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TMI Blog2023 (11) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... (ACBs), Low Voltage Products etc. They imported 'Frequency Converter' (variable speed drive) from M/s. ABB Finland vide 14 Bills of Entry from classifying them under Chapter Heading 9032 89 90. The original and the appellate authorities rejected the classification of the imported goods under Chapter Heading 9032 8990 as claimed by the Appellants and re-classified the same under Chapter Heading 8504 4010. Aggrieved by these orders, the appellant is in appeal. 3. On behalf of the appellant the counsel made the following submissions: a) The item imported Frequency converter/Variable-Frequency Drive (VFD) is a system for controlling the rotational speed of an AC electric motor by controlling the frequency of the electrical power supplied to the motor. The frequency converters are not mere electric convertors but also carry out the function of motor control and are widely used in industries to control the speed of motor automatically coupled with energy saving feature. b) The VFD senses the requirement of pressure through pressure transducer and vary the speed of the motor to keep pressure constant in the storage tank. During certain timings when the pressure requirement is low, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e only simple inverters which merely does the function of converting the Direct Current into Alternating Current. Referring to the technical literature as discussed above, it is submitted that the 'Frequency Converter' is not a mere inverter which converts the DC current into AC current, but regulates the frequency of the current into a variable speed and thereby controls the motor speed and torque thereby facilitating motion control. It is submitted that Note 1(m) of Section XVI to Customs Tariff specifically excludes goods which are classifiable under Chapter Heading 90 of the Customs Tariff Act, 1975 from being classified under Section XVI (which includes chapter 85). 4. The learned counsel, therefore, submits that the impugned goods are covered under Chapter 9032 by virtue of Note 1(m) to Section XVI since the goods get excluded from Section XVI itself. In this regard, reliance is placed on the Explanatory notes to Refer to HSN EN to 8504 which excludes 9032 provides that Automatic voltage regulators are to be classified under Heading 9032. Instead, it is rightly classifiable under Chapter Heading 9032 89 90 of the Customs Tariff Act, 1975 as chapter heading 9032 covers "Autom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity Biscuits Ltd., reported in 1994 (71) E.L.T. 1035 (Tribunal). 6. It is further submitted that the World Customs Organisation (WCO) ruling was specifically in relation to the frequency converter and the frequency converter which was considered by the WCO did not have the control functions and it is for this reason the goods were classified as inverters under 8504 while the impugned goods having control functions including programmable control functions are rightly classifiable under CTH 9032. They also claim that based on the decision in the case Commissioner of Central Excise and Customs v. M/s. Reliance Infrastructure Ltd. with Final Order No. A/30026/2022, the supplier's classification is not binding on the importer. It is further claimed that the Order-in-Original has been passed on grounds not set out in the show-cause notice. In the absence of specific charges set out in the demand notice, it is stated that the demand notice was vague and therefore, the Order-in-Original passed on the basis of the demand notice in question is clearly violative of the principles of natural justice. In this regard, the Appellant places reliance on the decision of the Supreme Court in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 504 40 Static converters: u 10% - 8504 40 10 --- Electric inverter ---Rectifier 9. The Learned counsel has stated that the show-cause notice is not a valid notice since no grounds were alleged in the notice for reclassification of the said product in question. The original authority vide Order-in-Original No. 286/2009 dated 13.10.2009 has clearly stated that a query was raised for manufacturer's catalogue in substantiation of the classification claimed by the appellant. It is also stated that on scrutiny of import documents and the invoice, it is found that the said goods have been described as 'frequency converter' and the Customs Tariff Heading indicated by the foreign supplier in the invoice is 8504. Based on these observations, a show-cause notice was issued classifying the 'frequency converters' under Chapter Heading 8504 and it is also noted that there is no reply to the show-cause notice though the personal hearing was attended by the appellant. The second show-cause notice dated 22.2.2010 was a recurring show-cause notice, therefore, no grounds were specified in that show-cause notice, hence, the claim by the appellant that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the converting elements act alternately as conductors and non-conductors. The fact that these apparatus 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: ..... (B) Invertors (C) Alterating 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." From the submissions of the learned counsel, the