Custom, Excise & Service Tax Tribunal
Honda Motorcycle And Scooter India Pvt ... vs Commissioner, Customs -New Delhi on 31 July, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH, COURT NO. 1
CUSTOMS APPEAL NO. 51210 OF 2020
[Arising out of Order in Appeal No. CC(A)CUS/D-II/ICD/PPG/426/2020-21
dated 24.08.2020 passed by the Commissioner of Customs (Appeals) New
Delhi]
HONDA MOTORCYCLE AND SCOOTER INDIA
.........Appellant
PVT LTD.
Plot No. 1 & 2, Sector-3, IMT Manesar
Distt. Gurgaon, Haryana-122050
Vs.
COMMISSIONER OF CUSTOMS-NEW DELHI .........Respondent
New Customs House, IGI Airport, New Delhi-110037 Appearance:
Shri B L Narasimhan and Ms. Anshika Khandelwal, Advocates for the appellant Shri Rakesh Kumar, Authorised Representative for the Department CORAM:
HON'BLE MR. JUSTICE DILIP GUPTA, PRESIDENT HON'BLE MR. P. V. SUBBA RAO, MEMBER ( TECHNICAL ) FINAL ORDER NO. 56197 /2024 Date of Hearing : 24/07/2024 Date of Decision: 31/07/2024 P. V. SUBBA RAO:
M/s. Honda Motor cycle and Scooter India (Pvt.) Ltd. 1 filed this appeal to assail the Order-in-Appeal2 dated 24.8.2020 passed by the Commissioner (Appeals) whereby he upheld the Order-in-Original 1 the appellant 2 impugned order 2 C/51210/2020 dated 26.5.2007 passed by the Joint Commissioner and rejected the appeal filed by the appellant.
2. The issue which falls for consideration in this appeal is whether the restrictions under the Policy Condition 2(II) (d) of Chapter 87 of the ITC (HS) Classification under the Foreign Trade Policy 3 , which 'permits import of new vehicles only through some designated ports, airports and ICDs' also applies to new vehicles imported in completely knocked down4 condition.
3. The impugned order holds that this port restriction applies to new vehicles imported in CKD condition and, accordingly, upheld the confiscation of the goods imported by the appellant through ICD Garhi Harasu (which is not a permitted ICD), imposition of redemption fine and imposition of penalty. Revenue supports this position. According to the appellant, this port restriction does not apply to vehicles imported in CKD condition.
4. We have heard Shri B L Narasimhan, learned counsel for the appellant and Shri Rakesh Kumar, learned authorised representative for the Revenue and perused the records.
5. There is no dispute that the appellant had imported motor cycles in CKD condition under two Bills of Entry through ICD, Garhi Harasu. There is also no dispute that under the Customs Tariff they were correctly classified as motor cycles and the appropriate amount of duty, after applying the exemption notifications, was paid. However, since 3 FTP 4 CKD 3 C/51210/2020 they were imported through ICD Garhi Harasu- an ICD through which import of new vehicles is not permitted, the Joint Commissioner confiscated the goods under section 111(d) of the Customs Act, 19625 and allowed them to be redeemed on a small redemption fine of Rs. 5,00,000/- under section 125 and also imposed a small fine of Rs. 2,00,000/- under section 112(a) on the appellant.
6. Shri B. L. Narasimhan, learned counsel made the following submissions:
(i) The port restriction as per the policy condition no. 2(II) (d) of Chapter 87 of ITC (HS) of the Foreign Trade Policy only restricts the import of new vehicles;
(ii) As per condition no. 2(I)(a), for the purpose of this policy, 'new vehicle' means a vehicle that is not manufactured/ assembled in India. The motor cycles in CKD condition were not manufactured at all. They will be manufactured /assembled in their factory after import;
(iii) General Interpretative Rule 2(a) of the Customs Tariff requires such vehicles in CKD condition to be classified as vehicles under the Customs Tariff but this GIR 2(a) does not apply to the policy conditions of ITC (HS). He placed reliance on:
LML Limited vs. Commissioner of Customs, Bombay6 upheld by the Supreme Court7 5 the Customs Act 6 1999(105) ELT 718 (Tri-Bom) 7 1999(107) ELT A 119 (SC) 4 C/51210/2020 Rama Krishna Sales Pvt. Ltd. vs. Union of India8
(iv) Since there is no port restriction on import of motor cycles in CKD condition, there was no violation of any law with respect to their import and therefore, confiscation under section 111(d) of the Customs Act and redemption fine cannot be sustained.
