2024 (8) TMI 1143 - AT - Central Excise

Railway locomotive pantographs and parts classified under Chapter 86 not CTH 8535, extended limitation rejected

CESTAT Chennai held that pantographs and parts exclusively used in railway locomotives should be classified under Chapter 86 rather than CTH 8535, as ... Classification of goods supplied to the Indian Railways - major items manufactured are brake systems, HVAC, couplers, doors, pantographs etc. - to be classified under Chapter 86 or under chapters 84, 85 etc.? - Extended period of limitation - interest - penalty. Classification of goods - HELD THAT:- The discussion on pantographs and its parts occurs at para 26 of the impugned order and is very cryptic. It accepts that pantograph and its parts are exclusively used in railways or tramway locomotives, however it states that the classification of any item under the Central Excise Tariff is not guided by usage or application of the goods but guided by the notes prescribed under Section / Chapters of the Schedule to the Central Excise Tariff, 1985. Revenue has failed to establish its case for classification of pantographs and its parts under CTH 8535. The order is cryptic and non-speaking on the issue. A lack of reasoning in an order makes it difficult for Appelate Authorities to discharge their appellate function properly. Extended period of limitation - HELD THAT:- It is not merely a blame worthy act that would trigger the evocation of the extended period of limitation, something more is required. The act should have been done with the intention to evade payment of duty. There is a positive finding of intended duty evasion has not been arrived at in the impugned order. Hence the demand of duty for the extended period must fail. Interest - HELD THAT:- The appellant is liable to pay duty for the normal period. Further whenever the payment of interest is mandated by statute, it automatically comes into play, when the happening or non-happening of an event mentioned in the relevant section of the statute occurs. The liability gets extinguished only when the statutory payments are made as required by the statute. A similar issue relating to payment of interest under the Central Excise Act was examined by the Hon’ble Supreme Court in COMMISSIONER OF CENTRAL EXCISE, PUNE VERSUS M/S SKF INDIA LTD. [2009 (7) TMI 6 - SUPREME COURT] wherein it was held that interest was payable even in a case of short payment of duty which was indeed completely unintended and without any element of deceit etc. We thus find that the appellant is lawfully bound to pay interest on the duty demanded, and that interest is leviable on delayed or deferred payment of duty for whatever reasons. Penalty - HELD THAT:- It is found that revenue has not made out a case of a blame worthy act with intention to evade payment of duty, hence the question of penalty does not arise and the same is set aside. Appeal disposed off. Issues Involved:1. Misclassification of goods.2. Wrong availment of CENVAT credit.3. Issuance of corrigendum.4. Invocation of extended period for demand.Detailed Analysis:1. Misclassification of Goods:The appellant, engaged in the manufacture and supply of rail products, classified their goods under Chapter 86, paying GST at 5% and Central Excise duty at 6%. The department argued that these goods should have been classified under Chapters 84 or 85, attracting a higher duty of 12.5%. The Original Authority confirmed the reclassification and demanded differential duty. The appellant contended that they had reclassified the goods under Chapter 8607 in 2014 based on industry practice and not to evade duty. The tribunal found that the appellant had undertaken an internal exercise to revalidate the classification, reclassifying 22 out of 29 disputed products under other chapters, while retaining 7 items under Chapter 86. The dispute narrowed down to the classification of 'Pantographs and its parts'.2. Wrong Availment of CENVAT Credit:The department alleged that the appellant wrongly availed CENVAT credit for 'Kittings' and 'Platform Doors', which were procured and cleared as such. The appellant had paid duty at 12.5% when procuring these items but cleared them under Chapter 8607, paying a lower duty of 5-6%. The tribunal noted that this led to an excess buildup of CENVAT credit, which the appellant agreed to reverse only after being confronted during the investigation. The tribunal found that while this action indicated a lack of bona fide, it did not necessarily imply mala fide intent.3. Issuance of Corrigendum:The department issued a corrigendum changing the classification of pantographs and its parts from CTH 8607 to CTH 8535, imposing an additional duty demand. The appellant argued that the corrigendum traversed beyond the SCN and was bad in law. The tribunal referred to the Allahabad High Court's judgment in Polyplex Corpn. Ltd., which held that a corrigendum should not materially change the content and grounds of the original SCN. The tribunal found that the department failed to establish its case for classification under CTH 8535, as the order was cryptic and non-speaking. The classification of pantographs and its parts as revised by the appellant was upheld.4. Invocation of Extended Period for Demand:The department invoked the extended period under Section 11A (4) (e) of the Central Excise Act, 1944, alleging willful misstatement and suppression of facts by the appellant. The appellant contended that they had reclassified the goods under Chapter 8607 in 2014 when the duty rate was 12.5% and not to evade duty. The tribunal found that the allegations did not disclose any willful attempt to evade duty. The complexity in the classification and the department's own change in classification through a corrigendum indicated a lack of mala fide intent. The tribunal referred to the Supreme Court's judgment in Pushpam Pharmaceuticals Company, which held that suppression must be deliberate to evade duty. The demand for the extended period was set aside.Conclusion:The tribunal modified the impugned order as follows:- The classification of pantographs and its parts under CTH 86079990 was upheld.- The demand for duty was to be revised for the normal period and paid by the appellant.- Interest was to be paid on the duty as reworked.- The penalty imposed was set aside.The appellant was granted consequential relief as per law, and the appeal was disposed of accordingly.