By TIOL News Service

MUMBAI, JAN 31, 2014: THIS is the second round of proceedings before the Tribunal.

The appellants are manufacturers of 'Programmable Logic Controllers' and they sought classification of the said goods as ‘automatic data processing machines' falling under CETH 84.71 of the Central Excise Tariff, or in the alternative they contended that the goods manufactured by them would be classifiable under CETH 9032. However, it is Revenue's contention that the goods are classifiable under CETH 8537 and duty is payable on such goods under that heading.

Earlier, the matter was remanded to the Commissioner(A) by the CESTAT.

And in remand, the impugned order was passed by holding that -

++ the impugned goods do not measure or control parameters such as flow level, pressure, temperature or other variables of liquids or gases and hence they do not merit classification under CETH 9032 as the said entry pertains to automatic controlling and regulating instruments and apparatus.

++ the equipment manufactured by the assessee also is not useful for automatic data processing but are used as a programmable controllers and, therefore, they merit classification under CETH 85.37.

Aggrieved by the said decision, the appellant is before the CESTAT.

Incidentally, when the Stay application had come before the Bench, pre-deposit was waived and stay was granted on the ground that the appellant prima facie had a strong case in favour as earlier order of Commr(A) was in favour of appellant and the issue had travelled up to the Supreme Court.[See (2013-TIOL-277-CESTAT-MUM)

It is submitted that the impugned goods are programmable automation controllers which is an advanced form of logic controllers and incorporates multiple disciplines such as logic control, process control and motion control, all single open platform with a single date base and are parts and accessories which are used in conjunction with industrial process controllers and hence in terms of Chapter Note 2(b) of Chapter 90, they have to be classified under Chapter 90. The decision in Commissioner of Customs vs. N.I. Systems (India) Pvt. Ltd. 2010-TIOL-52-SC-CUS is also relied upon. Alternatively, it is pleaded that the products would merit classification under CETH 84.71 as automatic data processing machines as they essentially do processing of data and, therefore, it cannot be classified under CETH 85.37.Reliance is also placed on the decision in the case of Larsen & Toubro Ltd. vs. Commissioner of Central Excise vide order No. A/294/2011/EB/C-II dated 06/04/2011 wherein the programmable logic controller manufactured by M/s. Larsen & Toubro Ltd. was held to be classifiable under CETH 90.32 and since the appellant manufactures similar products, the classification under CETH 90.32 is appropriate.

The Bench referred to the various competing entries viz. 8471, 8537, 9032, the technical opinion given by the Electrical Engineering Department of VJTI, the product literature and observed that the principal functions of the machines is control of machines and not computation of data [CETH 84.71] and, therefore, in view of section notes 3 & 4 to section XVI, the product is a programmable logic controller meriting classification under CETH 8537.

The CESTAT also adverted to the Section 37B order no. 49/3/97-CX dated 09/05/1997 issued by the Board pointing out the differences between a Programmable Logic Controller and Programmable Process Controller and concluded -

"6.11 From the above clarifications it is seen that to qualify as ‘programmable process controller', Continuous monitoring of the various parameters such as pressure, flow and temperature level etc. has to be done and comparison should be made of the parameters of the desired value with the actual value and the machine should be capable of bringing the variables to the desired value. None of the machines in the present case undertake these functions nor do they have a measuring device to measure any of these parameters. As per the HSN Explanatory Notes, to fall under heading 9032, the equipment should consist of a measuring device (sensing device, resistance probe, thermocouple, etc.) which determines the actual value of the variable to be controlled and converts it into a proportional electrical signal, an electrical control device which compares the measured value with the desired value and a starting or stopping or operating device (contacts, switches or circuit breakers, relay switches). From the technical literature, it is seen that the impugned goods do not satisfy the criteria laid down. Therefore, they do not merit classification under Heading CETH 90.32."

The decision of the apex court in the case of N.I. Systems (India) P. Ltd. and the Tribunal decision in Larsen & Toubro were also distinguished by the Bench.

In fine, the Programmable logic controllers manufactured by the appellant were held to be classifiable under CETH 8537; the duty demands were confirmed; but the penalty was set aside on the ground that the matter related to a classification dispute.

In passing :  Also see 2014-TIOL-124-CESTAT-MUM.

(See 2014-TIOL-157-CESTAT-MUM)