Holding

CKD packs are to be classified as motor cars, and exemption under the cited notifications is unavailable unless the goods are imported as components/parts and all statutory conditions, including the required certificates, are satisfied.

Summary

The Collector of Customs appealed against the orders of the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT) which had allowed two importers, Mis. Maruti Udyog Ltd. and Mis. Maestro Motors Ltd., to claim exemption under customs notifications. The Court examined whether goods imported in completely knocked down (CKD) packs should be classified as complete motor cars or as components under Rule 2(a) of the General Rules of Interpretation of the Harmonized System. It held that CKD packs possess the essential character of a complete car and must be classified as motor cars. Consequently, exemption under Notification No. 29/83 (or 29183) is available only if the importer satisfies all statutory conditions, including production of the required certificates, while Notification No. 72/93 exempts only components and parts that are imported as such and not as CKD cars. The Court therefore allowed the revenue’s appeals, set aside the CEGAT order for Maestro Motors, and remitted the Maruti matter to CEGAT to determine compliance with certificate requirements.

Issues considered

Whether goods imported in completely knocked down (CKD) packs are to be classified as motor cars or as components for customs purposes.
Whether Rule 2(a) of the General Rules of Interpretation of the Harmonized System applies to customs exemption notifications.
Whether the importers are entitled to exemption under Notification No. 29/83 (or 29183) and Notification No. 72/93 respectively.
Whether the statutory conditions, particularly the required certificates, were complied with for the benefit of the notifications.

Legislation cited

Customs Act, 1962s. 25(1)
Customs Tariff Act, 1975s. 87.02, s. 87.04, s. First Schedule, s. Section 3

Subjects

customs dutycompletely knocked down (CKD)motor vehicle classificationRule 2(a) interpretationexemption notificationCustoms Tariffcomponents vs carscertificate compliance

Judgment

COLLECTOR OF CUSTOMS, BANGALORE A
V.

M/S. MAESTRO MOTORS LTD. AND ANR.

DECEMBER 7, 2004
B
[S.N. VARIAVA AND DR. AR. LAKSHMANAN, JJ.]

Customs Act, 1962 :

Section 25(1)-Customs Tariff Act, 1975, First Schedule-Exemption
Notifications-Notification Nos. 29183 and 72193-lmport of passenger car C
components in Completely Knocked Down (CKD) condition packs-Bill of
entries for clearance of goods claimed the same to be components of motor
vehicles-Claiming benefit-Correctness of-Held, applying interpretative
Rule 2(a), the consignments are motor cars and not components-
Components in CKD packs not exempted and benefit of notifications not D
available.

Respondents are manufacturers of motorcars. Respondent-Maruti
Udyog Limited imported CKD packs and in the bills of entry for clearing
the goods claimed the same to be components of motor vehicles. The
company also claimed benefit of notification nos. 29/83 and 29A/83, E
which permitted exemption from levy of Custom duty to a certain limit
with respect to components, including components of fuel-efficient
motorcars in semi knocked down packs or completely knocked down
packs. Adjudicating officer held that imported components being
complete cars had the complete character of finished product and as F
such were to be treated as motor cars and not components and as such
not entitled to benefit of exemption notification.

In appeal, the Commissioner held that goods were components/
parts and not motorcars and also held that company was entitled to the
benefit of notification No. 29/83. Tribunal upheld the appellate order. G
Hence, this appeal by the revenue.

It was contended that the company would not be entitled to the
benefit of notification inasmuch as they had not complied. with the
condition of notification. H
745
746 SUPREME COURT REPORTS [2004] SUPP. 6 S.C.R.

A In the other appeal, Respondent-Maestro Motors Limited imported
the entire cars in CKD. Claiming goods to be components, the company
also claimed benefit of notification No. 72/93, which exempted from
customs duty components and parts. The goods were imported by filing
different bills of entires with Bombay and Madras customs.
B
The Adjudicating authority held that between the imports in
Bombay and Madras, entire cars had been imported in CKD and the
components were, thus, classified as cars. Benefit of notification No. 72/
93 was not, thus, available to the company. Tribunal held that the
company was entitled to the benefit of notification No. 72/93. Hence, the
c appeal by revenue.

