2005 (1) TMI 108 - SC - Central Excise

Supreme Court sets aside Tribunal decision on Minimum Oil Circuit Breakers classification under Central Excise Tariff Act

COMMISSIONER OF CENTRAL EXCISE Versus ESWARAN & SONS ENGINEERS LTD.

The Supreme Court ruled in favor of the Department in a case concerning the classification of Minimum Oil Circuit Breakers under the Central Excise Tariff ... Whether the Circular dated 14-7-1994 applies to present case? Held that:- Under Section 37B of the Act, the Board is empowered to issue instructions to Central Excise Officers, for the purpose of uniformity in the classification of excisable goods, which instructions, are required to be followed by such officers. However, under proviso (a) to Section 37B an exception is made. The said proviso states that the said Instructions, orders or directions cannot make any Central Excise Officer to dispose of a particular case in a particular manner. Similarly, under proviso (b) such Instructions, shall not bind the discretion of Commissioner of Central Excise (Appeals), discharging appellate functions. In view of the proviso to Section 37B, the said Circular dated 14-7-1994 issued by the Board was not applicable to the facts of the present case. As stated above, in the present case, the Assistant Collector had taken a prima facie view for purposes of reclassification as far back as 17-12-1993. Therefore, the Circular dated 14-7-1994 had no application to the facts of the present case. The judgment of the Supreme Court in the case of H.M. Bags Manufacturer (1997 (7) TMI 119 - SUPREME COURT OF INDIA) did not deal with the case where the department had issued show cause notice purporting to reclassify the product prior to the issuance of Instructions by the Board. Therefore, the said judgment has no application to the facts of the present case. Appeal allowed. Issues: Classification of Minimum Oil Circuit Breakers under Central Excise Tariff Act, 1985; Applicability of Circular dated 14-7-1994 under Section 37B of the Act.Classification Issue:The case involved a dispute regarding the classification of Minimum Oil Circuit Breakers under the Central Excise Tariff Act, 1985. The Department contended that the Circuit Breakers should be classified under sub-heading 8537, while the assessee argued for classification under sub-heading 8535. The Department issued show cause notices proposing a revision in classification, leading to a demand for differential duty. The Assistant Collector ruled in favor of the Department, classifying the Circuit Breakers under sub-heading 8537. The assessee appealed to the Collector of Central Excise (Appeals) and subsequently to the Tribunal, which upheld the classification under sub-heading 8537. The Tribunal, however, directed a recalculation of duty based on a Circular dated 14-7-1994, which operated prospectively. The Supreme Court analyzed the relevant headings and sub-headings under Chapter 85, noting the Tribunal's decision in a similar case involving Circuit Breakers. The Court disagreed with the Tribunal's reliance on the Circular, emphasizing that the show cause notice predating the Circular was based on the Assistant Collector's interpretation and not the Circular. The Court held that the Circular did not apply to the case, allowing the Department's appeal and setting aside the Tribunal's judgment.Applicability of Circular Issue:The second issue revolved around the applicability of the Circular dated 14-7-1994 under Section 37B of the Act. The Tribunal had based its decision on the Circular, determining the duty recalculations should be prospective. The Supreme Court, however, clarified that the Circular did not apply to the case due to the show cause notice issued before its issuance. The Court referenced the judgment in H.M. Bags Manufacturer case, highlighting the limitations of Circulars under Section 37B. The Court explained the provisos of Section 37B, emphasizing that the Circular could not bind the discretion of the Assistant Collector who had already initiated the reclassification process before the Circular's issuance. Relying on the principles laid down in previous cases, the Court concluded that the Circular dated 14-7-1994 had no relevance to the case, allowing the Department's appeal and overturning the Tribunal's decision.Conclusion:In a comprehensive analysis, the Supreme Court addressed the classification issue of Minimum Oil Circuit Breakers under the Central Excise Tariff Act, 1985, and the application of Circular dated 14-7-1994 under Section 37B of the Act. The Court ruled in favor of the Department, setting aside the Tribunal's judgment based on the incorrect reliance on the Circular and the show cause notice predating its issuance. The judgment provided clarity on the classification criteria and the limitations of Circulars under Section 37B, ensuring uniformity in excisable goods' classification.