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TMI Blog2019 (8) TMI 943X X X X Extracts X X X X X X X X Extracts X X X X ..... e way, Electrical Static Converters operate on the principle that that the combination of certain products used as electrodes in combination with certain liquids used as electrolytes will only allow current to now in a single direction. In this case, we find that the Power Banks consists of not only the Lithium-ion Polymer battery but also the circuitry such as charge management system and 'voltage boost converter'. All the components. together make up the Power Bank. Admittedly, it is not the battery alone which makes up a Power Bank. The battery combined with the charge management system and the voltage boost convertor constitute the Power Bank. All three components work in tandem to perform the function of storing electrical energy and discharging it to the connected device when required. The mere fact that there is a converter in the Power Bank will not make it a Static Converter. It is emphasised that the primary difference between the Static Converter and the Accumulator is the fact of storage of electrical energy. It is not the function of converting the direct current from its input supply to its output device by either stepping up the voltage which characte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery used to store the electrical energy, which can be connected to a USB Port of a Computer or a Battery Charger i.e., adaptor. The Second component is the Circuitry, which is equipped with an Integrated Chipset that has the dual function of providing charge management and voltage boost control. The charge management system detects the type of charger being used to charge the Mi Power bank and adjust the charging current accordingly i.e. it converts the input voltage to 4.2V that is to be stored in the lithium ion polymer battery of power bank. The Voltage Booster Converter is a DC-to-DC power converter that steps up voltage from its input supply to its output i.e., load. It is a class of switched mode power supply (SMPS) containing at least two semiconductors (a diode and a transistor) and at least one energy storage element i.e., a Capacitor, Inductor or the two in combination. Filters made of Capacitors (sometimes in Combination with inductors) are added to the output and input to reduce voltage ripples. The said converter detects the device being charged by the Mi Power Bank and adjusts the current to ensure the optimum level of current voltage output, as per the load demand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e power bank and reduces the input of 9 voltage DC to a constant 4.2 Voltage DC as required for the battery and lithium-ion polymer batteries of the power bank is appropriately charged. Non-availability of the charge management system would damage the battery of the power bank. 6.1.2. Further, when mobile phone is connected to the power bank for charging the batteries of the mobile phone, the voltage boost convertor of the power bank detects the input load requirement of the mobile battery and supplies the same. Suppose the input requirement of battery of the mobile phone is 5/9/12 voltage DC, the voltage boost convertor of the power bank derives the power from the lithium ion polymer battery at 4.2 voltage and converts the electric power to 5/9/12 voltage DC and mobile phone batteries gets appropriately charged. In a case, where the voltage step down/step up is not effected by the voltage boost converter, the same could result in damage of the battery of the device being charged. 6.1.3 In View of the above, the appellant has submitted that the Charging Management System and the Voltage boost converter are not enhancing the function of the battery and are not in nature of anc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arging management system and voltage boost converter are direct current converter which are classified as of type static converter under clause (D) to the explanatory notes, These converters perform the function of stepping up and stepping down the voltage of the electric current as per the requirement of the battery of the power bank and device connected to it in order to ensure that device connected is appropriately charged. 6.2.4 Further, they have submitted that an accumulator cannot itself Charge another battery unless another charger is connected to it i.e. a static convener. As per the Section Note. 4 to the Section XVI of Part II of the import tariff, the principal function of the power bank is to appropriately charge the device connected to it, which is performed by charging management system and voltage boost converter in the power bank. The said components are in nature of the static converter in the light of the explanatory notes to the Harmonized Commodity Description and Coding System. 6.2.5. Further, they have relied on the Judgment of Hon'ble CESTAT, Delhi bench in the case of C.E.G.S.T-Delhi vs SB Industries (Final order No 50039/2019 dt 14.01.2019), = ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the above technical research report before concluding the Power Bank as an electrical accumulator. 