The Tax Implications of Universal Joints in Transmission Shafts.

Court Name : CESTAT Delhi

Parties : Kafila Forge Ltd Vs Principal Commissioner of Customs

Decision Date : 28 July 2023

Judgement ref : Customs Appeal No. 52189 of 2019

When you're dealing with Universal Joints, particularly those used in transmission shafts, it's crucial to understand their tax implications. This mem is your guide to navigating this complex terrain. It's based on a judgement by CESTAT Delhi in the case of Kafila Forge Ltd Vs Principal Commissioner of Customs.

The case, decided on 28 July 2023, falls under the Customs Appeal No. 52189 of 2019. The judgement provides a comprehensive understanding of how these parts, falling under the heading 8483 60 90, are treated for tax and customs purposes.

Remember, when it comes to tax, every detail matters. This case is a prime example of how specific parts used in machinery can have unique tax treatments. So, whether you're a manufacturer, a tax professional, or a law practitioner, this ripple is a valuable resource for you. It not only helps you understand the tax implications but also equips you with the knowledge to handle similar scenarios in your practice.

Stay informed, stay ahead. Your understanding of such intricate tax matters can make a significant difference in your professional journey.

Please note that this narrative strictly adheres to the information provided in the ripple and does not make any assumptions or unnecessary creative additions.

FINAL ORDER No. 50968 /2023

PER HEMAMBIKA R PRIYA

The dispute, in the present appeal, arose when M/s Kafila

Forge Ltd. (hereinafter referred to as the appellant) filed a Bill of

Entry No. 7800127 dated 13.12.2006 for clearance of goods

declared as “U.J. Cross Part & U J Cross Cup part” claiming the

classification to be under heading 8483 60 90 of the Customs

Tariff. These goods weighed 24241.900 kgs and the assessable

value was declared to be Rs. 31,63,822.01/-. The assessing

officer objected the classification and passed an order No.

08/2017/DC/ICD/TKD dated 11.01.2017 classifying the said

goods under CTH 8708 of the Customs Tariff. The appellant filed

an appeal before the Commissioner(Appeals), who vide the

impugned order upheld the said Order-in-Original.

2. The learned Counsel for the appellant submitted that the

classification of the impugned goods is not a fresh one but has

been classified since long only in the tariff entry of 8483

specifically. He pointed out that various notifications issued by the

Central Government also classifies Universal Joints under the

heading 8483 in respect of its use in motor vehicles or in a

machine. He relied on the decision of the Supreme Court in

Collector of Customs, Bangalore versus Maestro Motors Ltd

[2004(12)TMI 86-SC)] wherein it has been held that such

Universal Joints are not classifiable as motor vehicle parts. He

submitted that the heading clearly includes Universal Joints which

is part of Transmission Shafts and Cranks. He drew the attention

of the bench to the Note 2(b) of Section XVI of the Customs Tariff

dealing with Chapter 87, which states Parts of Universal Joint

Cross and parts of Universal Joint Cross suitable for use solely or

principally with the said transmission shaft are also classified with

the transmission shaft i.e., under heading CTH 8483. It is not

disputed that the goods being imported by the appellants are for

use solely or principally with the transmission shafts which may

be used in motor vehicles. He relied on the order of the Tribunal

reported in [2004(167)ELT 343-Tri-Del] in their own case.

3. The learner authorised representative stated that

appellant’s contention that the subject goods are covered under

8483 is intended to evade customs duty. The Chapter Heading

8483 essentially relates to transmission shafts, whereas they had

declared the goods as parts suitable for use as part of motor

vehicles. He drew attention to Part F of the Explanation three

notes for CTH 8708 which includes other transmission parts and

components (for example propeller shafts, half shafts, here’s,

gearing, plain shafts bearings, reduction gear assemblies,

universal joints) but the heading excludes crankshafts, camshafts

and flywheel of heading 8483. He stated that the HSN explanatory

notes have a persuasive value for determining the right

classification. The self declaration by the appellant that these are

parts to be used as parts of motor vehicle is material evidence

and cannot be denied at this stage. The submission of Counsel

that it is a general part which can be used anywhere is irrelevant

as the subject goods shall only be used in motor vehicles as has

been stated by the appellant before the Commissioner (Appeals).

