2023 (11) TMI 20 - AT - Customs

Classification of imported goods - Frequency Converter (variable speed drive) - to be classified under Chapter Heading 9032 89 90 or under Chapter Heading 8504 4010? - HELD THAT - 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 controlling temperature, while the product under dispute undisputedly converts alternating current to different frequency which are entirely different from an automatic regulator. Therefore, the question of classifying the Frequency converter imported by the appellant under 9032 is ruled out. As per the literature of the imported item, essential character is that of inverter and hence, they are rightly classifiable under specific entry under Chapter 8504 as per the Interpretative Rules specified above. Moreover, they are more akin to the description given under Chapter 8504 and as per Clause (4) above of General Rules for the Interpretation of Import Tariff they are to be classified under Chapter Heading 8504 only - 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. The goods are rightly classifiable under Chapter Heading 8504 as against the classification under Chapter Heading 9032 as claimed by the appellant - appeal dismissed.

Summary

Issues Involved:
1. Validity of the show-cause notice.
2. Classification of the imported goods "Frequency Converter (Variable Speed Drive)" under the appropriate Chapter Heading of the Customs Tariff Act, 1975.

Summary:

1. Validity of the Show-Cause Notice:
The appellant argued that the show-cause notice was invalid as it did not specify grounds for reclassification. However, the Tribunal found this claim baseless since the grounds were mentioned in the first show-cause notice dated 13.10.2009. The second notice was a recurring one, reiterating the grounds already specified.

2. Classification of Imported Goods:
The primary issue was whether "Frequency Converter (Variable Speed Drive)" should be classified under Chapter Heading 9032 89 90 or 8504 40 10 of the Customs Tariff Act, 1975.

- Appellant's Argument:
- The frequency converter is not a mere inverter but also performs motor control, regulating the frequency and speed of the motor, thus should be classified under Chapter Heading 9032 89 90, which covers "Automatic Regulating or Controlling Instruments and Apparatus."
- Reliance was placed on Note 1(m) of Section XVI and various judicial precedents, including the CBEC Circular No. 45/95-Cus and the case of CC, Chennai Vs Kone Elevator India Ltd.

- Revenue's Argument:
- The frequency converter falls under Chapter Heading 8504, which covers "Electrical transformers, static converters (for example, rectifier) and inductors."
- The product is classified as a static converter by the World Customs Organization (WCO) and other customs houses.
- The primary function of the frequency converter is to convert electrical energy, aligning with the description under Chapter Heading 8504.

Tribunal's Findings:
- The Tribunal examined the technical literature and HSN Explanatory Notes, concluding that the primary function of the frequency converter is as an inverter, converting AC to DC and vice versa.
- Chapter 85 includes all machinery related to electrical transformers and static converters, while Chapter 90 pertains to optical, photographic, measuring, and medical instruments.
- The Tribunal emphasized the "General Rules for the Interpretation of Import Tariff," which prioritize specific descriptions over general ones and classify goods based on their essential character.
- The product's essential character as an inverter aligns it with Chapter Heading 8504, not 9032.
- The Tribunal also cited various judicial precedents supporting the classification under Chapter 85, including the cases of Larsen & Toubro Ltd. and Pioma Chemicals.

Conclusion:
The Tribunal upheld the classification of the imported goods under Chapter Heading 8504 40 10, dismissing the appeals. The classification was based on the product's primary function, relevant Section and Chapter Notes, HSN Explanatory Notes, and the WCO decision. The appeals were dismissed, and the goods were rightly classifiable under Chapter Heading 8504.