2024 (9) TMI 1556 - AT - Customs

Solar Pump Inverter VFD classified as inverter under CTI 8504 40 90 not semiconductor device under section 28

M/s Shakti Pumps India Ltd. Versus The Commissioner, CGST & Central Excise, Indore (M.P.)

CESTAT New Delhi classified imported Solar Pump Inverter VFD under CTI 8504 40 90 as inverter rather than appellant's claimed CTI 8541 50 00 as ... Classification of imported goods - Solar Pump Inverter - classifiable under CTI 8541 50 00 as claimed by the appellant or under CTI 8504 40 90 as held in the impugned order? - invocation of extended period of limitation u/s 28 of the Customs Act in the same order, when the assessment is finalized through the order-in-original - levy of penalty u/s 114A of the Customs Act - eligibility for exemption from payment of additional duty of customs. Is the Solar Pump Inverter – VFD classifiable under CTI 8541 50 00 as claimed by the appellant or under CTI 8504 40 90 as held in the impugned order? - HELD THAT:- It cannot be denied that the primary function of the device is that of an inverter i.e. one which converts direct current into alternate current. Even the inverters used at homes have chips and semi-conductors and also perform several ancillary functions which enhance their utility. For instance, they sense when there is a power cut in the grid and start converting the direct current from the battery into alternate current and supplying it for household use. When the power is restored, the inverter senses it and reverses the system and starts charging the battery using the power from the grid. High quality inverters used at home also ensure that the sine wave quality of the power is good and there is no adverse affect on the devices at home or their performance. Many inverters used at home also have displays which indicate the voltage, level of charge, etc. All these intelligent functions of the domestic inverters are because of the semi-conductors embedded in them. However, they do not cease to be inverters because of these additional functions. Likewise, the “Solar pump Inverter – VFD” imported by the appellant continues to be an inverter and must be classified as such - the correct classification of the imported goods is as inverter under CTI 8504 40 90 and not as other semi-conductor devices under CTI 8541 50 00 as claimed by the appellant. When the assessment is finalized through the order-in-original, can a demand be also raised invoking the extended period of limitation under section 28 of the Customs Act in the same order? - HELD THAT:- It needs to be noted that the demand under section 28 of the Customs Act is a mechanism for the proper officer to reopen an assessment which has already been completed. This has to be done within a period of one year, or as the case may be five years from the relevant date. Explanation 1 (b) to section 28 of the Customs Act clarifies that the relevant date in a case where duty is provisionally assessed under section 18 of the Customs Act, is the date of adjustment on duty after the final assessment thereof or re-assessment as the case may be. The finalization in this case was completed through order-in-original passed by the Joint Commissioner. Any demand of duty under section 28 of the Customs Act in such a case will arise after the finalizing of this assessment that means after the order-in-original was passed. Until then, the assessment had not yet been completed - while the appellant is required to pay duty as per the final assessment, no demand under section 28 of the Customs Act can be raised. Consequently, any recovery of interest under section 28AA of the Customs Act which follows the confirmation of demand under section 28 of the Customs Act also does not apply to this case. Is any penalty imposable under section 114A of the Customs Act upon the appellant? - HELD THAT:- As is evident, section 114A of the Customs Act provides for imposition of penalty, where demand is made under section 28 of the Customs Act and such demand arose by reason of collusion or any willful mis-statement or suppression of facts by the appellant. Since section 28 of the Customs Act does not apply in this case neither will section 114A of the Customs Act. Is the appellant are eligible for exemption from payment of additional duty of customs? - HELD THAT:- The appellant’s claim of the benefit of N/N. 24/2005-CUS dated 01.03.2015, N/N. 12/2012-CE and N/N. 21/2012-CUS are all based on their claim of this classification. Having decided the classification in favour of the revenue, it cannot be held that the appellant will be entitled to the benefit of these notifications. The impugned order is modified to the extent that though the classification of the goods and the finalization of assessment of duty is upheld, the appellant is required to pay duty as final assessment. The demand under section 28, interest under section 28AA and penalty under section 114A of the Customs Act are set aside. The appeal is party allowed. Issues Involved:1. Classification of the imported 'Solar Pump Inverter - VFD'.2. Applicability of demand under section 28 of the Customs Act.3. Imposition of penalty under section 114A of the Customs Act.4. Eligibility for exemption from payment of additional duty of customs.Issue-Wise Detailed Analysis:1. Classification of the imported 'Solar Pump Inverter - VFD':The primary issue was whether the imported goods should be classified under CTI 8541 50 00 as 'other semi-conductor devices' or under CTI 8504 40 90 as 'inverters'. The appellant argued that the Solar Pump Inverter - VFD is a semi-conductor device and falls under 'other semi-conductor devices' eligible for exemption notifications. The department contended that the goods are inverters and should be classified as such. The Tribunal concluded that despite the additional functions of the Solar Pump Inverter - VFD, its primary function is converting direct current to alternating current, similar to domestic inverters. Therefore, the correct classification is under CTI 8504 40 90 as inverters.2. Applicability of demand under section 28 of the Customs Act:The appellant contended that the demand under section 28 could not be confirmed before finalizing the provisional assessment. The Tribunal noted that the goods were provisionally assessed due to a classification dispute, and a provisional duty bond was executed. The final assessment was completed through the order-in-original. The Tribunal held that the demand under section 28 of the Customs Act does not arise in such circumstances, as it is a mechanism to reopen an already completed assessment. Consequently, any recovery of interest under section 28AA also does not apply.3. Imposition of penalty under section 114A of the Customs Act:The Tribunal examined whether the penalty under section 114A, which is contingent upon the demand under section 28 and involves collusion, willful mis-statement, or suppression of facts, was applicable. Since the demand under section 28 was not applicable, the imposition of penalty under section 114A was also deemed inapplicable.4. Eligibility for exemption from payment of additional duty of customs:The appellant's claim for exemption from payment of duty was based on their classification of the goods under CTI 8541 50 00. However, with the classification decided in favor of the revenue under CTI 8504 40 90, the Tribunal held that the appellant is not entitled to the benefit of the exemption notifications.Conclusion:The Tribunal upheld the classification of the goods as inverters under CTI 8504 40 90 and the finalization of the assessment of duty. However, it set aside the demand under section 28, the interest under section 28AA, and the penalty under section 114A of the Customs Act. The appellant is required to pay duty as per the final assessment. The appeal was partly allowed, and the impugned order was modified accordingly. The miscellaneous application filed by the appellant was also disposed of.