6.2.8. Further, they have drawn attention towards the Rule 3(b) of the General Rules of Interpretation of Import Tariff, which has been reproduced below: 3. When by application of Rule 2(b) or for any other reason, goods are prima facie, Classifiable under two or more headings, classification shall be affected as follows: (a) The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more heading each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those heading are to be regarded as equally specific in relation to those goods, even if one them gives a more complete or precise description of the goods. (b) Mixtures, composite goods consisting 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er is not available, similar to Power Bank, where also the stored energy in battery is transmitted to the end device as per the load the requirement of device. The only difference between Power Bank and UPS is that for output, Power Bank has a voltage boost converter module while UPS has a power inverter module. Inverter module is an electronic device or circuitry that changes direct current (DC) to alternating current (AC). Therefore, they submitted that, Power Bank is akin to a UPS and it is settled that the UPS is classifiable under the Customs Tariff heading 8504. 6.3.3 Further, they relied on the ruling by the Supreme Court upholding the decision of the CESTAT in the case of Luminous Electronics Private Limited {2001 (129) ELT 605 (Tri-L.B) = 2001 (3) TMI 131 - CEGAT, NEW DELHI classifying the UPS under heading 8504. They submitted that, the question before the bench was whether UPS is classifiable under the HSN 8504 vis-a-vis 8543. In this regard, the Hon'ble bench of CEGAT, New Delhi held that UPS is covered by the wording of 'static converter' as understood in HSN and hence classifiable under the heading 8504, which was upheld by the Supreme Court. Furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he device connected to it. Further. they submitted that the electrical connectors referred in the explanatory notes are in nature of the wiring connecters and not in the nature of the static converter. 6.5. The learned authority has erred in holding that their view is supported by Notification No.24/2018-Central Tax (Rate) dated 31.12.2018, effective from 01.01.2019, which classified the 'Power Bank' under the heading 8507 vide Sl.No.376AAA covering lithium-ion accumulators (other than battery) including lithium-ion power bank.' In this regard, they have submitted that the mere insertion of the entry in the notification would not be conclusive to determine the classification of a product. The classification of the product must be made in the light of the tariff entries read along with rules for the interpretation of the Customs Tariff Act, 1975. 6.6 In view of the aforesaid, the appellant prayed that the impugned order be modified and the Power Bank be classified under HSN 8504 4090 as Static Converter. PERSONAL HEARING: - 7. The Appellants were called for a personal hearing on 15.04.2019 and were represented by Shri. K Sivarajan, Chartered Accountant. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8504 40 29 ---- Others 8504 40 30 --- Battery chargers 8504 40 40 --- Voltage regulator and stabilizers (other than automatic) 8504 40 90 ---Other 8507 ELECTRIC ACCUMULATORS, INCLUDING SEPARATORS THEREFOR, WHETHER OR NOT RECTANGULAR (INCLUDING SQUARE) 8507 10 00 - Lead-acid, of a kind used for starting piston engines 8507 20 00 -Other lead-acid accumulators 8507 30 00 - Nickel-cadmium 8507 40 00 - Nickel-iron 8507 50 00 - Nickel-metal hydride 8507 60 00 - Lithium-ion 8507 80 00 - Other accumulators 850790 0 - Parts 10.1. The nomenclature of goods described in the Customs Tariff Act is based on the Harmonized System of Nomenclature (HSN) developed by the World Customs Organization. The HSN notes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... They are equipped with auxiliary devices, e.g., for priming, charging, cooling, and sometimes to maintain the vacuum. There are two categories of gas discharge rectifiers identifiable according to the mechanism of the primer, viz., excitrons (with charging anodes) and ignitrons (with igniters). (b) Thermo-ionic rectifiers with incandescent cathodes. Their converting element (e.g., a thyratron) is similar to that of mercury arc rectifiers except that it contains an incandescent cathode in place of the mercury cathode. (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 synchronization with the frequency of the alternating current to be rectified. (b) Mercury-jet turbine rectifiers with a rotating jet of mercury, synchronized with the frequency of the alternating current, which strikes a fixed contact. (c) Vibrator rectifiers with a thin metal tongue, ascillating at the frequency of the alternating current, which touches a contact so placed that the current is drawn from the source. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umulators may also be assembled in a larger container. Accumulators may be of the wet or dry cell type. The main types of accumulators are: (1) Lead-acid accumulators, in which the electrolyte is sulphuric acid and the electrodes lead plates or lead grids supporting active material. (2) Alkaline accumulators, in which the electrolyte is usually potassium, or lithium hydroxide or thionyl chloride and the electrodes are, for example: (i) Positive electrodes of nickel compounds and negative electrodes of iron, cadium or metal hydride; (ii) Positive electrodes lithiated cobalt oxide and negative electrodes of a blend of graphite; (iii) Positive electrodes of carbon and negative electrodes of metallic lithium or lithium alloy; (iv) Positive electrodes of silver oxide and negative electrodes of zinc. Th electrodes may consist of simple plates, grids, rods, etc. or of grids or tubes covered or filled with a special paste the active material. Alkaline accumulators may be of a specific size and shape, so designed to fit the device for which they are the source of electricity. They may be within water proof containers. Many alkaline accumulat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l energy from an outside source can be applied to the chemical system, and reverse its operation, restoring the battery's charge. 