9911796707
TMI Blog2024 (7) TMI 1325X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the jurisdiction of the Advance Ruling Authority under Section 28E(b) of the Customs Act, 1962 is to determine a question of law or fact specified in the application regarding the liability to pay duty in relation to an activity which is proposed to be undertaken by the applicant - HELD THAT:- The object of Advance ruling is avoidance of litigation and promoting better relationship. In the era of globalisation of business, the purpose for creating the Authority is for expeditious disposal and determination of question of law or fact specified in the application regarding the liability to pay tax in relation to a transaction proposed by the applicant for which the Authority is required to give advance ruling. The Authority has been created to promote better compliance inter alia with the provisions of the Customs Act, 1962, on the lines of a similar Authority constituted under the Income-tax Act, 1961. The advance ruling would enable an importer to obtain in advance, a binding view from the Authority under the Act on issues which could arise in determining his tax liability A reading of the above provision would show that an advance ruling would be binding only unless there is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is also a settled position in law that the goods would have to be assessed in the form in which they are imported and presented on import and not on the basis of the finished goods manufactured after subjecting them to some process after the import is made. Rule 2 (a) if applied to the facts considered by the 1st Respondent, the import cannot be understood as that of motor vehicles. Six essential components viz., Engine along - with Transmission Unit, Door Panel, HVAC and Cooling Module, Exhaust System and Axle are being procured from vendors in India. There are no reason to interfere with the impugned order - this Writ Petition stands dismissed. - Hon'ble Mr. R. Mahadevan, Acting Chief Justice And Hon'ble Mr. Justice Mohammed Shaffiq For the Petitioner : Mr. V. Sundareswaran For the R2 : Mr. Karthik Sundaram ORDER The present writ petition has been filed by the Revenue challenging the order dated 20.11.2015 passed by the first respondent - the Authority for Advance Rulings (AAR) in Advance Ruling No. AAR/Cus/12/2015 with respect to Application No.AAR/44/Cus/01/2014 filed by the second respondent - M/s BMW India Pvt Ltd (BMW India). Facts: 2. The 2nd Respondent is wholl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to note that the issue prior to April 2013 related to import of vehicles in CKD form. We intend to clarify that the impugned Advance Ruling dated 20.11.2015 is in relation to the activity/business model which the 2nd respondent proposed to follow on the date of its application before the Advance Ruling Authority i.e., subsequent to April 2013. It is stated that there is marked difference in the Modus Operandi / Business Model with regard to which the present application for Advance Ruling was sought. 2.4. The 2nd Respondent from April 2013 onwards proposed to change its business model / modus operandi , and the customs authorities were duly informed. Under the new business model the 2nd Respondent was to discontinue the import as CKD kits and proposed to import as parts of the motor vehicle . Under this new business model all the underlying component / parts / sub assemblies required for manufacturing motor vehicles were to be imported (except the seats and wire harness for 2 models) which were intended to be locally sourced from 3rd party vendors in India. The parts were intended to be imported from various BMW Group Companies and 3rd Party overseas vendors. Importantly, the im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompleted Built up Units (CBU) 60% Explanation I - Completely Built-up Unit means completely assembled vehicle, whether or not fitted with tyres or batteries. Explanation II For removal of doubts, it is hereby clarified that if the engine and the gear box assemblies are installed in the body assembly of a vehicle, then such a vehicle shall be deemed as a Completely Built-up Unit. b) if imported in any other form 30% 2. Amendment To Notification No.21/2002, vide Notification No.26/2003 dated 01.03.2003 Motor cars and other motor vehicles principally designed for the transport of persons (other than those of heading 87.02) including station wagons and racing cars, new which have not been registered anywhere prior to importation: a) if imported as Completed Knocked Down (CKD) Unit. 25% b) if imported in any other form 60% 3. Amendment to Notification No.21/2002, vide Notification No.11 of 2005 dated 01.03.2005 (xxxvi) against S.No.344 for the entry in column (4) occurring against item (1), the entry 15% shall be substituted instead of 25%. 