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TMI Blog2023 (6) TMI 1094X X X X Extracts X X X X X X X X Extracts X X X X ..... not provide the basic function of propulsion as required for the classification under CTH 870 3.So, without the battery, the Tricycle cannot be operated and hence it is one of the essential parts. Similarly, the other parts not imported are also essential to make a fully finished Tricycle. Hence, the findings of the adjudicating authority that the goods imported by the appellants together has the essential characteristic of erickshaw/ Tricycle, cannot be agreed upon. The goods as imported by the Appellants together are not in complete nature and require a manufacturing process in order to obtain a fully finished vehicle. As per the definition of the vehicle, any imported components cannot be said to be fully functional unless they achieve the basic characteristic of the said appliance/instrument. Since, the Appellants together has not imported the complete kit required for a fully finished Tricycle falling under CTH 8703, it is held that the imported spare parts together cannot be classified under 8703. Accordingly duty cannot be demanded @ 30% by applying Sl.No.526(1)(b) of Notification 50.2017. The Notice proposes to adopt the value of Rs 33,000 per Tricycle as per the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... They are authorized to manufacture Tricycles operated by battery under Motor Vehicle Rules. Baba Baidyanath (herein after referred as Appellant 2) is a Trading Company dealing in parts of Tricycle. The Appellant 1 imported some parts of the Tricycle and procured some parts from Appellant 2, which were imported by him separately. The allegation of the department is that both the parts imported by Appellant 1 and Appellant 2 together would constitute a fully assembled Tricycle. Accordingly Show Cause Notice dated 23.05.2019 was issued to the Appellants 1 and 2 proposing to club both the imports together and to assess the goods as fully finished Tricycles, instead of parts of tricycles, as claimed by the Appellants.The said Notice was adjudicated by the Commissioner of Customs (Port) vide Order-in-Original dated 12.03.21, wherein the adjudicating authority classified the goods imported as Tricycles under the CTH 8703840 as against the classification of 87089900, claimed by the Appellants as parts of Tricycles. Vide the impugned order, the adjudicating authority confirmed differential duty of Rs.18,91,596/- and imposed redemption fine of Rs.2 Lakhs. He also demanded interest and impose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being sold in international market as parts. They further stated that classification of the goods is to be made on the basis of the item imported on as is where is basis. The goods are required to be classified in the form in which it is imported. Both the appellants have imported few spare parts only which would not make a Tricycle in CKD condition. Several parts and precision manufacturing would be needed for manufacturing of a Tricycle. It is alleged in the impugned order that the imports by both the Appellants had taken place at the same time.The Appellants stated that because of that a conjecture has been made by the department that both the imports when put together would make a Tricycle in CKD condition. Appellant 1 had imported certain parts for their own use and for certain parts they had to depend on Appellant 2 since these were required to be manufactured at China and that they have an expertise in the same they got the goods manufactured with their monogram so that it can pass the test laid down under the Motor Vehicles Act. Matching of the spare parts imported by both of them together is of no consequence since both these imports together would not make Tricycles in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d chapter note along with terms of heading. If no clear picture emerges then only one can resort to subsequent rules. 10. It would appear from the Customs Tariff Heading 8703 parts of the vehicles are not covered therein. Rule 2(a) would not be applicable inasmuch as the items imported and presented for assessment were parts and engineering process of completion was required to be undertaken. Manufacturing of vehicle is a very high technical skill and prototype approval is required from international standard as well as state level. It cannot be done by mere fixings. In view of the facts and circumstances, import of the components cannot be treated as import in CKD condition. 11. The Appellant relied upon the decision in the case of Sony India Ltd Vs CCICD, New Delhi, 2002 (143) ELT 411 (Tri- LB)wherein it has been held that the components imported cannot be treated as complete colour T.V. set by clubbing.They cited the decision of Larger Bench in the case of New India Industries Ltd Vs Collector of Customs (73)ELT 723(LB), wherein it has been held that the goods are to be assessed for classification in the manner and condition in which the same are imported. 12. The Appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no bill of entry was filed with incorrect material particulars. A classification dispute will not lead to a charge of 114AA. Classification is assertion of right and it is a point of law. As held by the Hon ble Supreme Court in the case of Northern Plastic, a dispute on classification will not be a case of mis - declaration. In the bills of entry there was no incorrect material particular given. Therefore, penalty under Section114AA not imposable. 16. The Ld A.R reiterated the findings in the impugned order. 17. Heard both sides and perused the appeal records. 18. The issues to be decided in the appeals are: (1) Classification of the goods whether under CTH 87089900 as claimed by the Appellants or CTH 8703840 as determined by the Revenue in the impugned order (2) Whether penalties under section 114A /114AA are imposable ? (3) Whether confiscation of the goods and imposing redemption fine sustainable? (4) Whether dropping of the demand on the value enhancement by the adjudicating authority is correct? 19. We observe that the main issue involved in the present appeals is the classification of the goods imported by the Appellants. The Appellants imported variou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aracteristic of e-rickshaw. For Example, battery is one of the parts not imported. As per the terminology of three wheeled vehicle, the same has to be powered or there should be propulsion through a battery which provides the power to the motor in order to thrust a vehicle.CTH 8703.80 covers the vehicle propelled through motor powered by a battery. The goods imported by the appellants together if assembled will not provide the basic function of propulsion as required for the classification under CTH 870 3.So, without the battery, the Tricycle cannot be operated and hence it is one of the essential parts. Similarly, the other parts not imported are also essential to make a fully finished Tricycle. Hence, we do not agree with the findings of the adjudicating authority that the goods imported by the appellants together has the essential characteristic of erickshaw/ Tricycle. 