In order to find the right classification, it is description of goods as

well as the test of predominance that matters as, has been held in

catena of decisions. The learned Authorised Representative relied

on recent judgement in Westinghouse Saxby farmers Ltd vs.

Commissioner of Central Excise Calcutta [MANU/SC/0162/2021].

4. Having heard both sides, the issue to be decided is

classification of the goods, namely U.J. Crossparts, U.J. Cross

Body, U.J. Cross Cup, U.J. Cross Needly Roller, U.J. Cross SNAP

Ring. We observe that the usage of these goods is not in

dispute in as much as these goods are for use solely or principally

with the Transmission Shafts which may be used in Motor

Vehicles. It is an admitted fact by the appellant- that universal

joints or parts of universal joint and transmission parts fall under

Tariff Entry No. 8483. The goods imported are Universal Joint

parts to be used in Transmission Shafts. Transmission Shafts are

further used in automobiles. Transmission shafts are classifiable

under CTH 8483.

5. In order to appreciate the coverage of the goods

falling under heading 8483 of the Customs Tariff Act, the same is

reproduced below:

" 8483 TRANSMISSION SHAFTS (INCLUDING CAM SHAFTS AND CRANK

SHAFTS) AND CRANKS; BEARING HOUSINGS AND PLAIN SHAFT

BEARINGS; GEARS AND GEARING; BALL OR ROLLER SCREWS;

GEAR BOXES AND OTHER SPEED CHANGERS, INCLUDING TORQUE

CONVERTERS; FLYWHEELS AND PULLEYS, INCLUDING

PULLEY BLOCK; CLUTCHES AND SHAFT COUPLINGS (INCLUDING

UNIVERSAL JOINTS)

(1) (2)

8483 10 - Transmission shafts (including cam shafts and crank shafts)

and cranks:

848310 10 - Crank shafts for sewing machines Other:

8483 10 91 - Crank shaft for engines of heading 8407

8483 10 92 - Crank shaft for engines of heading 8408

8483 10 99 - Other

8483 20 00 - Bearing housings, incorporating ball or roller bearings

8483 30 00 - Bearings housings, not incorporating ball or roller bearings;

plain shaft bearings

8483 40 00 - Gears and gearing, other than toothed wheels, chain

sprockets and other transmission elements presented

separately; ball or roller screws; gear boxes and other

speed changers, including torque converters

8483 50 - Flywheels and pulleys, including pulley blocks:

8483 50 10 --- Pulleys, power transmission

8483 50 90 --- Other

8483 60 - Clutches and shaft couplings (including universal joints):

8483 60 10 --- Flexible coupling

8483 60 20 --- Fluid coupling

8483 60 90 --- Other

8483 90 00 --- Toothed wheels, chain sprockets and other transmission

elements presented separately; parts

6. We find that the department has also not disputed that the

impugned goods are part of the transmission shaft, but the dispute

is that these goods are to be used as the motor vehicle parts

which fall under heading 8708. Both sides have relied upon

the Section Notes pertaining to Chapter 84 and 87 of the Custom

Tariff Act. Before examination of the Section Notes, the general

rules for the interpretation of import tariff have been examined and

reproduced below:

THE GENERAL RULES FOR THE INTERPRETATION OF HARMONISED SYSTEM

Classification of goods in this Schedule shall be governed by the

following principles:

1. The titles of Sections, Chapters and Sub-chapters are

provided for ease of reference only; for legal purposes,

classification shall be determined according to the terms

of the headings and any relative Section or Chapter

Notes and, provided such headings or Notes do not

otherwise require, according to the following provisions:

2. (a)Any reference in a heading to an article shall be taken

to include a reference to that article incomplete or

unfinished, provided that, as presented, the incomplete

or unfinished articles has the essential character of the

complete or finished article. It shall also be taken to

include a reference to that article complete or finished

(or falling to be classified as complete or finished by

virtue of this rule), presented unassembled or

disassembled.

(b)Any reference in a heading to a material or substance

shall be taken to include a reference to mixtures or

combinations of that material or substance with other

materials or substances. Any reference to goods of a

given material or substance shall be taken to include a

reference to goods consisting wholly or partly of such

material or substance. The classification of goods

consisting of more than one material or substance shall

be according to the principle of rule 3.

