UPS Imports Qualify As ‘Static Converters’ Eligible For Basic Customs Duty Exemption: CESTAT
Pranav B Prem
The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that Uninterruptible Power Supply (UPS) systems qualify as “static converters” and are entitled to exemption from basic customs duty under Serial No. 4 of Notification No. 25/2005-Customs, rejecting the department’s attempt to deny the benefit on the ground that UPS systems have multi-sectoral usage.
The Bench comprising Justice Dilip Gupta (President) and C.J. Mathew (Member – Technical) was dealing with a batch of 36 appeals filed by Socomec Innovative Power Solutions Pvt. Ltd. against a common order dated 31 October 2023 passed by the Commissioner of Customs (Appeals), Mumbai-II. The appellate authority had upheld assessment of higher duty on 36 Bills of Entry covering imports of UPS systems, denying the benefit of the exemption notification.
The dispute centred around Serial No. 4 of Notification No. 25/2005-Customs dated 1 March 2005, which grants exemption from basic customs duty to “static converters for automatic data processing machines and units thereof, and telecommunication apparatus, other than static converters for cellular mobile phones.” The customs authorities had taken the view that UPS systems, being capable of use in sectors such as healthcare, infrastructure, data centres and telecommunications, were not “meant” exclusively for ADP machines or telecommunication apparatus and therefore fell outside the scope of the exemption.
The Commissioner (Appeals), while denying the exemption, relied on the principle of strict interpretation of exemption notifications. He observed that the notification did not use expressions such as “solely” or “principally” and held that no additional words could be read into it. On this reasoning, it was concluded that static converters used in sectors like healthcare or infrastructure were not eligible for the exemption, even if they otherwise answered the description of UPS systems.
Before the Tribunal, the appellant submitted that the very same issue had already been examined and decided in its favour by a co-ordinate Bench of the Tribunal in an earlier appeal arising from a speaking order passed on another Bill of Entry. In that decision dated 14 February 2025, the Tribunal had categorically held that UPS systems classifiable under Customs Tariff Item 8504 4090 are “static converters” and are eligible for full exemption from basic customs duty under Serial No. 4 of Notification No. 25/2005-Customs.
The Tribunal noted that after the adverse speaking order was passed by the department in one case, the appellant, as a matter of caution, had self-assessed subsequent Bills of Entry at a higher rate of duty. However, once the speaking order itself was set aside by the Tribunal in February 2025, the very foundation for denying the exemption in respect of subsequent imports no longer survived.
The Bench also placed reliance on another decision of a co-ordinate Bench in Prostarm Info Systems Ltd. v. Commissioner of Customs, where denial of exemption on UPS imports under the same notification was held to be unsustainable. Importantly, that decision had been accepted by the customs department, lending finality and consistency to the legal position.
Rejecting the department’s arguments, the Tribunal emphasised that once a particular interpretation of an exemption notification has been consistently adopted by co-ordinate Benches and accepted by the department, a different view cannot be taken in subsequent cases involving identical facts and issues. It held that the Commissioner (Appeals) was not justified in denying the exemption merely by stressing the multi-sectoral usage of UPS systems, when the tariff description and the notification clearly covered “static converters.”
The Tribunal reiterated that UPS systems are, by their very nature, static converters and that the exemption notification does not restrict eligibility only to converters exclusively or solely used with ADP machines or telecommunication apparatus. Introducing such limitations would amount to reading words into the notification, which is impermissible.
Accordingly, the CESTAT set aside the impugned order dated 31 October 2023 and allowed all 36 appeals. The Tribunal granted the benefit of exemption from basic customs duty on the imported UPS systems, reaffirming that UPS imports qualifying as static converters are entitled to exemption under Notification No. 25/2005-Customs.
Cause Title: Socomec Innovative Power Versus Commissioner of Customs (NS-V)
Case No: Customs Appeal No. 85427 Of 2024
Coram: Justice Dilip Gupta (President) and C.J. Mathew (Member – Technical)
