2025 (1) TMI 835 - AT - Customs

Classification of imported goods declared as components and parts of Electric Tricycle / E-Rickshaw - to be classified under CTH 87089900 or under CTH 87038040 as complete E-Rickshaws in CKD condition? - benefit under Notification No. 50/2017-Cus. dated 30.06.2017 Serial No. 528 - rejection of declared value - enhancement of declared value - confiscation - redemption fine - penalty - HELD THAT - The issue is covered by the decision of this Tribunal in the case of COMMISSIONER OF CUSTOMS (PORT) KOLKATA VERSUS M/S. TWINKLE TRADECOM PRIVATE LIMITED 2024 (5) TMI 472 - CESTAT KOLKATA wherein the Tribunal has observed ' The goods imported as such, by the respondent, if assembled together, will not provide the basic function of propulsion as required for the classification under CTH 8703. Accordingly, we uphold the findings of the ld. appellate authority in the impugned order and hold that the goods imported would not constitute a fully finished e-rickshaw as it did not have all essential components for a fully finished e-rickshaw.' It was also held that 'Regarding enhancement of value, we observe that the Ld. Commissioner (Appeals) has relied on the judgment of COMMISSIONER OF CUSTOMS (GENERAL CFS) , MUMBAI VERSUS RADHEY SHYAM RATANLAL 2017 (5) TMI 322 - CESTAT MUMBAI and observed that the enhancement of values was done without providing any logical reasons.' Conclusion - The classification as parts, classified under CTH 87089900 upheld - duty exemption granted - value enhancement is rejected - confiscation and penalties annulled. The appeals filed by the Revenue are dismissed.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

Whether the imported goods, declared as parts of E-Rickshaw, should be classified under Tariff Item No. 87089900 or reclassified under CTH 87038040 as complete E-Rickshaws in CKD condition.
Whether the importer is entitled to the duty exemption benefit under Notification No. 50/2017-Cus. [Sl. No. 528] dated 30.06.2017.
Whether the enhancement of the declared value of the imported goods by the lower authority was justified.
Whether the confiscation of goods and imposition of redemption fine and penalty under the Customs Act, 1962, were appropriate.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Classification of Imported Goods

Relevant legal framework and precedents: The classification of goods under the Customs Tariff Act, 1975, particularly the application of Rule 2(a) of the General Rules of Interpretation (GIR) for incomplete or unassembled articles.
Court's interpretation and reasoning: The Tribunal found that the interpretation of Rule 2(a) by the lower authority was incorrect. The goods imported did not have the essential characteristics of a complete E-Rickshaw as they lacked a battery, which is necessary for propulsion.
Key evidence and findings: The goods included essential parts like the motor, axle, and chassis but were not in a condition to be classified as a complete E-Rickshaw.
Application of law to facts: The Tribunal upheld the classification under Tariff Item No. 87089900, as the goods did not meet the criteria for a complete vehicle under CTH 87038040.
Treatment of competing arguments: The Tribunal agreed with the respondent's argument that the lower authority's reliance on Rule 2(a) was misplaced, as the goods did not constitute a complete E-Rickshaw.
Conclusions: The Tribunal concluded that the goods should be classified as parts of E-Rickshaw, not as complete vehicles.

Issue 2: Duty Exemption Benefit

Relevant legal framework and precedents: Notification No. 50/2017-Cus. [Sl. No. 528] provides duty exemption for certain goods.
Court's interpretation and reasoning: The Tribunal found that the goods were correctly declared and eligible for the duty exemption.
Key evidence and findings: The goods matched the description under the notification, and there was no mis-declaration.
Application of law to facts: The Tribunal upheld the duty exemption as the goods were parts, not complete vehicles.
Treatment of competing arguments: The Tribunal dismissed the Revenue's argument against granting the exemption.
Conclusions: The duty exemption benefit was rightly extended to the importer.

Issue 3: Enhancement of Declared Value

Relevant legal framework and precedents: Customs Valuation Rules, 2007 (CVR) and principles of natural justice.
Court's interpretation and reasoning: The Tribunal held that the enhancement of value by the lower authority lacked justification and did not follow the CVR, 2007.
Key evidence and findings: No evidence was provided to support the rejection of the declared value.
Application of law to facts: The Tribunal found the enhancement of value unsustainable due to procedural lapses.
Treatment of competing arguments: The Tribunal sided with the respondent, noting the absence of logical reasoning for value enhancement.
Conclusions: The declared value should be accepted as there was no valid basis for enhancement.

Issue 4: Confiscation and Penalties

Relevant legal framework and precedents: Sections 111(m), 112(a)(ii), and 125 of the Customs Act, 1962.
Court's interpretation and reasoning: The Tribunal found no grounds for confiscation or penalties as the alleged mis-declaration was not established.
Key evidence and findings: The goods were not in CKD condition and did not meet the criteria for confiscation.
Application of law to facts: The Tribunal set aside the penalties and redemption fine imposed by the lower authority.
Treatment of competing arguments: The Tribunal rejected the Revenue's claims of mis-declaration and upheld the respondent's position.
Conclusions: The confiscation and penalties were unwarranted and thus annulled.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: "In order to have the essential characteristics of any machine or vehicle, the parts involved in the manufacturing should fulfil the basic principle of that vehicle or machine."
Core principles established: The classification of goods must reflect their actual condition and characteristics; procedural fairness in valuation and penalty imposition is crucial.
Final determinations on each issue: The Tribunal upheld the classification as parts, granted the duty exemption, rejected the value enhancement, and annulled the confiscation and penalties.

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