TaxTMI 
TaxTMI 
2026 (1) TMI 800
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....or Latch and Actuator Assembly" and also denied the benefit of preferential rate of duty availed for the earlier imports as per Sl. No. 1478 of Notification No.46/2011-Cus. Dated 01.06.2011. 2. Brief and relevant facts for the purpose of this Appeal are that the Department initiated investigation on the ground that the Importer-Appellant while importing "Door Latch and Actuator Assembly" had classified the same wrongly under Customs Tariff Item (CTI) 87089900, which resulted in the Department entertaining an opinion that the imported item is to be classified under CTI 83012000 under the category of 'Automobile Locks'; and as an outcome of the Investigation, a Show Cause Notice No. 60/2024 dated 20.06.2024 came to be issued under Section 28(4) and 124 of the Customs Act, 1962 thereby levelling the allegation that the assessment and the declared classification of the imported goods under CTI 87089900 imported vide 149 Bills of Entry are liable to be rejected for wrong-classification and is to be re-classified under CTI 83012000 of the First Schedule to the Customs Tariff Act, 1975 and the subject Bills of Entry had to be re-assessed resulting in denial of the benefit of concession....
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....ent Appeal on the following grounds: (a) The imported item such as 'Latch and Actuator Assembly' are sub-assembly and components necessary for manufacturing of an Automobile Electronic Lock system along with other components and sub-assemblies procured either domestically or from import sources, as such, the imported items are mere parts of lock systems and not a complete lock per se. (b) The imported item such as 'Latch and Actuator Assembly' are neither complete nor capable of performing any essential function of an Automobile Electronic Lock System, hence, in terms of Rule 2(a) of GIR, the imported item are only 'parts' and not capable of performing essential functions of lock. (c) Details of procurement of other components from Domestic Market along with particulars of suppliers of the components were submitted to the Adjudicating Authority and such relevant and pertinent facts are neither considered nor rebutted in the Impugned Order and therefore, the findings in the Impugned Order suffers with infirmities and also contrary to the principles of natural justice. (d) It is a settled position of law as per the Country of Origin Rules notified ....
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....e "Latch and Actuator Assembly" are components for making of Locks and to make a complete Lock, seven more items, such as M/Screw (6 Nos), Striker Assy DR, Handle Assy DR Outside, Handle Assy DR Inside, SET KEY (Key & Key Cylinder), FOB Key and Wiring Harness are domestically procured or imported and Invoices pertaining to such procurement were also enclosed at Page Nos. 178 to Page No. 186 of the Appeal Memorandum. Further, the manufacturing process also is narrated and explained through Technical Drawings and such documents are also enclosed from Page Nos. 170 to Page No. 177 of the Appeal Memorandum. (b) That the Original Authority at Para 39.2 of the Impugned Order has inter-alia observed as follows :- "39.2 With respect to the above submission of the Noticee that there is value addition that occurs during the manufacturing process so as to make a Complete Lock System, I find that the significant cost of the impugned goods out of the total cost (as submitted by the Noticee) implies that a substantial portion of the product's functionality and value originates from the imported Components i.e., "Latch and Actuator Assembly". I further find that, the increase in....
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....trictly while determining the eligibility of the preferential duty benefit claimed by the Appellant. (e) That in accordance with Section 5(1) of the Customs Tariff Act, 1975, the Customs Tariff (Determination of Origin of Goods under the Preferential Trade Agreement between the Governments of Member States of the Association of South East Asian (ASEAN) and the Republic of India) Rules, 2009 have been notified and the said Rules specifically deals with the Standard Operating Procedures concerning the implementation and determination of grant of preferential benefit. More specifically, Rule 7 of Annexure-III of the said Rules state that "(C) In cases where an AIFTA Certificate of Origin is not accepted by the Customs Authority of the importing party, such AIFTA Certificate of Origin shall be marked in Box 4 and the original AIFTA Certificate of Origin shall be returned to the Issuing Authority within a reasonable period but not to exceed two months. The Issuing Authority shall be duly notified of the grounds for the denial of preferential tariff treatment." (emphasis supplied). (f) That in the impugned case, the Respondent has sought to deny the benefit of ....