11.3 The storage capacity of the lithium-ion battery used in a Power Bank varies and this determines the charging capacity of the Power Bank. The more mAh a power bank has, the larger the energy stored which means more recharges for your device. For eg. A Power Bank with a capacity of 10000mAh can charge a 2000mAh smartphone roughly around 3-4 times. Power banks are encased in a housing and feature a power button, USB ports and four LED indicator lights that indicate the lithium battery's charge levels. Included with each power bank is a USB cable. Power Banks use sophisticated electronic circuitry to manage being charged, and then charging other devices. 11.4 In order to ensure that the amount of charge in the battery is known so that they do not become overcharged, to ensure that they are charged at the right rate, and also to manage the charging of the portable devices, specifically designed integrated circuits and modules are built into the Power Bank to provide all the intelligence required. Over Voltage Protection, Over Charge Protect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;s decision in the case of M/s. S.B Industries (2019-VIL-37-CESTAT-DEL-CE) to buttress their case that the battery in the power bank in itself cannot act as a charger; that there should be another charger connected to it to appropriately charge the device, which are in the nature of static converter. We have gone through the said case law in detail. We find that the point being determined by the Tribunal in the said case was regarding the eligibility to exemption Notification No 12/2012 Customs. The appellant in that case was a manufacturer of power bank and claimed the benefit of Customs Notification No. 12/2012 Cus on the imports of parts for the manufacture of the power bank. The said Notification exempts parts or Components as classifiable under any chapter for manufacture of battery charger of a mobile handset . The Revenue denied the benefit of the said exemption to the appellant on the grounds that the power bank manufactured by them was an accumulator and not a battery charger. The Tribunal while examining that case was only determining whether the power bank was a battery charger or not. At no point did the Tribunal in the said case determine the classification of the pow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arger Bench in the case of M/s Luminous Electronics Ltd is of no persuasive value in the matter before us. Further, even applying the trade parlance theory / common parlance theory, the two products i.e. UPS and Power bank are dissimilar in their functions. While the primary use of a Power Bank is to charge the batteries of a mobile phone/laptop/tablet, the function of a UPS is to provide a range of electronic equipment with stable alternating current in the case of failure or serious disruption of the main electricity supply. When a consumer wants to buy a portable mobile charging device, which he can use without looking for a power source, he would look for a Power Bank and not a UPS because it performs a specific function for him. On the other hand when a consumer desires to have an uninterrupted supply of regulated power to his electrical equipment even during brownouts and blackouts, he would opt for a UPS and not a Power Bank. The dictum laid down by the Supreme Court in Atul Glass Industries Ltd reported in 1986 (25) ELT 473 (SC), = 1986 (7) TMI 90 - SUPREME COURT that the common parlance theory is a test commonly applied to decide classification disputes is to be appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rk in tandem to perform the function of storing electrical energy and discharging it to the connected device when required. The mere fact that there is a converter in the Power Bank will not take make it a Static Converter. It is emphasised that the primary difference between the Static Converter and the Accumulator is the fact of storage of electrical energy. It is not the function of converting the direct current from its input supply to its output device by either stepping up the voltage which characterises an accumulator. Accumulation of electrical energy and the conversion of electrical energy from DC to DC that Step up the voltage from its input supply to its output load together characterise the function of a Power Bank. The critical aspect of storage of electrical energy is what distinguishes an accumulator from a static converter. In view of the aforesaid, we hold that the Power Bank traded by the Appellant is classifiable as an accumulator under Chapter heading 85.07. 19. Our view as detailed above is reinforced by the recent changes in the GST rates for goods under Chapter 85.07. With the onset of GST, Notification No 01/2017 IT (R) dt 28.06.2017 prescribed a GST rate ..... X X X X Extracts X X X X X X X X Extracts X X X X
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