TMI Blog2023 (2) TMI 676X X X X Extracts X X X X X X X X Extracts X X X X ..... complete or finished by virtue of this rule), presented unassembled or disassembled. In the instant case, the applicant has stated that they will be importing kits of passenger cars and it is also settled, if all the parts are presented in knocked down condition and they have the essential character of a complete article, they have to be assessed as complete article, in terms of said Rule 2(a) of GIR. In the present case, the motor vehicles are initially assembled at site to a substantive extent for thorough verification and testing, then disassembled and imported in form of a kit. Therefore, notwithstanding the fact that at the initial assembling stage, they have not acquired the completeness of a car to be roadworthy, these kits have acquired the essential characteristics of motor vehicle to merit classification under Heading 8703, noting that they are principally designed for the transport of persons, numbering less than ten persons. Reliance placed in the case of M/S VOLVO AUTO INDIA PRIVATE LIMITED VERSUS PRINCIPAL COMMISSIONER OF CUSTOMS, BANGALURU AND COMMISSIONER OF CUSTOMS, CHENNAI [ 2022 (3) TMI 560 - CUSTOMS AUTHORITY FOR ADVANCE RULINGS- NEW DELHI ]. In this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n application dated 26-4-2022, received in this office on 27-4-2022, seeking advance ruling under Section 28H of the Customs Act, 1962 before the Customs Authority for Advance Rulings, New Delhi (CAAR, New Delhi in short). On scrutiny, the application was found to be in order as per CAAR Regulations, 2021 and accordingly the application was registered under Serial No. 9/2022, dated 27-4-2022. 2. The applicant, vide the aforesaid application, has sought ruling by CAAR, New Delhi on the question of classification of IMPORTED ELECTRIC VEHICLE KITS and eligibility of the import for S. No. 526A(1)(a) of the mega exemption notification, thereby qualifying for 15% BCD rate for the kits . 3. The details of the proposed business model of the applicant is as below : 3.1 The applicant plans to import Volvo passenger Electric Vehicle (EV) in knocked down condition from overseas manufacturing plant of Volvo Group. Different models of electric vehicle kits may be imported by them, from time to time, which include front-wheel drive as well as all-wheel drive variants, along with rear-wheel drive variants that may be imported in due course of time. All major parts/sub-assemblies constit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for import into India is attached as under as Exhibit A 4.3 Disassembled parts of the vehicle are shipped as CKD kits to India consisting of various identifiable parts, components, and sub-assemblies. The vehicle would be broken down into approximately 105 parts/sub-assemblies, which are standalone and not attached to each other or any other parts, components or assembly. Going forward, the number of parts in which the vehicle is broken could increase. The details of these sub-assemblies are captured below : S. No. Description of goods Category A : Sub-assemblies or parts specified in serial no. 526A of Mega Exemption Notification, which extends concessional rate of BCD on import of electric vehicles HV battery [Battery pack] Electric Front Axle Drive (EFAD) [motor, front] Electric Rear Axle Drive (ERAD) [motor, rear] Engine Control Module (ECM) [motor controller] On-board Charger (OBC) [charger] Inverter high voltage front axle (IHFA) [Power control unit, front motor] Inverter Electrical rear axle drive Module (IEM) [Power control unit, rear motor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maintained in case of such parts/sub-assemblies imported in close proximity. 4.8 The import documentation (packing list, bill of lading, etc.) would also capture description of imports as knocked down kit. The item wise details of all the parts, sub-assemblies constituting the kit would be captured in the packing list for each container. Further, the applicant wishes to highlight that certain one-time usage parts such as nuts and bolts will be imported as separate unit loads. 4.9 On arrival into India, the applicant shall file a bill of entry for import clearance of the electric vehicle kit, comprising of all sub-assemblies/parts, at the customs port. The applicant would be the importer on record for such vehicles and would discharge the customs duty on such imports. 4.10 The assembly of electric vehicles would be undertaken at the manufacturing plant of Volvo Group India Private Limited on contract manufacturing basis. 4.11 The assembly line will consist of approximately 9 assembly stations, 1 media filling station and 6 inspection and verification stations. The imported electric vehicle kits would be moved through the stations in a sequential order and each of these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.1 The applicant understands that customs duty rate on import is based on the classification of goods under the First Schedule to the Customs Tariff Act, 1975. In terms of the said schedule, passenger motor vehicles (including electric vehicles) are classifiable under Chapter 87 - Vehicles other than railway or tramway rolling-stock, and parts and accessories thereof . Relevant entry (4-digit level) for classification of passenger cars is produced below. Relevant entry (4-digit level) for classification of passenger cars is produced below : Tariff item Description Rate of duty 8703 Motor cars and other motor vehicles principally designed for the transport of persons (other than those of heading 8702), including station wagons and racing cars 125% 5.2 Since imports by the applicant are in the form of electric vehicle kits comprising of unassembled/disassembled sub-assemblies or parts, it is important to refer to Rule 2(a) of the General Rules for Interpretation ( GRI ) to First Schedule, which outlines principles for determining classification. The said rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntly, these entries have been revised, in order to remove the doubts that have arisen about the scope of these entries. The revised entries at S. Nos. 525, 526A and 531A of Notification No. 50/2017, dated 30-6-2017 are now self-explanatory. It is to reiterate that this is a clarificatory change only with no change in the applicable BCD rates on various forms of E-vehicles. [S. Nos. 138, 139, 140 of Notification No. 2/2022-Customs, dated 1st February, 2022 refers] 5.6 Therefore, based on the above-mentioned exemption entry, the rate of BCD on import of electric vehicle is dependent upon the level of breakdown/disassembly at the time of import as under : (i) Incomplete or unfinished electric vehicle, imported as knocked down kit containing necessary sub-assemblies, including battery pack, motor, motor controller, charger, power control unit, energy monitor, contactor, brake system, electric compressor (hereinafter referred to as 9 specified sub-assemblies ), with none of these inter-connected with each other and not mounted on a chassis, attracting 15% BCD. (ii) Incomplete or unfinished electric vehicle, imported as knocked down kit containing necessary sub-assem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ehicles) designed for the transport of persons; it does not, however, cover the motor vehicles of Heading 8702. The vehicles of this heading may have any type of motor (internal combustion piston engine, electric motor, gas turbine etc.) While referring, to the General Rules 2(a), it is mentioned that the imported goods, if all the parts are presented in CKD conditions and the goods have essential character of complete goods, they have to be classified as complete goods. Goods imported separately cannot be clubbed together because they are not presented as one CKD pack at the time of import. If all the parts are presented in CKD condition and they have essential character of a complete article, they have to be assessed as complete article [as held in case of Procal Electronics India Pvt. Ltd. v. Commissioner - 2005 (185) E.L.T. A58 (S.C.)]. It is seen from the packing list (Exhibit-A) that the CKD list consisting of listed parts are giving essential characteristics of motor vehicles. If these items are brought together, they can be classified under Heading 8703. In view of the above the electric vehicle kits proposed to be imported are classifiable under CTH 8703 of the first sched ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remain consistent, as all the items constituting a kit, including one or more parts imported separately, would be offered/presented together for customs clearance and would have essential character of complete vehicle. 9. In view of the same, finding that the application is valid in terms of the provisions of the Customs Act and the CAAR Regulations, 2021, having heard the applicant, I allow the application as per Section 28-I(2) of the Customs Act. Further, recognizing the importance of timely pronouncement of rulings, I proceed to examine the question posed for advance rulings on merits. 10. The applicant has approached this Authority seeking ruling on the following questions : (i) Whether the electric vehicle kits proposed to be imported are classifiable under Tariff Entry No. 8703 of the First Schedule to Customs Tariff Act, 1975? (ii) Whether the electric vehicle kits proposed to be imported by the applicant would be eligible for exemption under sub-category (a) of Serial No. 526A(1) of the Mega Exemption Notification and qualify for 15% BCD rate? 11. The first question relates to the classification of the Electric Vehicle Kits of Volvo brand passenge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It shall also be taken to include a reference to that article complete or finished (or falling to be classified as complete or finished by virtue of this rule), presented unassembled or disassembled. In the instant case, the applicant has stated that they will be importing kits of passenger cars and it is also settled, if all the parts are presented in knocked down condition and they have the essential character of a complete article, they have to be assessed as complete article, in terms of said Rule 2(a) of GIR. I find that in the present case, the motor vehicles are initially assembled at site to a substantive extent for thorough verification and testing, then disassembled and imported in form of a kit. Therefore, notwithstanding the fact that at the initial assembling stage, they have not acquired the completeness of a car to be roadworthy, these kits have acquired the essential characteristics of motor vehicle to merit classification under Heading 8703, noting that they are principally designed for the transport of persons, numbering less than ten persons. In coming to this conclusion, I have relied inter alia on my Ruling No. CAAR/Del/Volvo/19/2021, dated 10-9-2021 in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-assemblies inter-connected with each other but not mounted on a chassis 30% (2) in a form other than (1) above, - (a) with a CIF value more than USS 40,000 100% (b) Other than (a) above 60% Explanation. - For the removal of doubts, the exemption contained in items (1)(a) and (1)(b) of this entry shall be available, even if one or more of the components, parts or sub-assemblies required for assembling a complete vehicle are not imported in the kit, provided that the kit as presented, is classifiable under the heading 8703 of the Customs Tariff Act, 1975 as per the general rules of interpretation. 15. I find that the above entry covers all electric vehicles falling under Heading 8703. Further, given the form in which the vehicle kits in disassembled form will be presented before the customs, the question before me narrows down to whether the said vehicle kits ..... X X X X Extracts X X X X X X X X Extracts X X X X
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