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2018 (9) TMI 1151 - AT - CustomsConcessional rate of duty - import of BMW CARS IN CKD - Department took the stand that as the imported goods namely, Engine Assembly and the Transmission Sub-assembly/Gear Box were in a pre-assembled form, the appellant was not eligible to avail the concessional rates provided in the said Notifications. - clause (i) of Sl. No. 344 of Table appended to Notification 21/2011Cus. and sub-clause (1)(a) of Sl. No. 437of Notification 12/2012-Cus. Whether imports made by the appellant (i) are CKD imports for the period 1.3.2011 to 23.3.2011, entitled to a rate of Customs duty at 10% (as claimed by the appellant) or a rate of Customs duty at 60% (as claimed by the Department); (ii) are CKD imports for the period 24.3.2011 to 11.4.2013, entitled to a rate of Customs duty at 10% (as claimed by the Appellant) or a rate of Customs duty at 30% (as claimed by the Department)? Invocation of Longer period of limitation under Section 28 (4) of the Customs Act, 1962 - Penalty under Section 114A and Section 112 (a) of the Customs Act, 1962 - imposition of redemption fine in lieu of confiscation under Section 125 of the Customs Act, 1962. Held that - The changes brought about by Notification No. 31/2011-Cus. not only created an additional slab of concessional duty, but also further clarified what exactly would be considered as CKD. Notification 31/2011-Cus. in fact expanded the types of imports which could be considered as CKD unit. In the Notification 31/2011 if the engine, gearbox and transmission mechanism was not in a pre-assembled condition, this would be considered as a CKD kit, meriting the lowest rate of 10% BCD - At the same time, even if the engine, gearbox and transmission mechanism was in a pre-assembled form, however not mounted on the chassis or a body assembly, even if such imported kit may well be considered as a CKD kit for the purposes of the notification, that will be required to suffer BCD @ 30%. If the imports do not fit into any of these two categories, they would have to pay customs duty @ 60%. As clarified by the TRU in their letter dt. 25.04.2011, only those CKD kits where all the parts and components including engine/gearbox and transmission assembly which are imported in a completely knocked down condition, will alone benefit from the lowest rate of 10% BCD. Thus, as per the amended Notification (31/2011-Cus.) when all the parts and components are imported in completely knocked down condition, the lower rate of 10% BCD will be applicable. A combined reading of the Notification No.31/2011-Cus. as also the TRU letter dt.25.4.2011 serves to clarify that not in a preassembled condition meant imported in completely knocked down condition - However, even when the engine or gearbox or transmission mechanism was imported in preassembled form, with the remaining parts, components etc., the entire kit would still be treated as a CKD kit, though required to suffer a higher rate of 30% BCD. It is also pertinent to note that if the imported automobile CKD kit has the engine or gearbox or transmission in preassembled condition, the entire kit will not get the benefit 10% BCD under entry 344 (1) (a) but will have to suffer 30% BCD under entry 344 (1) (b). In the present case, From the samples of the Bill of Entry and related documents filed by appellants in page 32 onwards of compilation of documents Vol-I, we find that in a sample Bill of Entry No.7949107 dt.14.09.2012, the imported goods were declared as BMW cars in CKD . In the Bill of Entry the imported goods are declared as falling within the Customs Tariff Heading 87039090 and claiming benefit of Notification No.12/2012-Cus. Entry 431 (1) (a) namely claiming BCD @ 10%. The related corresponding Invoice No.GCO 7402 dt. 23.07.2012 describes the consignment as BMW CKD Cars BMW CKD automobile parts - the effect of notification No.31/2011-Cus. and also Notification No.12/2012-Cus.is that 10% BCD will be available only when the CKD kit imported contains engine / gearbox / transmission assembly in completely knocked down condition, i.e. not in preassembled condition. So also, in respect of another Bill of Entry 9190798 dt. 01.02.2013, the description of the imported goods is given as BMW Cars in CKD . The Custom Tariff Heading declared was 87039090 claiming concessional rate of 10% BCD available as per Sl. No. 437(1)(a) of Notification 12/2012-Cus. The corresponding invoice GCQ 8426 dt. 07.01.2013 describes the goods as CKD Cars BMW CKD Automotive Parts . Here also, the invoice advises to refer to packing list or alternatively, the invoice attachment, for description of quantity and nature of goods supplied . It appears to reason that assembly engine imported is already a complete preassembled engine. So also, the packing list does not contain items like gearsets, torque converters, mechatronic parts etc. which are components that go into the assembling of an automatic gearbox. Hence it appears to reason that the imported transmission sub-assembly / assembly auto gearbox / automatic transmission are gear box / transmission which are already preassembled at the time of import - Reference is also made to letters of appellants dt. 22.03.2013 and 04.04.2013 wherein it has been clarified that they do not assemble internal components of engine and automatic gearbox at the Chennai plant. We have then no doubt in our mind that the goods imported by the appellants were not of the type and nature which would merit the lowest B.C.D rate of 10% as extended vide the Notification No.21/2011-Cus. and later in No.31/2011-Cus. as amended by Notification No.12/2012-Cus. The allusion made to the rulings of the AAR will