TaxTMI 
TaxTMI 
2021 (3) TMI 291
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.... circuits must be controlled by one signal. 5. Though essentially relays are electrical equipment, they may also 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 February1993, the effective rate of excise duty charged under both subheadings was 15% and hence the appellant had no problem with the classification of their goods under subheading No.8536.90. But with effect from 28.02.1993, the effective rate of excise duty for the goods under subheading No.8536.90 became much higher than the effective rate of duty for the goods under subheading 8608. 8. On 27.08.1993, the appellant submitted a classification list for the approval of the Assistant Collector, Central Excise. This list provided details of the products manufactured by the appellant as Railway signaling equipment, including relays and claimed that they should be classified under subheading 8608 and not under 8536 in the First Schedule to the Central Excise Tariff Act. Admittedly this classification list was approved by the competent authority. 9. On ....
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....fication and demanding differential duty, the appellant filed an appeal before CESTAT. The CESTAT dismissed the appeal by a final order dated 26.03.2008. It is against the said order that the appellant has come up with the present appeal 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 used only as Railway signaling equipment would fall under Chapter 86, Tariff Item 8608 as claimed by the appellant or under Chapter 85 Tariff Item No.8536.90 as claimed by the Department ? (ii) Whether the show cause-cum-demand notices issued by the Department on various dates during the period 1995-1998 were not barred by time under Section 11A of the Central Excise Act,1944, in the absence of any fraud, collusion, willful misstatement or suppression of facts, especially since the classification list submitted by the appellant have been approved on 27.08.1993? Question No.1 15. For finding an answer to question No.1, it is necessary first to see the description of the goods that fall under Chapter 85 and Chapter 86 with particular reference to the relevant Tariff ....
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....rical machinery or equipment, covered by Chapter 85. The Assistant Commissioner also relied upon Rule 3(a) of the "General Rules for Interpretation of the First Schedule" to the Central Excise Tariff Act, 1985 to hold that the Heading which provides the most specific description shall be preferred to the Heading providing a more general description. Therefore, the Original Authority held that since "Relays" do not find a mention in Chapter 86, but finds a specific mention in Chapter Heading 8536, the same has to be classified only under sub-Heading 8536.90. 22. The Appellate Authority agreed with the assessee that the Relays manufactured by them are used solely as part of the Railway signaling 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 of the Original Authority by which penalty was imposed. This was on the ground that the classification list submitted by the appellant on 27.08.1993 was approved by the competent Authority and that, therefore, the appellant could not be taken to have violated the provisions of the law. 23....
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....classification of goods consisting of more than one material or substance shall be according to the principles of Rule 3. 3. When by application of rule 2(b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows: (a) the heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods. (b) mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to (a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable. (c) when goods cannot be classified by reference to (a) or (b), they sh....
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....es not specifically mention "electrical relays". The assessee's contention is that "it is part of the railway signaling safety or traffic control equipment" and that, therefore, Relays manufactured by them would fall under Chapter Heading 8608 due to the usage of the word "parts". It is this contention that is sought to be repelled 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 on hand, it may not, upon a deeper scrutiny. 35. Note 3 of Section XVII reads as follows: "References in Chapters 86 to 88 to "parts" or "accessories" do not apply to parts or accessories which are not suitable for use solely or principally with the articles of those Chapters. A part or accessory which answers to a description in two or more of the headings of those Chapters is to be classified under that heading which corresponds to the principal use of 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 as electrical machinery or equipment, for use other....
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.... or suppression of facts, especially since the classification list submitted by the appellant have been approved on 27.08.1993. 41. At the outset we should point out that this is not a case where the extended period of limitation would apply, especially in the light of the admitted position that the assessee who had his product classified under subheading 8536.90 till the year 1993, specifically filed a classification list on 27.08.1993, reclassifying them under subheading 8608 and the same was also approved by the competent authority. Therefore, there is no question of any fraud or collusion or any willful misstatement or suppression of facts or contravention of any of the provisions of this Act or of the rules made there under with intent to evade payment of duty. It is not even the case of the Department 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 had only the normal period of limitation available to them to invoke the power under Section 11A. 42. As a matter of fact the first Appellate Authority held in the penultimate paragraph of its Order as f....