3. When by application of rule 2(b) or for any other

reason, goods are, prima facie, classifiable under

two or more headings, classification shall

be affected as follows:

(a) The heading which provides the most

specific description shall be preferred to headings

providing a more general description. However,

when two or more headings each refer to part only of the

materials or substances contained in mixed or composite

goods or to part only of the items in a set put up for

retail sale, those headings are to be regarded as equally

specific in relation to those goods, even if one of them

gives a more complete or precise description of the

goods.

(b) Mixtures, composite goods consisting of

different materials or made up of different components,

and goods put up in sets for retail sale, which cannot be

classified by reference to (a), shall be classified as if they

consisted of the material or component which gives them

their essential character, in so far as this criterion is

applicable.

(c) When goods cannot be classified by reference to

(a) or (b), they shall be classified under the heading

which occurs last in numerical order among those which

equally merit consideration.

4. Goods which cannot be classified in accordance with the

above rules shall be classified under the heading

appropriate to the goods to which they are most akin."

(Emphasis Supplied)

6.1 From the aforesaid general rule for the interpretation

of import tariff, it is undoubtedly an established position that the

heading which provides most specific description shall be

preferred to heading providing a more general description.

7. In order to appreciate the coverage of the goods

falling under heading 8708 of Customs Tariff under which the

department have sought to classify these impugned goods,

the said tariff heading is reproduced below:

8. On comparison of the both the heading 8483 and 8708, the

impugned goods i.e. Universal Joints Parts to be used in

transmission shaft, are more specifically covered under sub

heading 8483 60 90 whereas nothing specific is found in respect

of these goods under the heading 8708.

9. Further, in accordance with the General Rules for the

interpretation, the classification shall be determined according to

the terms of the heading and relative Section

or Chapter Notes. Thus, it would be pertinent to examine

the Section Notes.

9.1 The Section XVI of the Customs Tariff Act covers the Chapter 84 & 85. For ready reference, the Note 1 of this Section is reproduced below:

" 1. This Section does not cover:

(a) transmission or conveyor belts or belting, of plastics of Chapter 39,

or of vulcanised rubber (heading 4010), or other articles of a kind used

in machinery or mechanical or electrical appliances or for other technical

uses, of vulcanised rubber other than hard rubber (heading 4016);

(b) articles of leather or of composition leather (heading 4205) or of fur

skin (heading 4303), of a kind used in machinery or mechanical

appliances or for other technical uses;

(c) bobbins, spools, cops, cones, cores, reels or similar supports, of any

material (for example, Chapter 39, 40, 44 or 48 or Section XV);

(d) perforated cards for Jacquard or similar machines (for example,

Chapter 39 or 48 or Section XV),

(e) transmission or conveyor belts or belting of textile material (heading

5910) or other articles of textile material for technical uses (heading

5911);

(f) precious or semi-precious stones (natural, synthetic or

reconstructed) of headings 7102 to 7104, or articles wholly of such

stones of heading 7116 except unmounted worked sapphires and

diamonds for styli (heading 8522);

(g) parts of general use, as defined in Note 2 to Section XV, of base

metal (Section XV), or similar goods of plastics (Chapter 39);

(h) drill pipe (heading 7304);

(i) endless belts of metal wire or strip (Section XV);

(k) articles of Chapter 82 or 83;

(1) articles of Section XVII;

(m) articles of Chapter 90;

(n) clocks, watches or other articles of Chapter 91;

(o) interchangeable tools of heading 8207 or brushes of a kind used as

parts of machines (heading 9603); similar interchangeable tools are to

be classified according to the constituent material of their working part

(for example, in Chapter 40, 42, 43, 45 or 59 or heading 6804 or

6909);

(p) articles of Chapter 95; or

(q) typewriter or similar ribbons, whether or not on spools or in

cartridges (classified according to their constituent material, or in

heading 9612 if inked or otherwise prepared for giving impression), or

monopods, bipods, tripods and similar article, of heading 9620."

(Emphasis supplied)

9.2 From the above, it is clear that the 'article of the Section

XVII' doesn't fall under the Section XVI provided the impugned

goods falls under Section XVII having Chapter 86 & 87 within it.

