2025 (5) TMI 1230 - AT - Customs

Revenue appeal dismissed on valuation and classification of imported motor controllers and electric tricycle parts

Principal Commissioner of Customs (Port), Kolkata Versus M/s. Aahana Commerce Pvt. Ltd.

CESTAT Kolkata dismissed the Revenue's appeal regarding valuation and classification of imported motor controllers and electric tricycle spare parts. The ... Valuation of imported goods - Motor Controller and Electric Tricycle Spare Parts - enhancement of CIF value - rejection of declared value - chang of classification of the item imported Motor Controller from CTH 8503 0090 to CTH 8708 9900 - HELD THAT:- Both sides agree that the same issue in respect of the same appellant came up to be decided by this Bench in COMMISSIONER OF CUSTOMS (PORT) VERSUS M/S. AAHANA COMMERCE PRIVATE LIMITED [2024 (9) TMI 543 - CESTAT KOLKATA]. The Bench has held that 'the correct classification of the goods in question is CTH 8503 0090. Therefore, hold that the Ld. Commissioner (Appeals) has rightly held the classification of the impugned goods under CTH 8503 0090.' Conclusion - The declared transaction value must be accepted for customs assessment, and the classification under CTH 8503 0090 is correct. Appeal of Revenue dismissed. The core legal questions considered in this judgment are:1. Whether the assessing authority was justified in enhancing the customs assessable value of the imported goods (Motor Controller and Electric Tricycle Spare Parts) by rejecting the declared transaction value and relying on NIDB data.2. Whether the classification of the imported goods as 'Motor Controller' under Customs Tariff Heading (CTH) 8503 0090 by the Respondent was correct, or whether the goods should have been classified under CTH 8708 9900 as parts and accessories of electric vehicles (e-rickshaw).Issue 1: Validity of Value Enhancement and Rejection of Declared Transaction ValueThe relevant legal framework includes Section 14 of the Customs Act, 1962, which mandates that the assessable value of imported goods shall be the transaction value, i.e., the price actually paid or payable for the goods when sold for export to India, subject to certain conditions. The Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, particularly Rule 5, prescribe criteria for determining the value in case of rejection of transaction value, including factors like country of origin, quantity, quality, and supplier identity.Precedents cited include:Prayas Woollens Pvt. Ltd. vs. CC Import Mumbai, which held that enhancement of value without evidence and without considering factors such as quality, quantity, and country of origin is unjustified.Sanjivani Non-Ferrous Trading Pvt. Ltd. vs. C.C.E. & S.T., which emphasized that the assessable value must be based on the price actually paid unless the price is not sole consideration or parties are related.M/s Rajkumar Knitting Mills (P) Ltd. vs. Collector of Customs, Bombay, where contemporaneous imports from the same supplier and similar time frame were accepted as basis for valuation enhancement.The Court's reasoning emphasized that the assessing authority's reliance solely on NIDB data, which reflects assessed values rather than declared transaction values, was improper. The NIDB database is not exhaustive and does not clarify whether the recorded values are declared or enhanced values. The assessing authority failed to examine essential factors under Rule 5 of the Customs Valuation Rules, such as supplier identity, quality, and quantity, and did not provide any evidence that the declared transaction value was not genuine.The Court noted that the assessing authority's approach was mechanical and arbitrary, lacking application of mind and violating principles of natural justice by not adequately considering or refuting the Respondent's submissions. The Court held that mere difference in price paid by other importers or data from NIDB cannot justify rejection of declared transaction value without proper inquiry and evidence.Applying the law to facts, the Court found no evidence that the buyer and seller were related or that the price was not the sole consideration. The Respondent had paid duty under protest to avoid demurrage but had substantiated the declared value with invoices. The enhancement was therefore struck down, and the transaction value declared by the Respondent was accepted.Competing arguments from the Revenue relying on NIDB data and alleged undervaluation were rejected on the ground that such data cannot be the sole basis for value enhancement without following statutory valuation procedures.Conclusion: The enhancement of assessable value was unlawful, and the declared transaction value must be accepted.Issue 2: Classification of Imported GoodsThe legal framework for classification is the Customs Tariff Act, 1975, and the Harmonized System Nomenclature (HSN) explanatory notes, along with Section Notes to Chapter XVII. The classification depends on the principal use and essential character of the goods.The Respondent classified the goods as 'Motor Controller' under CTH 8503 0090, which covers parts suitable for use solely or principally with electric motors (heading 8501). The assessing authority reclassified the goods under CTH 8708 9900, which covers parts and accessories of motor vehicles, including electric vehicles such as e-rickshaws.The Court examined the definition of 'controller' as a device that receives input signals, compares values, and controls the motor operation by starting, stopping, and regulating speed. It noted that the controller's function is integrally connected to the electric motor, which itself has multiple uses beyond e-rickshaws.The Court found no evidence that the controller was exclusively or principally used in e-rickshaws, nor was there any declaration by the Respondent to that effect. The assessing authority's reliance on pictorial references and assumption of exclusive use in e-rickshaws was unsupported by evidence.The Court distinguished between parts of the motor (rotor, stator, brushes, etc.) and the controller, which is an accessory used to control the motor's functioning. The controller is not a part of the motor but is a part suitable for use with the motor, fitting the description under CTH 8503.Further, the explanatory notes exclude electronic controllers from classification under CTH 8708 (parts of motor vehicles). The Notes to Section XVII provide that goods described under two or more headings should be classified according to their principal use. Since the controller is principally used with electric motors, and not solely with e-rickshaws, classification under 8503 0090 is appropriate.The Court also noted that the assessing authority failed to provide evidence that the goods were parts and accessories of e-rickshaws or that the Respondent declared such use.Competing arguments by the Revenue that the controller is a separate device used for controlling various activities including motor operation in e-rickshaws were rejected for lack of evidence and logical reasoning.Conclusion: The goods are correctly classifiable under CTH 8503 0090 as parts suitable for use with electric motors.Significant HoldingsOn valuation, the Court held:'The enhancement made by the ld. adjudicating authority is contrary to law... The lower authorities adopted the pick and choose approach which did not reflect the true nature of the NIDB database... The enhancement of values by the lower authority is arbitrary and without following any underlying legal principles read with Section 14 of the Act and Rule-5 of Customs Valuation Rule-2007... The whole exercise of value enhancement is not maintainable and liable to be set aside.'On classification, the Court stated:'The controller is principally used with the motor to perform these functions... The goods imported by the Respondent are rightly classifiable under Chapter heading 8503 0090 as claimed by them... The goods as imported did not fulfil the description as provided in explanatory notes to CTH 8708... The lower authority has not adduced any evidence that the goods imported are parts and accessories of e-rickshaw.'The final determinations were that the declared transaction value must be accepted for customs assessment, and the classification under CTH 8503 0090 is correct. The Revenue's appeal was dismissed accordingly.