Customs Classification Dispute: Ever Star Motors Pvt. Ltd. vs. Department of Customs

Crux Issue

The central dispute involves the customs classification of imported goods. The importer, Ever Star Motors, declared the items—specifically chassis frames and various components—under subheading 8708.99.00, which covers motor vehicle parts and accessories. However, the Bhairahawa Customs Office and the Department of Customs argued that because these components, when assembled, possessed the “essential character” of a complete vehicle, they should be classified as 8703.21.10 (for passenger auto-rickshaws) and 8704.31.00 (for goods-carrying loaders).

Court Verdict and the Company

• The Company: Ever Star Motors Pvt. Ltd., located in Naya Baneshwor, Kathmandu.
• The Verdict: The Revenue Tribunal (Kathmandu) upheld the decision made by the Director General of the Department of Customs.
• Split Opinion: The decision was reached by a majority (Chairperson Tek Prasad Dhungana and Revenue Member Govinda Prasad Adhikari), while the Accounts Member, Pushpa Prasad Guragain, provided a dissenting opinion based on procedural and deposit grounds.

Decision by Court

• Validation of Classification: The court ruled that according to General Interpretative Rule 2(a) of the Harmonized System, an incomplete or unfinished article must be classified as the complete article if it has the essential character of the finished product.
• Essential Character: The Tribunal found that the 29 types of imported parts, when assembled, formed 30 “JSA Victory Pass” passenger rickshaws and 20 “JSA Victory Loader” units.
• Procedural Legality: The majority rejected the appellant’s claim that the decision was delayed beyond the legal limit, stating that the 60-day deadline cited by the company did not apply to this specific administrative referral process.
• Rejection of Compensation: The court dismissed the company’s claim for compensation for financial losses, noting that there was no evidence of the goods being destroyed or damaged while in customs custody.
• Dissenting View: The dissenting member argued the appeal should have been dismissed immediately because the company failed to deposit the required 100% security amount (NPR 4,058,602) as mandated by the Revenue Tribunal Act, 2031.

Conclusion

The Revenue Tribunal concluded that the Department of Customs acted within the law by reclassifying the “incomplete” auto-rickshaws as finished vehicles rather than individual spare parts. Consequently, the appeal filed by Ever Star Motors Pvt. Ltd. was unsuccessful, and the initial classification decision made on 2076/11/12 (BS) remains valid