9.3 With respect to the parts of the machine, the relevant Section Note 2 of Section XVI is reproduced below:

"2. Subject to Note 1 to this Section, Note 1 to Chapter 84 and to Note

1 to Chapter 85, parts of machines (not being parts of the articles of

heading 8484, 8544, 8545, 8546 or 8547) are to be classified according

to the following rules:

(a) parts which are goods included in any of the headings of

Chapter 84 or 85 (other than headings 8409, 8431, 8448, 8466,

8473, 8487, 8503, 8522, 8529, 8538 and 8548) are in all cases

to be classified in their respective headings.

(b) other parts, if suitable for use solely or principally with a particular

kind of machine, or with a number of machines of the same heading

(including a machine of heading 8479 or 8543) are to be classified with

the machines of that kind or in heading 8409, 8431, 8448, 8466, 8473,

8503, 8522, 8529 or 8538 as appropriate. However, parts which are

equally suitable for use principally with the goods of headings 8517 and

8525 to 8528 are to be classified in beading 8517, and parts which are

suitable for use solely or principally with the goods of heading 8524 are

to be classified in heading 8529;

(c) all other parts are to be classified in heading 8409, 8431, 8448,

8466, 8473, 8503, 8522, 8529 or 8538 as appropriate or, failing that, in

heading 8487 or 8548."

(Emphasis Supplied)

9.4 In view of the above Section Note 2, the parts which are

goods included in any of the heading of chapter 84 are in all cases

to be classified in their respective headings, except for the

heading 8409, 8431, 8448, 8466, 8437, 8487. The goods in

question are included in heading 8483 of Chapter 84. However,

such classification of the parts in their respective

headings is subject to Note 1 of this Section XVI, which excludes

the "article of Section XVII." Therefore, it is further inevitable to

examine the Notes of Section XVII.

10. For ease of examination, the relevant Section Notes 2

of Section XVII is reproduced below:

"2. The expressions- 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) joints, washers or the like of any material (classified

according to their constituent material or in heading 8484)

or other articles of vulcanised rubber other than hard rubber

(heading 4016);

(b) parts of general use, as defined in Note 2 to Section XV,

of base metal (Section XV), or similar goods of plastics

(Chapter 39);

(c) articles of Chapter 82 (tools);

(d) articles of heading 8306;

(e) machines and apparatus of headings 8401 to

8479, or parts thereof, other than the radiators for

the articles of this Section, articles of heading 8481 or

8482 or, provided they constitute integral parts of

engines and motors, articles of heading 8483;

(f) electrical machinery or equipment (Chapter 85);

(g) articles of Chapter 90;

(h) articles of Chapter 91;

(i) arms (Chapter 93);

(k) luminaries and lighting fittings and parts thereof heading

9405, or

(1) brushes of a kind used as parts of vehicles (heading

9603).

10.1 In view of the above Section Note, the parts

and accessories of Section XVII don't apply to article of heading

8483 (clause (e) of Section Note 2).

10.2. In view of the specific exclusion of 'articles of heading

8483' from the ambit of the Section XVII under which chapter 87

falls, the impugned goods will not fall under Chapter 87.

11. The learned Counsel of the appellant has submitted that

the classification of the impugned goods has already decided by

the Hon'ble Tribunal, New Delhi in their

own case reported at 2004 (167) E.L.T. 343 (Tri.-Del) [20-

11-2003] 2004 (167) E.L.T. 343 (Tri. - Del.) in the case of

COMMISSIONER OF CENTRAL EXCISE, ROHTAK Versus

KAFILA FORGE LIMITED, which is reproduced below:

"2. The Revenue filed this appeal against the Order-in-Appeal passed

by The Commissioner (Appeals) whereby the Commissioner (Appeals)

held that the transmission shafts and its parts manufactured by the

respondents were classifiable under Heading 84.83 of the Central Excise

Tariff.

3. The contention of the Revenue is that the transmission shafts

manufactured by respondents specially designed for use in the motor

vehicle of Chapter 87 of the Tariff. Therefore, are to be classified under

heading as parts of vehicles. We find that this issue is settled by the

decision of the Tribunal in the case of Bharat Fritz Werner (P) Ltd. v.

