Diffused Silicon Wafer cannot be classified as Solar Cell: CESTAT

CETC Renewable Energy Technology (India) Private Limited Vs Commissioner of Customs (CESTAT Chennai)

CESTAT Chennai held that ‘Diffused Silicon Wafer’ doesn’t have capacity to perform the essential function of a Solar Cell and hence it cannot be classified under specific heading of Solar Cell i.e., CTH 8541 4011. However, ‘Diffused Silicon Wafer’ can be classified under CTH 8541 9000 as parts of semi-conductor device.

Facts- The appellant is a private limited company engaged in manufacture of Solar Cells. The appellant has been importing various capital goods from overseas, to be used in the manufacture of Solar Cells, from Diffused / Undiffused Silicon Wafers / Blue Wafers. Diffused / Undiffused Silicon Wafer / Blue Wafer is claimed to be the basic input / raw material required for the manufacture of Solar Cells.

DRI initiated verification process of the imports made by the appellant on the pretext that the imported items were Solar Cells which were classifiable under Customs Tariff Item No. 8541 4011. DRI assumed that the above import warranted imposition of safeguard duty in terms of Notification No. 01/2018-Customs (SG) dated 30.07.2018 which was applicable for the imports of Diffused Silicon Wafers / Blue Wafers since the DRI entertained a belief that the imported items were nothing but Solar Cells.

Thereafter, the commissioner also rejected the declared classification of goods and ordered reclassification. Further, commissioner confirmed the demand of applicable safeguard duty on the imported goods. Being aggrieved, the present appeal is filed.

Conclusion- The imported Diffused Silicon Wafer as such has no capacity to perform the essential function of a Solar Cell. Therefore, the imported item is not classifiable under the specific heading of Solar Cell, i.e., CTH 8541 4011. Also, at the time of import, it has not attained the status of a finished semi-conductor device. It is also noteworthy here that CTH 8541 9000 deals with Parts of Semi-conductor devices. As per the scheme of arrangement of various Headings and Sub-Headings of CTH 8541, it is found that CTH 8541 deals with finished goods and also parts of semi­conductor devices and covered under CTH 8541 90. There is no specific entry for an incomplete or an intermediate product. Though in a conventional sense, the imported Diffused Silicon Wafer is not a part of Solar Cell, for the purpose of classification, it has to be dealt as a product other than a finished Solar Cell. The imported item cannot be equated with a finished Solar Cell. A Solar Cell is manufactured from diffused Silicon Wafer and hence, the imported item is only a raw material or a base material or can be considered as a part or intermediate product for manufacture of Solar Cell. Considering the arrangement of Tariff, intermediate / semi-finished product is equated as parts of semi-conductor devices and thus, the contention of the appellant that the same is classifiable under CTH 8541 9000 is acceptable.

Held that the product imported was clearly different and distinct from the Product Under Consideration and therefore, the same did not attract safeguard duty. Hence, the demand of safeguard duty as confirmed in the impugned order and the reclassification of the product imported is unsustainable, for which reason the impugned order is set aside.

FULL TEXT OF THE CESTAT CHENNAI ORDER

This appeal is filed against the Order-in-Original No. 100362/2022 dated 09.12.2022 passed by the Commissioner of Customs, Chennai-II (Import), wherein the adjudicating authority has confirmed the demand, as proposed under Section 28(8) along with applicable interest under Section 28AA of the Customs Act, 1962. He has also inter alia rejected the classification of the declared goods imported by the appellant, ordered confiscation of goods seized, apart from imposing penalty under Section 112(a) ibid.

2.1.1 Brief facts, as could be gathered from the impugned order and the Show Cause Notice, are that the appellant is a private limited company incorporated in 2017 having set up a factory at Sri City, Andhra Pradesh for manufacture of Solar Cells. The appellant is shown to have been importing various capital goods from overseas, to be used in the manufacture of Solar Cells, from Diffused / Undiffused Silicon Wafers / Blue Wafers. Diffused / Undiffused Silicon Wafer / Blue Wafer is claimed to be the basic input / raw material required for the manufacture of Solar Cells and therefore, it appears that after installing the capital goods, the appellant regularly imported Blue Wafers / Silicon Wafers from China, which were cleared through Custom House, Sea Port, Chennai and also Air Cargo Complex, Chennai.

2.1.2 It appears that at the time of import, the appellant sought for classification of the imported goods under CTH 3818 and paid applicable Basic Customs Duty (BCD) at the above places of import.

2.1.3 It appears that in 2019, the Directorate of Revenue Intelligence (DRI) initiated verification process of the imports made by the appellant on the pretext that the imported items were Solar Cells which were classifiable under Customs Tariff Item No. 8541 4011. Based on the above, it appears that the DRI assumed that the above import warranted imposition of safeguard duty in terms of Notification No. 01/2018-Customs (SG) dated 30.07.2018 which was applicable for the imports of Diffused Silicon Wafers / Blue Wafers since the DRI entertained a belief that the imported items were nothing but Solar Cells. During its verification / investigation, it appears that samples were drawn and statements were also recorded, in terms of Section 108 of the Customs Act, 1962, from various personnel of the appellant-company.

2.2 It appears that in accordance with the Pre-Notice Consultation process, the DRI, Chennai issued a Pre- Consultative Notice dated 11.11.2020 wherein it was inter alia proposed to reclassify the imported item under CTH 8541 apart from proposing to levy safeguard duty in terms of Notification No. 01/2018 ibid.

2.3 It appears that the appellant filed a detailed reply dated 02.12.2020 and thereafter, also appears to have participated in the personal hearing granted on 11.12.2020.

SHOW-CAUSE NOTICE

2.4 It appears that the DRI, not satisfied with the explanation offered by the appellant, issued a Show Cause Notice dated 08.01.2021, which was answerable to the Commissioner of Customs, Air Cargo Complex, Chennai and the Commissioner of Customs (Import), Custom House, Chennai. In the Show Cause Notice, it was inter alia proposed as under: –

i. Re-classification of the goods imported in bills-of-entry mentioned at column 17 of the Worksheet-I under 85414011 as mentioned in column 23 of Worksheet-I;

ii. The imported product to be held as solar cells not assembled into panels or modules.

iii. Imposition of safeguard duty of Rs.22,13,62,755/-in terms of Notification No. 01/2018-SG as mentioned in column 24 of the Worksheet-I;

iv. To confiscate the goods seized vide seizure memorandum dated 18.04.2020 as mentioned in column 26 of the Worksheet-I under Section 111(m) of the Customs Act, 1962;

v. Enforcement of bank guarantee executed for the bills of entry;

vi. To hold the imported goods, which were not available for seizure as mentioned in column 26 of the Worksheet-I, liable for confiscation under Section 111(m) of the Customs Act, 1962;

vii. Imposition of penalty under Section 112 ibid.

A further proposal was also made to: –

i. Re-classification of the goods imported in bills-of-entry mentioned at column 17 of the Worksheet-II under 85414011 as mentioned in column 23 of Worksheet-II;

ii. The imported product to be held as solar cells not assembled into panels or modules.

iii. Imposition of safeguard duty of Rs.20,30,36,749/-in terms of Notification No. 01/2018-SG as mentioned in column 24 of the Worksheet-II;

iv. To confiscate the goods seized vide seizure memorandum dated 18.04.2020 as mentioned in column 26 of the Worksheet-II I under Section 111(m) of the Customs Act, 1962;

v. Enforcement of bank guarantee executed for the bills of entry;

vi. To hold the imported goods, which were not available for seizure as mentioned in column 26 of Worksheet-II, liable for confiscation under Section 111(m) of the Customs Act, 1962;

vii. Imposition of penalty under Section 112 ibid.

2.5It appears that Notification No. 19/2021-Customs (N.T./CAA/DRI) dated 22.02.2021 was issued whereby a common adjudicating authority was appointed, namely, the Commissioner of Customs, Custom House, Sea Port, Chennai, before whom the appellant filed its detailed reply dated 19.03.2021 to the Show Cause Notice issued.

2.6 Thereafter, it appears that a personal hearing was given on 09.11.2022 wherein the appellant appears to have participated.

3. It appears that the Ministry of Finance through the DGFT, in terms of Section 8B of the Customs Tarff Act, 1975, issued a “Notice of Initiation of Safeguard Investigation” dated 19.12.2017 concerning imports of Solar Cells whether or not assembled in modules or panels into India and the same are referred to as ‘Product Under Consideration’ (PUC). The same, apparently, was to protect the domestic producers of like and directly competitive articles (to the PUC) from serious injury / threat of serious injury caused by such increased imports. The said initiation of investigation appears to be based on an application dated 28.11.2017 filed under Rule 5 of the Customs Tariff (Identification and Assessment of Safeguard Duty) Rules, 1997 by the Indian Solar Manufacturer’s Association (ISMA) on behalf of five Indian producers namely, (i) M/s. Mundra Solar PV Limited, Gujarat; (ii) M/s. Indosolar Limited, Uttar Pradesh; (iii) M/s. Jupiter Solar Power Limited, Himachal Pradesh; (iv) M/s. Websol Energy Systems Limited, West Bengal; and (v) M/s. Helios Photo Voltaic Limited, New Delhi. It appears that the said applicant had sought for imposition of safeguard duty on imports of PUC into India by claiming that on account of the surge in imports of the PUC, many domestic producers have kept their production facilities almost idle and that heavy losses had crippled the domestic industry. Thus, safeguard duty was sought to be levied as a measure to mitigate their injury.

REPLY TO SCN

4.1 It appears that the appellant filed a detailed reply vide letter dated 19.03.2021, the summary of their submissions have been reproduced by the adjudicating authority at paragraph 84 / page 50 of the impugned order.

For convenience, the gist of the submissions are reproduced hereinbelow: –

• The Blue Wafer has not the element of collecting and conducting electricity and hence, has not attained the status of finished product.
• The technical standards as codified under IEC 60904 and IS: 12834 specifically state that the screen printing and sintering / firing are essential processes for manufacturing of Solar Cells and the imported item has not gone through the said processes.
• The determination of classification of item and levy of duty based upon notification are two different independent processes and a strict interpretative process has to be adopted so as to find out the real meaning of the Product Under Consideration.
• Report of DG, Safeguards states that imposition of safeguard duty would protect the domestic industry and their company also made substantial investment in India and generated employment.
• The imported item i.e., Blue Wafer is processed further wherein various high grade metal pastes such as Silver and Aluminium Pastes are used for creation of fingers (horizontal metallic lines) and busbars (vertical metallic lines). This process is called screen printing.
• The busbars are the backbone of most power applications, providing the critical interfaces between the power modules and the outside world. Busbars wire Solar Cells together to create high voltage; as more busbars are added, the idea is that more electrons are able to pass through and power efficiency increases.
• After screen printing, sintering process, also called as ‘firing process’, is carried out in which the front metal contacts are formed in a Silicon Solar Cell. In this process, the Thick Film Paste is dried at about 150° C to remove much of solvents to avoid cracks and voids. The above two processes result in value addition up to 50%.

• The imported item was not accepted for testing by MNRE as they do not test intermediate products.
• The imported item i.e, Blue Wafer or Diffused Wafer, has to go through intricate and technical processes to reach the stage of semi-conductor devices and hence, is a component for manufacture of semi­conductor device.
• The technical reports mentioned in the Show Cause Notice also refer to the process of screen printing and the process is yet to be performed on the imported items. Hence, the goods cannot be termed as ‘finished Solar Cells’ but are semi-finished or intermediate goods.
• No clarification was sought from TRU, as recommended by the DGTR, regarding the applicability of safeguard duty on the imported items.

4.2 They appear to have relied on the following judgements / orders: –

i. Keltron Power Devices Ltd. v. Collector of Customs, Cochin [1987 (28) E.L.T. 93 (Tri. – Del.)]

ii. Semi-Conductors Ltd. v. Collector of Customs [1989 (42) E.L.T. 236 (Tri. – Del.)]

iii. Bharat Heavy Electricals Ltd. v. Collector of Customs, Bombay [2002 (149) E.L.T. 79 (Tri. – Del.)]

iv. In Re: Purbachal International and Another [1985 (21) E.L.T. 673 (Cal.)]

v. Collector of Central Excise v. Jayant Oil Mills Pvt. Ltd. [1989 (040) E.L.T. 0287 (S.C.)]

vi. Collector of Central Excise, New Delhi v. United Felt & Carpet [1999 (111) E.L.T. 807 (Tri. – Del.)]

vii. Kesarwani Zarda Bhandar v. State of U.P. [2008 (227) E.L.T. 337 (S.C.)]

viii. Samay Electronics v. Collector of Customs, Bombay [2009 (235) E.L.T. 284 (Tri. – Mum.)]

ix. Philips India Ltd. v. Commissioner of Customs, Mumbai [2004 (166) E.L.T. 49 (Tri. – Mum.)]

x. In Re: Permalite Electricals (P) Ltd. [2004 (168) E.L.T. 164 (A.A.R.)]

xi. Plaza Lamps and Tubes Ltd. v. Commissioner of Customs [2007 (209) E.L.T. 182 (Del.)]

xii. Anchor Daewoo Industries Ltd. v. Commissioner of Customs, Kandla [2007 (214) E.L.T. 230 (Tri. – Ahmd.)]

