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TMI Blog2022 (12) TMI 1471X X X X Extracts X X X X X X X X Extracts X X X X ..... nator to produce electricity and drive the three-phase induction motor. In this electrical AC drive system, the control cabinet and wheel motor play the role of the gearbox and transmission system. Hence, it shall not comprise of a gearbox and transmission system, and this would instead be replaced by the alternate technology explained above, i.e., a control cabinet and wheel motor - In the instant case, the subject dump truck proposed to be imported in CKD form shall continue to be driven by fuel only and no electrical energy is derived from any external source or from batteries to run such dump trucks. This truck does not operate solely on electrical energy to be called electrically operated vehicle. Whether the goods imported as Completely Knocked Down (CKD) kit by the applicant contains all the necessary components, parts or sub-assemblies, for assembling a complete vehicle with engine or gearbox or transmission mechanism in pre-assembled form but not mounted on a chassis or a body assembly? - HELD THAT:- In the present case, the role of a gearbox and transmission system is performed by an alternate technology in the subject motor vehicle. The dump truck shall be built wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rishi Raj-Head Mining, Government Business and Natarajan Murugan, DGM-Dumper Mid HEX, for the Applicant. Shri Yogendra Singh, A.O Gr-V-B, Import Commissionerate -I, for the Respondent RULING M/s TATA Hitachi Construction Machinery Company Private Limited (hereinafter referred to as applicant), is a company incorporated in India under the provisions of the Companies Act, 2013 and having its registered head office located at Jubilee Building, 45, Museum Road, Bengaluru, Karnataka 560025. 2. The applicant is a joint venture entered into between TATA Motors Limited and Hitachi Construction Machinery Company Limited and are into manufacturing of mining and construction equipment. The Applicant has filed four CAAR 1 applications no. CAAR/Cus/Appl/71/2022, CAAR/Cus/Appl/72/2022, CAAR/Cus/Appl/73/2022 and CAAR/Cus/Appl/74/2022 on the same issue but pertains to different ports of import viz. Commissioner of Customs, Nhava Sheva -V, JNCH and Commissioner of Customs, Import I, New Custom House, Mumbai, Commissioner of Custom, Kolkata, Commissioner of Customs, Chennai. 2.1 The applicant is seeking a ruling on whether they are eligible to claim concessional rate of basic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 50/2017-Customs dated June 30, 2017. 3.6 The import of CKD kit covers imports of sub-assemblies within its ambit. Hence, as long as the imported goods are not in the form of a completely built-up unit (CBU), the same can be said to be in CKD condition for the purpose of determining the classification and taxability under the Customs law. 3.7 The CKD kit are imported for the purpose of assembly of dump trucks which shall be used for mining, quarrying, loading and other activities. 3.8 They relied on the Circular F. No. 528/128/97-Cus-TRU, dated 5 December 1997 issued by the CBEC explaining the scope of said Rule 2(a) of the General Rules of Interpretation. As per the circular the engine and alternator, gearbox, chassis, transmission assembly system, body/cab suspension system, axle front and rear are among the parts or components or sub-assemblies, considered most essential to bring into effect a finished motor vehicle. 3.9 They further relied on following judgments: (a) M/s Volvo Auto India Private Limited [2022 (3) TMI - 560 - Customs Authority for Advance Rulings, New Delhi)/2022 (379) E.L.T. 513 (AAR - Cus - Delhi)] (b) M/s H-D Motor Company India Private ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e engine and alternator, control cabinet and wheel motor (i.e. alternate technology used in place of gearbox and transmission system), chassis in a completely knocked down form. Since in the present case, the imported goods do not contain all the necessary components viz. gearbox/transmission mechanism as envisaged in the notification, thus it is clear that this vehicle is different from one mentioned in the notification as it uses alternator in place gearbox and transmission mechanism. Thus this CKD Motor vehicle is not covered under Sl. No. 524(1)(b) of the Notification No. 50/2017-Cus., Dated 30-6-2017. Hence, the CKD Motor Vehicles (proposed to be import) is ineligible for exemption benefit under Sl. No. 524(1)(b) of the Notification No. 50/2017-cus., dated 30-6-2017. 