2024 (5) TMI 1334 - AT - Central Excise

Classification of Colour Television Sets in SKD condition - classifiable under sub-heading No.8528.00 of CETA or not - confirmation of demand with interest and penalty - HELD THAT - The issue is no more res integra and is squarely covered by the decision of the Tribunal in the case of M/S. L.G. ELECTRONICS INDIA PVT. LTD., SHRI S.N. RAI AND SHRI ATUL TANDON VERSUS COMMISSIONER OF CENTRAL EXICSE, NOIDA-II 2022 (8) TMI 873 - CESTAT ALLAHABAD . In the above matter the Tribunal has decided that the parts and Sub-assembling cleared without all the critical components cannot be classified as CTVs. The Tribunal further held that unless all the critical parts of CTVs i.e. CTPs and PCBs also, are removed together, till then Rule 1 of the Rules of Interpretation to the Tariff is applicable and Rule 2(a) of the same Rule has no application and accordingly, the classification of such parts/Sub-assemblies will fall under 85.29 of the Tariff. The Tribunal set aside the adjudication order which applied Rule 2(a) in similar case where also CTPs were not removed by the supplier with other parts/Sub-assemblies. The aforesaid order of the Tribunal was assailed by the Department before the Supreme Court in COMMISSIONER OF CENTRAL EXCISE, NOIDA II VERSUS M/S. LG ELECTRONICS INDIA PRIVATE LIMITED ETC. 2023 (4) TMI 1326 - SC ORDER and the Civil Appeal was dismissed holding that ' on closer scrutiny of the unique facts of this case, it is our view, the goods of the appellant may not be said to be parts as per Section Note 2 to Section XVI of the Tariff. The appellant not only used to assemble all parts of the Television Receivers and make complete television sets, but the said Television Receivers were also operated in the manufacturing unit of the appellant and thoroughly checked and only upon it being confirmed that the Television Receivers were complete in all respects, they were disassembled and along with relevant material and individual serial numbers, sent to the various satellite units.' The impugned order passed by the Commissioner is set aside - Appeal allowed.

Issues Involved:
1. Classification of Colour Television Sets (CTVs) and their parts/sub-assemblies.
2. Applicability of Interpretative Rule 2(a) of the Central Excise Tariff.
3. Invocation of extended period of limitation under proviso to Section 11A of the Central Excise Act, 1944.
4. Confirmation of Central Excise duty demand.
5. Imposition of interest and penalty under Sections 11AB and 11AC of the Central Excise Act, 1944.

Detailed Analysis:

1. Classification of Colour Television Sets (CTVs) and their parts/sub-assemblies:
The primary issue revolves around whether the parts and sub-assemblies of CTVs supplied by the Appellant to OEMs should be classified under Heading 85.28 as complete CTVs or under Heading 85.29 as parts of CTVs. The Tribunal referenced the decision in M/s L. G. Electronics India Pvt. Ltd. vs. CCE, Noida-II, which held that parts and sub-assemblies cleared without all critical components, such as Colour Picture Tubes (CPTs) and populated Printed Circuit Boards (PCBs), cannot be classified as complete CTVs. Therefore, these parts/sub-assemblies should fall under Heading 85.29 of the Tariff.

2. Applicability of Interpretative Rule 2(a) of the Central Excise Tariff:
The Tribunal examined the applicability of Interpretative Rule 2(a), which states that incomplete or unfinished goods should be classified as complete goods if they have the essential character of the finished goods. However, it was clarified that this rule applies only if all components forming the complete goods are removed together at the same point of time. The Tribunal concluded that since the Appellant did not supply all critical parts (CPTs and PCBs) together, Rule 2(a) was not applicable. Instead, Rule 1 of the Rules of Interpretation should be applied, classifying the parts/sub-assemblies under Heading 85.29.

3. Invocation of extended period of limitation under proviso to Section 11A of the Central Excise Act, 1944:
The Tribunal noted the audit findings and the subsequent issuance of the show cause notice (SCN) dated 31.01.2008, which invoked the extended period of limitation for demanding duty for the period from 01.04.2003 to 30.09.2003. The Tribunal did not specifically address the validity of invoking the extended period of limitation in this judgment, focusing instead on the classification issue.

4. Confirmation of Central Excise duty demand:
The Commissioner had confirmed the demand of Central Excise duty amounting to Rs.1,41,02,716/- under Section 11A of the Central Excise Act, 1944. However, the Tribunal, relying on the decision in M/s L. G. Electronics India Pvt. Ltd. vs. CCE, Noida-II, set aside the adjudication order that applied Rule 2(a) for classification. Consequently, the demand for duty based on the incorrect classification under Heading 85.28 was also set aside.

5. Imposition of interest and penalty under Sections 11AB and 11AC of the Central Excise Act, 1944:
The Commissioner had also confirmed the demand for interest on the duty amount under Section 11AB (now Section 11AA) and imposed a penalty equal to the duty amount under Section 11AC read with Rule 25 of the Central Excise Rules, 2002. Given the Tribunal's decision to set aside the duty demand, the related interest and penalty were also invalidated.

Conclusion:
The Tribunal concluded that the impugned order dated 13.11.2015 passed by the Commissioner was not justified. The appeal filed by the Appellant was allowed, setting aside the order and granting consequential relief as per law. The Tribunal emphasized that the classification of parts and sub-assemblies should be under Heading 85.29, not 85.28, and that Rule 2(a) was inapplicable in this context. The Tribunal's decision was pronounced in open court on 21st May, 2024.

← Previous Next →