Import of Solar Inverters Without Photovoltaic Cells Not Eligible for Exemption Under Notification: Kerala HC [Read Order]

In a recent ruling, the Kerala High Court ruled that the import of solar inverters without photovoltaic (PV) cells does not qualify for customs duty exemption under Notification No. 12/2012-Central Excise dated 17.03.2012.

Solgen Energy Pvt. Ltd., based in Thrissur, had approached the High Court challenging an order passed by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), which denied the company the benefit of exemption under the said notification.

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The petitioner had earlier succeeded before the First Appellate Authority, which had accepted its contention that the inverters formed an integral part of the solar power generating system and thus were entitled to the exemption.

The CESTAT reversed that order, ruling that the exemption applied only when a full solar power generating system was imported. The tribunal concluded that the import could not be treated as a complete system and hence did not qualify for exemption.

Before the High Court, the petitioner’s counsel argued that inverters are a crucial component of any solar power system and should be eligible for the exemption even if imported separately. They argued that the beneficial nature of the exemption notification required a liberal interpretation, especially in light of India’s push for renewable energy. They also submitted that the Customs department had not shown any evidence that the inverters were to be used for non-solar purposes.

The Customs department’s counsel argued that the exemption was intended for complete systems and not for individual parts. They explained that PV cells are essential for solar energy generation, and without them, the inverters alone cannot function as a solar power system.

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A division bench of Justice Dr. A.K. Jayasankaran Nambiar and Justice P.M. Manoj observed that the exemption is available only when the imported goods constitute a complete solar power generating system, which must include both the inverters and the PV cells.

The court held that the petitioner’s import of only solar inverters did not meet the conditions of Notification No. 12/2012-CE, which was clearly intended to apply to a composite import of an entire solar power generating system. The court also observed that exemption notifications promoting renewable energy are beneficial in nature, but they must be interpreted in line with their stated scope and purpose. The court dismissed the appeals filed by Solgen Energy Pvt. Ltd. and upheld the CESTAT’s decision.

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