CESTAT Delhi Holds GE Vernova's Imported Products Are Relays, Not Multifunctional Devices

The Principal Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), New Delhi has held that four imported products of GE Vernova T&D India Ltd., including relay products with additional monitoring, data logging and alarm features, remain classifiable as “relays.” The tribunal held that their principal function continues to be protection and control of electrical systems.

A bench of President Justice Dilip Gupta and Technical Member P.V. Subba Rao partly allowed appeals filed by GE Vernova T&D India Ltd. and three of its officials. The appeals challenged a customs order that had reclassified the imported products as Feeder Management Intelligent Electronic Devices (FMIEDs), denied exemption benefits to certain imports, and imposed duty demands and penalties.

“The primary function of the products imported by the appellant is, therefore, to control, protect and supervise an electric system from over current and over voltage in transformers. The additional features resulting in the form of technological advancements are ancillary and cannot alter the core function of the goods.”, the tribunal observed.

The dispute arose after the customs department alleged that Midos relays, K-Range relays, MICOM relays, and relays for tap changer control and transformer monitoring were not relays.

According to the department, they were Feeder Management Intelligent Electronic Devices classifiable under the residual tariff entry for “other apparatus.”

The department also alleged that GE Vernova had wrongly claimed exemption available to relays with contact ratings up to 7 amperes.

GE Vernova argued that the imported products were bought and sold as relays. It said technological advancements adding features such as monitoring, alarms and data recording did not alter their core protective function.

Accepting this contention, the tribunal relied on the principal function test. It also referred to a CBEC circular on smartphone classification and the Supreme Court's ruling in Xerox India Ltd. to hold that multifunctional products must be classified according to their dominant function.

“the four products imported by the appellant are 'relays' classifiable under CTI 8536 49 00.”

The tribunal further found that, except MICOM relays, the remaining imported products had contact ratings below 7 amperes. They were therefore entitled to the exemption claimed.

As regards MICOM relays, the tribunal noted that GE Vernova had already paid the differential duty and applicable interest before issuance of the show cause notice. This followed an internal review after which it accepted that MICOM relays above 7 amperes were not eligible for exemption.

The tribunal also set aside penalties imposed on the company and its officials. It noted that the explanation of an internal communication oversight relating to the technological upgrade of MICOM relays was a plausible one.

Accordingly, the tribunal modified the impugned order and allowed all four appeals to the extent indicated.