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2025 (2) TMI 1052 - AT - Central ExciseClassification of goods - Fuel Filter assembly Water Pump Assembly Cylinder Head Sub-Assembly and Cylinder liner stud Assembly which are sub-assemblies and components of High Horse Power locomotives for Railways - yo be classified under Chapter Heading 8607 as parts of railway locomotives or under other headings as suggested by the Department? - applicability of Exemption N/N. 12/2016-CE dated 01.03.2016 - time limitation. Classification of goods - HELD THAT - Section 37B Order issued earlier on 01.09.1993 instructing classification of Steel/Aluminium Water Tanks for supply to Railways either under Chapter 73 or Chapter 76 of the CETA 1985 was withdrawn consequent to the Order of the Tribunal in M/s. Sri Ram Metal Works 1997 (11) TMI 265 - CEGAT MADRAS that the provision of water in a coach was a necessity and the water tank became part of the coach after fitment. The decision is in keeping with the relevant Section Notes and Rules for Interpretation of Tariff as well as judgments of the Hon ble Supreme Court and decision of the Tribunal in identical cases. Therefore the Lower Appellate Authority did not commit any error in falling back upon Board s Circular dated 20.10.2000. In the case of M/s. G.S. Auto International Ltd. 2003 (1) TMI 700 - SUPREME COURT a question arose as to whether items such as Sprint Centre Bolts with Nuts Spring U Bolt with Nuts Spring U Clamps with nuts and plates Spring Shackle Pin (Shackel Bolt) with Nuts and Spring Shackle Pin (Spring Pin) specifically designed for use in automobile vehicles merited classification as parts of general use under CH 73.08 or as parts and accessories of motor vehicles under CH 87.08. CETA 1985 is enacted on the basis and pattern of the HSN. For resolving any dispute with reference to classification reference to HSN is needed. However when Section or Chapter Notes are clear and unambiguous resorting to HSN Notes is not required. The principles governing classification are given in the General Rules of the Interpretation of Tariff. As per Rule 1 of the said General Rules the classification is to be determined in terms of the headings and any relevant Section or Chapter Notes. If determination of classification is still elusive recourse can be taken to Rules 2 to 6. If the dispute cannot be resolved in the manner said above reference to HSN Notes is required. In this case applying Note 3 of Section XVII coupled with the judgment of the Hon ble Supreme Court in the case of M/s Westinghouse Saxby and Rule 3(a) of the General Rules for Tariff Interpretation the issue has been resolved by classifying the products under CH 8607. Therefore any further reference to HSN Notes is not legally warranted. The products manufactured and supplied by the respondent are rightly classifiable under CH 8607 of CETA and the ratio of the decision of this Bench in the case of M/s. Shakthi Tech Manufacturing India Pvt. Ltd. applies to this case entitling the respondent to avail concessional rate of duty under the amending Notification No. 12/2016-CE dated 01.03.2016. Time limitation - HELD THAT - Even in the Customs advisory contained in Instruction No. 01/2022-Customs dated 05.01.2022 to which a reference is made in Para 26 of the appeal memo in Para 3 the Board says that In the context of the divergent practises arisen it is noted that the classification of parts of goods falling under Section XVII of the Customs or Central Excise Tariff is a complex issue. Thus the factum of admission in Board s circular that the classification of parts is a complex issue confirms the view that the issue is not free from doubt. Therefore there are no hesitation to hold that the demand raised invoking extended period of limitation under Section 11(4) CEA 1944 is wholly without any basis. Conclusion - i) The classification of the respondent s products under Chapter 8607 affirmed based on the sole or principal use test as articulated in Note 3 to Section XVII and supported by the Supreme Court s decision in Westinghouse Saxby Farmer Ltd. ii) The demand raised invoking extended period of limitation under Section 11(4) CEA 1944 is wholly without any basis. Appeal of Revenue dismissed.
ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment revolve around the classification of certain products manufactured by the respondent under the Central Excise Tariff Act, 1985 (CETA). The primary issue is whether the products, specifically parts for railway locomotives, should be classified under Chapter Heading 8607 as parts of railway locomotives or under other headings as suggested by the Department. This classification affects the duty liability and eligibility for exemption under Notification No. 12/2016-CE. A secondary issue pertains to the invocation of the extended period of limitation for demanding differential duty. ISSUE-WISE DETAILED ANALYSIS Classification of Products: - Relevant Legal Framework and Precedents: The classification dispute hinges on the interpretation of Section Notes and Chapter Notes of the CETA, specifically Notes 2(e) and 3 of Section XVII. The Department argues for classification under other headings based on these notes, while the respondent relies on Note 3, which emphasizes the "sole or principal use" test. The judgment references several Supreme Court decisions, including Westinghouse Saxby Farmer Ltd., which supports classification under Chapter 86 based on the sole or principal use criterion. - Court's Interpretation and Reasoning: The Tribunal emphasizes the importance of the sole or principal use test, as recognized in Note 3 to Section XVII and supported by the Supreme Court in the Westinghouse Saxby case. It rejects the Department's reliance on Note 2(e) for exclusion, asserting that the products are specifically designed for use in railway locomotives and not marketed independently. - Key Evidence and Findings: The Tribunal notes that the products are manufactured according to Indian Railways' specifications and are solely used in railway locomotives. This specific use aligns with the criteria set by Note 3, supporting classification under Chapter 8607. - Application of Law to Facts: The Tribunal applies the sole or principal use test to determine that the products are rightfully classifiable under Chapter 8607. It emphasizes that the products do not have independent marketability and are designed exclusively for railway use. - Treatment of Competing Arguments: The Tribunal addresses the Department's reliance on other Supreme Court decisions, such as Intel Design Systems and Uni Products, distinguishing them based on the nature of the products and the specific legal questions involved. It asserts that the Westinghouse Saxby decision, being directly on point and rendered by a larger bench, takes precedence. - Conclusions: The Tribunal concludes that the products are correctly classified under Chapter 8607, entitling the respondent to the concessional duty rate under Notification No. 12/2016-CE. Invocation of Extended Period of Limitation: - Relevant Legal Framework and Precedents: The issue concerns the applicability of the extended period of limitation under Section 11A(4) of the Central Excise Act, 1944. The Department alleges misclassification and suppression of facts to justify the extended period. - Court's Interpretation and Reasoning: The Tribunal finds that the respondent made full disclosures in their returns and invoices, and the Department was aware of the classification. It emphasizes that any misclassification was not deliberate and resulted from a genuine interpretative issue. - Key Evidence and Findings: The Tribunal notes that the Department did not act on the classification until the exemption notification was availed, indicating a lack of deliberate suppression by the respondent. - Application of Law to Facts: The Tribunal applies the principle that mere misclassification, without intent to evade duty, does not justify invoking the extended period of limitation. - Treatment of Competing Arguments: The Tribunal considers and rejects the Department's argument for the extended period, citing precedent cases where similar circumstances did not warrant such invocation. - Conclusions: The Tribunal concludes that the demand raised under the extended period is unsustainable, as there was no deliberate suppression or misstatement by the respondent. SIGNIFICANT HOLDINGS - The Tribunal affirms the classification of the respondent's products under Chapter 8607, based on the sole or principal use test as articulated in Note 3 to Section XVII and supported by the Supreme Court's decision in Westinghouse Saxby Farmer Ltd. - The Tribunal rejects the Department's reliance on Note 2(e) for exclusion, emphasizing that the products are specifically designed for railway use and do not have independent marketability. - The Tribunal holds that the invocation of the extended period of limitation is unjustified, as the respondent did not engage in deliberate misclassification or suppression of facts. - The Tribunal underscores the binding nature of the Supreme Court's decision in Westinghouse Saxby, which takes precedence over other cited decisions due to its direct relevance and the larger bench that rendered it. - The Tribunal highlights the importance of adhering to the principles of classification as outlined in the Section and Chapter Notes, and the General Rules for Interpretation of Tariff, affirming the respondent's entitlement to the concessional duty rate under the exemption notification.
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