2025 (2) TMI 380 - AT - Customs

Classification of imported aircraft engine - to be classified under Customs Tariff Item 8716 39 00 of the First Schedule to the Customs Tariff Act 1975 or under CTI 8609 00 00? - period from April 2018 to March 2019 - HELD THAT - The aircraft engine stands and its units are primed and paint-protected with a resistant enamel. They are specifically designed to support an engine with or without the Engine Build Unit. The aircraft engine stands majorly comprise of a base a cradle set and caster wheels for ease of movement of the stand with engine on it. The cradle supports the engine and is mounted to the base through a shock attenuation system which is critical to the safe transporting of engines. The cradle is of unique shape and holds the engine in a manner that the engine is safely secured while it is being transported and that it is not damaged due to shock. The shock attenuation system dampens shock loads introduced to the engine during transport. With the help of caster wheels the aircraft engine stand along with engine is able to move within the shop only on smooth surfaces and for very small distances. An engine stand is specially designed for safely transporting the aircraft engine by different modes of transport i.e. by land air and sea. The engine stand comprises of a cradle (holder) a base and four caster wheels. The cradle holds the engine safely and prevents impact of any shock or jerk to the aircraft engine during transportation. An engine is kept on engine stand even while it is getting repaired in the repair shop or during installation/removal from the aircraft. An engine stand allows limited mobility within the repair workshop for adjustment of direction for easy access to all sides of the engine. It is therefore moved along with the engine right from its loading on to a truck vessel or aircraft till the time it is unloaded and even during repairs. If an engine is to be transported from one airport to another by road engine stand cannot be used as a trailer for transportation. Engine stand in such a case is placed on another truck and tied properly and then transported on a road worthy truck. Engine stand cannot even enable movement of the engine from the bay area of the airport to the repair workshop. This is because the weight of engine stand is approximately 2.5T and with the engine it is approximately 5T or more. It is therefore difficult for manpower to move the engine safely even till the repair workshop. The caster wheels on the engine stand only enable smooth movement of the engine within the repair workshop - an engine stand being a composite machine has to be classified basis the component that gives the essential character to it i.e. cradle (container). It would be seen from judgment of the Supreme Court in G. CLARIDGE COMPANY LTD. VERSUS COLLECTOR OF CENTRAL EXCISE 1991 (2) TMI 112 - SUPREME COURT that the term container was given a narrow interpretation to mean a receptacle in which articles are covered or enclosed because the term container was preceded by the type of containers like boxes cartons and cases which are all closed containers. In the present case CTH 8609 does not use the term boxes or cartons . In fact in terms of HSN Explanatory Notes to CTH 8609 all packing receptacles specially designed and equipped for carriage by one or more modes of transport are covered under this Heading. HSN Explanatory Notes to CTH 8609 also give various examples of containers that can get covered within the Heading. One example at paragraph (4) is also of an open container. Thus so far as CTH 8609 is concerned there is no good reason to apply the narrow meaning of the term container as against the broad meaning as discussed by the Supreme Court in G. Claridge Company Ltd. In view of the provisions of rule 3(b) of the GI Rules aircraft engine stand would merit classification under CTI 8609 00 00. Conclusion - The air craft engine stand imported by the appellant would deserve classification under CTI 8609 00 00 and not under CTI 8716 39 00 as claimed by the department. The impugned order dated 30.01.2020 passed by the Principal Commissioner therefore deserves to be set aside and is set aside - appeal allowed.

Summary

The core issue presented and considered in this legal judgment revolves around the classification of aircraft engine stands imported by the appellant, InterGlobe Aviation Ltd. The primary legal question is whether these engine stands should be classified under Customs Tariff Item (CTI) 8609 00 00, as containers specially designed for carriage by one or more modes of transport, or under CTI 8716 39 00, as trailers or semi-trailers. This classification determines the applicable customs duty and related financial implications for the appellant.

The relevant legal framework includes the Customs Tariff Act, 1975, and the General Rules for the Interpretation of the Schedule (GI Rules). The court's interpretation and reasoning are based on the essential character of the engine stands, examining whether they function primarily as containers or trailers. The key evidence involves the design and function of the engine stands, including their components such as the cradle, shock attenuation system, and caster wheels.

The appellant argued that the engine stands are containers under CTI 8609 00 00, emphasizing their role in safely transporting aircraft engines by various modes of transport. They contended that the essential character of the engine stands is derived from the cradle, which secures the engine, rather than the caster wheels, which only provide limited mobility within repair workshops. The appellant also highlighted that the engine stands are not used as trailers for road transportation but are placed on other vehicles for such purposes.

Conversely, the department argued that the engine stands should be classified under CTI 8716 39 00, asserting that their primary function is to transport aircraft engines safely, and thus, the essential character is derived from their wheels, classifying them as trailers.

The court's analysis focused on the description and function of the engine stands, considering the GI Rules, particularly rule 3(b), which dictates classification based on the component giving the essential character to the goods. The court examined the design and purpose of the engine stands, noting that they are specially designed to support and secure aircraft engines during transportation, with features like a shock attenuation system to prevent damage from shocks or jerks.

The court concluded that the essential character of the engine stands is given by the cradle, which acts as a container, rather than the caster wheels. The engine stands are not designed to transport engines independently over long distances but are used in conjunction with other modes of transport. Thus, the court determined that the engine stands should be classified under CTI 8609 00 00 as containers.

Significant holdings include the court's determination that the aircraft engine stands are not trailers and do not derive their essential character from wheels. The court emphasized that the classification should be based on the component that gives the essential character to the engine stands, which is the cradle in this case.

The final determination was that the engine stands should be classified under CTI 8609 00 00, and the order demanding differential customs duty under CTI 8716 39 00 was set aside. The appeal was allowed, and the impugned order was overturned.