Case Law Details
In re Denso Haryana Private Limited (CAAR Delhi)
The classification of the Inverter Assembly used in motor vehicles, imported by the applicant, centers on determining the appropriate Customs Tariff Heading (CTH) and assessing eligibility for concessional duty benefits. The applicant contends that the Inverter Assembly should be classified under CTH 8504, specifically sub-heading 8504 40 10. This classification hinges on several key points, beginning with the function of the Inverter Assembly, which converts AC to DC and vice versa, a characteristic of static converters (electrical inverters). According to the General Rules of Interpretation (GIR), classification primarily follows the terms of the headings and relevant section or chapter notes (GIR 1). CTH 8504 encompasses electrical transformers and static converters, supporting the applicant’s position. At the sub-heading level, the same rules apply (GIR 6), with 8504 40 specifically addressing “Electric Inverters.” When multiple headings describe the product, the most specific description prevails (GIR 3(a)). Here, the applicant argues that 8504 40 10 (“Electric Inverter”) is more precise than 8504 40 90 (“Other”).
The World Customs Organization (WCO) Explanatory Notes for CTH 8504 support this classification, noting that this heading covers inverters converting DC to AC. Section notes further bolster this claim. Note 2(a) of Section XVI stipulates that parts classified under Chapter 84 or 85 should remain within those chapters if they fit the descriptions. Given that the Inverter Assembly functions as an electrical converter, it logically falls under Chapter 85. This interpretation is reinforced by various case laws and rulings, such as US Cross Rulings (NY N306512 and NY G86580) and the Westinghouse judgment, all suggesting classification under Chapter 85. Consequently, the Inverter Assembly should be classified under CTH 8504 40 10 based on its function, explanatory notes, GIR principles, and supporting rulings.
Regarding eligibility for concessional duty benefits under Notification No. 57/2017-Cus and Notification No. 69/2011-Cus, the applicant qualifies under both. Notification No. 57/2017-Cus (Sl. No. 13) offers a concessional Basic Customs Duty (BCD) rate of 10% for all goods under CTH 8504 40, excluding chargers, power adapters, and solar inverters. Since the Inverter Assembly is neither a charger, power adapter, nor solar inverter, it benefits from the 10% BCD rate. Notification No. 69/2011-Cus exempts all goods under CTH 8504 from the entire BCD when imported from Japan, contingent on the goods meeting the Customs Tariff (Determination of Origin of Goods under the Comprehensive Economic Partnership Agreement between the Republic of India and Japan) Rules, 2011. If the Inverter Assembly is imported from Japan and complies with these origin criteria, it enjoys a 0% BCD under this notification. Thus, the applicant is entitled to concessional duty benefits under both notifications, assuming the goods originate from Japan and meet the specified origin rules.
The evaluation of classification and concessional duty applicability must consider the legal framework and existing rulings. Classification under the Customs Tariff adheres to the General Rules of Interpretation (GIR), section and chapter notes, and relevant explanatory notes. The principal function and specific nature of the goods are paramount in determining the correct classification. Existing rulings and instructions, such as the Supreme Court and CBIC instructions, underscore the importance of section and chapter notes. Post-Westinghouse judgment, CBIC instructions clarify that exclusions and specific provisions within the customs tariff are crucial. The application of GIR, particularly GIR 1 and GIR 6, ensures that headings and sub-headings’ terms are given precedence. GIR 3(a) resolves conflicts between general and specific descriptions by favoring the more specific description. Case references, including US Cross Rulings and the Westinghouse judgment, support the classification under Chapter 85, while CBIC’s instruction No. 01/2022-Customs reiterates the approach to exclusions and specific headings.
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