Customs, Excise and Gold Tribunal - Delhi
Tata Liebert Ltd. vs Commissioner Of Central Excise on 7 December, 1999
Equivalent citations: 2000(67)ECC245, 2000(117)ELT817(TRI-DEL)
ORDER P.S. Bajaj, Member (J)
1. The issue referred to this Bench is as to whether uninterrupted power supply system (UPS) is classifiable under Heading No. 85.04 or 85.43 of Chapter 85 of the CETA.
2. The necessity for this reference had arisen due to the conflicting judgments of the different Benches of the Tribunal on this issue. In J.K. Synthetics Ltd. v. CCE, Jaipur 1995 (80) E.L.T. 208 (T) the Tribunal had taken the view that UPS is classifiable under Heading 85.43, whereas in Mangalore Chemicals & Fertilizers Co. Ltd., 1997 (93) E.L.T. 548 (T) the Tribunal had expressed the view that UPS is classifiable as static converter under Heading 85.04. In that case the Bench while differing with the view taken in the J.K. Synthetics, supra, opined for making reference to the Larger Bench.
3. In CCE v. M/s. Eppelectone Engineers decided vide Final order No. E/1691/98-B1, dated 13-11-1998 the Tribunal had also taken the view that UPS is classifiable under Heading 85.04 of the CETA.
4. Before reverting the contentions of the parties on merits, it would be beneficial to refer to both the Headings 85.04 and 85.43 :-
"83.04 - Electrical transformers, static converters (for example, rectifiers) and inductors85.43 - Electrical machines and apparatus, having individual functions, not specified or included elsewhere in this chapter"
4. The learned counsel for the assessees has contended that UPS is similar in composition and function, to that of static converter and both ' are called emergency power packs and that the interrupted supply by the UPS is only its secondary function. Therefore, UPS deserves to be classified as static converter under Heading 85.04. In support of his contention, the counsel has tried to draw support from these documents-
(1) Circular No. 40/90 of the Board, (2) Classification opinion of HSN, (3) ITC HS Code issued under Section 4 of the FDR, (4) Customs Notification No. 57/95 and (5) HSN Explanatory Notes
5. On the other hand, while refuting this contention of the counsel, the learned JDR has contended that UPS is quite distinct in composition, function from static converter and as such cannot be classified along with it under Heading 85.04, but has to be classified under Heading 85.43.
6. In order to appreciate the contentions of the counsel and the learned JDR, it is essential to know the definition, types, composition and functions of the static converter and UPS, from the literature supplied by both the sides.
Static Converter -
A static converter is a device that converts alternating current (AC) power to direct current (DC) power without the use of any moving device i.e. motor, generator etc. It is used to supply DC power to the appliances that are designed to run on DC power. It is economical alternative to DC batteries.
The static converter is of two types (i) Single phase and (ii) Three phase. The single phase converter converts single phase AC supply to DC, whereas the three phase converters converts three phase AC supply to DC. Both these types may either have half wave rectifier or full wave rectifier and that rectifier may either be a controlled or uncontrolled type. The difference between half wave and full wave type converter is that in the case of former, the DC output is not always exactly DC, it may be varying while in the latter case, the DC output is more close to regular DC. Similarly, in the case of uncontrolled rectifier converter, the output voltage will depend upon the level of input voltage and which cannot be further controlled, whereas in controlled rectifier converter, the output DC voltage obtained is variable and controllable.
7. The components of the converter are :-
(1) Transformer - It is used for stepping up or stepping down the input voltage to match the required output voltage.
(2) Rectifier Unit - It converts the AC voltage into DC voltage and comprises of diodes for uncontrolled type and thyristors for controlled type converter.
(3) Filter Unit - This smoothens the variations in output voltage of the rectifier unit and makes the output voltage less pulsating.
UNINTERRUPTED POWER SUPPLY (UPS) Definition - UPS is a combination of both electrical and electronics systems designed to provide a total continuity of AC power even in the absence of mains power. UPS draws AC power from the commercial Line and processes it to a required condition and at the same time charges the battery which is connected to it. Even if the AC mains fail, it provides an output voltage (without any interruptions) from the battery sources.