Allowing the appeals, the Court

HELD : 1. As per Rule 2(a) of the General Rules of Interpretation
D of Harmonized system, in the absence of any denial that components
were imported in CKD packs, what was imported was completely knocked
down cars. The components presented had the essential character of a
complete car even though presented in unassembled form. The
components had to be classified as car. [750-G)

E 1.2. Respondent-Meastro Motors Limited had imported, in effect
car in co~pletely knocked down condition. Applying interpretative
Rule 2(a), the goods claimed are to be classified as cars. [755-H)

2.1. To avail the benefit of a notification a party must comply with
F all the conditions of a notification. Further, a notification has to be
interpreted in terms of its language. If, in the notification, exemption is
granted with reference to tariff items in the First Schedule to Custom
Tariff Act' 1975, then the same rules of interpretation must apply. In
that case, goods will be classified, even for the purposes of the notification,
as they are classified for purposes of payment of Customs duty. [753-D]
G
2.2. When the language is plain and clear, effect must be given to
it. Effect must be given to the wording of the notification. The components
in completely knocked down packs would get the exemption under this
notification, even though for purposes of classification they may be
H considered to be cars. (753-E)
COLLECTOR OF CUSTOMS, BANGALORE v. MIS. MAESTRO MOTORS LTD. 747

2.3. Neither side has shown what were the certificates, establishing A
compliance with the conditions of the notification, which were produced
before the Adjudicating authority. In the absence of those certificates
it can't be decided whether the conditions imposed by the notification
have been fulfilled. Hence, the matter remitted to CEGAT for
reconsideration of this aspect. [754-A)
B
2.4. For subsequent imports the department has granted benefit of
the notification and allowed clearances of the components CKD packs.
This can't be a ground for allowing benefit of the notification in this
case. [755-C)
c
2.5. Under notification No. 72/93 goods exempted are components
. and parts falling within chapter 87 of the First Schedule to the Customs
Tariff Act and goods specified in column 3 of the .table. For a component
and part to be exempted it must be component or part within chapter
87 of the First Schedule. [759-C) D
2.6. Interpretative rule 2(a) of the General Rules of Interpretation
of Harmonized system does apply to a notification when a notification
exempts goods falling within the First Schedule to the Customs Tariff
Act '1975, then the goods must be classified in the same manner both
for the purposes of payment of customs duty as well as for the purposes E
of exemption/benefit under that notification. However, if the wording
of the notification show that an item is specifically exempted then th2
exemption will apply when though for purposes of clarification it may
be considered to be something else. (759-D, E]
F
2.7. As regards the 20 components and parts which the notification
exempts, company will be entitled to such benefit only when they are
imported as components and parts. If they are imported as components
and parts in CKD pack, then the pack as a whole is car by virtue of the
interpretative rule. In such a case even the components would not be
entitled to exemption. (760-B) G

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 3532-3560
of 1997.

From the Judgment and Order dated 10.9.96 of the Central Excise H
748 SUPREME COURT REPORTS [2004) SUPP. 6 S.C.R.

A Customs and Gold (Control) Appellate Tribunal, New Delhi in F.O. Nos.
C-741-769196-B2 in A. Nos Cll460185-B2 with CICross Nos. 503185-B2
and Suppl.A. No. Cl809194-B, A Nos. CISBl2614, 2615, 2620, 2621, 2622,
2564, 2624, 2582, 2625194-B2, Cl6, 7, 223, 253, 256, 257, 259, 251, 252,
258, 260, C/79195-B, CISBl2587 of 1995-B.
B
R. Mohan, Additional Solicitor General, V.G. Pragasam and
B. Krishna Prasad for the Appellants.

R.S. Hedge, Chandra Prakash, Ms. Savitri Pandey and K.R. Nagaraja
for the Respondents No. l.
c
Sunil Gupta, Pramod Dayal, Jatin Zaveri and Praveen K. Pandey for
·the Respondent No. 2.

The Judgment of the Court was delivered by
D
S.N. VARIAVA, J. :' 1These Appeals are against the Judgment of the
Customs Excise and Gold (Control) Appellate Tribunal (for short CEGAT)
dated l 0th Septemner, 1996. This Judgment is in respect of two companies,
namely, Mis. Maruti Udyog Ltd. and Mis. Maestro Motors Ltd. (earlier
known as Mis. Sipani Automobiles Limited). Both these Companies are
E manufacturers of motor cars. Apart from this common fact, the other facts
are not identical. Even though CEGAT has disposed of the Appeals by a
common Order, the cases of these two parties would have to be dealt with
separately by this Court.

p First, the case of Mis. Maruti Udyog Ltd. is being considered.

