In re Valco India Private Limited (CAAR Mumbai)
The Customs Authority for Advance Rulings (CAAR), Mumbai examined the classification of an electric inverter used with the electric axle of electric vehicles and its various components/parts imported by the applicant. The issue raised in the CAAR application related solely to classification under the Customs Tariff Act, 1975 and was held to be admissible under section 28-I(2) of the Customs Act, 1962.
At the outset, the Authority reiterated that classification must be determined strictly in accordance with Rule 1 of the General Rules for Interpretation (GRI), read with the relevant Section Notes, Chapter Notes, and HSN Explanatory Notes, and that subsequent rules apply only if classification cannot be resolved under Rule 1.
Classification of the Inverter
The Authority first examined the classification of the electric inverter itself. Although the inverter is designed for use in electric vehicles, it was observed that Note 2(1) to Section XVII specifically excludes electrical machinery or equipment of Chapter 85 from being treated as parts or accessories of motor vehicles, even if identifiable for such use. Consequently, the inverter could not be classified under heading 8708 as a motor vehicle part.
Applying GRI Rule 1 and the exclusion under Section XVII, the Authority held that the inverter is squarely classifiable under heading 8504, which covers static converters, including inverters. More specifically, it was held classifiable under CTH 8504 40 10, being an electric inverter.
Classification of Parts of the Inverter
The Authority then examined the classification of individual components imported as parts of the inverter. For this purpose, Note 2 to Section XVI was applied, which prescribes a hierarchy for classification of machine parts. It was emphasized that once a part is classifiable under Note 2(a)—that is, if it is itself covered by a specific heading of Chapter 84 or 85—recourse to Notes 2(b) or 2(c) is not permitted.
Applying these principles, the Authority classified various parts as follows:
