The Chennai Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the customs department’s re-determination of classification of the imported Computer & Bracket Assembly/Electronic Control Unit (ECU) was not legal and proper.
The Bench of P. Dinesha (Judicial Member) and M. Ajit Kumar (Technical Member) has observed that the department has not discharged the burden of proof to show that the ECU, is taxable in the manner claimed by them under CTH 8708 9090 and hence the classification as adopted by HMIL must prevail.
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Background
The appellant/assessee, M/s. Hyundai Motor India Limited, Kanchipuram (HMIL) is engaged in the manufacture of passenger motor cars, under the brand name of “Hyundai”.
They import various parts and accessories of passenger motor cars through Chennai ports.
Intelligence developed by the Directorate of Revenue Intelligence (DRI), allegedly indicated that HMIL was resorting to misclassification of various goods imported for manufacture of automobiles, in order to avail undue benefit of BCD exemption vide Notification No. 152/2009- Customs dated 31/12/2009 as amended.
They visited HMIL’s premises and made enquiries.
The assessee informed DRI that they have reviewed the classification adopted in respect of certain Bills of Entry (BE), details of which were also given, and had found that the classification assigned by them was not consistent in some of the cases with the nature of the products and as the Country of Origin (COO) Certificates with the inconsistent codes had already been filed, they intend approaching the suppliers to revise the HS codes and issue the COO for the respective Bills of Entry retroactively as provided under the India-Korea CEPA.
The importer also informed the voluntary payment of differential duty and interest, in respect of some products and attached a copy of TR-6 challan paid at Chennai Customs.
Two Show Cause Notices were issued to HMIL. SCN mainly for ECU’s, for a differential duty of Rs 59.93 Crores was confirmed by Order-in-Original. A second SCN was issued for a differential duty of Rs 38.62 Crores, which pertained to 15 items imported and cleared through 195 No.’s of finally assessed Bills of Entry and was confirmed.
Issue Raised
The assessee raised the issued was whether the re-determination of classification of the imported Computer & Bracket Assembly / Electronic Control Unit (ECU) is legal and proper.
The dispute pertains to the classification of the impugned goods as per CTH 9032 under the category ‘Automatic regulating or controlling instruments and apparatus’ (HMIL) or CTH 8708 as ‘Parts and accessories of the motor vehicle of heading 8701 to 8705’ (revenue).
Arguments
The assessee submitted that the Computer & Bracket Assembly / ECU is a device that controls all the electronic features in a car. This may range from fuel injection to maintaining perfect cabin temperature to controlling braking and suspension. ECU is hardware embedded with software. It operates much like the BIOS does in a computer and controls all the electronic features in a car. While the basic working principle of engine operation is still based on combustion, the process is now controlled by the ECU.
The assessee contended that ECU acts as a receiver of inputs and compares these inputs with the programmed optimum levels and accordingly sends the output signal to control/ regulate the respective parameters of the parts. The imported ECU is hence a Programmable Process Controller.
The assessee contended that the classification of Computer Bracket Assembly/ ECU was dealt with by two SCN’s and connected OIO’s. As per SCN dated 06/10/2022, Computer Bracket Assembly/ ECU was sought to be classified under the CTH 8537, however the impugned order has travelled beyond the SCN and classified the goods under a completely new CTH i.e. 8708. This is highly irregular and since the change in classification was made outside the SCN the order merits to be set aside on this ground itself.
The assessee contended that the Central Board of Excise and Customs (CBEC) vide Central Excise Order No. 49/3/97-CX dated 09.05.1997 in consultation with the Department of Electronics, had inter alia clarified that there are 2 types of Programmable controllers, and these are, Programmable Logic Controller (PLC) and Programmable Process Controller (PPC). While the former is classifiable under heading 85.37 the latter is classifiable under heading 90.32. Departmental officers are bound by Boards instructions.
The department contended that ECU’s are commercially known as part of motor vehicle manufactured by HMIL. They are electronic goods containing Core: Microcontroller; Memory: RAM/ROM/CPU; Communication Links: Controller Area Network (CAN) and III) Embedded Software: Boot S/W. The input factors/quantities received by Electronic Control Units are different from the factors/quantities controlled by them. ECU does not automatically regulate or control any of the variables of liquids or gases or electrical non-electrical quantities.
Conclusion
The tribunal held that the ECU being a combination of equipment and by its specific functions, satisfies the definition of being an apparatus. As per Rule 3(a) to the General Rules of Interpretation of the Customs Tariff, it is provided that the heading which provides a specific description shall be preferred to a heading having a more general description. CTH 8708 is a residual entry covering various ‘parts and accessories’ when compared to CTH 9032 which covers ‘Automatic regulating or controlling instruments and apparatus’.
Case Details
Case Title: Hyundai Motors India Ltd. Versus Commissioner of Customs
Case No.: Customs Appeal No.40029 of 2024
Date: 21.10.2024
Counsel For Appellant: M. Manickam
Counsel For Respondent: P. Narasimha Rao
