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2005 (10) TMI 548 - AAR - CustomsApplication seeking advance ruling u/s 28H - Non-resident company - Whether the import of car parts, listed at Annexure III, would be considered as import of completely knocked down (‘CKD”) unit, eligible to the concessional rate of customs duty of 15% being covered by Entry 344 of CTH No. 8703 (1) of Notification No. 21/2002-Cus. as amended by Notification No. 11/2005-Cus.? - Majority decision of the Members of the Authority - HELD THAT:- It may be noted from the clarification report that (1) there are no specific guidelines prescribed for defining CKD and SKD kits; (2) there are some parts in the Annexure which could be taken as component form while there are other parts which could be termed as SKD form. (3) on the basis of the analysis carried out by ARAI and the discussions held with BMW, it was learnt that seats would be manufactured locally and then installed in the vehicle; (4) inasmuch as without seats the vehicle could not be treated as complete, the words “by and large” have been used. From the perusal of these reports, the position that emerges is that parts listed in Annexure-III to the application represent the CKD Unit and with the assembly of seats, which will be procured locally, the parts would constitute a complete car. There are some parts, which could be taken as component form while there are other parts which could be termed as SKD form. It is true that there are no definitions of the terms “CKD” and “SKD” in the Customs Act or Rules framed thereunder. But from the material furnished by the applicant for comparison of CKD and SKD, it appears that the components for the CKD vehicle are procured from the suppliers who supply to main BMW production facility at the CKD location and approximately 1400 single parts and body parts are transported to the CKD country. In the case of SKD, the vehicles are completely built up in a main BMW production facility in Germany and subsequently certain components are disassembled; the partially disassembled vehicles are mounted on transport skids and shifted to the respective countries where the disassembled components are fitted. The reports of the expert, as may be seen, refer to Annexure–III as CKD unit. The notification does not use the term “SKD”. The Notification for purposes of concessional duty refers to two categories : (i) imported as completely knocked down (CKD) unit dutiable 15%; and (ii) imported in any other form 60%. The reports of the expert do not mention that the car is not imported in completely knocked down (CKD) unit. What they say is that some parts of the car are in SKD form, thereby meaning, they can be further knocked down into components. This, in our view, may not be a relevant factor because it is clear from the report that Annexure–III represents completely knocked down unit of motor cars. If that be so, the contention of the Commissioner that Sl. No. 344 (2) prescribing 60% duty would apply, cannot be accepted; the applicable rate of duty would be 15%. We hasten to make it clear that the motor cars if imported in any form other than completely knocked down (CKD) unit, the rate of duty applicable would be 60%. Thus, we rule on the question set forth in the application that import of car parts as listed in Annexure-III to the application would be considered as import of motor car as a completely knocked down unit (CKD), eligible to the concessional rate of customs duty of 15% [applicable to motor cars if imported as completely knocked down (CKD), unit] being covered by Entry 344 of CTH No. 8703 of Notification No. 21/2002-Cus., dated 1-3-2002 as amended by Notification No. 11/2005-Cus., dated 1-3-2005. RULING OF THE AUTHORITY - In view of the opinion of the majority of the Members of the Authority on the question set forth in the application, it is ruled that import of car parts as listed in Annexure-III to the application would be considered as import of motor car as a completely knocked down unit (CKD), eligible to the concessional rate of customs duty of 15% [applicable to motor cars if imported as completely knocked down (CKD) unit] being covered by Entry 344 of CTH No. 8703 of Notification No. 21/2002-Cus. as amended by Notification No. 11/2005-Cus.
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