WESTINGHOUSE SAXBY FARMER LTD. versus COMMR. OF CENTRAL EXCISE CALCUTTA on 8 March 2021

622

SUPREME COURT REPORTS

[2021] 3 S.C.R.

AWESTINGHOUSE SAXBY FARMER LTD.

v.

COMMR. OF CENTRAL EXCISE CALCUTTA

(Civil Appeal No. 37 of 2009)

BMARCH 08, 2021

[S. A. BOBDE, CJI, A. S. BOPANNA ANDV. RAMASUBRAMANIAN, JJ.]

Central Excise Tariff Act, 1985: Chapter 86, Tariff Item No.8608 and Chapter 85 Tariff Item No.8536.90 – “Relays”Cmanufactured by the assessee, used as Railway signaling equipment– Taxability of – Classification of, under Tariff Item No. 8608 or8536.90 – Held: Relays manufactured by the assessee are usedsolely as part of the railway signaling/traffic control equipment –On the basis of the ‘predominant use’ or ‘sole/principal use’ testDacknowledged by the General Rules for the Interpretation of theSchedule, ‘relays’ are classifiable as parts of ‘railway signallingequipment’, under Heading 8608 – Thus, the invocation of Note2(f) in Section XVII, overlooking the “sole or principal user test”indicated in Note 3, not justified –These goods were previouslyclassified (before 1993) under Sub--heading 8536.90, but a revisedEclassification list, classifying them under sub-heading 8608,submitted by the assessee, was approved by the competent Authorityon 27.08.1993 – After such specific approval of the classificationlist, it was not proper on the part of the Authorities to invoke Note2(f) of Section XVII – Furthermore, the show cause-cum-demandFnotices issued by the Department during 1995-1998 were partlytime barred u/s. 11-A – Despite the fact that some of the individualnotices were issued within the period of limitation, the veryinvocation of s. 11-A, cannot be said to be within time – CentralExcise Act, 1944 – s. 11-A.

Allowing the appeal, the CourtG

HELD: 1.1 Section 2 of the Central Excise Tariff Act, 1985provides that the rates at which duties of excise shall be leviedunder the Central Excise Act, 1944 are specified in the FirstSchedule and the Second Schedule. The First Schedule containsa set of Rules known as “General Rules for the Interpretation ofH

this Schedule”. These Rules begin with a mandate that the“classification of goods in this Schedule shall be governed by theprinciples laid thereunder.”Rule 1 of these Rules makes it clearthat “the titles of Sections, Chapters and Sub-Chapters are providedfor ease of reference only and that for legal purposes, classificationshall be determined according to the terms of the Headings andany relative Section or Chapter Notes and provided such headingsor Notes do not otherwise require, according to the provisions of therules that follow”. Rule 2 deals with (i) incomplete or unfinishedarticles; and (ii) mixtures or combinations of material or substance.While Rule 2(a) deals with incomplete or unfinished Articles, Rule2(b) deals with mixtures or combinations of a material orsubstance. Rule 3 deals with cases where goods are classifiableunder two or more sub-headings. But Rule 3 begins with areference to Rule 2(b). Therefore, it is necessary to extract Rule2(b) and Rule 3 together.Rule 2(a) speaks about “Article”, Rule2(b) speaks about “material or substance” as well as “goods of agiven material or substance” and Rule 3 speaks about “goods”.[Para 25-29][631-G-H; 632-A-D; 633-D]

1.2 In the instant case, the claim of the assessee was thatthe relays manufactured by them were part of the railway signalingequipment. But all the Authorities were of the unanimous viewthat this product is referable to goods of a specific description inChapter sub-Heading 8536.90 and that, therefore, General Rule3(a) will apply. But in invoking General Rule 3(a), the Authoritiesomitted to take note of 2 things. They are that the General Rulesof Interpretation would come into play, as mandated in Rule 1itself, only when no clear picture emerges from the terms of theHeadings and the relevant section or chapter notes; and that inany case, Rule 3 of the General Rules can be invoked only whena particular good is classifiable under two or more Headings,either by application of Rule 2(b) or for any other reason. Oncethe authorities have concluded that by virtue of Note 2(f) of SectionXVII, ‘relays’ manufactured by the appellant are not evenclassifiable under Chapter Heading 8608, it is not known howthe Authorities could fall back upon Rule 3(a) of the General Rules.There is a fundamental fallacy in the reasoning of the Authorities,that Rule 3(a) of the General Rules would apply, especially afterthey had found that ‘relays’ are not classifiable under Chapter AB

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[2021] 3 S.C.R.

