2022 (8) TMI 873 - AT - Central Excise

Classification of goods - sub-assemblies/parts of CTVS (Colour Television Sets) - to be classified under Heading 85.28 of the Central Excise Tariff, or not - extended period of limitation - penalties - interpretation of Rules 2(a) of the Central Excise Tariff - HELD THAT - It would also be useful to contrast this Interpretative Rules 2(a) with Interpretative Rules 2(a) of the Customs Tariff, which is identical with the only difference being that instead of removed , the expression presented appears in the Customs Tariff. In regard to the applicability of rule 2(a) of the Customs Tariff to import of goods, it has been repeatedly held that until all the components of the complete article are presented together for assessment at the same point of time, rule 2(a) cannot be invoked to classify the parts as complete article. It has also been held that consignments removed/presented at different points of time from different factories cannot be clubbed together to classify the parts as complete article. In the present case, it is not in dispute that not even a single consignment was cleared or removed from the factory of the appellant to the manufacturers containing all the parts of CTVS at the same point of time. All the consignment of sub-assemblies/parts (except for 21 Flatron) the colour picture tubes were not supplied and the colour picture tubes were always purchased by the manufacturers from the picture tubes manufacturers directly - when the consignments cleared by the appellant did not contain all the parts at the same point of time, Interpretative Rule (a) cannot be pressed into service - It is, therefore, not possible to accept the contention of the learned authorized representative appearing for the Department that complete assemblies/sub-assemblies of CTVS were supplied to the original equipment manufacturers. Even otherwise, rule 2(a) could not have been invoked for the reason that classification of the goods in the present case would be governed by Section Note 2 to Section XVI of the Central Excise Tariff and the Rules of Interpretation would not be applicable at all - in view of Rule 1, sub-assemblies and parts cleared by the appellant are to be classified under Heading 85.29 only. Once the goods are classifiable under a particular Heading by application of the Headings and relevant section and chapter notes, the classification cannot be altered by taking recourse to the Interpretative Rules. Penalties - HELD THAT - Once it is held that the duty demanded in the show cause notice cannot be confirmed, penalties cannot be imposed upon S.N. Rai and Atul Tandon. Other contentions not examined. Appeal allowed.

Issues Involved:

1. Applicability of Interpretative Rules 2(a) of the Central Excise Tariff.
2. Classification of sub-assemblies/parts of Colour Television Sets (CTVS).
3. Invocation of extended period of limitation under section 11A of the Excise Act.
4. Imposition of penalties on the appellant and its employees.

Issue-wise Detailed Analysis:

1. Applicability of Interpretative Rules 2(a) of the Central Excise Tariff:

The Commissioner based the order on Interpretative Rules 2(a), which states that incomplete or unfinished goods having the essential character of complete goods should be classified as complete goods. The Tribunal noted that Rule 2(a) can only be applied if all components forming the complete or finished goods are removed together at the same time. The Tribunal referenced the Larger Bench decision in Sony India Ltd. and the Supreme Court's judgment in CC vs. Sony India Ltd., which emphasized that Rule 2(a) is applicable only when all components are presented together for assessment. The Tribunal concluded that since the appellant did not supply all critical parts of CTVS in a single consignment, Rule 2(a) was inapplicable.

2. Classification of sub-assemblies/parts of CTVS:

The Tribunal observed that the classification of goods should be governed by Section Note 2 to Section XVI of the Central Excise Tariff, which takes precedence over the Interpretative Rules. The Tribunal found that Heading 85.29, covering parts of CTVS, was more specific to the facts of the case. The Tribunal cited the Supreme Court's decision in Simplex Co. Ltd., which stressed the primacy of section and chapter notes over interpretative rules. The Tribunal concluded that the sub-assemblies and parts cleared by the appellant should be classified under Heading 85.29, not as complete CTVS under Heading 85.28.

3. Invocation of extended period of limitation under section 11A of the Excise Act:

The Tribunal did not find it necessary to examine the contention regarding the invocation of the extended period of limitation, as the primary issue of classification was decided in favor of the appellant.

4. Imposition of penalties on the appellant and its employees:

Since the Tribunal held that the duty demanded in the show cause notice could not be confirmed, it consequently ruled that penalties could not be imposed on the appellant or its employees, S.N. Rai and Atul Tandon.

Conclusion:

The Tribunal set aside the order dated 21.03.2016 passed by the Commissioner, confirming the duty demands and imposing penalties. The Tribunal allowed Excise Appeal No. 70677 of 2016, Excise Appeal No. 70678 of 2016, and Excise Appeal No. 70679 of 2016, thereby ruling in favor of the appellant and its employees.

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