2010 (10) TMI 1003 - AT - Central Excise

Tribunal overturns duty demand on mobile storage system for EOU

SHANKARRAO MOHITE SSG LTD. Versus COMMISSIONER OF C. EX., PUNE

The Tribunal set aside the lower authorities' orders confirming the duty demand under Notification 1/95-C.E. for the procurement of a mobile storage ... - 1. ISSUES PRESENTED AND CONSIDERED 1. Whether a 'mobile storage system' supplied to a 100% EOU qualifies as 'office equipment' excluded from exemption under the relevant end-use exemption notification. 2. Whether the officer-in-charge of the recipient (EOU) unit may re-determine or re-classify goods already classified by the officer-in-charge of the manufacturing/clearing unit after issuance of a CT-3 certificate. 3. Whether duty liability and entitlement to exemption are to be determined at the time and place of removal by the manufacturer (i.e., whether end-use exemption is applied at clearance and cannot be reopened subsequently by the recipient unit). 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Classification of the mobile storage system as 'office equipment' and entitlement to exemption Legal framework: The relevant statutory scheme grants exemption under an end-use based notification for goods supplied to a 100% EOU. Classification of goods (chapters/heading) determines whether particular items fall within exempted categories or excluded categories (e.g., 'office equipment' versus 'office furniture'). Exemption applicability depends on classification at the time/place of removal. Precedent Treatment: The respondent relied on Tribunal decisions holding certain items (e.g., filing cabinets) to be office furniture and not office equipment. Those decisions were invoked to argue non-entitlement to exemption. Interpretation and reasoning: The Tribunal observed that the show cause notice challenged entitlement on a vague ground that the mobile storage system is 'like an office furniture' and thus not 'office equipment.' The Tribunal emphasized that classification must be determined rigidly by the appropriate officer and that the factual question whether the item is 'office equipment' was not properly reopened by the recipient's officer. The Court noted that the impugned supply was cleared by the manufacturer as office equipment under specified headings and that the issue raised related to reclassification rather than a cogent demonstration that the manufacturer's classification was erroneous. Ratio vs. Obiter: Ratio - entitlement to exemption cannot be denied on a mere assertion that an item is 'like office furniture' where the manufacturer's officer has classified the goods and issued clearance; classification and exemption are to be determined at removal. Obiter - general observations comparing features of furniture versus equipment (not traversed in depth) are ancillary. Conclusion: The Tribunal declined to deny exemption on the ground advanced, holding that the mere characterisation by the recipient's officer as 'like office furniture' was insufficient to override the manufacturer's classification. The question of the correct substantive classification of the mobile storage system was not finally decided on merits; rather, the Tribunal held the recipient officer lacked jurisdiction to re-classify after the manufacturer's clearance. Issue 2: Jurisdiction to re-determine classification - officer-in-charge of recipient unit versus manufacturer's officer-in-charge Legal framework: Statutory and administrative practice requires classification of excisable goods to be made at the time and place of removal by the officer-in-charge of the manufacturing/clearing unit. Certificates (CT-3) issued in respect of clearance constitute administrative approval relied upon by recipients. Precedent Treatment: The Tribunal acknowledged decisions cited by the respondent concerning classification of similar goods, but distinguished them on the ground that those decisions related to classification disputes at the manufacturing end rather than post-clearance reclassification by a recipient's officer. Interpretation and reasoning: The Tribunal held it is a settled principle that classification is to be carried out by the jurisdictional officer-in-charge of the manufacturing unit, and that the officer-in-charge of the recipient unit cannot sit in judgment over a classification already determined by the manufacturing officer. Re-opening classification by the recipient after issuance of CT-3 would effectively permit collateral review of the manufacturer's approved clearance, contrary to the statutory/time-of-removal focus of duty determination. Ratio vs. Obiter: Ratio - the officer-in-charge of a recipient unit has no jurisdiction to re-determine or re-open classification already approved by the officer-in-charge of the supplying/manufacturing unit at the time/place of removal. Obiter - implications for broader reclassification disputes not squarely before the Tribunal. Conclusion: The Tribunal concluded that the recipient officer's attempt to re-classify the goods after issuance of the CT-3 by the manufacturing officer was not permissible; consequently, the demand premised on such reclassification could not be upheld. Issue 3: Timing and place of duty determination; application of end-use exemption Legal framework: Duty liability is determined at the time and place of removal; end-use exemptions are applied at the time of clearance and depend on classification and declared end-use at removal. Administrative approvals/clearances at removal ordinarily fix the entitlement unless validly impugned on proper grounds. Precedent Treatment: The Tribunal noted established law that exemption entitlement is applied at clearance. Decisions cited by respondent on classification do not negate the procedural point that duty/exemption is determined at removal by the manufacturing officer. Interpretation and reasoning: The Tribunal reasoned that Notification 1/95 is an end-use exemption for supplies to 100% EOUs and that exemption application must be determined at the time of removal. Because the manufacturer cleared the goods under the relevant headings and the CT-3 certificate was issued, any challenge to exemption must confront the fact that duty liability is fixed at removal. The recipient's later attempt to impose duty on the ground of different classification was therefore procedurally inappropriate. Ratio vs. Obiter: Ratio - duty liability and entitlement to end-use exemption are to be determined at the time and place of removal by the manufacturing officer; subsequent unilateral re-classification by the recipient is impermissible. Obiter - nothing beyond procedural allocation of classification authority was decided about substantive criteria for classifying specific goods. Conclusion: The Tribunal set aside the demand for duty as premised on an impermissible re-classification after removal, allowing the appeal and granting consequential relief under law.