2022(12)LCX0219(AAR)

Tata Hitachi Construction Machinery Company Private Limited

decided on 29-12-2022

CUSTOMS AUTHORITY FOR ADVANCE RULINGS
NEW CUSTOM HOUSE, BALLARD ESTATE, MUMBAI - 400 001
E-MAIL: cus-advrulings.mum@gov.in

The 29^th of December, 2022
Ruling Nos. CAAR/Mum/ARC/48-51/2022
in
Application No. CAAR/CUS/APPL/71-74/2022 -O/o Commr-CAAR-MUMBAI

Ruling

M/s TATA Hitachi Construction Machinery Company Private Limited (hereinafter referred to as applicant), is a company incorporated in India under the provisions of the Companies Act, 2013 and having its registered head office located at Jubilee Building, 45, Museum Road, Bengaluru, Karnataka 560025.

2. The applicant is a joint venture entered into between TATA Motors Limited and Hitachi Construction Machinery Company Limited and are into manufacturing 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, the key essential components required for assembling the truck shall be imported in a single consignment. These key essential components, among other components, are as follows:

i. Engine and Alternator
ii. Main frame assembly (i.e., chassis)
iii. Control cabinet
iv. Wheel motor
v. Rear and front axles
vi. Suspension cylinders

3.2 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. 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 chassis) in the CKD kit imported by them.

3.3 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 the electrical AC drive system, the control cabinet and wheel motor play the role of the gearbox and transmission system in a mechanical drive system. Hence, it shall not comprise of a gearbox and transmission system, and this would instead be replaced by the alternate technology i.e., a control cabinet and wheel motor.

3.4 The dump trucks proposed to be imported merit classification under the HSN 87041010 (i.e., Motor Vehicles for the Transport of Goods) of the Custom Tariff Act, 1975.

3.5 They propose to claim concessional rate of Basic Customs Duty of 25% for the import of dump trucks in CKD form wherein the engine and alternator, gearbox and transmission system are pre-assembled but not mounted on a chassis as the condition prescribed at per sr.no. 524 (1) (b) of the Notification No. 50/2017-Customs dated June 30, 2017.

3.6 The import of CKD kit covers imports of sub-assemblies within its ambit. Hence, as long as the imported goods are not in the form of a completely built-up unit (CBU), the same can be said to be in CKD condition for the purpose of determining the classification and taxability under the Customs law.

3.7 The CKD kit are imported for the purpose of assembly of dump trucks which shall be used for mining, quarrying, loading and other activities.

3.8 They relied on the Circular F. No. 528/128/97-Cus-TRU, dated 5 December 1997 issued by the CBEC explaining 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)
(b) M/s H-D Motor Company India Private Limited (2010 (7) TMI 42 - Authority for Advance Rulings)
(c) Bayerische Motoren Werke Aktiengesellschaft (2005- (10)- TMI - 548 - Authority for Advance Rulings, New Delhi)
(d) M/s Varshatronics Pvt. Ltd. v. Commissioner of Customs, Chennai (1998 (11) TMI 250 - CEGAT, Madras)
(e) M/s Hindustan Udyog v. CCE 2001 (133) ELT 405 (CEGAT)

4. Since the applicant had filed four applications pertaining to four different ports, comments were sought from Jurisdictional Commissioner. Comments were received from Commissioner of Customs, Nhava Sheva-V, JNCH and Commissioner of Customs, Import I, New Custom House, Mumbai. No Comments were received from Commissioner of Custom. Kolkata and Commissioner of Customs, Chennai.

5. Comments were received from Commissioner of Customs, Nhava Sheva-V, JNCH vide letter dated 7-11-2022 which are as follows:

5.1 The goods under Chapter Head 8702 are freely importable under payment of applicable rate as per policy condition. Hence, there is no issue in import of dump trucks designed for off-highway use in completely knocked down (CKD) form wherein the key essential components for assembly of dump truck are imported as a single consignment.

