1999 (12) TMI 89 - AT - Central Excise

Summary

Issues Involved:
1. Classification of Uninterrupted Power Supply (UPS) under Heading No. 85.04 or 85.43 of Chapter 85 of the Central Excise Tariff Act (CETA).

Detailed Analysis:

1. Conflicting Judgments:
The necessity for this reference arose due to conflicting judgments from different Benches of the Tribunal on the classification of UPS. In the case of J.K. Synthetics Ltd. v. CCE, Jaipur, the Tribunal classified UPS under Heading 85.43, whereas in Mangalore Chemicals & Fertilizers Co. Ltd., the Tribunal classified UPS as a static converter under Heading 85.04. Another case, CCE v. M/s. Eppelectone Engineers, also classified UPS under Heading 85.04.

2. Contentions of the Parties:
The counsel for the assessees argued that UPS is similar in composition and function to a static converter and should be classified under Heading 85.04. They supported their contention with various documents, including Circular No. 40/90 of the Board, HSN Classification opinions, ITC HS Code, Customs Notification No. 57/95, and HSN Explanatory Notes. Conversely, the learned JDR contended that UPS is distinct in composition and function from a static converter and should be classified under Heading 85.43.

3. Definitions and Functions:
The judgment elaborated on the definitions, types, composition, and functions of both static converters and UPS. A static converter converts AC to DC power without any moving parts and is used to supply DC power to appliances. UPS, on the other hand, ensures total continuity of AC power even in the absence of mains power, with components like rectifiers, inverters, transfer switches, and battery banks.

4. Points of Similarity and Dissimilarity:
The judgment identified points of similarity, such as both having transformers and rectifier units. However, the points of dissimilarity were more significant:
- Static converters convert AC to DC, while UPS supplies uninterrupted AC power.
- UPS includes a battery bank and inverter unit, which are not part of a static converter.
- UPS has a transfer switch to connect AC mains directly to the load, unlike static converters.
- The components of a static converter form only one functional block of a UPS.

5. Evaluation of Supporting Documents:
The judgment evaluated the documents referred by the counsel and found them unconvincing. Circular No. 40/90 was withdrawn by Circular No. 25/96-Cus, and the ITC (HS) classification was for export and import duties, not relevant for Central Excise Tariff classification. Customs Notification No. 59/95-Cus was also found irrelevant as it pertained to Customs duty. HSN Explanatory Notes did not specify UPS under Heading 85.04, and the judgment emphasized that these notes could not override CETA provisions.

6. Judicial Precedents:
The judgment referred to the Delhi High Court's observations in Manisha Pharma Plasto Pvt. Ltd. and Supreme Court rulings in Sahney Paris Rohne Ltd. v. CCE and Paharpur Cooling Towers Pvt. Ltd. v. CCE. These cases highlighted the importance of specific classification based on the function and composition of the apparatus.

Conclusion:
The judgment concluded that UPS and static converters are distinct apparatus with different components and functions. UPS, designed to provide uninterrupted power supply to sophisticated equipment, cannot be classified under Heading 85.04 as a static converter. Instead, it falls under the residuary Heading 85.43, which pertains to electrical machines and apparatus with individual functions not specified elsewhere in the chapter. The view taken in J.K. Synthetics Ltd. was upheld, and the contrary views in CCE v. M/s. Eppelectone Engineers and Mangalore Chemicals & Fertilizers Co. Ltd. were overruled. The reference was answered accordingly, and the appeals were to be disposed of by the concerned Bench.