ADJUDICATION/FINDINGS OF ADJUDICATING AUTHORITY

5.1 The adjudicating authority, in the adjudication proceedings, has considered all the replies filed by the appellant, has also referred to a report by IIT, Madras dated 15.10.2020, wherein it has been apparently reported that the “sample of Blue Silicon wafer exhibited photovoltaic effect and was able to directly convert sunlight into electrical energy / electricity at the atomic level”, and thereafter, has concluded as under: –

(i)The classification of the imported goods in India is governed by the General Rules of Interpretation (GRI) and the Harmonized System of Nomenclature (HSN).

(ii) CTH 3818 covers such crystals, polished or not, whether or not root coated with a uniform epitaxial layer.

(iii) Those more extensively worked devices (e.g., by selective diffusion) fall in heading 85.41 as semiconductor.

(iv) Undiffused Silicon Wafer is covered under Customs Tariff Item 38180010. Doped chemical elements of Chapter 28 and chemical compounds containing additives in the forms mentioned in HSN 2017 (other than Undiffused Silicon Wafer) fall under the remaining category of ‘Other’ under Customs Tariff Item 38180090.

(v) The appellant had imported products which had been doped with both Boron and Phosphorus and had undergone extensive work, including diffusion.

(vi) The words “extensively worked” and “selective diffusion” indicate the type of goods which are out of the scope of CTH 3818. CTH 3818 covers doping of the order of parts per million alone; that those extensively worked are beyond the scope of CTH 3818.

(vii) CTH 3818 allows processes up to doping of the silicon wafer with P type or N type dopants, which is followed by texturing of silicon wafer, which has been done.

(viii) The diffusion which is done for PN junction formation is in a controlled manner so that the PN junction is uniform throughout the wafer with uniform depth and then etching and polishing is done for the purpose of edge isolation of and finally, PECVD (plasma enhanced chemical vapor deposition) and anti-reflective coating is done.

(ix) Reference has been made to a patent document no. CN104300035 dated 18.07.2013 titled “Low-Temperature Diffusion Technology” to hold that the silicon wafer used by the suppliers prior to starting the process of texturing itself is P type doped silicon wafer.

(x) Subsequently only the other processes are undertaken, which is extensively worked, selectively doped and selectively diffused even before the import is made by the appellant.

(xi) References are made to Customs Tariff Heading 8541 at paragraph 97 and the General Rules of Interpretation (GRI) at paragraph 98.

(xii) In terms of the HSN 2017 Explanatory Notes to CTH 8541, Solar Cell is defined as “silicon photovoltaic cells which convert sunlight directly into electric energy”. The essential character of a Solar Cell is to convert sunlight into electricity and it is a fact that the imported Blue Wafers have the ability to convert sunlight into electricity, which is attained by the formation of PN junction subsequent to the diffusion process.

(xiii) Applying Rule 2 of the GRI, the imported goods which are displaying photovoltaic effect, is appropriately classifiable under Sub-heading 854140.

(xiv) The Explanatory Notes to CTH 3818 mentions that the same covers chemical elements of Chapter 28 (for example, Silicon and Selenium) doped with, for example, Boron or Phosphorus; that those more extensively worked (e.g., by selective diffusion) fall under CTH 8541 as semi-conductor devices.

5.2.1 With regard to leviability of safeguard duty under Notification No. 01/2018-Cus. ibid., the Ld. Commissioner has referred to the DGTR Final Findings dated 16.07.2018 and holds as under: –

(i) PUC clearly mentions that the goods which have the ability to convert solar energy into electricity at the atomic level i.e., exhibit photovoltaic effect, are called Solar Cell.

(ii) The goods which exhibit photovoltaic effect are called Solar Cells even without electrical connections.

(iii) In the test report of IIT, Madras dated 15.10.2020, it has been clearly observed that the imported Blue Silicon Wafer exhibited photovoltaic effect which is sufficient to hold that the impugned goods fall under the definition of Solar Cells for imposition of safeguard duty.

5.2.2 He has recorded the request of the appellant for referring the matter to the Tax Research Unit (TRU), but however, finds that the imported goods have already been tested at IIT, Madras and thus there was no need for any further reference to the TRU.

5.2.3 In view of the above, he finds that the goods imported satisfy the only criteria for imposition of safeguard duty i.e., exhibition of photovoltaic effect and hence, the said goods cannot be held to be “intermediate” products.

5.3 Thus, the Ld. Commissioner has: –

(a) Rejected the declared classification of the goods imported and ordered reclassification, as proposed in the Show Cause Notice;

(b) Held the imported product as ‘Solar Cells not assembled into panels or modules’ and covered by the Product Under Consideration as per the DGTR Notification F.No.22/1/2018-DGTR dated 16.07.2018, as amended, for levy of safeguard duty;

(c) Confirmed the demand of Rs.42,43,99,504/-towards the applicable safeguard duty on the imported goods, as proposed, under Sections 28(8) and 28AA of the Customs Act, 1962;

(d) Ordered confiscation of the goods seized under Section 111(m) , however, allowed redemption on payment of redemption fine of Rs.25,00,000/-;

(e) Held the goods, other than those seized, also liable for confiscation under Section 111(m) , however, the same having been cleared, imposed redemption fine of Rs.19,75,00,000/-; and

(f) Imposed penalty of Rs.2,20,00,000/- under Section 112(a)

6. It is against the above order wherein inter alia safeguard duty has been levied on the appellant that the present appeal has been filed before this forum.

GROUNDS URGED

7. In the appeal memorandum, the impugned order has been assailed on the following grounds: –

• Ground No.1: The investigation of the Director General of Trade Remedies (DGTR) was based upon a complaint made by the domestic manufacturers, who are engaged in manufacturing of a complete Solar Cell and as such, the Product Under Consideration (PUC) was a complete Solar Cell and not a Diffused Silicon Wafer, which is an intermediate product and thus, the entire proceedings are contrary to the findings and recommendations of the DGTR.
• Ground No.2: The imported sample was not tested in accordance with the technical specifications notified by IEC 60904 and the ISO Standard No. 12834 and the IIT-M report relied upon by the original authority is neither complete nor based upon any IEC / ISO Standards. Hence, such reliance on the IIT-M report for any decision is bad in the eye of law.

• Ground No.3: The National Institute of Solar Energy (NISE), a testing agency under the Ministry of Renewable Energy, is the only approved testing agency to test the Solar Cells and the imported representative sample has not been tested by the Department. Hence, the core element of determinative factor has not been ascertained and based on an imperfect / incorrect assumption and false presumptions, the impugned order has been passed, which is contrary to the fundamental principles of administrative jurisprudence and also amounts to abuse of quasi-judicial powers.
• Ground No.4: The imported item is a Diffused Silicon Wafer / Blue Wafer and to make it as a Solar Cell, post importation, a substantial process of manufacturing in the form of screen printing and sintering process are to be carried out in India and these important aspects have been completely overlooked and in a mechanical and arbitrary manner the original authority has decided the issue, which is contrary to the provisions of the Customs Act, 1962 and also against the Safeguard Duty Regulations.
• Ground No.5: Under the International Trade Law, more specifically, as per the guidelines of WTO / GATT, the PUC in the investigation by the DGTR and the product under import should be one and the same or like article for levy of safeguard duty and this is the vital element for levy of safeguard duty. The impugned order has been passed in direct conflict with the basic framework of the International Trade Law.
• Ground No.6: Various judicial decisions and Notifications issued by the Department of Revenue are referred to by the appellant to establish that the imported item is only an intermediate product and also a semi-finished product or an un-finished product. The original authority has failed to consider the decisions of the quasi-judicial / judicial authorities and thus the impugned order is contrary to earlier judicial decisions and also contrary to various notifications referred to in the reply to the Show Cause Notice. As such, the impugned order is neither a speaking order not a sustainable order and hence, the same has to be quashed and set aside.

• Ground No.7: In the case of Canon India, the Hon’ble Supreme Court has categorically held that the Additional Director General of the DRI is not the proper officer to issue Show Cause Notice under Section 28 of the Customs Act, 1962 and not following the ratio of the said decision is circumvention of Article 141 of the Constitution and an act of indiscipline and as such the entire proceedings would be vitiated on account of lack of jurisdiction.
• Ground No.8: There is no mis-declaration of description or technical information about the product under import and the entire issue is mere determination of levy of safeguard duty. As such, confiscation of the imported and cleared goods and imposing redemption fine are contrary to law and in direct conflict with Section 111 and Section 125 of the Customs Act, 1962.
• Ground No.9: On an interpretational issue of notification, question of alleging the motive or mens rea does not arise and accordingly, the levy of penalty is contrary to Section 112 of the Customs Act, 1962 and confiscation and release of the goods with redemption fine as per Section 125 is also not warranted and is against the various decisions of the Hon’ble Apex Court.

8. When the matter was taken up for hearing, Dr. C. Manickam, Ld. Advocate, argued for the appellant and Shri R. Rajaraman, Ld. Assistant Commissioner, argued for the Revenue.

9.1 Ld. Advocate submitted at the outset that though the case was investigated by the DRI and thereafter, the Show Cause Notice was also issued by the DRI, that even though he has an arguable case on the jurisdiction of the DRI to issue Show Cause Notice, but however, he is not pressing that ground relating to the jurisdiction of the DRI. He has also placed on record an Affidavit duly executed by the appellant to the effect that they are not pressing the ground of the appeal which relates to the jurisdiction of the DRI to issue a Show Cause Notice.

9.2 The same is taken on record. Consequently, we refrain from answering any contention taken out in the appeal memorandum against the said issue.

SUBMISSIONS ON BEHALF OF APPELLANT

10.1 The contentions of the Ld. Advocate, taken out during the hearing, could be summarized, as below: –

• The investigation of the Directorate General of Trade Remedies was based on a complaint made by the domestic manufacturers of a complete Solar Cell and hence, the PUC was a complete Solar Cell and not a Diffused Silicon Wafer, which is only an intermediate product.
• A member country of the WTO is empowered to initiate emergency remediate measures as per Article XIX of GATT, 1994, against import of a particular product and in the domain of International Trade Law, the product, which is subject to investigation by the authorities, is the Product Under Consideration (PUC).
• The scope and ambit of the definition of PUC is to be determined taking into account many factors like technical and scientific characteristics of the product, identification of the product in the technical and market parlance, fungibility of the product and the interchangeability, substitutability of the similar or like article in the technical and market parlance.

• Product Under Consideration (PUC), as defined in the Notice of Initiation of Safeguard Investigation dated 19.12.2017 (paragraph 3), has been mis­quoted by the adjudicating authority. He has apparently reproduced the same at paragraph 104 of the impugned order.
• The Initiation of Investigation, as per the above Notification, requires that the PUC is Solar Cells, whether or not assembled in modules or panels; photovoltaic Solar Cells are also known as photovoltaic cells in the market and trade parlance; Solar Cells are solid state electrical devices that convert sunlight directly into electricity by photovoltaic effect; for the practical use of the Solar Cells, they are placed in modules or panels; the Customs tariff classification is indicative only and is in no way binding on the levy of safeguard duty; and the description of the product would be the determinative factor for levy of safeguard duty.
• The PUC, which was the subject matter of the investigation by the competent authority, is therefore, a finished Solar Cell in terms of technical and market parlance and not a Diffused Silicon Wafer / Blue wafer, which has no ability to collect electricity and conduct electricity. Hence, the Diffused Silicon Wafer / Blue Wafer imported cannot be traded as a Solar Cell the market.
• The imported goods are subjected to substantial and intricate manufacturing processes after importation at their factory premises.

10.2.1 The Ld. Advocate has referred to the report submitted by IIT, Madras and contended that the imported sample was not tested in accordance with the technical specifications notified under the International Electrotechnical Commission (IEC) No. 60904 and the International Organization for Standardization (ISO) Standard No. 12834 and hence, the same was not complete in the sense that it was not based on any IEC / ISO Standards.

10.2.2 Reference is made to the National Institute of Solar Energy (NISE), a testing agency under the Ministry of New and Renewable Energy, which is an approved testing agency to test Solar Cells. He would also contend that the semi-conductor devices are tested in accordance with the standards prescribed by IEC, which are also accepted as Indian Standards by the Government of India through IS Standard No. 12834, 12762, etc. as per which, the photovoltaic cells will have PN junction, cells junction, metallised lines, busbars, grid lines with photovoltaic materials and photovoltaic effect i.e., production of DC voltage by absorption of photons.

10.2.3 Ld. Advocate, while referring to the report of IIT, Madras, further submitted that the said report is incomplete in all respects and thereafter, took us through the observations recorded, which read as under: –

a. The sample of Solar Cell does not have printed gridlines (busbars and fingers).

b. Screen printing is not completed.

c. Since the grid lines are not there for collection of all the electrons generated on the solar cell, the multi-meter probes record the voltage/current parameters in the immediate vicinity of the probes on the Solar Cell.

d. Hence, the observed values cited in the test report will be on the much lower side than the voltage/current parameters than that of the same Solar Cell with grid lines.

10.2.4 He would also submit that the appellant had also forwarded two samples i.e., one containing Diffused Silicon Wafer and another one, which was a finished Solar Cell to NISE, but however, NISE had declined to test the Diffused Silicon Wafer and they only tested the finished Solar Cell.