5.2 The applicant has sought clarification as to whether alternate technology be used in place of gearbox and transmission system and claim BCD exemption rate of 25% vide Notification No. 50/2017-cus dated 30-6-2017 Sl. No. 524. The serial number 524(1)(b) of Notification No. 50/2017-Cus. dated 30-6-2017 exempts vehicles imported as a completely knocked down (CKD) kit containing all the necessary components, parts or sub-assemblies, for assembling a complete mechanism in pre- assembled form. In the present case, the applicant has sought to import the dump trucks in CKD form containing the following parts:

(i) Engine and Alternator
(ii) Main frame assembly (i.e. chassis)
(iii) Control Cabinet
(iv) Wheel motor
(v) Rear and front axles
(vi) Suspension cylinders.

The applicant has sought clarification as to whether they are eligible to claim concessional rate of basic Customs duty rate of 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), chassis in a completely knocked down form. Since in the present case, the imported goods do not contain all the necessary components viz. gearbox/transmission mechanism as envisaged in the notification, thus it is clear that this vehicle is different from one mentioned in the notification as it uses alternator in place gearbox and transmission mechanism. Thus this CKD Motor vehicle 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 these components (i.e., gearbox and transmission system) as absent, it is to be understood that these functionalities are being met by alternate components which are the alternator, control cabinet and wheel motor.

6.2 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.

6.3 The legislative intent of the specific mention of the terms gearbox and transmission system should be understood to represent key components. The terms gearbox and transmission system are not defined under the Customs law and therefore, in the absence of a definition, these terms should be interpreted and understood in terms of their functionality, legislative intent and not merely by its nomenclature. From a functionality perspective, as elaborated in the aforesaid paragraphs, it has been established that in the electrical AC drive system, the alternator, control cabinet & wheel motor jointly perform the functions performed by a gearbox and transmission system in a mechanical drive system.

6.4 The Government has prescribed three different rates of duty depending upon the degree of manufacturing activity required to be carried out on the imported items in India. While fully assembled motor vehicles (which do not require any manufacturing operation after their import) are subjected to BCD of 40%, motor vehicles imported in CKD form and requiring manufacturing activity to be undertaken in India are subject to BCD rate of 25% or 15% depending on whether or not the key components are pre-assembled.

6.5 The intent of law in providing the exemption in the instant case is based on the manner of import, level of disintegration of the key components and the extent of manufacturing activity undertaken in India. Under the entry Sl. No. 524(1), the requirement of importing in CKD form comprising all the essential components, sub-assemblies, etc. has been provided. This condition is being duly met by the Company and the same has not been objected by the Nhava Sheva Customs authorities as well. Thereafter, once a product is eligible under Sl. No. 524(1), the next step of evaluation provided under sub-entries (a) and (b) for determining the applicable rate is based on the level of disintegration of the key 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)

(b) M/s Datex Ohmeda India Pvt. Ltd. v. The Commissioner of Customs, Bangalore (2018-TIOL-2647-CESTAT-BANG)

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 import of dump trucks in CKD form should not be denied.

6.8 The CBIC Instruction No. 16/2018 - Customs dated 8 October 2018 clarifies that RFID seals/e-seals merit classification under the Heading 8309, which covers "Stoppers, caps and lids (including crown corks, screw caps and pouring stoppers), capsules for bottles, threaded bungs, bung covers, seals and other packing accessories, of base metal." Applying the same rationale in the instant case, merely because the kit has advanced technology components with in-built gearbox and transmission function, it does not cease to be a kit of a dump truck.

6.9 It is not mandatory to import gearbox and transmission system to qualify for the concessional rate of duty provided under Sl. No. 524(1)(b) of the Notification as long as the essential items are imported. In order to qualify for the concessional rate of duty being evaluated as provided under Sl. No. 524(1)(b) of the Notification, it is only mandatory that the product is imported in CKD form comprising the essential components, sub-assemblies, etc.; and one of the three key components (i.e., engine, gearbox or transmission system) is imported in pre-assembled form but not mounted on a chassis.