AHeading 8608, on account of Note 2(f) of Section XVII.[Paras 30, 31][633-E-H; 634-A]

Central Excise vs. Simplex Mills Co. Ltd. (2005) 3 SCC51 : [2005] 2 SCR 441 – relied on.

1.3 Section XVII, which precedes Chapter 86, the sameBcontains a few notes, one of which is Note 2, which lists out certainarticles to which the expressions “parts” and “parts andaccessories” mentioned in Chapter 86 do not apply. Note 2(f) isrelied upon by the Revenue, in view of the fact that ChapterHeading 8608 uses the words “parts of the foregoing” after theCwords “Railway or tramway track fixtures and fittings” etc.Chapter Heading 8608 does not specifically mention “electricalrelays”. The assessee’s contention is that “it is part of the railwaysignaling safety or traffic control equipment” and that, therefore,Relays manufactured by them would fall under Chapter Heading8608 due to the usage of the word “parts”. It is this contentionDthat is sought to be repelled by the Authorities by relying uponNote 2(f) of Section XVII. [Para 32, 33][634-B, E-F]

1.4 What is recognized in Note 3 can be called the“suitability for use test” or ‘the user test’. While the exclusionunder Note 2(f) may be of goods which are capable of beingEmarketed independently as electrical machinery or equipment,for use otherwise than in or as Railway signaling equipment, thoseparts which are suitable for use solely or principally with an articlein Chapter 86 cannot be taken to a different Chapter as the samewould negate the very object of group classification. This is madeFclear by Note 3. [Para 36][635-B]

1.5 It is conceded by the Revenue that the relaysmanufactured by the appellant are used solely as part of the railwaysignaling/ traffic control equipment. Therefore, the invocation ofNote 2(f) in Section XVII, overlooking the “sole or principal userGtest” indicated in Note 3, is not justified. The respondents oughtnot to have overlooked the ‘predominant use’ or ‘sole/principaluse’ test acknowledged by the General Rules for the Interpretationof the Schedule. [Para 37, 38][635-C, G]

1.6 The Commissioner (Appeals), pointed out that the goodswere previously classified (before 1993) under Sub-headingH

8536.90, but a revised classification list, classifying them undersub-heading 8608, submitted by the appellant, was approved bythe competent Authority on 27.08.1993. After such specificapproval of the classification list, it is not proper on the part ofthe Authorities to invoke Note 2(f) of Section XVII. [Para 39][635-G-H; 636-A-B]

2.1 This is not a case where the extended period of limitationwould apply, especially in the light of the admitted position thatthe assessee who had his product classified under sub-heading8536.90 till the year 1993, specifically filed a classification list on27.08.1993, reclassifying them under sub-heading 8608 and thesame was also approved by the competent authority. Therefore,there is no question of any fraud or collusion or any willfulmisstatement or suppression of facts or contravention of any ofthe provisions of this Act or of the rules made there under withintent to evade payment of duty. It is not even the case of theDepartment that the appellant was guilty of any of these things,warranting the invocation of the extended period of limitation.Therefore, the conclusion is inescapable that the Revenue hadonly the normal period of limitation available to them to invokethe power under Section 11-A. [Para 41][636-D-F]

2.2 The Appellate Authority held without any discussion,that the show cause notices were issued within the time limitenvisaged in Section 11-A and that “any discussion on thejurisdiction of invocation of extended period is not at all required”.Therefore, it is obvious that none of the Authorities chose toinvoke the extended period of limitation, but proceeded on thefooting that all show cause notices were issued within the normalperiod of limitation. If only any of the Authorities had taken careto look at the dates of the show cause notices, the period coveredby those notices and the normal period of limitation that prevailedat that time, they could have easily found that the show causenotices were at least partly time barred. [Para 43][637-A-C]

