accept this submission. These 20 components and parts would get exemption only provided they were imported as components and parts. If they are imported as components and parts in CKD pack, then the pack as a whole is a car by virtue of the Interpretative Rule. In such a case even these components would not be entitled to exemption. The order of CEGAT in respect of M/s. Maestro Motors Ltd. cannot be sustained and is hereby set aside. The Order of the Adjudicating Authority is restored.

Issues Involved:
1. Classification of CKD packs as motor cars or components.
2. Entitlement to the benefit of Notification No. 29/83 for M/s. Maruti Udyog Ltd.
3. Compliance with the conditions of Notification No. 29/83 by M/s. Maruti Udyog Ltd.
4. Entitlement to the benefit of Notification No. 72/93 for M/s. Maestro Motors Ltd.

Issue-wise Detailed Analysis:

1. Classification of CKD Packs as Motor Cars or Components:
The court considered whether the CKD packs imported by M/s. Maruti Udyog Ltd. and M/s. Maestro Motors Ltd. could be classified as motor cars or components. According to the General Rules of Interpretation of the Harmonized System, Rule 2(a) states that an article incomplete or unfinished, if it has the essential character of the complete article, should be classified as the complete article. The court observed that the imported components had the essential character of complete cars, even though they were presented in unassembled form. Therefore, for purposes of clearance, the components had to be classified as motor cars under Tariff Item 87.02. The finding of the Commissioner (Appeals) to the contrary was set aside.

2. Entitlement to the Benefit of Notification No. 29/83 for M/s. Maruti Udyog Ltd.:
Notification No. 29/83 exempts components required for the manufacture of fuel-efficient motor cars of engine capacity not exceeding 1000 cubic centimeters. Despite the classification of the components as motor cars for customs duty purposes, the court held that the clear language of the Notification exempted components in completely knocked down packs. Hence, M/s. Maruti Udyog Ltd. was entitled to the benefit of Notification No. 29/83, provided they complied with its conditions.

3. Compliance with the Conditions of Notification No. 29/83 by M/s. Maruti Udyog Ltd.:
The court noted a dispute regarding whether M/s. Maruti Udyog Ltd. had complied with the conditions of Notification No. 29/83, specifically the submission of required certificates. The Adjudicating Authority had held that the certificates were not produced, while the Commissioner (Appeals) and CEGAT found them sufficient. The court remitted the matter back to CEGAT to determine whether the required certificates had been produced before the Adjudicating Authority, clarifying that no new certificates could be introduced. If the certificates were available, M/s. Maruti Udyog Ltd. would be entitled to the benefit of the Notification; otherwise, they would not.

4. Entitlement to the Benefit of Notification No. 72/93 for M/s. Maestro Motors Ltd.:
Notification No. 72/93 exempts components and parts of motor vehicles falling within Chapter 87 of the First Schedule to the Customs Tariff Act, 1975. The court held that components in CKD packs, which are classified as cars for customs duty purposes under Interpretative Rule 2(a), could not be considered components and parts for the purposes of the Notification. Thus, M/s. Maestro Motors Ltd. was not entitled to the benefit of Notification No. 72/93. The court also rejected the argument that the 20 specified components and parts should be exempted if imported as part of a CKD pack, as the pack as a whole is classified as a car.

Conclusion:
The court set aside the findings of the Commissioner (Appeals) and CEGAT regarding the classification of CKD packs and the entitlement to Notification benefits. It remitted the matter of M/s. Maruti Udyog Ltd. back to CEGAT for reconsideration of compliance with Notification No. 29/83. The court restored the Adjudicating Authority's order regarding M/s. Maestro Motors Ltd., denying them the benefit of Notification No. 72/93. The appeals were disposed of with no order as to costs.

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