Ckd/skd rules of customs

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Querist : Anonymous

Querist : Anonymous (Querist)

10 September 2012 I WOULD LIKE TO KNOW IF THERE IS A RULE IN CUSTOMS WHICH SAYS THE NORMS OF CKD/SKD RULES/ WHAT ARE LOCALISATION PERCENTAGE REQUIRED IN SUCH IMORTS. PL SPECIFY

RAMESH KUMAR VERMA

RAMESH KUMAR VERMA (Expert)
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10 September 2012 DEAR ANONYMOUS,

Goods imported in completely knocked down (CKD) condition are complete goods or just a conglomeration of parts—that is the question in customs . It has been so for long . Judging from the number of decisions given by the Tribunal considering the several High Court and Supreme Court judgements also, the issue needs some introspection in totality which this treatise proposes to do .

Issues are two. First issue is if the goods in CKD/SKD condition are complete goods or not, when some parts are not there.

Second, there are always exemptions for goods imported in CKD condition or as parts. The question arises about the applicability of exemption.

The general principle that is applicable on these two issues is given in the statutory rules called General Rules for the Interpretation of this Schedule. The Schedule refers to both the Customs and Central Excise Schedules.

The concerned Rule 2(a) says that when incomplete goods are presented before customs for clearance and they have the essential character of complete goods, they have to be classified as complete goods. We shall examine the different issues involved with reference to judicial decisions.

If all the parts are presented in CKD condition and they have the essential character of a complete article, they have to be assessed as complete article. This has been held in the case of Procal Electronics India Ltd. v. Commissioner - 2005 (185) E.L.T. A58 (S.C.)]. Here the Supreme Court agreed to the Tribunal and the Revenue holding that once the goods are imported in CKD condition and presented before Customs as such the goods are classifiable as complete electronic calculator.

he conclusion is the following:

Rule 2(A) stipulates that if all the parts are presented in CKD condition and they have the essential character of the complete article, they have to be assessed as complete article. Goods imported separately cannot be clubbed together because they are not presented as one CKD pack at the time of import. If some non-essential items are not imported, the CKD pack can still become complete article. But if the parts missing are essential, the CKD pack cannot constitute a complete article. Issue arises which is essential and which is non-essential. This is a matter of fact and has to be decided in each case. Simply the essential parts do not make a complete article. Board has issued a circular No.55/95-Cus dated 30.5.1995 (F. No.528/42/95-Cus.(TU) which is quite outdated. It is high time a new circular is issued.

Querist : Anonymous

Querist : Anonymous (Querist)

10 September 2012 Thanks Mr Verma for elaborate reply, agree to your views that a new circular is needed to clarify the matter.

Moreover Supreme court in year 2008 in the matter of Sony India, has ruled that CTV kits imported by SONY India cannot be termed as CKD/SKD imports as the items cannot be assesmbled with simpple screw driver technology, instead a complicated manufacturing process is involved.

thanks once again

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RAMESH KUMAR VERMA

RAMESH KUMAR VERMA (Expert)
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12 October 2012 ANY QUERY???