TaxTMI 
TaxTMI 
2025 (1) TMI 219
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....Central Excise Tariff Act, 1985 (CETA) whereas the Department alleged that such parts merit classification under respective Chapters 84 or 85, as per section note 2 (f) of Section XVII of CETA. The excise duty on railway parts under HSN 8607 was reduced to 6% from 12.5% w.e.f. 01.03.2016 as per Notification No. 12/2016-CE dated 01.03.2016 whereas all other railway parts which were classifiable under Chapter 84 or 85 continued to attract 12.5%. Consequent to completion of investigation, a Show Cause Notice dated 25.02.2021 was issued to the Appellant seeking to reclassify the goods under Chapter 84 instead of under 8607 of CETA and to demand differential duty of Rs. 2,18,29,679/- for the period 01.04.2016 to 30.06.2017 in terms of Section 11A (4) of Central Excise Act, 1944 (ACT) read with Section 174 (2) of CGST Act, 2017, along with interest under Section 11AA and to impose penalty under Section 11A (2) of the ACT ibid. The impugned order dated 31.01.2022 has confirmed all the proposals put forth in the SCN. Being aggrieved, the Appellant came on appeal before this forum. 2. The main contentions of the appellant as culled out from the grounds of appeal have been summarized belo....
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....according to their constituent material or in heading 84.84) and other articles of vulcanised rubber other than hard rubber (e.g., mudguard-flaps and pedal covers) (heading 40.16). (2) Parts of general use as defined in Note 2 to Section XV, for example, cable and chain (whether or not cut to length or equipped with end fittings, other than brake cables, accelerator cables and similar cables suitable for use in vehicles of Chapter 87), nails, bolts, nuts, washers, cotters and cotter-pins, springs (including leaf springs for vehicles) (such goods of base metals fall in Chapters 73 to 76 and 78 to 81, and similar goods of plastics fall in Chapter 39), and locks, fittings or mountings for vehicle coachwork (e.g., made up ornamental beading strips, hinges, door handles, grip bars, foot rests, window opening mechanisms), number plates, nationality plates, etc. (such goods of base metals fall in Chapter 83, and similar goods of plastics fall in Chapter 39). (3) Spanners, wrenches and other tools of Chapter 82. (4) Bells (e.g., for cycles) and other articles of heading 83.06. (5) Machines and mechanical appliances, and parts thereof, of headings 84.01 t....
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....er or of composition leather, of vulcanised fibre, etc. (heading 42.02). (5) Bicycle or balloon nets (heading 56.08). (6) Towing ropes (heading 56.09). (7) Textile carpets (Chapter 57). (8) Unframed safety glass consisting of toughened or laminated glass, whether or not shaped (heading 70.07). (9) Rear-view mirrors (heading 70.09 or Chapter 90 - see the corresponding Explanatory Notes). (10) Unframed glass for vehicle headlamps (heading 70.14) and, in general, the goods of Chapter 70. (11) Flexible shafts for speed indicators, revolution counters, etc. (heading 84.83). (12) Vehicle seats of heading 94.01. iii. It was put forth that the adjudicating authority without any cogent explanation had dismissed the Circular dated 09.07.1990 issued by CBEC which was based on sole usage test had taken a view that the transmission elements would fall under CETH 8607 or 8708 and not under 8483 since they were integral parts of the former. iv. It was pointed out that Note 2 of Chapter 86 is applicable to other items as well and Section Note 1 (l) of Section XVI for Chapters 84 and 85 excludes articles of Se....
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.... the Appellant reiterated the grounds of appeal and submitted that the invocation of Note 2 (e) overlooking Note 3 is not justified as it was held that Note 3 of Section XVII [Sole/principal use test] is applicable and NOT Note 2 of Section XVII [Parts of general use]. Further, Section Note 1 (l) of Section XVI for Chapters 84 and 85, excludes articles of Section XVII. Further, it was averred that parts of railway diesel locomotive are specifically covered only in CETH 86079100 and nowhere else and therefore, classification under 8413/8414/8483 was wrong. 3.2 It was submitted that the Westing House decision was rendered by Full Bench - three judges which dealt with both Note 2 and Note 3 of Section XVII and held Note 3 is applicable. On 5.1.2022, CBIC issued a circular stating that a review petition was being filed on the grounds that when the goods are excluded from Section XVII by Section Note 2, such goods will not fall under XVII, against the decision of Westing House by relying on the decisions of Hon'ble Supreme Court in the cases of Intel Design Systems (India) Pvt Ltd Vs. CCE [2008 (223) ELT 135 (SC)] and Uni Products India Ltd. [2020 (372) ELT 465 (SC)]. It was pointed ....
