TaxTMI 
TaxTMI 
2025 (12) TMI 1567
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....d requested for rulings for classification of the goods in question under 85044090 along with eligibility for exemption under S.No. 646 of Notification No. 69/2011. 1. The applicant in their application, submitted as under :- 1.1. The Applicant, a wholly owned subsidiary of Mitsubishi Electric Corporation, Japan, is engaged in the business of manufacturing, sale, and trading of automotive electrical & electric components. 1.2. As part of its business activities, the Applicant is engaged in the assembly of a Motor Generator Unit (hereinafter referred as 'MGU'). For this, the Applicant is importing / intends to import complete Inverter Assembly Unit (hereinafter referred as 'IAU'). The IAU would be assembled with other parts (such as stator, rotor, brackets, resolver, etc.) to manufacture an MGU for further use in a mild hybrid motor vehicle. These MGUs will thereafter be supplied to various Original Equipment Manufacturers. About the Motor Generator Unit (MGU) 1.3. In hybrid motor vehicles, the MGU assists the engine during acceleration and serves as the primary power source when starting and driving. During acceleration, the MGU supplements the engine....
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....uts go into the Control Board. They ensure proper integration of components and secure connections for power and signal transmission. 1.5. For ease of understanding, an image of IAU showing all the individual components is provided below: 1.6. The IAU may sometimes be accompanied with cyber security features in its as-imported form. After the import, IAU would be assembled with other parts of the MGU of the vehicle (like, Stator, Rotor, brackets, resolver etc.) to form the finished product (MGU) for further use in mild hybrid motor vehicles. Functioning of the IAU 1.7. To ensure proper functioning and operation of MGU in a motor vehicle, the IAU performs two primary functions: motoring operation and power generation. Motoring Operation: (i) DC-to-AC Conversion: IAU converts DC flowing from the battery into AC. This conversion is achieved by rapidly switching ON and OFF by the FETs. (ii) Control Board Processing: Digital input signals, including speed, engine revolutions per minute (RPM), and torque requests (twisting or rotational force of the crankshaft) from the vehicle's Controller Area Network bus (CAN Bus), are received and processed by the....
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....n assembled with the vehicle's MGU are provided below: Applicant's eligibility for Advance Ruling 1.11. In order to file an application before the Customs Authority for Advance Ruling, the Applicant must satisfy the conditions prescribed under the Customs Act, 1962 (hereinafter referred to as 'Customs Act'). 1.12. Provisions relating to Advance Ruling are prescribed under Chapter VB of the Customs Act. Clause (c) of Section 28E of the Customs Act defines an "Applicant" as: "In this chapter, unless the context otherwise requires, (c) "applicant" means- (i) holding a valid Importer-exporter Code Number granted under section 7 of the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992)" 1.13. The Applicant herein has been granted a valid Importer-Exporter Code Number (IEC) under Section 7 of the Foreign Trade (Development and Regulation) Act, 1992. The same is 0498049850. 1.14. Clause (b) of Section 28E of the Customs Act defines 'advance ruling' as: (b) "advance ruling" means a written decision on any of the questions referred to in section 28H raised by the applicant in his application in respect....
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....Spraytec India (supra) has been affirmed in In Re: Spraytec India Ltd., 2023 (383) E.L.T. 364 (A.A.R. - Cus. - Del.). 1.21. It is also noteworthy that the Hon'ble CAAR, Delhi has also issued advance rulings in cases where imports of similar products were made prior to filing of the Advance Ruling Application. Reliance is placed on the following rulings: * Advance Ruling No. CAAR/Del/Nikon/21/2023-460 to 465 dated 19.09.2023 - Re: Nikon India Pvt. Ltd .; * Advance Ruling No. CAAR/Del/Amazon/15/2023 dated 12.07.2023 - Re: Amazon Wholesale India Pvt. Ltd .; and * Advance Ruling No. CAAR/Del/Forever/30/2024-1211 to 1215 dated 27.08.2024 - Re: Forever New Apparels Pvt. Ltd. 1.22. In the instant case, the Applicant is filing the present Application to seek a ruling on the appropriate classification of IAUs. 1.23. The questions on which an application for an advance ruling can be made have been provided under Section 28H of the Customs Act. As per Section 28H(2) of the Customs Act, of questions relating to classification of goods under the Customs Tariff Act, 1975 ('Customs Tariff'). The relevant portion of the Customs Act has been extracted....