7. Comments were sought from the Commissioner of Customs, Import I, New Custom House, Mumbai, which were received vide their letter dated 9-11-2022 and are as follows:

7.1 The applicant is proposing to import essential/critical components such as Engine -and Alternator, Main frame assembly (i.e. chassis), Control cabinet, Wheel motor Rear and front axles and Suspension cylinder only as dump trucks in CKD condition for the purpose of undertaking assembly in India by utilizing certain other parts such as .dump body, tyres, rims, etc. procured locally. However, dump body, rim and tyres, are also the essential/necessary components and without these components, a dump truck or any vehicle cannot be treated as complete vehicle at all. Therefore, as per the Sl. No. 524 of the Notification No. 50/2017-Customs dated 30-6-2017, all the necessary components are not being imported by the applicant to make a complete vehicle.

7.2 The concessional rate of basic duty is applicable only when a Motor vehicle is imported as CKD containing all necessary components which makes a complete vehicle, not only the essential/critical components. But the importer is ignoring this fact/condition 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.)

(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 an exemption notification has to be strictly interpreted and onus to prove that all the conditions are fulfilled is on the importer:

7.4 In view of the above facts, all essential parts are not only imported as part and parcel in CKD condition by the importer and further since the Notification itself says all necessary components which makes a complete vehicle are to be imported for considering anything in CKD condition, the concessional rate of Basic Duty should not be made available for such an import.

8. Comments of the Commissioner of Customs, Import I, New Custom House, Mumbai were forwarded to the applicant who vide letter dated 2-12-2022 submitted their rejoinder, which is as follows:

8.1 The terms "essential" and "necessary" are synonymous. As per Oxford dictionary, the term "necessary" means "which is needed for a purpose" and the term "essential" is a synonym to it. Therefore, the argument that the body, rims and tyres are "essential" components of a dump truck without which the CKD kit proposed to be imported cannot be said to be a complete vehicle, is not appropriate. The subject goods proposed to be imported comprise of all the necessary/essential components and the same when assembled in India shall have the essential character of a motor vehicle.

8.2 With regard to the argument that the CKD kits being imported do not constitute a complete vehicle, they submitted that in order to be eligible for the concessional rate of 25% as provided under sr.no.524(1)(b) of the Notification, there is no pre-condition for the CKD kit to be a "complete vehicle". The requirement laid down in the Notification is that the CKD kit should comprise all the "necessary" components and not "all" the components. Incomplete motor vehicles i.e., not fitted with certain parts should be considered as complete vehicles according to the Explanatory notes to HSN.

8.3 The facts of the case laws relied upon by the Commissioner of Customs, Import I, New Custom House, Mumbai are entirely different from the facts of their case and hence, would not be binding on them as in both the relied upon cases, the essential parts were not imported together, however in their case all the parts are being imported together.

8.4 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.

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 has clarified 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, are considered most essential to bring into effect a finished motor vehicle.

9.2 The subject dump truck should not be considered as an electrically operated vehicle. They relied on the Notification No. 50/2017-Customs dated 30-6-2017. As per the explanation given in Sl. No. 495 of the Notification electrically operated vehicles means vehicles which are run solely on electrical energy derived from an external source or from one or more electrical batteries fitted to such road vehicles and shall include electric motor assisted cycle rickshaw driven by rechargeable solar batteries, also known as 'soleckshaw'.

9.3 Therefore, in the instant case, the subject dump truck proposed to be imported in CKD form shall continue to be driven by fuel only and no electrical energy is derived from any external source or from batteries to run such dump trucks.

10. A personal hearing in the matter was held on 29-11-2022, Shri. T.R. Venkateswaran (Authorised Representative), Shri. Ravi Kumar Bhatia (Authorised Representative), Shri. Abhishek Mishra (Head Tax Planning, TATA Hitachi), Shri. Rishi Raj (Head Mining, TATA Hitachi) and Shri. Natarajan Murugan (DGM - Dumper & Mid HEX, TATA Hitachi) represented the applicant. Shri. Yogendra Singh, Appraising Officer, Group 5B, represented the Jurisdictional Commissioner viz. Commissioner of Customs, Import I, Mumbai Customs Zone-I. The authorised representatives explained the CAAR-1 application in detail. They submitted their responses to the views expressed by the Nhava Sheva v. Commissionerate. During the course of hearing, the copy of the jurisdictional Commissioner (Mumbai Import-l)'s response to the CAAR-I application was shared with them. The applicant was granted four days' time to submit their response to the stand taken by the Jurisdictional Commissioner.

