2025 (12) TMI 891 - AAR - Customs

ASU and ACU for aircraft held classifiable as CTH 8807 30 10 parts u/s XVII Note 3

The CAAR, New Delhi held that the proposed imports, namely the Air Start Unit (ASU) model GS-400 and the Air Conditioning Unit (ACU) model GF 50, are ... Classification of goods proposed to be imported - Air Conditioning Unit GF 50 - Air Start Unit GS 400 - to be classified under CTH 88073010 or not - HELD THAT:- As per the Section XVII Note 3, to be a 'part' of Chapters 86-88, the article be suitable for use solely or principally with the vehicles/aircraft of those Chapters (and not be excluded by other Section XVII notes). Note 3 to Section XVII states that references in Chapters 86 to 88 to 'parts' or 'accessories' do not apply to parts or accessories which are not suitable for use solely or principally with the articles of those Chapters. A part or accessory which answers to a description in two or more of the headings of those Chapters is to be classified under that heading which corresponds to the principal use of that part or accessory. On the facts placed on record, it is clear that the ASU is purpose-built to provide the 'jet start' pneumatic energy profile specified by aircraft engine OEMs and has no plausible general utility outside aircraft starting systems. It is found that due to exclusive use, it satisfies Note 3's sole/principal use threshold and cannot be considered as 'part of general use' excluded by Section XVII Note 2. Accordingly, the ASU is appropriately covered under 8807 30 - the above view is duly supported by decision of Hon'ble Court in Commissioner Vs Mak Controls case [2005 (2) TMI 821 - SC ORDER] wherein a ground-based unit that substitutes on-board systems while the aircraft is on ground was held to be a 'part' under the aircraft-parts heading. The Tribunal in case of the CC Vs Mak Controls & Systems (P) Ltd [2006 (12) TMI 332 - CESTAT, CHENNAI] has subsequently applied the same logic to components of such ground units (e.g., compressor for GPU) and held to be classifiable as 'parts' under 8807. I find that the department is also agreeable with this classification. In this case also classification should be determined by function and intended use. As per Section XVII Note 3, the product must be considered where a machine is engineered solely/principally for aircraft operation and is identifiable as such. The record placed in this case shows that the ACU is designed to interface to aircraft ducts/ports, deliver cabin/ avionics-compatible flows/ pressures/ temperatures, and act as an APU substitute during ground operations. The applicant has shown in detail that international practice reflected in aviation-parts guidance and the CAAR, Mumbai ruling in case of Alvest Millenium Aviation Leasing IFSC Pvt. Ltd. considered such APU-OFF/ACU units as aircraft 'parts' when they are dedicated to aircraft and not of general use. I find that in light of Section XVII Note 3 and in light of ratio in two cases of court judgements; ACU is rightly classifiable under CTH 8807. Air Start Unit (ASU) GS-400 is classifiable under 8807 30 10 - APU-off substitute; having exclusive aircraft coupling/parameters; no general-purpose use, ACU is also classifiable as part of aeroplanes under CTH 8807 3010. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether the application for advance ruling was maintainable in view of the IEC status and the statutory conditions under the Customs Act and CAAR Regulations. 1.2 What is the correct tariff classification of the Air Start Unit (ASU) GS-400 proposed to be imported, and specifically whether it is classifiable as 'other parts of aeroplanes, helicopters' under heading 8807. 1.3 What is the correct tariff classification of the Air Conditioning Unit (ACU) GF-50 proposed to be imported, and specifically whether it is classifiable under heading 8807 as 'other parts of aeroplanes, helicopters' or under heading 8415 as an 'air-conditioning machine'. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Maintainability of the application / eligibility for advance ruling Interpretation and reasoning 2.1 The jurisdictional Commissionerate reported that the IEC mentioned by the applicant stood 'deactivated' as per DGFT records. The applicant subsequently informed that the IEC was active and that it was eligible to seek an advance ruling. 2.2 The Court examined the application in light of the Customs Act, 1962 and the CAAR Regulations, 2021, including the bar under section 28-I(2) regarding pending proceedings and the definition of 'applicant' under section 28-E(c). The Commissionerate also confirmed that no proceeding on the same matter was pending before any authority, Tribunal or Court. Conclusions 2.3 On being satisfied that the IEC was active and that none of the statutory bars under the Customs Act or CAAR Regulations applied, the Court held the application to be valid and proceeded to determine the classification of the proposed imports. Issue 2 - Classification of Air Start Unit (ASU) GS-400 Legal framework 2.4 The Court applied the General Rules for Interpretation of the Import Tariff, with emphasis on Rule 1, which mandates that classification is to be determined according to the terms of the headings and any relevant Section or Chapter Notes. 2.5 Heading 8807 covers 'Parts of goods of heading 8801, 8802 or 8806', with sub-heading 8807 30 10 covering 'Other parts of aeroplanes, helicopters'. 2.6 Section XVII Note 3 provides that references in Chapters 86 to 88 to 'parts' or 'accessories' do not apply to parts or accessories not suitable for use solely or principally with the articles of those Chapters, and that where a part answers to descriptions in two or more headings, it is to be classified under the heading which corresponds to its principal use. 2.7 The Court referred to judicial and quasi-judicial precedents, particularly decisions in Mak Controls, where ground power units (GPU), and even their components, used solely with aircraft as substitutes for on-board systems during ground operations, were held to be 'parts' of aircraft falling under the aircraft-parts heading (earlier 8803, now 8807). Interpretation and reasoning 2.8 The Court recorded the detailed technical description of ASU GS-400 as a ground support equipment, comprising a diesel prime mover, an oil-free screw compressor and digital controls, engineered to deliver high-pressure, temperature-controlled compressed air with parameters calibrated specifically to aircraft engine starting systems when the APU is off or inoperative. 