2.3 The normal period of limitation for invoking Section11-A was six months until 11.05.2000 and the same was modifiedas one year by Act 10 of 2000 with effect from 12.05.2000. Thisperiod of one year was modified as two years by Act 28 of 2016with effect from 14.05.2016. All show cause notices were of a A

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EF

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Adate prior to 12.05.2000 and hence the normal period of limitationwas only six months and at least a couple of show cause noticeswere issued in respect of a period partly or fully beyond the periodof limitation. Unfortunately neither the Appellate Authority norCESTAT took care to analyze the show cause notices individuallywith reference to the period covered by them. [Paras 44, 45]B[637-C-D; 638-A-B]

2.4 In any case all the show cause notices were issued onlyon and after 30.08.1995, raising a classification dispute, afterhaving approved the classification list submitted on 27.08.1993.The dispute in the case on hand was one of classification alone,Capplicable to the product manufactured during the entire periodafter 27.08.1993. The dispute was not invoice-centric. Therefore,what was sought to be done by the Original Authority was actuallyto review the approval of the classification list submitted on27.08.1993 by cleverly issuing separate notices covering certain Dspecific periods. The attempt to undo the effect of the approvalof the classification done on 27.08.1993, was actually time barred.Therefore, despite the fact that some of the individual noticeswere issued within the period of limitation either in respect ofthe part of the period or in respect of the whole of the periodcovered by them, the very invocation of Section 11-A, in the factsEand circumstances of the case, cannot be said to be within time.[Para 46][638-B-E]

3. The Orders-in-Original, the Order of the AppellateAuthority and the Order of the CESTAT are set aside.Consequently, the show cause-cum-demand notices are also set

Faside. [Para 47][638-E]

A. Nagaraju Bros Vs. State of A.P. 1994 Supp (3) SCC

122 : [1994] 1 Suppl. SCR 784 – referred to.

From the Judgment and Order dated 26.03.2008 of the Customs,Excise and Service Tax Appellate Tribunal at Eastern Zonal Bench inHM.A. No.64 of 2008 in Excise Appeal No.EDM-566/2004.

Kunal Chatterji, Ms. Maitrayee Banerjee, Pravar Veer Misra,Advs. for the Appellant.

Ms. Nisha Bagchi, Ms. Aakansha Kaul, B. V. Balaram Das, B.Krishna Prasad, Advs. for the Respondent.

The Judgment of the Court was delivered by

V. RAMASUBRAMANIAN, J.

1. Aggrieved by the dismissal of their appeal by the CustomsExcise and Service Tax Appellate Tribunal (for short “CESTAT”), theassessee has come up with the present appeal under Section 35 L(b) ofthe Central Excise Act, 1944.

2. We have heard Shri Kunal Chatterji, learned counsel for theappellant/assessee and Ms. Nisha Bagchi, learned standing counsel forthe respondent.

3. The appellant is a company wholly owned by the StateGovernment of West Bengal. It 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 tocontrol a circuit. They may also be used where several circuits must becontrolled by one signal.

5. Though essentially relays are electrical equipment, they mayalso 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 February-1993, the effectiverate of excise duty charged under both sub-headings was 15% and hencethe appellant had no problem with the classification of their goods undersub-heading No.8536.90. But with effect from 28.02.1993, the effectiverate of excise duty for the goods under sub-heading No.8536.90 becamemuch higher than the effective rate of duty for the goods under sub-heading 8608.

8. On 27.08.1993, the appellant submitted a classification list forthe approval of the Assistant Collector, Central Excise. This list provided A

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Adetails of the products manufactured by the appellant as Railway signalingequipment, including relays and claimed that they should be classifiedunder sub-heading 8608 and not under 8536 in the First Schedule to theCentral Excise Tariff Act. Admittedly this classification list was approvedby the competent authority.

B9. On 23.04.1996 the Central Board of Excise and Customs issueda circular indicating that ‘plug-in type relays’ merited classification underthe Chapter Heading 85.36. Thereafter, the Assistant Commissioner ofCentral Excise issued nine different show cause-cum-demand noticescalling upon the appellant to show cause as to why the goods should notbe classified under the Sub-Heading 8536.90 and why the differentialCduty should not be collected together with the interest and penalty.

