UPS battery assemblies classified as machine components, with duty demand remanded for factual verification of goods cleared.

A specially adapted battery assembly built from batteries, cells, racks and connecting accessories for use in a UPS is classifiable as a component part of the UPS under Heading 8504, not as a separate battery under Heading 8507.00, because a part essential to the working of the machine falls with the machine under Section Note 2(b) of Section XVI. The duty demand could not be finally sustained on the existing record because the show cause notice proceeded on batteries, while the dispute concerned battery assemblies; the actual nature of the goods cleared required factual verification. The classification adopted by the Assistant Collector was upheld, the contrary appellate order was set aside, and the demand issue was remanded for fresh determination.

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Issues: (i) whether the battery assembly for UPS was classifiable under Heading 8507.00 as a battery or under Heading 8504 as a component part of UPS; (ii) whether the duty demand based on the show cause notice could be sustained without verifying whether the goods cleared were batteries simpliciter or battery assemblies.

Issue (i): whether the battery assembly for UPS was classifiable under Heading 8507.00 as a battery or under Heading 8504 as a component part of UPS

Analysis: The assembly consisted of batteries, cells, racks and connecting accessories configured for a specific use in the UPS system. It was not a battery simpliciter, but a specially designed and adapted assembly intended to function as part of the UPS. Applying the principle of classification of component parts under Section Note 2(b) of Section XVI, a specially adapted part essential for the working of the machine falls with the main machine rather than under the heading of a separate independent item.

Conclusion: The battery assembly was classifiable under Heading 8504 as a component part of UPS and not under Heading 8507.00.

Issue (ii): whether the duty demand based on the show cause notice could be sustained without verifying whether the goods cleared were batteries simpliciter or battery assemblies

Analysis: The demand proceeded on the allegation of clearance of batteries, whereas the classification dispute concerned battery assemblies. Since the actual nature of the goods cleared required factual verification, the demand could not be finally confirmed on the existing record and required reconsideration by the original authority.

Conclusion: The duty demand was remitted for re-determination after verification of the actual goods cleared.

Final Conclusion: The classification adopted by the Assistant Collector was upheld, the contrary appellate order was set aside, and the demand issue was sent back for fresh decision on facts.

Ratio Decidendi: A specially adapted assembly that functions as an essential part of a machine is classifiable as a component part of the machine under the relevant section note and not as an independent article under a separate heading.

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