15% 4. Amendment to Notification No.21/2002, vide Notification No.11/2006 dated 01.03.2006 (xxxiv) against S.No.344 for the entry in column (4), for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and transmission mechanism not in a pre-assembled condition; 10% b) engine or gearbox or transmission mechanism in pre-assembled form but not mounted on a chassis or a body assembly; 30% 2) in any other form- a) with FOB value more than USD 40,000 and with engine capacity more than 3000 cc for petrolrun vehicles and more than 2500 cc for diesel-run vehicles; 75% b) other than (a) above; 60% 5.1. From a reading of the above Table, it would be clear that Notification No.21/2002 dated 01.03.2002 provided vide S.No.344 that motor vehicles in completely built up condition would be liable to duty at 60%, while import in any other form would be liable to tax at 30%. The notification also contained an Explanation with regard to the expression completely built up . The above Notification was amended vide Notification No.26/2003-Cus dated 01.03.2003 whereby motor vehicle imported in completely knocked down condition was liable to duty at 25% and import of motor vehicle in any other form at 60%. The rate of duty on import of completely knocked down motor vehicles was reduced periodically from 25% to 15%, 15% to 12.5% and 10% vide Notification No.11 of 2005, Notification No.11 of 2006, Notific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e imported, Rule 2(a) of the General Interpretative Rules would come into play since it is possible to take a view that when all these parts, components or sub assemblies when put together would have the essential character of a complete or finished motor vehicle. Importantly, it was also clarified that if a few of these components or parts of sub assemblies are not imported but are manufactured or purchased locally, it would then be difficult to take a view that the import of the other components or parts or sub assemblies has the essential character of a complete or finished motor vehicle. Issue of Maintainability raised by 2 n d Respondent : 10. We shall now deal with the issue of maintainability of the application before the 1st Respondent raised by the appellant. The appellant raised a preliminary objection as to the maintainability of the application before the 1st Respondent, on the premise that the jurisdiction of the Advance Ruling Authority under Section 28E(b) of the Customs Act, 1962 is to determine a question of law or fact specified in the application regarding the liability to pay duty in relation to an activity which is proposed to be undertaken by the applicant. 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to an activity which is proposed to be undertaken, by the applicant; . 12.1. A conjoint reading of the above provisions would show that an Advance Ruling can be sought for determination of a question of law or fact specified in the application regarding the liability to pay duty in relation to an activity proposed to be undertaken . Activity is defined to mean import or export while also including any new business of import or export proposed to be undertaken by the existing importer or exporter. The learned counsel for the Revenue would submit that the 2nd Respondent being already in the business of import of motor vehicle, mere change in the business model would not enable them to obtain an advance ruling, for, it would then not be a new business which is a condition precedent for the 1st Respondent to issue any ruling. We are unable to agree with the above submission of the learned counsel for the 2nd respondent, if we bear in mind the object of constituting an Advance Ruling Authority, which is to give a ruling in advance to remove uncertainty in the mind of an applicant and eliminate possibility of dispute before any dispute arises. The object of Advance ruling is avoidan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y be useful to refer to the following judgment : 1. CIT v. Hindustan Bulk Carriers, reported in (2003) 3 SCC 57: 18. The statute must be read as a whole and one provision of the Act should be construed with reference to other provisions in the same Act so as to make a consistent enactment of the whole statute. 19. The court must ascertain the intention of the legislature by directing its attention not merely to the clauses to be construed but to the entire statute; it must compare the clause with other parts of the law and the setting in which the clause to be interpreted occurs. (See R.S. Raghunath v. State of Karnataka [(1992) 1 SCC 335: 1992 SCC (L S) 286: (1992) 19 ATC 507: AIR 1992 SC 81]) Such a construction has the merit of avoiding any inconsistency or repugnancy either within a section or between two different sections or provisions of the same statute. It is the duty of the court to avoid a head-on clash between two sections of the same Act. (See Sultana Begum v. Prem Chand Jain [(1997) 1 SCC 373: AIR 1997 SC 1006]) 2. Jayam and Co. vs. Assistant Commissioner reported in (2016)15 SCC 125: a. 18. Another principle of statutory interpretation which needs to be noticed is th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct the application on the ground that the question raised in the application is already pending before an officer of Customs, Appellate Tribunal or Court or the question raised is decided by Appellate Tribunal or Court. 