2001 (12) TMI 437 - Commissioner - Central Excise

Summary

Issues: Classification of AC Variable Drive under Central Excise Tariff Act, 1985

Analysis:

1. Classification Issue: The appeal was filed against the order classifying the product variable frequency A.C. Drive under Chapter 85.43 of the Central Excise Tariff Act, 1985, with a recovery order of Rs. 81,97,868 under Section 11A of the Central Excise Act, 1944. The appellants contended that the product should be classified under Chapter 85.04 based on trade and commercial parlance.

2. Show Cause Notices: Eight show cause notices were issued to reclassify the product under Chapter 85.43 from 1-9-96 onwards, citing decisions of CEGAT and seeking recovery of short-paid duty and interest under Section 11AA of the Central Excise Act, 1944.

3. Appellants' Arguments: The appellants argued that the product should be classified under Chapter 85.04 as a static converter, relying on judgments like Commr. v. Siemens Ltd. and emphasizing the principle function of converting electricity. They highlighted the absence of a battery backup, distinguishing their product from an Uninterruptible Power Supply System (UPSS).

4. Functionality of AC Variable Drive: The AC Variable Drive was described as converting AC power to DC and vice versa, altering frequency and voltage to regulate motor speed. The appellants emphasized the conversion aspect as the principal function, supported by case law like Luminous Electronics Pvt. Ltd. v. CCE.

5. Tribunal's Decision: The Original Authority classified the product under Heading No. 8543.00 as a machine with individual functions, disregarding the Tribunal's decision in Siemens Ltd. case. The Tribunal's binding decision classified the AC Drive system as a static converter under Heading No. 8504.00, settling the classification issue.

6. Judgment: The Commissioner directed the classification of the AC Drive system under Heading 8504.00, setting aside the impugned order and allowing the appeal in light of the Tribunal's decision. The Commissioner emphasized the binding nature of Tribunal decisions on subordinate authorities, reiterating the settled classification of the product as a static converter.

This detailed analysis covers the classification issue, show cause notices, appellants' arguments, functionality of the AC Variable Drive, Tribunal's decision, and the final judgment directing the reclassification under the appropriate heading based on established case law.