10.2.5 Ld. Advocate drew our attention to the test report of NISE, which is at pages 702 to 706 of Vol.III of the appeal paper-book, to contend that the report of IIT, Madras when compared with that of NISE, it could be seen that there are remarkable differences in terms of both technical and scientific parameters and would submit that:-

1. The finished Solar Cells and the Blue Wafers are different, in that the finished one will have front H-pattern metallization grid contact and rear full area metallization contact as against the Blue Wafers, which have no metallization contacts on both front and rear sides.

2. Photoluminescence (PL) Images of finished Solar Cells have higher PL counts and the front H-pattern grid contact is visible in PL images as against the Blue Wafers which will have lower PL counts and the front contact is not visible in PL images.

3. Effective carrier lifetime can only be measured for the Blue Wafers, but not for the finished Solar Cells.

4. I-V measurement can only be measured for the finished Solar Cells whereas the Blue Wafers do not have electrical contacts and the efficiencies of the Finished Solar Cells are ~18.6%.

5. Silver or Aluminium elements are detected at the front and rear metallized regions in respect of finished Solar Cells whereas the same are absent in the case of Blue Wafers.

10.2.6 He would thus contend, while referring to the observation in IIT-M’s report, that the sample Solar Cells do not have printed grid lines as against the finished Solar Cell, which would have grid lines with busbars and fingers in the front side and electrodes on the back side. It is for this reason that a multi-meter probe was employed as an additional device to measure the electric contacts in respect of Blue Wafers, which is not so in the case of the finished Solar Cell; this itself sufficiently reveals that the imported item-Blue Wafers lack the basic element of grid lines that would perform the function of collection of electricity through fingers and conduction of the same through busbars.

10.3.1 It was submitted that the imported item is claimed only as a Diffused Silicon Wafer / Blue Wafer, which upon import is subjected to substantial processes of manufacturing, in the form of screen printing and sintering, which are carried out in India and which are necessary, which have been completely overlooked by the adjudicating authority.

10.3.2 He has referred to the following manufacturing processes that are involved which are carried out in India:-

I. Feeder

II. Screen Printing

(i) Printing Machine 1: Silver Slurry(Back Electrode Slurry)

(ii) Printing Machine

(iii) Flipper

(iv) Printing Machine 4: Silver Slurry (Busbar Slurry)

(v) Printing Machine 5: Silver Paste (Finger Slurry)

III. Sintering Furnace

IV. Testing & Sorting

V. EL Inspection

VI. Manual Inspection

VII. Packing Process

10.3.3 He would also refer to the written synopsis filed during the course of arguments wherein each of the above processes has been explained along with pictorial depiction of the initial product and the product at the end of each of the above mentioned processes.

10.3.4 He would again refer to the report of IIT, Madras where there is an observation that the imported item does not have screen printing and also lacks busbars and fingers, to submit that busbars are the backbone of most power applications providing the critical interfaces between power modules and the outside world; busbars are the vertical lines within Solar Cells which are nothing but metallic wires which carry cumulative current of fingers and interconnect others to develop modules; fingers are the horizontal thin lines within Solar Cells, which are metallic wires that collect current and deliver to connected busbars; when the number of busbars in Solar Cells are increased, the current generated would travel less distance in fingers, which are the thin lines, and at the same time cumulative space in busbars is also increased which would offer a low resistance path to the current, which in turn results in increase in the current carrying capacity of the module.

10.3.5 He would thus summarize on these that if the number of busbars is increased, the current generation capacity would increase in the same solar radiation.

10.3.6 While explaining the manufacturing process as above, he would contend that the process of manufacture carried out in India by the appellant results in transformation of the Silicon Blue Wafers into Solar Cells, both in the context of technical parlance and market parlance and that the above manufacturing parameters carried out in India are substantial, intricate and significant, without which the finished Solar Cell out of the Diffused Silicon Wafer could not be achieved. There is substantial value addition made by the appellant, on import, in India.

10.3.7 He would thus contend that there is no finding at all in the impugned order with regard to the above processes that are undertaken in the manufacture of Solar Cells.

10.4.1 The Ld. Advocate has also contended that under the International Trade Law, more specifically, as per the guidelines of WTO / GATT, the PUC in the investigation by the DGTR and the product under import should be one and the same or like article for levy of safeguard duty which, according to the Ld. Advocate, is the vital element for the levy of safeguard duty and that the impugned order passed is in direct conflict with the basic framework of the International Trade Law.

10.4.2 He would refer to the reply dated 28.12.2020 received from the DGTR towards the request by the DRI-CZU wherein even the DGTR have indicated the DRI to seek comments/views of Tax Research Unit (TRU), but however, the same has not been obtained by the DRI.

10.4.3 He would refer to the Final Findings dated 16.07.2018 of the DGTR, as also contained in the Review Notification dated 18.07.2020, where it has been proposed to levy safeguard duty only on “Solar Cells otherwise called as photovoltaic cells in the market parlance”, to contend that the essential functions of a Solar Cell are conversion of heat or light into electricity, collecting generated current without loss and transmitting / conducting the so collected electricity through busbars and that market parlance is very relevant since it should be recognized as such in the market and capable of being sold / used as such. He also contended that the item that was imported could at best be called as ‘Parts of Semi-conductor Devices’; semi­conductor device is a finished and functional product in all respects whereas the imported Diffused Silicon Wafer is only an intermediate product which can only be classified as parts of semi-conductor device, but nevertheless, the classification has no relevance in determining the scope and ambit of levy of safeguard duty.

10.4.4 He further submitted that determination of classification and levy of duty based upon Notification are two independent processes in the eye of law. Though not mutually exclusive, the Notification has to be applied based on the language without imparting external meaning to the description of the product as described in the Notification.

10.5.1 Ld. Advocate would submit that the appellant had placed reliance on decisions / orders of various judicial fora and also Notifications issued by the Department of Revenue in support of its claim that the imported item is only an intermediate product or semi-finished product, but however, the adjudicating authority has not considered any of the decisions relied upon.

10.5.2 He would invite our attention to the decision in the case of M/s. Keltron Power Devices (supra), the ratio of which has been followed in the cases of M/s. Semi-Conductors Ltd. (supra) and M/s. Bharat Heavy Electricals Ltd. (supra); the appeals against both these decisions have also been dismissed by the Hon’ble Supreme Court.

10.6.1 He would further contend that there was no mis-declaration as regards the description or technical information about the product under import was concerned and the entire issue relates to mere determination of levy of safeguard duty and as such, there was no requirement for confiscation of the imported and cleared goods and consequently, there was no requirement to impose redemption fine. He would submit that the issue pertained only to classification, which was not accepted but reclassified, and that ipso facto would not tantamount to mis-declaration at the time of import.

10.6.2 Apart from this, it is also contended that the proper officer of the Customs had also examined the goods and verified the description and only upon satisfaction, the goods were permitted for Out-of-Charge.

10.6.3 The appellant had also submitted a letter to the DRI, Chennai requesting for reclassification under CTH 854190 as parts of semi-conductors, but, in the impugned order, the adjudicating authority had applied Rule 2(a) of the General Rules of Interpretation and classified the goods under Customs Tariff Item 85414011 as Solar Cells; that it is the settled position of law that the said note is applicable with respect to an incomplete or semi-finished article subject to the condition that such an article has an essential characteristic of the finished / complete product.

10.6.4 He would thus submit that it is essential to critically examine the characteristics of both the imported item and a complete Solar Cell: Solar Cell is capable of converting solar light into electrical energy, the element of grid lines help in collecting the converted electricity through fingers and then the same is transmitted through busbars, whereas the imported Silicon Wafer can never perform the function of collection of electricity or conduction of the same and thus lacks the essential characteristic of Solar Cell.

10.6.5 In the absence of any specific entry for intermediate products which do not contain all the essential characteristics, the product under import was sought to be classified as ‘Parts of Semi-conductor Devices’ and since the issue was highly technical in nature, it is contended that there could be no mala fides attributable to the appellant just for the sake of confiscation of the imported goods and imposition of penalty.

10.7. Ld. Advocate would further contend that the issue on hand is on interpretation of notification and also classification and hence, no mens rea could be alleged to levy penalty under Section 112 of the Customs Act.

11. In view of the above submissions, Ld. Advocate would request for setting aside the impugned order and thereby the various demands, confiscation, redemption fine and penalty levied on the appellant as confirmed therein.

SUBMISSIONS ON BEHALF OF REVENUE

12.1 Per contra, Ld. Assistant Commissioner would submit, at the outset, that the appellant had resorted to mis-declaration of the product imported in its bills-of-entry. He would also take us through the allegations in the Show Cause Notice and also the relevant findings of the Commissioner, to contend that the imported product was nothing but ‘Solar Cell’, which was the Product Under Consideration and therefore, amenable for safeguard duty in terms of Notification No. 01/2018 ibid.

12.2 He would also contend that the mahazar drawn during the visit of the officers to the appellant’s premises reveal that the imported product had already undergone various processes like texturing, diffusing, etching, polishing and plasma enhanced chemical vapor deposition (PECVD). Thus, he supported the findings in the impugned order which is passed after taking into consideration the report filed by an expert i.e., IIT, Madras.

12.3 He also submitted that the appellant had in fact accepted the mis-classification of the item and thus, sought for sustaining the demands confirmed in the impugned order.

12.4 He also filed written submission on 26.07.2023 wherein we find only the reiteration of the allegations in the Show Cause Notice. The salient features are: –

• At the time of import, the appellant classified the goods under CTH 3818 by calling them as Undiffused Silicon wafers. The Department did not agree with that and hence, re-classified the imported goods as diffused and extensively worked silicon wafers under CTH 8541.

• Since the extensively worked silicon wafer imported by the appellant had already undergone the processes of texturing, diffusing, etching and polishing and PECVD (plasma enhanced chemical vapor deposition) at the overseas supplier’s end before import itself, the imported item described by the appellant as “Blue Silicon Wafer” had already attained characteristics that were out of the purview of a silicon wafer of CTH 3818, which was already admitted by the appellant.
• Solar Cells are also known as photovoltaic cells in the market parlance, which convert sunlight into electricity by photovoltaic effect.
• The definition of ‘Solar Cells’, as defined by the World Customs Organization in the Explanatory Notes of HSN, is relied upon.
• Solar Cells, as defined by the Bureau of Indian Standards, has also been referred to.
• The test report of IIT, Madras has also been referred to.

12.5 The appellant has also filed a rejoinder to the written submission filed by the Revenue.

13. We have heard the rival contentions, we have carefully gone through the documents placed on record as well as the literature referred to during the course of arguments and we have also gone through the judgements / orders referred to during the course of arguments. The preliminary point of dispute appears to be the classification, whether under CTH 3818 or CTH 8541. The Revenue re-classified under CTH 8541, allegedly on the ground of mis-classification by the appellant and consequently, has ordered for confiscation of the imported goods apart from levy of penalty and fine.

13.1 In the above factual background, we find that the impugned order mainly deals with two major issues, namely: –

i. That the product under import and the Product Under Consideration are one and the same; and

ii. The imported products are appropriately classifiable under CTH 8541 4011 – under the category of ‘Finished Solar Cells’, liable for safeguard duty, with interest, fine and penalty.

ISSUES

14. After hearing both sides, we find that the following issues arise for our consideration: –

(1) Whether the product under import was classifiable under CTH 3818, as declared by the appellant, or under CTH 8541, as re-classified by the Revenue?

(2) Whether the product under import and the Product Under Consideration (PUC) are one and the same? and

(3) Whether the product under import and the Product Under Consideration (PUC) are one and the same for the purposes of levy of safeguard duty in terms of Notification No. 01/2018 ibid.?

15.1 It is evident from the documents placed on record, the Show Cause Notice and the impugned Order-in-Original, that the product imported by the appellant was declared as Diffused Silicon Wafer / Blue Wafer. Notification No. 01/2018 seeks to levy safeguard duty on the imported Solar Cells, Solar Cell Module or Solar Cells in Panel. Therefore, in the context of the above Notification, the issue on hand requires appropriate analysis in order to answer the basic issue involved in this case. In the light of the peculiar facts of this case, on the date of import, admittedly, the appellant declared the goods under CTH 3818 and also sought for availing the benefit of exemption from payment of Basic Customs Duty (BCD) in terms of Sl. No. 1 of Notification No. 24/2005 (Customs) dated 01.03.2005, as amended. However, we find that vide Sl. No. 23 of the same Notification, exemption from payment of BCD was even granted for the goods classifiable under CTH 8541 as well. Therefore, on the date of import, both the goods which were classifiable under both the above tariff entries remained exempted from payment of BCD, as such, no motive could be ascribed to the appellant to avail any undue benefit thereby to cause any revenue loss. Thus, we find that the point of difference between the appellant and the Revenue is whether to classify the imported goods under the category of ‘Finished Solar Cell’ or under the category of ‘Parts of Semi-Conductor Devices’ for levy of safeguard duty under Notification No. 01/2018 (SG) dated 30.07.2018.

