TaxTMI 
TaxTMI 
2026 (1) TMI 571
X X X X Extracts X X X X
X X X X Extracts X X X X
....s submissions are as given below :- 1.2. M/s Mitsubishi Electric India Private Limited, having its head office at 3rd Floor, Tower-A, Global Gateway, MG Road, Gurgaon- 122002, Haryana, India (herein after referred to as MEI' (or)' applicant'), is a company incorporated in India under the Companies Act, 1956. Mitsubishi Electric Corporation, Tokyo, Japan and Mitsubishi Electric Asia Pvt. Ltd, Singapore, holds respectively 30% and 70% shares in the company. MEI has various business verticals like Factory Automation & Industrial Division, Living Environment, Visual & Imaging, Transportation Systems, and Semiconductor & Devices. The Living Environment Division of MEI is engaged in the import and trading of different kinds of Air Conditioner (hereinafter referred to as "AC") and its parts & accessories. 1.3. MEI was importing Air conditioning (AC) machines, viz Room Air Conditioners (RAC) and Packaged Air Conditioners (PAC) from their overseas group companies especially from Mitsubishi Electric Consumer Products (Thailand) Co Ltd., and selling to customers in India. MEI has been classifying the fully assembled Air conditioners under CTSH 841510 or under 841581or under ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....) Panel (for PAC unit only) 1.7. MEI was importing the indoor and outdoor units (IOU & ODU) together in CKD/SKD form under one invoice and presented them for Customs clearance under a single bill of entry in respect of RAC Models. In respect of PAC models, along with ODU & IOU, MEI was also importing Panels and presented them together for customs clearance under a single bill of entry. After import, they would supply them to the job worker, along with the locally procured capacitors. The Job worker unit would assemble them into a complete air conditioners by a simple assembly process, fill up the ODS gas and return to MEI for onward sale to customers on payment of applicable. 1.8. Alternately, whenever it was not possible or required to import all the parts under one invoice by filing one bill of entry, MEI would import the IDU or ODU (except 'capacitors') in CKD/SKD condition under separate invoices and file separate Bills of Entry (BOEs) for Customs clearance. Thereafter, all these parts together in sets would be sent to the job worker for assembling them into a finished Air conditioners and returned to the MEI for onward sales on payment of GST. The job worker woul....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... ii. The IDU or ODU/Condenser or Evaporator (HEX) as parts of air-conditioner would merit classification under sub-heading 8415 9000 as parts of air conditioners. However, when HEX units are presented together as air conditioner kit, it would merit classification as air conditioning machine under heading 841510/ 841581/841582/841583, as applicable. iii. In cases where air conditioner kits containing all the assembly, including cooler or condenser or evaporator are presented together in CKD condition for assessment and clearance, as per rule 2(a)of GRI, such kits in CKD condition, including parts of condenser or evaporator would merit classification as air- conditioning machine under heading 841510/8415811 841582/841583 as applicable. However, in the event of parts of HEX units being presented together for assessment, but not as part of air conditioning kit, noting that these parts of HEX (cooler or condenser or evaporator) are specifically designed to be used in an air-conditioner, these would merit classification under sub-heading 8415.90 in accordance with rule 2(a) of GRI. 1.12. MEI was importing the goods as narrated as above based on the above rulings of the AAR an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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" 1.14.3. The Section or Chapter notes or Chapter sub-notes give a detailed explanation as to the scope and ambit of the respective sections and chapters. The Section Notes to Section XVI include the following notes, which are critical for the classification of the subject goods: Note 1(g): this Section does not cover parts of general use, as defined in Note 2 to Section XV [of base metal] or similar goods of plastic covered under Chapter 39 of the Customs Tariff. Note 2(a): parts, which are goods, included in any of the headings of Chapter 84 or 85 (other than headings 8409, 8431, 8448, 8466, 8473, 8485, 8503, 8522, 8529, 8538 and 8548) are in all cases to be classified in their respective headings. Note 2 (b): other parts, if suitable for use solely....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sible heat pumps): 8415 8110 --- Split air-conditioner two tonnes and above u 20% - 8415 81 90 --- Other u 20% - 8415 82 -- Other, incorporating a refrigerating unit 8415 82 10 --- Split air-conditioner two tonnes and above u 20% - 8415 82 90 --- Other u 20% - 8415 83 -- Not incorporating a refrigerating unit: 8415 83 10 --- Split air-conditioner two tonnes and above u 20% - 8415 83 90 --- Other u 20% - 8415 90 00 - Parts kg. u 20% - 1.14.5. The General Explanatory Notes to the GRI further provide that: "The description of an article or group of articles under a heading is preceded by"-", the said article or group of articles shall be taken to be a sub-classification of the article or group of articles covered by the said heading. Where, however, the description of an article or group of articles is preceded by" -- ", the said article or group of articles shall be taken to be a sub-classification of the immediately preceding description of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in the case of Galaxy Agencies vs. C.C.E- 2009(239)ELT478(Tri.). In addition, in the case of Bayerische Motoren -2006 (193) E.L.T. 138 (A.A.R.), the AAR held that Motor cars imported in CKD units without seats have to be treated as complete cars. However, if the parts missing are essential, the CKD pack cannot constitute a complete article. The Tribunal in the case of Wipro Ge Medical vs. CC-2006 (202) E.L.T. 141 (Tri.) 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 vs. Maestro Motors Ltd. vs. 2004(174) ELT289 (SC). 1.14.9. The applicant proposes to procure the 'capacitors' locally and utilize them in the assembly process of ACs in India. The capacitor is a non-essential part, used only in the electronic boards fitted with the outdoor unit/indoor units. The capacitors are not essential for carrying out ACs primary function of cooling /heating. Therefore, all parts proposed to be imported in SKD/CKD form, except capacitors, will be classifiable unde....