On 23rd April, 1982 Mis. Maruti Udyog Ltd. applied for grant of and
Industrial Licence for manufacturing passenger cars and light duty utility
vehicles. They also entered into joint venture agreement and collaboration
with Mis. Suzuki Motors Company Ltd. Mis. Maruti Udyog Ltd. imported
G from Mis. Suzuki Motors Company Ltd. two shipments i.e. 24 CKD packs
(completely knocked down condition) and 48 CKD packs respectively of
passenger car components. They filed two Bills of Entry bearing Nos. 1181
345 and 1412/261 for clearing the goods which were claimed to be components
of motor vehicles under Tariff Heading 8704 of the Customs Tariff. They
H also claimed benefit of Notification Nos. 29183 and 29Al83.
COLLECTOR OF CUSTOMS, BANGALORE "· MIS. MAESTRO MOTORS LID. [VARIAVA, J.) 749

By two Orders dated 9th September, 1983 and 30th September, 1983, A
the Adjudicating Authority held that the imported components being complete
cars in CKD packs had the essential character of the finished product and
as.such the consignments were to be treated as motor cars and not components.
It was held that Mis. Maruti Udyog Ltd. was not entitled to the benefit of
Notifications as the Notifications were only for components. It was further B
held that in any case Mis. Maruti Ugyog Ltd. had not complied with the
conditions of the Notifications.

In the Appeal filed by Mis. Maruti Udyog Ltd., the Commissioner
(Appeals) by an order dated 30th April, 1985 held that the goods were
component parts and not motor cars. It was also held that the Company was c
entitled to the benefit of Notification No. 29183.

CEGAT has, by a 2 to l Judgment, held that both the Companies are
entitled to benefit of the Notifications.
D
The questions for consideration by this Court was whether the CKD
packs imported into country could be considered to be motor cars and not
components and secondly, whether Mis. Maruti Udyog Ltd. are entitled to
the benefit of Notification No. 29183.
E
The relevant Tariff Items are 87 .02 and 87 .04, which read as
follows :

Heading Sub-heading No. and Standard Central
No. description Rate of duty Excise F
Tariff Item.

(1) (2) (3) (4)

87.02 Motor vehicles for the transport 34
of persons goods or materials
(including sports motors vehicle~ G
other than those of Heading
No. 87.09112):

(1) Not elsewhere specified 60%

H
750 SUPREME COURT REPORTS [2004] SUPP. 6 S.C.R.

A 87.04/06 Chassis fitted with engines, 34, 34A
bodies (including cabs) and
parts and accessories of the
motor vehicles falling within
Heading No. 87.0l, 87.02
B or 87.03:

(l) Not elsewhere specified 100%

(2) Parts designed for the article~ 40%
covered by sub-heading No. (l)
of Heading No. 87.01 and
c sub-heading No. (3) of Heading
No. 87.02.

In considering which Tariff Item is to apply one has to take note of
the general rules of Interpretation of the Harmonized System, Rule 2(a) of
D which reads as follows :

"Rule 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 article has
the essential character of the complete or finished article. It shall
E 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."

Thus, as per this Interpretative Rule, even though an article is incomplete
F or unfinished when it is presented for clearance, if that article was the
essential character of the complete article and/or even though the complete
or finished article is presented in an unassembled or dissembled form the
classification must be as a complete article. In this case, it is fairly not being
denied that the components were imported in a CKD packs. Thus what was
G imported was completely knocked down cars. The components imported
had the essential character' of a complete car even though presented in
unassembled form. As per interpretative Rule 2(a) even though presented
unassembled they have to be classified as a complete article. Thus, for
purposes of clearance the components had to be classified as a car under
Tariffltem 87 .02. The finding of the Commissioner (Appeals) to the contrary
H is clearly erroneous and requires to be and is hereby set aside.
COLLECTOR OF CUSTOMS, BANGALORE•·. MIS. MAESTRO MOTORS LTD. [VARIAVA, J.] 751

The question then arises as to whether Mis. Maruti Udyog Ltd. is A
entitled to benefit of Notification No. 29/93. The said Notification read as
follows :

"In exercise of the powers conferred by sub-Section (1) of
Section 25 of the Customs Act, 1962 (52 of 1962), the Central B
Government, being satisfied that it is necessary in the public interest
to hereby exempt components (including components of fuel-
efficient motor cars in semi-knocked down packs and completely
knocked down packs) required for the manufacture offuel-efficient
motor car of engine capacity not exceeding I 000 cubic centimeters
~= c
(a) So much of the duty of customs which is leviable thereon
under the First Schedule to the Customs Tariff Act, 1975 (51
of 197 5), as is in excess of the amount calculate at the rate
of 25% .ad-veloram; and D
(b) the whole of the additional duty leviable thereon under Section
3 of the said Customs, Tariff Act.