ANALYSIS

15.2 A little analogy may be useful here. India, as a Member of the WTO, is empowered to initiate / investigate for the levy of safeguard duty or Anti-Dumping Duty as a trade remedy, for the purpose of protection of the domestic industry, subject to the broad framework of International Trade Law, as adopted / reconciled with the Indian Law. Though Anti-Dumping Duty and safeguard duty are levied in different contexts / purposes and objects, but however, the common element is the determination of the definition of Product Under Consideration (PUC). Normally, a Notification is interpreted based on the text / language employed therein and since the issue involved in the case on hand is relating to a Notification issued under Section 8B ibid. read with the Customs Tariff (Identification and Assessment of Safeguard Duty) Rules, 1997, the literature available in determining the meaning of PUC would be very handy.

15.3 We note that PUC has been a subject matter of interpretation / examination both by courts of law as well as various clarifications available as issued by the Central Board of Indirect Taxes.

16. At this juncture, it is useful to refer to a Circular issued by the Central Board of Indirect Taxes dated 08.05.2012 (F. No. 354/5/2012-TRU) relating to Anti-Dumping Duty whereby a clarification was sought as to whether stainless steel circles of various sizes imported and assessed to Anti-Dumping Duty on actual width / diameter was a subject matter, to levy Anti-Dumping Duty. The Central Board of Indirect Taxes issued the following clarification:

“3. The issue has been examined. DA in the preliminary findings dated 27^th March, 2009 issued vide Notification No. 14/6/2008-DGAD have mentioned in Part B Para 5 the product under consideration as:

“The ‘product under consideration’ is “Cold-rolled Flat products of stainless steel of the width of 600 mm or more of all series not further worked than Cold rolled (cold reduced). The product under consideration comprises of stainless steel coil, sheets plates of above description. The subject are used for manufacture of white goods, processed equipment, dairy equipment, automotive components, rail carts, metro coaches, architecture, building and construction, etc. The subject goods are classified under Chapter 72 of the CTA under sub-heading 7219.31, 7219.32, 7219.33, 7219.34, 7219.35 and 7219.90. The customs classification is indicative only and in no way binding on the scope of investigation.”

In the Final Findings issued by the Designated Authority in Part B, Para 5 also, the same product under consideration has been reiterated.

4. In this context, it is relevant that the anti-dumping duty is levied on the specified product as described under ‘Product Under Consideration’ notified at the time of initiation of the investigations by the Designated Authority and the tariff classification of the product is only incidental/indicative for levy of such duty. The ‘product under consideration’ is clearly mentioned in the notifications regarding initiation, provisional findings and final findings of the DA and in the present case, the product under consideration on which the anti-dumping duty has been levied is Cold-rolled Flat products of stainless steel of the width 600 mm or more of all series not further worked than Cold rolled (cold reduced). Even though the CTH indicated in the notification is 7219, not all flat products classifiable under CTH 7219 become liable to anti-dumping duty. Only those cold rolled flat products of stainless steel, which are actually of a width of 600 mm or more, will get levied to anti-dumping duty. Any other products even though classifiable under the said tariff heading in terms of chapter notes, section notes or otherwise will not attract anti-dumping duty. It has been mentioned in the findings also that the product under consideration comprises of stainless steel coil, sheets plates of the width of 600 mm or more of all series not further worked than Cold rolled (cold reduced).

As such, even if stainless steel circles are classifiable as cold rolled flat products of stainless steel falling under CTH 7219, the same would not attract any anti-dumping duty in terms of Notification No. 14/2010-Cus., dated 20­2-2010. It is requested that all field formations under your jurisdiction may be advised accordingly and all pending disputes, if any, may be decided accordingly.”

PRODUCT UNDER CONSIDERATION [PUC]

17.1 From the above, it is clear that the specific product described as ‘Product Under Consideration’ alone is subject to levy of duty and not any other product, even though classifiable under the same Tariff Heading. In order to understand the meaning of PUC mentioned in the Notification, the provisional findings, final findings and review findings of the Designated Authority are required to be referred to. Hence, in the case on hand, the PUC, as specified in the Notification, is “Solar Cells whether or not assembled in modules or panels”. To determine the scope and ambit of the meaning of the PUC, we have to consider primarily four important documents, namely: –

i. Notification for Initiation of Safeguard Investigation dated 19.12.2017 issued by the Directorate General of Safeguards;

ii. Preliminary Findings of the Directorate General of Safeguards dated 05.01.2018;

iii. Final Findings of the Directorate General of Trade Remedies dated 16.07.2018; and

iv. Final Findings of the Directorate General of Trade Remedies dated 18.07.2020.

17.2 In the same Notification, ‘PUC’ has been explained, which is as follows: –

“3. Product Under Consideration (PUC): The product under consideration is “Solar Cells whether or not assembled in modules or panels” classifiable under Tariff Heading 85414011 of Chapter 85 of the Customs Tariff Act, 1975. Photovoltaic Solar Cells are also known as Photovoltaic Cells in the market / trade parlance. Photovoltaic technology enables direct conversion of sunlight into electricity at the atomic level. Solar Cells are solid state electrical devices that convert sunlight directly into electricity by the photovoltaic effect. To make practical use of the Solar Cells, these are placed in panels or modules. In other words, a solar panel / module is a packaged, connected assembly of Solar Cells. The electrical connections are made to the Solar Cells in series to achieve the desired output wattage and / or in parallel to provide the desired current capability. The Customs tariff classification is indicative only and is in no way binding on the scope of the present investigation.”

(Emphasis supplied)

17.3 Paragraph 3.2 of the same Notification reads as under: –

“3.2 The applicants claim to manufacture Solar Cells using c-Si Technology and not by using Thin Film Technology. The applicants further state that Solar Cells made by using both Crystalline and Thin Film technologies are used in comparable applications or end uses and there are no material differences between such Solar Cells though the technology used may be different. Therefore, the applicants claim that the domestically produced Solar Cells based on c-Si technology are like and directly competitive articles to the imported Solar Cells originating from the use of either c-Si technology or Thin Film technology.”

(Emphasis supplied)

17.4 Further, vide paragraph 9, it has been notified that after examination of the application, it was decided to initiate an investigation into the issue thereby inviting views from all interested parties.

18. Thereafter, vide Reference F. No. 22011/68/2017 dated 05.01.2018, the said authority issued a Preliminary Findings, perhaps based on the investigation that was initiated, the relevant portion of which is extracted below:-

“5.1 The Product Under Consideration (PUC)

5.1.1 The PUC is “Solar Cells whether or not assembled in modules or panels” classifiable under Tariff Heading 8541 and Tariff Item 85414011 of the Customs Tariff Act, 1975. Solar Cells are also known as Photovoltaic Cells in the market parlance. Photovoltaic technology enables direct conversion of sunlight intro electricity at the atomic level and Solar Cells are solid state electrical devices that convert sunlight directly into electricity by the photovoltaic effect. For practical use, Solar Cells are packaged and connected into an assembly and such an assembly of Solar Cells is referred to as a Solar Panel or Solar Module. The electrical connections are made to the Solar Cells in series to achieve desired output wattage and / or in parallel to provide a desired current capability.

…”

(Emphasis supplied)

and thereafter, recommended for levy of provisional safeguard duty on the import of the PUC.

19. The Final Findings / report of the said authority is
also placed on record, which is dated 16.07.2018, whereby the authority has recommended for imposition of safeguard duty for a period of two years, as indicated in the table to paragraph 76 therein.

20.1 It appears that the above report was sought for review and the said authority vide its ‘Final Findings of review investigation’ dated 18.07.2020 has reproduced the Product Under Consideration, which was defined as follows: –

“36. The product under consideration in the original investigation was defined as follows:

“Solar Cells whether or not assembled in modules or panels” classifiable under Tariff Heading 8541 and Tariff Item 85414011 of the Customs Tariff Act, 1975. Solar Cells are also known as Photovoltaic Cells in the market parlance. Photovoltaic technology enables direct conversion of sunlight intro electricity at the atomic level and Solar Cells are solid state electrical devices that convert sunlight directly into electricity by the photovoltaic effect. For practical use, Solar Cells are packaged and connected into an assembly and such an assembly of Solar Cells is referred to as a Solar Panel or Solar Module. The electrical connections are made to the Solar Cells in series to achieve desired output wattage and / or in parallel to provide a desired current capability.”

(Emphasis supplied)

20.2 Further, paragraph 39 reads as under: –

“39. Thus, the existing safeguard duty is applied on “Solar Cells whether or not assembled in modules or panels” classifiable under the Tariff Headings 85414011 and/or 85414012 of Chapter 85 of Schedule I of the Customs Tariff Act, 1975. The Customs tariff classification is, however, indicative only and is in no way binding on the scope of the product under consideration.”

(Emphasis supplied)

20.3 After considering the inputs from various interested parties, the said authority redefined PUC as under: –

“45. Taking into account the change in the customs tariff headings, the PUC is defined as follows:

“Solar Cells whether or not assembled in modules or panels” classifiable under Tariff Heading 854140 and Tariff Items 85414011 and 85414012 of the Customs Tariff Act, 1975. Solar Cells are also known as Photovoltaic Cells in the market parlance. Photovoltaic technology enables direct conversion of sunlight into electricity at the atomic level and Solar Cells are solid state electrical devices that convert sunlight directly into electricity by the photovoltaic effect. For practical use, Solar Cells are packaged and connected into an assembly and such an assembly of Solar Cells is referred to as a Solar Panel or Solar Module. The electrical connections are made to the Solar Cells in series to achieve desired output wattage and / or in parallel to provide a desired current capability.

The Customs tariff classification is, however, indicative only and is in no way binding on the scope of the product under consideration”.”

(Emphasis supplied)

20.4 A final recommendation to extend the safeguard duty for one more year was made.

21. It appears that after the final investigation report, there was a visit by the DRI to the factory premises of the appellant on 11.03.2020, on which date a mahazar was drawn, during which time it appears that the appellant had submitted “Flow Process Chart”.

22. Consequently, a notice dated 11.11.2020 was issued by the Additional Director General, DRI wherein it was indicated that the classification of the imported product was CTH 8541 as ‘Solar Cell’ and not under CTH 3818 as ‘Undiffused Silicon Wafer’ and if the appellant was agreeable, then the appellant could make payment of full safeguard duty liability along with interest, thereby seeking closure of the proceedings without Show Cause Notice.

23. It appears that the appellant responded to the above vide its reply dated 02.12.2020 whereby they appear to have explained the processes that were carried out by the appellant post import of Diffused Silicon Wafer / Blue Wafer and thereby denying any liability to safeguard duty.

24. It appears from the record that when a personal hearing was granted, the same was duly attended to by the appellant and thereafter, it appears that vide letter dated 16.12.2020, the DRI sought for clarification from the Director General (Safeguard), DGTR, New Delhi as to:

• whether any interested party sought inclusion/exclusion of blue silicon wafers/blue wafers from the ambit of safeguard duty?
• whether the understanding of this office (DRI) with regard to the leviability of safeguard duty on silicon wafers was in variance with opinion of DGTR, and if so, to communicate the same with appropriate

25. In response to the above communication by the DRI, it appears that the Ministry of Commerce and Industry, Department of Commerce, DGTR replied / issued Office Memorandum dated 28.12.2020, which is reproduced hereinbelow: –

The same is placed on record at page 771 of Vol.-III of the appeal memorandum.

26.1 It appears that thereafter, a Show Cause Notice dated 08.01.2021 came to be issued under Sections 28(1) and 124 of the Customs Act, 1962 whereby it was inter alia proposed to hold that what was imported by the appellant was only Solar Cell classifiable under CTH 8541; the same is not a ‘part’ of photovoltaic cell; the same has PN junction and was exhibiting photovoltaic effect and that the said product was also covered under the ambit of “Product Under Consideration” of DGTR Notification F. No.22/1/2018-DGTR dated 16.07.2018. Thereafter, various proposals were made which are extracted at paragraph 3 of this order.

26.2 The adjudicating authority having considered during adjudication the reply filed by the appellant and also the final report of the DGTR, however, vide impugned Order-in-Original No. 100362/2022 dated 09.12.2022 confirmed the demands, as proposed.

27. We will first analyse the ‘Product Under Consideration’ (PUC) by the DGTR. PUC, as defined in the original investigation as well as the final report, are reproduced below for convenience: –

“The product under consideration in the original investigation was defined as follows:

“Solar Cells whether or not assembled in modules or panels” classifiable under Tariff Heading 8541 and Tariff Item 85414011 of the Customs Tariff Act, 1975. Solar Cells are also known as Photovoltaic Cells in the market parlance. Photovoltaic technology enables direct conversion of sunlight intro electricity at the atomic level and Solar Cells are solid state electrical devices that convert sunlight directly into electricity by the photovoltaic effect. For practical use, Solar Cells are packaged and connected into an assembly and such an assembly of Solar Cells is referred to as a Solar Panel or Solar Module. The electrical connections are made to the Solar Cells in series to achieve desired output wattage and / or in parallel to provide a desired current capability.”

….

“Taking into account the change in the customs tariff headings, the PUC is defined as follows:

Solar Cells whether or not assembled in modules or panels” classifiable under Tariff Heading 854140 and Tariff Items 85414011 and 85414012 of the Customs Tariff Act, 1975. Solar Cells are also known as Photovoltaic Cells in the market parlance. Photovoltaic technology enables direct conversion of sunlight into electricity at the atomic level and Solar Cells are solid state electrical devices that convert sunlight directly into electricity by the photovoltaic effect. For practical use, Solar Cells are packaged and connected into an assembly and such an assembly of Solar Cells is referred to as a Solar Panel or Solar Module. The electrical connections are made to the Solar Cells in series to achieve desired output wattage and / or in parallel to provide a desired current capability.