The UPS can be broadly classified into two categories - (1) Rotary type and (2) Static Type Rotary Type - It is made of mainly these components - (i) DC Motor, (ii) Fly wheel, (iii) AC Generator, (iv) Battery Bank, (v) Rectifier Units and (v) Transfer Switch The DC motor and AC generator are coupled to the same shaft, with a flywheel in between them. The AC main is Stepped down, rectified, filtered and supplied to the DC motor (Simultaneously charging the battery). The DC motor and the AC generator, keep on running and the generator output is given to the equipment. When the AC mains fail, the DC motor keeps on running with the help of the battery. There will be no interruption in the supply to the load during the change over period, due to the huge flywheel which keeps the generator running without much loss of speed. Even though this type of UPS is outdated, it is used in some of the bigger installations.
Static Type -
The static type of UPS are known for compactness and silent operation as they make use of electronic components and even micro-processors. This type of UPS can be divided into two broad categories - (1) Off-line or stand-by UPS and (2) On-line or line preferred UPS or Line interactive UPS.
The latest entry in the On-line UPS is intelligent on line UPS or Smart UPS.
Off-line UPS -
In OFF line UPS, the output is directly connected to the commercial AC mains via transfer switch and at the same time the AC mains is stepped down, rectified, filtered and given for charging the batterybank. From the battery bank, it is given to the inverter section and from there it is given to the transfer switch. Whenever the AC mains fails, the transfer switch switches the load to the inverter section, which is driven from the battery bank. A relay which is used in the UPS system to sense the failure of the AC main triggers the inverter. The switch over takes time of only 25 to 50 milli seconds.
On Line UPS -
In the case of ON Line UPS, the AC mains from the commercial line is stepped down to the voltage which is equal or slightly more than the voltage in the battery bank and then it is rectified, filtered and given to the battery bank to charge the battery and thereafter to the inverter section. The output voltage from the inverter section is given to the transfer switch and then to the load. Even if the AC mains fails in the commercial line, the voltage is provided to the load from the inverter section which is driven by the battery bank, thus avoiding all kinds of distortion from the commercial line. If the problem arises due to battery bank or inverter section, suddenly the transfer switches the load to the AC commercial line within a time of 25 to 50 m seconds, thus providing a continuous voltage.
The ON line intelligent or Smart UPS has certain additional features also, i.e. Intelligent battery management indicating its status load bar graph and battery charge graph to indicate percentage of load and charging of battery, while its Smart Boost corrects a low mains AC condition and smart Trim corrects high mains AC condition. It has got Power management software for unattended operation of computer systems, power quality related data logging and also shut down notification and controlr autostart, diagnostics and battery conservation features.
Components of a Static UPS The blocks which are present in the static type UPS, are- (1)Rectifier/Battery charger, (2) Static inverter (3) Transfer switch (4) Battery Bank.
Rectifier/Battery charger The AC mains which is received from the commercial line is firstly stepped down to a required voltage (the voltage depends upon the design of the UPS) and then rectified and given to the inverter section. It is used for charging the battery bank and is kept in a floating condition.
Static Inverter It is the main block or the main section of the UPS since it determines the quality of the power delivered to critical loads. It converts DC to AC with fixed frequency and closely regulates the output voltage, even if there is any variation in the DC input and also the load which is connected. The basic block of the inverter consists of one or more basic power stages using power semiconductor switches such as SCRs, transistors, IGBTs, MOSFETs etc. to covert DC to a square wave AC power. Transfer Switch Transfer switch is nothing but a simple relay used in some UPS systems to sense the loss of the mains AC and trigger the inverter simultaneously connecting the output load to the inverter or to the AC commercial line depending upon the type of UPS. It will switch the output load to the inverter within 25 to 50 m seconds.
Battery Bank -
The battery is considered to be the heart of the UPS. Without the battery the UPS cannot be considered functional.
8. From the above referred definitions, the components and types of the static converter and the UPS, points of similarities and dissimilarities can be easily drawn. The points of commonality between the two are - (1) both may have transformers with rating depending upon the output power and (2) both have rectifier and filter units having rating again depending upon the output power.
9. The points of dissimilarity between these two apparatus can be summed as under :-
(1) A static converter converts AC power to DC power i.e. it draws AC power from the mains and supplies DC power to the load. This supply of DC power is made by the static converter only as long as AC mains power is available, whereas the name itself indicates the UPS must supply AC power to the load uninterruptedly. The UPS normally draws AC power from the mains and supplies AC power to the load. Even in case of failure of AC mains supply, UPS supplies AC to the load drawing power from the battery :
(i) Battery is not a part of static converter, whereas UPS is not complete without the bank of batteries.