10. The appellant gave reply to the show cause notices, contendingthat what was manufactured by them was supplied only to Railways aspart of the signaling equipment and that, therefore, the show cause noticesrequired to be dropped.D

11. However, the Assistant Commissioner passed 9 separateOrders-in-original on 20/21.12.2001 confirming the demand. The datesof the show cause notices, the period to which each one of them relatedto, the differential excise duty arrived at by the Adjudicating Authorityand the penalty imposed by the Adjudicating Authority are provided in aEtabular column for easy appreciation as follows:- F

G

H

12. Aggrieved by the Orders-in-original, the appellant filed statutoryappeals. All the nine appeals were partly allowed by the Commissioner(Appeals) by an Order dated 29.08.2003. By this Order, the AppellateAuthority confirmed the classification made by the Adjudicating Authorityand the consequential differential duty demanded by the AdjudicatingAuthority. However, the penalty imposed by the Original Authority wasset aside by the Commissioner (Appeals).

13. Challenging that portion of the order of the Commissioner(Appeals) upholding the proposed classification and demandingdifferential duty, the appellant filed an appeal before CESTAT. TheCESTAT dismissed the appeal by a final order dated 26.03.2008. It isagainst the said order that the appellant has come up with the presentappeal 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 usedonly as Railway signaling equipment would fall underChapter 86, Tariff Item 8608 as claimed by the appellant orunder Chapter 85 Tariff Item No.8536.90 as claimed bythe Department ?

(ii) Whether the show cause-cum-demand notices issued bythe Department on various dates during the period 1995-1998 were not barred by time under Section 11-A of theCentral Excise Act,1944, in the absence of any fraud,collusion, willful misstatement or suppression of facts,especially since the classification list submitted by theappellant have been approved on 27.08.1993?

Question No.1

15. For finding an answer to question No.1, it is necessary first tosee the description of the goods that fall under Chapter 85 and Chapter86 with particular reference to the relevant Tariff Items thereunder.Chapter 85 covers goods, described as “Electrical machinery andequipment and parts thereof; sound recorders and reproducers,television image and sound recorders and reproducers, and partsand accessories of such articles.”

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A16. Chapter Heading 8536 covers “Electrical apparatus forswitching or protecting electrical circuits, or for making connectionsto or in electrical circuits (for example, switches, relays, fuses, surgesuppressors, plugs sockets, lamp-holders and other connectors,junction boxes), for a voltage not exceeding 1,000 volts; connectorsfor optical fibres, optical fibre bundles or cables.”B

A

17. Sub-heading 8536.90 covers “other apparatus”. This includes(i) Motor starters for AC motors under sub-heading 8536.90.10;

(ii) Motor starters for DC motors under sub-heading 8536.90.20;

(iii) Junction boxes under sub-heading 8536.90.30; and C

(iv) others under sub-heading 8536.90.90.

18. Chapter 86 covers “Railway or tramway locomotives, rolling-stock and parts thereof; railway or tramway track fixtures andfittings and parts thereof; mechanical (including electro-mechanical)Dtraffic signaling equipment of all kinds.”

19. Chapter Heading 8608 covers “Railway or tramway trackfixtures and fittings; mechanical (including electro-mechanical)signaling safety or traffic control equipment for railway, tramways,roads, inland waterways, parking facilities, port installation or air-fields; parts of the foregoing”.E

20. There are five sub-headings under Chapter Heading 8608which are as follows:

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21. The Assistant Commissioner who passed the Orders-in-Original felt that the ‘Relays’ manufactured by the appellant fell onlyunder the category of ‘Electrical machinery’ covered by Chapter 85 andthat in view of Note 2(f) of Section XVII, the expressions “parts” and“parts and accessories” appearing in Chapter 86 do not apply toelectrical machinery or equipment, covered by Chapter 85. The AssistantCommissioner also relied upon Rule 3(a) of the “General Rules forInterpretation of the First Schedule” to the Central Excise Tariff Act,1985 to hold that the Heading which provides the most specific descriptionshall be preferred to the Heading providing a more general description.Therefore, the Original Authority held that since “Relays” do not find amention in Chapter 86, but finds a specific mention in Chapter Heading8536, the same has to be classified only under sub-Heading 8536.90.

