Classification of Tire Pressure Monitoring System & Differential Pressure Sensors

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

2.4 Differential Pressure Sensor:

2.4.1 In addition to safety, the vehicles manufactured by the Applicant also strive to comply wit i the highest standards of environmental norms. Accordingly, the Applicant fits various components to diesel variants of its vehicles in order to reduce emissions. One such component is t e Differential Pressure Sensor (‘DPS’).

2.4.2 DPS is a pressure sensor fitted to the Diesel Particulate Filter (‘DPF’) which is located at t e exhaust of the vehicle. DPF performs an important task of filtering and reducing carbon emissions of the vehicle. Accordingly, DPS is responsible for measuring the differential pressure in DPF i.e. the difference in pressure between the inward flow of exhaust gases into DPF and outward flow of filtered exhaust gases from DPI’.

2.4.3 Applicant further informs that DPS is only capable of measuring the pressure. After measuring the pressure, the data in respect of the same is relayed to the Engine Control Unit (ECU) which performs further tasks independently of DPS.

2.5 The applicant has stated that both the devices are classifiable under 90262000. In support of the above, the applicant has submitted decisions a ruling of this Learned Authority in Re: Tata Motors (Ruling No. CAAR/Mum/ARC/07/2022) wherein the classification of identical systems was analysed.

3. Port of Import and reply from jurisdictional Commissionerate:

3.1 The applicant in their CAAR-1 indicated that they intend to import the subject goods from the jurisdiction of Commissioner of Customs (Import), Import Commissionerate, Mumbai Zone III, Air Cargo Complex Sahar, Andheri (East), Mumbai, Maharashtra 400099. The application was forwarded to the jurisdictional Commissioner of Customs (Import), ACC, Sahar, Mumbai for their comments on 14.07.2023.

3.2 The Jurisdictional Customs Commissionerate sent the comments vide their letter dated 2(.09.2023. Inter-al ia it has been informed they have no cases with regard to the classification of the TPMS and DI’S. No comments have been made on the classification of the subject goods.

4. Details of Personal Hearing:

A personal hearing was held on 12.12.2023 at 11:30 PM. Shri Nishant Shah, Advocate along with other officials/representative of applicant appeared for the hearing. The applicant reiterated their contention of classification of subject goods and argued that the subject items be covered under CTI 90262000. They explained the functions of TPM S and DPS. They mainly relied upon the judgement passed in matter of M/s. Tata Motors by this Advance Ruling Authority vide order dated 17.03.2022. They also contended that globally also the same classification system is being followed and that as per GIR Specific entry shall prevail over general entry in the Customs tariff. No body appeared physically or through virtual mode from the jurisdictional commissionerate of the proposed port of Import.

5. I have considered all the materials placed before me in respect of the classification of subject goods. I have gone through the submissions made by the applicant during the personal hearing as well as the response received from the Jurisdictional Customs Commissionerate. Therefore, I proceed to pronounce a ruling on the basis of information available on record as well as existing legal framework. The issue before me pertains to the classification of Tire Pressure Monitoring Sensors (TPMS) and Differential Pressure Sensors (DPS).

5.1 I find that 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. TPMS is a combination of a pressure valve which allows the tire to be filled with air (“Valve’) and a Sensor which is capable of monitoring the pressure inside the tire (‘Tire Sensor’). TPMS is to be fitted within the rims of vehicles. TPMS is only fitted in higher trims of their vehicles. The lower trims are only 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. TPMS is imported as a pre-assembled item. I find that the percentage of total value in case of Sensor to measure air pressure and transmitter to transmit data captured by the sensor is significantly higher than the cost of Air Valve for pneumatic transmission.

5.2 I find that the Applicant also fits various components to diesel variants of its vehicles in order to reduce emissions. One such component is the Differential Pressure Sensor (‘DPS’). DPS is a pressure sensor fitted to the Diesel Particulate Filter (‘DPF’) which is located at the exhaust of the vehicle. DPF performs an important task of filtering and reducing carbon emissions of the vehicle. Accordingly, DPS is responsible for measuring the differential pressure in DPF i.e. the difference in pressure between the inward flow of exhaust gases into DPF and outward flow of filtered exhaust gases from DPF. DPS is only capable of measuring the pressure. After measuring the pressure, the data in respect of the same is relayed to the Engine Control Unit (ICU’) which performs further tasks independently of DPS.

6. Before deciding on the issue, let me deliberate on the legal framework prescribed in Customs Tariff Act, 1975, Chapter/ Section notes along with HSN explanatory notes.

