TaxTMI 
TaxTMI 
2023 (5) TMI 298
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....mmissioner, the adjudication order Sl. No. 09/2009 (Commr.) dated 31/07/2009 was challenged before the Hon'ble CESTAT, Chennai who vide order No 215/10 dated 22/02/2010 have remanded the matter to the lower authority for a fresh decision after taking into account the written submission field by the appellant on 20/03/2009. Accordingly, the learned Commissioner in de-novo proceedings vide the impugned order has held that the 'alternators' manufactured and cleared from Unit - I are dutiable articles falling under Central Excise Tariff Heading (CETH) 8501.00 upto 27.2.2005 and under CETH 85016100 / 85016200 with effect from 28.2.2005. He has gone on to confirm the duty demanded and also imposed penalty. Aggrieved by the impugned order, the appellant is now before us. 3. The background of the issue is that the appellant has two units. The principal unit is Unit - II from where final products are manufactured and cleared. Unit - I is an additional premises of the appellant. The appellants case is that raw materials for manufacture of specific 'alternators' are first sent by Unit - II to Unit - I and exclusively designed semi-finished 'alternators' meant for use as integral part....
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....also dismissed by the Hon'ble Supreme Court - 2022 (382) ELT 292 (SC) on 10.8.2022. In view of the above reasons, the learned counsel submitted that Alternators of GPU would fall under CETH 8803 and Alternators of APU would fall under CETH 8710. The learned counsel stated that the Tariff rate is NIL for CETH 8803 upto 11.5.2007. Therefore, the demand on the Alternators of GPU from May, 2003 to 10.5.2007 is not sustainable. The learned counsel stated that irrespective of CETH [whether it is 8803 or 8501], the parts of aeroplanes or helicopters of any chapter for servicing of aeroplanes or helicopters are exempted vide Sl.No:240 of notification 6/2002-CE dated 1.3.2022 as extended/ amended. Further, bulk quantity of GPUs was also exported under notification 42/2001-CE (NT). It is an admitted fact that Unit-II has availed these exemptions for GPUs and such exemption was not denied by the Revenue. Under such circumstances, alternators, which are integral part of GPU [parts of parts] are also entitled for such exemption. Doctrine of substantial compliance and intended use is satisfied. On the same logic as above, alternators of APUs and DFGs were cleared based on the excise duty exempti....
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....ing exemption under Notification No. 67/95-CE dated 16.3.1995 but since the alternators received from Unit I are used only for the manufacture of exempted final products and not dutiable final product by Unit II, therefore duty exemption appeared to be not available to them under the said Notification for the alternator. The original authority has hence correctly classified the goods and demanded duty etc, so the impugned order may be upheld. He reiterated the other points made in the impugned order. 6. We have heard both sides and carefully gone through the appeal papers and the submissions made. We find that the points for determination are: (a) Whether the product 'alternators' manufactured at Unit - I is a distinct excisable product, (b) Whether the alternator in question is classifiable under CETH No. 8501 or 8803 / 8710 of the Schedule to CETA. (c) Whether Unit - I is eligible for the exemptions claimed by the appellant. (d) Whether the method adopted for determining the assessable value is correct and (e) Whether extended period for issue of show cause notice is invokable in this case. 7. We find that the whole i....
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.... Rule would be of use in determining the classification of incomplete/ unfinished goods, for assessment purposes, when they satisfy the criteria for 'excisable goods' including the fact that they are also marketable in that condition. 10. Classification of goods are intrinsically linked to the assessment of goods for the purposes of determining the duty that is payable. The assessment process involves classifying the goods, checking the quantity of goods cleared, ascertaining its value in the case ad valorem duty is to be levied, eligibility of the goods to the benefits of duty exemption if any etc. Hence assessment, which means determination of the tax liability, comes into play only when 'excisable goods' are manufactured. When no excisable product has been demonstrated to have been manufactured 'General Rules' would not be very relevant. The issue of marketability being an essential ingredient of determining whether goods have reached the stage of manufacture where duties of Central Excise could be said to have been attached to it, is no longer res integra. In Moti Laminates Pvt. Ltd. vs. CCE - 1995 (76) ELT 241 (SC), this aspect was again reiterated by the Supreme Cour....