22. The Appellate Authority agreed with the assessee that theRelays manufactured by them are used solely as part of the Railwaysignaling equipment, but held that in view of Note 2(f) of Section XVII,the Orders of the Original Authority did not call for any interference.However, the Appellate Authority set aside that portion of the Orders ofthe Original Authority by which penalty was imposed. This was on theground that the classification list submitted by the appellant on 27.08.1993was approved by the competent Authority and that, therefore, the appellantcould not be taken to have violated the provisions of the law.

23. CESTAT, by the Order impugned in the present appeal, merelyconcurred with the reasoning given by the Appellate Authority anddismissed the appeal.

24. As could be seen from the Orders of the Original Authorityand the first Appellate Authority, the answer to question No.1 revolvesaround the description of goods found in Chapters 85 and 86, as well asthe Notes in Section XVII and the General Rules for Interpretation ofthe First Schedule. We have already extracted the description of goodsin Chapters 85 and 86. Therefore, let us now take note of the relevantNotes in Section XVII and the relevant Rule of the General Rules forinterpretation of the First Schedule.

25. Section 2 of the Central Excise Tariff Act, 1985 provides thatthe rates at which duties of excise shall be levied under the CentralExcise Act, 1944 are specified in the First Schedule and the SecondSchedule. The First Schedule contains a set of Rules known as “General A

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ARules for the Interpretation of this Schedule”. These Rules beginwith a mandate that the “classification of goods in this Scheduleshall be governed by the principles laid thereunder.”

26. Rule 1 of these Rules makes it clear that “the titles of Sections,Chapters and Sub-Chapters are provided for ease of reference onlyBand that for legal purposes, classification shall be determinedaccording to the terms of the Headings and any relative Section orChapter Notes and provided such headings or Notes do nototherwise require, according to the provisions of the rules thatfollow”.

C27. Rule 2 deals with (i) incomplete or unfinished articles; and (ii)mixtures or combinations of material or substance. While Rule 2(a) dealswith incomplete or unfinished Articles, Rule 2(b) deals with mixtures orcombinations of a material or substance.

28. Rule 3 deals with cases where goods are classifiable underDtwo or more sub-headings. But Rule 3 begins with a reference to Rule2(b). Therefore, it is necessary 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 substanceEshall be taken to include a reference to mixtures orcombinations of that material or substance with othermaterials or substances. Any reference to goods of a givenmaterial or substance shall be taken to include a reference togoods consisting wholly or partly of such material orFsubstance. The classification of goods consisting of more thanone material or substance shall be according to the principlesof Rule 3.

3. When by application of rule 2(b) or for any other reason,goods are, prima facie, classifiable under two or moreheadings, classification shall be effected as follows:G

(a) the heading which provides the most specific descriptionshall be preferred to headings providing a more generaldescription. However, when two or more headings eachrefer to part only of the materials or substancescontained in mixed or composite goods or to part only H

of the items in a set put up for retail sale, those headingsare to be regarded as equally specific in relation to thosegoods, even if one of them gives a more complete orprecise description of the goods.

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(b) mixtures, composite goods consisting of differentmaterials or made up of different components, andBgoods put up in sets for retail sale, which cannot beclassified by reference to (a), shall be classified as ifthey consisted of the material or component which givesthem their essential character, insofar as this criterionis applicable.

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(c) when goods cannot be classified by reference to (a) or(b), they shall be classified under the heading whichoccurs last in numerical order among those whichequally merit consideration.”

29. Interestingly Rule 2(a) speaks about “Article”, Rule 2(b)speaks about “material or substance” as well as “goods of a givenmaterial or substance” and Rule 3 speaks about “goods”.

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30. In the case on hand, the claim of the assessee was that therelays manufactured by them were part of the railway signalingequipment. But all the Authorities were of the unanimous view that thisproduct is referable to goods of a specific description in Chapter sub-Heading 8536.90 and that, therefore, General Rule 3(a) will apply.