11. I have gone through the contents of the application, the submissions made by the applicant, replies and responses received from the Commissioner of Customs, Nhava Sheva v. JNCH and Commissioner of Customs, Import I, New Custom House, Mumbai. No Comments were received from Commissioner of Custom, Kolkata, Commissioner of Customs, Chennai. Since the issue 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 chassis).

11.3 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 the 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 replaced by the alternate technology explained above, i.e., a control cabinet and wheel motor. They want to classify the imported goods under the HSN 8704 10 10 (i.e., Motor Vehicles for the Transport of Goods) of the Custom Tariff Act, 1975.

11.4 The applicant is seeking a ruling on whether the applicant is 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 50/2017-Customs dated 30-6-2017. The relevant extract of the notification is as follows:

11.5 To qualify for the benefit of concessional rate of duty of 25% as per Sl. No. 524(1)(b) of the notification, the proposed goods should satisfy the following conditions:

(a) The goods should be Motor vehicles (excluding electrically operated vehicles) which can be classified under 8702 or 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 replaced by the alternate technology explained above, i.e., a control cabinet and wheel motor. I further find that as per explanation given at Sl. No. 495 of the Notification No. 50/2017-Customs dated 30-6-2017, electrically operated vehicles means vehicles which are run solely on electrical energy derived from an external source or from one or more electrical batteries fitted to such road vehicles and shall include electric motor assisted cycle rickshaw driven by rechargeable solar batteries, also known as 'soleckshaw'. Therefore, a motor vehicle can be classified an electrically operated vehicle only when it runs solely on electrical energy (derived from an external source or from batteries fitted to such vehicle). In the instant case, the subject dump truck proposed to be imported in CKD form shall continue to be driven by fuel only and no electrical energy is derived from any external source or from batteries to run such dump trucks. This truck does not operate solely on electrical energy to be called electrically operated vehicle.

11.7 Now I have to decide whether the goods imported as Completely Knocked Down (CKD) kit by the applicant contains 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 arguing that the CKD kit imported by them comprises of essentially all the significant components required for assembly of the dump truck such as engine and alternator, chassis, control cabinet, wheel motor, rear and front axles, suspension cylinders, etc. Therefore, they submit that the CKD kit being imported, albeit being incomplete, has the essential character of a dump truck. The Commissionerate of Customs, Import I, Mumbai Customs Zone 1, has stated that the dump body, rim and tyres are also the essential/necessary components and without these components, a dump truck or any vehicle cannot be treated as complete vehicle at all. Therefore, as per the Sr. No. 524 of the Notification, all the necessary components are not being imported to make a complete vehicle.

11.8 The General Rules of Interpretation of the Harmonized System (GRI) provides for the rules/principles for classification of goods. In terms of Rule 2(a) of the GRI, 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. 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 here-in-below 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 system, body/cab suspension system, axles front and rear. In general, it may be mentioned that if all these components or parts or sub-assemblies are imported, Rule 2(a) of the aforesaid rules for interpretation would come into play, inasmuch as it would be possible to take a view that when put together, these parts or components or sub-assemblies constitute essential characteristics of a motor vehicle has been achieved."

In view of the contents of the GBIC circular mentioned above the stand taken by the Commissionerate of Customs, Import I, Mumbai Customs Zone 1 is legally not sustainable.

11.9 Reading together the GRI Rule 2 (a) and the CBEC Circular F. No. 528/128/97 Cus-TRU, dated 5 December 1997, I find that the CKD kit proposed to be imported by the applicant for the purpose of undertaking the assembly of the dump trucks in India contains the essential components such as engine and alternator, main frame assembly (i.e., chassis), control cabinet, wheel motor, rear and front axles, suspension cylinders to make a complete vehicle. I find that similar view was taken by the Customs Authority for Advance Ruling, New Delhi in the case of M/s Volvo Auto India Private Limited.

