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TMI Blog2023 (4) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... ers when presented together. It is concluded that imported air-conditioner kits in CKD/SKD condition, as described above have acquired the essential characteristics of an air-conditioner and therefore, when presented together at the stage of assessment under common invoice and bill of entry would merit classification under Heading 8415 and specifically under sub-heading 8415 10 or 8415 81 or 8415 82 or 8415 83, as the case may be depending upon the configuration and model type - an incomplete machine having the features of the complete machine presented unassembled and hence the indoor and outdoor units presented together in CKD/SKD forms are to be classified under Heading 8415 10/8415 81/8415 82/8415 83, as applicable. When the parts of IDU/ODU or Cooler/Condenser [Heat Exchange Units (HEX)] are imported in CKD/SKD condition, would the same also to be treated as parts of air-conditioners inasmuch as such parts are specifically designed for use in the assembly of HEX (IDU/ODU or Cooler/Condenser), which is an integral part of an air-conditioner; and therefore, eligible to be classified under sub-heading 8415 90 00 as parts of a part of air-conditioner? - HELD THAT:- As per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng import of air-conditioners in CKD/SKD condition has sought advance rulings on the questions as under :- (i) If the applicant imports all parts of air-conditioner in CKD/SKD condition (except capacitors) and assemble the complete air-conditioner in India, whether all such parts imported in CKD/SKD condition can be classified as air-conditioners under sub-heading 8415 10 10 or under any other sub-headings, by invoking Rule 2(a) of the General Rules of Interpretation (GRI, in short) to the Customs Tariff Act, 1975? (ii) If the applicant imports all the parts of air-conditioners in CKD/SKD condition, under different Bills of Entry by presenting them separately before Customs for clearance, whether all such parts can be classified as parts of air-conditioners under sub-heading 8415 90 00 by invoking Section Note 2(b) of Section XVI of the Customs Tariff Act, 1975? (iii) When the parts of cooler/condenser (i.e. heat exchange units-HEX) such as Fins, Copper tubes, Thermoset, Metal Plastic plates and others are imported together under a separate invoice and assembled by the job worker in India, whether they are classifiable as parts of heat exchange units under sub-head ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cus., dated 1-6-2011, as amended or under Notification No. 84/2004-Cus., dated 31-8-2004, as amended, as the case may be. 3.3 The applicant has further stated that they intend to import all the parts in CKD/SKD form and assemble the Air-Conditioners (finished goods) in India through a job worker; after import, they will supply the CKD/SKD parts to the job worker who will assemble them into a fully assembled Air-conditioners and send back to them. 3.4 The SKD parts proposed to be imported are : (a) Indoor Unit - IDU [in CKD/SKD condition] : (i) Unit Mock Up (ii) Motor (iii) Electric Box (iv) Line flow Fan (v) Fins, Copper tubes, Thermistor, Metal Plastic plates etc., (Parts of Heat Exchangers - HEX) (vi) Remote controllers (b) Outdoor Unit - ODU [in CKD/SKD condition] : (i) Unit Mock Up (ii) Motor (iii) Electric Box (iv) Compressor (v) Propeller Fan (vi) Reactor [for inverter models] (vii) Fins, Copper tubes, Thermistor, Metal Plastic plates etc. (Parts of Heat Exchangers - HEX) (c) Panel (for PAC unit only) 3.5 As detailed in the application, the applicant may impo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icle; the view has been upheld in the case of Procal Electronics India Ltd. v. Commissioner - 2005 (185) E.L.T. A58 (S.C.), wherein the Supreme Court agreed to the Tribunal and Revenue holding that once the goods are imported in CKD condition and presented before Customs as such the goods are classifiable as complete article. It is also stated that even if some non-essential items are not present in the CKD/SKD pack, the latter can still become a complete article as ruled in the case of Galaxy (Tuticorin) Agencies v. C.C.E. - 2009 (239) E.L.T. 478 (Tri.); and in the case of Bayerische Motoren - 2006 (193) E.L.T. 138 (A.A.R.), the erstwhile Authority for Advance Rulings held that motor cars imported in CKD units without seat have to be treated as complete cars; however, if the parts missing are essential, the CKD pack cannot constitute a complete article; further, the Tribunal in the case of Wipro GE Medical Systems Ltd. v. C.C. - 2006 (202) E.L.T. 141 (Tri.) has held that the CKD pack does not constitute a complete scanning machine because it did not contain parts like probes, monitor and keyboard assemblies; a CKD pack containing all the parts to make a car will be classified as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igerant only (ductable) 84158210 The applicant has also stated that parts imported separately cannot be clubbed together as discussed in the following cases; the Tribunal in the case of P.R. Trivedi v. CC - 2005 (192) E.L.T. 801 (Tri. - Mumbai) held that if the goods are imported and presented by different importers they cannot be allowed to be treated as complete car cassette player; even if they are imported by the same importer but in different consignments, they still do not become complete article since they are not presented together as a complete article in CKD condition, held the Supreme Court in the case of C.C., Delhi v. Sony India - 2008 (231) E.L.T. 385 (S.C.); thus, as per GRI 2(a) to the Customs Tariff Act, 1975, the CKD/SKD parts proposed to be imported by the applicant are all classified under the sub-heading 8415 10 10 or 8415 81 10/90 or 8414 82 10/90, as the case may be depending upon whether the installation is ductable or non-ductable because, as per the HSN explanatory notes, the classification of the air-conditioning machine under various sub-headings of Tariff Heading 8415 is mainly based on its design for fit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 84145990 8 Capacitor 85322200 9 Reactor 85043100 10 Motor 85014090 11 Compressor 84148011 12 Remote controller 84159000 The applicant has stated that the parts described against S. Nos. 4, 6 to 11 of the table above are goods which are specifically covered as goods in the tariff sub-headings mentioned against each; by following the Chapter Notes 2(a) of Chapter 84 all these items get classified under the respective tariff headings/sub-headings as indicated in the above table by