6.1  In this case, these devices can be classified either as instruments for measurement of pressure or as parts and accessories to be used solely or principally with vehicles. Therefore, I am confronted with two different possible headings for classification of the impugned devices, i.e. 8708; Parts and accessories of the motor vehicles of headings 8701 to 8705 or 9026: instruments and apparatus for measuring or checking the flow, level, pressure or other variables of liquids or gases (for example, flow meters, level gauges, manometers, heat meters) excluding instruments and apparatus of heading 9014, 9015, 9028 or 9032.

6.2 Relevant portion of CTH 9026 is reproduced below for ease of reference:

6.3  The devices are used for measuring the pressure of gases. They are fitted with sensors sensitive to the variations in pressure. Heading 9026 covers instruments and apparatus like manometers for measuring or checking the pressure of liquids or gases. Pressure gauges indicate the pressure of a liquid or gas in a closed space. One of the types of pressure gauge, as per explanatory notes is an electrical pressure gauge based on variations of an electrical phenomenon (e.g., resistance, capacitance) or using ultrasound. Further, heading 9026 also includes differential pressure gauges used to measure pressure differences. The devices under consideration use electrical phenomena to measure the pressure. Therefore, these instruments can be classified under heading 9026. Subheading 90262000 specifically includes instruments for measuring or checking the pressure.

6.4 As per GIZI I the titles of Sections, Chapters and sub-Chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the following provisions. Section XVII covers chapter 87. Note 2 to Section XVII states that the expressions “parts” and “parts and accessories” do not apply to the following articles, whether or not they are identifiable as for the goods of this Section:…(g) articles of Chapter 90. The general explanatory notes state that the articles need to comply with the following three conditions to be eligible for classification as part and accessories under any chapter of Section XV II:

(a) They must not be excluded by the terms of note 2 to this section and

(b) They must be suitable for use solely or principally with the articles of Chapters 86 to 88 and

(c) They must not be more specifically included elsewhere in the Nomenclature

The scope of Note 2 to Section XVII is further explained in the general explanatory notes to Section XVII, (III) parts and Accessories, (A). It lists parts and accessories excluded by the above mentioned section note. Sr. No. 8 of this list states that the instruments and apparatuses of Chapter 90, including those used on certain vehicles are excluded from Section XVIII. Sr. No. 8(e) mentions a manometer (heading 9026), a pressure gauge, as one of the examples in the exclusion list. As pressure gauges like TPMS and DPS can be classified under Chapter 90, they appear to be excluded from Section XVII, and consequently from heading 8708.

7 It is also necessary to take note of the case laws that has dealt with similar questions, i.e. whether to classify a particular device as a part and accessory of a vehicle or as a separate article. In the case of Premier Instruments & Controls Ltd. 2005 (101) ECC 566,2005 (183) ELT 65 Tri Chennai, as upheld by the apex court, the Chennai bench of the Hon’ble Tribunal ruled that the automotive dashboard cluster consisting of pressure gauge, temperature gauge, fuel gauge, ammeter and speedometer are classifiable as parts and accessories of vehicles. The Hon’ble Tribunal observed that these devices containing multiple instruments were cleared as a single device, i.e., as an instrument cluster. Although the components of the instrument are classifiable under Chapter 90, the instrument cluster does not find a place in Chapter 90.

Therefore, the instrument cluster is classifiable as a part, principally and solely meant for use in motor vehicles, under heading 8708. However, in the present case both DPS and TPMS answer to a specific subheading i.e. 90262000 as instruments for measuring or checking the pressure. Therefore, although, they are principally and solely used in vehicles, they appear to be excluded from heading 8708.

7.1 I have also studied the case laws relied upon by the applicant. In the case of SPM India, the issue of classification of air leak tester was under consideration It was observed by the Hon’ble Tribunal that the air leak tester is a high precision measuring instrument and can be classified under heading 9026, and that when there is a specific entry, there is no need to choose a residual entry under heading 9031. Accordingly, the Hon’ble Tribunal ruled that the heading 9026 as an appropriate heading for air leak tester. The issue of classification of water sensors used for monitoring and detecting the presence of water in the fuel feed system under consideration  insideration. The Hon’ble Tribunal, observed that as the device does not have controlling and  operating functionalities, they are not classifiable under subheading 9032 as an automatic controlling instrument and is eligible for classification under tariff item 90268090 of the tariff A -t 1975. Taking into account the preceding discussions, it is my considered opinion that heading 9026 and more specifically subheading 90262000 is the appropriate classification for the  devices under consideration.

7. 2 I have also gone through a ruling of this Authority in Re: Tata Motors (Ruling No. CAAR/Mum/ARC/07/2022) wherein the classification of identical systems was analysed.

8. In view of my aforesaid discussions, I rule that the Tire Pressure Monitoring System (TPMS) and Differential Pressure Sensor (DPS) merit classification under subheading 9 1262000 of the first schedule of the Customs Tariff Act, 1975.