APRIL 02, 2024

By S K Rahman, IRS, working as AR at Delhi CESTAT

1. THE Principal Bench of CESTAT, New Delhi has passed Final Order. No 55365-55440/2024 dt.19-03-2024 2024-TIOL-305-CESTAT-DEL in the case of M/s Continental Automotive Brake Systems India Private Limited vs Commissioner of Customs, ICD, Patparganj.

2. In these cases, during the period from 14-06-2018 to 16-03-2020, the appellant has imported "Electronic Control Unit" (ECU) used for manufacture Electronic Stability Control System and supplied to manufacturers of Automobiles. The importer classified the impugned goods under CTH 9032 8910 with rate of duty of 7.5% (BCD) + 18% (IGST) + 0.75% (SWC) = 27.735%. The Department has reclassified the impugned goods under CTH 8708 9900 with rate of duty of 15% (BCD) + 28% (IGST) + 1.5% (SWC) = 49.120%. The difference is 21.4%.

3. The Hon'ble CESTAT has relied upon HSN Explanatory Notes of Section XVII. As per explanatory notes to Section XVII of the HSN, parts and accessories of the vehicles should be classified under their respective headings of Section XVII, only if they comply with the following three conditions:

a) They must not be excluded by the terms of Note 2 of Section XVII

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

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

4. Criteria of Exclusion: - The HSN explanatory note clearly lists the parts and accessories which are excluded by Note 2 to Section XVII. The impugned goods are not mentioned in the list. But the counsel for the appellant attempted to draw attention of Hon'ble CESTAT to Para (8) relying upon "such as" but Hon'ble CESTAT did not agree.

5. Criteria of Sole or principal use:- The impugned goods as declared by the Appellants are for the sole and principal use only in automobiles. In the bill of entry self assessed and filed by the importer, the description is "ECU Automotive Parts".

6. Criteria of specific coverage elsewhere: - The impugned goods are not covered in the list given in HSN which are more specifically mentioned elsewhere.

7. The Counsel for the Appellant attempted to apply Rule 2 (a) of General Rules of Interpretation but the Hon'ble CESTAT has agreed in with the submissions of the Authorised Representative that the Rules must be applied sequentially and the Rule 1 of the GIR provides that the classification shall be determined as per Sections or Chapter Notes.

8. The Counsel for the Appellant argued that the impugned goods shall be classified under CTH 9032 on the basis of Section Notes 7 (b) read with its HSN Explanatory Notes II given under CTH 9032. For any goods to be classified under CTH 9032 it shall essentially consists of (a) a measuring device, (b) a control device, and (c) an operative device. It also says that an automatic Regulator within the meaning of Chapter Notes 7 (b) of Chapter 90 shall consists of all the three devices (a), (b) & (c) assembled together as a single entity. The Authorised Representative has shown the sample of Imported goods and convinced the Hon'ble CESTAT that impugned goods can perform the function of (b) a control device but do not function as (a) a measuring device and (c) an operative device.

9. Thus, the takeaways from this judgement are:

(i) For any goods to be classified as parts and accessories under CTH 8708, the conditions mentioned in HSN Explanatory Notes to Section XVII shall be fulfilled. In case of any doubt the lists of goods and CTHs given in HSN Explanatory Notes for each of the criteria may be relied upon.

(ii) For any goods to be classified under CTH 9032 on the basis of Section Notes 7 (b) read with its HSN Explanatory Notes II given under CTH 9032 it shall consists of (a) a measuring device, (b) a control device, and (c) an operative device assembled together as a single entity.

(iii) This case law can be used for classification of other Electronic Control Units such as those used in Electronic Power Steering System in automobiles under CTH 8708 as some importers are classifying the same under 8543 or 8537 or 8538 with less rate of duty.

(The views expressed are personal and not in official capacity)

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