CKD Electric Two-Wheelers Without Battery, Charger Not Eligible For Customs Duty Exemption: CESTAT Delhi

The Customs, Excise and Service Tax Appellate tribunal (CESTAT), New Delhi, has denied concessional customs duty to an importer of electric two-wheelers in completely knocked down (CKD) condition because the kits lacked components required under the applicable exemption notification.

A Bench of Officiating President Dr. Rachna Gupta and Technical Member Hemambika R. Priya, however, upheld their classification as complete electric two-wheelers under Rule 2(a) of the General Rules for Interpretation (GRI). The tribunal observed:

“Consequently, we hold that the goods imported possess the essential characteristics of complete vehicle and satisfies the requirements of Rule 2(a) of GRIs. Hence, the classification of the imported goods under CTH 87116020 as decided by the adjudicating authority is upheld.”, it ruled.

Rissala Electric Motors Pvt. Ltd. had imported electric two-wheeler components in CKD condition and declared them under Customs Tariff Heading (CTH) 87116020. It claimed concessional duty under a 2017 notifcation as amended in 2019.

The Customs Department issued a show-cause notice alleging incorrect classification and wrongful availment of the exemption. The adjudicating authority confirmed a differential duty demand of ₹54.82 lakh, held the goods liable to confiscation under Section 111(m) of the Customs Act, 1962, and imposed a penalty under Section 112.

Before the tribunal, the company challenged the jurisdiction of the officer who issued the notice. It argued that a subsequent corrigendum could not cure the alleged defect. It also disputed the Department's claim that it had received a pre-notice consultation letter.

The tribunal rejected these objections. It held that the corrigendum making the notice answerable to the Principal Commissioner related back to the original notice without causing prejudice to the company. It also noted that the order recorded the company's reference to receiving the consultation letter dated June 28, 2021.

On classification, the tribunal applied Rule 2(a), which allows an incomplete article to be classified as the complete article if it possesses the latter's essential character. The Bench noted that the company had described the imports as “e-Bike in CKD condition with all pre-assembled essential parts & components”.

However, classification as a complete vehicle did not automatically entitle the company to concessional duty. The tribunal noted that Serial No. 531A(1) of the notification required the imported motorcycles to contain all necessary components.

Since the battery pack, charger, and electric compressor had not been imported, the tribunal ruled that the exemption was unavailable. It also rejected the company's alternative claim under Serial No. 531A(2), noting that the benefit had not been claimed when the Bills of Entry were filed.

The tribunal declined to interfere with the confiscation and penalty, relying on its earlier decision in Y.C. Electricals. It dismissed the appeal and upheld the adjudicating authority's order.

For Appellant: Advocate Sushant Uniyal, 

For Respondent: N. M. Goyal, Authorised Representative