The Customs tariff classification is, however, indicative only and is in no way binding on the scope of the product under consideration.”

(Emphasized by us for clarity)

28.1 Admittedly, the description of the product specified in the Notification has to be understood based on the text of the Notification vis-à-vis the findings of the competent / Designated Authority. While doing so, we may have to even refer to the guidelines in the form of interpretation made available by judicial precedents in identical situations.

28.2 In this context, it is relevant here to refer to the order of CESTAT, Mumbai in the case of M/s. Philips India Ltd. v. Commissioner of Customs, Mumbai [2004 (166) E.L.T. 49 (Tri. – Mum.)] wherein the levy of Anti-Dumping Duty was involved, on the imported Compact Fluorescent Lamp (CFL) with choke or without choke. At the time of import, the product under import was in a semi-finished form and post importation, a few items were procured from the domestic market and subsequently, CFL was manufactured in India. It was the contention of the Revenue that the imported item had attained the essential characteristics of a Compact Fluorescent Lamp and hence, had sought to collect Anti-Dumping Duty in terms of Notification No. 128/2001 dated 21.12.2001. It was inter alia held as under: –

“4.  …

… That a notification should be construed strictly is an accepted position in law. It is not possible to interpolate words into a notification. Since the notification imposes ADD only on CFL, one will have to see whether what is imported is CFL at all. It has been brought out that the importers in addition to the imported parts procured local components up to a certain value to manufacture CFLs. …”

28.3 We find that the above ratio was adopted / followed in M/s. Anchor Daewoo Industries Ltd. v. Commissioner of Customs, Kandla [2007 (214) E.L.T. 230 (Tri. – Ahmd.)] which was subsequently upheld by the Hon’ble Delhi High Court in the case of M/s. Plaza Lamps and Tubes Ltd. v. Commissioner of Customs [2007 (209) E.L.T. 182 (Del.)].

28.4 The order in the case of M/s. Anchor Daewoo Industries Ltd. (supra) was challenged before the Hon’ble Supreme Court by the Revenue which was thereafter dismissed by the Hon’ble Apex Court as reported in 2016 (331) E.L.T. A138 (S.C.).

29.1 The proposition, therefore, which emerges from the above is that a semi-finished or intermediate product could not be subjected to Anti-Dumping Duty or safeguard duty in a case where a specific complete / finished product is the subject matter of investigation by the Designated Authority and the same is defined as the Product Under Consideration.

29.2 In the case on hand, we find that the appellant has established its factory in India, installed capital goods and is undertaking substantial manufacturing process and on this fact, we do not find any disputes by either of the parties.

MANUFACTURING PROCESS BY THE APPELLANT

29.3 The product which was imported by the appellant is Diffused Silicon Wafer / Blue Wafer for the manufacture of Solar Cells at their factory located at Sri City, Andhra Pradesh. It is the claim of the appellant that the product so imported is only an intermediate product or one of the raw materials or components for the manufacture of Solar Cells. It was explained, even before us, as was done before the lower authority, the various processes involved in the manufacture of Solar Cells, which has eight steps, namely: (1) Texturing (2) Diffusing (3) Etching and Polishing (4) PECVD (5) Screen Printing (6) Sintering/Firing (7) Testing & Sorting and (8) Packaging. Before Import, the product undergoes processes such as making ingots, texturing, diffusing and coating and edging. After importation into India, the following processes are carried out: –

I. Feeder:

• Load Wafers in trays and feed into feeding machine, after finishing loading, other side loads empty cassette and start machine.
• Each cassette has 100 cells; after finishing, cassette to be kept separate.

• Take the cassette with both the hands and place it in the feeder, making sure the blue side of the cell is facing down.
• It is allowed to place up to 4 boxes of the cells in the feeder to avoid deformation of the feeding rack caused by the excessive quantity.
• Do not place the cassette at the last rack to prevent dust and dirt.

II. Screen Printing:

• Function and mechanism: highly chemically active metal slurry (such as Silver paste – finger, busbar, back electrode Silver paste, Aluminium Paste is printed on the Blue Silicon Wafer on the front and back side through the set of process of printing machine.

(i) Printing Machine 1: Silver Slurry (Back Electrode Slurry)

• Printing Back Electrode Slurry: The Back Electrode Slurry is applied on the back side of the Blue Wafer which will help to form Positive Electrode line.
• After the Back Electrode Slurry [Silver Slurry is semi-solid by nature] is applied on Blue Wafer, the Blue Wafer will be further moved to the Drying Oven (Drying oven at 200° C).
• Drying Oven #1: Wafer is dried to ensure that the printed back electrode is protected from damage during the further steps of printing.

(ii) Printing Machine:

• After the Positive Electrode line is formed, the Blue Wafer is further moved to the next printing process – BSF (Aluminium Back Surface Field).
• Printing BSF Purpose: After applying the BSF Slurry on the back side of Blue Wafer, such as re-doping, removing PN junction on the back of the cell, reduce carrier recombination, increase the voltage.
• Further, the Blue Wafer is again moved to drying oven.
• Drying Oven #2: To protect BSF from damage when the Positive Electrode is printed.

(iii) Flipper

• Flipper Process: This process helps the Blue Wafer to flip another side, from back side to front side printing process.

(iv) Printing Machine 4: Silver Slurry (Busbar Slurry)

• In this, the Blue Wafer is further moved to another printing process to form Negative Electrode on the Blue Wafer.
• Printing Busbar Paste: The Busbar Slurry will be applied on the front side of the Blue Wafer to print the main grid lines on wafer which will help in collecting photoelectric current and provide a Negative Electrode of the cell.
• Further the Blue Wafer is moved to drying oven.
• Drying Oven #3: Wafer is dried to ensure that the printed busbar lines are protected from damage during the further steps of printing process.

(v) Printing Machine 5: Silver Paste (Finger Slurry)

• In this, Blue Wafer is further moved to another printing process to form Negative Electrode on the Blue Wafer.
• Printing Finger Paste: The Finger Slurry will be applied on the front side of the Blue Wafer to print the sub grid lines on the wafer, for collecting photoelectric current and providing a Negative Electrode of the cell.

III. Sintering Furnace:

• Sintering: The slurry on the wafer is dried to burn the organic components of the slurry to form a good ohmic contact between the slurry and the wafer.
• In this process, temperatures increase up to 800° C and decreases to 75° C.

IV. Testing & Sorting:

• Test the electrical performance parameters of each Solar Cell under artificial/simulated sunlight and separate according to colour and efficiency.

V. EL Inspection:

• Purpose: Every half an hour, EL conduct the sampling test to ensure whether the printing has any defects or not; if it has any defects, then notify the printing personnel immediately to rectify it.

VI. Manual Inspection:

• Purpose: Efficiency of the Solar Cell is distinguished as per: colour, A-type cells, B-type Cells and disqualified.

VII. Packing Process:

• Place the cells as per efficiency and colour on the table or trolley.
• Place 4 packs of cells gently in the foam box, cover the box and paste the label and write the particular personnel’s QC code. (Note: When covering the lid, ensure all the four packs in the particular box are of the same efficiency and same colour).
• Ensure the cells in the carton box are of same efficiency and same colour.
• Packing personnel should not mix the efficiency and colour.

29.4 It is clear from the above that after undergoing the above explained processes, a completely new product emerges, which is considered as their manufactured product. There is no doubt that such a final product resulting from their manufacturing activity is sold as such, as solar cell, in the market. We have to hold so since the Hon’ble Apex Court in the case of M/s. Kesarwani Zarda Bhandar v. State of U.P. [2008 (227) E.L.T. 337 (S.C.)] has held that “the distinction between ‘manufactured’ and ‘processed’ may not in all situations depend upon the nature of the Statute involved. It must pass the requisite test, namely, as to whether it is a completely new item. Raw material of a manufactured product has to be distinguished from the manufactured product. The distinction between ‘processing’ and ‘manufacturing’ is well known.”

29.5 In the case on hand, admittedly, what is imported is Diffused Silicon Wafer / Blue Wafer, which is claimed to be a semi-finished / intermediate processed product and not a finished product. If it is to be assumed to be the final product, then it has to be sold as such in the open market. The burden is on the person who claims that it is a solar cell, to discharge the same by establishing that fact. But the revenue having alleged that what was imported was solar cell, has not discharged their initial burden to establish that the same could be sold as such in the open market and could be used as such, by the end user. The processes of screen printing and sintering carried out in India assume significance in the manufacturing process, thereafter transforming the semi-finished / intermediate product into a finished functional product capable of performing essential functions as a Solar Cell which could be sold in the market as a Solar Cell.

30. The Commissioner has held that it is the process of diffusion that results in the formation of PN junction, which is sufficient for the purposes of conversion of solar energy into electrical energy. That is to say that the diffusion process which results in the formation of PN junction itself results in photovoltaic effect.

31. The question now is whether that Blue Silicon Wafer, which according to the Commissioner, exhibits photovoltaic effect, and therefore, is a Solar Cell, is sufficient to be called a Solar Cell in the market parlance. We have to see the practical uses in the sense whether the same is sufficient to be marketed as it is / the market recognizes as such and could it be used as it is. This is most relevant since the application before the authority was by the manufacturers of the product named ‘solar cells’.

32.1 At this juncture, it is very useful to juxtapose the reports of both IIT, Madras and NISE. The report of IIT-M may not throw much light to decide the issue on hand since, all that it says is that the product that was sent for examination did exhibit photovoltaic effect and hence there is the conclusion in the said report that the very same product could be called as Solar Cell for all practical purposes, in scientific/technical parlance, and market parlance. This assumes relevance, as what was complained by the applicant before the authority was about the Solar Cells per se since, as observed by the authority in its notification, the applicant was a body or Association of manufacturers of Solar Cells, who feared that the businesses of some of the association members were being affected by the import of Solar Cells. They are thus not manufacturers of parts of Solar Cells.

32.2 Hence the scope of complaint/application before the authority was to consider levy of safeguard duty on the import of Solar Cells as such and not the parts thereof.

Hence, first we have to check and analyse the nature of complaint before we come to the issue in the case on hand.

32.3 In this context, we have to first consider the definition of ‘Product Under Consideration’ (PUC) as defined at various places like the Notice of Initiation of Safeguard Investigation dated 19.12.2017 and the review order of the competent authority.

• As per the Notice of Initiation of Safeguard Investigation dated 19.12.2017 (paragraph 3):

“3. Product Under Consideration (PUC): The product under consideration is “Solar Cells whether or not assembled in modules or panels” classifiable under Tariff Heading 85414011 of Chapter 85 of the Customs Tariff Act, 1975. Photovoltaic Solar Cells are also known as Photovoltaic Cells in the market / trade parlance. Photovoltaic technology enables direct conversion of sunlight into electricity at the atomic level. Solar Cells are solid state electrical devices that convert sunlight directly into electricity by the photovoltaic effect. To make practical use of the Solar Cells, these are placed in panels or modules. In other words, a solar panel / module is a packaged, connected assembly of Solar Cells. The electrical connections are made to the Solar Cells in series to achieve the desired output wattage and / or in parallel to provide the desired current capability. The Customs tariff classification is indicative only and is in no way binding on the scope of the present investigation.”

• As per the Final Findings of review investigation dated 07.2020 (paragraph 45):

“45. Taking into account the change in the customs tariff headings, the PUC is defined as follows:

“Solar Cells whether or not assembled in modules or panels” classifiable under Tariff Heading 854140 and Tariff Items 85414011 and 85414012 of the Customs Tariff Act, 1975. Solar Cells are also known as Photovoltaic Cells in the market parlance. Photovoltaic technology enables direct conversion of sunlight into electricity at the atomic level and Solar Cells are solid state electrical devices that convert sunlight directly into electricity by the photovoltaic effect. For practical use, Solar Cells are packaged and connected into an assembly and such an assembly of Solar Cells is referred to as a Solar Panel or Solar Module. The electrical connections are made to the Solar Cells in series to achieve desired output wattage and / or in parallel to provide a desired current capability.

The Customs tariff classification is, however, indicative only and is in no way binding on the scope of the product under consideration”.”

33. The following words require to be analysed in order to understand the exact/intended meaning of Solar Cells.

33.1 The definition at all the above places starts with “… Solar Cells, whether or not assembled in modules or panels ….”. This itself gives indication that the Solar Cells which were under consideration were ready in all respects, to be assembled or not assembled in either modules or panels. This also gives an indication that whether or not assembled, but however, they are ready to be marketed as such, without requiring any further scientific or technical process. The same is assumed to be treated or having undergone all such scientific or technical processes and hence, the same is referred to as Solar Cells, when the words ‘market parlance’ only indicate what the market recognizes or is known in the market.

33.2 Now let us consider the next point in the definition.

33.2.2 It is said that for practical use, Solar Cells are packaged and connected into an assembly and such an assembly is referred to as Solar Panel or Solar Module.

33.2.3 What we can understand from this is that a Solar Panel or a Solar Module is complete when Solar Cells are packed and connected into an assembly.

33.3. Now we will get back to the previous sentence in the definition which reads as under:

“Photovoltaic technology enables direct conversion of sunlight into electricity at the atomic level and Solar Cells are solid state electrical devices that convert sunlight directly into electricity by the photovoltaic effect.”