Subject to the following conditions, namely :
E
(i) ~he exemption contained herein shall be applicable only
to those components (including components of fuel-
efficient cars in semi-knocked down packs and completely
knocked down packs) which are covered by lists certified
by an officer not below the rank of an industrial Advisor F
or Additional Industrial Adviser in the Directorate General
of Technical Development and an Officer not below the
rank of a Joint Secretary in the Ministry of Industry
(Development of .Heavy Industry) to be required for the
manufacture of fuel efficient motor cars to engine capacity
not exceeding 1000 cubic centimeters; G

(ii) the importer products evidence to the Assistant Collector
or Customs to the effect that the said components
(including components or fuel-efficient motor cars in
semi-knocked down packs and completely knocked down H
752 SUPREME COURT REPORTS [2004] SUPP. 6 S.C.R.

A packs) have been imported by such importer under a
programme duty approved by the Ministry of Industry
(Development of Heavy Industry) and the Industrial
Adviser or the Additional Industrial Adviser of the
Directorate General of Technical Development in the
B Ministry oflndustry for the manufacture of fuel efficient
motor cars of engine capacity not exceeding I 000 cubic
centimetei:_s; and

(iii) the imported shall, within such period as the Asstt
Collector of Customs may specify in this behalf, produce
c a certificate from the Asstt. Collector of Central Excise
in whose jurisdiction the factory manufacturing such
fuel-efficient motor cars is situated to the effect that such
imported components (including components of fuel-
efficient motor cars in semi-knocked down packs and
D completely knocked down packs) have been used in the
manufacture of fuel-efficient motor cars of engine·
capacity not exceeding I 000 cubic centimeters.

Explanation: For the purpose of this notification, "fuel
efficient motor car" in respect of a motor car of engine
E capacity not exceeding I 000 cubic centimeters means a
motor car which is certified to run not less than 20
kilometers per liter of petrol by an officer not below the
rank of a Joint Secretary in the Ministry of Industry
(Development of Heavy Industry) on the basis of the
F tests (hereinafter referred to the fuel-efficiently test)
carried out by the vehicle Research Development
Establishment of the Ministry of Defence, Ahmednagar
(Maharashtra) or the Automotive Research Association
of India, Pune (Maharashtra), having regard to the
following, namely :
G
(a) the fuel-efficiency test shall be conducted with a
pay load of 300 kilograms;

(b) the fuel-efficiency test shall be conducted using
H petrol having an octone level not exceeding 87; and
COLLECTOR Of CUSTOMS, BANGALORE"· MIS. MAESTRO MOTORS LTD. [VARIAVA, J.] 753

(c) the fuel-efficiency test shall be carried out on a A
selected level test track at a steady speed of 50
kilometers per hour for a minimum stretch of one
kilometer and the average of 20 runs, comprising
of 10 runs in each direction shall be taken for
carrying out the test and the test figures shall be B
corrected to sea level and to + 25% C ambient
temperature.

2. This Notification shall be in force upto an inclusive of the 24th
day of February 1988."
c
It is settled law that to avail he benefit of a notification a party must comply
with all the conditions of the Notification. Further, a Notification has.to be
interpreted in terms of its language. If in the Notification exemption is
granted with reference to tariff items in the First Schedule to the Customs
Tariff Act, 1975, then the same rules of interpretation must apply. In that D
case the goods will be classified, even for the purposes of the Notification,
as they are classified for purposes of payment of customs duty. But w~,ere
the language is plain and clear effect must be given to it. In this Notification
what is exempted is components, including components of fuel efficient
motor cars in semi-knocked down packs and completely knocked down
packs. Undoubtedly, for purposes of levy of custom duty, by virtue of E,
Interpretative Rule 2(a), the components in a completely knocked down
pack would be considered to be cars. But in view of the clear language of
the Notification the components including components in completely knocked
down packs are exempted. Effect must be given to the wording of the
Notification. Thus components in completely knocked down packs would F
get the exemption under this Notification, even though for purposes of
classification they may be considered to be cars.

