TaxTMI 
TaxTMI 
2024 (7) TMI 1325
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....ent company is engaged in the manufacture and sales of "BMW cars" outside the territory of India. 2.1. The 2nd respondent commenced its business in India in 2005, its business operation has undergone significant changes since then. The 2nd Respondent started its business in India with the import of Completely Built Units (hereinafter referred to as "CBUs") of motor vehicles from BMW Group Companies outside India and assembly of motor vehicles from imported CKD kits (with the exception of seats locally procured) at its Chennai plant. An advance ruling was also issued by the 1st Respondent, wherein, vide order dated 28.10.2005, it was ruled that import of car parts as listed in Annexure-III to the said application would be considered as import of motor car as a completely knocked down unit (CKD), eligible to the concessional rate of customs duty of 15% [applicable to motor cars if imported as completely knocked down (CKD) unit] being covered by Entry 344 of CTH No.8703 of Notification No. 21/2002-Cus., dated 01.03.2002 as amended by Notification No. 11/2005- Cus., dated 01.03.2005. The 2nd Respondent imported the motor vehicle by paying the concessional rate of duty prevailing at ....
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....e viz., 1. Engine( along with engine and transmission unit) 2. Axle assembly; 3. Exhaust systems; 4. Cooling module; 5. Heating, Ventilation and Air Conditioning unit (HVAC); and 6. Door Panels. 3. Against this background, the 2nd Respondent approached the 1st Respondent raising the following questions with regard to which the ruling was sought: "a) Whether the import of components / parts/ sub-assemblies by the applicant will be classified as motor vehicle under Tariff Heading 87.03 or as Completely Knocked Down (CKD) kit under Sr. No. 437 of Notification No. 12/2012-Cus., dated 17.3.2012, as amended, when six essential and critical components/parts/subassemblies, namely; (i) engine (along with engine and transmission unit) (ii) axle assembly (iii) exhaust systems (iv) cooling module (v) heating, ventilation and air conditioning unit and (vi) door panels are to be locally assembled/manufactured by approved local third party vendors? b) If the import of components/parts/sub-assemblies by the applicant will not be classified as motor vehicle or as CKD kits, whether the applicants imports will be classified un....
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...., for the entry relating to item (1) of column (3), the entry "12.5%" shall be substituted instead of 15%. 12.5% 5. Amendment to Notification No.21/2002, vide Notification No.20/2007 dated 01.03.2007 (xxxiii) against S.No.344 for the entry in column (4), for the entry relating to item (1) of column (3), the entry "10%" shall be substituted instead of 12.5%. 10% 6. Amendment to Notification No.21/2002, vide Notification No.21/2011 dated 01.03.2011 (xxiv) against S.No.344, in column (3), after the entry, the following shall be inserted, namely:- Explanation.- For the purposes of this exemption, "Completely Knocked Down: unit means a unit having all the necessary components, parts or subassemblies for assembling a complete vehicle but does not include,- (a) a kit containing a pre-assembled engine or gearbox or transmission mechanism; or (b) a chassis or body assembly of a vehicle on which any of the component or sub-assembly viz., engine or gearbox or transmission mechanism is installed; 7. Amendment to Notification No.21/2002, vide Notification No.31/2011 dated 24.03.2011 (ii) for S.No.344, and the entries relating ....
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....in any other form" at 60%. The rate of duty on import of completely knocked down motor vehicles was reduced periodically from 25% to 15%, 15% to 12.5% and 10% vide Notification No.11 of 2005, Notification No.11 of 2006, Notification No.20 of 2007 dated 01.03.2005, 01.03.2006, 01.03.2007 respectively. 6. While so, Notification No.21 of 2002 was further amended vide Notification No.21 of 2011 whereby an Explanation was inserted which defined "Completely Knocked Down" condition to mean a unit having all the necessary components, parts or sub-assemblies for assembling a complete vehicle but does not include- (a) a kit containing a pre-assembled engine or gearbox or transmission mechanism; or (b) a chassis or body assembly of a vehicle on which any of the components or sub-assemblies viz., engine or gearbox or transmission mechanism is installed. 7. Import of motor cars as CKD kit containing all the necessary components or sub-assemblies, for assembling a complete vehicle with engine, gear box and transmission not in pre-assembled condition was liable to tax at 10%. If the Motor Vehicle is imported as a CKD kit containing engine or gearbox or transmission mechani....
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....on the premise that the jurisdiction of the Advance Ruling Authority under Section 28E(b) of the Customs Act, 1962 is to determine a question of law or fact specified in the application regarding the liability to pay duty in relation to an "activity" which is proposed to be undertaken by the applicant. 10.1. It was submitted by the learned Senior Standing Counsel for the appellant placing reliance upon sub clause (b) read with sub-clause (a) to Section 28E of the Customs Act, 1962 that the activity with regard to which an advance ruling can be issued under Section 28E is only in relation to an "activity" which is proposed to be undertaken. In other words the "advance ruling" sought for must be in relation to a "new business of import or export" proposed to be undertaken. However, the activity i.e., business with regard to which the advance ruling is sought for viz., import of motor vehicles is an existing business and thus the 1st Respondent ought to have rejected the application as not maintainable. 11. To the contrary, it was submitted by the learned counsel for the 2nd Respondent that the above submission by the learned counsel for the appellant is misconceived both in law....