Consequently, the penalty under section 112 of the Customs Act also cannot be sustained;
(v) Therefore, the appeal may be allowed and the impugned order may be set aside.
7. Shri Rakesh Kumar, learned authorised representative for the Revenue made the following submissions:
(i) The appellant imported Motor cycles with internal combustion piston engine of 100% cylinder capacity exceeding 800 cc and classified them under ITC HS 87115000 and claimed the exemption notification no. 12/2012 [S. No. 443 (1) (b)] as amended which was available to motor cycles which had not been registered before importation into India. These Bills of Entry were filed in ICD, Garhi Harasu, Gurgaon, Haryana which is not one of the ICDs through which motor vehicles could be imported as DGFT Notification No. 117 (RE-2013)/2009-2014 dated 13.3.2015 read with Policy conditions of FTP under chapter 87 of ITC (HS) 2017;
(ii) The appellant submitted a letter dated 24.5.2017 stating that they had imported through Garhi Harasu since it was close to
8 2019 (2) TMI 149- Delhi High Court 5 C/51210/2020 their factory and that it was a bonafide mistake, waived personal hearing and requested that the consignment may be cleared;
(iii) Since the goods were imported contrary to prohibition imposed under the FTP, they were liable to confiscation under section 111(d) of the Customs Act and the appellant was liable to penalty under section 112 of the Customs Act;
(iv) Import of vehicles is restricted to some large ports and ICDs which have better control and regulations and they are not allowed to be imported through other ports and ICDs;
(v) Therefore, there was no error in the impugned order upholding the confiscation, imposition of redemption fine and penalty;
(vi) Since motor cycles were imported in CKD condition, they were classified as such and duty was paid. It is not open to the appellant to argue that while they were motor cycles for the purpose of paying duty and claiming exemption, they cease to be so for the purpose of port restrictions under the FTP. He placed reliance on M/s. Olympic Exports vs. Commissioner of Customs, New Delhi 9 in which this Tribunal held that vehicles imported in CKD condition also require a Type Approval Certificate from the Motor Vehicle Authority under the Motor Vehicle Rules as per the FTP;
(vii) In view of the above, the appeal may be dismissed.
8. We have considered the submissions advanced on both sides and perused the records.
9 2019 (365) ELT 114 (Tri-Del) 6 C/51210/2020
9. Goods imported into India are subject to restrictions and prohibitions under the Foreign Trade Policy framed under the Foreign Trade (Development & Regulations) Act, 1992, under the Customs Act and other laws. The Foreign Trade Policy classifies all goods into a 8 digit ITC (HS) classification similar to the Customs Tariff. Against each 8-digit code, the import policy indicates if the import is 'prohibited' (import not allowed), 'restricted' (import requires a licence from the Director General of Foreign Trade) or 'free'. In addition, every Chapter of the ITC(HS) classification has some 'policy conditions' which must also be met in every import. These conditions could be those imposed under the FTP itself or those imposed under some other law and reflected in the ITC(HS) for ease of reference.
10. In Chapter 87 (under which the imported goods fall), policy note 1 deals with import of second hand or used vehicles and policy note 2 deals with import of new vehicles. It reads as follows:
(2) (I) A new imported vehicle (including all the vehicles other than Railway or Tramway) for the purposes of this Chapter shall mean a vehicle that:-
(a) has not been manufactured/assembled in India; and
(b) has not been sold, leased or loaned prior to importation into India; or
(c) has not been registered for use in any country according to the laws of that country, prior to importation into India.
(II) The import of new vehicles shall be subject to the following conditions:
a. The new vehicle shall-
(i) have a speedometer indicating the speed in Kilometers per hour;
(ii) have right hand steering, and controls (applicable on vehicles other than two and three wheelers);
(iii) have photometry of the headlamps to suit "keep-
left" traffic; and
(iv) be imported from the country of manufacture. 7
C/51210/2020 b. In addition to the conditions specified in (a) above, the new vehicle shall conform to the provisions of the Motor Vehicles Act, 1988 and the rules made thereunder, as applicable, on the date of import.