It was however urged that even though these components were covered
by the Notification Mis. Maruti Udyog Ltd. would not be complied with the
conditions of the Notification. it was submitted that they had not submitted G
the certificates required under sub-clauses b(i) and b(ii) of the said
Notification. This was disputed by counsel on behalf ofM/s. Maruti Motors
Ltd. We find that the Adjudicating Authority has categorically held that
these certificates were not produced. On the other hand, the Commissioner
(Appe;ils) and CEGAT have held that the certificates produced were sufficient. H
754 SUPREME COURT REPORTS [2004] SUPP. 6 S.C.R.

A Unfortunately, neither side has shown to us what were the certificates which
were to be produced before the Adjudicating Authority. In the absence of ~
those certificates we cannot decide whether or not the conditions imposed
by Sub-clauses b(i) and b(iii) have been fulfilled. It will therefore be
necessary to remit the matter back to CEGAT for reconsideration of this
B aspect after clarifying what is required.

. It is clear that under Sub-clauses b(i) of the said Notification the
components imported must be those which are covered by lists certified by
an Officer not below the rank ofan industrial Advisor or Additional Industrial
Adviser in the Directorate General to Technical Development and an Officer
c not below· the rank of an Joint Secretary in the Ministry of Industry
(Development of Heavy Industry). Such a list must show that the components
are required for manufacturing of fuel efficient motor cars of engines
capacity not exceeding I 000 cubic centimeters. A mere certificate that the
components are required for manufacture of motor vehicle or that Mis.
D Maruti Udyog Ltd. has been licenced to manufacture such motor vehicles
would not be sufficient. What would have to be ascertained by CEGA T is
whether any lists, as per Sub-clause b(i) had been produced before the
Adjudicating Authority and whether the components are as. per that list.

Under Sub-clause b(iii) of the Notification, a certificate of fuel efficiency
E of same type of car or a prototype would not be sufficient. What would be
required is a certificate from the Assistant Collector of Central .Excise, in
whose jurisdiction the factory is situated, to the effect that the components
imported (in completely knocked down packs) had been actually used in the
manufacture of fuel efficient motor cars of an engine capacity not exceeding
F I 000 cubic centimeters. The fuel-efficiency Certificate has to be issued in
respect of a car after carrying out the test set out in the Explanation to Sub-
clause b(iii). Of course such a test need not be of each and every car
manufactured from the components. A _test of a prototype or a single car
would be sufficient. But the certificate must show that the components were
actually used in manufacture of fuel efficient motor cars of engine capacity
G not exceeding I 000 cubic centimeters.

With these clarifications we remit the matter ofM/s. Maruti Udyog Ltd.
back to CEGAT for deciding whether the required certificates were produced.
It is clarified that these certificates should have. been produced before the
H Adjudicating Authority. It would not be open for the CEGAT to allow M/
COLLECTOR OF CUSTOMS, BANGALORE 1·. M/S. MAESTRO MOTORS LTD. [VARIA VA, J.] 755

s. Maruti Udyog Ltd. to produce any new or other certificate which had not A
already been produced before the Adjudicating Authority. If the certificates
as required are available, then M/s. Maruti Udyog Ltd. will be entitled to
the benefit of the Notification No. 29183. If the certificates as required are
not available then M/s. Maruti Udyog Ltd. will undoubtedly not be entitled
to the benefit of Notification No. 29193. In that event for purposes of B
payment of custom duty the components will have to be classified as a car
and duty will have to be paid under Tariff Item 82.02.

Before parting we must take note of one further aspect. It was submitted
that for the subsequent imports the Department has granted the benefit of C
the Notification and allowed clearance of the components in CKD packs
by granting benefit of the Notification. It was submitted that this also
showed that Mis. Maruti Udyog Ltd. is entitled to be benefit of the
Notification. We cannot accept such a submission. Those clearances may
be because the conditions of the Notification were fulfilled in respect of
those imports. Thus, merely because in those cases clearances have been D
al lowed by itself cannot be a ground for allowing benefit of the Notification
in this case.

