2017 (1) TMI 72 - HC - Customs

Court dismisses petition challenging Internal Combustion Engine classification under Central Excise Act

The Court dismissed the writ petition challenging the classification of Internal Combustion Engines for Dumper Application under the Central Excise Act. ... Refund claim - manufacture of Internal Combustion (I.C.) Engines - classified under Tariff Item No.29 of the First Schedule to the Central Excise Act, 1944 - The argument of the petitioners is that the classification of their I.C. Engines for Dumper Application has been an issue consistently raised, but throughout the petitioners have succeeded in satisfying the Authorities that the attempt to classify them under a distinct special item cannot succeed. Held that: - differential duty cannot be recovered on the ground of short levy when the duty levied is on the basis of the approved classification list. It is submitted that in the latter Judgment of the Hon'ble Supreme Court in the case of ITW Signode India Ltd. Vs. Collector of Central Excise, [2003 (2) TMI 75 - SUPREME COURT OF INDIA], the argument before the Hon'ble Supreme Court was that Section 11A of the Central Excise Act, 1944 has been amended by Finance Act, 2000 with effect from 17111980. That is made with a view to change the basis of the Judgment in Cotspun Limited [1999 (9) TMI 87 - SUPREME COURT OF INDIA]. It is in these circumstances that the earlier view was brought to the notice of the Bench dealing with the case of ITW Signode India Ltd. The matter was then referred to a Larger Bench. Then our attention is invited to the decision of the Larger Bench ITW Signode India Ltd. Vs. Collector of Central Excise [2003 (11) TMI 114 - SUPREME COURT OF INDIA], and it was held therein that Section 11A of the Central Excise Act, as amended by Section 110 of the Finance Act, 2000 making a provision for reopening of the approved classification list is a valid piece of legislation. Petition dismissed - decided against petitioner. Issues:Classification of Internal Combustion (I.C.) Engines for Dumper Application under Central Excise Act, 1944.Analysis:The petitioners, engaged in manufacturing I.C. Engines, classified under Tariff Item No.29, faced a dispute regarding the classification for Dumper Application. Initially, the Government of India allowed their revision application with a refund of duty. However, a new dispute arose in 1981, which was resolved in favor of the petitioners. Despite paying duty as per approved lists, a show cause notice was issued in 1985 alleging contravention of provisions. The petitioners argued that the Authorities consistently failed to classify their engines under a distinct special item.In challenging the impugned order, the petitioners contended that the Authorities showed a total nonapplication of mind by repeatedly raising the same issues. The Revenue argued that I.C. Engines for Dumpers fall under Tariff Item No.29(i), contrary to the petitioners' insistence on subitem (ii). Reference was made to a Supreme Court judgment emphasizing that short levy does not apply when duty is levied based on an approved classification list.The Court considered the authoritative Supreme Court pronouncements on the matter. It was noted that Section 11A of the Central Excise Act, as amended by the Finance Act, 2000, allows for reopening of approved classification lists. Consequently, the challenge raised in the writ petition was not sustained, leading to its dismissal.Although the demanded amount was paid, no penalty was imposed. The petitioners requested protection against the quantum of interest, citing the amended Sections 11AA and 11AB of the Central Excise Act, 1944. The Court, considering the peculiar circumstances of the case and the payment made, decided to scale down the interest from a specific date to the date of payment, thereby preventing further recoveries as per the impugned order.Ultimately, the writ petition was dismissed, subject to the above decision. The rule was discharged, interim relief was vacated, and no costs were awarded.