JMK Energy Vs Commissioner of Customs (CESTAT Delhi)
CESTAT Delhi held that simply because there are four other alternative means through which Portable Solar Home Electric Light – HANS 300 and HANS 150 can be charged, it doesn’t mean that they are not solar power based devices.
Facts- M/s JMK Energy, New Delhi filed this appeal to assail the order-in-original dated 14.08.2020 passed by the Commissioner of Customs, Patparganj, ICD, New Delhi whereby the appellant’s classification of imported goods under Customs Tariff Heading No. 85131010 and IGST S. No. 234 of Schedule I of Notification No. 1/2017-IGST (Rate) dated 28.06.2017 was rejected and the imported goods were held to be classifiable under CTH 85076000 and covered under S. No. 139 of IGST Schedule IV of Notification No. 1/2017-IGST (Rate) dated 28.06.2017 . Differential amount of IGST of Rs. 2,25,99,024/- was ordered to be recovered under Section 28(1) of the Customs Act, 1962 along with interest under Section 28AA. Penalty of Rs. 22,60,000/- was imposed under Section 112 and penalty of Rs. 1,00,000/- was imposed under Section 117 of the Act.
Conclusion- The imported goods in question ‘Portable Solar Home Electric Light – HANS 300 and HANS 150’ are designed for the purpose of performing several complementary or alternative functions viz. (a) generation of electricity solar energy; (b) storing the electricity so generated or collected through four other different means; and (c) supplying electricity to the in-built LEDs as well as for charging mobiles and running electrical devices. Evidently, their heart is the storage which can be done by five different means, one of which is charging using in-built solar panel. The power so generated can be used for several purposes and not only for using the LED lamps built into it the goods. Thus, they have multiple inputs and multiple output options. The imported goods can be used regardless of which input source is used or what the output purposes are but they cannot be used without the accumulator. Therefore, they deserve to be classified as accumulators under CTH 8507.
Held that simply because there are four other alternative means through which they can be charged, it does not mean that the imported goods are not solar power based devices. Therefore, the imported goods are not solar power based devices. Therefore, the imported goods merit classification under 234 of Schedule I of Notification No. 1/2017-IGST (Rate) dated 28.06.2017. Consequently, the demand for IGST differential duty along with interest cannot be sustained.
FULL TEXT OF THE CESTAT DELHI ORDER
M/s JMK Energy, New Delhi1 filed this appeal to assail the order-in-original dated 14.08.20202 passed by the Commissioner of Customs, Patparganj, ICD, New Delhi whereby the appellant’s classification of imported goods under Customs Tariff Heading3 No. 85131010 and IGST S. No. 234 of Schedule I of Notification No. 1/2017-IGST (Rate) dated 28.06.2017 was rejected and the imported goods were held to be classifiable under CTH 85076000 and covered under S. No. 139 of IGST Schedule IV of Notification No. 1/2017-IGST (Rate) dated 28.06.2017. Differential amount of IGST of Rs. 2,25,99,024/- was ordered to be recovered under Section 28(1) of the Customs Act, 19624 along with interest under Section 28AA. Penalty of Rs. 22,60,000/- was imposed under Section 112 and penalty of Rs. 1,00,000/- was imposed under Section 117 of the Act.
2. The facts of the case, in brief, are that the appellant imported goods described as ―Portable Solar Home Electric Light – HANS 300 and HANS 150‖5 under five bills of entry classifying them under CTH 85131010 and S. No. 234 of Schedule I of IGST Notification No. 1/2017-IGST (Rate) dated 28.06.2017. At this stage, it needs to be pointed out that a vast majority of the goods which are imported into the country are cleared on the basis of self assessment of duty by the importer under Section 17(1) while some goods are re-assessed to duty under Section 17(5). If the goods are cleared on the basis of self assessment, the bills of entry are audited after clearance and this process is commonly referred to as Post Clearance Audit.
