TaxTMI 
TaxTMI 
2019 (8) TMI 943
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....d 22.01.2019 = 2019 (2) TMI 66 - AUTHORITY FOR ADVANCE RULINGS, KARNATAKA pronounced by the Karnataka Authority for Advance Ruling. Brief facts of the case: l. The Appellant is a Private Limited company and registered under GST With GSTIN No.29AAACX1645B1ZK and is engaged in trading of electrical and electronic goods such as Mobile Phones, Power Banks, Air Purifiers & other lifestyle products. The Power Bank traded by the appellant is procured domestically as well as imported and the same is sold under the brand name 'Mi Power Bank', through a chain of distributors / retailers within India. 2. The Power Bank is a device used to charge mobile phones, tablets & other compatible electronic devices. It hosts mainly three components i.e., • The Battery, • The Circuitry (charge management system & voltage boost converter) and • The Outer Shell. The first component battery used in the said power bank, is a lithium ion polymer battery used to store the electrical energy, which can be connected to a USB Port of a Computer or a Battery Charger i.e., adaptor. The Second component is the Circuitry, which is equipped with an Integrat....
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....ling No. ADRG 01/2019 dated 22nd January 2019 (hereinafter referred to as 'Impugned Order) gave the following ruling: "The 'Power Bank' traded by the appellant is classifiable under Heading 8507 as Accumulator and not as Static Converter." 6. Being aggrieved by the above-mentioned Ruling of the Authority, an appeal was preferred before Appellate Authority for Advance Ruling under section 100 of the CGST Act, 2017 / KGST Act, 2017 on 23.02.2019 on following grounds: 6.1 The authority has erred in concluding that both the circuits (charging management System and voltage boost converter) are essentially enhancing the function of the main part i.e. Battery and are ancillary in nature. In this regard, the appellant highlighted the functioning of the power bank with an example as follows: 6.1.1 Suppose a charger having output of 9 voltage DC is used to charge the power bank. The charging management system of the power bank detects type of charger being used to charge the power bank and reduces the input of 9 voltage DC to a constant 4.2 Voltage DC as required for the battery and lithium-ion polymer batteries of the power bank is appropriately charged. Non-availa....
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....ase) is converted to direct current, generally accompanied by voltage change. (B) Inverter by which direct current is converted to alternating current. (C) Alternating current converters and cycle converters by which alternating Current (single or polyphase) is converted to a different frequency or voltage. (D) Direct current converters by which direct current is converted to a different voltage": 6.2.3. From the above explanatory notes, it can be inferred that static converter is an apparatus or a device which converts the electric energy in order to adapt it for further use. A static converter essentially coverts electric charge of a known frequency and voltage (input) into one having different frequency and voltage (output), which can be higher or lower than the known frequency of input, Accordingly, as per clause D to the above explanatory note, even a DC to DC converter which coverts direct current to a different DC Voltage would be Static converter. Ina power bank. the charging management system and voltage boost converter are direct current converter which are classified as of type static converter under clause (D) to the explanatory notes, These converters perfo....
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....nk can be considered as Static Converter and not only a charge accumulator. Relevant para of the said report is reproduced below: "In view of the architecture and operation discussed in Section 5, it may be observed that the Power Bank Stores energy with the help of power electronic circuits and also release energy to charge consumer's battery through the power converters only. These power electronic circuits also ensure adequate protection to the over current and overvoltage. In this way it can be said that battery charger, controller and voltage boost converter are essential to the performance of principal function of power Bank. Thus, merely having a Li-ion battery neither made a power bank nor is sufficient enough to charge the consumers battery with due protection. Based on these discussions following may be Concluded - "Power Bank can be considered as Static Converter and not only a charge accumulator." The learned authorities, in the impugned order have not considered the above technical research report before concluding the Power Bank as an electrical accumulator. 6.2.8. Further, they have drawn attention towards the Rule 3(b) of the General Rules of Inte....
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....d, they detailed the architecture and functioning of the UPS to buttress their claim that the judgments classifying UPS as static converter are applicable. 6.3.1 A UPS is a specialized circuit for catering to power loss conditions. It comes with a suitable sized battery that gets charged during the normal operation and consumption from mains. When the mains fail, a sensing switch automatically transmits the battery power to the load, disconnecting the main. 6.3.2 The UPS mainly consists of three components i.e., Charger, Battery and Inverter. The mode of operating and function of UPS is similar to that of Power Bank. A UPS is intended to provide regulated output power same as a power bank. The UPS and Power Bank both hosts a battery / storage device along with power electronic circuits flow of power from input to output. UPS also performs the process of charging and discharging similar to that of Power Bank. In UPS the stored energy is released to the load as per the requirement, when grid power is not available, similar to Power Bank, where also the stored energy in battery is transmitted to the end device as per the load the requirement of device. The only difference betwee....
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....in concluding that the principal function of power bank is that of battery based on the assumption that power bank would not function without the battery. 6.4. The learned authority has erred in concluding that Power Bank is an accumulator based on the explanatory note in the Harmonized Commodity Description and Coding Systems for HSN 8507. In this regard, they have submitted that the explanatory note in respect of HSN 8507 (accumulator) covered products like battery packs within its ambit. Battery packs means a set of any number of identical batteries or individual battery cell and called as external batteries used to supply energy only to specific devices against specified rate of output voltage. The voltage booster converter in the power bank are not in nature of the ancillary components. The voltage boost converter is an Integral part of the power bank itself, which ensure that the battery of the connected device is appropriately charged and does not cause any damage to the battery of the device connected to it. Further. they submitted that the electrical connectors referred in the explanatory notes are in nature of the wiring connecters and not in the nature of the static c....
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....fication the item "Power Bank" which is traded by the Appellant. The question to be determined is whether the "Power Bank" is to be classified under Chapter Heading 8504 as a Static Convertor or under Chapter Heading 8507 as an Electrical Accumulator. 10. Since the description of the entries under Chapter Heading 8504 and 8507 as per the Customs Tariff Act, 1975 are of specific importance, the same are extracted hereunder; Tariff Item Description of goods 1 2 8504 ELECTRICAL TRANSFORMERS, STATIC CONVERTERS (FOR EXAMPLE, RECTIFIERS) AND INDUCTORS 8504 40 - Static Converters: 8504 40 10 --- Electrical inverter --- Rectifier 8504 40 21 ---- Dip Bridge rectifier 8504 40 29 ---- Others 8504 40 30 --- Battery chargers 8504 40 40 --- Voltage regulator and stabilizers (other than automatic) 8504 40 90 ---Other 8507 ELECTRIC ACCUMULATORS, INCLUDING SEPARATORS THEREFOR, WHETHER OR NOT RECTANGULAR (INCLUDING SQUARE) 8507 10 00 - Lead-acid, of a kind used for starting piston engines 8507 20 00 -Other lead-acid accumulators 8507 30 00 - Nickel-cadmium 8507 40 00 - Nickel....
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...., transistor). (b) Polycrystalline semiconductor rectifiers using a selenium disc. (2) Gas discharge converters, such as: (a) Mercury arc rectifiers. Their converting element consists of a glass envelope or a metal tank having a vacuum and containing a mercury cathode and one or more anodes through which the current to be rectified passes. They are equipped with auxiliary devices, e.g., for priming, charging, cooling, and sometimes to maintain the vacuum. There are two categories of gas discharge rectifiers identifiable according to the mechanism of the primer, viz., "excitrons" (with charging anodes) and "ignitrons" (with igniters). (b) Thermo-ionic rectifiers with incandescent cathodes. Their converting element (e.g., a thyratron) is similar to that of mercury arc rectifiers except that it contains an incandescent cathode in place of the mercury cathode. (3) Converters with a mechanical converting element based on the one-way conductivity of various contacts, such as; (a) Contact rectifiers (e.g., those using camshafts) with a device whose metal contacts open and close in synchronization with the frequency of the alternating c....