c. Whoever being an importer or dealer in motor vehicles who imports or offers to import a new vehicle into India shall,
(i) at the time of importation, have valid certificate of compliance as per the provisions of rule 126 of Central Motor Vehicle Rules(CMVR), 1989, for the vehicle model being imported, issued by any of the testing agencies, specified in the said rule;
(ii) be responsible for all the provisions assigned to the manufacturer as per Rules 122 & 138 of CMVR, 1989 and for issuing Form 22, as per provisions of CMVR, 1989; and
(iii) give an undertaking in writing that the proof of compliance to conformity of production as per rule 126A of CMVR shall be submitted within six months of the imports. In case of failure to do so, no further import of new vehicle of that model shall be allowed thereafter. d. The import of new vehicles shall be permitted only through the Customs port at Nhava Sheva, Kolkata, Chennai and Chennai Airport, Cochin, ICD-Tughlakabad and Delhi Air Cargo, Mumbai Port and Mumbai Air Cargo Complex, ICD Talegaon Pune.
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11. The question to be decided is whether the expression ' motor vehicles' in 2(II) (d) above also includes vehicles imported in CKD condition or it includes only completely built units. The submission of the learned counsel for the appellant is that although vehicles in CKD condition are classified as vehicles under the Customs Tariff by applying General Interpretative Rule 2(a), they cannot be so classified for the purpose of ITC(HS) classification for deciding whether the goods are freely importable, restricted or prohibited. The submission of the learned authorised representative for the Revenue is that if vehicles in CKD condition are vehicles for classification under the Customs Tariff, they are also vehicles under ITC(HS) classification.
12. The submission of the learned counsel for the appellant insofar as it pertains to classification under ITC (HS) cannot be accepted for 8 C/51210/2020 more than one reason. ITC (HS) classification, like the Customs Tariff, is based on the Harmonised system of Nomenclature (HSN) which is universally accepted. It is a well settled principle that when deciding classification, HSN notes can be referred to. The General Rules of Interpretation including GIR 2(a) are not an innovation of the Customs Tariff but have been adopted from the HSN according to which goods in CKD and SKD conditions should be classified as complete goods. While classifying the goods under ITC (HS), one cannot take a different stand.
13. Secondly, as is evident from the Bills of Entry submitted by the appellant, it has itself classified the imported motor cycles in CKD condition as per GIR 2(a) both under the Customs Tariff and under RITC (Revised Import Trade Control or RITC is the expression used in the Bills of Entry for classification of the imported goods under the ITC (HS) of the FTP). It needs to be mentioned that the Bills of Entry require the importer to mention both the RITC and the classification under customs tariff and the appellant had done so. It cannot now say that GIR 2(a) should not be applied to classify goods under ITC (HS) having itself done so in this very case.
14. Thirdly, if the learned counsel's submission is accepted it will create chaos and confusion not only for the appellant but also for other importers. For instance, if the learned counsel's submission that GIR 2(a) should not be applied to ITC (HS) is accepted and applied to these Bills of Entry, the imported motor cycles in CKD condition should be classified as motorcycles for the Customs Tariff and each individual part comprising the motorcycle must be separately classified and the policy 9 C/51210/2020 against each should be examined applied. Some parts may not even fall under the same Chapter (for instance, tyres, battery, etc, may fall under different chapters themselves).
15. It will also open a new set of complications. Where import of a good is prohibited or restricted, one may simply divide it into two parts by opening a few nuts and bypass restrictions. Conversely, if the entire good is allowed to be imported, an ingenious officer may start examining individual parts to see if any of them is prohibited and seize some parts.
16. Therefore, the appellant correctly classified the imported goods in its Bills of Entry correctly by applying GIR 2(a) both under Customs Tariff and under ITC (HS).
17. The policy conditions mentioned in any Chapter of the policy stand on a different footing because they are not linked to the ITC (HS) classification and are in the form of plain text.
18. The question that remains to the be decided is what is the scope of 'motor vehicles' in Note 2 (II) (d) and whether it includes those in CKD condition. The Note itself is silent and it neither says that it includes vehicles in CKD condition nor does it say that it does not. So, the meaning of this expression has to be understood reading Note 2 as a whole because "import of new vehicles" was subject to not only port restrictions but also some other restrictions.
19. As per Policy Condition 2 (II) (a), a new vehicle shall (i) have a speedometer indicating the speed in Kilometers per hour; (ii) have right hand steering, and controls (applicable on vehicles other than two and 10 C/51210/2020 three wheelers); (iii) have photometry of the headlamps to suit "keep-
left" traffic; and (iv) be imported from the country of manufacture. Needless to say that in CKD condition, the motor vehicle is just a combination of all parts and it cannot have these parts until they are assembled together. Therefore, a motor vehicle in CKD condition cannot fulfil this policy condition.