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....ard: Provided also that where the application is rejected, reasons for such rejection shall be given in the order." 1.28. It is submitted that for import of IAUs, the Applicant is not involved in any dispute/case before any authority/court. Thus, the bar under Section 281(2)(a) of the Act above does not apply to the Applicant. 1.29. Further, the classification of such an IAU capable of converting DC to AC and vice-versa has not been decided by the Appellant Tribunal or the Courts previously. Thus, the bar under Section 28I(2)(b) of the Act above also does not apply to the Applicant. Therefore, the present application must be allowed to be proceeded with. Issues requiring Advance Ruling 1.30. In view of the above, the Applicant is seeking an Advance Ruling on whether IAUs imported by the Applicant are correctly: (i) classifiable as 'electric inverters' under Custom Tariff Item (hereinafter referred to as 'CTI') 8504 40 10 or as Goods other than inverters or rectifiers under CTI 8504 40 90 or under CTI 8511 90 00 as parts of MGU of the vehicle or under CTI 8708 99 00 as parts of motor vehicles; and (ii) Whether IAUs imported from....
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.... vs. Collector of Customs, 1986 (23) E.L.T. 283 (Tri-L.B.) has held that the Tariffs have to be interpreted in the light of relevant Section and Chapter Notes which have statutory binding like the headings themselves. Thus, the Section and Chapter Notes have an overriding force on the respective headings. This judgment was approved by the Hon'ble Supreme Court of India in the case of Saurashtra Chemicals vs. Collector of Customs, 1997 (95) E.L.T. 455 (SC). 1.37. The Schedules of Tariff Act are based on the Harmonised Commodity Description and Coding System, generally referred to as HSN, developed by World Customs Organization (hereinafter referred to as WCO') which is applied uniformly by more than 137 countries of the World. Under HSN, various goods are classified under different headings, sub-headings and tariff entries. 1.38. For purposes of uniform interpretation of HSN, the WCO has published detailed Explanatory Notes to HSN which have long been recognized as a safe guide to interpret the Tariff Schedule. The Tariff Act as well as HSN comprise various commodity groups, each identified by a six-digit code, arranged in a legal and logical structure, and is supporte....
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....tors 8504 40 - Static converters: 8504 40 10 --- Electric inverter --- Rectifier: 8504 40 21 -- Dip bridge rectifier 8504 40 29 -- Other 8504 40 30 -- Battery chargers 8504 40 40 -- Voltage regulator and stabilizers (other than automatic) 8504 40 90 --- Other 1.44. Further, the relevant portion of HSN EN to CTSH 8504 40 is reproduced below for ease of reference: "The apparatus of this group are used to convert electrical energy in order to adapt it for further use. They incorporate converting elements (e.g., valves) of different types. They may also incorporate various auxiliary devices (e.g., transformers, induction coils, resistors, command regulators, etc.). Their operation is based on the principle that the converting elements act alternately as conductors and non-conductors. The fact that these apparatuses often incorporate auxiliary circuits to regulate the voltage of the emerging current does not affect their classification in this group, nor does the fact that they are sometimes referred to as voltage or current regulators. This group includes: (A) Rectif....
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....e were responsible for converting AC to DC & vice-versa. These converters regulated the frequency of the current into a variable speed, motor speed and torque to facilitate motion control. The Tribunal in the case decided the classification of the product under CTH 8504 in view of its essential character, after rejecting the contention of the appellant that the goods are not merely inverters which convert DC current into AC current but also regulate the frequency of the current into a variable speed. Relevant portion of the judgment is reproduced below: "19. Admittedly, the principal function of the imported item is of an inverter, and it is also not under dispute that these drives are being used in those machinery which are classifiable under Chapter 84 or 85. Therefore, based on the above Section Notes absolutely there is no confusion as to the classification of the product. It also says that the machine refers to the machines classifiable under Chapter 84 or 85 so the question of classifying the product under Chapter 90 does not arise. The WCO also for which India is a member decided the classification of the 'frequency converter' under Chapter 8504." 1.50. F....