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....sifying them under CETH 86079100 and paid duty at 6% as per Notification No. 12/2016-CE dated 01.03.2016 whereas Department classified the products under 8413/8414/8483 as mentioned against each and assessed duty at 12.5%. The differential duty of 6.5% was sought to be demanded by initiation of the proceedings as detailed above. Sl.No. Product Name Department's classification 1 Lube Oil Strainer assembly/Lube Oil Strainer Housing 84133090 2 Fuel strainer assembly 84133090 3 Lube Oil pump assembly 84133090 4 Scavenging Lube oil pump assembly [Part - Sleeve] 84133090/84139190 5 Water Pump Assembly [Parts - Bushing, spring, impeller and seal impeller]. 84133030/84139190/84139120 6 Parts of Turbo charger [Turbo Dowelling Assembly, shaft carrier, idler gear support assembly, coupling, seal compressor bearing, nozzle ring, Diffuser assembly, heat shield, scroll dowelling assembly, kit of turbo dowelling components, support assembly, idler shaft assembly, set gear planet, engine coupling disc]. 84148090/84149090 7 Air Duct assembly/Air inlet duct assembly. 84159000 8 Power transmission parts - Cam shaft drive ho....
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.... (a) joints, washers or the like of any material (classified according to their constituent material or in heading 8484) or other articles of vulcanised rubber other than hard rubber (heading 4016); (b) parts of general use, as defined in Note 2 to Section XV, of base metal (Section XV), or similar goods of plastics (Chapter 39); (c) articles of Chapter 82 (tools); (d) articles of heading 8306; (e) machines or apparatus of headings 8401 to 8479, or parts thereof; articles of heading 8481 or 8482 or, provided they constitute integral parts of engines or motors, articles of heading 8483; (f) electrical machinery or equipment (Chapter 85); (g) articles of Chapter 90; (h) articles of Chapter 91; (ij) arms (Chapter 93); (k) lamps or lighting fittings of heading 9405; or (l) brushes of a kind used as parts of vehicles (heading 9603). 3. 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 o....
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.... than hard rubber (heading 4016); (b) Articles of leather or of composition leather (heading 4205) or of furskin (heading 4303), of a kind used in machinery or mechanical appliances or for other technical uses; (c) Bobbins, spools, cops, cones, cores, reels or similar supports, of any material (for example, Chapter 39, 40, 44 or 48 or Section XV); (d) Perforated cards for Jacquard or similar machines (for example, Chapter 39 or 48 or Section XV); (e) Transmission or conveyor belts or belting of textile material (heading 59.10) or other articles of textile material for technical uses (heading 5911); (f) Precious or semi-precious stones (natural, synthetic or reconstructed) of headings 7102 to 7104, or articles wholly of such stones of heading 7116, except unmounted worked sapphires and diamonds for styli (heading 8522); (g) Parts of general use, as defined in Note 2 to Section XV, of base metal (Section XV), or similar goods of plastics (Chapter 39); (h) Drill pipe (heading 7304); (ij) Endless belts of metal wire or strip (Section XV); (k) Articles of Chapter 82 or 83; (l) Articles of Section X....
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....ntribute together to a clearly defined function covered by one of the headings in Chapter 84 or Chapter 85, then the whole falls to be classified in the heading appropriate to that function. 5. For the purposes of these Notes, the expression "machine" means any machine, machinery, plant, equipment, apparatus or appliance cited in the headings of Chapter 84 or 85. Tariff-Chapter 84 Nuclear reactors, boilers, machinery and mechanical appliances; parts thereof 8413 PUMPS FOR LIQUIDS, WHETHER OR NOT FITTED WITH A MEASURING DEVICE; LIQUID ELEVATORS - Pumps fitted or designed to be fitted with a measuring device: 841311 -- Pumps for dispensing fuel or lubricants, of the type used in filling stations or in garages: 84131110 --- Hand pumps u 10% - --- Other : 84131191 ---- Pumps for dispensing fuel u 7.5% - 84131199 ---- Other u 7.5% - 841319 -- Other: 84131910 --....
