Parts of packing machinery assessed under HS No.84229090

[MANOHARAN ARUMUGAM]

Dear Exports,

We have imported Motors which are an integral part of the packing machine and cleared the goods under CTH 84229090 and paid concessional rate of BCD @ 5% under Sl.No.455 of Customs Notification No.50/2017 dt.30.06.2017. However, we received a demand notice from customs stating that Motors to be assessed under CTH 8501 and asked us to pay the differential duty.

Without the motors, the packing machine cannot function. Whether our stand is right or department's stands is correct. If our stand is correct, can you support with any case laws in this regard?

Thanking you in advance.

[KASTURI SETHI]

SH.MANOHARAN ARUMUGAM Ji,

Pl. go through these case laws :-

Onus of establishing that goods are classifiable under a particular tariff entry lays upon the Revenue---Larger Bench decision in the case of Brindavan Beverages Pvt. Ltd . Vs.CCE, Meerut reported as 2019 (10) TMI 762 - CESTAT ALLAHABAD (LB).

Classification dispute - Parts - Test for decision is whether a thing is part of other, if other cannot function without it. [para 27] 2019 (3) TMI 1361 - SUPREME COURT. CTO, ANTI EVASION, CIRCLE III, JAIPUR Versus PRASOON ENTERPRISES.

[KASTURI SETHI]

Pl.wait for more case laws on the issue.

[Yash Shah]

A view can be taken that the parts which in current case is the motor without which the packing machine cannot function can be considered falling under CTH 84229090. Even the definition of "parts of general use" under Note 2 to Section XV of the customs tariff does not cover the Chapter 84 items. (COMMISSIONER OF C. EX., DELHI vs INSULATION ELECTRICAL (P) LTD. 2008 (3) TMI 22 - SUPREME COURT) But important to note that the appeal of assessee was dismissed on the facts of the cases which were different than current.

[MANOHARAN ARUMUGAM]

Thanks a lot for all your expert advice with supporting case laws.

[Shilpi Jain]

Also there was a recent clarification under the Customs law in the context of classification of parts. This was issued in the background of a Supreme court decision

[Ganeshan Kalyani]

IGST Rate notification does not cover the "parts" of an asset under main asset entry. As as reason department considers parts of an asset at higher rate of tax bracket. Same tariff classification as is available in Customs tariff should be replicated in IGST rate notification at least for import purpose.

[Raghunandhaanan rvi]

Sir,

According to you, the Motor is an integral part of the Packaging machine. In this case, please refer to Note 2(a) of Section XVI of the Customs Tariff Act 1975, which is reproduced below:

2........................

(a) Parts that are goods included in any of the headings of chapter 84 or chapter 85(other than heading 8409,84318448,8466,8473,8487,8503, 8522,8529, 8538, and 8548) are in all cases, to be classified in their respective headings.

Electric Motors and Generators are specifically included in Chapter heading 8501. . Thus, according to the above note, motors have to be classified in HS code 8501 only. If you had imported the whole packing machinery with the motor in a consignment, you can classify the machine under HS code 8422. This is my view.

AI Summary

Tariff classification of integral machine parts decides applicable duty and can trigger differential duty demands on import assessment.
A classification dispute arises over whether imported motors integral to packing machinery should be classified with the machine or as electric motors under their own heading. The functional integration test-whether the machine cannot operate without the motor-is central, with the revenue bearing the onus of proof. Legal authorities recognize that specific tariff notes and express inclusion of electric motors in their own heading may nevertheless require separate classification. The factual matrix of each case and divergences between customs tariff treatment and IGST notifications affect potential differential duty assessments.