That now brings us to the case of Mis. Maestro Motors Ltd. On 17th
November, 1993 and 5th May, 1992, M/s. Sipani Automobiles Limited (as E
it then was) entered into collaboration with Mis. Rover U .K. for manufacture
of Montego cars. They imported 217 sets of cars considering of body
assembly (complete with accessories), with gear, engine assembly etc. and
also components such as wind screen assembly, wheel rim~, glass assembly,
radiator assembly, front and back suspension, fuel tank assembly etc. In
F
effect they were importing the entire car in completely knocked down
condition. Mis. Sipani imported all these items by filing 11 Bills of Entries
with the Bombay' Customs and the rest 14 Bills of Entries with the Madras
Custom. They claimed the goods to be components and also claimed benefit
of Notification No. 72193.
G
The Adjudicating Authority held that between the imports in Bombay
and Madras entire cars had been import.ed. in completely knocked down
condition. The c·omponents were thus classified as cars. It was also held that
·-
,. the Company was not entitled to the benefit of Notification No. 72/93 as
that Notification only gave benefit to parts and components. H
756 SUPREME COURT REPORTS [2004) SUPP. 6 S.C.R.

A CEGA T has by the impugned majority Judgment allowed the Appeal
even of Mis. Maestro Motors Ltd. It is held that Mis. Maestro Motors Ltd.
are entitled to the benefit of NotificatioQ No. 72193.

We have, whilst dealing with the case of Mis. Maruti Udyog Ltd., set
B out how for the purposes of payment of custom duty such goods are to be
classified. As stated above, such components are nothing but cars in knocked
down condition. Applying Interpretative Rule 2(a) such components are to
be classified a cars.

The question then arises as to whether .Mis. Maestro Motors Ltd. is
C entitled to the benefit to Notification No. 72193. As has been stated
hereinabove, whilst dealing with the case of Mis. Maruti Udyog Ltd., a
Notification has to be interpreted in accordance with the language used in :.
the Notification. Where the language is clear and unambiguous an
interpretation which does not tally with the language cannot be given.
D Notification No. 72193 reads as follows : ·

"In exercise ofthe powers conferred by sub-section (I) of the
Customs Act, 1962 (52 of 1962), the Central Government, being
satisfied that it is necessary in the public interest so to do, hereby
exempts components and parts of motor vehicles falling within
E Chapter 87 of the First Schedule to the Customs Tariff Act, 1975
(51 of 1975) and goods specified in column (3) of the Table hereto
annexed and falling under the heading Nos. of the First Schedule,
specified in the corresponding entry in column (2) of the said Table,
when imported into India, for the manufacture of motor falling
F within Chapter 87 of the said First Schedule, from :

(a) so much of the duty of Customs which is leviable thereon
under the First Schedule to the Customs Tariff Act, 1975 (51
of 1975) as is in excess of the amount calculated at the rate
of 50 per cent . Ad valorem; and
G
(b) the whole of the additional duty leviable thereon under section
3 of the said Customs Tariff Act, subject to the following
conditions, namely : •

(i) the exemption contained herein shall be applicable only
H
COLLECTOR OF CUSTOMS, BANGALORE 1·. MIS. MAESTRO MOTORS LTD. [VARIAVA, J.] 757

:" to those goods which are required for the manufacture A·
of motor vehicle;

(ii) that the importer shall, within such period as the Assistant
Collector of Customs may specify in this behalf, produce
a certificate from the Assistant Collector of Central Excise B
in whose jurisdiction the factory manufacturing motor
vehicles using the goods imported under this notification
is situated to the effect that the said imported goods have
If
been used in the manufacture of motor vehicles; and
c
(iii) the imported furnishes an undertaking to the effect
that :

(a) the said goods shall be used for the purpose specified
above;
D
(b) an account of the said goods received and consumed
in the place of manufacture forthe aforesaid purpose
shall be maintained in the manner specified by the
Assistant Collector of Customs;
E
(c) he shall produce the extract of such account duly
certified by the jurisdiction Assistant Collector of
Central Excise evidencing receipt of the said goods
in the premises of the place of manufacture and the
use thereof for manufacture of motor vehicles within F
a period of three motor vehicle within a period of
three months or such extended period as the Assistant
Collector of Customs may allow; and

(d) he shall pay, on demand, in the event of his failure G
to comply with (a), (b) or (c) above an amount
equal to the difference between the duty leviable on
such quantity of the said imported goods but for the
exemption contained herein and that already paid
at the time of the importation. H
758 SUPREME COURT REPORTS [2004] SUPP. 6 S.C.R.