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....ssentially of a container holding the electrolyte in which are immersed two electrodes, fitted with terminals for connection to an external circuit. In many cases the container may be subdivided, each subdivision (cell) being an accumulator in itself; these cells are usually connected together in series to produce a higher voltage. A number of cells so connected is called a battery, A number or accumulators may also be assembled in a larger container. Accumulators may be of the wet or dry cell type. The main types of accumulators are: (1) Lead-acid accumulators, in which the electrolyte is sulphuric acid and the electrodes lead plates or lead grids supporting active material. (2) Alkaline accumulators, in which the electrolyte is usually potassium, or lithium hydroxide or thionyl chloride and the electrodes are, for example: (i) Positive electrodes of nickel compounds and negative electrodes of iron, cadium or metal hydride; (ii) Positive electrodes lithiated cobalt oxide and negative electrodes of a blend of graphite; (iii) Positive electrodes of carbon and negative electrodes of metallic lithium or lithium alloy; (iv)....
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....(LiMn204) in a liquid electrolyte of lithium salt. Lithium-Ion-Polymer batteries replace the liquid electrolyte with a plastic (or polymer) electrolyte. The electrolyte is a chemical medium that allows the flow of electrical charge between the cathode and anode. Unlike disposable batteries which work only in one direction i.e transforming chemical energy to electrical energy, rechargeable batteries are designed so that electrical energy from an outside source can be applied to the chemical system, and reverse its operation, restoring the battery's charge. 11.3 The storage capacity of the lithium-ion battery used in a Power Bank varies and this determines the charging capacity of the Power Bank. The more mAh a power bank has, the larger the energy stored which means more recharges for your device. For eg. A Power Bank with a capacity of 10000mAh can charge a 2000mAh smartphone roughly around 3-4 times. Power banks are encased in a housing and feature a power button, USB ports and four LED indicator lights that indicate the lithium battery's charge levels. Included with each power bank is a USB cable. Power Banks use sophisticated electronic circuitry to manage being charg....
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....n is that while the Power Bank is a charge accumulator, it can be considered as a static converter. Such a non-conclusive, neither-here-nor-there opinion cannot be the basis for determining the classification of a product under law. Therefore, we are not inclined to give any weightage to the technical opinion of the IIT (BHU) Varanasi furnished by the Appellant. 14. The Appellant has also strongly relied on the Delhi Tribunal's decision in the case of M/s. S.B Industries (2019-VIL-37-CESTAT-DEL-CE) to buttress their case that the battery in the power bank in itself cannot act as a charger; that there should be another charger connected to it to appropriately charge the device, which are in the nature of static converter. We have gone through the said case law in detail. We find that the point being determined by the Tribunal in the said case was regarding the eligibility to exemption Notification No 12/2012 Customs. The appellant in that case was a manufacturer of power bank and claimed the benefit of Customs Notification No. 12/2012 Cus on the imports of parts for the manufacture of the power bank. The said Notification exempts "parts or Components as classifiable under any....
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....ements have persuasive value only when there is similarity in the facts. In the instant case, the classification of the product which we are to determine is the Power Bank whereas the product which was in question before the Larger Bench for determination was the classification of the UPS. As already mentioned, the two products are different in the manner they supply the output power. As such the ratio of the decision of the Larger Bench in the case of M/s Luminous Electronics Ltd is of no persuasive value in the matter before us. Further, even applying the trade parlance theory / common parlance theory, the two products i.e. UPS and Power bank are dissimilar in their functions. While the primary use of a Power Bank is to charge the batteries of a mobile phone/laptop/tablet, the function of a UPS is to provide a range of electronic equipment with stable alternating current in the case of failure or serious disruption of the main electricity supply. When a consumer wants to buy a portable mobile charging device, which he can use without looking for a power source, he would look for a Power Bank and not a UPS because it performs a specific function for him. On the other hand when a c....
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....he Power Banks consists of not only the Lithium-ion Polymer battery but also the circuitry such as 'charge management system' and 'voltage boost converter'. All the components. together make up the Power Bank. Admittedly, it is not the battery alone which makes up a Power Bank. The battery combined with the charge management system and the voltage boost convertor constitute the Power Bank. All three components work in tandem to perform the function of storing electrical energy and discharging it to the connected device when required. The mere fact that there is a converter in the Power Bank will not take make it a Static Converter. It is emphasised that the primary difference between the Static Converter and the Accumulator is the fact of storage of electrical energy. It is not the function of converting the direct current from its input supply to its output device by either stepping up the voltage which characterises an accumulator. Accumulation of electrical energy and the conversion of electrical energy from DC to DC that Step up the voltage from its input supply to its output load together characterise the function of a Power Bank. The critical aspect of storage of elec....