TaxTMI 
TaxTMI 
2022 (12) TMI 1471
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....anufacturing of mining and construction equipment. The Applicant has filed four CAAR 1 applications no. CAAR/Cus/Appl/71/2022, CAAR/Cus/Appl/72/2022, CAAR/Cus/Appl/73/2022 and CAAR/Cus/Appl/74/2022 on the same issue but pertains to different ports of import viz. Commissioner of Customs, Nhava Sheva -V, JNCH and Commissioner of Customs, Import I, New Custom House, Mumbai, Commissioner of Custom, Kolkata, Commissioner of Customs, Chennai. 2.1 The applicant is seeking a ruling on whether they are eligible to claim concessional rate of basic custom duty at 25% on import of dump trucks designed for off-highway use in CKD form, with the engine and alternator, control cabinet and wheel motor (i.e., alternate technology used in place of gearbox and transmission system) in pre-assembled condition but not mounted on a chassis in a completely knocked down form, as per Sl. No. 524 (1)(b) of the Notification No. 50/2017-Customs dated June 30, 2017. 3. The applicant made the following submissions: 3.1 They are proposing to import dump trucks in the form of completely knocked down (CKD) kits for the purpose of undertaking the assembly of the dump trucks in India. As part of the CKD kits,....
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....laining the scope of said Rule 2(a) of the General Rules of Interpretation. As per the circular the engine and alternator, gearbox, chassis, transmission assembly system, body/cab suspension system, axle front and rear are among the parts or components or sub-assemblies, considered most essential to bring into effect a finished motor vehicle. 3.9 They further relied on following judgments: (a) M/s Volvo Auto India Private Limited [2022 (3) TMI - 560 - Customs Authority for Advance Rulings, New Delhi)/2022 (379) E.L.T. 513 (AAR - Cus - Delhi)] (b) M/s H-D Motor Company India Private Limited (2010 (7) TMI 42 - Authority for Advance Rulings)/2011 (270) E.L.T. 432 (AAR) (c) Bayerische Motoren Werke Aktiengesellschaft (2005- (10)- TMI - 548 - Authority for Advance Rulings, New Delhi)/2006 (193) E.L.T. 138 (AAR)/2005 taxmann.com 345 (AAR) (d) M/s Varshatronics Pvt. Ltd. v. Commissioner of Customs, Chennai (1998 (11) TMI 250 - CEGAT, Madras)/1999 (106) E.L.T. 89 (Trib.)/1999 taxmann.com 1271 (CEGAT - Chennai) (e) M/s Hindustan Udyog v. CCE 2001 (133) E.L.T. 405 (CEGAT - Kol.)/2001 taxmann.com 1409 (CEGAT - Kol.) 4. Since the a....
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....cle is not covered under Sl. No. 524(1)(b) of the Notification No. 50/2017-Cus., Dated 30-6-2017. Hence, the CKD Motor Vehicles (proposed to be import) is ineligible for exemption benefit under Sl. No. 524(1)(b) of the Notification No. 50/2017-cus., dated 30-6-2017. 6. Comments of the Commissioner of Customs, Nhava Sheva-V, JNCH were forwarded to the applicant who vide letter dated 25-11-2022 submitted their rejoinder, which is as follows: 6.1 The role of a gearbox and transmission system is performed by an alternate technology in the subject motor vehicle. The dump truck proposed to be assembled by the applicant in India shall be built with an electrical AC drive system, wherein power is supplied from the engine to the alternator to produce electricity and drive the three-phase induction motor. In an electrical AC drive system, the function of a traditional gearbox and transmission system is being achieved through other components such as alternator, control cabinet and wheel motor, although a gearbox and transmission system (as understood in a traditional sense) are not present separately owing to technological evolution in automobiles. Therefore, instead of construing thes....
