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TMI Blog2024 (7) TMI 1325X X X X Extracts X X X X X X X X Extracts X X X X ..... d sales of "BMW cars" outside the territory of India. 2.1. The 2nd respondent commenced its business in India in 2005, its business operation has undergone significant changes since then. The 2nd Respondent started its business in India with the import of Completely Built Units (hereinafter referred to as "CBUs") of motor vehicles from BMW Group Companies outside India and assembly of motor vehicles from imported CKD kits (with the exception of seats locally procured) at its Chennai plant. An advance ruling was also issued by the 1st Respondent, wherein, vide order dated 28.10.2005, it was ruled that import of car parts as listed in Annexure-III to the said 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 01.03.2002 as amended by Notification No. 11/2005- Cus., dated 01.03.2005. The 2nd Respondent imported the motor vehicle by paying the concessional rate of duty prevailing at the relevant time of import. 2.2. Thereafter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion unit) 2. Axle assembly; 3. Exhaust systems; 4. Cooling module; 5. Heating, Ventilation and Air Conditioning unit (HVAC); and 6. Door Panels. 3. Against this background, the 2nd Respondent approached the 1st Respondent raising the following questions with regard to which the ruling was sought: "a) Whether the import of components / parts/ sub-assemblies by the applicant will be classified as motor vehicle under Tariff Heading 87.03 or as Completely Knocked Down (CKD) kit under Sr. No. 437 of Notification No. 12/2012-Cus., dated 17.3.2012, as amended, when six essential and critical components/parts/subassemblies, namely; (i) engine (along with engine and transmission unit) (ii) axle assembly (iii) exhaust systems (iv) cooling module (v) heating, ventilation and air conditioning unit and (vi) door panels are to be locally assembled/manufactured by approved local third party vendors? b) If the import of components/parts/sub-assemblies by the applicant will not be classified as motor vehicle or as CKD kits, whether the applicants imports will be classified under their respective headings/sub-headings of the Customs Tariff Act, 1975 or under Tariff Heading 87.08 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fication No.20/2007 dated 01.03.2007 (xxxiii) against S.No.344 for the entry in column (4), for the entry relating to item (1) of column (3), the entry "10%" shall be substituted instead of 12.5%. 10% 6. Amendment to Notification No.21/2002, vide Notification No.21/2011 dated 01.03.2011 (xxiv) against S.No.344, in column (3), after the entry, the following shall be inserted, namely:- Explanation.- For the purposes of this exemption, "Completely Knocked Down: unit means a unit having all the necessary components, parts or subassemblies for assembling a complete vehicle but does not include,- (a) a kit containing a pre-assembled engine or gearbox or transmission mechanism; or (b) a chassis or body assembly of a vehicle on which any of the component or sub-assembly viz., engine or gearbox or transmission mechanism is installed; 7. Amendment to Notification No.21/2002, vide Notification No.31/2011 dated 24.03.2011 (ii) for S.No.344, and the entries relating thereto the following S.No. and entries in column (3) and (4) shall be substituted, namely:- Motor cars and other motor vehicles principally designed for the transport of persons (othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 01.03.2005, 01.03.2006, 01.03.2007 respectively. 6. While so, Notification No.21 of 2002 was further amended vide Notification No.21 of 2011 whereby an Explanation was inserted which defined "Completely Knocked Down" condition to mean a unit having all the necessary components, parts or sub-assemblies for assembling a complete vehicle but does not include- (a) a kit containing a pre-assembled engine or gearbox or transmission mechanism; or (b) a chassis or body assembly of a vehicle on which any of the components or sub-assemblies viz., engine or gearbox or transmission mechanism is installed. 7. Import of motor cars as CKD kit containing all the necessary components or sub-assemblies, for assembling a complete vehicle with engine, gear box and transmission not in pre-assembled condition was liable to tax at 10%. If the Motor Vehicle is imported as a CKD kit containing engine or gearbox or transmission mechanism in pre-assembled form, but not mounted on a chassis or a body assembly, it was liable to duty at 30%. Import of motor vehicles in any other form was liable to tax at 60%. 