2026 (1) TMI 571 - AAR - Customs

Classification of air conditioners in CKD/SKD form affirmed as under finished goods headings; prior advance ruling extended three years.

Classification of imported air conditioners in CKD/SKD form is governed by the general rules for interpretation of the Harmonized System and HSN ... Classification of imported goods - application for advance ruling to extend its validity for another three-year term or passing fresh rulings - Classification Of Air conditioners to be imported in CKD/SKD condition under CTSH 84151010 Or other CTSHs - classification of finished Condenser or evaporator i.e. Heat Exchange Unit (HEX) - imported separately or in CKD/unassembled form under a separate invoice/bill of entry - availing the FTA benefits provided under India-Thailand FTA(ITFTA) and ASEAN-Indian FTA(AIFTA) - Interpretation of Law - HELD THAT:- As per the GRI 2(a) to the Customs Tariff Act 1975, the CKD/SKD parts proposed to be imported by MEI are all classifiable under CTSH 84151010 (or) 84158110/90 (or) 84148210/90 as the case may be depending upon whether the installation is ductable or non- ductable. Because, as per the HSN explanatory notes, the classification of the Air conditioning machines under various sub-headings of tariff heading 8415 is mainly based on its design for fitting in wall, floor, ceiling or window and whether or not a 'duct' is required for installation of the subject Air conditioners. It is a well settled law that when an article (complete or finished) is classifiable under a particular tariff heading or sub-heading, then the CKD/SKD parts of that article even in incomplete or unfinished condition are also required to be classified under the same heading/sub- heading. The only conditions to be satisfied are that it should have the essential character of the finished article and all the parts are to be presented together before customs for clearance. Applicant submitted that they have been importing the mentioned goods based on the rulings of the CAAR and would continue to do so for few more years till their factory, being established in India, is fully operational. Since, the validity of the rulings have expired, they filed the instant application for advance ruling to extend its validity for further period or passing fresh rulings. The Central Board of Indirect Taxes and Customs (CBIC) in its circular No.55/95-Cus dated 30.5.1995 (F. No.528/42/95-Cus.(TU) had reiterated the fact that the field officers should consider the provisions of GIR 2(a) while classifying the goods imported in CKD/SKD form. There is plethora of case laws in support of the classification of the goods in CKD/SKD under the tariff heading relevant to the complete or finished goods. It is therefore prayed that the honourable Advance ruling authority may be pleased to pass orders classifying the CKD/SKD parts of the Air conditioners under the relevant tariff sub-headings as demonstrated Application for advance ruling to extend its validity for further period or passing fresh rulings - The issue of classification in respect of which the applicant has approached this authority through the present application already stands adjudicated and disposed by the then competent Authority vide Advance Ruling [2023 (4) TMI 16 - CUSTOMS AUTHORITY FOR ADVANCE RULINGS, NEW DELHI] As there is no change in the product, it unnecessary and redundant to re- examine or deliberate upon the questions raised in this application on merits, as the issue has already been conclusively decided by the then competent Authority. Accordingly, hold that the Advance Ruling pronounced by this Authority vide Ruling [2023 (4) TMI 16 - CUSTOMS AUTHORITY FOR ADVANCE RULINGS, NEW DELHI] shall continue to be valid, and operative for a further period of three years from the date of this order. Issues: (i) Whether air-conditioners imported in CKD/SKD sets (except capacitors) and presented together for clearance are classifiable as complete air-conditioners under Tariff Heading 8415; (ii) Whether CKD/SKD parts of air-conditioners imported and presented separately under different bills of entry are classifiable as parts of air-conditioners under sub-heading 84159000; (iii) Whether parts of Heat Exchange Units (HEX) imported together in CKD/SKD form are classifiable as parts of HEX under 84199090 or as parts of air-conditioners under 84159000; and (iv) Whether the earlier Advance Ruling No. CAAR/Delhi/Mitsubishi/10/2022 dated 30.08.2022 should be continued for a further period.Issue (i): Whether CKD/SKD sets of air-conditioners (excluding capacitors) presented together are classifiable as complete air-conditioners under Tariff Heading 8415.Analysis: Application of Rule 2(a) of the General Rules of Interpretation requires that an incomplete or unassembled article that, as presented, has the essential character of the finished article is to be treated as the complete article. Chapter and Section notes to Tariff Heading 8415 define the scope of air-conditioning machines and their parts. The factual position is that CKD/SKD sets (other than non-essential capacitors) contain the parts necessary to impart the essential character of the finished air-conditioner and are presented together for assessment and clearance.Conclusion: CKD/SKD sets of air-conditioners (excluding capacitors) presented together for clearance are classifiable as complete air-conditioners under Tariff Heading 8415.Issue (ii): Whether CKD/SKD parts imported and presented separately under different bills of entry are classifiable as parts of air-conditioners under sub-heading 84159000.Analysis: Section/Chapter Note 2(b) to Section XVI provides that parts suitable for use solely or principally with a particular kind of machine are to be classified with that machine. Where parts are separately identifiable under other tariff sub-headings, those sub-headings apply. The goods described (mock-up units, HEX parts, fans, motors, compressors etc.) are, in substance, either specifically covered by separate tariff sub-headings or are solely/principally designed for use with air-conditioners. The classification therefore follows the suitability-for-use test and applicable chapter notes.Conclusion: CKD/SKD parts presented separately are classifiable as parts of air-conditioners under sub-heading 84159000 where not otherwise separately classifiable; items covered by other specific sub-headings retain those classifications.Issue (iii): Whether parts of Heat Exchange Units (HEX) imported together in CKD/SKD form are classifiable under 84199090 (parts of HEX) or under 84159000 (parts of air-conditioners).Analysis: Where HEX or its parts are specifically identifiable under a separate tariff sub-heading, that sub-heading applies for standalone import. However, parts of HEX that are solely or principally designed for use in air-conditioners and not separately classifiable shall be treated as parts of air-conditioners under Note 2(b) to Section XVI and sub-heading 84159000. Prior rulings and applicable explanatory notes support treating HEX parts as parts of air-conditioners when presented as such.Conclusion: Parts of HEX imported in CKD/SKD form are classifiable under their specific heading if available; otherwise they are classifiable as parts of air-conditioners under 84159000 when solely or principally used with air-conditioners.Issue (iv): Whether the prior Advance Ruling No. CAAR/Delhi/Mitsubishi/10/2022 dated 30.08.2022 remains operative and should be continued for a further period.Analysis: The present application raises questions pari materia to those decided in Ruling No. CAAR/Delhi/Mitsubishi/10/2022 and there is no change in the product description or relevant facts. Re-examination on merits is therefore unnecessary where the earlier ruling remains applicable to the same questions and facts.Conclusion: The earlier Advance Ruling No. CAAR/Delhi/Mitsubishi/10/2022 dated 30.08.2022 shall continue to be valid and operative for a further period of three years from the date of the present order.Final Conclusion: The Advance Ruling Authority confirms the classifications as per the established application of GRI Rule 2(a) and Section Note 2(b) to Section XVI: CKD/SKD sets presented together are classifiable as finished air-conditioners under Tariff Heading 8415; separately presented parts are classifiable as parts of air-conditioners under 84159000 unless separately classifiable; HEX parts follow their specific heading if available otherwise 84159000. The prior ruling is extended for three years.Ratio Decidendi: Where CKD/SKD parts, as presented, exhibit the essential character of the finished article they are to be classified as that article under GRI Rule 2(a); parts suitable solely or principally for use with a machine are to be classified with that machine under Note 2(b) to Section XVI.