(ii) The static converter does not have a inverter unit whereas a UPS is incomplete without an inverter unit.
(iii) A UPS has a transfer/by-pass switch that connects the AC mains directly to the load, while it is not so in the static converter.
(iv) The static converter, consists of transformer, rectifier and filter units, whereas all these components just form one of the functional blocks, sub-systems of the UPS.
10. Keeping in view the above referred points of distinction which are much more than the points of commonality, it is difficult to conclude that UPS and static converter are one and the same apparatus, though both may in common parlance be known as emergency power packs, apparatus.
11. The documents referred to by the learned counsel in support of his contention, also do not in any manner advance the plea of the assessees that UPS deserves to be classified under heading 85.04 by treating it as static converter. The circular No. 40/90, dated 10-10-1990 referred to by the counsel, only containted opinion of the Central Board of Excise & Customs. The Board in its wisdom, after taking into consideration the deliberations held at the Conference of the Collectors of Customs and Central Excise on 13th & 14th September 1988 at Goa, and also HSN Explanatory Notes, issued this circular that UPS merits classification under Heading 85.04. But this circular was before the judgment of the Tribunal in J.K. Synthetics case(supra) was withdrawn by the Board by another circular No. 25/96-Cus. dated 24-4-1996. Therefore, this circular is no longer in force or existence. Even otherwise this circular was issued by the Board on the basis of the opinion expressed by the Collectors at the time of Conference at Goa. How and in what manner the conclusion was arrived at in the Conference of Collectors of Customs and Central Excise remains undisclosed in this circular. No points of similarities and dissimilarities of the UPS with the static converter were given in this circular. The observations of the Apex Court relied upon by the counsel in Paper Products Ltd. v. CCE, 1999 (112) E.L.T. 765 (S.C.) that circular issued by Central Board of Excise & Customs and is binding on the departmental authorities, are of no avail to the assessees in this case, when the circular in question had already been withdrawn by the Board itself. Therefore, the Revenue department is not estopped from contesting the plea of the assessees that UPS is classifiable as static converter under heading 85.04. Keeeping in view the composition, function and the points of dissimilarities pointed out above, it is not justiciable to hold that UPS and static converter are one and the same apparatus for the purpose of classification under Heading 85.04.
11. Similarly, ITC (HS) Classification of Export and Import Items, referred by the learned counsel, had been issued by the Ministry of Commerce, Government of India making classification of static converter under Heading 850400.00 and of the UPS under Heading 850440.40 is not of any avail to the assessees in the present case. This classification had been made by the Ministry of Commerce for the purpose of determining the export and import duties on these two apparatus. This classification has nothing to do with the classification which is required to be made in this case under the Central Excise Tariff Act. That classification can be relied upon by the assessee only when they intend to import these apparatus, in order to claim concessional rate or nil rate of Customs duty thereon. The exigibility of both these apparatus under the Central Excise Tariff has to be in accordance with the Tariff Headings under which they respectively fall.
12. The Customs Notification No. 59/95-Cus., dated 16-3-1995 as amended by Notification No. 175/95-Cus., dated 29-12-1995 relied upon by the counsel also does not advance the case of the assessees. This notification had been issued under the Customs Tariff Act only for the purpose of charging Customs duty at a particular rate on the goods specified therein and as such the classification of the UPS, mentioned in it under Heading 85.04 of that Tariff, cannot be legally read for the purposes of Central Excise Tariff Act as both these Tariff Acts have been enacted for different purposes. Therefore, the classification of a particular item for Customs duty under a specific heading/sub-heading of the Customs Tariff Act, cannot be applied to that item, under the Central Excise Tariff Act.
13. Likewise, the HSN Explanatory Notes pertaining to Sections XVI to XXI - Chapters 85 to 97 issued by Customs Cooperation Counsel, referred to by the learned counsel classifying Electrical Transformers, static converters (for example, Rectifiers) and inductors, under Heading 85.04 do not in any manner advance the contention of the learned counsel. The UPS system under these Notes had been nowhere specified as classifiable under this very Heading. The static converter and UPS have also not been expressly opined to be one and the same apparatus/systems in these Notes. Moreover, these Notes contain only opinion of the HSN and cannot override the specific provisions of the CETA.
14. True in Manisha Phartna Plasto Pvt. Ltd., 1999 (112) E.L.T. 22 (Del.) referred to by the learned counsel, it has been observed by the Honourable Delhi High Court that "HSN is a high powered body to ascertain international practice of classification of a particular product referred to it and recommends to the member nations the most appropriate classification of the product under HSN and as such the opinion or recommendation of the Committee cannot just be brushed aside simply because similar products are manufactured or sold under drug licence. If any doubt arises, HSN is a safe guide for resolving dispute regarding tariff classification"..But these observations of their Lordship of the Delhi High Court, are not much avail to the assessees here, as in our view there exists no doubt regarding the classification of UPS and statics converter. The static converter is covered by specific Heading 85.04 while the UPS does not fall within that Heading and is covered only by the residuary Heading 85.43 which relates to electrical machines, apparatus having individual functions not specified or included erstwhile in the Chapter.
15. Similarly Note 3 to Section XVI of Chapter 85 to which reference has also been made by the learned counsel in support of his contention for classifying the UPS & static converter under Heading 85.04 is not attracted in the present case. That Note only enacts as under :-
"3. Unless the context otherwise requires, composite machines consisting of two or more machines fitted together to form a whole and other machines adapted for the purpose of performing two or more complementary or alternative functions are to be classified as if consisting only of that component or as being that machine which performs the principal function."
The provisions of this Note cannot be invoked, in this case, in the light of discussion made above as not only the definition, but also the composition, form and functioning of UPS are quite different from that of static converter. The points of dissimilarities between the two have already been also detailed above. The components of static converter, namely transformer, rectifier and filter, just form one of the functional block, sub-sytems of the UPS. The static converter cannot take place of the UPS where the latter is required for providing uninterrupted power supply to the highly sophisticated equipments like computers, medical equipment and satellite communication system etc. which have to be run continuously without any kind of interruption and where even a short interruption may cause serious disaster whereas static converter is normally used for supply of DC power to the appliances which are designed to run on that power. Both are distinct apparatus with different components, functions and have individual acknowledged marketability. Therefore, UPS cannot be classified with the static converter under Heading 85.04 of the Tariff.
16. In Sahney Paris Rohne Ltd. v. CCE Hyderabad, 1995 (77) E.L.T. 13 (S.C.), the Apex Court was faced with a question regarding the classification of ordinary electric motor and self-starter motor and both were not held to be one and the same items for Tariff classification. The Apex Court was pleased to observe as under :-
"Self-starter motor is an electric motor fitted with additional items like solenoid and other connected apparatus which taken together would constitute self-starter motor. Though the motor is used, it is not motor alone but something else equally important which in conjunction with others would constitute self-starter motor. Consequently, the self-starter motor is not covered under Tariff Item 30 of the erstwhile Central Excise Tariff but would be covered by the residuary Item 68 ibid.
17. Similarly in Paharpur Colling Towers Pvt. Ltd. v. CCE, Calcutta, 1995 (77) E.L.T. 18 (S.C.) the Apex Court was confronted with a question as to whether hubs and blades known as 'blade assembly' and used in the cooling towers, is an electric fan and hence classifiable under Item 33(2) of the erstwhile Central Excise Tariff, while answering this question, the Court ruled as under :-
"The duty under Tariff Item 33(2) of the erstwhile Central Excise Tariff is attracted on such electric fans which are not only designed for use but are indispensable for its operation. The entry has to be read both widely and narrowly. Widely as the goods designed for use as mentioned irrespective of shape would be taxable under this Tariff. Narrow because it must be electric fan, therefore, hubs and blades known as 'Blade Assembly' is not an electric fan hence not classifiable under Tariff Item 33(2)k of the erstwhile Central Excise Tariff because of the fans, at the time of their removal from the factory, did not have any electric motor or any other kind of device to generate electricity. Rather the fans were mounted on the shaft of the motor."
18. In the light of what has been discussed above, it must be "held that the UPS is classifiable under Heading 85.43 and not under Heading 85.04, as static converter. The view in this regard, has been correctly taken by the Bench of this Tribunal in J.K.Synthestic case, supra. The contrary view expressed in CCE, New Delhi v. Eppletone Engineers and in Mangalore Chemicals & Fertilizers, (supra) that UPS is classifiable as static converter under Heading 85.04, cannot be held to be correct one.
19. Consequently, the reference made to the Bench stands accordingly answered. The appeals be placed before the concerned Bench for disposal accordingly.