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....hat in the absence of any bond executed with Customs prior to clearance of the imported goods, on post clearance stage, the imported goods are not liable for confiscation. In the impugned case, no such Bond has been executed prior to clearance of the goods. Hence, it was prayed that based on the proposition of law propounded by the Hon'ble Supreme Court, the confiscation of goods in the Impugned Order and imposition of penalty and redemption fine thereon may be held as unlawful and the same may be quashed and set aside. (j) On the above submissions, it was humbly prayed that the material facts along with the applicable provisions of law and the judicial precedents applicable to the impugned facts may be considered in totality and as a result, the Appeal of the Appellant may be allowed in all aspects as prayed with consequential reliefs. 7. Per contra, Shri Anoop Singh, ld. Joint Commissioner while relying on the findings in the Impugned Order, has inter-alia submitted that the imported "Latch and Actuator Assembly" are fitted into the Door of the vehicle and as imported, these two items are capable of performing essential function of Automobile Locks. Therefore, General....
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....by the Department for many years. After the initiation of investigation, the Appellant made a submission to the Department and sought re-classification of the item under CTI 83016000 as 'parts of Locks'. It is a settled position of law that it is the sole and exclusive power of the Department to determine the classification of the imported goods. The Importer is under the mandatory obligation to declare the essential characteristics and the description of the imported goods and enable the Department to make a fair assessment in determination of the classification and duty liability. In this context, we deem it appropriate to refer to the relevant portion/s of the Harmonized System of Nomenclature (HSN). The sub-headings and tariff items under CTH 8708 are reproduced for ease of reference: Tariff Item 87089900 8708 PARTS AND ACCESSORIES OF THE MOTOR VEHICLES OF HEADING 8701 to 8705 8708 10 - Bumpers and parts thereof: 8708 10 10 --- For Tractors 870810 90 --- Other - Other parts and accessories of bodies (including cabs): 87082100 -- Safety seat belts 87082200 -- Front windscreens(windshields), rear windows ....
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....ce: "2. Throughout the Nomenclature, the expression "parts of general use" means: (a) Articles of heading 73.07, 73.12,73.15,73.17 or 73.18 and similar articles of other base metal, other than articles specially designed for use exclusively in implants in medical, surgical, dental or veterinary sciences (90.21); (b) Springs and leaves for springs, of base metal, other than clock or watch springs (heading 91.14); and (c) Articles of heading 83.01, 83.02, 83.08, 83.10 and frames and mirrors, of base metal, of heading 83.06. In Chapters 73 to 76 and 78 to 82 (but not in heading 73.15) references to parts of goods do not include references to parts of general use as defined above. Subject to the preceding paragraph and to Note 1 to Chapter 83, the articles of Chapter 82 or 83 are excluded from Chapters 72 to 76 and 78 to 81." 10. Thus, from the above it is evidently clear that even if the goods/articles are to be used in automobile but are excluded vide Note 2 to Section XV (which also covers articles of heading 83.01 (Padlocks and Locks), 83.02, 83.08, 83.10 and frames and mirrors, of base metal, of heading 8306) as reproduced above, the....
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....ETNAM/Hyundai Motor Company, Korea 762.32 2 M/Screw (6 Nos) Imported Hyundai Motor Company, Korea 20.58 3 Striker Assy DR Locally Procured PHA India 36.6 4 Handle Assy DR Outside Locally Procured MOTHERSON AUTOMOTIVE TECHNOLOGIES AND ENGINEERING, India 274.6 5 Handle Assy DR Inside Locally Procured MOTHERSON AUTOMOTIVE TECHNOLOGIES AND ENGINEERING, India 101.48 6 SET KEY (Key & Key Cylinder) Locally Procured Jay Ushin Ltd, India 245.33 7 FOB Key Locally Procured MOBASE ELECTRONICS INDIA 744.04 8 Wiring Harness Locally Procured APTIV COMPONENTS INDIA (P) LTD/KYUNGSHIN INDUSTRIAL MOTHERSON (P) LTD, INDIA 934.44 Total 3119.39 12. Along with the above reply, the Appellant also appears to have produced the working drawings and manufacturing process of the Complete Lock Systems. Over and above, the same was substantiated by submitting the details of procurement of other components from domestic manufacturers, viz., Striker Assembly was procured vide Tax Invoice No. 2410013180 dated 31.07.2024 from M/s. PHA India Limited, Handle Assembly Door Outside and Handle As....
