The phrase 'suitable for use' in an exemption notification denotes capability of being used for the specified purpose, such as in motor vehicles, and is to be construed broadly to include indirect use, while interest and penalty on IGST are not applicable retrospectively before 16.08.2024.

BINU TAMTA:

1. M/s. Continental Automotive Brake Systems (India) Private Limited¹The Appellant has assailed the Order-in-Original²18/VC/COMMR/CONTINENTAL AUTOMOTIVE/ICD-PPG/2023-24 dated 15.09.2023 denying the benefit of concessional rate of customs duty in terms of Notification No.50/2017-Cus dated June 30, 2017, as amended and re-classifying the goods, Pressure Transducers/Sensors under Tariff Item No.90318000. Accordingly, the demand and recovery of duty amount was confirmed along with interest under Section 28AA and penalty under Section 112(a)(ii) of the Customs Act, 1962.

2. The appellant is engaged in the manufacturing of Anti-lock Brake Systems³ABS /Electronic Accepted Control System⁴ECS and brake sensors, which are supplied to automobile manufacturers in India. For manufacturing these systems, the appellant imported the following components during the period 1.4.2021 to 30.09.2022:-

3. The appellant availed concessional rate of basic customs duty under Sl.No.485A and 581B of Notification No.50/2017-Cus , as amended, on the ground that the imported goods were components used in the manufacture of ABS/MAB/ECS and not directly usable in the motor vehicles.

4. Pursuant to amendment made vide Notification No.21/2021-Cus dated 31.03.2021, the Directorate of Revenue Intelligence (DRI) alleged that the imported goods were “suitable for use” in motor cars and motorcycles and hence excluded from the scope of the exemption. Show cause notice dated 24.03.2023 was issued proposing denial of exemption and recovery of differential duty for 179 Bills of entry.

5. On adjudication, the Commissioner was of the view that the goods imported by the appellant being part of the part, which is used in the manufacturing of automobiles is not entitled to exemption under Notification. The demand of differential customs duty amounting to Rs.7,24,38,749/- was confirmed under Section 28 (1) of the Act along with interest and penalty. The classification of Pressure Transducers/Sensors was upheld under CTH 90318000, which provides a description more akin to Pressure Transducers/Sensors. Being aggrieved, the appellant has preferred the present appeal.

6. Heard Ms. Priyanka Rathi and Shri Chandrasekaran, Advocates for the appellant and Shri Shiv Shankar, Authorised Representative for the respondent/Department.

7. The submission of the learned counsel is that the appellant had imported DC motors, which is used in ABS systems, but the motors being of general use are “capable of being used” in other industrial units. The learned counsel negated the application of the principle that “a part of a part is a part of the whole” on the basis that the classification of the imported part should be as parts/motor cycle classifiable under CTH 8708, however, the motors imported are classified under CTH 8501. The submission is that the essential characteristic of the goods is to function as an electric motor and hence the same cannot be classified as a part of the motor vehicle under Chapter 8701. Learned Counsel has also argued that the concept in the notification “suitable for use” has not been defined under the notification, however, it has been interpreted in the decision of the Tribunal in Cellulose Products of India Ltd. Vs. Collector of Central Excise, Vadodara ⁵1996 (82) E