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TMI Blog2021 (3) TMI 291X X X X Extracts X X X X X X X X Extracts X X X X ..... o a different Chapter as the same would negate the very object of group classification. This is made clear by Note 3 - It is conceded by the Revenue that the relays manufactured by the appellant are used solely as part of the railway signaling/ traffic control equipment. Therefore, the invocation of Note 2(f) in Section XVII, overlooking the sole or principal user test indicated in Note 3, is not justified. As pointed out by the Commissioner (Appeals), the goods were previously classified (before 1993) under Subheading 8536.90, but a revised classification list, classifying them under subheading 8608, submitted by the appellant, was approved by the competent Authority on 27.08.1993. After such specific approval of the classification list, it is not proper on the part of the Authorities to invoke Note 2(f) of Section XVII - decided in favour of the appellant and against the Revenue. Whether the show cause-cum-demand notices issued by the Department on various dates during the period 19951998 were not barred by time under Section 11A of the Central Excise Act, 1944, in the absence of any fraud, collusion, willful misstatement or suppression of facts, especially since the classificati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is engaged in the manufacture of "Relays" which is used as part of the Railway signaling system. 4. A 'Relay' is generally an electrically operated switch, used to control a circuit. They may also be used where several circuits must be controlled by one signal. 5. Though essentially relays are electrical equipment, they may also form part of Railway signaling equipment. 6. While the normal electrical relays fall under Tariff Item No. 8536.90, 'Railways and Railways signaling equipment' fall under No. 8608. 7. It appears that from 01.03.1986 till February1993, the effective rate of excise duty charged under both subheadings was 15% and hence the appellant had no problem with the classification of their goods under subheading No.8536.90. But with effect from 28.02.1993, the effective rate of excise duty for the goods under subheading No.8536.90 became much higher than the effective rate of duty for the goods under subheading 8608. 8. On 27.08.1993, the appellant submitted a classification list for the approval of the Assistant Collector, Central Excise. This list provided details of the products manufactured by the appellant as Railway signaling equipment, including relays and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dicating Authority and the consequential differential duty demanded by the Adjudicating Authority. However, the penalty imposed by the Original Authority was set aside by the Commissioner (Appeals). 13. Challenging that portion of the order of the Commissioner (Appeals) upholding the proposed classification and demanding differential duty, the appellant filed an appeal before CESTAT. The CESTAT dismissed the appeal by a final order dated 26.03.2008. It is against the said order that the appellant has come up with the present appeal under Section 35L(b) of the Central Excise Act, 1944. 14. The questions that arise for our consideration in this appeal are: (i) Whether the "Relays" manufactured by the appellant used only as Railway signaling equipment would fall under Chapter 86, Tariff Item 8608 as claimed by the appellant or under Chapter 85 Tariff Item No.8536.90 as claimed by the Department ? (ii) Whether the show cause-cum-demand notices issued by the Department on various dates during the period 1995-1998 were not barred by time under Section 11A of the Central Excise Act,1944, in the absence of any fraud, collusion, willful misstatement or suppression of facts, especially ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lip;……………………………… 21. The Assistant Commissioner who passed the Orders-in-Original felt that the 'Relays' manufactured by the appellant fell only under the category of 'Electrical machinery' covered by Chapter 85 and that in view of Note 2(f) of Section XVII, the expressions "parts" and "parts and accessories" appearing in Chapter 86 do not apply to electrical machinery or equipment, covered by Chapter 85. The Assistant Commissioner also relied upon Rule 3(a) of the "General Rules for Interpretation of the First Schedule" to the Central Excise Tariff Act, 1985 to hold that the Heading which provides the most specific description shall be preferred to the Heading providing a more general description. Therefore, the Original Authority held that since "Relays" do not find a mention in Chapter 86, but finds a specific mention in Chapter Heading 8536, the same has to be classified only under sub-Heading 8536.90. 22. The Appellate Authority agreed with the assessee that the Relays manufactured by them are used solely as part of the Railway signaling equipment, but held that in view of Note 2(f) of Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary to extract Rule 2(b) and Rule 3 together. They read as follows: "2. (a) xxxx (b) Any reference in a heading to a material or substance shall be taken to include a reference to mixtures or combinations of that material or substance with other materials or substances. Any reference to goods of a given material or substance shall be taken to include a reference to goods consisting wholly or partly of such material or substance. The classification of goods consisting of more than one material or substance shall be according to the principles of Rule 3. 3. When by application of rule 2(b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows: (a) the heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise descrip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rts and accessories" mentioned in Chapter 86 do not apply. Note 2 (f) reads as follows:" 1. xxxx 2. xxx (a) xxxx (b) xxxx (c) xxxx (d) xxxx (e xxxx (f) electrical machinery or equipment (Chapter 85)" 33. Note 2(f) is relied upon by the Revenue, in view of the fact that Chapter Heading 8608 uses the words "parts of the foregoing" after the words "Railway or tramway track fixtures and fittings" etc. Chapter Heading 8608 does not specifically mention "electrical relays". The assessee's contention is that "it is part of the railway signaling safety or traffic control equipment" and that, therefore, Relays manufactured by them would fall under Chapter Heading 8608 due to the usage of the word "parts". It is this contention that is sought to be repelled by the Authorities by relying upon Note 2(f) of Section XVII. 34. Though at first blush, Note 2(f) seems to apply to the case on hand, it may not, upon a deeper scrutiny. 35. Note 3 of Section XVII reads as follows: "References in Chapters 86 to 88 to "parts" or "accessories" do not apply to parts or accessories which are not suitable for use solely or principally with the articles of those Chapters. A part or accesso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to invoke Note 2(f) of Section XVII. Hence question No.1 is answered in favour of the appellant and against the Revenue. Question No.2 40. The second question that arises for consideration is as to whether the show cause-cum-demand notices issued by the Department on various dates during the period 19951998 were not barred by time under Section 11A of the Central Excise Act, 1944, in the absence of any fraud, collusion, willful misstatement or suppression of facts, especially since the classification list submitted by the appellant have been approved on 27.08.1993. 41. At the outset we should point out that this is not a case where the extended period of limitation would apply, especially in the light of the admitted position that the assessee who had his product classified under subheading 8536.90 till the year 1993, specifically filed a classification list on 27.08.1993, reclassifying them under subheading 8608 and the same was also approved by the competent authority. Therefore, there is no question of any fraud or collusion or any willful misstatement or suppression of facts or contravention of any of the provisions of this Act or of the rules made there under with intent to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 31.01.1997 7 04.09.1998 February 1998 8 05.09.1998 01.03.1998 to 31.08.1998 9 05.03.1999 01.09.1998 to 28.02.1999 45. It could be seen from the above table (i) that all show cause notices were of a date prior to 12.05.2000 and hence the normal period of limitation was only six months; and (ii) that at least a couple of show cause notices were issued in respect of a period partly or fully beyond the period of limitation. Unfortunately neither the Appellate Authority nor CESTAT took care to analyze the show cause notices individually with reference to the period covered by them. 46. In any case all the show cause notices were issued only on and after 30.08.1995, raising a classification dispute, after having approved the classification list submitted on 27.08.1993. The dispute in the case on hand was one of classification alone, applicable to the product manufactured during the entire period after 27.08.1993. The dispute was not invoice-centric. Therefore, what was sought to be done by the Original Authority was actually to review the approval of the classification list submitted on 27.08.1993 by cleverly issuing separate notices covering certain specific periods. What i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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