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....7.5% - 84138200 -- Liquid elevators u 7.5% - - Parts: 841391 -- Of pumps: 84139110 --- Of reciprocating pumps kg. 7.5% - 84139120 --- Of centrifugal pumps kg. 7.5% - 84139130 --- Of deep well turbine pumps and of other rotary pumps kg. 7.5% - 84139140 --- Of hand pump for handling water kg. 10% - 84139190 --- Other kg. 7.5% - 84139200 -- Of liquid elevators kg. 7.5% - 8414 AIR OR VACUUM PUMPS, AIR OR OTHER GAS COMPRESSORS AND FANS; VENTILATING OR RECYCLING HOODS INCORPORATING A FAN, WHETHER OR NOT FITTED WITH FILTERS 84141000 - Vacuum pumps u 7.5% - 841420 - Hand or foot-operated air pumps : 84142010 --- Bicycle pumps u 10% - 84142020 --- Other hand pumps u 10% - 84142090 --- Other u 7.5% - 84143000 - Compressors of a kind used in refrigerating equipment u 7.5% - 841440 - ....
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....or reversal of the cooling or heat cycle(reversible heat pumps): 84158110 --- Split air-conditioner two tonnes and above u 10% - 84158190 --- Other u 10% - 841582 -- Other, incorporating a refrigerating unit: 84158210 --- Split air-conditioner two tonnes and above u 10% - 84158290 --- Other u 10% - 841583 -- Not incorporating a refrigerating unit : 84158310 --- Split air-conditioner two tonnes and above u 10% - 84158390 --- Other u 10% - 84159000 - Parts kg. 10% - 8483 TRANSMISSION SHAFTS (INCLUDING CAM SHAFTS AND CRANK SHAFTS) AND CRANKS; BEARING HOUSINGS AND PLAIN SHAFT BEARINGS; GEARS AND GEARING; BALL OR ROLLER SCREWS; GEAR BOXES AND OTHER SPEED CHANGERS, INCLUDING TORQUE CONVERTERS; FLYWHEELS AND PULLEYS, INCLUDING PULLEY BLOCKS; CLUTCHES AND SHAFT COUPLINGS (INCLUDING UNIVERSAL JOINTS) 848310 - Transmission shafts (including cam shafts and crank shafts) and cranks....
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....90 --- Other parts of axles and wheels kg. 10% - - Brakes and parts thereof : 86072100 -- Air brakes and parts thereof kg. 10% - 86072900 -- Other kg. 10% - 860730 - Hooks and other coupling devices, buffers and parts thereof: 86073010 --- Buffers and coupling devices kg. 10% - 86073090 --- Other kg. 10% - - Other : 86079100 -- Of locomotives kg. 10% - 860799 -- Other : 86079910 --- Parts of coach work of railway running stock kg. 10% - 86079920 --- Parts of tramway, locomotives and running stock kg. 10% - 86079930 --- Hydraulic shock absorbers for railway bogies kg. 10% - 86079990 --- Other kg. 10% - HSN Chapter 84 Nuclear reactors, boilers, machinery and mechanical appliances; parts thereof Notes. 1.----- 2. Subject to the operation of Note 3 to Section XVI and subject to Note 9 to ....
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....chucks). (4) Machines operated electronically (e.g., electronic calculating or automatic data processing machines) or incorporating photoelectric or electronic devices (e.g., rolling mills with photo-electric apparatus and machine-tools incorporating a variety of electronic control devices). (B) GENERAL ARRANGEMENT OF THE CHAPTER (1)---------------- (2) Headings 84.02 to 84.24 cover the other machines and apparatus which are classified mainly by reference to their function, and regardless of the field of industry in which they are used. (6) Headings 84.81 to 84.84 cover certain general-purpose goods suitable for use as machinery parts or as parts of goods of other Chapters. (C) PARTS As regards parts in general, see the General Explanatory Note to Section XVI. Separately presented electrical parts generally fall in one or other of the headings of Chapter 85, for example: electric motors (heading 85.01), electrical transformers (heading 85.04); electro-magnets, permanent magnets, electro-magnetic lifting heads for cranes and electro-magnetic chucks (heading 85.05); electrical starting equipment for internal comb....
