TaxTMI 
TaxTMI 
2023 (4) TMI 16
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.... (i) If the applicant imports all parts of air-conditioner in CKD/SKD condition (except capacitors) and assemble the complete air-conditioner in India, whether all such parts imported in CKD/SKD condition can be classified as 'air-conditioners' under sub-heading 8415 10 10 or under any other sub-headings, by invoking Rule 2(a) of the General Rules of Interpretation (GRI, in short) to the Customs Tariff Act, 1975? (ii) If the applicant imports all the parts of air-conditioners in CKD/SKD condition, under different Bills of Entry by presenting them separately before Customs for clearance, whether all such parts can be classified as 'parts of air-conditioners' under sub-heading 8415 90 00 by invoking Section Note 2(b) of Section XVI of the Customs Tariff Act, 1975? (iii) When the parts of cooler/condenser (i.e. heat exchange units-HEX) such as Fins, Copper tubes, Thermoset, Metal Plastic plates and others are imported together under a separate invoice and assembled by the job worker in India, whether they are classifiable as 'parts of heat exchange units' under sub-heading 8419 90 90 (or) as 'parts of air-conditioners' under sub-heading 8415 90 00 by i....
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.... (iii) Electric Box (iv) Line flow Fan (v) Fins, Copper tubes, Thermistor, Metal Plastic plates etc., (Parts of Heat Exchangers - HEX) (vi) Remote controllers (b) Outdoor Unit - ODU [in CKD/SKD condition] : (i) Unit Mock Up (ii) Motor (iii) Electric Box (iv) Compressor (v) Propeller Fan (vi) Reactor [for inverter models] (vii) Fins, Copper tubes, Thermistor, Metal Plastic plates etc. (Parts of Heat Exchangers - HEX) (c) Panel (for PAC unit only) 3.5 As detailed in the application, the applicant may import the indoor and outdoor units (IDU & ODU) together in CKD/SKD form under one invoice and present the same for customs clearance under a single Bill of Entry in respect of RAC Models; in respect of PAC models, along with ODU & IDU, they may also import 'Panels' and present them togeth....
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.... as such the goods are classifiable as complete article. It is also stated that even if some non-essential items are not present in the CKD/SKD pack, the latter can still become a complete article as ruled in the case of Galaxy (Tuticorin) Agencies v. C.C.E. - 2009 (239) E.L.T. 478 (Tri.); and in the case of Bayerische Motoren - 2006 (193) E.L.T. 138 (A.A.R.), the erstwhile Authority for Advance Rulings held that motor cars imported in CKD units without seat have to be treated as complete cars; however, if the parts missing are essential, the CKD pack cannot constitute a complete article; further, the Tribunal in the case of Wipro GE Medical Systems Ltd. v. C.C. - 2006 (202) E.L.T. 141 (Tri.) has held that the CKD pack does not constitute a complete scanning machine because it did not contain parts like probes, monitor and keyboard assemblies; a CKD pack containing all the parts to make a car will be classified as a car for Basic Customs Duty under the Schedule (CC v. Maestro Motors Ltd. - 2004 (174) E.L.T. 289 (S.C.). It is further stated that the applicant proposes to procure 'capacitors' locally and utilize them in the assembly process of ACs in India; the capacitor is a non-ess....
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..... 385 (S.C.); thus, as per GRI 2(a) to the Customs Tariff Act, 1975, the CKD/SKD parts proposed to be imported by the applicant are all classified under the sub-heading 8415 10 10 or 8415 81 10/90 or 8414 82 10/90, 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 machine 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 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 finished article and all the parts are to be presented together before Customs for clearance; C.B.C. & C. in its Circular No. 55/95-Cus., dated 30-5-1995 had reiterated the fact that the field officers should consider....
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....aws confirming the view that when a part is solely or principally used with a particular kind of machine then such part need to be classified along with that machine; in a recent judgment, the Supreme Court in the case of Westinghouse Saxby Farmer Ltd. - 2021 (3) TMI 291-SC = 2021 (376) E.L.T. 14 (S.C.) has upheld the applicability of the 'suitability for use test' and held that those parts which are suitable for use solely or principally with an article in (a) Chapter cannot be taken to a different Chapter as the same would negate the very object of group classification; by applying the rationale of the Hon'ble Supreme Court decision cited above, it can be argued that all parts that go into the assembly of an air-conditioner should be classified under 8415 90 00 as parts of air-conditioner since these parts are solely or principally designed and used only with the air-conditioners; in other words, the following parts, viz. motor, compressor, propeller fans, line flow fan, capacitor, reactor, remote control, Heat Exchange Units (HEX) and its parts are all designed and manufactured to be assembled as an air-conditioning machine and therefore, all of them merit classification as 'par....
