2024 (4) TMI 1341 - AT - Customs

Static converters/UPS eligible for customs exemption under Sl. No. 4 of Notification 25/2005-Cus, multi-use allowed

CESTAT (Chennai) held that imported static converters/UPS are eligible for exemption under Sl. No. 4 of N/N 25/2005-Cus. The Tribunal found the ... Eligibility for the benefit of exemption at Serial No.4 of the N/N. 25/2005 dated 01.03.2005 - denial of exemption on the ground that the appellant has not furnished evidence to prove that the imported goods (static converters / UPS) are meant for use only for automatic data processing machine and telecommunication apparatus - HELD THAT:- On perusal of the notification it can be seen that the words of the notification read as ‘Static converters for automatic data processing machines and units thereof, and telecommunication apparatus’. It is not disputed by the department that the imported goods are capable for use in ADP machines. The benefit of exemption has been denied stating that these goods can be put to use for other purposes also. The notification does not say that the goods have to be used only for IT industry as alleged by the department. The words of the notification are very clear and does not give rise to any ambiguity. When there is no ambiguity in the language of the notification the benefit of the concessional rate of duty cannot be denied by adding words into the notification. The adjudicating authority as well as the Commissioner (Appeals) has relied on the Explanatory notes of the budget speech to hold that the object of the notification was to exempt goods for IT and Telecommunication industry only. The notification does not use the word ‘only’. When the plain language of the notification is clear and unambiguous, the department ought not to have relied on extraneous aids to interpret the notification. The very same issue was considered by the Tribunal in the case of M/s. Cyber Power Systems India Vs. Commissioner of Customs (Port), [2024 (2) TMI 875 - CESTAT KOLKATA] where it was held that 'the impugned goods are eligible for exemption benefits as claimed by the importer/appellant in terms of Notification No. 25/2005 Cus dated 01.03.2005 (vide Sl. No.4).' In the case of Escorts Limited Vs. Collector of Customs, [1989 (11) TMI 168 - CEGAT, NEW DELHI] the question considered was whether the concessional duty can be denied merely because the equipment used for testing purpose in the automotive industry is also usable for general purpose - The Tribunal answered in the negative and in favour of the assessee. The denial of exemption benefit is not justified. The goods are eligible for exemption of the benefit at Serial No. 4 of Notification No. 25/2005. The impugned order is set aside - Appeal allowed. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether static converters/UPS falling under Heading 8504 40 are eligible for exemption from basic customs duty under Serial No. 4 of Notification No. 25/2005-Cus. dated 01.03.2005. 1.2 Whether the expression 'Static converters for automatic data processing machines and units thereof, and telecommunication apparatus' in Serial No. 4 of Notification No. 25/2005-Cus. imposes an end-use or exclusive-use condition requiring proof that the goods are meant only for such use. 1.3 Whether the scope and conditions of Notification No. 25/2005-Cus. can be restricted or expanded by reference to the Explanatory Notes to the Budget Speech or to the so-called 'object' of the notification. 1.4 Whether the multipurpose or dual-use capability of the imported UPS/static converters disentitles them from the benefit of exemption when they are admittedly capable of use with automatic data processing machines. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 & 2: Eligibility under Serial No. 4 of Notification No. 25/2005-Cus. and whether an end-use or exclusive-use condition is embedded in the phrase 'for automatic data processing machines and units thereof, and telecommunication apparatus' Legal framework (as discussed): 2.1 Serial No. 4 of Notification No. 25/2005-Cus. exempts 'Static converters for automatic data processing machines and units thereof, and telecommunication apparatus, other than static converters for cellular mobile phones' falling under Heading 8504 40 from basic customs duty. 2.2 The goods were admittedly classifiable under Heading 8504 40 (UPS/static converters) and were provisionally assessed; the dispute was confined to the availability of the exemption. Interpretation and reasoning: 2.3 The Tribunal noted that the departmental authorities denied exemption for the reason that the importer, being a trader, could not furnish evidence that the imported UPS/static converters were 'meant for use only for automatic data processing machines and telecommunication apparatus', and that the goods were capable of multiple uses. 2.4 On a plain reading of Serial No. 4, the Tribunal held that the notification does not contain any requirement that the static converters must be used 'only' for automatic data processing machines or 'only' for the IT industry, nor does it prescribe any end-use or actual-use condition or bond requirement. 2.5 It was specifically noted that the department did not dispute that the imported UPS/static converters are capable of use with automatic data processing machines; the sole objection was that they could also be used elsewhere. 