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.... 1.52. The above CESTAT order was subsequently affirmed by the Hon'ble Supreme Court vide order reported at 2003 (152) E.L.T. 35 (SC). 1.53. Reliance may also be placed on the decision of Hon'ble Tribunal in Bajaj Auto Ltd. vs. Commissioner of Customs, Final Order No. A/36/2005-WZB/C-I(C.S.T.B.) in Appeal No. C/1123/99- Bom, wherein the Tribunal rejected the submissions of the appellant that the goods were not merely inverters for reasons of having additional function to control motor speed and held the classification of the Inverters under question in CTSH 8504 40. 1.54. From the above-cited precedents, it is clear that static converters i.e. which convert DC into AC and vice-versa are covered under CTSH 8504 40. 1.55. As per the Applicant's understanding, an IAU is a static converter which switches DC voltage from the battery into AC voltage using semi-conductor-based FETs. Further, during regenerative braking, the IAU act as a rectifier for converting AC power from the motor back into DC power which is then used to recharge the battery present in the motor vehicle. Thus, the IAU correctly merit classification under CTSH 8504 40. 1.56. Reliance may be pla....
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....icant wishes to highlight a ruling that addressed the classification of similar goods. In Denso Haryana Pvt. Ltd., CAAR/Del/Denso/24/2024 dated 06.06.2024, the goods under consideration were 'Inverter Assembly', used to convert DC into AC from a battery or other source to power an electric motor of an EV. The subject goods could also convert AC into DC from generator for battery charging. In the case, CAAR, New Delhi ruled that the subject goods merit classification under CTSH 8504 40 and more specifically under CTI 8504 40 10 by application of GRI 3(a). The authority however held that CTI 8504 40 10 is a more specific entry for the subject good as compared to CTI 8504 40 90. 1.60. Therefore, the primary nature of the goods i.e., converting electrical energy into usable form, confirms their classification under CTSH 8504 40. At the eight-digit level the goods are classifiable under CTI 8504 40 90 as these are performing functions of both an inverter and a rectifier. However, alternatively CTI 8504 40 10 may also be considered in light of Denso (supra). Analysis of CTH 8708 / 8511 1.61. The Applicant also considers it relevant to discuss Chapter 87 of the First Sche....
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....menclature. The relevant HSN EN to Chapter XVII is reproduced below: "It should, however, be noted that these headings apply only to those parts or accessories which comply with all three ofthe following conditions : (a) They must not be excluded by the terms of Note 2 to this Section (see paragraph (A) below); and (b) They must be suitable for use solely or principally with the articles of Chapters 86 to 88 (see paragraph (B) below); and (c) They must not be more specifically included elsewhere in the Nomenclature (see paragraph (C) below). " 1.65. In view of the above, when the IAUs are correctly classifiable under Chapter 85, they will not be classifiable under Section XVII i.e. Chapter XVII. 1.66. Reliance is placed on the following precedents which have held that parts of machines which are goods / machines of Chapter 84 or 85 are classifiable in their respective headings and not under the heading of the machine to which it is a part of: * Secure Meters vs. Commissioner of Customs, New Delhi, 2015 (319) E.L.T. 565 (SC) * Collector of Central Excise vs. Delton Cables Ltd., 2005 (181) E.L.T. (SC); * Co....
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.... if classifiable under Chapter 87, will not be classified there if they are also covered as machinery or equipment within Chapter 85. 1.73. From the above, it is clear that all electrical machinery or equipment covered under Chapter 85 are not regarded as "parts and accessories" of motor vehicles classifiable under Chapter 87 and the same stand excluded from the ambit of Section XVII by virtue of Note 2(f) to Section XVII. Thus, the IAUs, which are electrical devices of Chapter 85 (i.e. CTH 8504) are excluded from the purview of Chapter 87 (i.e. 8708). Issues requiring Advance Ruling and Applicant's understanding. 1.74. In the light of the afore-mentioned submissions, the Applicant seeks to enter the following questions for Advance Ruling and its interpretation of the question is as below: (i) Whether the IAUs are correctly classifiable under CTI 8504 40 90 or 8504 40 10 or 8511 90 00 or 8708 99 00 of the First Schedule to the Customs Tariff Act, 1975? (ii) Whether the IAU imported from Japan and classified under CTI 8504 40 10 / 8504 40 90 is eligible for exemption under SI. No. 646 of Notification No. 69/2011? Applicant's Understanding: 1.75.....
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.... 8504 40 90 --- Other (c) Further the relevant Explanatory Note of CTH 8504 is as follows: (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 synchronisation with the frequency of the alternating current to be rectified. (b) Mercury-jet turbine rectifiers with a rotating jet of mercury, synchronised with the frequency of the alternating current, which strikes a fixed contact. (c) Vibrator rectifiers with a thin metal tongue, oscillating at the frequency of the alternating current, which touches a contact so placed that the current is drawn from the source. (4) Electrolytic rectifiers based on the principle that the combination of certain products used as electrodes in combination with certain liquids used as electrolytes will only allow current to flow in a single direction. Electrical static converters may be used for different purposes, e.g. (1) Converters to supply electricity to drive stationary machines or electric traction vehicl....
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.... (2) The fact that the importer has submitted a certificate of origin issued by an Issuing Authority shall not absolve the importer of the responsibility to exercise reasonable care. (3) Where the proper officer has reasons to believe that country of origin criteria has not been met, he may require the importer to furnish further information, consistent with the trade agreement, in such manner as may be provided by rules. (4) Where importer fails to provide the requisite information for any reason, the proper officer may, - (i) cause further verification consistent with the trade agreement in such manner as may be provided by rules; (ii) pending verification, temporarily suspend the preferential tariff treatment to such goods: PROVIDED that on the basis of the information furnished by the importer or the information available with him or on the relinquishment of the claim for preferential rate of duty by the importer, the Principal Commissioner of Customs or the Commissioner of Customs may, for reasons to be recorded in writing, disallow the claim for preferential rate of duty, without further verification. (5) Where the preferential....
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....ng Authority; (iv) the certificate of origin is produced after the period of its expiry. and in all such cases, the certificate of origin shall be marked as "INAPPLICABLE". (11) Where the verification under this section establishes non-compliance of the imported goods with the country of origin criteria, the proper officer may reject the preferential tariff treatment to the imports of identical goods from the same producer or exporter, unless sufficient information is furnished to show that identical goods meet the country of origin criteria. Explanation: For the purposes of this Chapter, - (a) "certificate of origin" means a certificate issued in accordance with a trade agreement certifying that the goods fulfill the country of origin criteria and other requirements specified in the said agreement; (b) "identical goods" means goods that are same in all respects with reference to the country of origin criteria under the trade agreement; (c) "Issuing Authority" means any authority designated for the purposes of issuing certificate of origin under a trade agreement; (d) "trade agreement" means an agreement for trade in go....
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....ms Act; Not Applicable No Comments to offer (v) Determination of Origin of goods in terms of the regulations notified under the Customs Tariff Act, 1975 and matters relating thereto. Not applicable. No Comments to offer. For the reasons, as mentioned above : (i) The Imported Goods i.e. Inverter Assembly units are specifically covered in CTH 8504 and since they have both functionality of Inversion and rectification, therefore Inverter Assembly units the imported goods merits Classification in CTI 8504 40 90. (ii) As Notification 69/2011-Customs dated 29.07.2011 read-with Notification 55/2011 dated 01.07.2011 has clearly laid down procedure for claim of preferential rate of duty wherein the applicability of Preferential rate is decided on case-to-case basis. So, there is no need of Advance Ruling in this matter require under Customs Notification no 69/2011 and 55/2011 read-with Section 28DA and CAROTAR 2020, which required to be verified in each case to case basis. Personal Hearing 3. The personal hearing in the instant application was conducted on 20.06.2025. During the course of personal hearing, the Authorised Representative reiterated the....
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....otor control algorithms, FET-based power modules with integrated heat sinks, a resolver assembly to detect rotor position, connectors for signal transmission, and a plastic casing that ensures environmental protection and structural support. 5.2 In addition to powering the MGU, the IAU is also responsible for regenerative braking and energy recovery. During vehicle deceleration, the IAU harnesses mechanical energy from the engine crankshaft to rotate the MGU's rotor, generating AC voltage in the stator coils. The IAU then switches to rectification mode, converting the generated AC voltage into DC voltage suitable for charging the vehicle's battery. This dual functionality motor drive and power generation allows the IAU to contribute significantly to improved fuel efficiency and reduced emissions by recovering otherwise lost energy. After importation, the IAU is assembled with other components of the MGU, such as the stator, rotor, resolver, and mounting brackets, to form the finished MGU, which is then integrated into the hybrid vehicle. In some cases, the IAU may also feature cyber security mechanisms in its as-imported form to safeguard the vehicle's electronic sys....