20. As per policy condition 2(II) (b), a new vehicle shall conform to the provisions of the Motor Vehicles Act, 1988 and the rules made thereunder, as applicable, on the date of import. The provisions of the Motor Vehicles Act cannot obviously be met at the time of import of vehicle in CKD condition. For instance, there cannot be functioning brakes and headlights until these are assembled.
21. As per policy condition 2(II) (c), the importer should have a valid certificate of compliance as per the provisions of rule 126 of Central Motor Vehicle Rules (CMVR), 1989, for the vehicle model being imported, issued by any of the testing agencies, specified in the said rule. Rule 126 of CMVR, 1989 reads as follows:
"126. Prototype of every motor vehicle to be subject to test.--On and from the date of commencement of Central Motor Vehicles (Amendment) Rules, 1993, every manufacturer or importer of motor vehicles other than trailers and semi-trailers shall submit the prototype of the vehicle including trailers, semi-trailers and modular hydraulic trailer including registered association (identified by the concerned State Transport department) for E-rickshaw, wherever applicable shall submit the prototype of the vehicle to be manufactured or importer by him for test by the Vehicle Research and Development Established of the Ministry of Defence of the Government of India or Automotive Research Association of India, Pune, or the Central Farm Machinery Testing and Training Institute, Budni (MP), or the Indian Institute of Petroleum, Dehradun, or the Central Institute of Road Transport‖ Pune or the International Centre for Automotive Technology, Manesar, or the Northern Region Farm Machinery Training and Testing Institute, Hissar (for testing of combine harvester) and such other agencies as may be specified by the Central Government for granting a certificate by that agency as to the compliance of provisions of the Act and these rules:11
C/51210/2020 Provided further that the procedure for type approval of certification of motor vehicles for compliance to these rules shall be in accordance with the AIS: 0117-2000, as amended from time to time.
Provided that in that in respect to the vehicles imported into India as completely built units (CBU), the importer shall submit a vehicle of that particular model and type to the testing agencies for granting a certificate by that agency as to the compliance to the provisions of the Act and these rules."
22. The above Rule requires the prototype to be tested by testing agencies and approved. It goes without saying that when the motor vehicle is imported in CKD condition, it will not be possible to test it nor will it be possible to grant type approval to a vehicle which has not even been assembled. Therefore, this can only be meant for motor vehicles which have been fully installed.
23. Learned authorised representative relied on Olympic exports in which the Tribunal held that type approval was required under the policy even in case of incomplete e-vehicles. The relevant portion of this order is reproduced below:
'6. View of the appellants is that, present products will be assembled in India to make a vehicle. We find such narrow view of the issue will not lead to proper appreciation of the licensing condition. Admittedly, the goods imported are motor vehicle brought in CKD condition, for the ease of import and transport. Necessarily, these items are to be used as motor vehicle in India and are governed by Motor Vehicle Rules. There is no dispute on this aspect. When the appellants intended to import 'motor vehicle', the requirement of Motor Vehicle Rules are to be complied. The Policy stipulations clearly make out that various conditions including Type Approval Certificate by the competent authority is a mandatory requirement for any vehicle imported into India. We also note that the present vehicle (in CKD condition) was imported having electric capacity of more than 250 watt which as per mandatory requirement is to be registered with the Motor Vehicle Authority.
7. Considering these stipulations of Policy and the conditions of CMVR, we are of the considered view that the imported goods are in violation of Import Policy Notes, applicable during the relevant time.
Accordingly, we find no reason to interfere with the impugned order." 12
C/51210/2020
24. Learned counsel relied on Ram Krishna Sales Pvt. Ltd. vs. Union of India & Others10 in which Delhi High Court dealt with a case where some parts of E-rickshaw were imported by the petitioner and those parts together deserved to be classified under the Customs Tariff as e-rickshaw. The question was whether the petitioner was also required to meet the policy condition for import of new vehicle of the import policy. The relevant portion of this judgment is reproduced below:
"9. It is apparent from the above that a motor vehicle is a contraption that can be used on roads. E-rickshaw is clearly a motor vehicle; but the three parts in question, even though being substantial components of an E-rickshaw, cannot be termed as motor vehicle within the meaning of Section 2(28) of the Motor Vehicles Act.
