2023 (1) TMI 1443 - AT - Central Excise

Classification of the model Arjun Ultra-1 CE - to be classified under Chapter Sub-heading No. 8429.51.00 of the Schedule to the Central Excise Tariff Act 1985 as Front End Shovel Loaders or under Chapter 87 as Tractors for the purpose of Central Excise duty - Applicability of exemption N/N. 06/2006-CE dated 16.11.2006. Classification of the model Arjun Ultra-1 CE - to be classified under Chapter Sub-heading No. 8429.51.00 of the Schedule to the Central Excise Tariff Act 1985 as Front End Shovel Loaders or under Chapter 87 as Tractors for the purpose of Central Excise duty - HELD THAT - The classification of the goods is to be done in according to the terms of heading/ sub heading and relevant Section Notes and Chapter Notes. All other tests such as end use verification trade understanding of the goods etc. are only aid to understand the nature and character of goods for determining the classification under tariff. It is also settled principle of law that classification and assessment of the goods is to be done at the time of the clearance of the goods and in the form in which they are presented for assessment. The law in this respect has been settled by the Hon ble Supreme Court long back in case of DUNLOP INDIA LTD. MADRAS RUBBER FACTORY LTD. VERSUS UNION OF INDIA AND OTHERS 1975 (10) TMI 94 - SUPREME COURT where Hon ble Apex Court observed From the findings as recorded by the adjudicating authority in order-in-original and the technical opinion given by the IIT Professor the only conclusion that can be arrived is that the goods in the form and manner in which they are cleared for sale to consumers are nothing but Solar Power Generating System or Solar Photovoltaic Lantern and the exemption claimed by the appellants in respect of same under Sl. No. 237 of Notification No. 6/2002-C.E. as amended (Sl. No. 18 of List 9) as claimed by them is admissible to the whole package. From the plain reading of the heading 8701 it is quite obvious and evident that all sort of tractors other than those classifiable under heading 8709 need to be classified under this heading. However impugned order while determining the classification of tractor has sought to limit the scope of this heading to agricultural tractors and have sought to classify the tractors fitted with certain attachment after their clearance from the factory at the instance of the customer by the dealers as machinery under heading no 84295100. In view of what the approach of the Commissioner in determining the classification of the goods as cleared by the appellant on the basis of the attachments provided by the dealers at the instance of the customer cannot be agreed. The impugned goods in the form and manner as cleared are tractors classifiable under heading 8701. Applicability of exemption N/N. 06/2006-CE dated 16.11.2006 - HELD THAT - Since the impugned goods are classifiable under heading 8701 the exemption claimed by the appellant under Sl No 40 of the exemption notification no 06/2006-CE will be admissible to them. Conclusion - i) The impugned goods in the form and manner as cleared are tractors classifiable under heading 8701. ii) Since the impugned goods are classifiable under heading 8701 the exemption claimed by the appellant under Sl No 40 of the exemption N/N. 06/2006-CE will be admissible to them. Appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions addressed in this judgment are:

• Whether the classification of the "Arjun Ultra-1 CE" model should be under Chapter Sub-heading No. 8429.51.00 as "Front End Shovel Loaders" or under Chapter 87 as "Tractors" for the purpose of Central Excise duty.
• Whether the appellant is entitled to the exemption under Notification No. 06/2006-CE dated 16.11.2006 for goods classified under heading 8701.
• Whether the extended period of limitation for demanding duty and the imposition of penalties and interest is justified.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Classification of "Arjun Ultra-1 CE"

• Relevant legal framework and precedents: The classification dispute revolves around whether the "Arjun Ultra-1 CE" should be classified under heading 8701 as tractors, or under heading 8429 as "Front End Shovel Loaders." The classification is guided by the Central Excise Tariff Act, 1985, and the Harmonized System of Nomenclature (HSN) Explanatory Notes.
• Court's interpretation and reasoning: The court relied on the HSN Explanatory Notes to determine the classification. It noted that tractors, including those used for constructional engineering work, fall under heading 8701. The court emphasized that the classification should be based on the state of the goods at the time of clearance from the factory, without considering subsequent modifications.
• Key evidence and findings: The court considered technical certifications from the Central Farm Machinery Training and Testing Institute and the Automotive Research Association of India, which classified the "Arjun Ultra-1 CE" as a tractor. The court also reviewed marketing materials and user manuals that described the model as construction equipment.
• Application of law to facts: The court applied the General Rules for the Interpretation of Tariff and concluded that the "Arjun Ultra-1 CE," as cleared from the factory, is a tractor under heading 8701. The court dismissed the revenue's argument that the model should be classified based on its potential use as a loader.
• Treatment of competing arguments: The appellant argued that the model is a tractor, supported by certifications and technical literature. The revenue contended that the model's design and marketing as construction equipment warranted classification under heading 8429. The court favored the appellant's position, emphasizing the legal requirement to classify goods as presented for assessment.
• Conclusions: The court concluded that the "Arjun Ultra-1 CE" should be classified under heading 8701 as a tractor, not as a front-end shovel loader under heading 8429.

Issue 2: Entitlement to Exemption under Notification No. 06/2006-CE

• Relevant legal framework and precedents: Notification No. 06/2006-CE grants exemption from excise duty for goods classified under heading 8701, except for road tractors for semi-trailers with engine capacity over 1800 cc.
• Court's interpretation and reasoning: The court interpreted the notification to mean that all goods under heading 8701, except specified road tractors, are exempt from duty. The court found no basis for limiting the exemption to agricultural tractors.
• Key evidence and findings: The court noted that the "Arjun Ultra-1 CE" falls under heading 8701 and is not a road tractor for semi-trailers, thus qualifying for the exemption.
• Application of law to facts: Since the "Arjun Ultra-1 CE" is classified under heading 8701, the court held that it is entitled to the exemption provided by the notification.
• Treatment of competing arguments: The revenue argued that the exemption should apply only to agricultural tractors, but the court found no support for this limitation in the notification or the accompanying circular.
• Conclusions: The court concluded that the appellant is entitled to the exemption under Notification No. 06/2006-CE for the "Arjun Ultra-1 CE."

Issue 3: Extended Period of Limitation and Penalties

• Relevant legal framework and precedents: The extended period of limitation under Section 11A of the Central Excise Act, 1944, and penalties under Section 11AC are applicable in cases of willful suppression or misstatement.
• Court's interpretation and reasoning: The court did not find it necessary to address this issue in detail, given its conclusions on the classification and exemption issues.
• Conclusions: The court did not impose penalties or interest, as the appellant was found to be entitled to the exemption on merit.

3. SIGNIFICANT HOLDINGS

• Preserve verbatim quotes of crucial legal reasoning: "The classification of the goods is to be done in according to the terms of heading/ sub heading and relevant Section Notes and Chapter Notes. All other tests, such as end use verification, trade understanding of the goods etc., are only aid to understand the nature and character of goods for determining the classification under tariff."
• Core principles established: The classification of goods for excise duty purposes should be based on the state of the goods at the time of clearance from the factory. Exemptions should be applied as per the explicit terms of the relevant notification.
• Final determinations on each issue: The "Arjun Ultra-1 CE" is classified under heading 8701 as a tractor, qualifying for exemption under Notification No. 06/2006-CE. The appeals are allowed, and no penalties or interest are imposed.