Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2026 Supreme(Online)(CESTAT) 1905

CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
Dilip Gupta, President, P. V. Subba Rao, Technical Member
GE Vernova T & D India Limited – Appellant
Versus
Commissioner of Customs – Respondent
Customs Appeal No. 52421 of 2019|Customs Appeal No. 52730 of 2019|Customs Appeal No. 52732 of 2019|Customs Appeal No. 52733 of 2019

Advocates:
For the Appellants/Petitioners: Amar Dave, Udit Jain, Saurabh Dugar, Adhya M.
For the Respondents: Nikhil Mohan Goyal

In classifying composite electronic devices, the 'principal function' test dictates that the device is classified according to the machine that performs the primary function, notwithstanding the presence of ancillary features or multi-functionality.

Headnote:(A) Customs Act, 1962 - Section 28(4), 28AA, 112, 114A, 114AA - Classification of goods - Principal function test applies to multi-functional electronic devices - Relays used for control, protection and supervision of electrical systems qualify as 'Relays' under CTI 8536 49 00 despite ancillary digital features - Notification No. 12/2012 confers exemption for relays with contact rating up to 7 amperes.

Facts of the case:
The appellant imported various relay models including Midos, Tap Changer controls, K-range, and MICOM. The revenue authorities alleged that these devices, due to their multi-functionality, belonged to a residuary category (CTI 8536 90 90) rather than the 'Relays' entry (CTI 8536 49 00) and that several exceeded the 7-ampere limit required for duty exemption. The appellant contested the misclassification and penalties.

Findings of Court:
The tribunal found that the primary function of the devices is electrical protection, making them 'Relays'. The department failed to provide evidence that three of the four imported models exceeded the 7-ampere threshold; thus, they qualify for exemption. MICOM relays were confirmed to exceed 7 amperes, but penalty imposition was deemed unjustified given the voluntary payment of duty and interest before notice.

Issues: Whether the goods are classifiable as 'Relays' or 'Other apparatus' and whether they qualify for duty exemption based on contact ratings.

Ratio Decidendi: In accordance with Note 3 to Section XVI of the Customs Tariff, composite machines performing multiple functions are classified based on their principal/primary function. Ancillary monitoring or display features do not alter the essential character of a relay designed for circuit protection.

Result: Appeals allowed to the extent of setting aside differential duty on three models and vacating all penalties.

JUSTICE DILIP GUPTA

Customs Appeal No. 52421 of 2019 has been filed by M/s GE Vernova T&D India Limited¹1 the appellant to assail that portion of the order dated 24.06.2019 passed by the Commissioner that has confirmed the differential duty demand of Rs. 2,39,65,764/- under section 28(4) of the Customs Act, 1962²2 the Customs Act with interest under section 28AA of the Customs Act and penalties under sections 114A and 114AA of the Customs Act.

Customs Appeal No. 52370 of 2019, Customs Appeal No. 52732 of 2019 and Customs Appeal No. 52733 of 2019 have been filed by Mr. Irudayara Anthony Joseph Balan (Customs Operation Analyst), Mr. Nomula Srinivas (Manager-Application) and Shri Puthupada Nair Veetil Sunish (General Manager and Head of Finance) of the appellant against that portions of the order dated 24.06.2019 passed by the Commissioner that impose penalties upon them under sections 112 and 114AA of the Customs Act.

The issues involved in these appeals are whether the goods namely (a) Midos (MVAJ, MVAA, MVAX); (b) Relays for Tap Changer control and transformer monitoring; (c) K-range Relays (KAVR, KAVS), and (d) MICOM (P14, P24, P40) imported by the appellants during the period 05.03.2013 to 04.12.2017 are:

1. relays classifiable under Customs Tariff Item³3 CTI 8536 49 00 (- Relays -- Others) or in the nature of Feeder Management Intelligent Electronic Devices⁴4 FMIEDs classifiable under CTI 8536 90 90 (-Other apparatus --- Other) owing to their multi-functionality; and

2. eligible for the exemption available to relays of contact rating upto 7 amperes under Serial No. 376 (No.8 of List 21) of Notification No. 12/2012 dated 17.03.2012⁵5 Exemption Notification.

The relevant portion of the said Exemption Notification is reproduced below:

S.N.	Chapter or Heading or sub-heading or tariff item	Description of goods	Standard rate	Additional duty rate	Condition No.
376.	84,85 or 90	The goods specified in List 21	Nil	-	-

Serial No. (8) of List 21 is:

(8) Relays of contact rating upto 7 amperes

A summary of the demands, penalty and interest contained in the order dated 24.06.2019 are as follows:

S.N.	Particulars	Amount (in Rs.)
I	Company
(a)	Differential duty u/s 28(4) of the Customs Act	2,39,65,764
(b)	Interest u/s 28AA	As applicable
(c)	Penalty u/s 114A	2,36,65,764+interest
(d)	Penalty u/s 114AA	5,00,00,000
II	Individuals(3)
(e)	Penalty u/s 114AA [1,00,00,000 each]	3,00,00,000
(f)	Penalty u/s 112 [20,00,000 each]	60,00,000

According to the appellant out of the total differential duty of Rs. 2,39,65,764/-, an amount of Rs. 1,78,79,947/- pertains to MICOM relays of contact rating more than 7 amperes, and this amount is not contested insofar as the claim of exemption is concerned but so far the classification of MICOM relays is concerned, the appellant claims that the primary function of such a relay is to ensure the protection of the transmission system, and, therefore, MICOM relays are classifiable under CTI 8536 49 00.

The appellant also claims that the balance duty of Rs. 60,85,817 relates to remaining three relays whose contact rating is less than 7 amperes. The finding on the issue of exemption as well as classification are contested by the appellant.

A summary of the duty demand for different relays is mentioned below:

Amperage	Relay Type	Duty (Rs.)	Remarks
Relays >7 amperes	MICOM relays	1,78,79,947	Paid, and uncontested insofar as the exemption claim is concerned
(a) Relays <7 amperes	Relays for Tap Changer control & transformer monitoring	60,85,817	Contested
	Midos relays
	K-range Relays
	Total differential duty	2,39,65,764

The appellant further claims that upon realization of an inadvertent error towards exemption claimed for import of MICOM relays having contact rating over 7 amperes, the appellant, post an internal review, immediately paid an amount of Rs. 4,49,85,564/- (duty + applicable interest) prior to issuance of the show cause notice. The appellant further claims that the i

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