6. Comments of the Commissioner of Customs, Nhava Sheva-V, JNCH were forwarded to the applicant who vide letter dated 25-11-2022 submitted their rejoinder, which is as follows: 6.1 The role of a gearbox and transmission system is performed by an alternate technology in the subject motor vehicle. The dump truck proposed to be assembled by the applicant in India shall be built with an electrical AC drive syste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dertaken in India. Under the entry Sl. No. 524(1), the requirement of importing in CKD form comprising all the essential components, sub-assemblies, etc. has been provided. This condition is being duly met by the Company and the same has not been objected by the Nhava Sheva Customs authorities as well. Thereafter, once a product is eligible under Sl. No. 524(1), the next step of evaluation provided under sub-entries (a) and (b) for determining the applicable rate is based on the level of disintegration of the key components and the extent of manufacturing activity to be undertaken in India. Accordingly, in the instant case, since the key components (i.e., the engine, alternator, control cabinet and wheel motors) shall be imported in pre-assembled form but not mounted on the chassis, we submit that BCD rate of 25% shall be applicable. 6.6 They relied upon the decision the following decisions: (a) Collector of Customs Central Excise v. Lekhraj Jessumal Sons (1996 (2) TMI 135 -SC)/1996 (82) E.L.T. 162 (S.C.)/1996 taxmann.com 983 (SC) (b) M/s Datex Ohmeda India Pvt. Ltd. v. The Commissioner of Customs, Bangalore (2018-TIOL-2647-CESTAT-BANG)/2018 (362) E.L.T. 866 (Trib.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or any vehicle cannot be treated as complete vehicle at all. Therefore, as per the Sl. No. 524 of the Notification No. 50/2017-Customs dated 30-6-2017, all the necessary components are not being imported by the applicant to make a complete vehicle. 7.2 The concessional rate of basic duty is applicable only when a Motor vehicle is imported as CKD containing all necessary components which makes a complete vehicle, not only the essential/critical components. But the importer is ignoring this fact/condition of the said Notification. To support their argument, they relied on the following judgments: (a) Commissioner of Customs, New Delhi v. Sony India reported in 2008 (231) E.L.T. 385 (S.C.)/2008 taxmann.com 1008 (SC) (b) M/s BMW India Pvt. Ltd. In re - Ruling of the Authority for Advance Ruling, New Delhi-AAR/Cus/12/2015 reported in 2016 (332) E.L.T. 537 (A.A.R.) 7.3 The CKD kit being imported contains the engine and alternator, control cabinet and wheel motor (i.e., alternate technology used in place of gearbox and transmission system) in pre-assembled form but not mounted on a chassis or a body assembly. However, condition 524 of the said Notification prescribes, engine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... according to the Explanatory notes to HSN. 8.3 The facts of the case laws relied upon by the Commissioner of Customs, Import I, New Custom House, Mumbai are entirely different from the facts of their case and hence, would not be binding on them as in both the relied upon cases, the essential parts were not imported together, however in their case all the parts are being imported together. 8.4 The role of a gearbox and transmission system is performed by an alternate technology in the subject motor vehicle. The dump truck proposed to be assembled by the applicant in India shall be built with an electrical AC drive system, wherein power is supplied from the engine to the alternator to produce electricity and drive the three-phase induction motor. 8.5 Hence the subject motor vehicle only comprises of an electrical technology as a replacement of gearbox transmission system and is not to be considered as an electrically operated vehicle since it continues to be driven by fuel. The eligibility of concessional rate should be determined on the basis of the functions and characteristics of the key components and mere fact that one of the internal systems uses an alternate techno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m. The applicant was granted four days' time to submit their response to the stand taken by the Jurisdictional Commissioner. 11. I have gone through the contents of the application, the submissions made by the applicant, replies and responses received from the Commissioner of Customs, Nhava Sheva v. JNCH and Commissioner of Customs, Import I, New Custom House, Mumbai. No Comments were received from Commissioner of Custom, Kolkata, Commissioner of Customs, Chennai. Since the issue of classification and notification benefit is exactly the same for four different applications, I hereby take up all applications for the purpose of discussion and analysis in this single ruling. 11.1 The applicant is proposing to import dump trucks in the form of completely knocked down (CKD) kits for the purpose of undertaking the assembly of the dump trucks in India. As part of the CKD kits, the key essential components required for assembling the truck shall be imported by them in a single consignment. These key essential components, among other components are as follows: (a) Engine and Alternator (b) Main frame assembly (i.e., chassis) (c) Control cabinet (d) Wheel motor (e) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ( a ) engine, gearbox and transmission mechanism not in a pre-assembled condition 15% ( b ) engine or gearbox or Transmission mechanism in pre-assembled form but not mounted on a chassis or a body assembly. 25% (2) other than (1) above. 