2003 (6) TMI 50 - AT - Customs

Valuation (Customs) - Classification components of engine - Rule 2(a) of General Rules - Interpretation of Customs Schedule - Import of complete Diesel/Petrol Engines in unassembled condition as claimed by the Revenue or as parts/components of such engines as confirmed by the Commissioner (Appeals) under the impugned common Order Nos. 6-8/2001 - HELD THAT - Nothing has been brought on record before us to rebut the material adduced by the Revenue to prove that each invoice was not in respect of sets of engines. This supports the case of the Revenue that the engines need not be assembled by combining the goods imported over a period of time. Once the Revenue has succeeded in showing that what was imported under one Bill of Entry were sets of engine in unassembled form and once they are assembled would have the essential character of engine, the findings in the impugned order cannot be upheld. The Respondents have imported component sets of engines in unassembled condition which on assembly would have the essential character of the complete or finished article. No doubt of the Respondents would need some local components to complete the assembly of engine. But that fact cannot make Rule 2(a) inapplicable as Rule 2(a) is there to be invoked in such cases only for the purpose of determining the classification of the product. There is no force in the submission of the learned Sr. Advocate that Rule 2(a) speaks of an article and in the present case, article is component of engine which is complete or finished and it should be classified as such. The Explanatory Notes below Section XVI of H.S.N. explains the applicability of Rule 2(a) by providing that a machine lacking only a fly wheel, a bed plate, calender rolls, tool holders, etc. is classified in the same heading as the machine, and not in any separate heading provided for parts. Thus, it is apparent that some part may not be there and procured separately. What is necessary for the application of Rule 2(a) is that article, as presented, has the essential character of the complete or finished article. The Note further mentions that no account is to be taken in that regard of the complexity of the assembly method. Accordingly, we hold that Rule 2(a) of the Interpretative Rules is applicable in the present matters. Accordingly, we set aside the impugned order and allow the appeals filed by the Revenue.

Issues Involved:
1. Classification of imported goods: Whether the imported goods are complete engines in unassembled condition or parts/components of engines.
2. Applicability of Rule 2(a) of the General Rules for the Interpretation of the Customs Schedule.
3. Interpretation of invoices, purchase orders, and bills of entry.
4. Legal implications of importing goods under multiple bills of entry over time.

Detailed Analysis:

1. Classification of Imported Goods:
The primary issue was whether the Respondents imported complete Diesel/Petrol Engines in unassembled condition or merely parts/components of such engines. The Revenue argued that the goods imported were complete engines in unassembled condition, as evidenced by the specific numbers/sets of engines and transmission components ordered and invoiced. The Respondents contended that they imported only parts and components, not complete engines.

2. Applicability of Rule 2(a) of the General Rules for the Interpretation of the Customs Schedule:
The Revenue emphasized that under Rule 2(a), an article incomplete or unfinished but having the essential character of the complete article should be classified as the complete article. They argued that the imported goods, though unassembled, had the essential character of complete engines. The Respondents countered that Rule 2(a) should not apply as the imported goods were individual components, not incomplete or unfinished articles.

3. Interpretation of Invoices, Purchase Orders, and Bills of Entry:
The Revenue presented evidence showing that the invoices, purchase orders, and bills of entry specified sets of engine components, indicating that complete engines were imported in unassembled condition. The Respondents argued that the components were imported over a period of time and not under a single consignment, and thus should be classified as parts.

4. Legal Implications of Importing Goods Under Multiple Bills of Entry Over Time:
The Commissioner (Appeals) held that goods imported under multiple bills of entry over time should be assessed as they are physically presented for classification, not as a finished product. The Larger Bench of the Tribunal in Sony India case supported this view, stating that consignments imported under different bills of entry over time cannot be combined to classify them as a complete product.

Judgment Summary:

The Tribunal considered the submissions and evidence from both sides. The key findings were:

1. Classification of Imported Goods:
- The Tribunal found that the Respondents imported sets of engine components in unassembled condition under single invoices and bills of entry. The imported goods, when assembled, would have the essential character of complete engines.

2. Applicability of Rule 2(a):
- The Tribunal held that Rule 2(a) was applicable. The imported components, though unassembled, had the essential character of complete engines. The fact that some local components were needed to complete the assembly did not negate the applicability of Rule 2(a).

3. Interpretation of Invoices, Purchase Orders, and Bills of Entry:
- The Tribunal observed that the invoices and purchase orders clearly specified sets of engine components. The corresponding bills of entry confirmed that the components were imported in unassembled condition under single consignments.

4. Legal Implications of Importing Goods Under Multiple Bills of Entry Over Time:
- The Tribunal distinguished the present case from the Sony India case, noting that in the present matter, each bill of entry represented sets of engines in unassembled form, not components imported over a period of time.

Conclusion:
The Tribunal set aside the impugned order and allowed the appeals filed by the Revenue. The imported goods were classified as complete engines in unassembled condition under Rule 2(a) of the General Rules for the Interpretation of the Customs Schedule.

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