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....antial physical or functional changes to the imported goods. This observation is inherently contradictory and incorrect. It is the submission of the Appellant before the Adjudicating Authority that along with the 'Latch and Actuator Assembly', other eight items were required to manufacture a Complete Lock and to substantiate such submissions, the Appellant had produced tax invoices and also the manufacturing process. This crucial aspect is not considered rather, is completely overlooked in the Impugned Order and hence, the observation of the Adjudicating Authority is bereft of any basis lacks any merit and thus is unsustainable in the eye of law. Moreover, the Original Authority had invoked Rule 2(a) of the GIR which inter-alia states that even incomplete or unfinished goods having the essential character of the complete or finished goods shall be classified as 'complete' or 'finished goods' for the purpose of classification. We have observed that it is evident from the manufacturing process adopted by the Appellant and the particulars of procurements of other components required for manufacturing of the Complete Lock System provide factual clarity that the imported Latch and Actua....
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....e marked accordingly in Box No. 4 and the Original AIFTA Certificate of Origin shall be returned to the Issuing Authority within a reasonable period but not to exceed two months. The Issuing Authority shall be duly notified of the grounds for the denial of preferential tariff treatment. The Appellant in this regard has heavily relied on Clause 7C of Annexure-III of the said Rules and also submitted that any objection leading to denial of the benefit should be intimated within 60 days from the date of submission of Country-of-Origin Certificate. It was also the submission of the Appellant that this proposition of law has been upheld by judicial and quasi-judicial authorities including in Customs Appeal No. C/40143/2024 vide Final Order Nos. 41308-41310/2024 dt. 21.10.2024 of this very Bench of CESTAT, Chennai. In the said Order, the following observations are made: "8.7 We find that the Government of India signed an Agreement on Trade in Goods Under the Framework Agreement of the 'Comprehensive Economic Co-operation between the Republic of India and the Association of Southeast Nations (ASEAN)' in the year 2009. A lot of thought has gone into framing the policy for the bene....
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....sonable doubt as to the authenticity or accuracy of the document, the Customs Authority of the importing party may suspend provision of preferential tariff treatment while awaiting the result of verification. As per Para 17 if the importing party is not satisfied with the outcome of the retroactive check, it may, under exceptional circumstances, request verification visits to the exporting party. 8.9 In the present case Revenue has not demonstrated that they have taken any steps as required by paras 7, 16 and 17 of Annexure III ibid and have thereby wrongfully sought to deny the exemption. In its judgment in Noble Import Pvt Ltd. Vs Union of India [2017 (349) E.L.T. 44 (A.P.)], the Hon'ble Andhra High Court held as under; "19. It is only after a retroactive check is conducted, and the concerned authorities are satisfied that the Certificate of Origin cannot be accepted, are they entitled, thereafter, to pass an adjudication order under the Customs Act. Without conducting a retroactive check, in terms of Clause 16(a) of Annexure-III to the 2009 Rules, it was not open to the 3rd respondent to pass an adjudicating order. The impugned orders dated 30-10-2015, passed e....
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....ertificate of Origin issued by the exporting country is not accepted. The Issuing Authority also should be notified of the grounds for the denial of preferential tariff treatment. Rule 7(d) requires, the issuing Authority shall provide with a detailed exhaustive clarification addressing the grounds for the denial of preferential tariff treatment raised by the importing party. The Customs Authority of the importing party shall accept the AIFTA Certificate of Origin and grant the preferential tariff treatment if the clarification is found satisfactory. Rules 13 to 15 deal with submission of original AIFTA Certificate of Origin to the Customs Authorities at the time of lodging the import entry. Rules 15 makes it clear that if there are minor discrepancies, the same are required to be ignored. Rule 16 deal with verification and the process that is required to be followed for further verification..." 16. The ratio that emerges from the above referred Rules and the interpretation drawn by the Hon'ble High Court and the Tribunal is that if any attempt is made beyond two months from the date of submission of the Country of Origin certificate to the importing party, to deny the benefit, ....