2024 (9) TMI 571 - AT - Customs

Classification of imported goods - electric kettle or parts of electric kettle - to be classified under Customs Tariff Item CTI 8516 90 00 as parts of electric kettle or under CTI 8516 71 00 as complete kettle? - Interpretation of Rule 2(a) of the General Rules of Interpretation of Import Tariff (GIR) - HELD THAT - As per GIR 2(a) goods in CKD or SKD condition deserve to be classified as finished articles. Similarly, unfinished or incomplete articles also deserve to be classified as complete or finished articles. If they are imported as parts which, if assembled, will not make the complete article but only make an incomplete article but such incomplete article will have the essential characteristics of the complete article such parts should also be classified as complete articles. It is undisputed that the plastic body, heating element, lid are imported through the Bill of Entry. The essential characteristics of an electric kettle is to heat the water using electricity to turn off heating as soon as the water attaining the required temperature. Heating element and thermostat and the body in the water is to be heated are all imported. The sensor provides an element of automation. In this case, insofar as the temperature is concerned, the controller thermostat itself functions as the sensor. Therefore, the sensor which the respondent procures domestically only adds some additional functionality. Similarly, the screw, plugs, wire etc., are minor parts without which also the kettle will have the essential characteristics of complete kettle although it will be incomplete. The Commissioner (Appeals) also recorded that the electric kettle will be incomplete without these parts without which it cannot be put in the market as an electric kettle. He, has lost sight of the fact that kettle incomplete also should be classified as complete kettle as per GIR 2(a). He misunderstood this rule and felt that unless all parts are imported together, an incomplete article or parts which constitute an incomplete article but which has the essential features of an complete article cannot be classified as a complete article which is contrary to GIR 2(a). There are no hesitation in holding that in the facts of this case that the Commissioner (Appeals) erred in setting aside the order in original passed by the Deputy Commissioner. The impugned order is set aside and the classification by Deputy Commissioner in his OIO is restored and the appeal filed by the revenue is allowed.

Summary

Issues:
Classification of imported goods as electric kettle or parts of electric kettle under Customs Tariff Item CTI 8516 90 00; Interpretation of Rule 2(a) of the General Rules of Interpretation of Import Tariff GIR.

Analysis:
The appeal and stay application were filed by the Revenue challenging the Order in Appeal that set aside the original order classifying the imported goods. The Commissioner (Appeals) held that the goods should be classified as parts of an electric kettle, not as an electric kettle itself. The Revenue contended that the goods had the essential character of an electric kettle and should be classified as such under Rule 2(a) of GIR. The respondent argued that additional essential parts were required for the goods to function as an electric kettle. The Tribunal had to determine whether the imported goods should be classified as an electric kettle or only as parts of an electric kettle.

The Department argued that the imported goods had the essential characteristics of an electric kettle, including components like the kettle body, lid, thermostat, base plastic top, and bottom. They contended that even unassembled or disassembled goods should be classified as finished articles if they have the essential characteristics of the complete article. The respondent, on the other hand, asserted that additional essential parts were needed for the goods to function as an electric kettle, such as the kettle controller, sensor, electric wire, and plug. They argued that without these additional parts, the goods should only be classified as parts of an electric kettle, not as a complete electric kettle.

The Tribunal examined the findings of the Deputy Commissioner and the Commissioner (Appeals) regarding the classification of the imported goods. The Deputy Commissioner found that certain essential parts were missing for the goods to function as an electric kettle, such as the sensor, electric wire, and plug. However, the Commissioner (Appeals) held that the goods could not be assembled into an electric kettle without additional parts procured domestically. The Tribunal concluded that the Commissioner (Appeals) erred in setting aside the original order, as the imported goods, even if incomplete, had the essential characteristics of an electric kettle. Therefore, the classification by the Deputy Commissioner was upheld, and the appeal by the Revenue was allowed, while the Cross-Objections by the respondent were dismissed. The Stay Application filed by the Revenue was also dismissed as infructuous.