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31. But in invoking General Rule 3(a), the Authorities have omittedto take note of 2 things. They are : (i) that as laid down by this Court inCommissioner of Central Excise Vs. Simplex Mills Co. Ltd[1] theGeneral Rules of Interpretation will come into play, as mandated in Rule1 itself, only when no clear picture emerges from the terms of theHeadings and the relevant section or chapter notes; and (ii) that in anycase, Rule 3 of the General Rules can be invoked only when a particulargood is classifiable under two or more Headings, either by application ofRule 2(b) or for any other reason. Once the authorities have concludedthat by virtue of Note 2(f) of Section XVII, ‘relays’ manufactured bythe appellant are not even classifiable under Chapter Heading 8608, wedo not know how the Authorities could fall back upon Rule 3(a) of the F

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AGeneral Rules. There is a fundamental fallacy in the reasoning of theAuthorities, that Rule 3(a) of the General Rules will apply, especiallyafter they had found that ‘relays’ are not classifiable under ChapterHeading 8608, on account of Note 2(f) of Section XVII.

32. Coming to Section XVII, which precedes Chapter 86, theBsame contains a few notes, one of which is Note 2, which lists out certainarticles to which the expressions “parts” and “parts and accessories”mentioned in Chapter 86 do not apply. Note 2 (f) reads as follows:- “1.xxxx

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(a) xxxx

(b) xxxx

(c) xxxx

(d) xxxx

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(exxxx

(f) electrical machinery or equipment (Chapter 85)”

33. Note 2(f) is relied upon by the Revenue, in view of the factthat Chapter Heading 8608 uses the words “parts of the foregoing”Eafter 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 signalingsafety or traffic control equipment” and that, therefore, Relaysmanufactured by them would fall under Chapter Heading 8608 due toFthe usage of the word “parts”. It is this contention that is sought to berepelled 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 onhand, it may not, upon a deeper scrutiny.

35. Note 3 of Section XVII reads as follows:G“References in Chapters 86 to 88 to “parts” or “accessories”do not apply to parts or accessories which are not suitablefor use solely or principally with the articles of those Chapters.A part or accessory which answers to a description in two ormore of the headings of those Chapters is to be classified H

under that heading which corresponds to the principal useof that part or accessory.”

36. What is recognized in Note 3 can be called the “suitability’for use test” or ‘the user test. While the exclusion under Note 2(f)may be of goods which are capable of being marketed independently aselectrical machinery or equipment, for use otherwise than in or as Railwaysignaling equipment, those parts which are suitable for use solelyor principally with an article in Chapter 86 cannot be taken to adifferent Chapter as the same would negate the very object of groupclassification. This is made clear by Note 3.

37. It is conceded by the Revenue that the relays manufacturedby the appellant are used solely as part of the railway signaling/ trafficcontrol equipment. Therefore, the invocation of Note 2(f) in SectionXVII, overlooking the “sole or principal user test” indicated in Note 3,is not justified.

38. On the question as to what test would be appropriate in agiven case, this court pointed out in A. Nagaraju Bros Vs. State ofA.P.[2], as follows:

“…..there is no one single universal test in these matters. Theseveral decided cases drive home this truth quite eloquently.It is for this reason probably that the common parlance testor commercial usage test, as it is called, is treated as the moreappropriate test, though not the only one. There may be cases,particularly in the case of new products, where this test maynot be appropriate. In such cases, other tests like the test ofpredominance, either by weight of value or on some otherbasis may have to be applied. It is indeed not possible, nordesirable, to lay down any hard and fast rules of universalapplication Therefore, the respondents ought not to have overlooked the‘predominant use’ or ‘sole/principal use’ test acknowledged by theGeneral Rules for the Interpretation of the Schedule.

39. As pointed out by the Commissioner (Appeals), the goodswere previously classified (before 1993) under Sub-heading 8536.90,but a revised classification list, classifying them under sub-heading 8608, 2 1994 Supp( 3) SCC 122

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Asubmitted by the appellant, was approved by the competent Authority on27.08.1993. After such specific approval of the classification list, it is notproper on the part of the Authorities to invoke Note 2(f) of SectionXVII. Hence question No.1 is answered in favour of the appellant andagainst the Revenue.

