In re Mahindra and Mahindra Rulings (CAAR Mumbai)
Introduction: In a recent ruling by the Customs Authority for Advance Ruling (CAAR) Mumbai, M/s Mahindra & Mahindra Ltd. sought clarification on the classification of Tire Pressure Monitoring Sensors (TPMS) and Differential Pressure Sensors (DPS). The applicant, a leading automobile manufacturer in the Indian market, filed the application on 26.06.2023, seeking advance rulings on the classification of these critical automotive components.
Submission by the Applicant: According to the application, Mahindra & Mahindra is focused on ensuring the safety and environmental compliance of its vehicles. TPMS is incorporated to monitor tire pressure and update the driver in case of irregularities. It consists of a pressure valve (Valve) and a Sensor for monitoring tire pressure (Tire Sensor). On the other hand, DPS is a component aimed at reducing emissions in diesel variants. It measures the differential pressure in the Diesel Particulate Filter (DPF) to regulate carbon emissions.
TPMS is imported as a pre-assembled unit, with the Valve and Sensor inseparable. The cost breakdown shows that the Sensor constitutes 96% of the total value. DPS, responsible for measuring pressure, relays data to the Engine Control Unit (ECU) for further tasks.
The applicant argued that both TPMS and DPS should be classified under 90262000, citing a ruling in the matter of Tata Motors for support.
Port of Import and Commissionerate Reply: The applicant intended to import the components from the Commissionerate of Customs (Import), Mumbai. The jurisdictional Commissionerate responded, stating no specific cases related to the classification of TPMS and DPS. No comments were made on the classification of the subject goods.
Details of Personal Hearing: A personal hearing was held on 12.12.2023, where the applicant reiterated their classification contention, emphasizing the judgment in the Tata Motors case. They argued that globally, the same classification system is followed, and specific entries should prevail over general entries in the Customs tariff.
CAAR Ruling: The CAAR, after considering all materials and submissions, proceeded to rule on the classification of TPMS and DPS. The ruling involved a detailed analysis of the legal framework, including the Customs Tariff Act, 1975, Chapter/Section notes, and HSN explanatory notes.
The CAAR identified two possible headings for classification: 8708 (Parts and accessories of motor vehicles) or 9026 (Instruments and apparatus for measuring or checking variables of liquids or gases).
It concluded that both TPMS and DPS, being used for measuring the pressure of gases, fall under heading 9026. The devices utilize electrical phenomena to measure pressure, placing them within the category of instruments for measuring or checking pressure. Subheading 90262000 specifically includes instruments for measuring or checking pressure.
The CAAR also considered case laws, including the Premier Instruments & Controls Ltd. case, and ruled that heading 9026 is the appropriate classification for TPMS and DPS.
Conclusion: In summary, the CAAR ruled that the Tire Pressure Monitoring System (TPMS) and Differential Pressure Sensor (DPS) are to be classified under subheading 90262000 of the Customs Tariff Act, 1975. This ruling provides clarity on the classification of these critical automotive components for Mahindra & Mahindra and sets a precedent for similar cases in the future.
FULL TEXT OF THE ORDER OF CAAR, MUMBAI
M/s Mahindra & Mahindra Ltd. (IEC No.: 0388033878) (Herein after will be referred to as ‘Applicant’) filed an application for advance ruling in the Office of Secretary, Customs Authority for Advance Ruling (CAAR) Mumbai on 26.06.2023 seeking advance rulings on the classification of Tire Pressure Monitoring Sensors (TPMS) and Differential Pressure Sensors (DPS).
2. Submission by the Applicant:
2.1 The applicant has informed that they are leading manufacturer of automobiles in the Indian Market. They have manufacturing facilities at various locations all over India.
2.2 As per application the applicant seeks classification of Tire Pressure Monitoring Sensors (TPMS) and Differential Pressure Sensors (DPS). Further, the applicant has informed the functioning of Tire pressure monitoring system and Differential Pressure Systems as below:
2.3 Tire Pressure Monitoring System (TPMS):
2.3.1. In order to ensure that the vehicles manufactured by the Applicant conform to the highest safety standards, the applicant fits their vehicles with the Tire Pressure Monitoring System. The role of Tire Pressure Monitoring System is to monitor the pressure in all tires of the vehicle and accordingly update the driver in case any irregularity is noticed. In order to enable Tire Pressure Monitoring System in its vehicles, the Applicant imports an instrument knows as a “TPMS Sensor Assembly”.
2.3.2. TPMS is a combination of:
a. A pressure valve which allows the tire to be filled with air (“Valve’); and,
b. A Sensor which is capable of monitoring the pressure inside the tire (Tire Sensor’).
2.3.3 After import, TPMS is fitted by the Applicant within the rims of vehicles. It is to be noted here that the ‘TPMS is only fitted in higher trims of their vehicles. The lower trims are on fitted with the Valve. Further, the TPMS is imported as a complete unit i.e. the Valve fitted thereon cannot be separated from the Tire Sensor.
2.3.4 TPMS is imported as a pre-assembled item, a breakup of cost attributable to each component of the TPMS is reproduced herein below in Table I for ease of reference. Such a statement of cost is based on a comparative analysis of the cost of the constituent items i.e. Valve and Sensor as sold separately.
Table 1