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....pellant, the Hon'ble Apex Court, held at para 11, that since marketability is an essential ingredient to hold that a product is dutiable or exigible, it was for the Revenue to prove that the product was marketable or was capable of being marketed. 11. Although the SCN dated 04/06/2008 at para 13 alleged that transactions between Unit I and Unit II (and vice versa) show the facility for fixing of rotating rectifier assembly on the alternators and testing was available in their Unit I itself; that in in a dozen odd cases, serial number were affixed to the alternators cleared from Unit I, pointing to the completion of the manufacturing process, the issue has not been elaborately discussed in the findings portion of the impugned order. Para 13.6 merely states that the recorded instances of the movement of alternators proves that the appellants manufacture fully finished alternators. The crux of his findings in this matter appears at para 13.6. At para 13.6 of the impugned order the learned Commissioner holds that even if the semi-finished alternators manufactured at Unit I was cleared to Unit II, by virtue of rule 2(a) of the General Rules for interpretation of the schedule to....
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....rnators of Unit I go through the finishing processes at Unit II. It is a continuous process of manufacture. As regards the classification and rate of duty applicable on 'alternators' if they had been found manufactured at Unit I, it should not make any difference. The appellant states that they have established the sole and principal use of GPU is for servicing of aircrafts. The classification of GPU was decided under CETH 8803 by the Tribunal in the appellant's own case - 2001 (138) ELT 1152 by relying on Note 3. The Revenue's appeal in the case was also dismissed by the Hon'ble Supreme Court. Similarly, the sole and principal use of APU is in armored vehicles and the classification is CETH 8710. Therefore, alternators of APU are also classified under CETH 8710. The learned Lower Authority on the other hand has held that both Unit I and Unit II are separate premises with separate Central Excise registration certificates. The usage of products manufactured in Unit I after its transportation to Unit II for further production cannot be termed as usage of goods within the factory of production. In other word the processing of goods sent by Unit I to Unit II cannot be considered to be ....
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....td., Cuttack v. Collector of Central Excise, Bhubaneshwar, 1991 Supp (1) SCC 125, this Court held that residuary item can be referred to and such item can be applied only when goods are shown to be not falling under any other specific item. If they are covered by a specific item, residuary item has no application. 59. The Court stated; "One more aspect of the issue should be adverted to before we conclude. The assessee is relying upon a specific entry in the tariff schedule while the department seeks to bring the goods to charge under the residuary Item 68. It is a settled principle that unless the department can establish that the goods in question can, by no conceivable process of reasoning, be brought under any of the specific items mentioned in the tariff, resort cannot be had to the residuary item" [See also Bharat Forge & Press Industries v. Commissioner of Central Excise, (1990) 1 SCC 532 : (1990) 45 ELT 525 (sc)] . . . . ." And again in Speedway Rubber Co. Vs. Commissioner of Central Excise, Chandigarh, [2002 (143) E.L.T. 8] it was held as under; "24. We may notice that as per Rule 3(a) of the Interpretation Rules to the Central Excise Ta....
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....1, 8448, 8466, 8473, 8487, 8503, 8522, 8529, 8538 and 8548) are in all cases to be classified in their respective headings. (emphasis added) (b) Other parts, if suitable for use solely or principally with a particular kind of machine, or with a number of machines of the same heading (including a machine of heading 8479 or 8543) are to be classified with the machines of that kind or in heading 8409, 8431, 8448, 8466, 8473, 8503, 8522, 8529 or 8538 as appropriate. However, parts which are equally suitable for use principally with the goods of headings 8517 and 8525 to 8528 are to be classified in heading 8517, and parts which are suitable for use solely or principally with the goods of heading 8524 are to be classified in heading 8529; (c) All other parts are to be classified in heading 8409, 8431, 8448, 8466, 8473, 8503, 8522, 8529 or 8538 as appropriate or, failing that, in heading 8487 or 8548." It is seen that Note 2 of Section XVI contains three rules, dealing with three different categories of parts. (a) Parts which are goods included in any of the headings of Chapter 84 or 85 (b) Other parts, if suitable for use solely or principally with a particula....
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....Moreover, reliance was placed on the interpretative Rule 3(a) of the 'General Rules', which provides that specific entry shall be preferred to the heading providing more general description. The Apex Court at para 5 held as under: "5. As per the Explanatory Notes to HSN the parts falling under Chapter Heading 8710 would be covered under the said chapter, provided they fulfill both the conditions i.e. they must be identifiable as being suitable for use solely or principally for such vehicles and that they must not be excluded by the provisions of Notes to Section XVII. The identifiable parts under the said heading bodies of armoured vehicles and parts thereof, cover special road wheels for armoured cars, propulsion wheels for tanks, tracts etc. As per this requirement, the goods should not only be identifiable to be armoured vehicles, but it should so not have been excluded by Notes to Section XVII. The Chapter note 2(f) excludes electrical machinery and equipment falling under Chapter 85. Explanatory Notes to HSN relating to the parts and accessories excluded by Note 2 specify items with reference to specific Chapter Heading as per (7) (a), (k) which excludes photographs a....