BQuestion No.2

40. The second question that arises for consideration is as towhether the show cause-cum-demand notices issued by the Departmenton various dates during the period 1995-1998 were not barred by timeunder Section 11-A of the Central Excise Act, 1944, in the absence ofCany fraud, collusion, willful misstatement or suppression of facts,especially since the classification list submitted by the appellant havebeen approved on 27.08.1993.

41. At the outset we should point out that this is not a case wherethe extended period of limitation would apply, especially in the light ofDthe admitted position that the assessee who had his product classifiedunder sub-heading 8536.90 till the year 1993, specifically filed aclassification list on 27.08.1993, reclassifying them under sub-heading8608 and the same was also approved by the competent authority.Therefore, there is no question of any fraud or collusion or any willfulmisstatement or suppression of facts or contravention of any of theEprovisions of this Act or of the rules made there under with intent toevade payment of duty. It is not even the case of the Department thatthe appellant was guilty of any of these things, warranting the invocationof the extended period of limitation. Therefore, the conclusion isinescapable that the Revenue had only the normal period of limitationFavailable to them to invoke the power under Section 11-A.

42. As a matter of fact the first Appellate Authority held in thepenultimate paragraph of its Order as follows:

“I find that the subject goods were previously classified undersub-heading No.8536.90 and then the appellant asked forGreclassification of the goods under sub-heading No.8608.00.The new classification was approved by the proper authorityand the appellant paid duty according to the approvedclassification. Hence there is no violation of any provisionsof law on the part of the appellant and therefore penalty isnot imposable under rule 173Q.H

WESTINGHOUSE SAXBY FARMER LTD. v. COMMR. OFCENTRAL EXCISE CALCUTTA [V. RAMASUBRAMANIAN, J.]

43. The Appellate Authority also held without any discussion, thatthe show cause notices were issued within the time limit envisaged inSection 11-A and that “any discussion on the jurisdiction ofinvocation of extended period is not at all required”. Therefore, it isobvious that none of the Authorities chose to invoke the extended periodof limitation, but proceeded on the footing that all show cause noticeswere issued within the normal period of limitation. If only any of theAuthorities had taken care to look at the dates of the show cause notices,the period covered by those notices and the normal period of limitationthat prevailed at that time, they could have easily found that the showcause notices were at least partly time barred.

44. The normal period of limitation for invoking Section 11-A wassix months until 11.05.2000 and the same was modified as one year byAct 10 of 2000 with effect from 12.05.2000. This period of one yearwas modified as two years by Act 28 of 2016 with effect from 14.05.2016.Keeping this in mind let us now have a look at the dates of issue of showcause notices and the period covered by the show cause notices. Theyare as follows:

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A45. It could be seen from the above table (i) that all show causenotices were of a date prior to 12.05.2000 and hence the normal periodof limitation was only six months; and (ii) that at least a couple of showcause notices were issued in respect of a period partly or fully beyondthe period of limitation. Unfortunately neither the Appellate Authoritynor CESTAT took care to analyze the show cause notices individuallyBwith reference to the period covered by them.

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46. In any case all the show cause notices were issued only onand after 30.08.1995, raising a classification dispute, after having approvedthe classification list submitted on 27.08.1993. The dispute in the caseon hand was one of classification alone, applicable to the productCmanufactured during the entire period after 27.08.1993. The dispute wasnot invoice-centric. Therefore, what was sought to be done by the OriginalAuthority was actually to review the approval of the classification listsubmitted on 27.08.1993 by cleverly issuing separate notices coveringcertain specific periods. What is to be seen here is that the attempt toDundo the effect of the approval of the classification done on 27.08.1993, was actually time barred. Therefore, despite the fact that some of theindividual notices were issued within the period of limitation either inrespect of the part of the period or in respect of the whole of the periodcovered by them, the very invocation of Section 11-A, in the facts andcircumstances of the case, cannot be said to be within time.E

47. Therefore, both questions of law are answered in favour ofthe appellant and the appeal is allowed. The Orders-in-Original, the Orderof the Appellate Authority and the Order of the CESTAT are set aside.Consequently, the show cause-cum-demand notices are also set aside.There will be no order as to costs.

F

Nidhi Jain

Appeal allowed.

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H