virtue of its coverage under the respective sub-headings as separately identifiable goods; the parts mentioned against S. Nos. 1-3 12 are solely or principally designed to be used with the air- conditioning machine and not covered under any other tariff heading/sub-heading; by following the Chapter Note 2(b) of Chapter 84, these goods are classifiable under the sub-heading 8415 90 00 as parts of air-conditioner; however, when p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... presented for clearance before Customs, they should also be classifiable under sub-heading 8415 90 00 as parts of air-conditioner based on the use and suitability test as propounded by the Hon ble Supreme Court in the recent judgment; however, as per Chapter Note 2(a) of Chapter 84, parts which are goods classifiable under a tariff heading/sub-heading, are to be classified under those headings where it is specifically mentioned as separate goods; by invoking this note, the parts of HEX, viz. Finns, Copper tubes, Tubes, Thermosets, Metal plastic plates etc. can be classified under sub-heading 8419 90 90 as parts of HEX also; however, application has requested to confirm the classification of the parts of condenser/cooler (HEX) either under sub-heading 8415 90 00 as parts of air-conditioners or under 8419 90 90 as parts of Heat Exchange unit (HEX). 5. In accordance with the procedure prescribed under the regulations, personal hearing in the matter took place on 9-5-2022. At the outset, the Authority briefed the authorized representatives that comments from the concerned Principal Commissioner/Commissioner are still awaited. It was also informed that ex parte ruling in absence of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unassembled components in excess of the number required for a complete machine or for an incomplete machine having the characteristics of a complete machine, are classified in their own appropriate heading; however, it is to be noted that import of air-conditioners under 8415 10 10 and 8515 10 90 with refrigerants is prohibited as per Notification No. 41/2015-2020-DGFT, dated 15-10-2020; when the indoor/outdoor units are presented separately, the same merits classification under 8415 90 00; the goods under 8415 90 are eligible for BCD exemption as per Serial No. 449A of Notification No. 50/2017-Cus., dated 30-6-2017; the importers have requested for classification of parts of the air-conditioner imported and presented separately under 8415 90 00 as these are parts designed and solely or principally used for assembling air-conditioner; attention is drawn to Note 2 of the Section XVI Notes; compressor, reactor/capacitor, line flow fan/propeller fan, parts of heat exchanger unit, if presented separately are to be classified in their specific headings in accordance with Section Note 2(a); hence these items in all cases are classified in their own appropriate heading even if specially ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cept capacitors) and assemble the complete air-conditioner in India, whether all such parts imported in CKD/SKD condition can be classified as air-conditioners under sub-heading 8415 10 10 or under any other sub-headings, by invoking Rule 2(a) of the General Rules of Interpretation (GRI, in short) to the Customs Tariff Act, 1975? and (ii) When the parts of a Heat Exchange Units (HEX) are imported and presented together in CKD/SKD condition, the same should also to be treated as parts of Air-Conditioners inasmuch as such parts are specifically designed for use in the assembly of HEX (condenser or evaporator) which is an integral part of an air-conditioner and therefore eligible to be classified under sub-heading 8415 90 00 as parts of a part of air-conditioner? 6.4 The Authority asked the representatives as they have been importing air-conditioners for a long time, as to whether question related to import of parts/components of air-conditioners in CKD/SKD has ever been decided by any authority of Customs or Tribunal or Court. The representative answered the question in negative. Hearing, in the matter was concluded and the applicant was informed that ruling in the matte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and accordingly give ruling in respect of the same two questions. 7.2 The first question requires ruling on classification of imports of all parts of air-conditioner in CKD/SKD (except capacitors), which will be assembled to make complete air-conditioner in India. It has been submitted that the kits which the applicant intends to import will consist of various separately identifiable parts, components and sub-assemblies and presented before the Customs together for assessment. After the import into India, the applicant would assemble the air-conditioner from the kits through job worker after procuring non-essential component, namely capacitor. 7.3 The legal position regarding classification of goods in CKD/SKD conditions are fairly settled. As per Rule 2(a) of the GRI, any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as presented, the incomplete or unfinished articles has the essential character of the complete or finished article. It shall also be taken to include a reference to that article complete or finished (or falling to be classified as complete or finished by virtue of this rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le. 7.6 I now take up the second question, i.e. when the parts of IDU/ODU or Cooler/Condenser [Heat Exchange Units (HEX)] are imported in CKD/SKD condition, would the same also to be treated as parts of air-conditioners inasmuch as such parts are specifically designed for use in the assembly of HEX (IDU/ODU or Cooler/Condenser), which is an integral part of an air-conditioner; and therefore, eligible to be classified under sub-heading 8415 90 00 as parts of a part of air-conditioner? 7.7 In this regard, I note that as per the applicant assembly of Heat Exchange Units (HEX) would consist of assembly of IDU or ODU/cooler or condenser. It is indisputable that in the instant case such HEX are component/part of air-conditioners. Therefore, the IDU or ODD/cooler or condenser as parts of air-conditioner would merit classification under sub-heading 8415 90 00 as parts. However, when HEX units are presented together as air-conditioner kit, it would merit classification as air-conditioning machine under Heading 8415 10/8415 81/8415 82/8415 83, as applicable. I note that Heat Exchange Units are independently classifiable under sub-heading 8419 50; and they can be so classified if impo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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