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....okes) 8504 50 90 -- Other 8504 90 - Parts: 8504 90 10 -- Of transformers 8504 90 90 -- Other 8511 ELECTRICAL IGNITION OR STARTING EQUIPMENT OF A KIND USED FOR SPARK-IGNITION OR COMPRESSION-IGNITION INTERNAL COMBUSTION ENGINES (FOR EXAMPLE, IGNITION MAGNETOS, MAGNETO-DYNAMOS, IGNITION COILS, SPARKING PLUGS AND GLOW PLUGS, STARTER MOTORS); GENERATORS (FOR EXAMPLE, DYNAMOS, ALTERNATORS) AND CUTOUTS OF A KIND USED IN CONJUNCTION WITH SUCH ENGINES 8511 10 00 - Sparking plugs 8511 20 - Ignition magnetos; magneto-dynamos; magnetic flywheels: 8511 20 10 -- Electronic ignition magnetos 8511 20 90 Other 8511 30 - Distributors; ignition coils: 8511 30 10 -- Distributors 8511 30 20 Ignition coils 8511 40 00 - Starter motors and dual purpose starter- generators 8511 50 00 - Other generators 8511 80 00 - Other equipment 8511 90 00 - Parts 8708 PARTS AND ACCESSORIES OF THE MOTOR VEHICLES OF HEADINGS 8701 TO 8705 8708 10 - Bumpers and parts thereof : 8708 10 10 -- For tractors 8708 10 90....
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....irect current converters by which direct current is converted to a different voltage. Electrical static converters may be divided into the following principal categories according to the type of converting element with which they are equipped: (1) Semiconductor converters based on the one-way conductivity between certain crystals. Such converters consist of a semiconductor as the converting element and various other devices (e.g., coolers, tape conductors, drives, regulators, control circuits). These include: (a) Monocrystalline semiconductor rectifiers using, as a converting element, a device containing silicon or germanium crystals (diode, thyristor, 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....
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.... for a range of electronic equipment. However, high-tension generators (or transformers) specifically designed for supplying radiological apparatus fall in heading 90.22. Automatic voltage regulators are classified in heading 90.32. 5.5 In the case on hand, it is observed that the product under consideration is an Inverter Assembly Unit (hereinafter referred to as "IAU"), proposed to be imported by the Applicant in an as-assembled state from Japan. As described in detail by the Applicant and supported by technical literature and illustrative schematics, the IAU is an electronic assembly that performs the dual function of converting Direct Current (DC) into Alternating Current (AC) (inverter function) and vice versa (rectifier function). The IAU forms an integral part of the Motor Generator Unit (MGU) in Mild Hybrid Electric Vehicles (MHEVs). It achieves this power conversion by utilizing semiconductor switching devices such as Field Effect Transistors (FETs) and is supported by a control board that implements motor control algorithms for regulated output. 5.6 It is observed that Note 2(a) to Section XVI covers "parts which are goods included in any of the headings of....
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....nd that reliance has been placed on the Advance Ruling in Denso Haryana Pvt. Ltd., CAAR/Del/Denso/24/2024 dated 06.06.2024, wherein a similar device was classified under CTI 8504 40 10 on the basis of its principal function as an inverter. 5.9 In light of these decisions and the HSN Explanatory Notes, it is evident that the IAU, being a multi- functional static converter capable of both inversion and rectification, is appropriately classifiable under heading 8504. At the 8-digit level, CTI 8504 40 90 is most appropriate considering its dual functionality. 5.10 I note that the Applicant has also raised the potential classification of the IAU under Chapter 87 (specifically CTH 8708) as a part of a motor vehicle or under CTH 8511 as a part of an MGU. However, I find that this contention does not hold when read in conjunction with Note 2(a) to Section XVI, which mandates that when a part is itself a good classifiable under Chapters 84 or 85, it shall be classified in its respective heading, even if it is a part of a larger machine. In addition, I find that Note 2(f) to Section XVII excludes electrical machinery or equipment of Chapter 85 from classification under Chapter 87. 5....
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....said Notification provides for complete exemption from Basic Customs Duty (BCD) on goods falling under CTH 8504, when imported from Japan, subject to fulfilment of origin requirements under the Customs Tariff (Determination of Origin of Goods under the Comprehensive Economic Partnership Agreement between the Republic of India and Japan) Rules, 2011 (hereinafter referred to as 'Japan CEPA Rules'). The relevant extract of the entry is reproduced herein below and copy of notification is enclosed. Chapter, Heading. S. No. Chapter, Heading, Sub- heading and Tariff item Description Rate in % (unless otherwise specified) 646 8504 40 All Goods. 0 5.14.2 In the case on hand, it is established that the subject goods, namely Inverter Assembly Units (IAUs), merit classification under CTI 8504 40 90, as discussed supra, which is a sub-heading covered under the scope of the Notification at SI. No. 646 and further, the Applicant has submitted that the IAUs are being imported directly from Japan and qualify as originating goods from Japan, thereby fulfilling the origin criteria laid down under the Japan CEPA Rules. 5.14.3 In this regard, reference is also invi....