TaxTMI 
TaxTMI 
2024 (8) TMI 1143
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....Railways and were uniformly classifying all such supplies under Chapter 86 and were paying GST @5% and Central Excise duty @6%. It appeared that the said goods should have been classified under the respective Chapter 84 or 85 as per Section Note 2(f) of section XVIII of the Central Excise Tariff, 1985 (CETA 1985) and discharge duty @12.5%. Show Cause Notice dated 18.6.2020 was issued to the appellant for reclassification of goods i.e. railway components etc. for the period March 2016 to June 2017. Duty of Rs.8,52,50,584/- was sought to be demanded along with interest. Penalties were also proposed. After due process of law, the Adjudicating Authority confirmed the proposals in the Show Cause Notice. Hence this appeal. 3. Shri Raghavan Ramabhadran, learned counsel appeared for the appellant and Shri P. Ayyamperumal, learned Special Counsel appeared for the respondent-department. 3.1 The Ld. Counsel for the appellant submitted that prior to 2014, they had been classifying the goods supplied to the Indian Railways under chapter 84/85/86, etc. for which the Excise Duty rate was mostly 12.5%. In February 2014 Excise duty rates for items under other respective tariff headings such as Ch....
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.... as the appellant had classified its products under CTH 8607 under a bonafide belief and not with an intention to evade payment of duty. Further the department had issued a corrigendum to the SCN enhancing the duty demanded by changing the position adopted in the SCN, which is not tenable in law. The Ld. Counsel stated that the SCN has been issued without any pre-consultation and is rendered liable to be quashed, having been passed in violation of established principles of law. The Original Authority has grossly erred in imposing interest and penalty when demand itself is not tenable. The Ld. Counsel prayed that the order may be set aside. 3.2 The Ld. Special Counsel for the respondent submitted that the key issues involved in the proceedings are misclassification of certain goods, wrong availment of CENVAT for certain category of goods procured and removed as such, issuance of corrigendum and invocation of extended period. He stated that the classification should be done taking into account all facts, details of individual items, admitted classification by Appellant, recorded statement having evidentiary value, all the decisions on the subject, to arrive at the appropriate classi....
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....072900 2. Brake systems and parts 86072100 3. Caliper 86072100 4. Couplers and Parts 86073010 5. Door and Parts 86079910 6. Pantographs and Parts 86079990 7. Parts of TBU (Thread Brake Unit) 86072100 The reclassification of all the 29 goods as per the headings indicated by the appellant was accepted by the Original Authority, except in the case of Pantographs and Parts, for which the department had issued a corrigendum changing its alleged classification from CTH 8607 in the SCN to CTH 8535 as per the corrigendum. We find that there is no dispute regarding the classification of the other goods after the same was re-worked out by the appellant and the dispute in this appeal has narrowed down to classifying 'Pantographs and its parts' only. 7. Since the appellant has raised a preliminary objection on the corrigendum issued for the classification of pantographs and its parts we take up the issue first. 8. The appellant has stated that by issuance of a corrigendum changing the classification of pantographs and its parts from CTH 8607 in the SCN to CTH 8535, the department has sought to impose an additional duty demand of INR 46,70,340. In the instant case, the clas....
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.... for demanding the newly proposed duty is to be computed from when the 'Corrigendum' to the show cause notice was issued. 10. As per the appellant pantographs and its parts are not capable of generic use since the same have been manufactured to cater to a specific design and configuration. The pantograph is a device used specifically for the collection of electric current, which is mounted on the roof of the car body. It is used to collect and transfer electric energy from the catenary to traction system and is mounted on insulators for electrical insulation of the car body. In an electric locomotive there are two pantographs mounted on the roof. At any given point of time, one pantograph is raised and connects the locomotive with the overhead contact wire carrying electricity in order to ensure constant power supply to the locomotives. These pantographs are solely and principally used with railway locomotives and do not have any other buyers as they are made as per the specification of railways / locomotive manufacturers. They qualify the test of Note 3 to section XVII of the Central Excise Tariff, 1985. They hence merit classification under heading 8607 as parts of railways or t....
