Importing E-Rikshaw Parts w/out 5 Key Assemblies not CKD/SKD: CESTAT Quashes Misdeclaration Claims & Higher CKD/SKD Customs Duty

The Principal Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) at New Delhi recently held that importing e-rikshaw parts without the five critical assemblies that constitute an e-rikshaw cannot be deemed to be import under Complete Knocked-Down/Semi-Knocked Down (CKD/SKD) condition as per Customs Tariff Heading (CTH) 8703.

Consequently, the Tribunal set aside the higher duty demand raised under this classification and quashed the department’s allegation of misdeclaration.

Multiple customs appeals were filed by related entities before the CESTAT, led by the case filed by M/s. Soni E Vehicle Pvt. Ltd. - a manufacturer of e-rikshaws in India who had imported various parts for assembly and filed multiple Bills of Entry, including consignments dated 12.02.2019 which were subjected to examination.

The Department alleged that the quantities in these consignments, which comprised 91 sets for 70 e-rikshaws and 99 sets for 72 e-rikshaws were actually the material required to piece together 142 e-rikshaws, imported in unassembled condition. The Department also flagged four earlier Bills of Entry filed by the appellant in December 2018 and March 2019.

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The key issue was that the items were imported as parts of e-rikshaw. The duty payable on e-rikshaw in CKD/SKD condition is higher than the duty leviable on the import of parts.

A detailed show cause notice dated 13.08.2019 was issued to the importer, its Managing Director, the Customs House Agent (Professional Exim), and its G-Card holder.

The Principal Commissioner, through an order dated 20.08.2020, reclassified 19 Bills of Entry under CTH 8703 and confiscated goods covered under six live Bills of Entry. The Commissioner also invoked the extended limitation under Section 28(4) for 13 previous Bills of Entry and imposed penalties on the importer, its Managing Director, the Customs House Agent and its G-Card holder under Sections 112(a)(ii) and 114A of the Customs Act, 1962.

These orders were challenged before CESTAT in the present connected appeals.

Arhum Sayeed, Rahil Ahmed, Deepriya Snehi and Yashika Kaushik appeared for Soni E Vehicle, its Managing Director while Sanjeev Kumar and Priyanka Goel appeared for the Customs House Agent and the G-Card Holder and sought to assail the impugned order.

Nikhil Mohan Goyal and Rajesh Singh were Authorized Representatives for the Department and supported the decisions of the Commissioner.

The Bench of Justice Dilip Gupta, President and Hemambika R. Priya, Member (Technical) observed that under the Office Order dated 12.03.2014 issued by the Joint Commissioner of Customs, an e-rikshaw in CKD/SKD form must necessarily include a motor along with at least two other essential assemblies - being the transmission, axle, chassis or controller. As the appellant had not imported the motor, the goods could not be classified under CTH 8703 and had to be treated as parts under CTH 8708.

As such, it was noted that the Principal Commissioner had misread the Office Order.

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CESTAT further held that the extended limitation under Section 28(4) was incorrectly invoked, as there was no evidence pointing towards wilful suppression or mis-statement. It was noted that the appellant had correctly described the goods, and the dispute was purely one of classification. Accordingly, the duty demanded for the 13 earlier Bills of Entry was set aside.

As no misdeclaration existed, the Tribunal held that confiscation of the six live consignments were unsustainable and also proceeded to quash the penalties imposed on the importer, its Managing Director, the CHA and the G-Card holder.

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