2019 (2) TMI 149 - HC - Customs

Court rules E-Rickshaw parts as components, not vehicles, in customs dispute

M/s. Rama Krishna Sales Pvt. Ltd. Versus Union Of India And Ors.

The court ruled in favor of the petitioner, directing the Customs Authorities to clear the consignment of E-Rickshaw parts upon payment of applicable ... Classification of imported goods - E-Rikshaws - petitioner disputes that the E-rickshaw parts can be considered as Motor Vehicles under Rule 126 of the Central Motor Vehicles Rules, 1989 - whether the Customs Authorities are justified in withholding the consignment of parts of E-Rikshaws on account of non-production of a Type Certificate as required under Rule 126 of the Central Motor Vehicles Rules, 1989? Held that:- Undoubtedly, the three parts (rear axle, motor and controller) imported by the petitioner are key essential parts for assembling an E-Rickshaw. The cumulative value of these three parts also constitutes a substantial value of an E-Rickshaw. However, it is not disputed that these three parts do not by themselves constitute the complete product (E-Rickshaw). There are, undisputedly, several other parts that are required to be assembled along with the three parts (rear axle, motor and controller) imported by the petitioner to produce an E-Rickshaw. In this view, it is difficult to accept that these parts imported by the petitioner could be construed as a motor vehicle for the purposes of the Motor Vehicles Act, 1988 or the Rules made thereunder. A motor vehicle is a contraption that can be used on roads. E-Rickshaw is clearly a motor vehicle; but the three parts in question, even though being substantial components of an E-Rickshaw, cannot be termed as motor vehicle within the meaning of Section 2 (28) of the Motor Vehicles Act. The petitioner does not dispute that in view of the interpretation as per scope of Rule 2(a) of the Interpretative Rules, the components imported by it are required to bear the same duty as applicable to an E-Rickshaw. The legal fiction as enacted under Rule 2(a) of the Interpretative Rules – that is treating incomplete and unfinished articles as complete articles – is only for the purposes of interpretation of the First Schedule of the Custom Tariff Act, 1975. This legal fiction cannot be extended beyond the purpose for which it was enacted. Plainly, by applying the legal fiction of Rule 2(a) of the Interpretative Rules, the components would not, by fiction, become complete motor vehicles for other purposes. The legal fiction enacted for purposes of interpreting the duties under the Custom Tariff Act, 1975 cannot be extended to treat the essential parts of a motor vehicle as a mechanically propelled vehicle adapted for use upon roads. It is well settled that legal fictions created by a statute cannot be extended beyond the purpose for which they are so created. While Rule 2(a) of the Interpretative Rules can be applied for treating the import of goods as an import of a complete E-Rickshaw for the purposes of the Customs Tariff Act, 1975, that is, for determining the applicable duties and tariffs, the said rule will have no application for treating the said goods as a complete E-Rickshaw under any other statute including the Motor Vehicles Act, 1988 and the Central Motor Vehicle Rules, 1989. Clearly, there is no scope for the specified organizations to grant a type approval only on the essential parts of an E-Rickshaw - If the contention as advanced by the respondents is accepted, it would mean that no person other than a manufacturer of an E-Rickshaw can import the essential components/assemblies of an E-Rickshaw. This is unpersuasive and cannot be accepted. The respondents are directed to clear the goods in question on payment of the duties as applicable to import of an E-Rickshaw - the respondents cannot withhold the goods for want of a type approval under Rule 126 of the Central Motor Vehicles Rules, 1989 - petition allowed. Issues Involved1. Whether the Customs Authorities are justified in withholding the consignment of E-Rickshaw parts due to non-production of a Type Certificate as required under Rule 126 of the Central Motor Vehicles Rules, 1989.Detailed AnalysisIssue 1: Justification for Withholding Consignment by Customs AuthoritiesThe primary question before the court was whether the Customs Authorities were justified in withholding the consignment of E-Rickshaw parts due to the non-production of a Type Certificate as mandated by Rule 126 of the Central Motor Vehicles Rules, 1989. The petitioner acknowledged that the parts could be classified as Motor Vehicles under the Customs Tariff Act, 1975 but disputed their classification as Motor Vehicles under Rule 126 of the Central Motor Vehicles Rules.The Customs Authorities detained the consignment on the grounds that it consisted of essential parts of a Motor Vehicle, thus necessitating a Type Certificate for release. The petitioner sought the release of the consignment, arguing that they were merely importing parts, not a complete vehicle, and therefore should not be required to furnish a Type Certificate.Context and SubmissionsThe petitioner, engaged in the business of electronic components, imported three essential parts of an E-Rickshaw from China: rear axle, motor, and controller. The consignment was examined by a Chartered Engineer who confirmed that these were essential parts but not sufficient to constitute a complete E-Rickshaw. The Customs Authorities, however, detained the consignment, citing the need for a Type Certificate under Rule 126.The respondents argued that a high-powered committee had determined that a motor along with any two essential components of an E-Rickshaw could be considered a complete vehicle under Rule 2(a) of the General Rules for the Interpretation of the First Schedule to the Customs Tariff Act, 1975. The petitioner contended that this interpretation could not be extended to Rule 126 of the Motor Vehicles Rules, 1989.Legal Analysis and ConclusionThe court noted that while the three parts (rear axle, motor, and controller) are essential for assembling an E-Rickshaw, they do not constitute a complete vehicle. The term 'Motor Vehicle' under Section 2(28) of the Motor Vehicles Act, 1988, refers to a vehicle that can be used on roads, which the three parts alone do not fulfill.Rule 126 of the Central Motor Vehicles Rules, 1989, requires manufacturers or importers of motor vehicles to submit a prototype for testing. This rule does not apply to parts of a motor vehicle. The petitioner, being an importer of parts, cannot obtain a type approval under Rule 126 since they are not importing a complete vehicle but parts intended for sale to manufacturers.The court emphasized that the Customs Authorities are concerned with the permissibility of importing goods and ensuring applicable duties are paid, but they do not administer the Motor Vehicles Act, 1988. The legal fiction under Rule 2(a) of the Interpretative Rules applies only for determining duties under the Customs Tariff Act, 1975, and cannot be extended to classify parts as complete vehicles under other statutes.The court referred to previous judgments, including L.M.L. Limited v. Commissioner of Customs, Bombay, and Maruti Udyog Ltd. v. Ram Lal, to support the principle that legal fictions should not be extended beyond their intended purpose. The court concluded that the components imported by the petitioner should be treated as parts, not as a complete E-Rickshaw, for the purposes of the Motor Vehicles Act, 1988.Final JudgmentThe court directed the respondents to clear the goods upon payment of duties applicable to the import of an E-Rickshaw but ruled that the goods cannot be withheld for want of a Type Certificate under Rule 126 of the Central Motor Vehicles Rules, 1989. The petitioner was also required to submit an undertaking that the goods would be sold only to registered manufacturers of E-Rickshaws.ConclusionThe petition was disposed of with the direction to clear the goods, and the Customs Authorities were instructed not to withhold the consignment for lack of a Type Certificate under Rule 126 of the Central Motor Vehicles Rules, 1989.