TaxTMI 
TaxTMI 
2026 (6) TMI 650
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.... (hereinafter referred to as "the applicant"), is an Electronic Manufacturing Services provider. 3.2 The applicant has proposed to import all the essential components of motherboards in CKD form as kits and subsequently assemble them into finished motherboards at their manufacturing facility in Plot No 18, SY No 198, Hitech Defense and Aero Space Park, Mahadevakodigehalli Village, Hobli - Jala,, Bengaluru, Bengaluru Urban, Karnataka, 562149 India. 3.3 The components of the CKD kit are assembled together to make the complete motherboard. The number of kits that will be imported will correspond exactly with the number of motherboards that will be made/assembled. 3.4 The motherboard consists of a printed circuit board (PCB) populated with electronic components such as resistors, capacitors, ICs, ferrite beads, and crystals, and mechanical components such as socket assembly / I/O plates, screws which are supplied as part of the imported CKD kit. After assembly of the above components, these PCBAs (Printed Circuit Board Assembly) undergo functional testing to verify electrical parameters and performance. After successful testing, the units are subjected to final inspection, lab....
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....lassified under the HSN applicable to 'motherboards' themselves, rather than the headings of their individual parts. 4. Interpretation of Law as per the Applicant :- A. The present application seeking advance ruling is maintainable: 4.1. The applicant submitted that the present application is maintainable as the advance ruling is sought on the question of classification of subject goods as below: " Whether the Completely Knocked Down ("CKD") kits of motherboards intended to be imported by M/s Smile Electronics Limited are classifiable under the CTH 8473": 4.2. The applicant stated that the question of classification of such goods has not been already raised and pending or decided by any officer of Customs, the Appellate Tribunal or any Court as far as the applicant is concerned. The question of classification is an admissible question in an application for Advance Ruling as per clause (a) of sub-section (2) of Section 28H of the Customs Act, 1962. Therefore, this application is maintainable and admissible before the Hon'ble Authority for Advance Ruling, under the provisions of the Customs Act. 4.3. It is submitted that as per Section 28E of the C....
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....aracter 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." 4.9. Therefore, Rule 2(a) of the GIR provides that any reference in a heading to an article shail include incomplete or unfinished articles, provided that they have the essential character of the finished article. It further clarifies that goods presented unassembled or disassembled are to be classified as the complete article if, as presented, they contain all the components necessary for assembly into the finished product. Therefore, if all the essential components of an article arc imported in CKD condition and presented before Customs at the same time, the goods are classifiable as complete article. 4.10. Thus, classification in such cases hinges on two tests: first, whether the CKD imports, taken together, exhibit the "essential character" of the finished article; and second, whether, "as presented" to Customs, the consignment comprises all essential components required for assembly. 4.11. The first part of the rule allows an ....
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.... words of the clause "as presented, the incomplete or unfinished article has the essential character of the complete or finished article". Once this condition is satisfied then the further clause is activated, suggesting that even when such article is in disassembled or unassembled condition, it would still be taken to be a complete article. Therefore, essentially the second part would come into play provided the component parts intended to make up the finished product are all presented for customs clearance at the same time." 4.15. In the instant case, the entire CKD kit of motherboard parts is imported in a single consignment, with only consumables such as soldering items sourced locally. Therefore, rule 2(a) of the GIR is squarely applicable, and such imports is to be treated as 'motherboards' in unassembled form, since the kit contains all essential components required to produce a complete motherboard that are presented together during clearance. Therefore, the classification of the CKD imports should align with the HSN applicable to motherboards, rather than the individual tariff headings of their constituent parts. 4.16. Even if some non-essential items are not....
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....73 40 - Parts and accessories of the machines of heading 8472: 8473 40 10 --- Parts of duplicating, hectograph or stencil machines u 7.5% - 8473 40 90 --- Other u 7.5% - 8473 50 00 - Parts and accessories equally suitable for use with machines of two or more of the headings 8470 to 8472 u Free - 4.19. The CTH 8473 includes "PARTS AND ACCESSORIES (OTHER THAN COVERS, CARRYING CASES AND THE LIKE) SUITABLE FOR USE SOLELY OR PRINCIPAL LY WI TH MAC HINES OF HEADINGS 8470 TO 8472", And the CTI 8473 30 20 specifically mentions "Motherboards" 4.20. The rule 1 of the General Interpretative Rules, stipulates that classification shall be determined according to the terms of the headings and any relevant section or chapter notes. Heading 8473 covers "parts and accessories (other than covers, carrying cases, and the like) suitable for use solely or principally with machines of headings 8470 to 8472." Motherboards, are essential components of automatic data processing (ADP) machines under Heading 8471. "Motherboards" are aligned with the description of chapter 8473, as they are integral to the function....