8. Notification No.12 of 2012 dated 17.03.2012 superseded Notification No.21 of 2002 and S.No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .1. It was submitted by the learned Senior Standing Counsel for the appellant placing reliance upon sub clause (b) read with sub-clause (a) to Section 28E of the Customs Act, 1962 that the activity with regard to which an advance ruling can be issued under Section 28E is only in relation to an "activity" which is proposed to be undertaken. In other words the "advance ruling" sought for must be in relation to a "new business of import or export" proposed to be undertaken. However, the activity i.e., business with regard to which the advance ruling is sought for viz., import of motor vehicles is an existing business and thus the 1st Respondent ought to have rejected the application as not maintainable. 11. To the contrary, it was submitted by the learned counsel for the 2nd Respondent that the above submission by the learned counsel for the appellant is misconceived both in law and on facts. The learned counsel for the 2nd Respondent would submit that the issue of maintainability of the application before the 1st Respondent cannot be raised inasmuch as the application was admitted by the 1st Respondent vide Misc. Order No.AAR/44/Cus/01/2015 dated 16.01.2015 and the same was never un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Advance ruling is avoidance of litigation and promoting better relationship. In the era of globalisation of business, the purpose for creating the Authority is for expeditious disposal and determination of question of law or fact specified in the application regarding the liability to pay tax in relation to a transaction proposed by the applicant for which the Authority is required to give advance ruling. The Authority has been created to promote better compliance inter alia with the provisions of the Customs Act, 1962, on the lines of a similar Authority constituted under the Income-tax Act, 1961. The advance ruling would enable an importer to obtain in advance, a binding view from the Authority under the Act on issues which could arise in determining his tax liability (GSPL India Transco Ltd. v. Union of India, (2012) 56 VST 19). 13. Keeping in view the above object of the Advance Ruling Authority, we find that the submission by the Revenue on maintainability is premised on a narrow construction on the expression "business". A new model / pattern / modus of import would constitute business for the purpose of Section 28E of the Act. One can draw support to the above view from Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utory interpretation which needs to be noticed is that a provision in the statute is not to be read in isolation rather it has to read along with other related provisions itself, more particularly when the subject matter dealt within different sections or parts of the same statute is the same. b. In the case of Kailash Chandra and another versus Mukundi lal and others, 2002 (2) SCC 678. In paragraph 11, following has been laid down: "11. A provision in the statute is not to be read in isolation. It has to be read with other related provisions in the Act itself, more particularly, when the subject matter dealt with in different sections or parts of the same statute is the same or similar in nature." On applying the above principle that the Act must be read as a whole it appears the submission of the respondents that the right to input tax credit is perfected/complete/absolute the moment inputs are used in the manufacture or processing of goods cannot be sustained inasmuch as it is in conflict that other provisions of the Value Added Tax in particular Section 19(4) and 19(5) of the TNVAT Act, 2006. The above submission is thus contrary to the settled rule of construction that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the 1st Respondent. We say this conscious of the fact that acquiescence or consent would not confer jurisdiction if the authority otherwise does not possess the requisite authority / jurisdiction. However, there is a distinction between jurisdiction to decide the matter and the ambit of the matter to be heard by the authority. While the waiver or consent would not confer jurisdiction in the case of the former, however waiver may be a factor to be considered in the case of the latter. We would think that apart from the fact that the challenge to jurisdiction is without merit, in any view, it falls within the latter category and thus the conduct of the appellant in participating in the proceeding may constitute waiver of its right to question / challenge maintainability before this Court (United Commercial Bank Ltd. v. Workmen, 1951 SCC 364; Kedar Shashikant Deshpande v. Bhor Municipal Council, (2011) 2 SCC 654). 