As far as the judgments relied by the Commissionerate of Customs, Import-I, New Custom House, Mumbai are considered, I find that the facts of those cases are totally different from the case of the applicant as discussed below.

(a) The Hon'ble Supreme Court in the case of Commissioner of Customs, New Delhi v. Sony India- 2008 (231) E.L.T. 385 (S.C.) relied by the Jurisdictional Commissioner had held that since the parts were imported during a period of 22 months on different dates in 94 consignments, therefore, the parts were not held as complete TV. However, in the case of the applicant all the essential parts are imported at one time as a single consignment.

(b) The Ruling of the Authority for Advance Ruling, New Delhi in the case of M/s BMW India Pvt. Ltd -2016 (332) E.L.T. 537 (A.A.R.) relied by the Jurisdictional Commissioner was with respect to the localization of the six essential components/parts/sub-assemblies required for manufacture of motor vehicles in India, namely; Engine (along with engine and transmission unit); Axel assembly; Exhaust system; Cooling module; Heating, Ventilation and Air-Conditioning unit (HVAC) and Door Panels and 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 with this argument of the Commissionerate of Customs, Import-I, New Custom House, Mumbai. I find that the role of a gearbox and transmission system is performed by an alternate technology in the dump trucks proposed to be imported by the applicant which shall be built with an electrical AC drive system, the power in the subject vehicle is supplied from the engine to the alternator to produce electricity and drive the three-phase induction motor. Therefore, instead of a gearbox and transmission system, the same function will be performed by an engine, control cabinet and wheel motor.

11.12 I find that Sl. No. 524(1)(b) of the Notification specifically provides for 'engine or gearbox or transmission mechanism in pre-assembled form but not mounted on a chassis or a body assembly'. Therefore, to be eligible for the duty exemption the applicant need not import engine, gearbox and transmission system- all three- in the pre-assembled form instead they need to import at least any one of them i.e. either an engine, or a gearbox or a transmission mechanism in the pre-assembled form. The applicant in this case is proposing to import engine and alternator, control cabinet and wheel motor in the pre-assembled from by the overseas vendor but the same shall not be mounted on the main frame assembly (also known as chassis). Hence applicant satisfies the notification condition. It appears that the word 'or' between engine and gearbox and between gearbox and transmission mechanism is overlooked by Commissionerate of Customs, Import I, New Custom House, Mumbai rendering completely different meaning.

11.13 The Commissionerate of Customs, Nhava Sheva v. JNCH has contended that, since in the present case, the imported goods do not contain all the necessary components viz. gearbox/transmission mechanism as envisaged in the notification, thus it is clear that this vehicle is different from one mentioned in the notification as it uses alternator in place gearbox and transmission mechanism. Thus, this CKD Motor vehicle 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.

11.14 In this regard I find in the present case, as already discussed in foregoing paras, 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 Customs, Bangalore (2018-TIOL-2647-CESTAT-BANG)

I find the present case is perfectly fit for application of ratio laid down by abovementioned judgments and hence the contention of jurisdictional Commissionerate reproduced in para 11.13 does not hold ground. Further, the jurisdictional Commissinerate of Mumbai- Import-I has quoted the Apex Court judgment in Dilip Kumar case in support of strict interpretation of notification wording. However, this judgment does not come in a way of binding nature of the CBEC circular from F. No. 528/128/97 Cus-TRU, dated 5-12-1997 on the departmental officer which explains the scope of Rule 2(a) of General Rules of Interpretation to the schedule I of the Customs Tariff clarifying which all components are essential to bring into effect a motor vehicle.

11.15 Further as held by me in para 11.14 above, it is not mandatory to import gearbox and transmission system, in view of technological advancement leading to replacement of these parts by parts based on different technology, to qualify for the concessional rate of duty provided under Sl. No. 524(1)(b) of the Notification as long as the essential items are imported. Applicant itself has submitted that the role of a gearbox and transmission system is performed by an alternate technology in the subject motor vehicle. In order to qualify for the concessional rate of duty as provided under Sl. No. 524(1)(b) of the Notification, it is only mandatory that the product is imported in CKD form comprising the essential components, sub-assemblies, etc.; and at least one of the three key components (i.e., engine or gearbox or transmission system) is imported in pre-assembled form but not mounted on a chassis. The applicant in this case is proposing to import engine and alternator, control cabinet and wheel motor in pre-assembled form assembled by the overseas vendor but the same shall not be mounted on the main frame assembly (also known as chassis) qualifying for the concessional rate of duty. The CKD kit proposed to be imported, as described in para 3.1 of this ruling, satisfies the test laid down by the CBEC Circular from F. No. 5281/128/97 Cus - TRU, dated 5-12-1997 that the components mentioned in this kit will bring into effect a motor vehicle.

11.16 Therefore, I hold that the dump truck proposed to be imported by applicant as Completely Knocked Down (CKD) kit contains all the necessary components, parts or sub-assemblies viz. engine and alternator, main frame assembly (i.e., chassis), control cabinet, wheel motor, rear and front axles, suspension cylinders for assembling a complete motor vehicle with engine, alternator, control cabinet & wheel motor in pre-assembled form but not mounted on a chassis or a body assembly in the present case.

12. On the basis of the above findings, I hold, in four separate CAAR-1 applications of the applicant, that they are eligible to claim concessional rate of basic Custom duty at 25% on import of dump truck 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, as per sr.no. 524 (1) (b) of the Notification No. 50/2017-Customs dated June 30, 2017.

This copy is certified to be a true copy of the ruling and is sent to: -

1. M/s. TATA Hitachi Construction Machinery Company Private Limited, Jubilee Building, 45, Museum Road, Bengaluru, Karnataka- 560025.
Email: k.somaskandan@tatahitachi.co.in , tr.venkateswaran@pwc.com

2. The Commissioner of Customs (Port), Customs House, 15/1, Strand Road, Kolkata- 700 001.
Email: kolcus-port@gov.in

3. The Commissioner of Customs, Chennai-II(Import) Custom House, 60, Rajaji Salai Marg, Chennai- 600 001
Email: chennai-importoffice@gov.in

4. The Commissioner of Customs, Import —I, New Custom House, Mumbai Zone-I, Ballard Estate, Mumbai-400 001 Email: import-I nch@gov.in

5. The Commissioner of Customs (NS-V), Jawaharlal Nehru Custom House, Nhava Sheva, TalukaUran, District-Raigad, Maharashtra- 400 707
Email: commr-ns5@gov.in

6. The Customs Authority for Advance Rulings, 5thFloor, NDMC Building, Yaslawaat Place, Satya Marg, Chanakyapuri, New Delhi-110021.
Email: cus-advrulings.del@gov.in

7. The Principal Chief Commissioner of Customs, Mumbai Customs Zone-I Ballard Estate, Mumbai -400001.
Email: ccu-cusmum1(a)nic.in

8. The Chief Commissioner(AR), Customs Excise & Service Tax Appellate Tribunal (CESTAT) West Block-2, Wing-2, R.K. Puram, New Delhi - 110066.
Email: cdrecestat123@gmail.com., ccar.cestat-delhi@gov.in

9. The Commissioner (Legal), CBIC Offices, Legal/CX.8A, Cell, 5^th floor, Hudco Vishala Building, C-Wing,Bhikaji Cama Place, R.K.Puram, New Delhi-110066.
Email: anishgupta.irs@gov.in, commr.legal-cbec@nic.in

10. The Member (Customs), Central Board of Indirect Taxes, North Block, New Delhi-110001
Email: mem.cus-cbec@nic.in

11. The Webmaster, Central Boards of Indirect Taxes & Customs.
Email: webmaster.cbec@icegate.gov.in

12. Guard file.