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.... under Heading 84.71 of the Tariff, therefore being parts and accessories are classifiable under Heading 8473 of the Tariff. 4.23. It is clear from the above that Motherboards are classified under the CTH 8473, Therefore, it is submitted that the Completely Knocked Down ("CKD") kits of motherboards are also classifiable under the same CTH, and specifically under CTI 8473 30 20 of the First Schedule to the Customs Tariff Act, 1975. 5. Port of Import and reply from jurisdictional Commissionerate: The applicant in their CAAR-1 indicated that they intend to import the subject goods from O/o the Commissioner of Customs, Bengaluru. The application was forwarded to the jurisdiction of O/o the Commissioner of Customs, Bengaluru, for comments on 27.01.2026, 16.02.2026, 12.03.2026 and 02.04.2026. However, no comments received from the jurisdiction of O/o the Commissioner of Customs Bengaluru. 6. Details of Personal Hearing: Advocate Jeswin Bable presented case on behalf of applicant pleading that his product should be classified as Complete Mother Board under CTH 84733020. It was also submitted that they have mailed amended Enclosure 1 the same may be seen. 6.1 The detai....
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....boards at its facility in India. The kits consist of a wide array of components such as integrated circuits (ICs), processors/chipsets, transistors, MOSFETs, diodes, capacitors, resistors, thermistors, inductors, crystals, ferrite beads, connectors, headers, sockets, jumpers, heat sinks, metal fittings and a bare printed circuit board (PCB)supplied together in a single consignment. 7.5 The applicant has submitted that since all essential components required to manufacture/assemble a motherboard are imported together in CKD form, the goods should be classified as "motherboards" in unassembled condition by virtue of Rule 2(a) of the General Rules for Interpretation (GIR). 7.6 Scope and Applicability of GIR 1 and GIR 2(a) 7.6.1. At the outset, it is settled law that classification must first be determined in terms of Rule 1 of the GIR, which provides that: "Classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes ... " Thus, recourse to Rule 2(a) arises only where Rule 1 does not conclusively determine classification. 7.6.2 Rule 2(a) of GIR provides as follows: "Any reference in a heading to an....
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...., attract Rule 2(a). 7.7.4 The interpretation adopted by the Hon'ble Supreme Court is consistent with the General Explanatory Notes to Rule 2(a) of the Harmonized System, which provide as follows: (I) "The first part of Rule 2(a) extends the scope of any heading which refers to a particular article to cover not only the complete article but also that article incomplete or unfinished, provided that, as presented, it has the essential character of the complete or finished article." (II) The provisions of this Rule also apply to blanks unless these are specified in a particular heading. The term "blank" means an article, not ready for direct use, having the appropriate shape or outline of the finished article or part, and which can only be used, other than the exceptional cases, for completion into the finished article or part (eg. Bottle preforms of plastics being intermediate products having tubular shape, with one closed end and one open end threaded to secure. a screw type. closure, the portion below the threaded end being intended to be expanded to a desired size and shape). ... ... ... ... ... ... ... ... RULE 2 (a) (A....
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.... Accordingly, the applicability of Rule 2(a) must be determined with reference to the condition, degree of completeness and character of the goods as presented at the time of importation. Where substantial manufacturing operations remain to be undertaken before the finished article emerges, the imported goods cannot be classified as the finished article under Rule 2(a). 7.8 Application of Essential Character Test to the Present Case, 7.8.1 In the present case, the imported goods consist of a large number of discrete electronic components, including integrated circuits (ICs), processors/chipsets, transistors, MOSFETs, diodes, capacitors, resistors, thermistors, inductors, crystals, ferrite beads, connectors, headers, sockets, jumpers, heat sinks, metal fittings and bare printed circuit boards (PCBs), which require numerous manufacturing stages, including PCB population, soldering, (off-line) SMT machine programming and component loading, integration, calibration and testing, before, they become a functional motherboard. It is also pertinent to note that the aforesaid components are independently identifiable, classifiable and marketable goods in their own right. Integrate....
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....s only after extensive manufacturing operations involving (off-line) SMT machine programming and component loading. PCB population, soldering, integration, inspection, testing and validation, among other processes. Therefore, the applicant's reliance on the aforesaid illustrations is misplaced and does not advance its claim for classification under Rule 2(a). 7.8.4 The manufacturing records and process flow charts placed on record as produced at para 3.7 above demonstrate that the finished motherboard is produced through a complex and multi-stage manufacturing process. he process commences with incoming goods inspection, material verification, controlled storage and kitting of components, followed by solder paste preparation and printing, (off- line) SMT machine programming and component loading, PCB loading. automated pick-and-place operations, manual placement of components, solder paste inspection and component verification. The populated PCB is thereafter subjected to reflow soldering under controlled thermal profiles, post- reflow inspection and automated optical inspection (AOI), followed by rework and corrective operations wherever required. 7.8.5 The process does ....