2.9 On the factual material placed on record, the Court found that the unit is purpose-built to provide the 'jet start' pneumatic energy profile specified by aircraft engine manufacturers, is functionally dedicated to aircraft engine starting, and is unsuitable for any general industrial or non-aviation application. 2.10 Applying Section XVII Note 3, the Court held that the ASU satisfies the sole/principal-use test with aircraft falling under heading 8802 and is not a 'part of general use' excluded by Section XVII Note 2. The functional role of the ASU as an external substitute for on-board systems during ground operations aligned with the ratio of the Mak Controls line of decisions treating such ground support units as 'parts' of aircraft. 2.11 The Port Commissionerate's comments also accepted, in principle, that the ASU, due to its exclusive use for aircraft ground operations and lack of general utility, fell within heading 8807. Conclusions 2.12 The Court concluded that the Air Start Unit (ASU) GS-400 is classifiable as 'Other parts of aeroplanes, helicopters' under tariff item 8807 30 10. Issue 3 - Classification of Air Conditioning Unit (ACU) GF-50 Legal framework 2.13 The competing headings considered were: (a) Heading 8807 - 'Parts of goods of heading 8801, 8802 or 8806', including sub-heading 8807 30 10 - 'Other parts of aeroplanes, helicopters'. (b) Heading 8415 - 'Air-conditioning machines, comprising a motor-driven fan and elements for changing the temperature and humidity...'. 2.14 The Port Commissionerate relied on the text and Explanatory Notes of heading 8415, which describe apparatus for maintaining required temperature and humidity in closed spaces and mention uses in offices, homes, public halls, ships, motor vehicles and certain industrial installations, and invoked GRI 3(a) to assert that, since 'air-conditioning machines' are specifically mentioned, the ACU should fall under 8415. 2.15 As to heading 8807, the Court again applied Section XVII Note 3 (sole/principal-use test for 'parts') and the General Rules for Interpretation, with emphasis on functional characterization and intended use, in line with the jurisprudence relied upon by the applicant and the earlier CAAR, Mumbai ruling in respect of similar APU-OFF / ACU units. Interpretation and reasoning 2.16 The ACU GF-50 was described as a ground support equipment designed to supply pre-conditioned air (ventilation, cooling or heating, filtration) to the aircraft cabin and equipment on the ground, interfacing through dedicated aircraft connectors, with flow, temperature and pressure parameters set to aircraft environmental control system requirements. It operates as an APU-off substitute for the aircraft's on-board environmental control system during ground operations and has no independent non-aviation utility. 2.17 The applicant emphasised that the ACU's discharge pressure, temperature and volume are compatible only with aircraft air-conditioning ducts and avionics needs; it is engineered solely for aircraft ground use, constitutes part of the APU-OFF 'power solution' for aircraft, and cannot be used as a generic building, vehicle or industrial air conditioner. The unit's sole/principal use is thus with aircraft under heading 8802. 2.18 The Port Commissionerate's contention under heading 8415 was that the ACU is, in form, an air-conditioning machine, and that heading 8415 specifically refers to such machines. However, the Court noted that the cited Explanatory Notes to heading 8415 refer to general applications (offices, homes, public halls, ships, motor vehicles, and industrial installations) and do not contemplate aircraft-specific ground support units designed as substitutes for on-board aircraft systems. 2.19 Considering the department's acceptance that the ASU, which is also a ground support equipment substituting on-board APU functions during ground operations and having no other use, merits classification under 8807, the Court examined whether the same functional and legal reasoning applied to the ACU. It found that both units share the same essential characteristic: each is purpose-built, exclusively for aircraft, to replace or support on-board systems during ground operations, and each has no plausible general-purpose use. 2.20 Applying Section XVII Note 3, the Court held that for the ACU, too, classification had to be based on its sole/principal use with aircraft, not on a more general description of its components or generic functionality. The unit is identifiable as suitable solely/principally with aircraft of heading 8802 and is not a 'part of general use' excluded from Chapter 88. 2.21 In addition, the Court took note of the reasoning in the CAAR, Mumbai advance ruling in respect of an APU-OFF combo unit, where such a unit, replacing the on-board APU and suitable solely and principally with aircraft under Chapter 88, was treated as a 'part of aircraft' under the aircraft-parts heading. 2.22 In light of this framework and precedent, the Court preferred the specific characterization of the ACU as an aircraft part under heading 8807 over its characterization as a generic 'air-conditioning machine' under heading 8415. The decisive factor was the highly specialized design and exclusive linkage of the ACU to aircraft ground operation requirements. Conclusions 2.23 The Court held that the Air Conditioning Unit (ACU) GF-50, being an APU-off substitute with exclusive aircraft coupling and parameters, and with no general-purpose use, is classifiable as 'Other parts of aeroplanes, helicopters' under tariff item 8807 30 10, and not under heading 8415.