Whether the drive is rated as Heavy a Duty or Normal Duty is a decision made at purchase. You BUY the drive as Normal or Heavy duty based on the application, as Keith suggested, then enable the mode you intend on using. So if you have a 40HP motor and you BUY a 40HP ND rated drive, putting it into "Heavy Duty Mode" with parameter 306 will only allow you to run a 30HP motor. If you bought a 40HP HD rated drive, you can run a 40HP motor, or if you change 306 to "Normal Duty Mode", you can use a 50HP motor.
Normal Duty is defined as a centrifugal load like a pump or fan. 70% of all AC induction motors are used for centrifugal pumps or fans, hence the term "normal". Other mfrs use the term "Variable Torque" or "Pump and Fan Duty", this is the same concept. ND/VT rating for the VFD means it is rated for 110% overload for 30 sec, and will trip to protect itself if the current attempts to go above 150% for more than 2 sec. This is because on a centrifugal load, you cannot overload a properly selected motor unless something else is wrong, meaning it needs to be shut down anyway. So since you can't overload it, the drive does not need the added capacity to handle that.
Any load that is not a centrifugal pump or fan will require a Heavy Duty rated drive. A HD/CT (Constant Torque) rated VFD will be rated for 150% overload for 1 minute, and over 200% for 3 seconds. This allows the VFD to develop full Break Down Torque in the motor, briefly, to re-accelerate a load after a large step change.
Parameter 306 enables the higher overload capacity in software, but cannot override the limitations of the hardware itself, which have separate firmware protection schemes. So if you enable HD Mode on a drive purchased as ND, you run the risk of having it shut itself down when trying to accelerate or re-accelerate the load.
As a gross generalization, loads typically operated by DC drives and motors will fall into the Heavy Duty category, so if you need a 40HP motor, buy a drive rated for 40HP HD, which will be the same as a 50HP ND drive.
"You measure the size of the accomplishment by the obstacles you had to overcome to reach your goals" -- Booker T. Washington