33.4 The last part of the definition reads as under:

“The electrical connections are made to the Solar Cells in series to achieve desired output wattage and / or in parallel to provide a desired current capability.”

33.5 The cumulative effect of the above sentences is that the photovoltaic cells which converts sunlight into electricity are connected so that purported object could be achieved. That means to say the Solar Cell, which has achieved or exhibited the photovoltaic effect, alone is not sufficient, the same should be able to give the desired result for which electrical connections are made. So, it should not just be exhibiting photovoltaic effect, but the same should be capable of carrying into electrical connections with transmitting the electricity so produced in order to achieve the desired object.

34. From the above, it could be understood that the PUC, which was the subject matter of investigation by the competent authority, was finished Solar Cell in all respects and known and recognized in the market parlance as such.

35. Now we have to analyse: whether the product which was imported by the assessee is a Solar Cell in all respects, and hence, the product is the same as under investigation before the competent authority?

36.1 It is the claim of the importer that what was imported by them was Diffused Silicon Wafers which is not a Solar Cell nor is it a like article of a Solar Cell. It is also claimed by the importer that upon import of the Diffused Silicon Wafers, the same is subjected to various manufacturing processes which results in the formation of printed gridlines i.e., busbars and fingers. This is the result of screen printing which is essential for the collection of the electrons that are generated due to photovoltaic effect in a Solar Cell.

36.2 The ordinary Diffused Silicon Wafers, therefore, require a multimeter probe, which records the voltage/current parameters in the immediate vicinity of the probes on the Solar Cell. Therefore, the imported product lacks the basic element of gridlines that performs the function of collection of electricity through fingers and conduction of electricity through busbars.

37.1 The importer has also claimed that the imported product is subjected to 8 various processes which ultimately results in the manufacture of Solar Cells, which is the final product in the market parlance that could be used as such. That product could be marketed as such as a Solar Cell and the same could also be used as it is. The various processes that are claimed to be involved, have been reproduced by us in the earlier paragraphs of this order, and there is also no dispute that four of the above processes are carried out even before the import, at the place of origin itself. To this extent, at least there is no dispute between the parties but however, it is the case of the Revenue that after the process of diffusion which results in the formation of PN junction, itself gives the photovoltaic effect and hence that itself is a Solar Cell. But against this, the importer claims that mere generation of photovoltaic effect is not of any use nor is the objective, but the photovoltaic effect which generates electricity, should be collected and transmitted in order to give completeness.

37.2.1 The process of screen printing involves the usage of a metal slurry, normally Silver paste or Aluminium paste, on the Blue Silicon Wafer, on the front and back side through a set of process of printing machine. The Back Electrode slurry is applied on the back side of the Blue Wafer, which results in the formation of Positive Electrode line. Then, Silver slurry is applied and thereafter, the Blue Wafer is moved to the drying oven where the wafer is dried to ensure that the printed electrode is protected from damage during the further steps of printing.

37.2.2 Once Positive Electrode line is found, the Blue Wafer is further moved to the next process called Aluminium BSF. After applying the BSF slurry on the backside of blue wafer such as re-doping-removing PN junction on the back of the cell, thereby to reduce carrier recombination and increase the voltage. The same is thereafter again dried.

37.2.3 The Blue Wafer is thereafter moved to the next process to form Negative Electrode on the Blue wafer. Busbar slurry is then applied on the front side of the wafer to print the main gridlines on the same, which is essential for collection of photoelectric current and provide a Negative Electrode of the cell and thereafter, the same is again moved into the drying oven.

37.2.4 After the process of applying Silver paste i.e., finger slurry, the Blue Wafer is subjected to the process of sintering. The slurry on the wafer is dried to burn the organic components of the slurry, in order to form a good ohmic contact between the slurry and the wafer.

37.2.5 The final process is the packing process which also requires the handling of the finished Solar Cells in a careful manner. The cells so manufactured are required to be placed as per their efficiency and colour.

38. Now when we have a relook at the report of IIT-M, it has been categorically observed therein that the imported goods that were tested did not have screen printing, did not have busbars and fingers, which means that though photovoltaic effect is observed, that by itself did not mean that the imported product was a Solar Cell in the market parlance.

39. The importance of busbars and fingers are discussed now.

40.1 Busbar is a metallic strip or bar typically housed inside bus bay enclosures. The same are the backbone of most power applications, providing critical interfaces between power modules and the outside world. Busbars wire Solar Cells together to create high voltage. Busbars are the vertical lines within solar cells; they are the metallic wires which carry cumulative current of fingers and are used to interconnect others to develop modules.

40.2 Fingers are the horizontal thin lines within Solar Cells, which are also metallic wires, and they collect current and delivers to the connected busbars. Fingers are integrated with the wafers, while busbars are pasted on the surface of the silicon wafers.

40.3 So even though P and N junctions are present, which no doubt exhibit photovoltaic effect, but unless P and N junction are connected with busbars and fingers, the so-called Solar Cells would not perform the desired function, that is to say, the Diffused Silicon Wafer cannot perform their essential function of photovoltaic or semiconductor device. Contacts are therefore required, which are essential in Solar Cells, to collect the electricity which is generated by the photons induced by carriers which are separated by a charge collection barrier, one form of which is technically called P and N junction. P and N junction in a silicon solar wafer is located within 1 µm [micron] from the surface of the Solar Cell which is exposed to sunlight due to several absorption considerations. The contact placed on the exposed surface are called the Front Contacts and are usually designed to cover minimum area consistent with the ability to collect the electricity produced by the Solar Cells.

41. With the above background, it is essential now to look into the various notifications issued by the Board right from the year 1987 wherein concessions/rebates were extended: –

i. Notification No. 83/87-Cus. dated 01.03.1987

ii. Notification No. 98/91-Cus. dated 25.07.1991

iii. Notification No. 88/94-Cus. dated 01.03.1994

iv. Notification No. 58/95-Cus. dated 16.03.1995

v. Notification No. 64/95-Cus. dated 16.03.1995

vi. Notification No. 13/97-Cus. dated 01.03.1997

vii. Notification No. 25/99-Cus. dated 28.02.1999

viii. Notification No. 21/2002-Cus. dated 01.03.2002

ix. Notification No. 12/2012-Cus. dated 17.03.2012

x. Notification No. 12/2016-Cus. dated 01.03.2016

xi. Notification No. 50/2017-Cus. dated 30.06.2017

41.1 The relevant portion of Notification No. 83/87-Cus. dated 01.03.1987 is extracted below: –

“In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts (Silicon, in the form of diffused wafers, discs or chips, falling under Chapter 38 or Chapter 85) of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), when imported into India for the purpose of manufacture of (semi-conductor devices,) from —

…”

(Emphasis supplied)

41.2 The relevant portion of Notification No. 88/94-Cus. dated 01.03.1994 reads as under: –

“In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the goods specified in column (3) of the Table hereto annexed and falling within one or more Chapters of the First Schedule to the Customs Tariff Act, 1975, specified in the corresponding entry in column (2) of the said Table, when imported into India, for the purpose of manufacture of goods specified in the corresponding entry in column (4) of the said Table (hereinafter referred to as the said finished goods) from so much of that portion of the duty of customs leviable thereon which is specified in the said First Schedule, as is in excess of amount calculated at the rate of 20% ad valorem, subject to the following conditions, namely :-

.
.

.

TABLE

S. No.	Chapter of the First Schedule to the Customs Tariff Act, 1975	Description of goods	Finished goods
(1)	(2)	(3)	(4)
…	…	…	…
10.	28, 38, 29, 71	Dopants or Doping Sources in all forms and with or without precious metal constituents	Semiconductor Devices, Silicon Single Crystals or Wafers.

…”

41.3 The relevant portion of Notification No. 58/95-Cus. dated 16.03.1995 is reproduced below: –

“In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby directs that each of the notifications of the Government of India in the Ministry of Finance (Department of Revenue) specified in column (2) of the Table hereto annexed, shall be amended or further amended, as the case may be, in the manner specified in the corresponding entry in column (3) of the said Table.

TABLE

S. No.	Notification No. and date	Amendment
(1)	(2)	(3)
…	…	…
(3) 6.	123/87-Customs, dated the 1st March, 1987	In the said notification, in the opening portion, for the words “non-conventional forms of energy”, the words “non-conventional forms of energy or silicon ingots/wafers used in the manufacture of solar cells or solar cells or Photovoltaic modules” shall be substituted.

…”

(Emphasis supplied)

41.4 The relevant portion of Notification No. 64/95-Cus. dated 16.03.1995 is also reproduced hereunder: –

“In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the goods specified in column (3) of the Table annexed and falling within one or more Chapters of First Schedule to the Customs Tariff Act, 1975, specified in the corresponding entry in column (2) of the said Table, when imported into India, for the purpose of manufacture of goods specified in the corresponding entry in column (4) of the said Table (hereinafter referred to as the said finished goods) from so much of that portion of the duty of customs leviable thereon which is specified in the said First Schedule, as is in excess of amount calculated at the rate of 15% ad valorem, subject to the condition that in case of import of goods covered by List B of the said Table, the importer furnishes, at the time of importation, to the Assistant Collector of Customs, an undertaking to the effect that :

.

.

.

TABLE

S. No.	Chapter of the First Schedule to the Customs Tariff Act, 1975	Description of goods	Finished goods
(1)	(2)	(3)	(4)
…	…	…	…
28.	38	Silicon in the form of undiffused wafers, discs or chips	Semiconductor devices.

41.5 We also find it appropriate to reproduce the relevant portion of Notification No. 13/97-Cus. dated 01.03.1997, which reads as under: –

“In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the goods specified in column (3) of Table below, and falling under the Chapters of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) specified in the corresponding entry in column (2) of the said Table, when imported into India for use in the manufacture of the finished goods specified in the corresponding entry in column (4) of the said Table, from so much of that portion of the duty of customs leviable thereon which is specified in the said First Schedule, as is in excess of the amount calculated at the rate of,-

.

.

.

TABLE

S. No.	Chapter	Description of imported goods	Description of finished goods
(1)	(2)	(3)	(4)
…	…	…	…
24.	38	Silicon in the form of undiffused wafers, discs or chips	Semiconductor devices.
25.	38,85	Silicon in the form of diffused wafers, discs or chips (with or without molybdenum disc)	Hybrid microcircuit or semiconductor devices.

…”

(Emphasis supplied)

42.1 From the above, we find that there have been numerous notifications, with the first one clearly indicating granting exemption to the imports of silicon in the form of diffused wafers, discs or chips, falling either under Chapter 38 or Chapter 85, which are used in the manufacture of semi-conductor devices. This also gives us a hint of the understanding of the Government that items like Diffused Silicon Wafer / Blue Wafer are only parts which are used in the manufacture of products like semi­conductor devices or Solar Cells.

42.2 The common takeaway from the above notifications is that silicon in the form of diffused wafers, discs or chips, with or without molybdenum discs, classifiable under Chapter 38/85 are always permitted for import and clearance with concessional rate of duty for the purpose of manufacture of the finished product namely, hybrid micro-circuits or semiconductor devices. Solar Cells, which are otherwise called photovoltaic cells, are one of the semiconductor devices and for the manufacturing of semiconductor devices, silicon in the form of Diffused Wafers/Undiffused Wafers has been recognized by the Government as one of the inputs. The clarity available in the form of notifications continued until the last of such notifications by the Government, dated 30.06.2017.

43. It is now equally relevant to analyse reports of experts in the field which are placed on record. Admittedly, report of IIT, Madras has alone been considered by the Commissioner in the impugned order whereas, the appellant has relied on the report of NISE.

44.1 From the reply filed by the importer to the Show Cause Notice, we find that since the importer was clear that the report of IIT-M was inconclusive inasmuch as the same was issued not in conformity with international standards i.e., IEC 60904, as amended, which was also a recognized standard in India as IS Standards 12834:2013, as amended. This prompted the importer to attempt to get the report or at least to get the imported products tested by the Ministry of New and Renewable Energy (MNRE). But it appears from the reply that the MNRE also refused apparently on the ground that the product to be tested was not a Solar Cell in all respects, but only an intermediate product. It appears from the reply to the Show Cause Notice that the appellant-importer was successful in obtaining the test report from NISE, which is an organ of the Ministry of New and Renewable Energy (MNRE), in whose website the testing standards have been prescribed to be in terms of IEC standards and notified Indian standards in accordance with IEC standard. As per the said standard, eight parameters are set for testing the product in order to understand the technical and mechanical characteristics of the Solar Cell. In this regard, it appears that the importer forwarded both the imported Blue Silicon Wafer as it is and also finished Solar Cell which was manufactured by the importer itself.

44.2 The importer has clearly brought out in its reply to the Show Cause Notice itself what the report of NISE revealed and its importance. They have clearly indicated that the said authority did not test the Blue Wafer samples since the same did not qualify as a Solar Cell, referred to the multi-crystalline Solar Cell and the test report showing results for Voltage (open circuit) as 0.63 V, Cell Efficiency as 17.42% and Pmax as 4.28 W (power at maximum power point). The increase in cell efficiency is clearly the result of printing of busbars and formation of fingers which are essential to call the product as a complete Solar Cell. It thus justifies the fact of rejection of Blue Wafers for testing by the NISE since the same was just an intermediate product and not a Solar Cell. The above is placed on record at page 704 of the appeal paper book.