22. In the case of Commissioner of Customs v. Lextrix Motors Ltd. reported in 2017 (353) ELT 149 (Del.) where Hon ble High Court has laid the emphasis on the definition of CKD kit and held as follows: When goods are imported, as in the present case, in a CKD condition, what in fact is imported is the entir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .No.526(1)(b) of Notification 50.2017. 25. In the case of Ma Sherawali Impex v. Commissioner of Customs (Port), Kolkata reported in 2003 (162) ELT 835 (Tri.-Kolkata), wherein the Tribunal held as follows:- 5. We have carefully considered the rival submissions and gone through the case records including the orders-in-original and the order-in-appeal and have also perused the case laws relied upon by the defence. The issues that arise for determination in all these appeals whether the impugned goods are classifiable as complete photocopier machines falling under Heading 9009.12 as held by the appellate authority or under sub-heading 9009.99 as components of photocopier as claimed by the appellants, and whether there was any mis-declaration with regard to value or the quantum of the goods imported. We observe that in all these cases the appellants herein have imported components of photocopying machines under different bills of entry and all the consignments were physically examined by the proper officer in the presence of the Chartered Engineer who have issued certificates of examination after inspection of the goods. The certificates clearly states the condition of the goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y mis - declaration with regard to the quantities and the number of items imported. The learned Counsels for the appellants have argued that for a photocopier to become functional the activities such as fixing of the assembly unit, feeding assembly, functional gears, drum unit, developer unit, motor, Clutch lens assembly with six mirror assembly, etc., have to be undertaken and after that all the unit has to be thoroughly cleaned with petrol/K. oil and the damaged parts if any have to be replaced. He has also pleaded that items such as Control panel, top panel cover, top glass, front cover, right cover, left cover, top flat ADF/ top cover Bypass tray, apart from other miscellaneous items like screws, washers, circlips, etc., are also required to make a photocopier complete and functional. The Revenue has not controverted this position. Further, it is also an admitted position by the Revenue itself that except in the case of import covered by three Bills of Entry, the goods were only almost complete photocopiers. In these three cases also. (BE No. 156088 dt. 19-12-02, Bill of Entry No. 15687 dt. 20-12-87 and Bill of Entry No. 156608, dt. 30-12-02) the Bills of Entry and the Charte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Knocked Down (CKD) kit containing all the necessary components, parts or sub-assemblies, for assembling a complete vehicle, with, - (a) engine, gearbox and transmission mechanism not in a pre-assembled condition; (b) Engine or gearbox or transmission mechanism in pre - assembled form but not mounted on a chassis or a body assembly. 10% 30% - - - - 28. As per Sl.No.526(1)(b), the imported goods should be in the form of completely knocked down kit containing all the necessary components, parts or sub-assemblies, for assembling a complete vehicle with the engine or gearbox or transmission mechanism in preassembled form but not mounted on a chassis or a body assembly will attract the standard rate of duty @ 30% ad valorem. The goods imported by the Appellants together did not have all the essential components i.e. Controller, Differential and battery which are required to form a CKD kit as per the definition of the said notification which reads as Completely Knocked Down (CKD) kit containing all the necessary components, parts or sub-assemblies, for assembling a comple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r confiscation under Section 111 (m) of the Customs Act. Section 111(o) of the Customs Act was also not applicable.The adjudicating authority demanded duty from the Appellants jointly and severally and imposed redemption fine and penalty jointly and severally which is contrary to law. We find merit in the arguments of the Appellants. There is no provision of demanding duty and imposing penalty jointly and severally from the Appellants. Accordingly, we hold that the demands are not sustainable on this count also. 31. Regarding the department s appeal we find that the adjudicating authority has given a clear finding in the impugned order which is reproduced below: 34.2 The party has submitted in their defence that there is no basis to reassess the goods imported by them at Rs.33,000/- contrary to the Valuation Rules. There is no ground given in the Show Cause Notice for rejection of the transaction value. The NIDB data referred in the Show Cause Notice is only three instances of import of tricycle in CKD conditions. There cannot be pick and choose of data for valuation. Lowest value is required to be taken. Data should be of continuous six months period for referring to DOV dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Heading 87038040. The goods are rightly classsifiable under CTH 87089900. (ii) .Regarding penalty imposed in the impugened order, we hold that Notice was not issued under Section 28(4) of the Customs Act and therefore penalty under Section 114A and under Section 114 AA are not applicable.provisionally assessed bill of entry could not be covered under Section 28 and 114 A of the Customs Act, 1962 and therefore imposition of penalty of Rs.18,91,596/- was erroneous inasmuch as 114A was not liable in the subject case.Section 114 AA was not applicable on the subject goods and therefore imposition of penalty of Rs.2 Lakhs on the appellant jointly and severally with M/s. Big Bull Traders is illegal and bad in law. (iii) goods were not liable for confiscation under Section 111(m) and 111(o) of the Customs Act and the order of confiscation not sustainable.order of imposition of redemption fine of Rs.2 Lac not sustainable and is liable to be set aside. (iv)The departments appeal for value enhancement is rejected. 34. In view of the above discussion, we allow the Appeals filed by the Appellants importers. The Appeal filed by the department is rejected. ( Order pronounced in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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