At, Customs Excise Service Tax Appellate Tribunal South Zonal Bench At Chennai
By, THE HONORABLE JUSTICE: SULEKHA BEEVI C.S.
By, MEMBER AND THE HONORABLE JUSTICE: B. RAVICHANDRAN
For Petitioner: Raghavan Ramabhadran, Advocate And For Respondents: Hemavathy, Commissioner, AR
1. Both the appeals are against the common impugned order dated 25-9-2015 of the Commissioner of Customs, Chennai-II. The brief facts of the case are that the main appellant M/s. L & T Metro Rail (Hyderabad) Ltd., imported "Electrical Multiple Unit' (EMU) consisting of '2 EL S-PR RAILWAY COACH-DMC (Locomotive) (Drive motors cars-DMC)' and '1 EL S-PR RAILWAY COACH-TC (Locomotive) (Trailer cars-TC)'. These EMUs were intended for use in Hyderabad Metro. The dispute in the present case relates to correct classification of trailer cars which came as a combination of EMU along with DMCs. Each EMU consisted of 2 DMCs and one TC. The main appellant imported 25 such EMUs through different consignments from Korea. They have claimed classification of these EMUs under CTH 8603 10 00 with full exemption of BCD in terms of Sl. No. 886 of Notification No. 152/2009-Cus., dated 31-12-2009. The Revenue objected to the said claim of exemption in respect of TCs. The Revenue held a view that these TCs are not self-propelled railway or tramway coaches and they are more appropriately to be classified under CTH 8605 00 00 as railway or passenger coaches not self-propelled. The rate of duty applicable to such goods will be 3.75% during the material time. Accordingly, proceedings were initiated against the appellants to reclassify the imported TCs and to demand differential duty.
2. The original authority decided the case resulting in the impugned order. He held that TCs do not have the characteristic features of self-propulsion and they are basically non-powered coaches without self-propulsion capacity and as such these trailer coaches cannot be classified under CTH 8603. It is also observed by the original authority that the appellant has separate value and indication in the invoice and as such the DMCs and TCs are to be treated separately for assessment purposes. The differential duty of Rs. 9,17,89,622/- was confirmed and various penalties were imposed on the main appellant as well as on the second appellant.
3. The Ld. Counsel appearing for both the appellants submitted on the following lines:-
(a) The EMUs consists of DMCs and TCs. They are to function and operate together. The DMCs or TCs cannot work separately. The whole design and pattern of EMU as can be seen from the technical specification will reveal that the propulsion of EMU is through integrated operation of TC having pantograph and step-down transformers to draw power and to convert the same for suitable usage by the motors which are located in DMCs. The whole process is integrated and DMCs have no way of drawing usable power for propulsion without integration with the TCs.
(b) The original authority erred in holding that these goods were separately dealt with for purchase invoicing and other needs. Factually, EMUs are always dealt with together and the price is shown separately in terms of arrangements. This does not make the product independent of each other.
(c) Relying on the Classification, Rulings of HS Committee, 57th Session (point No. 18), the Ld. Counsel submitted that the very same dispute came before the WCO HS Committee and the Committee opined that EMUs should be treated as a single unit meriting classification under 8603. The trailer cars cannot be classified separately.
(d) The Ld. Counsel also drew our attention to an advanced ruling by US Customs which dealt with the similar matter of passenger rail car for urban transport. In the case of Washington Metro the authority held that the impugned goods are to be classified under 8603.10 00.
4. The Ld. AR opposed the appeals on the following grounds:-
(a) The TCs imported by the appellants have no capacity for self-propulsion. A plain reading of the Tariff entry will make it clear that the said TCs cannot be considered as railway coaches having self-propulsion capacity.
(b) The appellants treated DMCs ahd TCs separately and valued it separately as could be seen from the invoices. This will give support to the finding of the original authority that the products are to be dealt with for classification separately.
(c) The reliance placed on the opinion of WCO is not acceptable, as when the matter came up for discussion, India opposed the said consideration on the ground that the General Interpretation Rules have not been properly applied before arriving at the opinion.
5. We have heard both sides and perused the appeal records.
6.1 We note that the original authority held that TCs do not have self-propulsion capabilities. The main point is that whether TCs can at all be to put into operation without integrating with DMCs. Admittedly, there is no dispute that EMU is a set of DMCs and TCs and whole propulsion of EMU is integrated with different components located in DMCs as well as TCs. The TC contains pantograph, transformers which are essential to draw power from overhead lines and convert the same to required capacity for use in the motors situated in DMCs. In other words, the DMCs have no capacity to draw or convert the power to make them capable of self-propulsion. That being the case, it is not clear how the DMCs can be considered as railway coaches with self-propulsion capacity apparently without pantograph and transformers DMCs cannot work. The point DMCs being self-propulsion coaches without the TCs itself is not sustainable. This is relevant to note, as the concession for DMCs as self-propelling coaches has been extended by the Revenue. The TCs are dealt with separately. We note that based on the technical specification and the arrangement of functioning of EMUs, it is apparent and clear that the EMUs operate together and the TCs or DMCs cannot operate separately. The submission of the Revenue that TCs are to be treated separately will go against their case as the DMCs though treated separately, as noted above, the DMCs of their own have no self-propulsion capacity. They are lacking capacity to draw power and to transform it to the required level for usage.
6.2 We also perused the opinion of HS Committee relied upon by the appellants. It is clear that the very same goods were examined by the Committee which gave a categorical ruling that EMUs are treated together and are to be classified under CTH 86.03. In fact, it is recorded that the
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T-cars could not be treated separately. Similar view has been taken by the US Customs authorities in advance ruling referred above. 6.3 In view of the above discussion and analysis, we note that TCs as well as DMCs which are integrally forming part to make a functional EMU are to be treated together for the purpose of classification, assessment. The concession available, extended by the Revenue to DMCs are to be extended to the EMUs as EMU is an integrated unit consisting DMUs and TCs. Neither DMC nor TC can be self-propelled on their own. In view of the above, we find that the impugned order is not legally sustainable. Accordingly the same is set aside and the appeals are allowed.