45. We see that as of now, there are two reports available on record: one clearly in favour of the importer, and the other, which is incomplete and inconclusive and apparently testing process was not carried out in terms of international standards, which merely says that the product in question exhibited photovoltaic effect.

46. Not being satisfied, it appears that the importer also approached for a third report from another authority namely, Solar Energy Research Institute of Singapore, which is a specialised research institute in the Solar Cell industry, and sought for testing and a report on the comparison of imported Blue Wafers and the finished Solar Cells. From their reply, we see that even the report of the said Solar Energy Research Institute of Singapore has also been placed on record before the lower authority, but however, the lower authority has not bothered to look into the same at least for the sake of academic interest. The said report of the Solar Energy Research Institute of Singapore has been summarized as under:

1. The finished Solar Cells and Blue Wafers are different in many ways. Finished Solar Cells have front H–pattern metallization grid contact and rear full area metallization contact. The Blue Wafers have no metallization contacts on either of the sides.

2. PL images of the finished Solar Cells have higher PL counts and the front H-pattern grid contact is visible in PL images whereas, in the case of Blue Wafers, they only have lower PL counts and the front contact is not visible in PL images.

3. Effective carrier lifetime could only be measured for the Blue Wafers and not for the finished Solar Cells.

4. I-V measurement could only be measured for the finished Solar Cells since the Blue Wafers did not have electrical contacts. The efficiency of the finished Solar Cells are near about 18.6%.

5. Silver and/or Aluminium elements were detected at the front and rear metallized regions in the case of finished Solar Cells whereas no such elements were detected in the Blue Wafers.

The above is part of the Reply to the Show Cause Notice, placed on record.

47. A harmonious reading of the available test reports and the standards adopted by each of the experts while testing the samples, clearly indicate that Blue Silicon Wafer is just an input and an intermediate product, which could not be compared with or called as ‘Solar Cells’. The Solar Cells in market parlance would emerge only after the formation of busbars and fingers through the process of screen printing and sintering. Hence, the Diffused Silicon Wafer and the ‘Solar Cells’ are different products altogether. In the context of the above, we are tempted to understand that in scientific parameters and so also in terms of marketability / market parlance, the imported Diffused Silicon Wafer is an incomplete, intermediate product which cannot be sold as a Solar Cell in the market and as such, it has no use.

48.1 In the Show Cause Notice, the authority has referred to various technical reports about the Solar Cell technology. The importer has also referred to another set of technical report on the very same subject in order to draw clear difference between the imported Diffused Blue Wafer and a complete Solar Cell. As a response letter of DRI–CZU, which is placed on record, reveals that there was a doubt in the minds of the adjudicating authority and therefore, the said authority sought for clarification from the competent authority – DGTR for classification of the imported product.

48.2 The clarification sought for from the DGTR, has been extracted in the earlier paragraphs of this order, but however, the same are repeated for the sake of convenience: –

i. whether any interested party sought inclusion/exclusion of blue silicon wafers/blue wafers from the ambit of safeguard duty?

ii. whether the understanding of this office (DRI) with regard to the leviability of safeguard duty on silicon wafers was in variance with opinion of DGTR, and if so, to communicate the same with appropriate substantiation.

48.3 It also appears from the record that the DGTR responded to the above communication vide Office Memorandum dated 28.12.2020 per e-mail wherein they have inter alia asked the DRI to seek comments / views of TRU.

48.4 It is surprising to note that when diverse opinion of experts in the field are available, and the authority has also entertained a serious doubt as to the classification of the imported product, had also sought for clarification from the competent authority and the said competent authority had, in turn, asked the Commissioner to seek clarification from the TRU, but however, no such attempt appears to have been made.

48.5 Had there been a sincere attempt in this regard, perhaps the Tax Research Unit would have definitely issued clarification since there were enough and substantial materials already available on record to be looked into by the Tax Research Unit.

48.6 It is also surprising that the adjudicating authority has also not bothered to refer to any of the reports of other experts like NISE or Solar Energy Research Institute of Singapore, but however, proceeded to ignore the same, which is not expected. The authority is expected to consider all such materials which are placed by the party against whom a notice of serious nature is issued, and to adjudicate after considering all such materials and then arrive at proper adjudication order.

49. Hence, we are of the view that the Revenue has jumped the gun in a haste, without analysing all the facts and evidences in the form of scientific/technical literatures vis-à-vis the purpose of application and the PUC.

50.1 Now let us look into the applicability of safeguard duty at the international level. Under the International Trade Law, as per the guidelines of WTO/GATT, the PUC under investigation by the DGTR and the product under import should be one and the same or like article for levy of safeguard duty. It is also a matter of record that the Commissioner himself had entertained a doubt as to whether the PUC and the product imported by the importer in the case on hand were one and the same and as an abundant precaution, the Commissioner thought it fit to seek the clarification from the competent authority which resulted in issuing a letter dated 16.12.2020. This ipso facto proves that there was a possibility that the two products in question are different and it is only a prima facie view. In such a scenario and having approached the competent authority – DGTR for clarifications, the Commissioner should have approached the Tax Research Unit as well as suggested, since any levy of safeguard duty would have wider implications/ramifications thereby affecting the business as well, of the importer and their stakeholders.

50.2 Hence, we have to accept the following factual aspects:

a. The essential function of the Solar Cell is in three­fold i.e., firstly, conversion of heat or light into electricity, which is otherwise called as photovoltaic effect.

b. Secondly, collecting the generated current without loss through fingers and lastly, transmitting the collected electricity through busbars.

c. As per the technical inputs available and as admitted in the Show Cause Notice itself, the last two processes i.e., the collection of electricity and conduction of electricity are two important and vital functions and such functions are created through the manufacturing process undertaken in India.

d. Therefore, it is the submission of the appellant that the item can be called as ‘Parts of Semi-conductor Devices’.

e. In both the dictionary meaning and technical meaning, semi-conductor device means ‘capable of conducting electricity’. Semi-conductor device is a finished and functional product in all aspects, whereas the imported Diffused Silicon Wafer is only an intermediate product and as such, it can only be classified as parts of semi-conductor devices.

f. Nevertheless, it is submitted that the classification has no relevance in determining the scope and ambit of levy of safeguard duty.

g. In the eye of law, determination of classification and levy of duty based upon notification are two independent processes. Though it is not mutually exclusive, in reality, the notification has to be applied based on the text of the language without any import of external language or meaning to the description of the product as described in the notification.

h. In the impugned issue, for the purpose of aid and construction to interpret the words of the Notification, necessarily reliance on the investigation report of the DGTR has to be placed, which gives a complete and unambiguous factual position that the Product Under Consideration was only about a finished product and not an intermediate product.

i. This aspect is the major point proposed in the WTO mechanism as a trade remedy to protect the domestic industry.

51.1 In the light of the above discussions, our observation is that the Revenue is trying to put the cart before the horse, in the sense that they are trying to fit in the case of the present importer into the Notification, whereas, they should have analysed in detail the case of the importer and the product imported, and then check if the product satisfies the definition as per the said Notification.

51.2 In the light of the above discussions, we deem it appropriate to highlight the differences between the product under import and the Product Under Consideration, as below: –

Differences between Diffused Silicon wafer / Blue Wafer (Product Under Import) and Solar Cells (Product Under Consideration) in terms of technical characteristics and market parlance:

S. No.	Criteria / Parameter	PUI	PUC
1	Finished OR intermediate product	Intermediate product and not a finished product.	It is a finished product.
2.	Essential character	It is a diffused wafer and only capable of converting sunlight into electricity and in the absence of screen printing, it is dumb without any essential character.	It has all the essential characteristics such as, capable of converting sunlight into electricity, collecting the electricity through fingers and conducting the electricity through busbars.
3	Ability to perform essential functions	It cannot perform any essential function in the absence of gridlines and electrodes.	It is capable of performing all essential functions of Solar Cells.
4	Processes carried out	Diffused with anti- reflecting coating and no screen printing / no sintering process carried out.	No process is required, since it is a manufactured product. Upon importation, the processes such as screen printing and sintering are carried out. Testing and inspection are also done prior to packing the manufactured Solar Cell.
5	Importance of screen printing	After doping through the process of diffusion, screen printing has to be carried out in horizontal and vertical forms for collection and transmission of electricity.	Solar Cell is a finished product and no further manufacturing is required.
6	Importance of sintering	No sintering process is carried out. As such it is more fragile than a finished product.	It is a manufactured product with diffusion, screen printing and sintering. These processes make the Solar Cell as a complete finished product capable of performing its essential function.
7	Importance of inspection and packing	To market, product testing and inspection and packing are vital and the imported product cannot be inspected since it is an intermediate product which has to undergo manufacturing process on post importation basis.	The finished Solar Cell is inspected and packed for easy transportation and also for safety.
8	Creation of fingers through gridlines	Fingers is a process of creation of horizontal line through intricate manufacturing process by applying silver paste and this process is carried out in India	Finished Solar Cell has fingers and hence, no further processing is required.
9	Creation of busbars with metal paste and metal slurry	Similarly, busbars are created with metallized lines through vertical lines which ensures that the collected current is transmitted without any loss and this process is carried out in India.	Finished Solar Cell has busbars and hence, no further processing is required.
10	IEC 60904- 1; 2006- 2009/IS 12762 Part 11	There is no prescribed standard for testing Diffused Silicon Wafer since it is an intermediate product.	Solar Cells are tested as per the standards specified.
11	Is it capable of being placed on a solar module or solar panel	Not possible since it is an intermediate product and has to undergo intricate and significant manufacturing process.	It is capable of being placed on a solar module or in a panel since it is a manufactured and finished product.
12	Is it a photovoltaic device	It is not a device since it is incomplete / semi-finished and it is only an intermediate product.	It is a device capable of performing all the essential functions of Solar Cell.
13	Is it marketable	Cannot be marketed for making solar panel or solar module.	It can be marketed as such since it has all technical elements and functional utility.
14	Customs Tariff Heading of the Item	8541 90 00 Since it is not a finished semi-conductor device and it is a processed and intermediate product and not a manufactured Solar Cell, which lacks the capacity to perform essential functions.	8541 40 11 under the category of finished Solar Cells – semi-conductor device.

Judicial Precedents:

52.1.1 In the case of M/s. Keltron Power Devices Ltd. v. Collector of Customs, Cochin [1987 (28) E.L.T. 93 (Tribunal)], it has been observed as under: –

“20. It is pertinent to note that a view held by the Collector of Customs (Appeals), in respect to identical goods concerning the same importers, has remained un-assailed by the Revenue, although a remedy of appeal to this Tribunal was available under the provisions of the Customs Act. We are alive to the proposition that this Tribunal is not bound by such an order but it cannot be disputed that an order inter-partes remaining unchallenged, and without any further material being disclosed which could establish that the view was erroneous, the Tribunal can certainly endorse such an order, with approval. Thus, keeping that factor in view, while in no manner being guided by the said order-in-appeal; we, on our own, come to the conclusion that the ‘exclusion clause’ of Column-4 to Notification No. 172/77-Cus would not take within its compass the imported goods, which were merely in the form of ‘diffused chips’ and had to undergo various intricate and technical processes to reach the stage of ‘semi conductor devices’, and which have been certified by the Department of Electronics (DGTD) to have been only in the nature of ‘raw material’ or components for manufacture of ‘semi conductor devices’.

21. We have already observed that the respondent has not placed any material before us to show them otherwise. We, therefore, in the result hold the appellants entitled to benefit of Notification No. 172/77-Cus dated 3­8-1977, in all these cases, in respect to the said goods while holding them classifiable under T.I. 85.18/27(1) of the CTA.”

52.1.2 In the above referred case, two issues apparently were considered: first one was about the classification of ‘diffused chips’ and the second one was whether the diffused chip was an intermediate product or a semi finished product or a raw material. The Ld. co-ordinate Bench has categorically held that the diffused chips are only in the nature of raw material or component for the manufacture of semi-conductor devices and various intricate and technical processes have been carried out to reach the stage of semi-conductor device. It, therefore, denotes that a diffused chip as such is not a semi­conductor device in itself.

52.1.3 The same analogy would apply to the case on hand. It boils down to the fact that the imported item is only a raw material or semi-finished product which is used in the manufacture of Solar Cells.

52.2 The ratio laid down in M/s. Keltron Power Devices Ltd. (supra) has been followed by the Tribunal, New Delhi in the cases of M/s. Semi-Conductors Ltd. v. Collector of Customs [1989 (42) E.L.T. 236 (Tribunal)] and M/s. Bharat Heavy Electricals Ltd. v. Collector of Customs, Bombay [2002 (149) E.L.T. 79 (Tri. – Del.)]. The order in the case of M/s. Semi-Conductors Ltd. (supra) was appealed before the Hon’ble Supreme Court, but the same was dismissed by the Hon’ble Supreme Court as reported in 1997 (93) E.L.T. A131 (S.C.). In the order of M/s. Semi-Conductors Ltd., the order in the case of M/s. Keltron Power Devices Ltd. (supra) was followed and hence by the doctrine of merger the order in M/s. Keltron Power Devices Ltd. has thus attained finality. We also find that it has been clearly demonstrated by documentary evidence that substantial value addition has been made in India by the appellant on the semi-finished / intermediate product and due to such intricate manufacturing process, the ‘Solar Cell’ has emerged, which is a new product that could be sold / marketed as such.