item in question the frequency converter has two components; one is the rectifier and other an inverter. The rectifier receives the AC voltage and converts it to direct current ('DC') voltage. A DC bus inside the VSD functions as a 'parking lot' for the DC voltage. The DC bus energizes the inverter, which converts it back to AC voltage again. The inverter can be controlled to produce an output frequency of the proper value for the desired motor shaft speed. When the capacity of the Drive increases, the drives ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 9032 applies only to: (a) instruments and apparatus for automatically controlling the flow, level, pressure or other variables of liquids or gases, or for automatically controlling temperature, whether or not their operation depends on an electrical phenomenon which varies according to the factor to be automatically controlled, which are designed to bring this factor to, and maintain it at, a desired value, stabilized against disturbances, by constantly or periodically measuring its actual value; and (b) automatic regulators of electrical quantities, and instruments or apparatus for automatically controlling non-electrical quantities the operation of which depends on an electrical phenomenon varying according to the factor to be controlled, which are designed to bring this factor to, and maintain it at, a desired value, stabilized against disturbances, by constantly or periodically measuring its actual value." 14. As rightly observed by the Commissioner (A) in the impugned orders, the products under Chapter 9032 refers to instruments and apparatus for automatically controlling the flow, level, pressure or other variables of liquids or gases, or for automatically controllin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cise Tariff Act, 1985 have been framed pursuant to the powers under Section 2 of that Act. According to Rule 1 titles of Sections and Chapters in the Schedule are provided for ease of reference only. But for legal purposes, classification "shall be determined according to the terms of the headings and any relevant section or Chapter Notes". If neither the heading nor the notes suffice to clarify the scope of a heading, then it must be construed according to the other following provisions contained in the Rules. Rule-I gives primacy to the Section and Chapter Notes along with terms of the headings. They should be first applied......". 17. Section XVI includes Machinery and Mechanical Appliances; Electrical Equipment; Parts Thereof; Sound Recorders and Reproducers, Television Image and Sound Recorders and Reproducers, and Parts and Accessories of Such Articles. The Section Notes reads as follows: 1. This Section does not cover : 2. Subject to Note 1 to this Section, Note 1 to Chapter 84 and to Note 1 to Chapter 85, parts of machines (not being parts of the articles of heading 8484, 8544, 8545, 8546 or 8547) are to be classified according to the following rules : (a) parts whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he First Schedule (which along with the Second Schedule specifies the rates at which duties of customs shall be levied under the Customs Act) provides: "The heading which provides the most specific description shall be preferred to headings providing a more general description..." 11. Further, Rule 3(b) of the same reads as follows: "Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to (a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable." (emphasis supplied). 12. In addition, Note 3 of Section XVI (which includes both Chapter 84 and Chapter 85) reads as follows: "Unless the context otherwise requires, composite machines consisting of two or more machines fitted together to form a whole and other machines designed for the purpose of performing two or more complementary or alternative functions are to be classified as if consisting only of that component or as being that machine which performs the- principal function." 20. This view of clas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction of the product, the Tribunal found classification under 8504 to be appropriate. 23. In the case of Pioma Chemicals v. Commissioner of Customs, Nhava Sheva-I: 2019 (370) ELT 301 (Tri-Mumbai) held that: "In our view all the published literature support the findings recorded by the Commissioner in the impugned order to the effect that the goods imported are nothing but re-esterified fat/oil. On going through the published literature referred above, and also the fact that as per the rulings relied from US Customs and Kenya Customs we do not find any error in the classification of the goods determined under Chapter 1516 20 91. It is true that the Rulings of the US Customs and Kenya Customs may not be binding but definitely have great persuasive value as the Classification Code followed by all these countries, are based on ,which the classification system adopted by Indian Customs is also aligned. It is only beyond six-digit level that local jurisdictions have their own expansions." 24. The Hon'ble Supreme Court of India in the case of Thermax Ltd. Versus Commissioner of Central Excise, Pune-I: 2022 (382) E.L.T. 442 (S.C.) dated on 13-10-2022 the Supreme Court held that: "6. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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