15.1. A reading of Section 28 I(2) of the Act would show that mere obtaining of an Advance Ruling in respect of a product does not bar an applicant from approaching the Advance Ruling Authority if there is a change in fact or law. Admittedly, there is change in business model. The 1st Respondent has on examination admitted the application which remains unchallenged. It is trite law that when an order resulting in adverse consequences is not challenged immediately / at the earliest / within the prescribed period (if limitation is prescribed) the same must be treated as having attained finality and then ought not to be disturbed lightly (Rama Narang v. Ramesh Narang, (2021) 15 SCC 338). It is also relevant to note that the appellant having participated and thereby acquiesced in the proceedings, ought to be understood as having waived their right to challenge the maintainability of the application before the 1st Respondent. We say this conscious of the fact that acquie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e applicant as they import and manufacture items which are relevant to BMW cars only is rejected by finding that there is nothing irregular in local third party vendors importing and manufacturing such items, as it is their business decision-specially when these third party vendors are reportedly renowned global suppliers and have their own independent factories. Therefore, the allegation levelled by Revenue that third party vendors appearing to be mere extension due to corporate agreements between the applicant and third local vendors, is without basis and therefore not tenable. (d) That the Applicant / 2nd Respondent proposes localization of six essential components / parts / sub-assemblies, which will be manufactured by local third party vendors on payment of Central Excise duty and supplied to the applicant for manufacture of motor vehicle. (e) That the Revenue has not produced any tangible evidence to indicate that the applicant has entered into any fictitious arrangement to evade Customs duty. (f) That Rule 2(a) of the Rules of Interpretation of Tariff are applicable only if all components intended to make a final product presented at same time for customs clearance. The judg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed article, which is as presented , must have the essential character of the complete or finished article . It is also a settled position in law that the goods would have to be assessed in the form in which they are imported and presented on import and not on the basis of the finished goods manufactured after subjecting them to some process after the import is made. In this regard, it may be relevant to refer to the following judgments: (i) Commissioner of Customs v. Sony India Ltd., reported in (2008) 13 SCC 145 : 23. We would, therefore, consider the implication of Rule 2(a). Rule 2(a) is as under: 2. (a) 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. The learned ASG, therefore, suggests that the articles though were not the CTVs in CKD form and were incomplete or unfinished ones, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustoms for assessment and classification purpose. It is also a settled position in law that the goods would have to be assessed in the form in which they are imported and presented to the customs and not on the basis of the finished goods manufactured after subjecting them to some process after the import is made. (ii) M/s.L.G. Electronic India Pvt. Ltd. and others v. Commissioner, Central Excise, Noida-II, reported in (2023) 6 Centax 183 (Tri. -All): 15. The first issue that arises for consideration is regarding Interpretative Rules 2(a) of the Central Excise Tariff. The order of the Commissioner is based on this rule 2(a) and, therefore, it will be necessary to reproduce it and rule 1 also and they are as follows: The Schedule-Excise Tariff Rules for the Interpretation of the this Schedule 1. The titles of Sections and Chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the provisions hereinafter contained. 2. (a) Any reference in a heading to goods shall be taken to includ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 1997 circular, it would be clear that in view of the fact that these six parts are being procured locally the import cannot be stated to have the essential character of a motor vehicle inasmuch as it was clarified that the following parts could be construed as most essential to bring into effect, a finished motor vehicle viz., Engine, Gear Box, Chassis, Transmission Assembly System, Body/Cab, Suspension System, Axel Front and Rear. It was clarified that if all these components or parts or sub assemblies are imported, Rule 2(a) of the General Interpretative Rules would come into play since it is possible to take a view that when all these parts, components or sub assemblies when put together would have the essential character of a complete or finished motor vehicle. Importantly, it was also clarified that if a few of these components or parts of sub assemblies are not imported but are manufactured or purchased locally it would then be difficult to take a view that the import of the other components or parts or sub assemblies has the essential character of a complete or finished motor vehicle. The facts considered by the Advance ruling would show that at least 3 out of the six com ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
