FEBRUARY 15, 2025

By S K Rahman, IRS, working as Chief Commissioner at CESTAT Delhi

ON  10th February, 2025, the CESTAT Principal Bench Delhi has passed a Final Order - 2025-TIOL-275-CESTAT-DEL on import of E-Rickshaw parts which were subsequently assembled into complete E-Rickshaw. The dispute was with respect to classification as Department is of the view that it shall be classified as Electric Motor Vehicles under CTH 8703 9000, whereas the Appellant is of the view that parts of E-Rickshaw are being imported and hence, shall be classified as parts of automobile under CTH 8708 9900.

2. BRIEF FACTS OF CASE: The brief facts of the case are that the appellant has imported converter, charging socket, connection box etc declaring them as spare parts of e-rickshaw under CTH of 8708 9900 vide 18 Bills of Entry during the period May 2019 to November 2019.

3. The Counsels for the appellant, submitted:

(a) Finality of Assessment: Bills of Entry, not appealed, are final (ITC Ltd. v. CCE, 2019).

(b) Partial Imports: Essential E-Rickshaw components are locally sourced (BHEL v. CC, 1987).

(c) Classification Basis: Goods must be classified as presented (Advani Pleasure Cruise v. CC, 2020).

(d) ICD TKD Order Inapplicable: Referenced Dynamo Electricals v. UoI (1995).

4. The Authorized Representative for the Revenue, has submitted the following arguments:

(a) Classification under CTH 87039000: As per HSN Explanatory Notes to Chapter 87, incomplete vehicles resembling finished ones fall under their respective headings.

(b) General Rules of Interpretation: Rule 2(a) classifies unassembled goods as complete if they retain essential characteristics.

(c) CBIC Circular & ICD TKD Order: Circular 55/1995-CUS and ICD TKD Office Order dt. 12-03-2014 support classification under CTH 8703 9000.

5. The Hon'ble CESTAT has considered which essential and common parts of E-Rickshaw constitute a complete E-Rickshaw (Ref Table 1 at para 11 of the Order). The CESTAT has also examined few Bills of Entry to see whether such essential parts of E-Rickshaw are being imported in each Bill of Entry and the quantity of import in that Bill of Entry (Ref Table 2 at para 12 of the Order). The CESTAT has concluded that, "…most of the common & essential parts of E-Rickshaw have been imported. We are convinced from the above tables that that the appellant had indeed imported most of the E-Rickshaw components which by merely assembling these components, an E-Rickshaw can be generated." (Ref Para 13 of the Order)

6. HSN Explanatory Notes: As per HSN Explanatory Notes to Chapter 87, "An incomplete or unfinished vehicle is classified as the corresponding complete or finished vehicle provided it has the essential character of the latter". It is also seen that the appellant is importing each of these items in the same number that is in equal numbers. To illustrate, the appellant imported 1000 sets of the above mentioned essential items. Thus, it appears from the impugned components, an E-Rickshaw can be easily assembled. But it may be incomplete or unfinished E-Rickshaw.

7. General Rules of Interpretation: The Rule 2(a) of General Rules of Interpretation for classification under HSN is reproduced here: "2. (a) Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as entered, the incomplete or unfinished article has the essential character of the complete or finished article." In the instant case some parts of E-Rickshaw are imported and some parts are domestically procured. The major components/assemblies that provide essential characteristics to make a complete E-rickshaw in CKD SKD condition are given in ICD Office Order dt. 12.03.2014.

8. ICD, TKD Office Order: ICD, TKD Office Order dt. 12.03.2014 mentions that there are five major components/assemblies such as (i) transmissions (ii) motors (iii) axles (iv) chassis and (v) controller that provides essential characteristics to make a complete E-rickshaw in CKD SKD condition classifiable at 8703. It also says that along with motor any two of the essential components mentioned above shall be imported to make a complete E-rickshaw in CKD SKD condition classifiable at 8703. The Table 2 at para 12 of the Order gives shows import of such essential components.

