Import of parts vs. Import in CKD form – Aggregation of disparate imports over a period of time to claim CKD form is not correct

The CESTAT Chennai has allowed assessee’s appeal in a case where the Revenue department had alleged misdeclaration of imports by importing goods in CKD form as parts. The dispute in Subash Iyappan v. Commissioner involved import of e-vehicles, allegedly in CKD form and thus being not eligible for benefit of reduced customs duty. The Tribunal for this purpose noted the following:

• Even consignments covered under the same Import General Manifest did not contain all essential components of an electric vehicle. 
• Bills of Entry analysis demonstrated that various components such as frames, motors, controllers and assemblies were imported in a fragmented manner, without any co-relation on a consignment-wise basis to constitute a complete kit. Several consignments found to contain only isolated components while many had not essential components. 
• Battery packs, which are critical for propulsion, were not imported along. In electric vehicles battery is not merely a component but is analogous to engine in an internal combustion engine vehicle.
• No quantification exercise carried out by Department to demonstrate number of complete kits imported.
• No correlation of the availability of essential components, including batteries, on a consignment-wise or period-wise basis. 
• Imports were made through multiple Bills of Entry at different points of time.
• Rule 2(a) of the Interpretative Rules can be invoked only on goods ‘as presented’. 
• Decisions on classification under Rule 2(a) turn on their own facts, and no universal principle can be applied.

According to the Tribunal, the Department thus failed to establish any co-relation of components to form a complete article and instead built its case on artificial aggregation of disparate imports over a period of time. The Department’s contention that the goods possessed ‘essential character’ of complete e-vehicles, was thus rejected. 

The assessee-importer was represented by Lakshmikumaran & Sridharan Attorneys here.