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.... testing activities are undertaken in India. Accordingly, the subject goods cannot be regarded as incomplete or unfinished articles having the essential character of the finished motherboard, nor can they be regarded as complete articles presented unassembled or disassembled within the meaning of Rule 2(a). Equally, the subject goods do not qualify as incomplete or unfinished articles presented unassembled or disassembled, since they do not possess the essential character of the finished motherboard at the time of importation, which is a prerequisite for application of the second limb of Rule 2(a). Therefore, the applicability of Rule 2(a) must be determined with reference to the condition, completeness and character of the goods at the time of importation, and not with reference to the finished product that may ultimately emerge after extensive manufacturing processes are undertaken in India. 7.9 Distinction from Cases Allowing CKD Classification 7.9.1 The applicant has relied upon decisions where. CKD goods were classified as complete articles. However, such reliance is misplaced. In Galaxy (Tuticorin) Agencies v. CCE, 2009 (239) E.L.T. 478 (Tri.), the Tribunal ....
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....lf covered by a specific heading of Chapters 84 or 85, such component is required to be classified in that heading irrespective of the machine, equipment or assembly in which it is intended to be used. It is only where a part is not classifiable in its own specific heading that recourse may be had to Note 2(b) or Note 2(c). 7.10.3 In the present case, the proposed imports comprise a large number of discrete electronic and electromechanical components such as integrated circuits, processors/chipsets, transistors, MOSFETs, diodes, capacitors, resistors, thermistors, inductors, crystals, ferrite beads, connectors, headers, sockets, jumpers, heat sinks, metal fittings and bare printed circuit boards. Many of these components are specifically covered by separate tariff headings and possess an independent tariff identity under the Customs Tariff. 7.10.4 It is also pertinent to note that the aforesaid components are independently identifiable, independently classifiable, independently marketable and commercially traded goods in their own right. Integrated circuits, semiconductor devices, capacitors, resistors, connectors, sockets and similar components are routinely bought and sold ....
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.... 7.10.7. This principle finds support in the judgment of the Hon'ble Supreme Court in Commissioner of Customs v. Acer India Ltd., 2004 (172) E.L.T. 289 (S.C.), wherein the Court observed that where an article is specifically covered by a tariff entry, it is not permissible to classify the same under a more general entry merely on the basis of its intended use or end-use. 7.10.8 At the same time, Note 2(b) and Note 2(c) contemplate classification of those parts which are not themselves covered by specific tariff headings. Such parts may, depending upon their nature, characteristics and principal use, fall to be classified under the appropriate parts heading, including Heading 8473, where the statutory requirements are satisfied. 7.10.9 Therefore, while the classification of a complete motherboard is required to be determined having regard to the General Rules for Interpretation, the relevant Section Notes and the tariff description, the classification of individual components forming part thereof cannot automatically be governed by Heading 8473 merely because they are imported together or intended for use in the manufacture of a motherboard. The classification of each suc....
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....rete electronic and electromechanical components which are independently identifiable, independently marketable and, in many cases, independently classifiable under specific tariff headings; * The imported components do not constitute a complete motherboard presented in unassembled or disassembled condition for reasons of packing, transport or handling; * The manufacturing operations undertaken after importation are not mere assembly operations contemplated under Rule 2(a), but constitute substantial and highly specialised manufacturing processes through which the finished motherboard acquires its identity, functionality and commercial character; * "Several constituent items are goods specifically covered by independent tariff headings and are required to be classified in accordance with Rule 1 of the GIR read with the relevant Section Notes, Chapter Notes and Section XVI Note 2. 7.13 To sum up: (i) The applicability of Rule 2(a) is contingent upon the imported goods possessing, at the time of importation, the essential character of the complete or finished article, or constituting a complete article presented in an unassembled or disassembled....
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....ot satisfy the conditions prescribed under Rule 2(a) and cannot be classified as "motherboards" under CTH 8473 30 20. Their classification is required to be determined in accordance with Rule 1 of the General Rules for Interpretation read with the relevant Section Notes, Chapter Notes and Section XVI Note 2, having regard to the nature and characteristics of the individual goods presented for importation. 17.14 On the basis of the facts and circumstances of the case, and in view of the foregoing discussions and findings, I reach the following conclusions: (i) Rule 2(a) of the General Rules for Interpretation is not applicable to the subject goods; (ii) The CKD kits proposed to be imported do not possess the essential character of a motherboard at the time of importation; (iii) The subject goods cannot be regarded either as incomplete or unfinished motherboards possessing the essential character of the finished article or as complete motherboards presented in an unassembled or disassembled condition within the meaning of Rule 2(a); (iv). The goods comprise a large number of discrete electronic and electromechanical components. viz. integrated c....
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