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....he comments from them reduce robustness of the ruling and acceptability by the department; and therefore, the concerned Principal Commissioner/Commissioner have been requested to expedite their comments. It was also informed that after the receipt of or lapse of reasonable time, whichever is earlier, one more hearing will be fixed after forwarding comments of Principal Commissioner/Commissioner, to the applicant. The Learned Advocate reiterated the submissions already made in the application for advance ruling. He explained that presently the company is engaged in import of complete air-conditioners (except refrigeration gas), but desires to start import of air-conditioners in CKD/SKD condition, with greater value addition being done in India after import through job worker. He explained the assembly process post intended importation and working of the RAC and PAC type of air-conditioners. The Authority desired to know as to whether the imported goods will be in CKD/SKD condition as having been assembled abroad and then knocked down for import or they would be in the nature of all components procured and imported together and presented as such to Customs. The advocate informed that....
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....ied under 8414 80 11 and leviable to BCD @ 10%; reactor/capacitor to be classified under 8504 and leviable to BCD @ 10% and motors under 8501 and leviable to BCD @ 10%; further attention is drawn to judgment of the Hon'ble Supreme Court in the case of Westinghouse Saxby Farmer - [2021 (3) TMI 291-Supreme Court] wherein it is held that on the question as to what test would be appropriate in a given case, this Court pointed out that in the case of A. Nagaraju Bros. v. State of A.P. [1994 (72) E.L.T. 801 (S.C.)], "there is no single universal test in these matters, the several decided cases drive home this truth quite eloquently, it is for this reason probably that the common parlance test or commercial usage test, as it is called, is treated as the more appropriate test, though not the only one, there may be cases, particularly in the case of new products, where this test may not be appropriate, in such cases, other tests like the test of predominance, either by weight or value or on some other basis may have to be applied, it is indeed not possible, nor desirable, to lay down any hard and fast rules of universal application."; heat exchanger unit if presented along with the indoor a....
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....hortly. 6.5 After the personal hearing, the applicant vide their written confirmation has stated inter alia that in their application, they have sought advance ruling on four questions. On re-consideration, they would like to confine the advance ruling only in respect of the following two questions. Question : 1. If MEI imports all the parts of air-conditioner in CKD/SKD (except capacitors) in unassembled or disassembled form and assemble the complete air-conditioner in India, whether all such parts imported in CKD/SKD condition can be classified as 'air-conditioners' under CTSH 8415 10 10 or under any other sub-headings as appropriate, by invoking Rule 2(a) of the General Rules of Interpretation (GRI) to the Customs Tariff Act, 1975? Question : 2. If MEI imports parts of air-conditioners such as IDU/ODU (or) Cooler/Condenser (Heat Exchange unit-HEX), which are being classified by the department as parts of air-conditioners under CTSH 8415 90 00, in CKD/SKD condition, whether all such parts imported and presented together before Customs for clearance can be classified as 'parts of air-conditioners' under HSN 8415 90 00 by invoking Section Note 2(b) of Sectio....
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....f this rule), presented unassembled or disassembled." This position has been upheld by Hon'ble Supreme Court in various cases, as mentioned above detailing the submissions of the applicant. 7.4 In order to answer this question posed for advance ruling, what is required to be examined is whether air-conditioners kits, without capacitors have acquired the primary characteristics of an air-conditioner? Viewed alternately, whether capacitors and ODS gas are essential or non-essential components of air-conditioners? I note that the applicant has submitted that capacitors are non-essential component of an air-conditioner. On cursory reading of technical literature available in public domain suggests that capacitors are essential component of an air-conditioner, which provide the initial jolt of electricity to the air-conditioner's motors needed to run successfully and a bad capacitor prevents the exterior unit from properly functioning, which hinders the cooling process as a whole. Be that as it may, notwithstanding the role of capacitors in air-conditioners, I accept the larger contention that the air-conditioner kit, as described by the applicant have acquired the characteristi....