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....ing gauges; (b) Semaphores, mechanical signal discs, level crossing control gear, signal and point controls, and other mechanical (including electro-mechanical) signalling, safety or traffic control equipment, whether or not fitted for electric lighting, for railways, tramways, roads, inland waterways, parking facilities, port installations or airfields. GENERAL This Chapter covers locomotives and rolling-stock, and parts thereof, and certain track fixtures and fittings, for railways or tramways of any kind (including narrow gauge railways, single rail railways, etc.). It also covers containers specially designed and equipped for carriage by one or more modes of transport. Mechanical (including electro-mechanical) signalling, safety or traffic control equipment for traffic of all kinds (including that for parking facilities) is also covered. Throughout this Chapter, the expressions " railway " and " tramway" refer not only to conventional railways and tramways using steel rails, but also to similar guided systems such as those using magnetic levitation or concrete tracks. These various goods are classified as follows: (A) Self-p....
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.... amusements (heading 95.08) 86.07 86.07 Parts of railway or tramway locomotives or rolling-stock. -Bogies, bissel-bogies, axles and wheels, and parts thereof: 8607.11 Driving bogies and bissel-bogies 8607.12 Other bogies and bissel-bogies 8607.19 Other, including parts - Brakes and parts thereof: 8607.21 Air brakes and parts thereof 8607.29 Other 8607.30 Hooks and other coupling devices, buffers, and parts thereof - Other: 8607.91 Of locomotives 8607.99 Other This heading covers parts of railway or tramway locomotives or rolling-stock, provided the parts fulfil both the following conditions: (1) They must be identifiable as being suitable for use solely or principally with the above-mentioned vehicles; (ii) They must not be excluded by the provisions of the Notes to Section XVII. Parts of railway or tramway locomotives or rolling-stock include: (1) Bogies, with two or more axles, and bissel-bogies consisting of a frame with only one axle. (2) Straight or cranked axles, whether or not assembled. (3) Wheels....
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....rity, the answer to question No.1 revolves around the description of goods found in Chapters 85 and 86, as well as the Notes in Section XVII and the General Rules for Interpretation of the First Schedule. We have already extracted the description of goods in Chapters 85 and 86. Therefore, let us now take note of the relevant Notes in Section XVII and the relevant Rule of the General Rules for interpretation of the First Schedule. 25. Section 2 of the Central Excise Tariff Act, 1985 provides that the rates at which duties of excise shall be levied under the Central Excise Act, 1944 are specified in the First Schedule and the Second Schedule. The First Schedule contains a set of Rules known as "General Rules for the Interpretation of this Schedule". These Rules begin with a mandate that the "classification of goods in this Schedule shall be governed by the principles laid thereunder." 26. Rule 1 of these Rules makes it clear that "the titles of Sections, Chapters and Sub-Chapters are provided for ease of reference only and that for legal purposes, classification shall be determined according to the terms of the Headings and any relative Section or Chapter Notes and ....
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....out "Article", Rule 2 (b) speaks about "material or substance" as well as "goods of a given material or substance" and Rule 3 speaks about "goods". 30. In the case on hand, the claim of the assessee was that the relays manufactured by them were part of the railway signaling equipment. But all the Authorities were of the unanimous view that this product is referable to goods of a specific description in Chapter sub-Heading 8536.90 and that, therefore, General Rule 3(a) will apply. 31. But in invoking General Rule 3(a), the Authorities have omitted to take note of 2 things. They are : (i) that as laid down by this Court in Commissioner of Central Excise Vs. Simplex Mills Co. Ltd (2005) 3 SCC 51 the General Rules of Interpretation will come into play, as mandated in Rule 1 itself, only when no clear picture emerges from the terms of the Headings and the relevant section or chapter notes; and (ii) that in any case, Rule 3 of the General Rules can be invoked only when a particular good is classifiable under two or more Headings, either by application of Rule 2 (b) or for any other reason. Once the authorities have concluded that by virtue of Note 2 (f....
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....or as Railway signaling equipment, those parts which are suitable for use solely or principally with an article in Chapter 86 cannot be taken to a different Chapter as the same would negate the very object of group classification. This is made clear by Note 3. 37. It is conceded by the Revenue that the relays manufactured by the appellant are used solely as part of the railway signaling/ traffic control equipment. Therefore, the invocation of Note 2 (f) in Section XVII, overlooking the "sole or principal user test" indicated in Note 3, is not justified. 38. On the question as to what test would be appropriate in a given case, this court pointed out in A. Nagaraju Bros Vs. State of A.P. 1994 Supp( 3) SCC 1222, as follows: ".....there is no one single universal test in these matters. The several decided cases drive home this truth quite eloquently. It is for this reason probably that the common parlance test or commercial usage test, as it is called, is treated as the more appropriate test, though not the only one. There may be cases, particularly in the case of new products, where this test may not be appropriate. In such cases, other tests like the test o....
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....accessories. