AUGUST 05, 2024

By S K Rahman, IRS, working as AR at Delhi CESTAT

THE CESTAT has passed Final Order No. 56067-56193/2024 dt 31-07-2024 - 2024-TIOL-728-CESTAT-DEL in the case of M/s Mitsubishi Electric Automotive India Pvt. Ltd., on the issue of Classification of "electronic control units for electronic power steering" EPS ECU. This is against 127 appeals filed by the importer appellant treating each assessed Bill of Entry as speaking Order,.

BRIEF FACTS

2 The Appellant importer during the period from February 2018 to May 2021 had imported "electronic control units for electronic power steering" EPS ECU. The appellant had self assessed the Bills of Entry by classifying the goods under CTH 8708 9400 as parts and accessories of motor vehicles(Steering wheels, steering columns and steering boxes; parts thereof) and thereafter assailed it before Commissioner (Appeals) that classification may be changed to:

According to the Revenue, these are parts of motor vehicles and should be classified, as such under CTH 8708 9400. The ld. Commissioner (Appeals) passed Order-in-Appeal dated 28/01/2022 in favour of Revenue. The party filed appeal in CESTAT against O-i-A.

Arguments of the appellant :Learned counsel for the appellant submitted as follows:

3 BURDEN TO CLASSIFY :

3.1 The burden of proof of establishing a classification rests on the department which has not been discharged by it. The department has not given specific reasoning as to why the goods are not covered under Customs Tariff Heading4 9032/8537 claimed by the appellant. Reliance is placed on the decision of : HPL Chemicals vs. Commissioner of Central Excise, Chandigarh 2006-TIOL-37-SC-CX

The Authorised Representative for the Department has submitted that in these appeals, the appellant had self-assessed goods classifying them under CTI 8708 94 00 and the department had not disputed this classification. Thereafter, the appellant challenged its own self-assessment by filing appeals before the Commissioner (Appeals) which were dismissed. Therefore, it is the appellant who is seeking to change the classification and the burden is on him to provide evidence.

The case law relied upon by the appellant HPL Chemicals vs. Commissioner of Central Excise, Chandigarh 2006-TIOL-37-SC-CX says (ref para 26 of the judgement) "If the Department intends to classify the goods under a particular heading or sub-heading different from that claimed by the assessee, the Department has to adduce proper evidence and discharge the burden of proof." But in the instant case, the appellant is seeking to change the classification, hence the burden is on the appellant and not upon Department.

3.2 The learned counsel for the appellant asserted that they had so classified the goods on the insistence of the department so as to get the goods cleared.

The Hon'ble CESTAT held that (ref para 25 of the Final Order) "…..We do not find any force in this argument. Any importer can self-assess goods by filing the Bill of Entry. Until the Bill of Entry is filed, the departmental officer cannot assess or take any action on it with respect to assessment. If the proper officer does not agree with the self-assessment by the importer, he can re-assess the duty and provide a speaking order. We do not see how the departmental officers could have insisted that the goods should be classified in a particular heading in the Bill of Entry even before it was filed. Even if there was any informal discussion with the proper officer and he had suggested that the goods should be classified under any particular CTI, the appellant could not have been compelled to file the Bills of Entry in any particular manner. ….."

4. CLASSFICATION UNDER CTH 90328910

4.1 The appellant's second submission is that EPS-ECU and its sub-assembly are correctly classifiable under CTI 9032 90 00 as 'Automatic regulating or controlling instruments and apparatus' because based on the speed and torque of the vehicle EPS-ECU regulates the voltage supplied to the motor and thereby the amount of assistance provided in steering. According to the learned counsel, it not only regulates the electrical quantity viz., voltage but also regulates the non-electrical quantity of torque with great emphasis on Chapter Note 7 to Chapter 90

4.2 The Authorised Representative for the Department has submitted that EPS-ECU is not an instrument or apparatus by itself. It does not measure the speed or torque but it receives the information about speed and torque from the speed sensors and torque sensors. It processes this information and determines how much assistance should be provided in steering and the assistance is actually provided by the motor using the energy from the battery and based on the instructions received from EPS-ECU

4.3 The Hon'ble CESTAT held that (ref para 29 of the Final Order) "…..We find from the details of the EPS-ECU provided by the learned counsel, that it acts as the brain and receives inputs from the speed sensor and torque sensor dynamically and processes this information to determine how much assistance should be provided to the driver in steering in a particular situation. Thereafter, based on this information it regulates the amount of voltage provided to the motor from the battery. The motor and battery are not part of the EPS-ECU. EPS-ECU is connected to the motor on one hand and the battery on the other.

The Hon'ble CESTAT further says that (ref para 31 of the Final Order) "….We are conscious that there are electronic instruments and apparatus which, though used in automobiles, are classifiable under Chapter 90. However, EPS-ECU is not an instrument or an apparatus but is a part of the power steering system. Merely because it is in the form of a PCB and other electronic components does not change it from a part of an automobile into an instrument or an apparatus. It is, in essence, a microprocessor with certain other parts which receives information from the speed and torque sensors and processes it and issues instructions to regulate the assistance provided by the power steering to the driver. Therefore, in our considered view, EPS-ECU does not merit classification under CTI 9032 90 00."

5 CLASSFICATION UNDER CTH 8708 9400

5.1 The Authorised Representative for the Department has submitted that as per explanatory notes to Section XVII (covering Chapters 86 to 89) of the HSN, parts and accessories of the vehicles, aircraft or equipment concerned should be classified under headings of Section XVII, only if they comply with all the three conditions of :

a) Criteria of Exclusion:- The HSN explanatory note clearly defines parts and accessories excluded by Note 2 to Section VIII.. The impugned goods are not the goods mentioned in the para (7). The list (e) to (k) of para 7 is specific.

b) Criteria of Sole or principal use:- The impugned goods as declared by the Appellants (as in page 5 of appeal memo) are for the sole and principal use only in steering systems of automobile and declared description is as ""automobile parts", and "parts for EPS ECU, automotive e-parts, captive consumption"

c) Criteria specific inclusion:- The impugned goods are not covered specifically any where else and also in the exclusion list given in HSN explanatory notes

Thus Revenue argued that these are parts of motor vehicles and should be classified, as such under CTH 8708 9400

5.2 The Authorised Representative for the Department has drawn the kind attention of the Hon'ble Bench to its own (he Principal Bench of Hon'ble CESTAT, New Delhi Final Order. No 55365-55440/2024 dt.19-03-2024 2024-TIOL-305-CESTAT-DEL in the case of M/s Continental Automotive Brake Systems India Private Limited vs Commissioner of Customs, ICD, Patparganj. In these cases, the appellant has imported "Electronic Control Unit" (ECU) used for manufacture Electronic Stability Control System and supplied to manufacturers of Automobiles. The importer classified the impugned goods under CTH 9032 8910 where as the Department has reclassified the impugned goods under CTH 8708 9900. Hon'ble CESTAT, New Delhi upheld the Department's classification of impugned goods under CTH 8708 9900. The Authorised Representative for the Department has pleaded that considering this decision the impugned goods in the instant case are parts of motor vehicles and should be classified, as such under CTH 8708 9400

5.3 The Hon'ble CESTAT held that (ref para 36 of the Final Order) "…..For all the above reasons, we find that EPS-ECU and its sub-assembly deserve to be classified and were correctly classified under CTI 8708 94 00. The impugned order insofar as this classification is concerned needs to be upheld."

6. CLASSFICATION UNDER CTH 8537 10 00

The appellant has submitted an alternative second claim for classification of EPS-ECU and its sub-assembly under CTI 8537 10 00 and its parts under CTI 8538 90 00 (cover, housing, housing assembly, spacer and circuit assembly) and CTI 85381090 (Heat Sink)

The Hon'ble CESTAT held in this regard that (ref para 33 of the Final Order) "….EPS-ECU is not designed for electricity distribution or electric control. It is a part of an automobile -specifically a part of the power steering system to decide how much assistance should be provided to the driver in steering. The mere fact that it makes this determination and intervenes between the 12-volt car battery and a small motor does not, in our considered view does not make, EPS-ECU into an electrical board, panel, etc. We, therefore, find that EPS-ECU does not merit classification under CTI 8537 10 00."

7 CLASSFICATION UNDER CTH 8543 70 99

The appellant has submitted an alternative third claim for classification of EPS-ECU and its sub-assembly under CTI 8543 70 99 as "Electrical machines and apparatus having individual functions, not specified or including elsewhere in this chapter- others"

The Hon'ble CESTAT held in this regard that (ref para 33 of the Final Order) "….We find that CTH 8543 covers various "electrical machines and apparatus having individual functions but not specified elsewhere in that Chapter". This includes, various specific electrical machines and apparatus such as particle accelerators, signal generators, machinery for electroplating, electrolysis, audio visual equipment. This CTH lists various types of machines and has a residual category 'Other' preceded by "- --" (three dashes). Within this three dash 'Other" category are various equipment and machines each preceded by "----" (four dashes) such as radio frequency power amplifiers, beauty care equipment, audio visual stereo encoders, etc. and the last four dash category is CTI 8543 70 99 "----other". We do not find that EPS-ECU, which is essentially a part of an automobile specifically designed to be a part of power steering and which has no other function, can be classified in the general residual entry of electrical machines and equipment"

8 PARTS

Once the Hon'ble CESTAT has decided the classification of impugned goods EPS ECU as CTH 87089400 and rejected the appellant's arguments on classification of EPS ECU, the appellant's arguments for parts of EPS ECU also would not stand which are consequential

9 Take away from this case : The takeaways from this case law are.

(i) The importer appellant had self-assessed goods classifying them under CTI 8708 94 00 and the department had not disputed this classification. The importer appellant themselves attempted to re classify them under alternative classification and filed appeal against the self assessed Bills of Entry. Thus the appellant challenged their own self-assessment.The appellant cannot turn around and say that the burden to justify classification has to be from Department. The Hon'ble CESTAT has held that (ref para 25 of the Order) "… the appellant who is seeking to change the classification and the burden is on them(appellant) to provide evidence."

(ii) The appellant importer can not say that they had so classified the goods on the insistence of the department so as to get the goods cleared. The Hon'ble CESTAT has held that (ref para 25 of the Order) "….the appellant could not have been compelled to file the Bills of Entry in any particular manner".

(iii) As per explanatory notes to Section XVII (covering Chapters 86 to 89) of the HSN, parts and accessories of the vehicles, aircraft or equipment concerned should be classified under headings of Section XVII, only if they comply with all the three conditions namely :

(iv) In Automobiles many electronic parts are used. The Hon'ble CESTAT has held that (ref para 31 of the Order) "…We are conscious that there are electronic instruments and apparatus which, though used in automobiles, are classifiable under Chapter 90. However, EPS-ECU is not an instrument or an apparatus but is a part of the power steering system. Merely because it is in the form of a PCB and other electronic components does not change it from a part of an automobile into an instrument or an apparatus." Thus for an item to be classified under CTH 9032 it should be covered under HSN Explanatory Note to Chapter Note 7 (a ) or (b) to Chapter 90.

(The views expressed are personal and not in official capacity)