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....We are unable to agree with the above submission of the learned counsel for the 2nd respondent, if we bear in mind the object of constituting an Advance Ruling Authority, which is to give a ruling in advance to remove uncertainty in the mind of an applicant and eliminate possibility of dispute before any dispute arises. The object of Advance ruling is avoidance of litigation and promoting better relationship. In the era of globalisation of business, the purpose for creating the Authority is for expeditious disposal and determination of question of law or fact specified in the application regarding the liability to pay tax in relation to a transaction proposed by the applicant for which the Authority is required to give advance ruling. The Authority has been created to promote better compliance inter alia with the provisions of the Customs Act, 1962, on the lines of a similar Authority constituted under the Income-tax Act, 1961. The advance ruling would enable an importer to obtain in advance, a binding view from the Authority under the Act on issues which could arise in determining his tax liability (GSPL India Transco Ltd. v. Union of India, (2012) 56 VST 19). 13. Keeping in vi....
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....repugnancy either within a section or between two different sections or provisions of the same statute. It is the duty of the court to avoid a head-on clash between two sections of the same Act. (See Sultana Begum v. Prem Chand Jain [(1997) 1 SCC 373: AIR 1997 SC 1006])" 2. Jayam and Co. vs. Assistant Commissioner reported in (2016)15 SCC 125: "a. "18. Another principle of statutory interpretation which needs to be noticed is that a provision in the statute is not to be read in isolation rather it has to read along with other related provisions itself, more particularly when the subject matter dealt within different sections or parts of the same statute is the same. b. In the case of Kailash Chandra and another versus Mukundi lal and others, 2002 (2) SCC 678. In paragraph 11, following has been laid down: "11. A provision in the statute is not to be read in isolation. It has to be read with other related provisions in the Act itself, more particularly, when the subject matter dealt with in different sections or parts of the same statute is the same or similar in nature." On applying the above principle that the Act must be read as a whole it appe....
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....st / within the prescribed period (if limitation is prescribed) the same must be treated as having attained finality and then ought not to be disturbed lightly (Rama Narang v. Ramesh Narang, (2021) 15 SCC 338). It is also relevant to note that the appellant having participated and thereby acquiesced in the proceedings, ought to be understood as having waived their right to challenge the maintainability of the application before the 1st Respondent. We say this conscious of the fact that acquiescence or consent would not confer jurisdiction if the authority otherwise does not possess the requisite authority / jurisdiction. However, there is a distinction between jurisdiction to decide the matter and the ambit of the matter to be heard by the authority. While the waiver or consent would not confer jurisdiction in the case of the former, however waiver may be a factor to be considered in the case of the latter. We would think that apart from the fact that the challenge to jurisdiction is without merit, in any view, it falls within the latter category and thus the conduct of the appellant in participating in the proceeding may constitute waiver of its right to question / challenge maint....
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....hat the Applicant / 2nd Respondent proposes localization of six essential components / parts / sub-assemblies, which will be manufactured by local third party vendors on payment of Central Excise duty and supplied to the applicant for manufacture of motor vehicle. (e) That the Revenue has not produced any tangible evidence to indicate that the applicant has entered into any fictitious arrangement to evade Customs duty. (f) That Rule 2(a) of the Rules of Interpretation of Tariff are applicable only if all components intended to make a final product presented at same time for customs clearance. The judgment of Hon'ble Supreme Court in Commissioner of Customs v. Sony India (2008) 13 SCC 145, is closer to the present case as components / parts / assemblies for manufacture of motor vehicle were not likely to be imported in the same container. They are not even likely to be imported at the same time and require further manufacture by different local third party vendors. (g) The attempt by the Revenue to rely upon Rule 2(a) of the General Interpretative Rules is mis-conceived inasmuch as it does not satisfy the test of the imports being made of the various e....
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....3. We would, therefore, consider the implication of Rule 2(a). Rule 2(a) is as under: "2. (a) Any reference in a heading to an article shall be 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." The learned ASG, therefore, suggests that the articles though were not the CTVs in CKD form and were incomplete or unfinished ones, they had the essential character of complete or finished CTVs and applying this Rule, every such component, would have to be taken as an import of CTV. The learned ASG heavily relied on the second part of the Rule, starting from words "It shall also to be taken to include a reference...." He says that every component whether it is complete or finished and which is presented in unassembled or disassembled condition, would have to be taken as the finished article, like CTVs in this case. In our opini....
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....All): "15. The first issue that arises for consideration is regarding Interpretative Rules 2(a) of the Central Excise Tariff. The order of the Commissioner is based on this rule 2(a) and, therefore, it will be necessary to reproduce it and rule 1 also and they are as follows: "The Schedule-Excise Tariff Rules for the Interpretation of the this Schedule 1. The titles of Sections and Chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the provisions hereinafter contained. 2. (a) Any reference in a heading to goods shall be taken to include a reference to those goods incomplete or unfinished, provided that, the incomplete or unfinished goods have the essential character of the complete or finished goods. It shall also be taken to include a reference to those goods complete or finished (or falling to be classified as complete or finished by virtue of this rule), removed unassembled or disassembled. (b)** 16. It would be clear ....
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....gine, Gear Box, Chassis, Transmission Assembly System, Body/Cab, Suspension System, Axel Front and Rear. It was clarified that if all these components or parts or sub assemblies are imported, Rule 2(a) of the General Interpretative Rules would come into play since it is possible to take a view that when all these parts, components or sub assemblies when put together would have the essential character of a complete or finished motor vehicle. Importantly, it was also clarified that if a few of these components or parts of sub assemblies are not imported but are manufactured or purchased locally it would then be difficult to take a view that the import of the other components or parts or sub assemblies has the essential character of a complete or finished motor vehicle. The facts considered by the Advance ruling would show that at least 3 out of the six components viz., Engine, Transmission, Axle found as essential for a motor vehicle in terms of the circular is procured locally. It may be relevant to note that it is found by the Advance Ruling Authority that the total number of parts proposed to be imported by the applicant would be 1940 and 1436 (depending on the model of the motor ....