Case nº Ruling No. AAR/Cus/02/2010 in Application No. AAR/Cus-1/03/2010 of Authority for Advance Rulings, July 27, 2010 (case H-D Motor Company India Private Limited Vs Commissioner of Customs, Inland Container Depot, Commissioner of Customs (General and Muland CFS) and Commissioner of Customs (Import) Nhava Sheva)

JudgeFor Appellant: Joseph Vellapally, Sr. Adv., Manish Mishra, Rahul Jena, Kabir Bogra and Ragvesh Singh Advs. and Pete Petersen III Company's Representative and For Respondents: S.K. Panda, B.K. Singh, Jt.'s CDR and Sumit Kumar, SDR
PresidentP.V. Reddi, J. (Chairperson), J.K. Batra and J. Khosla, Members
Resolution DateJuly 27, 2010


J.K. Batra, Member

  1. M/s H-D Motor Company India Private Limited, the applicant, is a wholly owned subsidiary of Harley-Davidson Singapore Pte. Ltd. The applicant proposes to import parts / components of motorcycles from Harley-Davidson Group of Companies and their vendors located in different countries for assembly of Harley-Davidson brand of motorcycles in India. The said parts are proposed to be packed into motorcycle kits. In general all the parts, components and sub assemblies required to build a standard order quantity of motorcycles would be shipped together. The vehicles would be assembled in India by fastening the various components together in a predefined sequence of operations. The operators will use a combination of hand tools (wrenches, sockets, screw drivers, etc.) and power tools (electric or pneumatic wrenches, nut drivers, drills, guns etc.) in assembling the vehicles. No other process such as machining, fabrication, stamping etc is proposed to be undertaken with respect to imported parts and components. Routine quality checks would be performed during the assembly operations and motorcycles would be released for distribution after final vehicle inspection.

  2. Motorcycles imported by the applicant are claimed to be covered under Custom Tariff sub heading 8711 50 00 of the First Schedule to the Custom Tariff Act, 1975. Further, motorcycles imported as "completely knocked down (CKD) unit" are eligible for a concessional rate of duty of 10% ad valorem under notification No. 21/2002-Customs, dated 1st March, 2002.

  3. Based on the aforesaid facts the applicant has sought a ruling on the following question, namely:

    Whether in the facts and circumstances of the present case, the import of motorcycle in the form of components, parts and sub-assemblies, proposed to be imported by the applicant, would constitute import of motorcycles in Completely Knocked Down form and as such would be eligible for concessional rate of basic customs duty at the rate of 10% provided under Entry 345 of Notification No. 21/2002-Cus, dated 1st March 2002(as amended)?

  4. The relevant extracts of Entry No. 345 of Notification No. 21/2002-Cus dated Ist March, 2002 (as amended) are as follows:

    S.No. Heading No. Description Rate of Duty

    345 8711 Motorcycles (including mopeds)

    and cycles fitted with an

    auxiliary motor, with or

    without side cars, and side

    cars, new, which have not been

    registered anywhere prior to


    (1) if imported as completely 10%

    knocked down(CKD)unit

    (2) if imported in any other form 60%

  5. The applicant has observed that the term "completely knocked down" is not defined under the Customs Law or any other Indian Laws. In the circumstances it is relevant for the applicant to ascertain whether the manner in which it proposes to import motorcycles would constitute an import as a completely knocked down unit so as to qualify for the concessional rate of duty in the aforesaid entry. Under the present industry practice only key components/parts are manufactured by the motor vehicle manufacturers in their own facility; most of the other components/parts are outsourced for manufacture by the ancillary units. All components/parts required to be assembled to manufacture a motorcycle are proposed to be imported from H-D Group Companies into India in a knocked down condition in the form of motorcycle kits. The applicant has submitted that it would import motorcycles in the same condition that Harley-Davidson would have presented the parts, components and assemblies to Harley-Davidson's motorcycles assembly lines in United States. The applicant has further submitted that because of the developing industry practice of outsourcing of manufacturing operations, the literal meaning of the expression " completely knocked down" cannot be adopted since it would not only be unviable but also unworkable.

  6. The applicant has filed the copy of an opinion tendered by the Automotive Research Association of India (ARAI) vide their letter No. AP:X/09-10/II-1260/073 dated 29th December, 2009. This letter is in response to a letter dated 26th November, 2009 from the applicant company. The ARAI in their letter dated 29th December, 2009 have observed as follows:

    On perusal of documentation, our views are as under:

  7. The Assembly Description and the supporting documentation covers mainly five vehicle models, namely Sportster, VRSC, Dyna, Softail and Touring.

  8. The assembly kits for these vehicle models consist of following sections.

    • Mid Assembly

    • Rear Assembly

    • Intermediate Sub-Assembly

    • Front Assembly

    • Final Vehicle Dress up

    Each assembly/section is further knocked down into sub-assemblies or parts/ components as the case may be. It appears that Engines are packed as complete unit. Similarly Wheel Rims and Tyres are also included as integrated assemblies.

  9. The assembly description covers simple processes like bolting, fastening, tightening and such mechanical assembly operation. Processes like machining, welding, fabrication, painting, etc. are not being used.

  10. The assembly part list indicates that main critical assemblies which are normally required for building motorcycles are covered in assembly drawings/sketches.

    In conclusion, it appears that the assemblies would represent the completely knocked down kits for the above vehicle models

  11. The applicant has further submitted that the Authority has already examined a similar issue in the matter of Bayerische Motoren Werke(BMW) reported in 2006 (193) ELT 138(AAR) wherein based on the opinion of the ARAI, the Authority held that even though some individual parts of the car may be imported in semi knocked down condition, the car itself would be viewed as having been imported in completely knocked down condition. The applicant has claimed that since the description of Entry No. 345 of the Notification is identical to the description of Entry No. 344, the motorcycle kits imported by the applicant would be eligible to claim the concessional rate of duty applicable to CKD kits

  12. The Commissioners of Customs have submitted that as the expression itself implies, "Completely Knocked Down" refers to items which cannot be dismantled any further into parts/components. The applicant has proposed to import a large number of assemblies or sub assemblies...

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