2024 (6) TMI 917 - AT - Customs

Solar lanterns with USB ports and AC charging classified under CTH 94055040 despite alternative power sources

Commissioner of Customs (Port), Kolkata Versus M/s. Sigma Power Product Pvt. Ltd.

The CESTAT Kolkata upheld the classification of imported solar lanterns under Customs Tariff Heading 94055040 rather than 85131090, allowing the appellant ... Classification of imported goods - Solar lantern - to be classified under Customs Tariff Heading 94055040 or under CET 85131090? - benefit of Serial No.587 of Notification No. 050/2017-cus. - HELD THAT:- The Customs officials have drawn the samples for testing. In the very first case, there is “Solar Mini Emergency Light with LED as inbuilt Solar Panel”. In other cases, there are no inbuilt solar panels but they have all with „USB port‟ with marking “Solar Charging” and they have also separate AC Charging point. There is nothing to deduce from the Test Report of the Revenue that this USB Ports cannot be used for charging the lanterns through solar panels. In the absence of any findings on this, the Appellants are correct and they are all lanterns having USB Port specifically for Solar charging. Overall, it would show that the lanterns are basically „solar lanterns‟ and further ports have been given for normal charging through electricity in case of emergency. The issue of solar lantern was also before the Mumbai Bench, in the case of M/S. AURA SOLAR PRODUCTS PVT. LTD., SHRI RAHUL NAHAR VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE-III [2020 (5) TMI 504 - CESTAT MUMBAI]. The Hon‟ble Mumbai Tribunal has held 'For classifying the one of two lamps in the package Revenue has relied on the fact that it can be charged with the normal power supply using suitable adapters. While doing so they ignore the fact that the technical opinion given by the IIT Professor clearly states that the normal mode of charging the batteries in the lamps will be solar power only.' The Appellant is correct in classifying the goods under “CTH 94055040” and there are no reason to interfere with the OIA passed by the Commissioner (Appeals) on the issue of classification. The impugned order upheld - appeal of Revenue dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether imported rechargeable lanterns that lack an in-built photovoltaic panel but possess USB ports labelled 'Solar charging' and separate AC charging points are classifiable under tariff heading 9405.50.40 as 'solar lanterns' or under heading 8513.10.90 as electrical lamps. 2. Whether earlier appellate orders granting classification under 9405.50.40 (for similar goods without in-built panels) are binding or distinguishable on the basis of different model numbers or because they were disposed under the National Litigation Policy. 3. Whether the availability of an AC charging facility or capability to be charged from non-solar sources precludes classification as a solar lantern under 9405.50.40. 4. Whether enhancement of assessed value (made on the premise of classification under Chapter 85) requires separate determination once classification under Chapter 94 is upheld. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Classification: solar lantern (CTH 9405.50.40) v. electrical lamps (CTH 8513.10.90) Legal framework: Classification must follow the General Rules for the Interpretation of Schedule (GRIs), especially Rule 3(a)/(c), and relevant chapter/section notes (Note 3 to Section XVI concerning composite machines and principal function). Precedent treatment: Prior appellate decisions in five Orders found similar imported rechargeable lanterns (without built-in photovoltaic panels) classifiable under 9405.50.40; a Tribunal decision was cited holding 'the only difference between a solar light and ordinary light is the source of energy.' A later Tribunal decision (Aura Solar Products) was relied on as supportive. Interpretation and reasoning: The Court examined physical features and test reports: some items had in-built solar panels, others did not but had USB ports marked 'Solar charging' and separate AC charging points. Revenue's test report did not demonstrate that USB ports could not be used with external solar panels. Applying GRI 3(a), goods that are essentially solar lanterns fall under the solar lantern heading; alternatively GRI 3(c) directs selection of the heading last in numerical order among equally meriting headings. Note 3 to Section XVI was applied to treat the principal function (drawing energy from sunlight) as decisive where goods perform complementary charging functions. The Court held that the primary/principal function-charging from solar energy-controls classification, and the presence of an AC charging option does not change that character. Ratio vs. Obiter: Ratio - the principal function test and application of GRIs lead to classification under 9405.50.40 even when an in-built solar panel is absent but the lantern is designed for solar charging (including via USB marked 'Solar charging'). Obiter - practical observations about e-retail listings and examples of past departmental acceptance are supportive but not essential to the legal ratio. Conclusion: Goods without an in-built solar panel but constructed/marketed to be charged by solar energy (including via USB ports labelled for solar charging) are classifiable under tariff item 9405.50.40 as solar lanterns; classification under 8513.10.90 is not appropriate where the principal function is solar energy utilization. Issue 2 - Precedent effect of earlier appellate orders and relevance of model numbers/National Litigation Policy Legal framework: Binding or persuasive effect of earlier appellate orders is assessed by comparing facts and relevant features; after insertion of Section 131BA certain departmental orders have limited precedential effect, but this does not constrain an appellate forum from following its earlier reasoning where facts are not distinguishable. Precedent treatment: Five prior Orders reached the same classification even where in-built panels were absent; the adjudicating authority attempted to limit their applicability by referencing differing model numbers and National Litigation Policy disposal. Interpretation and reasoning: The Court rejected the proposition that classification turns on model numbers alone, holding that functional features determine classification. The fact that prior orders were disposed under limited monetary/litigation policy does not bar an appellate forum from relying on those findings unless the department demonstrates materially different facts or circumstances. No distinguishing facts were shown by Revenue in the present case. Ratio vs. Obiter: Ratio - earlier appellate findings addressing the same core issue (solar charging capability as determinative) are applicable where facts and features are substantially similar; model number differences do not, by themselves, distinguish prior orders. Obiter - commentary on Section 131BA's effect on departmental precedence is explanatory, not the basis for decision. Conclusion: Earlier appellate determinations classifying similar goods under 9405.50.40 are applicable and persuasive here because the facts and controlling features are not materially different; model numbers or disposal under litigation policy do not negate their applicability absent contrary demonstration by Revenue. Issue 3 - Effect of AC charging capability on classification Legal framework: Classification focuses on the principal function of the goods; alternative or emergency modes of operation do not alter the character if primary function is otherwise. Precedent treatment: Prior orders and the cited Tribunal authorities recognize that capability to be charged by electricity does not preclude classification as a solar product if solar charging is the primary mode. Interpretation and reasoning: The presence of AC charging and dual charging options was considered an emergency or ancillary feature. The Court relied on factual findings (manufacturer labelling 'Solar charging' on USB ports, absence of Revenue evidence refuting solar-charging capability via external panels) to conclude solar charging is the primary function. Thus AC charging 'has no impact on the classification.' Ratio vs. Obiter: Ratio - the availability of AC charging does not prevent classification under solar lantern heading where solar charging is the principal function; determination depends on functional character, not secondary capabilities. Obiter - examples of market practice (e-retail listings) are illustrative but non-essential. Conclusion: AC charging capability is ancillary and does not defeat classification as a solar lantern where the product's principal function is to draw energy from sunlight. Issue 4 - Consequence for valuation/enhancement once classification resolved Legal framework: Valuation consequences depend on the correct classification; enhancements premised on an alternative classification become moot if classification is upheld in the taxpayer's favour. Precedent treatment: No new precedent was needed; the tribunal declined to address value enhancement independent of classification outcome. Interpretation and reasoning: Since the Court decided classification in favour of the appellants (9405.50.40), any enhancement or valuation adjustments premised on Chapter 85 classification were rendered infructuous at this stage and need not be considered. Ratio vs. Obiter: Ratio - determination of classification can render downstream valuation issues unnecessary; adjudication on valuation was therefore not required. Obiter - none. Conclusion: Enhancement of value based on the Revenue's asserted Chapter 85 classification is moot once classification under Chapter 94 is affirmed; no separate disposal of enhancement was required.