10. At this stage, it is relevant to refer to Rule 126 of the Central Motor Vehicles Rules, 1989 which reads as under :-
"126. Prototype of every motor vehicle to be subject to test. - On and from the date of commencement of Central Motor Vehicles (Amendment) Rules, 1993, every [manufacturer or importer] of motor vehicles [including trailers, semi-trailers and modular hydraulic trailer] [including registered association (identified by the concerned State Transport Department) for E-rickshaw wherever applicable] shall submit the prototype of the vehicle to be manufactured or imported by him for test by the Vehicle Research and Development Establishment of the Ministry of Defence of the Government of India or Automotive Research Association of India, Pune, or the Central Farm Machinery Testing and Training Institute, Budni (MP) or the Indian Institute of Petroleum, Dehradun, or the Central Institute of Road Transport, Pune, or the International Centre for Automotive Technology, Manesar, or the Northern Region Farm Machinery Training and Testing Institute, Hissar (for testing of combine harvester) or the Global Automotive Research Centre, Chennai and such other agencies as may be specified by the Central Government for granting a certificate by that agency as to the compliance of provisions of the Act and these rules :"
11. A plain reading of the aforesaid Rule indicates that it is applicable in respect of a manufacturer or an importer of motor vehicles. However, such manufacturer or importer is required to submit a prototype of the vehicle for testing by the specified organizations. Clearly, a prototype approval is not available for parts of a motor vehicle. The petitioner is an importer of certain parts of an E-rickshaw, which are intended to be sold to manufacturers. There is merit in the petitioner's contention that it cannot obtain a type approval under Rule 126 of the Motor Vehicles Rules, since it is not importing a motor vehicle but only certain parts thereof. The petitioner has imported these parts for selling the same to manufacturers. The manufacturers in turn are required to obtain a type approval under Rule 126 of the said Rules for manufacture of the E-Rickshaw."
10 2019 (2) TMI 149(Delhi High Court) 13 C/51210/2020
25. Both the above cases dealt with the question whether type approval was required for an incomplete vehicle which deserved to be classified as a complete vehicle under the Customs Tariff. The Tribunal held in Olympic exports that type approval was required. Later, in Rama Krishna Sales, Delhi High Court examined the question and the actual CVMR 126 and held that it applies to only manufacturers or importers of motor vehicles. Thus, the decision of the Tribunal Olympic exports stands impliedly overruled in Rama Krishna Sales.
26. From the above, it is obvious that the term 'motor vehicle' used in various clauses of Policy Note II to Chapter 87 can only apply to complete vehicles and cannot apply to vehicles in CKD condition or to incomplete vehicles.
27. When the same word or expression is used at many places in the same legislation, it should be understood to have been used in the same sense. We therefore, find that the term 'motor vehicles' in policy condition 2 II (d) to Chapter 87 of ITC (HS) can only mean an assembled vehicle and it cannot mean motor vehicle in CKD condition. Therefore, in importing motor cycles in CKD condition, through ICD, Garhi Harasu, the appellant had not violated any prohibition or restriction.
28. To sum up:
(a) GIR 2(a) as per which goods in disassembled or unassembled form (CKD condition) need to be classified under the same heading as the goods also applies to 14 C/51210/2020 classification under ITC(HS). The appellant itself also classified the goods accordingly in the Bills of Entry indicating the same heading under Customs Tariff and in RITC.
(b) The policy conditions in Chapter 87 are, however, not linked to any particular heading and are in plain language.
(c) The expression 'motor vehicles' has been used at multiple places in Condition 2 to Chapter 87 and if this expression is interpreted as including motor vehicles in CKD condition, it will result in absurd consequences.
Therefore, this expression cannot mean 'motor vehicles' in CKD condition and can only mean completely built vehicles.
(d) Therefore, policy condition no. 2 II (d) to Chapter 87 of ITC (HS) classification which restricts the ports and ICDs through which the vehicles can be imported does not apply to vehicles imported in CKD condition. Vehicles in CKD condition can be imported from any port or ICD.
(e) Therefore, in importing motor cycles in CKD condition through ICD, Garhi Harasu, the appellant had not violated any prohibition and the imported goods were therefore, not liable to confiscation under section 111(d). Consequently, no redemption fine or penalty was imposable on the appellant.
15
C/51210/2020
29. In view of the above, the appeal is allowed and the impugned order is set aside with consequential relief to the appellant.
(Order pronounced on 31.07.2024) (JUSTICE DILIP GUPTA) PRESIDENT (P. V. SUBBA RAO) MEMBER ( TECHNICAL ) Tejo