Case Law Details

Case Name : In Re Steelcase Asia Pacific Holdings India Private Limited (CAAR Mumbai)
Appeal Number : Ruling No. CAAR/Mum/ARC/33/2021
Date of Judgement/Order : 18/08/2021
Related Assessment Year :

In Re Steelcase Asia Pacific Holdings India Private Limited (CAAR Mumbai)

CAAR ruled that the components of swivel seats/chairs, proposed to be imported by the applicant in dis-assembled form, merit classification under sub-heading 94019000 of the first schedule to the Customs Tariff Act, 1975.

FULL TEXT OF THE ORDER OF CUSTOMS AUTHORITY OF ADVANCE RULING, MUMBAI

M/s. Steelcase Asia Pacific Holdings India Private Limited has filed the present advance ruling application. The applicant is stated to be engaged in the manufacture of office furniture, namely, office chairs and workstations and has IEC No. 0506043371. The applicant proposes to import chairs from Steelcase, Malaysia in disassembled form. After import, certain additional activities would be performed on the such chairs in the Pune plant before supply to the customers. The question posed by the applicant for advance ruling is whether the chairs proposed to be imported would merit classification under sub-heading 94013000 of the first schedule to the Customs Tariff Act, 1975 as swivel seat with variable height adjustment.

2. The applicant has stated that a chair consists of parts such as seat mechanism, arms assembly, back assembly, fabric and lumbar, base cylinder etc. The chair would be imported in disassembled form wherein all these parts would be put in one carton/box. The imported chair would have functions such as swivel function, i.e., turning around a central fixed point as well as height adjustment function. After the proposed import, the applicant would complete remaining activities such as the seat/bottom assembly and caster(wheels) assembly in their Pune plant. The inputs/raw materials required for these parts would be procured locally or imported as per the need. The chairs so assembled/ manufactured are designed to be placed on the floor or ground only.

3. The applicant has stated that customs duty is charged on import of goods into India under the provisions of Customs Act, 1962 at the rate specified in the first schedule to the Customs Tariff Act, 1975 on the value as prescribed under the provisions of the Act and Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. The importer is required to file a bill of entry consistent with the invoice and the packing list. Typically, goods as mentioned in the bill of entry are assessed to customs duty individually, i.e., goods A and B mentioned in a bill of entry would be assessed to customs duty at the rate applicable for A and B separately. For deciding the rate of duty, it is necessary to determine classification of imported goods. Classification is ordinarily determined in terms of headings in the tariff and relevant section and chapter notes of the tariff, aided by the rules of interpretation of tariff. These rules require that goods incomplete or unfinished would be classified as finished or complete goods if they have the essential characteristics of finished goods. Further, this rule is also employed even if such unfinished goods are presented in an unassembled or disassembled form. Therefore, if product X consists of sub-parts X 1, X2 and X3 where X1 and X2 give an essential character to the product, import of X1 and X2 shall be treated as import of X even if X3 is not imported. Ordinarily, goods are assessed to customs duty in the manner they are presented before the customs officer. It is also a settled position in law that goods would have to be assessed in the form in which they are imported and presented to the customs and not on the basis of the finished goods manufactured after subjecting them to some process after the import is made. The decisions of the Hon’ble Supreme Court in cases of Vareli Weaves Pvt. Ltd. [1996 (83) E.L.T. 255 (S.C.)] and Sony India Ltd. [2008 (231) E.L.T. 385 (S.C.)] have been cited in support.

4. To summarise the contentions of the applicant, classification of imported goods should ordinarily be done as they are presented to the customs officer. In the present case the imported components of a swivel/revolving chair would be presented in disassembled form wherein all the parts of such chair would be placed in one carton/box. On assembly of the said parts, the result would be an unfinished chair which would have functions such as turning around on a fixed central point and height adjustment function. Further, the said unfinished chair can be kept on the ground or floor. Under the chapter 94, heading 94.01 covers seats (other than those of heading 94.02), whether or not convertible into beds, and parts thereof. The tariff entry 94013000 includes in its ambit swivel seats and variable height adjustment. Further as per chapter notes, it has been provided that the articles (other than parts) referred to in headings 94.01 to 94.03 are to be classified in those headings only if they are designed for placing on the floor or ground. Explanatory Notes also provide that the heading 94.01 covers all types of seats such as lounge chairs, armchairs, folding chairs etc. On reading of the legal provisions, interpretative rules, customs tariff, chapter notes, and explanatory notes, it emerges that the unfinished chair proposed to be imported would merit classification under tariff entry 9401300, i.e., swivel seats and variable height adjustment. Even though the said chair is in unfinished form, the same has all the essential characteristics of a swivel seat.

5. In their CAAR – I form, the applicant has declared that they would be importing under the jurisdiction of the Principal Commissioner/Commissioner of Customs, Pune. Accordingly, their application was forwarded to the jurisdictional customs authorities for comments. However, no communication has been received from the jurisdictional Principal Commissioner/Commissioner of Customs.