also not help the case of the appellants - the goods imported by the appellants will not benefit from the B.C.D rate of 10% but will only be eligible for higher B.C.D. rate since the CKD kits imported contained engine or gearbox or transmission mechanism in preassembled form (but not mounted on chassis or body assembly). Both for the periods 01.03.2011 to 23.03.2011 as also 24.03.2011 to 11.04.2013, the appellants are not entitled to a rate of B.C.D. @ 10% but will necessarily have to discharge B.C.D @ 60% and 30% respectively only - the issue decided in favor of Revenue. Time Limitation - Held that - the imported kits had been examined by Customs Officers during the period March 2011 to April 2013 and in most of these reports, it has been confirmed that the impugned goods have been found in CKD condition. - The allegation that appellant has suppressed facts of import of pre-assembled engine and preassembled transmission mechanism or that they have misstated the description of the goods to avail concessional rate of duty is demolished - the extended period of limitation cannot be invoked in this case and hence, the differential duty liability can be confirmed and demanded only for the normal period of limitation - For this limited purpose, the matter would be required to be remanded to the adjudicating authority to work out the duty liability afresh limited to the normal period of limitation. Penalties - Held that - For the very reason that ingredients justifying invocation of extended period not being present in this case, further also taking into account that the issue per se revolves around interpretation of the notification which itself underwent a number of changes, we hold that the penalty under Section 114A of the Customs Act, 1962 is not just and fair and is therefore set aside - penalty set aside. Confiscation - Redemption Fine - Held that - With regard to confiscation of the goods, as there has been definite contraventions of Section 111 (m) and (o) of the Customs Act, 1962, the confiscation ordered by the adjudicating authority is upheld. However, we reduce the redemption fine to ₹ 1,00,00,000/- (Rupees One Crore only) imposed under Section 125 of the Customs Act, 1962. Appeal is partly allowed and partly remanded.
Issues Involved:
1. Classification of imports as CKD (Completely Knocked Down) units and applicable customs duty rates. 2. Invocation of the extended period of limitation under Section 28(4) of the Customs Act, 1962. 3. Imposition of penalties under Sections 114A and 112(a) of the Customs Act, 1962, and redemption fine under Section 125 of the Customs Act, 1962. Issue-wise Detailed Analysis: I. Classification of Imports and Applicable Customs Duty Rates: Period 1.3.2011 to 23.3.2011: The appellant imported goods declared as "BMW CARS IN CKD" and claimed a concessional rate of customs duty at 10%. The Department contended that the goods, being in a pre-assembled form, were not eligible for the concessional rate and demanded a higher duty of 60%. The Tribunal noted that the definition of CKD, as per Notification No.21/2011-Cus., excluded kits containing pre-assembled engines, gearboxes, or transmission mechanisms. The Tribunal concluded that the imported kits did not meet the criteria for CKD units as per the notification and upheld the Department's demand for a higher duty rate of 60%. Period 24.3.2011 to 11.4.2013: The appellant continued to claim the 10% duty rate under the revised Notification No.31/2011-Cus., which introduced a three-tier duty structure. The Tribunal found that the imported kits contained pre-assembled engines and gearboxes, which did not qualify for the lowest duty rate of 10%. The Tribunal held that the goods were eligible for a higher duty rate of 30% as per the revised notification. II. Invocation of Extended Period of Limitation: The Tribunal examined whether the extended period of limitation under Section 28(4) of the Customs Act, 1962, could be invoked. The appellant argued that they had informed the Department about their import practices and that the Department had conducted physical examinations of the goods. The Tribunal noted that the Department had not raised any objections during these examinations and that the appellant had communicated their intent to continue availing the concessional rate. The Tribunal concluded that there was no deliberate suppression of facts by the appellant and that the extended period of limitation could not be invoked. The demand was restricted to the normal period of limitation. III. Imposition of Penalties and Redemption Fine: The Tribunal addressed the imposition of penalties under Sections 114A and 112(a) of the Customs Act, 1962, and the redemption fine under Section 125. Given the findings on the extended period of limitation, the Tribunal set aside the penalty under Section 114A. However, the Tribunal upheld the confiscation of goods under Sections 111(m) and (o) and the imposition of a redemption fine, though it reduced the fine to ?1,00,00,000. Similarly, the Tribunal upheld the penalty under Section 112(a) but reduced it to ?1,00,00,000. Summary of Orders: 1. The demand for differential duty is upheld but restricted to the normal period of limitation. The matter is remanded to the adjudicating authority for re-quantification of duty for the normal period with applicable interest. 2. The penalty under Section 114A is set aside. 3. The confiscation of goods under Sections 111(m) and (o) is upheld, with the redemption fine reduced to ?1,00,00,000. 4. The penalty under Section 112(a) is upheld but reduced to ?1,00,00,000. The appeal is partly allowed and partly remanded on these terms.
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