.A S. No. Heading Description of Goods

(1) (2) (3)

1. 40.09 Brake hoses/radiator hoses
with or without fittings.
B
2. 40.10 V-Belts

3. 40.11 Tyres

4. 40.13 Tubes
•
c 5. 40.16 Weather strips, oil seals

6. 70.07 Safety glass

7. 70.09 Rear-view mirrors

D 8. 73.18 Screws, bolts, nuts and washers

9. 73.20 Leaf springs and helical springs

10. 8301 Locks

11. 84.07 Spark ignition reciprocating internal
E combustion piston engines (Petrol Engines) .
.
12. 84.08 Compressor Ignition internal combustion
piston engines (Diesel Engines)

13. 84.09 Parts of engines covered under heading
F No. 84.07 and 84.~

14. 84.13 Fuel, lubricating or cooling medium pumps
for internsl combustion piston engines t

15. 84.14 Turbocharger
G
16. 84.82 Ball or roller bearings.

17. 84.83 Crankshaft, plain shaft bearings, gears, fly
. wheels, clutches, universal joints.

H 18. 84.84 Gaskets
COLLECTOR OF CUSTOMS, BANGALORE''· MIS. MAESTRO MOTORS LTD. [VARIAVA, J.] 759

19. 85.11 Spark plugs, fly-wheel magneto, distributor, A
ignition coil, starter motor generator
(altermator) and cut outs.

20. 85.12 Wind screen wipres, head lights and
indicator lights
B
Thus, under this Notification what is exempted are components and parts
falling within Chapter 87 of the First Schedule to the Customs Tariff Act,

- 1975 and goods specified in Column 3 of the Table. Thus in this Notification,
unlike as in Notification No. 29/93, components in CKD packs the not
exempted. Under this Notification it is only components and parts which fall C
within Chapter 87 are exempted. The wording is very clear. For a component
and part to be exempted it must be a component or part within Chapter 87
of the First Schedule to the Customs Tariff Act, 1975. If, by virtue of
interpretative Rules, for purposes of the First Schedule to the Customs Tariff
Act, 1975 the imported goods are not considered to be components and D
parts, then for purposes of this Notification also they cannc,t be said to be
components and parts. In our view, CEGAT has erred in holding that the
interpretative Rule 2(a) does not apply to a Notification. When a Notification
exempts goods falling within the First Schedule to the Customs Tariff Act,
1975, then the goods must be classified in the same manner both for
purposes of payment of customs duty as well as for purposes of exemption/ E
benefit under that Notification. However ifthe wording of the Notification
show that an item is specifically exempted then the exemption will apply
to that item even though for purposes of classification it may be considered
to be something else. To take this very case as in illustration, where like
in Notification No. 29/83 components including components in CKD packs, F
were given benefit of exemption those components would get exemption
even though for purposes of payment of duty they are classified as cars. But
where, as in this case, components and parts falling within Chapter 87 are
exempted, then the components and parts must be considered to be
components and parts for purposes, not just for exemption but also payment
of custom duty. If for purposes of payment of custom duty they are not G
deemed to be components and parts, then they are also not components and
parts for purposes of the Notification. In other words when, in a Notification,
the exemption is with reference to an item in the First Schedule to the
Customs Tariff Act, 1975, then the interpretative Rules would eq:.ially apply
to such Notification. In such cases, if they are not components and parts for H
760 SUPREME COURT REPORTS [2004] SUPP. 6 S.C.R.
>-

A the purposes of payment of custom duty they would not be components and
parts even for the purposes of the Notification. Thus, Mis. Maestro Motors
Ltd. are not entitled to the benefit of Notification No. 72193.

It was however urged that this Notification exempts 20 components
B and parts. It was submitted that Mis. Maestro Motors Ltd. must be given
benefit of those 20 components and parts. We are unable to accept this
submission. These 20 components and parts would get exemption only
provided they were imported as components and parts. If they are imported
as components and parts in CKD pack, then the pack as a whole is a car
by virtue of the interpretative rule. In such a case even these components
C would not be entitled to exemption.

Under these circumstances, the Order of CEGAT in respect of Mis
Maestro Motors Ltd. cannot be sustained and is hereby set aside. The Order
of the Adjudicating Authority is restored.
D
These Appeals stand disposed of accordingly. There will be no order
as to costs.

B.K. Appeals allowed.