CCE, Bangalore, 1998 (102) E.L.T. 732 and in the case of CCE,

Coimbatore v. Venkatachalapathy Industries, 1999 (106) E.L.T. 176. In

these cases, crank shafts, tappet shafts, gear wheels, pulleys and

picking shafts are to be classifiable under Heading 84.83 of the Central

Excise Tariff being specifically covered therein and not as parts of

accessories of the machines. In view of the above decisions of the

Tribunal, we find no infirmity in the impugned order. The appeal filed by

the Revenue is rejected."

12. Apart from aforesaid case law, the learned Counsel has also

relied on the following case laws:

(i) Commissioner v. Best Cast (P) Ltd -2001(133) ELT

A 258 (SC);

(ii) Eicher Precision machine Ltd. v. Commissioner of C.

Ex., New Delhi- 2001 (131) ELT 600 (Tri.- Del.);

(iii) Eicher Ltd. v. CCE-2002(142) ELT 136 (Tri.-

Chennai);

(iv) Commissioner of Central Excise, Rohtak v. Kafila

Forge Ltd. - 2004(167) ELT 343 (Tri.- Del.) which

was in the case of the Appellant itself and relied in the

case of-Jer Ring Gears Pvt. Ltd. v. CCE-2005(186) ELT 73

(Tri.- Bang.)

(v) Collector of Customs, Bangalore v Maestro Motors

Ltd. - 2004(174) ELT 289 (SC);

(vi) Commissioner of C. Ex., Chandigarh v. Raja Forging

& Gears Ltd. - 2009 (233) ELT 404 (Tri.- Del.)

confirmed the above view by holding the classification of

items mentioned in Heading 8483, for use in motor

vehicle and which was not an integral part engine under

heading 8483 ibid and the said order has been affirmed

by the Hon'ble Supreme Court in 2016(337) ELT A42

(SC). Gear Box parts and clutch classifiable under subheading 8483.00 of CET as parts of gear box;

(vii) JTEKT SONA AUTOMOTIVE INDIA LIMITED VERSUS

COMMISSIONEROFCUSTOMS-2010 (11) TMI 257- CESTAT NEW DELHI

(viii) 2004 (12) TMI 86 SUPREME COURT- Other Citation:

2004 (174) E.L.T. 289 (SC)- COLLECTOR OF

CUSTOMS, BANGALORE VERSUS MAESTRO MOTORS LTD.

(ix) 2021 (12) TMI 490 CESTAT MUMBAI HERO

MOTORCORP LIMITED VERSUS COMMISSIONER OF

CUSTOMS (NS-I), RAIGAD

13. The judgment of Tribunal Mumbai in the case of TELCO

LTD. Vs COMMISSIONER OF CENTRAL EXCISE, PUNE (2006

(195 E.L.T.151 (Tri. – Mumbai) relied upon by

the Commissioner (Appeals) is not applicable in as much as the

goods, namely, Gear and Gear Box etc involved in the case were

specifically covered under heading 8708.

14. In view of above discussions, we hold that the

the impugned goods are rightly classifiable under heading 8483

60 90 of the Customs Tariff Act. Accordingly, the

appeal is allowed with consequential relief, if any.

(Pronounced in the open court on 28.07.2023 )

(DR. RACHNA GUPTA)

PRESIDENT

(HEMAMBIKA R PRIYA )

MEMBER (TECHNICAL)

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CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

NEW DELHI

PRINCIPAL BENCH-COURT NO. I

CUSTOMS APPEAL NO. 52189 OF 2019

[Arising out of Order-in-Appeal No. CC(A)/D-II /ICD /TKD-IMP/250/2019-20

dated 29.05.2019 passed by the Commissioner of Customs (Appeals), New

Delhi] ]

KAFILA FORGE LTD

Plot No. 32, K.M.Stone,

Kundli Distt. Sonepat.

Haryana

APPELLANT

VS.

PRINCIPAL COMMISSIONER OF CUSTOMS,

(IMPORT) ICD TKD, CUSTOMS, NEW DELHI

RESPONDENT

APPEARANCE:

Shri B.L. Yadav, Advocate for the Appellant assessee.

Shri Rakesh Kumar, Authorized Representative of the Department

CORAM:

HON’BLE DR.RACHNA GUPTA, PRESIDENT

HON’BLE MS. HEMAMBIKA R PRIYA, MEMBER (TECHNICAL)

DATE OF HEARING : March 22, 2023

DATE OF DECISION : July 28 , 2023