It is wrong on the part of Commissioner of Central Excise Calcutta to invoke Note 2(f) of Section XVII: SC

SC held the it is wrong on the part of Commissioner of Central Excise Calcutta to invoke Note 2(f) of Section XVII

Shivani Bhati | Nov 30, 2021 |

It is wrong on the part of Commissioner of Central Excise Calcutta to invoke Note 2(f) of Section XVII: SC

SC held it is wrong on the part of Commissioner of Central Excise Calcutta to invoke Note 2(f) of Section XVII

Appeal filed by the assessee before the Supreme Court under Section 35 L(b) of the Central Excise Act, 1994 due to dismissal of prior appeal before the Custom Excise and Service Tax Appellant Tribunal (CESTAT). 

The questions arise in this appeal are: 

  • Whether the “Relays” manufactured by the appellant used only as Railway signaling equipment would fall under Chapter 86, Tariff Item 8608 as claimed by the appellant or under Chapter 85 Tariff Item No.8536.90 as claimed by the Department?  
  • Whether the show cause ­cum ­demand notices issued by the Department on various dates during the period   1995­1998 was not barred by time under Section 11­A of the Central Excise Act,1944, in the absence of any fraud, collusion, willful misstatement or suppression of facts, especially since the classification list submitted by the appellant have been approved on 27.08.1993? 

Facts  

  • The appellant is a company wholly owned by the State Government of West Bengal. It is engaged in the manufacture of “Relays” which is used as part of the Railway signaling system. 
  • A ‘Relay’ is generally an electrically operated switch, used to control a circuit. They may also be used where several circuits must be controlled by one signal. Though essentially relays are electrical equipment, they may also form part of Railway signaling equipment. 
  • While the normal electrical relays fall under Tariff Item No. 8536.90, ‘Railways and Railways signaling equipment’ fall under No. 8608. 
  • It appears that from 01.03.1986 till February­ 1993, the effective rate of excise duty charged under both sub­headings was 15% and hence the appellant had no problem with the classification of their goods under sub­heading No.8536.90. But with effect from 28.02.1993, the effective rate of excise duty for the goods under sub­heading No.8536.90 became much higher than the effective rate of duty for the goods under sub­heading 8608. 
  • On 27.08.1993, the appellant submitted a classification list for the approval of the Assistant Collector, Central Excise. This list provided details of the products manufactured by the appellant as Railway signaling equipment, including relays and claimed that they should be classified under sub­heading 8608 and not under 8536 in the First Schedule to the Central Excise Tariff Act. Admittedly this classification list was approved by the competent authority. 
  • On 23.04.1996 the Central Board of Excise and Customs issued a circular indicating that ‘plug­in type relays’   merited classification under the Chapter Heading 85.36. Thereafter, the Assistant Commissioner of Central   Excise issued nine different show cause ­cum­ demand notices calling upon the appellant to show cause as to why the goods should not be classified under the Subheading 8536.90 and why the differential duty should not be collected together with the interest and penalty. 
  • The appellant gave a reply to the show-cause notices, contending that what was manufactured by them was supplied only to Railways as part of the signaling equipment and that, therefore, the show cause notices required to be dropped. 
  • However, the Assistant Commissioner passed 9 separate Orders on 20/21.12.2001 confirming the demand. 
  • Aggrieved by the Orders, the appellant filed statutory appeals. All the nine appeals were partly allowed by the Commissioner by an Order dated 29.08.2003. By this Order, the Appellate Authority confirmed the classification made by the Adjudicating Authority and the consequential differential duty demanded by the   Adjudicating Authority.  However, the penalty imposed by the Original Authority was set aside by the Commissioner. 
  • Challenging that portion of the order of the Commissioner upholding the proposed classification and demanding differential duty, the appellant filed an appeal before CESTAT. The CESTAT dismissed the appeal by a final order dated 26.03.2008. It is against the said order that the appellant has come up with the present appeal under Section 35L(b) of the Central Excise Act, 1944. 

Findings  

Chapter Heading 8536 covers “Electrical apparatus for switching or protecting electrical circuits, or for making connections to or in electrical circuits (for example, switches, relays, fuses, surge suppressors, plugs   sockets, lamp holders and other connectors, junction boxes), for a voltage not exceeding 1,000 volts; connectors for optical fibres, optical fibre bundles or cables.” 

Sub­heading 8536.90 covers “other apparatus”. This includes  

(i)  Motor starters for AC motors under sub­heading 8536.90.10;  

(ii) Motor starters for DC motors under sub­heading 8536.90.20;

(iii) Junction boxes under sub­heading 8536.90.30; and (iv) others under sub­heading 8536.90.90. 

Chapter Heading 8608 covers “Railway or tramway track fixtures and fittings; mechanical (including electro­mechanical) signaling safety or traffic control equipment for the railway, tramways, roads, inland waterways, parking facilities, port installation or airfields; parts of the foregoing”. 

This is not a case where the extended period of limitation would apply, especially in the light of the admitted position that the assessee who had his product classified under sub­heading 8536.90 till the year 1993, specifically filed a classification list on 27.08.1993, reclassifying them under sub­heading 8608 and the same was also approved by the competent authority. Therefore, there is no question of any fraud or collusion or any willful misstatement or suppression of facts or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty. 

Judgment  

Supreme Court held that, as pointed out by the Commissioner (Appeals), the goods were previously classified (before 1993) under Sub­heading 8536.90, but a revised classification list, classifying them under sub­heading 8608, submitted by the appellant, was approved by the competent Authority on   27.08.1993. After such specific approval of the classification list, it is not proper on the part of the Authorities to invoke Note 2(f) of Section XVII. 

Also, despite the fact that some of the individual notices were issued within the period of limitation either in respect of the part of the period or in respect of the whole of the period covered by them, the very invocation of Section 11­A, in the facts and circumstances of the case, cannot be said to be within time. 

 To Read the Judgment Download PDF Given Below:

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