16. For the above reasons we are unable to agree with the challenge to the maintainability raised as a preliminary issue by the appellant. Classification of Imports on Merits: 17. We shall now proceed to examine the classification of imports on merits. It may be re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly if all components intended to make a final product presented at same time for customs clearance. The judgment of Hon'ble Supreme Court in Commissioner of Customs v. Sony India (2008) 13 SCC 145, is closer to the present case as components / parts / assemblies for manufacture of motor vehicle were not likely to be imported in the same container. They are not even likely to be imported at the same time and require further manufacture by different local third party vendors. (g) The attempt by the Revenue to rely upon Rule 2(a) of the General Interpretative Rules is mis-conceived inasmuch as it does not satisfy the test of the imports being made of the various elements / components at the same time. 19. Having narrated the factual setting on the basis of which the Advance Ruling was issued, let us now examine Rule 2(a) of the General Interpretative Rules which forms the basis of the appellant case, to submit that the impugned order of the 1st Respondent ruling that Rule 2(a) of the Rules of Interpretation of Tariff is applicable and the imports bear essential character of Motor Vehicle and thus cannot be classified as import of parts. 19.1. It may thus be relevant to refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e learned ASG, therefore, suggests that the articles though were not the CTVs in CKD form and were incomplete or unfinished ones, they had the essential character of complete or finished CTVs and applying this Rule, every such component, would have to be taken as an import of CTV. The learned ASG heavily relied on the second part of the Rule, starting from words "It shall also to be taken to include a reference...." He says that every component whether it is complete or finished and which is presented in unassembled or disassembled condition, would have to be taken as the finished article, like CTVs in this case. In our opinion, this argument is completely illogical and again that is not the import of the language of the Rule. If the argument of the learned ASG has to be accepted, then we would have to concentrate only on the later part of the Rule, ignoring the first part of the Rule and such dissection, in our opinion, is not possible. The sine qua non for the application of this Rule is that any imported article, which is "as presented", must have the essential character of the "complete or finished article". This condition cannot be ignored and we cannot allow the reading only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... headings or Notes do not otherwise require, according to the provisions hereinafter contained. 2. (a) Any reference in a heading to goods shall be taken to include a reference to those goods incomplete or unfinished, provided that, the incomplete or unfinished goods have the essential character of the complete or finished goods. It shall also be taken to include a reference to those goods complete or finished (or falling to be classified as complete or finished by virtue of this rule), removed unassembled or disassembled. (b)** 16. It would be clear that this rule can be applied only if all the components which form part of the assembly or complete or finished goods are removed together at the same point of time. Thus, unless and until all the component or parts which form part of the complete goods, which in the present case are CTVS, are removed together, rule 2(a) would have no applicability. 17. It would also be useful to contrast this Interpretative Rules 2(a) with Interpretative Rules 2(a) of the Customs Tariff, which is identical with the only difference being that instead of "removed", the expression "presented" appears in the Customs Tariff. In regard to the appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts or parts or sub assemblies has the essential character of a complete or finished motor vehicle. The facts considered by the Advance ruling would show that at least 3 out of the six components viz., Engine, Transmission, Axle found as essential for a motor vehicle in terms of the circular is procured locally. It may be relevant to note that it is found by the Advance Ruling Authority that the total number of parts proposed to be imported by the applicant would be 1940 and 1436 (depending on the model of the motor vehicle). The above parts are imported from different entities in different consignments at different points of time, thus applying the decision in Sony India and L.G. Electronics to the facts recorded by the 1st Respondent, we agree with the finding of the 1st Respondent that Rule 2 A of G.I.R. would not apply. Relevance of the decision in Westinghouse Saxby : 20. The Revenue placed reliance on the above decision of the Apex Court reported in (2021) 5 SCC 586 to submit that the order of the Advance Ruling is erroneous. That was a case of relays manufactured under the Excise Act and the question was whether it would fall under Tariff Item 8608 or 8536.90, premised on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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