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..... Once the authorities have concluded that by virtue of Note 2(f) of Section XVII, 'relays' manufactured by the appellant are not even classifiable under Chapter Heading 8608, we do not know how the Authorities could fall back upon Rule 3(a) of the General Rules. There is a fundamental fallacy in the reasoning of the Authorities, that Rule 3(a) of the General Rules will apply, especially after they had found that 'relays' are not classifiable under Chapter Heading 8608, on account of Note 2(f) of Section XVII. 32. Coming to Section XVII, which precedes Chapter 86, the same contains a few notes, one of which is Note 2, which lists out certain articles to which the expressions "parts" and "parts and accessories" mentioned in Chapter 86 do not apply. Note 2(f) reads as follows :- "(1) xxxx (2) xxx (a) xxxx (b) xxxx (c) xxxx (d) xxxx (e) xxxx (f) electrical machinery or equipment (Chapter 85)". 33. Note 2(f) is relied upon by the Revenue, in view of the fact that Chapter Heading 8608 uses the words "parts of the foregoing" after the words "Railway or tramway track fixtures and fittings" etc. C....
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....ay have to be applied. It is indeed not possible, nor desirable, to lay down any hard and fast rules of universal application." Therefore, the respondents ought not to have overlooked the 'predominant use' or 'sole/principal use' test acknowledged by the General Rules for the Interpretation of the Schedule. 39. As pointed out by the Commissioner (Appeals), the goods were previously classified (before 1993) under sub-heading 8536.90, but a revised classification list, classifying them under sub-heading 8608, submitted by the appellant, was approved by the competent Authority on 27-8-1993. After such specific approval of the classification list, it is not proper on the part of the Authorities to invoke Note 2(f) of Section XVII. Hence question No. 1 is answered in favour of the appellant and against the Revenue." 16. It is seen from the above judgment that it does not deal with a case of classifying goods that has a specific description under a tariff heading and by applying Note 2 of Section XVI. In fact, Section XVI does not have a Note similar to Note 3 of Section XVII. The Westinghouse Saxby Farmer Ltd judgment (supra) looks into the applicability of Ge....
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....nion of India & Anr. Vs Major Bahadur Singh, (2006) 1 SCC 368]. 17. In the case of Commissioner of Central Excise, Delhi Vs Carrier Aircon Ltd. [2006 (199) E.L.T. 577 (S.C.)] decided by the Hon'ble Supreme Court the issue to be determined was; 2. . . . . "Whether the chillers manufactured by M/s. Carrier Aircon Limited (respondent herein) are classifiable under Chapter Heading 84.18 of the Schedule to the Central Tariff Act (for short "the Act") as claimed by them or under Chapter Heading 84.15 as contended by the Revenue?" It is seen that both the sub-headings under dispute were falling under Chapter 84 coming under Section XVI of the Schedule and did not have the legal requirement of being subjected to the 'sole/principal use test' as required by Note 3 of Section XVII. The Hon'ble Court held: "15. End use to which the product is put to by itself cannot be determinative of the classification of the product. See Indian Aluminium Cables Ltd. vs. Union of India and Others, 1985 (3) SCC 284 / 1985 AIR 1201. There are a number of factors which have to be taken into consideration for determining the classification of a product. For the purposes of cl....
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....it I and Unit II have different premises and different Central Excise Registration Certificates and hence the 'alternators' are not consumed within the factory. (b) the second condition of the notification is that the final products should suffer duty, which is not so in this case. We hence agree with the impugned order that the appellant was not eligible for the said exemption on 'alternators' during the period covered by the SCN. 21. The learned Commissioner has also examined the appellants claim for exemption under notification 214/86 dated 25/03/1986. He found that the appellant had not followed the job-work procedure as laid out in the notification. However, the appellant was of the view that the transactions were covered by delivery challans of Unit I and Unit II and hence substantial compliance and intended use is satisfied. We find that this is a procedural issue and in the light of our finding that no manufacture was involved a sympathetic view can be taken and the matter be laid to rest without having to go into the issue in-depth. 22. With respect to the other exemption notifications claimed by the appellant, we find that the same has not been discussed....