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....ey components and the extent of manufacturing activity to be undertaken in India. Accordingly, in the instant case, since the key components (i.e., the engine, alternator, control cabinet and wheel motors) shall be imported in pre-assembled form but not mounted on the chassis, we submit that BCD rate of 25% shall be applicable. 6.6 They relied upon the decision the following decisions: (a) Collector of Customs & Central Excise v. Lekhraj Jessumal & Sons (1996 (2) TMI 135 -SC)/1996 (82) E.L.T. 162 (S.C.)/1996 taxmann.com 983 (SC) (b) M/s Datex Ohmeda India Pvt. Ltd. v. The Commissioner of Customs, Bangalore (2018-TIOL-2647-CESTAT-BANG)/2018 (362) E.L.T. 866 (Trib.) 6.7 The principle adopted in the aforesaid judgments can be squarely applied in the instant case, wherein the functions of the gearbox and transmission system are being fulfilled by other components by way of an advanced technology, although the overall intent of law in providing the exemption is being fulfilled (as elaborated above and in the application filed by the Company). Therefore, merely due to technological advancement, the substantive benefit of concessional rate of duty available on impo....
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....ndition of the said Notification. To support their argument, they relied on the following judgments: (a) Commissioner of Customs, New Delhi v. Sony India reported in 2008 (231) E.L.T. 385 (S.C.)/2008 taxmann.com 1008 (SC) (b) M/s BMW India Pvt. Ltd. In re - Ruling of the Authority for Advance Ruling, New Delhi-AAR/Cus/12/2015 reported in 2016 (332) E.L.T. 537 (A.A.R.) 7.3 The CKD kit being imported contains the engine and alternator, control cabinet and wheel motor (i.e., alternate technology used in place of gearbox and transmission system) in pre-assembled form but not mounted on a chassis or a body assembly. However, condition 524 of the said Notification prescribes, "engine or gearbox or transmission mechanism in pre-assembled form but not mounted on a chassis or a body assembly." Hence, it is clear that the importer is using a technology to assemble the dump truck other than the technology mentioned in the said Notification which is not as per the condition. Thus, the condition "engine, gearbox and transmission mechanism not in a pre-assembled condition" is not fulfilled. As per the Hon'ble Supreme Court judgment in Dilip Kumar case 2018 (361) E.L.T. 5....
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....the subject motor vehicle. The dump truck proposed to be assembled by the applicant in India shall be built with an electrical AC drive system, wherein power is supplied from the engine to the alternator to produce electricity and drive the three-phase induction motor. 8.5 Hence the subject motor vehicle only comprises of an electrical technology as a replacement of gearbox & transmission system and is not to be considered as an electrically operated vehicle since it continues to be driven by fuel. The eligibility of concessional rate should be determined on the basis of the functions and characteristics of the key components and mere fact that one of the internal systems uses an alternate technology should not impact the benefit available. 9. The applicant also made additional submission vide their letter dated 9-12-2022, which is as follows: 9.1 The Circular F. No. 528/128/97 Cus-TRU dated 5 December 1997 has been issued by CBEC to clarify the manner of interpretation of Rule 2(a) of the General Rules for Interpretation in the context of import of parts or components or sub-assemblies of automobiles/motor vehicles. While explaining the scope of said Rule 2(a), the CBEC h....
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....of classification and notification benefit is exactly the same for four different applications, I hereby take up all applications for the purpose of discussion and analysis in this single ruling. 11.1 The applicant is proposing to import dump trucks in the form of completely knocked down (CKD) kits for the purpose of undertaking the assembly of the dump trucks in India. As part of the CKD kits, the key essential components required for assembling the truck shall be imported by them in a single consignment. These key essential components, among other components are as follows: (a) Engine and Alternator (b) Main frame assembly (i.e., chassis) (c) Control cabinet (d) Wheel motor (e) Rear and front axles (f) Suspension cylinders 11.2 Certain other parts such as dump body, tyres, rims, etc. shall be procured by them locally in India and utilized for assembling the dump trucks along with the CKD kit. In the CKD kit being imported by them, the engine and alternator, control cabinet and wheel motor shall be pre-assembled by the overseas vendor but the same shall not be mounted on the main frame assembly (also known as chassi....
