Kerala High Court : Solar Duty Exemption Denied | Inverter Alone Not A Solar Power Generating System Without Photovoltaic Cell
Safiya Malik
The High Court of Kerala Division Bench of Justice Dr. A.K. Jayasankaran Nambiar and Justice P.M. Manoj held that the import of only the inverter component, in the absence of the essential photovoltaic cell, does not satisfy the criteria for exemption under Notification No. 12/2012-CE dated 17.03.2012. The Court dismissed the appeals filed by the assessee against the orders of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), which had allowed the revenue’s challenge to the First Appellate Authority’s decision granting the benefit of exemption.
The appellant, a private limited company engaged in solar energy systems, had imported “Grid Tied Solar Inverters” and claimed exemption from additional customs duty under Notification No. 12/2012-CE dated 17.03.2012. The exemption under the notification applied to “Non-conventional energy devices/systems” including “Solar Power Generating Systems.”
The original customs authority denied the exemption, reasoning that the imported goods could not be regarded as a complete Solar Power Generating System. The authority concluded that the inverter component, imported independently without the photovoltaic cell, did not meet the technical completeness required to fall within the ambit of the notification. The adjudicating officer found that the item could have multiple applications and thus did not qualify solely as part of a solar energy system.
On appeal, the Commissioner (Appeals) reversed the original orders and granted exemption, holding that no conclusive evidence had been provided by the revenue to demonstrate the alleged multipurpose nature of the inverter. It was held that the notification should be interpreted liberally in favor of the assessee and the product be treated as a component of a Solar Power Generating System, thereby qualifying for the exemption.
Aggrieved, the Customs Department approached the CESTAT. The Tribunal set aside the First Appellate Authority’s orders, reinstating the view of the original authority. The Tribunal observed that the goods in question comprised only the inverter, without the photovoltaic cell—a fundamental part required to harness solar energy. The Tribunal concluded that the exemption was inapplicable as the appellant had not imported a complete system, but merely a component thereof.
In the present appeals before the High Court, the appellant restated its position that the inverter formed a crucial part of a Solar Power Generating System and, therefore, qualified for exemption, even if not imported together with the photovoltaic cell. The appellant argued that the notification should be interpreted in line with its functional purpose.
The respondent revenue, through its standing counsel, opposed this contention and supported the Tribunal’s view that the exemption was not applicable to individual components imported separately, especially when the product lacked a self-sufficient capability to function as a solar power system.
The Division Bench noted the factual admission by the appellant that the imported items were only inverters and not composite units including both inverters and photovoltaic cells. The Court stated ,
“It is the admitted case of the appellant herein that what they had imported was only the inverter component of the Solar Power Generating System.”
The Court clarified the functional necessity of the photovoltaic cell, stating , “Had they imported both the above components together as an integral unit, then perhaps they could have obtained the benefit of the notification that granted an exemption in respect of Solar Power Generating Systems.”
Rejecting the appellant’s interpretation of the notification, the Court further recorded , “Inasmuch as the import in the instant case was only of the inverter component, without the photo-voltaic cell — a component that was essential for harnessing solar energy... the appellant cannot be seen as eligible for the benefit of the exemption notification.”
The Bench endorsed the Tribunal’s view as legally sustainable and factually justified. It held that importing only one essential part of a system without the other crucial component did not meet the threshold defined under the notification. The Bench stated , “We, therefore, see no reason to interfere with the well reasoned order of the Appellate Tribunal impugned in these appeals.”
On a consideration of the rival submissions, we find that it is the admitted case of the appellant herein that what they had imported was only the inverter component of the Solar Power Generating System since they had not imported, as a composite unit, both the photo-voltaic cell as well as the inverter.
Had they imported both the above components together as an integral unit, then perhaps they could have obtained the benefit of the notification that granted an exemption in respect of Solar Power Generating Systems.
Inasmuch as the import in the instant case was only of the inverter component, without the photo-voltaic cell — a component that was essential for harnessing solar energy, which could then be routed through the inverter system for the supply of electrical energy to the grid, the appellant cannot be seen as eligible for the benefit of the exemption notification, as rightly found by the Appellate Tribunal.
We, therefore, see no reason to interfere with the well-reasoned order of the Appellate Tribunal impugned in these appeals. The appeals, therefore fail and are accordingly dismissed.
Advocates Representing the Parties
For the Petitioners: Sri. M. Balagopal, Smt. R. Devika, Smt. Anjali Menon, Advocates
For the Respondents: Sri. Suvin R. Menon, Standing Counsel
Case Title: M/s Solgen Energy Pvt. Ltd v. Commissioner of Customs
Neutral Citation: 2025:KER:36864
Case Number: Customs Appeal Nos. 2, 3 & 4 of 2024
Bench: Justice Dr. A.K. Jayasankaran Nambiar and Justice P.M. Manoj
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