2023 (1) TMI 296 - AT - Central Excise

Classification of goods - Silo - Rule 2 (a) of the General Rules of Interpretation - to be classified under Chapter Subheading 84379090 of the Central Excise Tariff Act 1985 or under chapter sub-heading 94060099 of the Central Excise Tariff Act 1985 - levy of penalty under Rule 26 of Central Excise Rules 2002 on Senior Vice President (Finance) and Company Secretary and Chairman and Managing Director of Appellant - Demand of interest - extended period of limitation - HELD THAT - From perusal of the entries it is quite evident that the terms of heading pre and post introduction of the 8 Digit Classification Code in Central Excise the Section Note and Chapter Note and the terms of Chapter Heading at 6- digit level were not amended or changed in any manner. This implies that the classification of the goods both pre and post introduction of 8 digit classification code in respect of these heading would not change till 6 digit - it is quite evident that the contracting parties to the HSN Convention could have in its statistical nomenclature could have only specified the any sub division at a level beyond the six digit nomenclature set out in the code. The amendments made in the First Schedule to Central Excise Tariff Act 1985 by the amending Act of 2004 were to expand the classification code from 6 digit to 8 digit and align the Central excise tariff with the Customs Tariff which was aligned to HSN. By adopting the Eight Digit classification code in Central Excise to align the Central Excise Tariff with the Custom Tariff the classification of the goods at the six digit level could not have been amended. From the perusal of the purchase orders it is quite evident that the findings recorded in the impugned order that the appellant was supplying only silo per-se cannot be sustained. It is silo system which is capable of performing the assigned function is being manufactured and cleared by the appellant along with the associated accessories. It is settled position in law as per the Rule 2 (a) of the General Rules of Interpretation and clearly specified as per Section Note 3 4 5 to Section XVI of the First Schedule to the Central excise Tariff Act 1985 that essential character determines or the prime function of the machines equipment interconnected or working in tandem will determine the classification of the said group of machines and equipment - the Office of Chief Commissioner has agreed with the view as canvassed by the appellant while classifying the said goods under Heading 8437. We also take the note of the fact that this view has been expressed by the Chief Commissioner under the scheme of eight digit classification code introduced by the Central excise Tariff Amendment Act 2004. We also take note of the Shipping Bills field by the appellant classifying the same goods under CTH 843709090 and assessed by the Custom Authorities at Nhava Sheva under the said heading. There are no merits in the impugned order classifying the impugned goods cleared by the appellant under CETH 94060099 and demanding the duty accordingly. Extended period of limitation - HELD THAT - The amendment scheme of classification from 6 digit to 8 digit was introduced in 1995 and the Office of Chief Commissioner has rendered the opinion after examination of the issue on 9th January 2013 then it is not understood just for the change of opinion how can appellant be charged for suppression with intent to evade payment of duty subsequently for invoking extended period of limitation and for imposition of penalty under Section 11AC. Since the order of demand of duty is set aside the order for demand of interest too can t be sustained - appeal allowed.

Summary

Issues Involved:
1. Classification of 'Silo' under the Central Excise Tariff Act, 1985.
2. Invocation of the extended period for recovery of duty.
3. Imposition of interest and penalties.

Issue-wise Detailed Analysis:

1. Classification of 'Silo' under the Central Excise Tariff Act, 1985:
The primary issue revolves around the correct classification of 'Silo' under the Central Excise Tariff Act, 1985. The appellant classified 'Silo' under Chapter Subheading 84379090, which pertains to "Machines for cleaning, sorting or grading seed, grain or dried leguminous vegetables; machinery used in the milling industry or for the working of cereals or dried leguminous vegetables, other than farm-type machinery" at Nil rate of duty. The revenue, however, reclassified 'Silo' under Chapter Subheading 94060099, which pertains to "Prefabricated buildings" under the Central Excise Tariff Act, 1985, attracting a normal rate of duty.

The Tribunal examined the relevant chapter headings and notes, both pre and post the introduction of the eight-digit classification code in 2005. It was noted that the terms of heading pre and post-introduction of the eight-digit classification code were not amended or changed in any manner, implying that the classification of goods at the six-digit level remained unchanged. The Tribunal referred to the HSN Explanatory Notes and the classification opinion rendered by the HSN Committee in its 59th Session, which classified similar silos under heading 8479.89, not under prefabricated buildings.

The Tribunal also considered the jurisdictional Chief Commissioner's opinion, which supported the appellant's classification under heading 8437, and the fact that the same classification was accepted by the Customs Authorities at Nhava Sheva for export purposes. Based on these findings, the Tribunal concluded that the impugned goods were not classifiable under heading 94060099 but under heading 8437.

2. Invocation of the Extended Period for Recovery of Duty:
The revenue invoked the extended period for recovery of duty, alleging willful misclassification by the appellant to evade payment of duty. The Tribunal noted that the issue of classification was previously decided by the Tribunal in 1995, and the office of the Chief Commissioner had expressed a consistent opinion post the introduction of the eight-digit classification code. The Tribunal found no new facts or changes in the law that would justify the invocation of the extended period. The Tribunal held that the appellant could not be charged with suppression with intent to evade payment of duty, as the classification issue was already settled and known to the revenue.

3. Imposition of Interest and Penalties:
The Tribunal, having concluded that the demand for duty was unsustainable, also held that the order for demand of interest and imposition of penalties could not be sustained. The Tribunal emphasized the principle that interest and penalties are consequential to the demand for duty, and since the demand itself was set aside, the associated interest and penalties were also set aside.

Conclusion:
The Tribunal allowed the appeals, setting aside the impugned orders that reclassified 'Silo' under Chapter Subheading 94060099 and demanded duty, interest, and penalties accordingly. The Tribunal reaffirmed the classification of 'Silo' under Chapter Subheading 84379090, as initially adopted by the appellant.