X X X X Extracts X X X X
X X X X Extracts X X X X
....able 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. 1.4.12. 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 tari....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ncipally designed to be used with the Air conditioning machines. Although, the parts mentioned against S.Nos.3 & 4 are covered specifically under CTSH 8419.5090, by following the chapter note 2(b) of chapter 84, these goods are capable of classifiable under CTSH 84159000 as 'parts of Air conditioners'. 1.5.4. Further, it is our contention that when parts are designed and solely used with a particular kind of machine, there is plethora of case laws 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 judgement, the Honourable Supreme Court of India, in the case of Westinghouse Saxby Farmer - [2021 (3) TMI 291 - Supreme Court], 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. 1.5.5. By applying the rationale of the Honourable Supreme Court decision cited above, it can be argued that all the parts mentioned in S. Nos. 1-....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iate. 1.7.2. When the CKD/SKD parts of the Air-conditioners are imported and presented separately before customs for clearance, such goods are to be classified as parts of Air-conditioners under CTSH 84159000 as these parts are designed and solely or principally used for the Assembling Air-conditioners in India. 1.7.3. When the parts of a Heat Exchange Unit(HEX) are imported in CKD/SKD condition, the same should also to be treated as parts of Air- conditioners in as much as such parts are specifically designed for use in the assembly of HEX(Condenser or Evaporator) which is an integral part of an Air-conditioner and therefore eligible to be classified under CTSH 84159000 as parts of a part of Air-conditioners (or) pass such order or orders as deemed fit and proper under the facts and circumstance of this case. 2. Comments of the Port Commissionerate: 2.1 As per the provision of CAAR Regulation, 2021, the complete application of the applicant was provided to the concerned Custom Port, and requested to furnish the requisite comments in the instant matter. The port authority vide letter dated 04.12.2025 furnished its comments, as follows :- 2.1.1. With respect to eligib....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Findings & Conclusion: 4.1 Having examined the CAAR-1 application, the comments received from the jurisdictional Customs Commissionerate and the applicable legal framework, I find the application to be valid in terms of the Customs Act, 1962 and the CAAR Regulations, 2021. I, therefore, allow the application and proceed to determine the classification of the proposed goods on the basis of the information on record. 4.2. Product description: 4.2.1. Based on the information submitted by the applicant, I note that the Applicant is engaged in importing Air conditioning (AC) machines, from their overseas group companies especially from Mitsubishi Electric Consumer Products (Thailand) Co. Ltd., and selling to customers in India. Apart from importing fully assembled Air conditioners, the applicant is also engaged in import of various parts & accessories of the Air conditioners and have been availing FTA benefits under the India- Thailand (ITFTA) & Indo-ASEAN (AIFTA) in the form of basic customs duty exemptions (BCD) granted under relevant Notifications. Further, the applicant has submitted that they intend to import the Outdoor Units (ODU) and Indoor Units (IOU) in CKD/SKD form a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....porator (HEX) as parts of air-conditioner would merit classification under sub-heading 8415 9000 as parts of air conditioners. However, when HEX units are presented together as air conditioner kit, it would merit classification as air conditioning machine under heading 841510/ 841581/841582/841583, as applicable. Further the Heat exchange Units are independently classifiable under sub-heading 841950; and they can be so classified if imported on stand alone basis, not as parts of air conditioners. iii. In cases where air conditioner kits containing all essential parts/components of the assembly, including cooler or condenser or evaporator are presented together in CKD condition for assessment and clearance, as per rule 2(a)of GRI, such kits in CKD condition, including parts of condenser or evaporator would merit classification as air- conditioning machine under heading 841510/ 8415811 841582/ 841583 as applicable. However, in the event of parts of HEX units being presented together for assessment, but not as part of air conditioning kit, noting that these parts of HEX (cooler or condenser or evaporator) are specifically designed to be used in an air-conditioner, these would....