6. The application was heard on 3rd August, 2021 in virtual mode. No one appeared on behalf of the Principal Commissioner/Commissioner of Customs, Pune. The applicant was represented by S/Shri Bharat Raichandani and Narendra Jangid, who have taken me through their application. It was pointed out to the representatives of the applicant that in paragraph 8 of their application, they have stated that after the proposed import, the applicant would complete remaining activities such as seat/bottom and castor(wheels) assembly at their Pune plant and also that the inputs/raw materials required would be procured locally or imported, and therefore, in light of such assertions, they would be required to provide the following details so that an informed decision can be taken.

> The list of components required for assembly/manufacture of a chair,

> The list of components that would be imported,

> The list of components that would be domestically procured,

> Whether the imported components would be ready for assembly or would there be a need of further working on such components,

> Whether the components proposed to be imported would match the number of chairs intended to be manufactured.

7. In their reply to the information sought at the time of the hearing, the applicant has supplied the following list of components required for manufacture of the chairs: –

(a) Mechanism,

(b) Arm assembly,

(c) Back finish and lumbar

(d) Base in star shape

(e) Cylinder

(f) Seat assembly/ Gaslift

(g) Caster assembly (wheels)

Out of the above, the first five would be imported and the remaining two would be procured domestically. The applicant has submitted that the imported components would be used straightaway for assembly/manufacture of chairs proposed to be sold in India and that there would be no further processes carried out on the said components. It has been further clarified by the applicant that the imported components would match the number of chairs that would be manufactured in India. The images of components of a chair have been enclosed in the applicant’s reply.

8. I have gone through the application, the records of the personal hearing and other relevant information. The applicant has stated that they have imported one consignment on test basis and the custom clearance in that case was on first check basis where assessment was done after verification. A copy of the Bill of Entry No. 3582688, dated 16.04.2021 has been submitted along with the application. In that document, the goods have been declared as `TV2 FRAME BLCK+ 3D BLCK, 4D, NO SEAT(ICP02163RP/1P00090495) (FOR OFFICE FURNITURE)’  and the classification adopted was sub-heading 94013000. However, no checklist, invoice, or packing list have been submitted by the applicant. From the description of goods as reproduced above, it is not possible to deduce exactly what has been imported. However, the description ‘NO SEAT’ appear to be in conformity with the applicant’s submissions that seats (and castor wheel assemblies) would be domestically procured. In light of the above, I proceed to examine the heading 9401 suggested by the applicant as the appropriate classification of the product/s intended to be imported. The Note 2 to Chapter 94 lays down that, ‘The articles (other than parts) referred to in headings 9401 to 9403 are to be classified in those headings only if they are designed for placing on the floor or ground.’ In this case even without the wheels, by virtue of the components like mechanism, arm assembly, back finish and lumbar, base in star shape and cylinder; when assembled, it would be possible for the product so assembled to stand on the floor or the ground, as mandated by the chapter note. Therefore, considering the components which are to be imported together and the relevant chapter note it would be reasonable to conclude that 9401 is the appropriate heading for the intended import. However, to merit classification under the heading 94013000 which is for swivel seats and variable height adjustment, it would be pertinent to examine whether the imported components, taken together, has the ability to assume the character of swivel seats, when assembled. Rule 2(a) of the General Rules for Interpretation of Import Tariff states that, ‘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 articles 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.’ Therefore, the proposed import of swivel chairs in disassembled form is not actually a bar to the classification under heading 9401. In fact, the HSN Explanatory Notes make it clear that articles of furniture presented disassembled or unassembled are to be treated as assembled articles of furniture, provided the parts are presented together. However, the fact that seats would not actually be a part of the components intended to be imported and presented to the Indian Customs authorities for assessment and clearance, makes it difficult to convince oneself that, the essential character of a swivel seat is achieved without the seat. As a matter of fact, going by the description of the sub-heading, i.e., swivel seats and variable height adjustment, it is clear that without the seat, which is going to be procured domestically and used in the assembly process post import, it has to be concluded that applying the principle that classification of goods need to be done in the state in which the goods are imported, the essential character of a swivel seat is not achieved. In the above backdrop, I am unable to agree with the applicant’s contention that the components of swivel seats that they intend to import in disassembled state merit classification under sub-heading 94013030. The HSN Explanatory Notes, with respect parts, states that, ‘This Chapter only covers parts, whether or not in the rough, of the goods of headings 94.01 to 94.03 and 94.05, when identifiable by their shape or other specific features as parts designed solely or principally for an article of those headings. They are classified in this Chapter when not more specifically covered elsewhere.’ Based on the material placed before me, there appears to be no doubt that the components of swivel seats/chairs proposed to imported are specifically designed for manufacture/assembly of goods described under the sub­heading 94013000. Considering the above and since, I have already reached the conclusion that heading 9401 is the appropriate classification for the components of swivel seats in disassembled state, the only possible entry at eight-digit level is 94019000.

In view of the foregoing discussions, I rule that the components of swivel seats/chairs, proposed to be imported by the applicant in dis-assembled form, merit classification under sub-heading 94019000 of the first schedule to the Customs Tariff Act, 1975.

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