9. Delhi High Court Order in Rama Krishna Sales: In the case of Rama Krishna Sales Pvt. Ltd. vs Union of India, - 2019-TIOL-378-HC-DEL-CUS, the Hon'ble High Court of Delhi has relied upon the said Office Order dt.12-03-2014 of ICD TKD. Thus, the Hon'ble High Court of Delhi has given judicial sanctity to this Office Order dt.12-03-2014. The Hon'ble High Court of Delhi also held that, the parts of E-Rickshaw imported were in the essential parts of E-rickshaw to be considered as motor vehicle for the purposes of interpretation of the First Schedule of Customs Tariff Act, 1975 by virtue of Rule 2(a) of Interpretative Rules.

10. The Authorised Representative for Revenue has relied upon following case laws in support of his arguments.

11. For the argument that Rule 2(a) of General Rules of Interpretation for classification under HSN and ICD, TKD Office Order dt. 12.03.2014 are not applicable in the instant case, submitted by the appellant, the CESTAT has opined that "However, we are of the opinion that the issue before us is whether the classification of impugned goods is CTH 8703 9000 as Electric Motor vehicles or CTH is 8708 9900 as Parts & accessories of automobiles. The aspects of allowing an unfinished vehicle as finished vehicle which may require certain statutory requirements under Motor Vehicles Act 1988 is not the issue under consideration". (Ref para 23 of the Order)

12. For the argument that 'As presented' relying upon Supreme Court judgment in the case of Commissioner of Customs, New Delhi Versus Sony India Ltd - 2008-TIOL-183-SC-CUS, submitted by the appellant, the CESTAT has opined that, "We are of the view that this judgement is not applicable in the instant case, as the impugned goods imported in one consignment (Bill of Entry) is established are sufficient to assemble E-Rickshaw in CKD/SKD condition. Moreover, we also note that the "Sony India" judgement relied upon by the appellant has been distinguished by many subsequent judgements" (Ref para 23 of the Order)

13. With respect to the Appellant's claim for the benefit of Sl. No. 526A of Notification No. 55/2017 dt. 30.06.2017, the CESTAT has held that, "in this context, we note that the benefit of Sl. No. 526A of Notification No. 55/2017 dt. 30.06.2017 was not claimed by the Appellant at the time of filing of Bill of Entry. We also note that the impugned order has denied the benefit of the said Notification relying CESTAT Order in the case of Abhedya Industries Ltd. Versus Commr. Of C. Ex. & S.T., Hyderabad-III reported as 2016 (340) E.L.T. 398 (Tri.-Hyd) [21-06-2016]". (Ref para 25 of the Order)

14. Considering all the above, the Hon'ble CESTAT has passed Order that,

"26. In view of the above, we are of the opinion that the impugned components imported are essential components of the E-Rickshaw. Consequently, the correct classification of the impugned goods is CTH 87039000. Accordingly, the impugned order is upheld and the appeal is dismissed". (Ref para 26 of the Order)

15. From the above, the takeaways from the CESTAT Final Order - 2025-TIOL-275-CESTAT-DELare:

a) The essential parts of E-Rickshaw when imported for assembly in India, even though some parts are obtained domestically for assembly, would be classified as E-Rickshaw under CTH 8703 9000 as long as

(i) each self-assessed Bill of Entry has minimum essential parts as per ICD, TKD Office Order dt. 12.03.2014 and

(ii) the essential character of the E-Rickshaw is attained for the imported components as per Rule 2(a) of General Rules of Interpretation for classification under HSN.

b) Pre-emptying such classification, the importer could claim the benefit of Notification available for such imports, such as the benefit of Sl. No. 526A of Notification No. 55/2017 dt. 30.06.2017, available during May-November 2019.

c) This case law may not be directly applicable to imported components through different Bills of Entry and could be at one port or different ports, assembled all together into a complete product and sold as a complete product.

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