52.3 In the case of In Re: Purbachal International and Another [1985 (21) E.L.T. 673 (Cal.)], the Hon’ble High Court has observed as under: –

“5. ….

…. In this connection, reference may also be made to the decision of Supreme Court of India in Dunlop of India Limited v. Union of India, reported in = 1983 E.L.T. 1566 (S.C.) – (1976) 2 S.C.C. Page 241 in which it was held by the Supreme Court that “in interpreting the meaning of word in a Taxing Statute, the acceptance of a particular word by the trade and its popular meaning should commend itself to be authority. So meanings given to articles in a fiscal statute must be as people in trade and commerce conversant with the subject generally treat and understand the same in the usual course and that technical and scientific tests offer guidance only within limits. Once the articles are in circulation and came to be described and known in common parlance, the Court should find as difficulty for statutory qualification under a particular entry. In the instant case, in view of the definition of cement as provided in paragraph 2(a) of the Import Cement (Control) Order, 1978 read with a Press Note issued by the Central Government and the authoritative publication made in the Indian Standard Institution treating while portland cement as a different commercial commodity to that of ordinary low heat portland cement, it must be held that in commercial parlance the two commodities are known as two different commercial commodities and that there is no scope for contending merely on the basis of some chemical test contrary to the chemical analysis published by the Indian Standard Institution to hold that white cement and ordinary cement are same commodity. The important test for determining whether white cement and ordinary cement is one commercial commodity or not. is that if a customer asks for cement from a cement dealer, whether, the cement dealer will give him or offer white cement, or not, certainly, a cement dealer will not offer white cement in such a case. The value of the two commodities are different, its chemical composition and uses arc quite different. In commercial world it is treated as two different commercial commodities. Even the Central Government treated the same as two different commodities. It is also well-established principle of law that in interpreting a particular commodity the dictionary meaning and technical meaning should not he adhered to and that in a Taxing Statute word of every day use-must be construed not in their scientific or technical sense, but as understood in commercial parlance. Reference may be made in this connection to the decisions of Supreme Court of India in Ramavatar Budhai Prasad v. Assistant Sales Tax Officer, Akola, AIR 1961 S.C. 1325: M/s. Motipur Zamindary Company v. State of Bihar. AIR 1962 S.C. 660 and State of West Bengal v. Washi Ahmed, AIR 1977 S.C. 1638 and Porritia and Spencers (Asia) Limited v. State of Haryana, reported in 1983 E.L.T. 1607 (S.C ) = AIR 1979 S.C. page 300. In view of the above decision of the Supreme Court and in view of the statutory definitions of cement under the Imported Cement (Control) Order, 1978 and the booklets issued by the Indian Standard Institution it is no longer open for the Collector of Customs to ignore such definition and to contend that the cement in the market parlance also includes white cement. Such a view taken by the Collector of Customs is without any basis or materials on record and such a finding on the face of it is perverse. A perverse view taken contrary to the view prevailing in the market parlance and commercial parlance in the facts and circumstances of the case cannot be accepted.”

52.4 In the case of Collector of Central Excise v. M/s. Jayant Oil Mills Pvt. Ltd. [1989 (040) E.L.T. 287 (S.C.)], the Hon’ble Supreme Court of India had an opportunity to decide whether Rice Bran Oil used in soap manufacturing is an Oil or Fat for the purpose of classification. On account of the reason that the Rice Bran Oil was in solid condition, the Revenue authority at the original stage sought to classify it as a Fat and to charge higher rate of duty and accordingly, the original authority charged higher rate of duty. However, in the appeal before the Appellate Collector and before the CEGAT, it was held that the item manufactured was Rice Bran Oil which was in solid state and had to be classified as Oil and not as Fat. Aggrieved by the said decision of the Tribunal, an appeal was filed before the Hon’ble Supreme Court and appreciating the technical characteristics and common market parlance, the Hon’ble Supreme Court upheld the decision of the CEGAT and observed that: –

“22. The Tribunal in both the appeals had taken into consideration all relevant and material factors, and market parlance and borne in mind the correct legal principles. The decision of the Tribunal, therefore, cannot be assailed.”

In the present case also, the technical characteristics and the common market parlance have to be given primacy for the purpose of determination as to whether it is a Solar Cell or not. We have held in the previous paragraphs that the product in import is neither a complete functional product nor accepted as a Solar Cell in the market by consumers.

52.5 In the case of Collector of Central Excise, New Delhi v. M/s. United Felt & Carpet [1999 (111) E.L.T. 807 (Tribunal)], the issue was as to whether to classify and tax a semi-finished floor covering felt as finished goods or not. It was held by the Tribunal, on the basis of market parlance, that semi-finished goods are not finished goods and observed as under: –

“4.  As against the above contentions of the Revenue, the impugned order has held that the item in question does not satisfy the requirements for classification as felt under sub-heading 5602.90. The order notes that the item is neither felt according to the generally accepted identity of felt or the definition of needle loom felt. The order also notes that under commercial or market parlance the item is not treated or recognised as felt. The order further notes that Revenue has produced no material to show that the impugned goods are marketed or marketable as felt at the stage at which they are removed from the respondents’ factory, while respondents have produced technical and trade opinions from I.I.T., Delhi and from traders to show that they are not recognised as felt technically or commercially.”

53.1 The first issue is with regard to the determination of classification. In the impugned order, the Commissioner has held that the imported Diffused Silicon Wafer has to be classified under CTH 8541 4011 under the specific entry of Solar Cells. The adjudicating authority has reached the said conclusion with the aid and support of Rule 2(a) of the General Rules of Interpretation. It was the observation of the Commissioner that the imported Diffused Silicon Wafer has the capacity to convert sunlight into electricity, which is otherwise called ‘photovoltaic effect’ and hence, held that it has the essential characteristics of Solar Cells. On the contrary, it was the submission of the appellant that the imported product is only an intermediate product and not a finished product. In the context of the manufacturing process as explained by the appellant and also keeping in mind the ratio laid down in M/s. Keltron Power Devices Ltd. (supra), this issue is required to be considered.

53.2 There is no doubt that the imported item is a Diffused Silicon Wafer / Blue Wafer and will fall outside the ambit of CTH 3818. Those items which are more extensively worked by way of selective diffusion will fall in Heading 8541 as semi-conductors, and as per the facts available on record, through the diffusion process and doping which have taken place on the Wafer, the imported item is appropriately classifiable under CTH 8541.

53.3 At the same time, it is the contention of the appellant that the imported product is not classifiable under CTH 8541 4011 as Solar Cells. The reason explained by the appellant was that the imported Diffused Silicon Wafer / Blue Wafer has no screen printing with fingers and busbars and hence, not capable of performing essential function of a Solar Cell. It was also explained that Rule 2(a) of the General Rules of Interpretation deals with determination of classification of an incomplete or semi­finished article which is capable of performing essential function.

53.4 In the report of IIT, Madras and in the documentary evidence furnished by the appellant, it is an unambiguous fact that the imported item has neither fingers nor busbars and thus, it lacks the capacity to collect electricity and conduct electricity. Solar Cell as a device, in technical parlance and market parlance, should have the capacity to convert sunlight intro electricity, collect the converted electricity through fingers and, ultimately conduct the electricity through busbars. Only upon completion of the post importation activity in India by way of screen printing, that the collection of electricity and conduction of electricity becomes possible, thereby achieving the desired result. Hence, the imported Diffused Silicon Wafer as such has no capacity to perform the essential function of a Solar Cell. Therefore, the imported item is not classifiable under the specific heading of Solar Cell, i.e., CTH 8541 4011. Also, at the time of import, it has not attained the status of a finished semi-conductor device. It is also noteworthy here that CTH 8541 9000 deals with Parts of Semi-conductor devices. As per the scheme of arrangement of various Headings and Sub-Headings of CTH 8541, it is found that CTH 8541 deals with finished goods and also parts of semi­conductor devices and covered under CTH 8541 90. There is no specific entry for an incomplete or an intermediate product. Though in a conventional sense, the imported Diffused Silicon Wafer is not a part of Solar Cell, for the purpose of classification, it has to be dealt as a product other than a finished Solar Cell. The imported item cannot be equated with a finished Solar Cell. A Solar Cell is manufactured from diffused Silicon Wafer and hence, the imported item is only a raw material or a base material or can be considered as a part or intermediate product for manufacture of Solar Cell. Considering the arrangement of Tariff, intermediate / semi-finished product is equated as parts of semi-conductor devices and thus, the contention of the appellant that the same is classifiable under CTH 8541 9000 is acceptable.

53.5 We also emphasize here, that in the definition of ‘Product under Consideration’, the competent authority in its findings, had given importance and significance only to the description of the product and the Tariff Heading of the product is only for reference and indicative purposes. Therefore, change of classification has no direct impact on the determination of levy of safeguard duty.

54. In view of the above discussions, we are of the view that the product imported was clearly different and distinct from the Product Under Consideration and therefore, the same did not attract safeguard duty. Hence, the demand of safeguard duty as confirmed in the impugned order and the reclassification of the product imported is unsustainable, for which reason the impugned order is set aside. Therefore, both the second and third issues are answered, in favour of the appellant.

55.1 We find that at the time of import, the classification sought by the appellant was under CTH 3818 whereas in the Show Cause Notice as well as the impugned Order-in-Original, the Revenue decided that the imported item being Diffused Silicon Wafer, has to be classified under CTH 8541 under the category of ‘Finished Solar Cell’. On the ground of mis-classification, confiscation of the imported goods was ordered and penalty was also imposed along with redemption fine. In the peculiar facts, we have to see whether the change of classification from CTH 3818 to CTH 8541 will have any adverse impact on the interests of the Revenue.

55.2 On the date of import, admittedly, the classification was sought under CTH 3818 and the appellant also availed the benefit of exemption from payment of Basic Customs Duty in terms of Sl. No. 1 of Notification No. 24/2005 (Customs) dated 01.03.2005, as amended. It is also significant to note that the said Notification, as amended, vide Sl. No. 23, also grants exemption from Basic Customs Duty to goods classifiable under CTH 8541. Therefore, on the date of import, the goods classifiable under both CTH 3818 and CTH 8541 were exempt from payment of Basic Customs Duty and as such, no motive is found on the part of the appellant to avail any undue benefit or to cause any revenue loss. Moreover, it is also ascertained that as on the date of import, the goods classifiable under CTH 3818 attracted 12% I.G.S.T. whereas, the goods classifiable under CTH 8541 attracted 5% I.G.S.T. Hence, overall evaluation of the rates of duty provides the factual clarity that the change of classification will have no impact on the interests of the Revenue. We also find that the appellant itself had submitted a letter to the office of the DRI for revision of classification even prior to the issuance of the Show Cause Notice.

55.3 It is the settled position of law that in cases where classification of goods is involved, confiscation by re-classifying the same is not possible, that too alleging mala fide intention, since, in our view, the same amounts to a different view adopted by the authorities. Hence, it becomes necessary for the Revenue to establish mala fide intention on the part of an importer for classifying the goods under import and in the absence of any proof, there will be no scope to suspect the bona fides of an importer.

We find support from the decision of the Hon’ble Supreme Court in the case of Union of India v. M/s. Garware Nylons Ltd. [1996 (87) E.L.T. 12 (S.C.)] wherein, at paragraph 15, it has been categorically held as under: –

“15. In our view, the conclusion reached by the High Court is fully in accord with the decisions of this Court and the same is justified in law. The burden of proof is on the taxing authorities to show that the particular case or item in question, is taxable in the manner claimed by them. Mare assertion in that regard is of no avail. It has been held by this Court that there should be material to enter appropriate finding in that regard and the material may be either oral or documentary. It is for the taxing authority to lay evidence in that behalf even before the first adjudicating authority. Especially in a case as this, where the claim of the assessee is borne out by the trade inquiries received by them and also the affidavits filed by persons dealing with the subject matter, a heavy burden lay upon the revenue to disprove the said materials by adducing proper evidence. Unfortunately, no such attempt was made. As stated, the evidence led in this case conclusively goes to show that Nylon Twine manufactured by the assessees has been treated as a kind of Nylon Yarn by the people conversant with the trade. It is commonly considered as Nylon Yarn. Hence, it is to be classified under Item 18 of the Act. The Revenue has failed to establish the contrary. We would do well to remember the guidelines laid down by this Court in Dunlop India Ltd. v. Union of India [1983 (13) E.L.T. 1566 (SC) = (AIR 1977 SC 597 – at page 607)], in such a situation, wherein it was stated :-

“……………….. When an article has, by all standards, a reasonable claim to be classified under an enumerated item in the Tariff Schedule, it will be against the very principle of classification to deny it the parentage and consign it to an orphanage of the residuary clause.” (Emphasis supplied)”

The above decision has thereafter been followed by various judicial fora.

55.4 In that view of the matter, imposition of penalty under Section 112 and/or fine, as confirmed in the impugned order, does not stand and consequently, the same is set aside.

56. In the result, the impugned order dated 09.12.2022 is set aside and appeal stands allowed with consequential relief, if any, as per law.

(Order pronounced in the open court on 03.08.2023)