Zeniak Innovation India Limited Vs Principal Commissioner of Customs (Port) (CESTAT Kolkata)
Import of E-Rickshaw Components Without Motor and Battery Cannot Be Classified as Complete CKD Vehicles Under Rule 2(a) of GIR
Conclusion: E-rickshaw components imported without the electric motor and battery could not be treated as complete E-rickshaws in CKD condition under Rule 2(a) of the General Rules for Interpretation, as they lack the essential character of the finished vehicle. Accordingly, the proposed reclassification under Chapter Heading 8703, differential customs duty demand, confiscation, redemption fine and penalties were unsustainable, therefore, assessee’s challenge to the impugned demand and penal consequences succeeded.
Held: Assessee, M/s. Zeniak Innovation India Ltd., imported chassis frames, body shells, structural assemblies, wiring harnesses and other ancillary parts of electric tricycles (E-rickshaws) under Chapter Heading (CTH) 8714 as parts and components. The imported consignments admittedly did not contain the essential propulsion components, namely the electric motor and battery. The Directorate of Revenue Intelligence (DRI) alleged that the consignments constituted complete E-rickshaws imported in Completely Knocked Down (CKD) condition and proposed reclassification under CTH 8703 by invoking Rule 2(a) of the General Rules for Interpretation (GIR), resulting in demand of differential customs duty, confiscation of goods, redemption fine and penalties. While, upon de novo adjudication, proceedings relating to 306 past Bills of Entry were dropped, the adjudicating authority sustained the demand, confiscation and penalties in respect of eight intercepted live Bills of Entry. Both the importer and the Revenue preferred appeals before the Tribunal. Assessee contended that the imported consignments consisted only of structural and ancillary parts and lacked the electric motor and battery, which are indispensable for an E-rickshaw to function as a self-propelled vehicle. Therefore, the goods did not possess the essential character of a complete E-rickshaw and could not be classified as CKD vehicles under Rule 2(a) of the GIR. It was further argued that the issue stood covered by the Tribunal’s earlier decision in Twinkle Tradecom Pvt. Ltd., wherein identical imports were held classifiable only as parts. Revenue submitted that the imported consignments, when assembled, substantially constituted complete E-rickshaws in CKD condition and were therefore liable to classification under CTH 8703. It argued that Rule 2(a) was squarely applicable as the consignments possessed the essential character of complete vehicles and that the adjudicating authority erred in dropping proceedings relating to the 306 past Bills of Entry despite identical modus operandi and corroborative evidence. Tribunal held that Rule 2(a) of the General Rules for Interpretation applies only where incomplete or unassembled goods possess the essential character of the complete article. In the case of electric vehicles, the electric motor and battery were indispensable propulsion components that confer the functional identity of an E-rickshaw. Since the imported consignments admittedly did not include either the motor or the battery, they could not be regarded as complete E-rickshaws in CKD condition or as possessing the essential character of such vehicles. Relying upon its earlier decision in Commissioner of Customs (Port), Kolkata v. Twinkle Tradecom Pvt. Ltd., Tribunal reiterated that structural assemblies, chassis, body parts and ancillary components, without the propulsion system, remain classifiable only as parts and not as complete vehicles under Rule 2(a). Consequently, the reclassification under CTH 8703, differential duty demand, confiscation, redemption fine and penalties in respect of the eight live Bills of Entry were held to be unsustainable. Tribunal also found no infirmity in the adjudicating authority’s decision dropping proceedings relating to the 306 past Bills of Entry and rejected the Revenue’s challenge.