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....r 8704. (b) the goods imported as Completely Knocked Down (CKD) kit should contain all the necessary components, parts or sub-assemblies, for assembling a complete vehicle with engine or gearbox or transmission mechanism in pre-assembled form but not mounted on a chassis or a body assembly. The applicant is proposing to import dump trucks designed for off-highway use in CKD form. I find that the Motor Vehicles for the transport of goods are classified under CTH 8704. I further find that there is a specific entry for Dumpers designed for off-highway use under CTH 8704 10. Therefore, I find that the Dump truck proposed to be imported as CKD kit will merit classification under the CTH 8704. 11.6 Further, the subject dump truck is not an electrically operated vehicle. The dump truck shall be built with an electrical AC drive system where power is supplied from the engine to the alternator to produce electricity and drive the three-phase induction motor. In this electrical AC drive system, the control cabinet and wheel motor play the role of the gearbox and transmission system. Hence, it shall not comprise of a gearbox and transmission system, and this would instead be re....
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.... taken to include a reference to that article incomplete or unfinished, provided that, as presented, the incomplete or unfinished article has the essential character of the complete or finished article. It shall also be taken to include a reference to that article complete or finished (or falling to be classified as complete or finished by virtue of this Rule), presented unassembled or disassembled. This point has been further substantiated by CBEC vide its Circular F. No. 528/128/97 Cus-TRU, dated 5 December 1997. The CBEC while explaining the scope of said Rule 2(a), has clarified in the above circular that the engine and alternator, gearbox, chassis, transmission assembly system, body/cab, suspension system, axle front and rear are among the parts or components or sub-assemblies could be construed as the most essential to bring into effect a finished motor vehicle. The relevant extract of the circular is reproduced hereinbelow for ease of reference: "It may be considered that the following parts or components of sub-assemblies could be construed as most essential to bring into effect a finished motor vehicle, namely; engine, gearbox, chassis, transmission assembly syste....
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....d that the local third party vendors will source the components/parts/sub-assemblies of the above said component/parts/sub-assemblies of the motor vehicles independently from BMW AG and its approved suppliers (if any). I find that the facts of this case is totally different from the present case and cannot be relied for deciding present ruling. 11.10 The second argument of the Commissionerate of Customs, Import-I, New Custom House, Mumbai was that the CKD kit being imported contains the engine and alternator, control cabinet and wheel motor (i.e., alternate technology used in place of gearbox and transmission system) is in pre-assembled form but not mounted on a chassis or a body assembly. However, condition 524 of the said Notification prescribes, "engine or gearbox or transmission mechanism in pre-assembled form but not mounted on a chassis or a body assembly." Hence, the importer is using the technology to assemble the dump truck other than the technology mentioned in the said Notification which is not as per the notification condition. Thus, the condition "engine, gearbox and transmission mechanism not in a pre-assembled condition" is not fulfilled. 11.11 I do not agree w....
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....aras, the role of a gearbox and transmission system is performed by an alternate technology in the subject motor vehicle. The dump truck shall be built with an electrical AC drive system, wherein power is supplied from the engine to the alternator to produce electricity and drive the three-phase induction motor. In this case, the function of a traditional gearbox and transmission system is being achieved through other components such as alternator, control cabinet and wheel motor, although a gearbox and transmission system. I further find that the eligibility of concessional rate should be determined on the basis of the functions and characteristics of the key components and mere fact that one of the internal systems uses an alternate technology should not impact the benefit available. In this regard I rely on the following decisions wherein it has been held that merely due to technological advancement the substantive benefit of concessional rate of duty available should not be denied. (a) Collector of Customs & Central Excise v. Lekhraj Jessumal & Sons (1996 (2) TMI 135 - Supreme Court) (b) M/s Datex Ohmeda India Pvt. Ltd. v. The Commissioner of....