40% 11.5 To qualify for the benefit of concessional rate of duty of 25% as per Sl. No. 524(1)(b) of the notification, the proposed goods should satisfy the following conditions: (a) The goods should be Motor vehicles (excluding electrically operated vehicles) which can be classified under 8702 or 8704. (b) the goods imported as Completely Knocked Down (CKD) kit should contain all the necessary components, parts or sub-assemblies, for assembling a complete vehicle with engine or gearbox or transmission mechanism in pre-assembled form but not mounted on a chassis or a body assembly. The applicant is proposing to import dump trucks designed for off-highway use in CKD form. I find that the Motor Vehicles for the transport of goods are classified under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y submit that the CKD kit being imported, albeit being incomplete, has the essential character of a dump truck. The Commissionerate of Customs, Import I, Mumbai Customs Zone 1, has stated that the dump body, rim and tyres are also the essential/necessary components and without these components, a dump truck or any vehicle cannot be treated as complete vehicle at all. Therefore, as per the Sr. No. 524 of the Notification, all the necessary components are not being imported to make a complete vehicle. 11.8 The General Rules of Interpretation of the Harmonized System (GRI) provides for the rules/principles for classification of goods. In terms of 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 article 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), presented unassembled or disassembled. This point has been further substantiated by CBEC vide its Circular F. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent dates in 94 consignments, therefore, the parts were not held as complete TV. However, in the case of the applicant all the essential parts are imported at one time as a single consignment. (b) The Ruling of the Authority for Advance Ruling, New Delhi in the case of M/s BMW India Pvt. Ltd -2016 (332) E.L.T. 537 (A.A.R.) relied by the Jurisdictional Commissioner was with respect to the localization of the six essential components/parts/sub-assemblies required for manufacture of motor vehicles in India, namely; Engine (along with engine and transmission unit); Axel assembly; Exhaust system; Cooling module; Heating, Ventilation and Air-Conditioning unit (HVAC) and Door Panels and that the local third party vendors will source the components/parts/sub-assemblies of the above said component/parts/sub-assemblies of the motor vehicles independently from BMW AG and its approved suppliers (if any). I find that the facts of this case is totally different from the present case and cannot be relied for deciding present ruling. 11.10 The second argument of the Commissionerate of Customs, Import-I, New Custom House, Mumbai was that the CKD kit being imported contains the engine and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... since in the present case, the imported goods do not contain all the necessary components viz. gearbox/transmission mechanism as envisaged in the notification, thus it is clear that this vehicle is different from one mentioned in the notification as it uses alternator in place gearbox and transmission mechanism. Thus, this CKD Motor vehicle is not covered under Sl. No. 524(1)(b) of the Notification No. 50/2017-Cus., Dated 30-6-2017. Hence, the CKD Motor Vehicles (proposed to be import) is ineligible for exemption benefit under Sl. No. 524(1)(b) of the Notification No. 50/2017-cus., Dated 30-6-2017. 11.14 In this regard I find in the present case, as already discussed in foregoing paras, the role of a gearbox and transmission system is performed by an alternate technology in the subject motor vehicle. The dump truck shall be built with an electrical AC drive system, wherein power is supplied from the engine to the alternator to produce electricity and drive the three-phase induction motor. In this case, the function of a traditional gearbox and transmission system is being achieved through other components such as alternator, control cabinet and wheel motor, although a gearbox an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s case is proposing to import engine and alternator, control cabinet and wheel motor in pre-assembled form assembled by the overseas vendor but the same shall not be mounted on the main frame assembly (also known as chassis) qualifying for the concessional rate of duty. The CKD kit proposed to be imported, as described in para 3.1 of this ruling, satisfies the test laid down by the CBEC Circular from F. No. 5281/128/97 Cus - TRU, dated 5-12-1997 that the components mentioned in this kit will bring into effect a motor vehicle. 11.16 Therefore, I hold that the dump truck proposed to be imported by applicant as Completely Knocked Down (CKD) kit contains all the necessary components, parts or sub-assemblies viz. engine and alternator, main frame assembly (i.e., chassis), control cabinet, wheel motor, rear and front axles, suspension cylinders for assembling a complete motor vehicle with engine, alternator, control cabinet wheel motor in pre-assembled form but not mounted on a chassis or a body assembly in the present case. 12. On the basis of the above findings, I hold, in four separate CAAR-1 applications of the applicant, that they are eligible to claim concessional rate of b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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