Modular Kitchens Imported in CKD/SKD Form Classifiable as Furniture: CESTAT

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai Bench, has held that modular kitchens imported in CKD/SKD condition are classifiable under Chapter 94 as furniture; however, the DGOV furniture guidelines cannot override provisions of Section 14 of the Customs Act, 1962 or the provisions of the Customs Valuation Rules, 2007. The bench of P. Dinesha (Judicial Member) and Vasa Seshagiri Rao (Technical Member) have held that the Department has not established valid grounds under Rule 12 for rejecting the declared transaction value in the 11 disputed Bills of Entry. The assessee/respondent company, a joint venture in which an Italian entity held a 49% stake, imported modular kitchen components in completely knocked down (CKD) and semi-knocked down (SKD) condition between August 2008 and December 2013. Since the importer and the foreign supplier were related parties, the matter was referred to the Special Valuation Branch to determine whether the relationship influenced the price declared under the Customs Valuation Rules, 2007. The SVB examined 72 Bills of Entry and concluded that the parties were related under the valuation rules. It rejected the declared value in 11 consignments on the ground that the per-kilogram value derived from those imports was significantly lower than earlier consignments. The authority then redetermined the value using contemporaneous imports and directed that future imports declared below ₹300 per kilogram should be aligned with benchmark values under the Directorate General of Valuation (DGOV) furniture guidelines. The importer challenged the enhancement, and the Commissioner (Appeals) set aside the revaluation, holding that modular kitchens could not be treated as furniture and that weight-based valuation was impermissible. The Department subsequently appealed to the Tribunal. One of the central issues before the Tribunal was whether modular kitchens imported in CKD/SKD condition should be classified as furniture under Chapter 94 of the Customs Tariff. The Department argued that the imported goods essentially represented complete or substantially complete kitchen units that possessed the essential character of furniture. It relied on the General Rules for Interpretation and the Harmonized System (HSN) explanatory notes, which include kitchen cabinets and fitted kitchen units within the scope of furniture. The Tribunal agreed with the Department on this limited point. It held that tariff classification must be determined at the time of importation and in the condition in which goods are imported. Since the goods were imported as movable modular components—such as cabinets, panels, shutters, drawers and fittings—they were capable of being bought and sold as such. The bench emphasized that the fact that the components are later installed and fixed in a kitchen does not alter their classification. Chapter Note 2 to Chapter 94 specifically clarifies that cupboards and other unit furniture remain classifiable as furniture even if designed to be fixed to walls or stacked together. Accordingly, the Tribunal held that modular kitchens imported in CKD/SKD form are appropriately classifiable under Heading 9403, particularly under sub-heading 9403.40 covering wooden furniture used in kitchens. Despite accepting the classification under Chapter 94, the Tribunal rejected the Department’s valuation methodology. The adjudicating authority had converted article-wise invoice values into a per-kilogram figure by dividing the total CIF value of each consignment by its weight. Variations in these derived figures were treated as evidence of undervaluation. The Tribunal found this approach flawed. It noted that the goods consisted of numerous modular components differing in size, configuration, finish and accessories. The supplier’s invoices reflected piece-wise pricing rather than weight-based pricing. The per-kilogram figure was therefore merely a mathematical construct created by the adjudicating authority rather than the commercial basis of sale. According to the Tribunal, such mechanical comparison of derived weight values does not satisfy the statutory requirements for comparison with identical or similar goods under the Customs Valuation Rules. Differences in design, customization, finishing and hardware components must be taken into account before any comparison can be made. The Tribunal further held that although the importer and supplier were related parties, the law requires the Department to establish that the relationship influenced the price before rejecting the transaction value. The adjudicating authority relied mainly on differences in derived per-kilogram values and variations in discounts ranging from 17% to 22%. However, the Tribunal observed that no evidence had been produced to show additional consideration, flow-back of funds, or any arrangement indicating price manipulation. The bench noted that commercial discounts are not inherently suspect unless linked to extraneous considerations. The explanation that some consignments involved project-based bulk procurement with simplified specifications had been rejected only on the basis of weight comparisons. In these circumstances, the Tribunal held that the rejection of the declared value in the 11 Bills of Entry was not supported by a proper application of Rule 12 of the Customs Valuation Rules. With respect to the remaining consignments, the Tribunal held that the adjudicating authority had already examined pricing across 72 Bills of Entry over a five-year period and found broad consistency. The Department had also failed to produce reliable contemporaneous import data demonstrating systematic undervaluation. Relying on the Supreme Court’s ruling in Eicher Tractors Ltd. v. Commissioner of Customs, the Tribunal reiterated that transaction value must be accepted unless specific grounds for rejection are established in accordance with the valuation rules. Consequently, the Tribunal upheld the acceptance of the declared value in all consignments and dismissed the Department’s appeals. The CESTAT ultimately concluded that while modular kitchens imported in CKD/SKD condition are classifiable as furniture under Chapter 94, classification alone does not justify the application of DGOV benchmark guidelines or weight-based valuation. Holding that the Department had failed to establish valid grounds for rejecting the declared transaction value, the Tribunal dismissed both appeals and upheld the orders of the Commissioner (Appeals). Case Details Case Title: Commissioner of Customs Versus M/s. Aran Kitchen World (India) Pvt. Ltd. Citation: JURISHOUR-232-CES-2026(CHEN) Case No.: Customs Appeal Nos. 40047 of 2015 Date: 03.03.2026 Counsel For Appellant: Sanjay Kakkar, Authorised Representative Counsel For Respondent: None Click Here To Read Order Read More: Interest Earned on Loans Not Consideration for Service Tax: CESTAT

Modular Kitchens Imported in CKD/SKD Form Classifiable as Furniture: CESTAT

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