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....med by them. [See HPL Chemicals Ltd. v. Commissioner of Central Excise, Chandigarh [(2006) 5 SCC 208], Parle Agro Pvt. Ltd. v. Commissioner of Commercial Taxes, Trivandrum [(2017) 7 SCC 540], Union of India & Ors. v. Garware Nylons Ltd. & Ors. [(1996) 10 SCC 413]. We find from the impugned order that 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. Hon'ble Chief Justice Y.V. Chandrachud writing for the Constitution Bench of the Apex Court in Shri Swamiji of Shri Admar Mutt etc. Vs The Commissioner, Hindu Religious and Charitable Endowments Dept. and Ors., [AIR 1980 SC 1], referred to Broom's Legal Maxims (1939 Edition, page 97) where the principle in Latin runs as follows, "Ces-sante Ratione Legis Cessat Ipsa Lex". The said principle was explained by the Hon'ble Chief Justice to mean, "Reason is the soul of the law, and when the reason of any particular law ceases, so does the law itself." Since the revenue has not been able to discharge their burden....
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.... not able to explain their actions rationally. 16. Can a person be said to be acting honestly or in a bona fide manner where he had reason to be suspicious that there is something wrong and does not make further enquiries? Bona fide is a Latin term signifying good faith. Honesty is the core of Good Faith. Its connotation is pure purpose free of taint or deception or dishonest design. Section 52 of the Indian Penal Code defines "good faith" as, "Nothing is said to be done or believed in 'good faith' which is done or believed without due care and attention." Perhaps the appellants action would fail this test. However, the question is whether the lack of bona fide alone would permit for the issue of SCN invoking the extended time limit. While negligence may indicate a lack of bona fide, it does not necessarily mean mala fides. Something more than negligence is necessary. 17. It is revenue's case that Central Excise duty is levied as per the provisions of the Central Excise Act, 1994 and the Rules made thereunder wherein a system of self-assessment and self-disclosure through periodical returns is prescribed. It is the legal responsibility of the appellant to discharge the du....
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..... In normal understanding it is not different that what is explained in various dictionaries unless of course the context in which it has been used indicates otherwise. A perusal of the proviso indicates that it has been used in company of such strong words as fraud, collusion or wilful default. In fact it is the mildest expression used in the proviso. Yet the surroundings in which it has been used it has to be construed strictly. It does not mean any omission. The act must be deliberate. In taxation, it can have only one meaning that the correct information was not disclosed deliberately to escape from payment of duty. Where facts are known to both the parties the omission by one to do what he might have done and not that he must have done, does not render it suppression." (emphasis added) 19. We find that a Coordinate Bench of this Tribunal has discussed this matter in detail in the case of M/s GD Goenka Private Limited VS The Commissioner of Central Goods and Services Tax, Delhi South [FINAL ORDER NO. 51088 /2023, Dated: 21.08.2023] while examining Section 73 of the Finance Act which was worded similar to Section 11A of the Central Excise Act, 1944. Relevant portion is extrac....
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.... Service Tax Returns the relevant portion of which is as follows : 1.2.1A The importance of scrutiny of returns was also highlighted by Dr. Kelkar in his Report on Indirect Taxation [Report of the Task Force on Indirect Taxation 2002, Central Board of Excise and Service Tax, Government of India.]. The observation made in the context of Central Excise but also found to be relevant to Service Tax is reproduced below: It is the view that assessment should be the primary function of the Central Excise Officers. Self- assessment on the part of the taxpayer is only a facility and cannot and must not be treated as a dilution of the statutory responsibility of the Central Excise Officers in ensuring correctness of duty payment. No doubt, audit and anti-evasion have their roles to play, but assessment or confirmation of assessment should remain the primary responsibility of the Central Excise Officers." (emphasis added) As per the discussions above 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. We find that a positive find....