The Bangalore bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that the Frequency converter/Variable- frequency Drive (VFD) used for controlling the rotational speed of an AC electric motor was classifiable under the category of ‘electric inverter’.
ABB Limited, the appellant assessee engaged in the manufacture of Automation Products, Distribution Control Systems, Control and Relay Panels, Air Circuit Breakers (ACBs), Low Voltage Products etc. They imported ‘Frequency Converter’ (variable speed drive) and classifying them under the category of instruments and apparatus.
The assessee appealed against the order passed by the adjudicating authority for rejecting the classification of products by the assessee and for confirming the classification proposed by the department.
Neetu James, the counsel for the assessee contended that the item imported Frequency converter/Variable- Frequency Drive (VFD) was a system for controlling the rotational speed of an Air Conditioner (AC) electric motor by controlling the frequency of the electrical power supplied to the motor and the frequency converters are not merely electric convertors but also carry out the function of motor control and are widely used in industries to control the speed of motor automatically coupled with energy saving feature.
Also submitted that the inverter can be controlled to produce an output frequency of the proper value for the desired motor shaft speed and when the capacity of the drive increases, the drives are split into two components namely, the Supply Unit (Converter) and the Drive Unit (Inverter), by adding the inverters in parallel and was rightly classified under the category of controlling instruments and apparatus.
K. A. Jathin, the counsel for the department contended that the static converters manufactured by the assessee where the primary function of the subject goods was to convert electrical energy to adapt it for further use namely direct current – alternating current – direct current or alternating current – alternating current. The subject goods are technically known as ‘frequency inventors, convertors for speed control of D.C. Motors, Chopper Controllers, A.C. Regulators’.
The Bench observed that in the case of Larsen & Toubro Ltd. V. Commissioner of Central Excise Mumbai, the court held that the primary function of the VFD was the controlling electrical speed of the AC, and the revenue was rightly classified under the category of electric inverter.
The two-member bench comprising D M Misra (Judicial) and Bhagya Devi (Technical) upheld the classification proposed by the revenue and held that the VFD was rightly classifiable under the category of electric inverter while dismissing the appeal filed by the assessee.
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