Case nº Ruling No. AAR/Cus/05/ 2011 in Application No. AAR/Cus/44/12/2010 of Authority for Advance Rulings, May 13, 2011 (case Amsafe Services India Pvt. Ltd. Vs The Commissioner of Customs)
| President | P.K. Balasubramanyan, Chairman, J.K. Batra and J. Khosla, Members |
| Resolution Date | May 13, 2011 |
Judgment:
J.K. Batra, Member, (Central Excise, Customs And Service Tax) New Delhi
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M/s AmSafe Services India Pvt. Ltd., the Applicant, is a subsidiary company of AmSafe Bridport Limited, UK. The Applicant proposes to import and supply parts of aircraft and ground handling equipment to Hindustan Aeronautics Limited (HAL), a Public Sector Undertaking in India. The Applicant intends to import the goods and supply to HAL after clearance from the Bangalore Customs. Alternatively, the Applicant would import and stock the goods in the private bonded warehouse approved by Customs under Section 58 of the Customs Act, 1962 and supply goods to HAL on the basis of specific purchase orders. The supplies to HAL from the Customs Port or from the private bonded warehouse shall be made against a custom duty exemption certificate (CDEC) provided to the Applicant by HAL.
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The Applicant has claimed that the goods proposed to be imported by it for supplies to HAL are classifiable under Heading 8803 of the First Schedule to the Customs Tariff Act, 1975 (CTA, 1975) as parts of aircraft even though based on the individual description of the goods, these may independently be otherwise classifiable under different Headings of the said First Schedule. The Applicant has also claimed that it is eligible for the exemption from basic Customs Duty and additional Customs Duty on such imported parts in terms of the entry at Serial No. 10 of Notification No. 39/96-Cus dated 23rd July, 1996 on the basis of Customs Duty Exemption Certificate (CDEC) made available to it by HAL. The manner of certification and authority by whom the certificate will be signed have been described in the application.
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The application was admitted by the Authority vide its order dated 7th January, 2011 after ascertaining the comments of the concerned Commissioner. The following questions have been framed by the Applicant for seeking the advance ruling:
(1) Whether the Applicant would be correct in classifying the goods sought to be imported under Tariff Classification 8803 (Parts of goods of Heading 8801 or 8802) as the goods shall be used as parts of aircrafts?
(2) Whether the Applicant would be correct in availing the benefit of exemption from basic Customs Duty and additional Customs Duty under Entry No. 10 of Notification No. 39/96-Cus dated 23rd July, 1996 (as amended) if the goods (as mentioned in Annexure-III of the application) are supplied to HAL who shall use (either as raw material, capital goods or consumables) the same for manufacturing or servicing of the aircraft to be supplied to Ministry of Defence?
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On the first issue the Applicant has stated that various kinds of aircrafts (non powered aircrafts, helicopters, aero planes etc.) are classified under Heading 8801 and 8802 of the First Schedule to the Customs Tariff Act. Heading 8803 of the First Schedule covers "Parts of goods of Heading 8801 or 8802". According to the Applicant, therefore, since the goods imported by the Applicant will be used as parts of aircrafts, the same would be eligible for classification under a more specific description as parts of aircrafts under Heading 8803 of the First Schedule. The Applicant has relied upon Rule 3 of the General Rules for the Interpretation of the Import Tariff in support of its contention. The Applicant has also cited the ruling given by this Authority on the application made by M/s One Stop Airlines 2009 (236) ELT 379 (AAR) wherein, it was observed that "Nuts, bolts, rivets, screws, washers, couplings etc, used in the process of servicing/repairing an aircraft's engine can be treated as parts of aircraft provided they are specially meant for use therein". The Applicant has also referred to a decision of the Customs, Excise & Gold (Control) Appellate Tribunal (CEGAT) in the case of Indian Airlines v. Collector of Customs 1993 (64) ELT 473 (Tribunal): 1989 (23) ECR 544 (Tri.-Delhi), wherein, cabin chairs manufactured by the Boeing company or their vendors as per prescribed standards were classified as aircraft parts.
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The Commissioner of Customs in his comments has contested the classification of some of the items such as connectors, washer, nut, bolt, screw, switch, o-ring, plug, as parts of aircrafts and has claimed that these goods merit classification under specific Headings 8536, 7318, 4016 etc. rather than under the generic entry as parts of aircrafts under Heading 8803. The Commissioner has also drawn our attention to the Explanatory Notes of Heading 8803 of the Harmonized System of Nomenclature (HSN) which is the basis for the First Schedule to the Customs Tariff Act. The Notes stipulate that to be eligible for classification under Heading 8803, the following two conditions need to be complied with:
(i) The parts must be identifiable as being suitable for use solely or principally with the goods of the Headings 8801 or 8802; and
(ii) They must not be excluded by the provisions of the Notes to Section XVII.
It has been further pointed out by the Commissioner that as per note (2) (b) of Section XVII, the expression "parts" and "parts and accessories" do not apply to the following articles, whether or not they are identifiable as for the goods of this section:
(a) xxx
(b) Parts of general use, as defined in Note 2 to Section XV, of base metal, or similar goods of plastics (Chapter 39).
(c) xxx
As per Note 2 to Section XV, throughout the Schedule, the expression "parts of general use" means:
(a) Articles of Heading 73.07, 73.12, 73.15, 73.17, or 73.18 and similar articles of other base metals;
(b) Springs and leaves of springs, of base metal, other than clock or watch springs (Heading 91.14); and
(c) Articles of Heading 83.01, 83.02, 83.08, 83.10 and frames and mirrors, of base metal, of Heading 83.06.
The Commissioner has therefore urged that such of these articles which are covered by exclusion Clauses will merit classification under their respective Headings only and not under Headings 8803 as claimed by the Applicant.
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During the course of arguments the Commissioner of Customs was advised to indicate the Chapter Heading under which each item sought to be imported by the Applicant and specified in Annexure-III of the application, merited classification. It was stated by the Departmental Representative (DR) that in respect of some of the items described in the list in Annexure-III, the description made available was not sufficient to decide the classification of the goods and that the Commissioner needs clarification from the Applicant. The Applicant and the Commissioner were accordingly advised to examine the list together; the clarifications would be provided by the Applicant wherever necessary and to identify the items where the dispute regarding classification still persisted.
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The Commissioner has since indicated vide its letter dated 12th April, 2011 that pursuant to the directions of the Authority the Applicant had a meeting with the officers of the Department. Apparently the Applicant was explained the basis adopted by the Department for the classification under HSN of the various parts proposed to be imported by the Applicant. The Commissioner has informed through the Departmental Representative appearing in the proceedings that vide its letter dated 1st April, 2011, the Applicant has revised the HSN classification of the goods which they intend to import and sell in India and therefore there were no...
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