Untitled Document

Notification 21/2002-Cus - Plea for restoring concessional rate of duty on spare parts used for maintenance of specified medical equipment

CARDIO vascular angiography X-ray equipments are classifiable under CTH 9022 of the CETA, 1985. For manufacture of these life saving medical equipments, manufacturers import as well as indigenously procure parts and accessories. On occasions, these market leaders import the machine themselves from their manufacturing facilities overseas. Considering the importance of such equipments in the diagnostic field, the Central government has offered concessional rates of duty on its imports.

In terms of notification 21/2002-Cus, dated 01.03.2002 the subject machines [medical equipments specified in List 37 to the notification] could be imported @5%. Parts for the manufacture of the said goods were also subject to @5% subject to satisfying the condition prescribed in Sr. no. 5. Similarly, accessories to the said goods were also charged to @5% subject to their satisfying a similar condition as applicable to parts. See Sr. no. 357A, 357B (i) and (ii) in the table appended below.

S. No.	Chapter or Heading or sub - heading	Description of goods	Standard rate	Additional duty rate	Condition No.
(1)	(2)	(3)	(4)	(5)	(6)
357A	9018, 9019, 9020, 9021 or 9022	Goods required for medical, surgical, dental or veterinary use	5%	-	-
357B	90 or any other Chapter	(i) Parts required for the manufacture of the goods at S. No 357A; and (ii) accessories of the goods at S. No 357A.	5% 5%	- -	5 -”;

Due to core competence in manufacture of these technologically advanced products customers are dependent upon them for the repairs and servicing of the above machinery during and after warranty period. On occasions, it is imperative that the parts are replaced instead of carrying out repairs due to the time sensitive nature of the activity and the difficulty in repairing highly sophisticated circuitry of these parts. So a manufacturer/importer is hard pressed to import parts for the repairs/maintenance of these machines. The Government fully understanding the criticality of the occasion had allowed such imports at concessional rate of duty of @5% subject to observance of condition no. 11 appended to the notification. The relevant Sr. no. 363 to notification 21/2002-Cus [as it then existed] and the Condition are as reproduced below -

363.

90 or any other Chapter

The following goods, namely:-

(A) Medical equipment (excluding Foley Balloon Catheters) and other goods, specified in List 37;

(B) Accessories of the medical equipment at (A) above;

(C) Parts required for the manufacture, and spare parts required for the maintenance, of the medical equipment at (A) above

(D) Continuous Ambulatory Peritoneal Dialysis(CAPD) Fluid contained in a solution bag with or without tubing system

(E) Accessories of (D) above

Nil

11.

If the importer furnishes an undertaking to the Deputy Commissioner of Customs or the Assistant Commissioner of Customs, as the case may be, to the effect that-

(a) the parts or, as the case may be, the spare parts shall be used for the manufacture or maintenance, as the case may be, of the specified medical equipment;

(b) he shall, within three months or such extended period that the said Deputy Commissioner or the Assistant Commissioner may allow, produce-

(i) in the case of parts, a certificate from the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, having jurisdiction over the factory manufacturing the specified medical equipment, to the effect that the parts have been used in the manufacture of the specified medical equipment; or

(ii)in the case of spare parts, necessary evidence to the satisfaction of the Deputy Commissioner of Customs or the Assistant Commissioner of Customs, as the case may be, to the effect that the spare parts have been used for the maintenance of the specified medical equipment; and

(c) he shall pay, on demand, in the event of his failure to comply with the above conditions, an amount equal to the difference between the duty leviable on such quantity of the parts or, as the case may be, spare parts, but for the exemption under this notification and that already paid at the time of importation.

However, the aforesaid Serial number 363 and the entries therein were omitted by notification no. 21/2010-Cus dated 27.02.2010 and accordingly the spare parts used for maintenance of these machineries are now chargeable to @15% in terms of general entry mentioned at sr. no. 366 of the notification read with condition no. 11.

366.

90 or any other Chapter

Parts required for the manufacture, and spare parts required for the maintenance, of medical equipment falling under headings 90.18 to 90.21 and sub-headings 9022.12, 9022.13, 9022.14 or 9022.21

15%

Similarly, sr. no. 357A appearing in the notification 21/2002-Cus has been substituted by amending notification 41/2010-Cus dated 01.04.2010 and the same now reads –

(1)

(2)

(3)

(4)

(5)

(6)

"357A

9018,

9019,

9020,

9021 or

9022

Goods required for medical,

surgical, dental or veterinary use

Explanation - For the purposes of this exemption, the term “Goods” refers to medical instruments / appliances required for medical, surgical, dental or veterinary use only and does not refer to Parts and spares thereof.

-".

It is amply clear that the insertion of the Explanation is to prevent misuse of the concessional rate of duty of @5% by those importers who sought to import Parts and Spares under the guise of Goods required for medical, surgical, dental or veterinary use, and is a welcome one.

But the fact of the matter is that due to omission of serial no. 363 and its contents, importers/manufacturers are now at a disadvantageous position of requiring to pay 15% for import of spares parts to carry out repairs and maintenance whereas for manufacturing these equipments they are charged to @5% and are, therefore, tempted to divert the imports of parts meant for manufacture of these equipments for undertaking repair and maintenance jobs in case of exigencies.

Needless to mention such irresponsible actions may make them susceptible to incur the wrath of the concerned investigative agencies like the ‘dreaded' DRI.

The pro-active Government should, therefore, immediately restore the Sr. no. 363 and the entries relating thereto as it existed earlier (i.e prior to 27.02.2010) and prevent further damage.

Condition No.	Conditions
5	If the importer follows the procedure set out in the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996.