In Customs Appeal No.75416 of 2021 -CESTAT- CESTAT (Kolkata) rules goods imported by Big Bull Traders and Baba Baidyanath cannot be clubbed for classification, rejects 30% duty levy
Members P.K. Choudhary (Judicial) & K. Anpazhakan (Technical) [23-06-2023]

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Read Order: Baba Baidyanath Trading Company and Ors v. Commissioner of Customs (Port), Kolkata

 

Chahat Varma

 

New Delhi, June 28, 2023: In a recent ruling, the Kolkata bench of the Customs, Excise and Service Tax Appellate Tribunal has determined that the goods imported by Big Bull Traders Pvt Ltd (appellant 1) and Baba Baidyanath (appellant 2) cannot be combined for classification purposes. The Tribunal concluded that the imported goods were not in a Completely Knocked Down (CKD) condition, leading to the decision that they should not be classified under CTH 87038040. Instead, the goods were deemed appropriately classifiable under CTH 87089900. Furthermore, the Tribunal also held that the penalty imposed was not applicable as the notice was not issued under Section 28(4) of the Customs Act, thereby negating the penalties under Section 114A and Section 114AA.

 

Brief background of the case was that the appellant 1 was a manufacturer of Tricycle. They were authorized to manufacture Tricycles operated by battery under Motor Vehicle Rules. The appellant 2 was a Trading Company dealing in parts of Tricycle. The appellant 1 imported some parts of the Tricycle and procured some parts from appellant 2, which were imported by him separately. The allegation of the department was that both the parts imported by appellant 1 and appellant 2 together would constitute a fully assembled Tricycle. Show Cause Notice was issued to the appellants 1 and 2 proposing to club both the imports together and to assess the goods as fully finished Tricycles, instead of parts of tricycles, as claimed by the appellants. The said notice was adjudicated by the Commissioner of Customs (Port) vide Order-in-Original, wherein the adjudicating authority classified the goods imported as Tricycles under the CTH 8703840, imposing differential duty, redemption fine, interest, and penalties. The penalties were jointly and severally imposed on both the appellants.

 

The bench comprising of P.K. Choudhary (Judicial) and K. Anpazhakan (Technical) noted that that the order by the adjudicating authority did not present any evidence to prove that the goods imported by the appellants, when combined, possessed the essential characteristics of an e-rickshaw. Thus, the bench held that the goods imported by the appellants, if assembled, would not fulfill the basic function of propulsion required for classification under CTH 8703.

 

The bench further observed that the goods imported by the appellants, when combined, were not in a complete and fully functional state. The imported components required further manufacturing processes to become a fully finished Tricycle falling under CTH 8703. The bench determined that since the appellants had not imported the complete kit necessary for a fully finished Tricycle, the imported spare parts could not be classified under CTH 8703.

 

The bench also observed that the goods imported by the appellants together did not contain all the essential components required to form a CKD kit as per Notification no. 50/2017. The necessary components such as the controller, differential, battery, gearbox or transmission mechanism, engine, speed meter, electrical lining, wiper mechanism, mechanical hubs, braking system, rear shocker, meter board, headlight, batteries, tires, and tubes were not included in the imported parts. As a result, the condition specified in the notification for levying duty at the rate of 30% was not satisfied.

 

The bench, thus, ruled that the imposition of penalties and confiscation of goods in this case were erroneous and not legally justified.

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