2.6 Relying on precedents interpreting the expressions 'for' and 'for use' in similar contexts (including decisions holding that 'for use' means 'intended for use' or 'capable of use', and that, in absence of express conditions, proof of actual end-use cannot be insisted upon), the Tribunal reasoned that: (a) The absence of any end-use bond or actual-user stipulation in the notification indicates that the legislature did not intend to limit the exemption to goods actually or exclusively used in any specific industry. (b) Where the notification uses the word 'for' without more, it describes the nature/capability of the goods, not actual exclusive user. 2.7 The Tribunal also drew support from its earlier decision in a substantially identical matter (Cyber Power Systems India), where it was held that: (a) Notification No. 25/2005-Cus. extends exemption to 'Static Converters for Data Processing Equipment' classifiable under Heading 8504 40, (b) Duality or multiplicity of use is immaterial so long as the imported goods answer that description, and (c) The notification does not relate the benefit to any end-use verification, nor prescribe end-use conditions. 2.8 Applying the same reasoning, the Tribunal held that the only requirement for exemption is that the imported goods be static converters which are for (i.e. suited and capable for) use with automatic data processing machines and units thereof or telecommunication apparatus. This condition was satisfied on the admitted facts and on the catalogue showing that the goods were UPS/static converters capable of such use. Conclusions: 2.9 The exemption under Serial No. 4 of Notification No. 25/2005-Cus. is available to the appellant's imported UPS/static converters, as they are static converters capable of use with automatic data processing machines and units thereof. 2.10 The notification does not impose any end-use or actual-use condition, nor does it require the importer to establish that the goods are used 'only' for automatic data processing machines or 'only' in the IT industry. Denial of exemption on the ground of non-furnishing of end-use proof or non-execution of end-use bond is unsustainable. Issue 3: Whether reliance on Explanatory Notes to the Budget Speech and 'object' of the notification can restrict the plain language of Notification No. 25/2005-Cus. Legal framework (as discussed): 3.1 The departmental authorities relied on Explanatory Notes to the Budget Speech for 2005-06, stating that customs duty was being exempted on tariff lines covered under the Information Technology Agreement and that goods imported for manufacture of ITA-bound items, subject to end-use condition, would be eligible for exemption. On that basis, they concluded that the notification's benefit was intended only for goods directly used in the IT industry or used for manufacture of such goods, subject to end-use conditions. Interpretation and reasoning: 3.2 The Tribunal observed that the notification itself does not use the word 'only' or any phrase limiting its scope to IT or telecommunication industries, nor does it incorporate any end-use condition or reference to manufacture of ITA-bound items. 3.3 It held that where the language of a notification is clear and unambiguous, resort to extraneous aids such as Budget Speeches or explanatory notes to deduce 'intention' or to introduce further conditions is impermissible. 3.4 The Tribunal further held that both the adjudicating authority and Commissioner (Appeals) erred in reading into the notification a restrictive purpose (i.e. that the goods must be directly used only in the IT industry) which finds no support in its text. Conclusions: 3.5 The scope of Serial No. 4 of Notification No. 25/2005-Cus. must be determined strictly on its own wording. The authorities were not justified in invoking the Explanatory Notes to the Budget Speech to restrict or modify the clear language of the notification. 3.6 The finding that the benefit is limited to goods directly used only in the IT industry or for manufacture of ITA-bound items, subject to end-use conditions, is contrary to the notification and is set aside. Issue 4: Effect of multipurpose or dual-use capability of UPS/static converters on entitlement to exemption Interpretation and reasoning: 4.1 The department relied on the fact that the imported UPS systems had multiple applications (domestic, industrial, critical applications, networks, servers, telecommunications, health care, etc.) and high power rating, to argue that they were not exclusively 'for automatic data processing machines and units thereof, and telecommunication apparatus'. 4.2 The Tribunal, following earlier decisions (including Escorts Limited and other cited precedents), reiterated that exemption benefits cannot be denied merely because the imported equipment, though designed for a particular qualifying use, can also be used for general or additional purposes, unless the notification itself requires exclusive use. 4.3 In line with the reasoning in Cyber Power Systems India, the Tribunal held that duality or multiplicity of use is immaterial so long as the description in the notification fits the goods; exclusivity of usage is not a statutory requirement under Serial No. 4 of Notification No. 25/2005-Cus. Conclusions: 4.4 The mere fact that the UPS/static converters are capable of multiple uses, or are not exclusively for automatic data processing machines, does not disentitle the importer to the exemption, since the notification does not prescribe exclusivity or restrict goods of general or multiple use. 4.5 The denial of exemption solely on the ground of multipurpose capability is unsustainable. Overall result 4.6 The Tribunal held that the imported goods are static converters capable of use with automatic data processing machines; the language of Serial No. 4 of Notification No. 25/2005-Cus. is clear, contains no end-use or exclusivity condition, and cannot be cut down by reference to Budget Speeches. The impugned order was set aside and the appeal allowed with consequential relief.