Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise & Customs, New Delhi
Subject:- Assembly of “White Goods” on import through different parts.
With the advent of liberalisation, many of the parts and components of machineries and house-hold appliances including items such as televisions, music systems, etc., have been allowed for import without import licence though the equipment itself is not yet allowed for import or is allowable under Special Import Licence. In addition, the import duty on the complete built unit is higher than the import duty on the components. A large number of manufacturer have resorted to importing the components through different ports or at different times through the same ports and assemble the same in their factories. In most of the cases, there is hardly any further manufacturing operations on the parts imported. In some cases even the packaging materials are being imported.
2. For classification purposes, as per Rule 2(a) of the General Rules for interpretation of the Customs Tariff, in case the goods are imported in dis-assembled or un-assembled condition if the imported goods, when put together, have the essential characteristics of the complete finished article, it would be classified as the complete or finished article. By resorting to import in parts, at different ports, and assembling it is the local factory here, the units have not only evaded paying higher customs duty, but also have resultantly declared less assessable value of the finished goods for Central Excise duty.
3. The Customs Wing had issued a Circular vide F.No. 528/128/97-Cus. (TU) dated 5.12.97 wherein they have taken the view that unless some major components are locally manufactured or indigenously sourced, the other components when imported would be classified as the finished article and pay the duty as finished article. In view of this, the imports by the manufacturers for assembly may be viewed as whole and seen whether there in any indigenisation of major components/ parts so that the rest of the goods when imported would not have had the essential characteristics of the complete article.
4. In the cases where no such manufacturing / real local sourcing in involved, the central excise formation may issue necessary show cause notices answerable to the Commissioner of Customs of the port through which the goods have been imported. A copy of the show cause notice along with other documents/ details should be sent to the concerned Customs House for further action. Simultaneously, the assessable value for the Central Excise purposes may also be re-rxamined soon after the cases are adjudicating determining the higher duty liability/ value of the imported goods.
5. Details of the cases detected on the basis of this circular may be intimated to Board under intimation to Director General (Anti-Evasion).