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2025 MarsdenLR 6044
HIGH COURT SABAH & SARAWAK SIBU
JINDAR SDN BHD – Appellant
Versus
DIRECTOR GENERAL OF CUSTOMS ROYAL MALAYSIAN CUSTOMS DEPARTMENT & ANOR – Respondent
[Originating Summons No: SBW-16-2-3/2024(HC)]
The classification of imported goods should focus on their intended function and use rather than solely on their physical characteristics, ensuring the essential character of the goods dictates their categorization.
Headnote:(A) Customs Act 1967 - Section 141W - Import tariff classification - Appeal against the decision of Customs Appeal Tribunal regarding the classification of imported crawler tractors - Court finds that intended use as agricultural tractors prevails over physical characteristics; classification under agricultural tariffs is justified - Essential character defined by function rather than design - Appeal allowed. (Paras 50, 40, 44)
(B) Classification of Goods - Customs Duties Order 2017 - General Rules for Interpretation applied systematically, prioritizing intended function over physical design - Importance of proper classification to avoid absurd results within tax laws. (Paras 23, 29)
Facts of the case:
The appellant imported crawler tractors, contending they should be classified as agricultural tractors exempt from tariffs, while the respondent classified them as track-laying tractors subject to tariffs due to their track design. (Paras 1, 2, 4)
Findings of Court:
Crawler tractors are classified under Agricultural tractors (tariff codes 8701.91.1000 and 8701.92.1000) based on their intended agricultural function, not merely their track-based movement. (Paras 40, 46)
Issues: Whether the crawler tractors should be classified under agricultural or track-laying categories, focusing on their intended use versus their design. (Paras 3, 11)
Ratio Decidendi: The court emphasized that classification must depend on the goods' essential character, which is determined by function and intended use, not mere physical characteristics. A rigid focus on design was deemed insufficient for classification purposes. (Paras 31, 39)
Result: Appeal allowed, classifying the tractors under the agricultural tariff codes. (Paras 50)
| Table of Content |
|---|
| 1. classification of tractors under tariff codes (Para 1 , 3) |
| 2. arguments for classification as agricultural tractors (Para 2 , 4 , 6 , 10 , 12) |
| 3. arguments for classification as track-laying tractors (Para 8 , 9 , 11) |
| 4. analysis of physical characteristics vs intended use (Para 13 , 14 , 18 , 30) |
| 5. application of harmonized system classification rules (Para 21 , 23 , 25) |
| 6. function and intended use determine essential character (Para 33 , 34 , 39) |
| 7. final classification under agricultural tractors (Para 40 , 46) |
| 8. court's final conclusion and order (Para 50) |
Introduction
[1] This is an appeal under s 141W of the Customs Act 1967 against the decision of the Customs Appeal Tribunal dated 21 February 2024. The Tribunal upheld the decision of the 1st respondent that the appellant's imported Crawler Tractors Big Bull C-1500E and Big Bull C-4500E ought to be classified under subheading Tariff Code 8701.30.000000 ("Track-Laying Tractors") under Customs Duties Order 2017, First Schedule-Chapter 87, attracting a 5% duty, rather than under subheadings Tariff Codes 8701.91.1000 and 8701.92.1000 ("Agricultural Tractors") therein, which are exempted.
[2] The appellant contends that the tractors are designed and used exclusively for agricultural purposes and therefore fall properly under the "Agricultural Tractors" classification. The respondent contends that, because the tractors move on tracks rather than wheels, they are properly classified as "Track-Laying Tractors."
Issues
[3] The key issue is whether the Crawler Tractors Big Bull C-1500E and Big Bull C-4500E imported by the appellant should be classified under subheadings Tariff Codes 8701.91.1000 and 8701.92.1000 ("Agricultural Tractors"), which are exempt from import tariffs, as contended by the appellant, or under subheading Tariff Code 8701.30.00000 ("Track-Laying Tractors"), which are subject to a 5% import tariff, as contended by the respondent.
The Appellant's Submissions
[4] The learned counsel for the appellant, in summary, submitted that the crawler tractors are solely used for agricultural purposes, such as spreading fertilizer, spraying pesticides/herbicides, loosening soil, or carrying fresh fruits.
[5] She submitted that the crawler tractors have been issued Certificates of Origin from Thailand, a member of the World Customs Organisation, under the ASEAN Trade in Goods Agreement, classifying them as "Agricultural tractors".
[6] She submitted that the track system of the crawler tractors is a mere physical characteristic. The classification must follow essential function and intended use.
[7] She submitted that the Customs Appeal Tribunal failed to consider the specific use of the Crawler Tractors is for agricultural purposes.
The Respondent's Submissions
[8] The learned Federal counsel, in summary, submitted that tariff classification must be governed by the General Rules for Interpretation of the Harmonized System under the Customs Duties Order 2017.
[9] The crawler tractors are track-based vehicles, not wheeled. The Explanatory Notes to subheading Tariff Code 8701.30 expressly include tractors that move on tracks, confirming the respondent's classification.
[10] The learned Federal counsel submitted that r 3(a) of the Customs Duties Order requires that the most specific description prevails. He submitted that "track-laying tractors" is more specific than the general agricultural categories.
[11] He submitted that intended use (agriculture or otherwise) is only relevant if ambiguity exists. Since physical design matches the track-laying category, the designed or intended purpose is irrelevant.
[12] The learned Federal counsel therefore urges the court to uphold the classification of the crawler tractors under subheading Tariff Code 8701.30.000000 ("Track-Laying Tractors") and be subject to 5% import tariff.
Analysis And Findings
[13] There is no dispute that the tractors imported by the appellant were manufactured and designed for agricultural use.
[14]