3. CTH 85131010 reads as follows:
“85.13 – Portable electric lamps designed to function by their own source of energy (for example, dry batteries, accumulators, magnetos), other than lighting equipment of heading 85.12.
851310 – Lamps;
85131010 – Torch………
4. During Post Clearance Audit of the above bills of entry, it appeared that this heading was meant for torches with self contained source of the electricity whereas the imported goods were not merely torches but had several features and, therefore, were composite machines and torch or lamp was only their minor feature. They store electricity of 300 watt hours or, as the case may be, 150 watt hours. They are portable and come with an inbuilt solar panel and the battery can be charged by either placing the device in sun or through four other methods. These are:
(i) Household outlet (domestic electricity);
(ii) DC Car Charger (sold separately);
(iii) Human Power Generator (HPG);
(iv) Built in solar plus solar Briefcase (sold separately).
5. It was also found that in addition to the in-built LED lamps, the imported goods can be used for several other purposes such as charging mobile phones through USB ports, operating small electric devices such as computers and televisions through a 12 volt port.
6. It is undisputed that the imported goods have all these features viz., a solar panel which generates power, a battery which stores it and the LED lights. It is also undisputed that the battery can be charged through by five different ways including through the in-built solar panel. It is also undisputed that in addition to the LED lamp, the imported goods can be used for other purposes such as charging mobile phones or running computers and televisions.
7. The case of the Revenue is that the imported goods should be classified as per their main function which is that of an accumulator. According to the Revenue, the in-built solar panel is only one of the five methods for charging the accumulator and the LED lamps in the goods are only one of the methods by which they can be used. Their other uses including charging mobile phones or running small electrical equipment show that the essential nature of the device is that of an accumulator. This accumulator can be charged through five different methods including in in-built solar panel and can be used for several purpose including for light through the in-built LED lamps. Accordingly, the imported goods should be classified under CTH 85076000. Further, according to the Revenue, the imported goods merit classification under S. No. 139 of Schedule IV of IGST Notification No. 1/2017-IGST (Rate) dated 28.06.2017 and not under S. No. 234 of Schedule I of this notification.
8. A show cause notice dated 7.2.2020 was issued to the appellant and after considering the reply submitted by the appellant the impugned order was passed.
9. In its reply, the appellant took the stand that not only are the goods are classifiable under S. No. 234 of Schedule I of the IGST notification but they are liable to be classified under CTH 85013120 and, therefore, not only was the appellant not liable to pay the IGST at higher rate but it was also eligible for refund of the excess basic customs duty paid by wrongly classifying the imported goods under 85131010. The reason for this assertion is that, according to the appellant, the main function of the imported goods is that of solar generator and neither are they solar lamps nor are they accumulators. Having generated solar power, it has to be stored and it is being stored in the battery. The other means of charging the battery are only alternative means of charging provided in them. The imported goods are, therefore, to be classified as electric generators under 8501.
10. The prayer in the appeal before us is as follows:
(i) Set aside the impugned OIO dated 14.08.2020 passed by the Commissioner, Customs, ICD Patparganj and other ICDs Delhi and allow the appeal in full with consequential relief to the Appellants;
(ii) Grant refund of the excess tax paid by the appellant;
(iii) Provide an opportunity of cross-examining Sh. Vinod Kumar Goel, the Chartered Engineer whose report is relied upon in the OIO;
(iv) Pass such other order or orders as may be deemed fit and proper in the facts and circumstances of the case;
(v) Provide an opportunity of being heard.
11. On behalf of the appellant, the following submissions were made:
(i) Since the imported goods are undisputedly solar power based devices they fall under S.No. 234 of Schedule-I of IGST Notification No. 1/2017-IGST (Rate) dated 28.06.2017. There is no dispute that they have solar panels. The AC power is only an alternative source for charging their device as a backup mechanism. S. No. 234 of Schedule I and S. No. 139 of Schedule IV of the notification read as follows:
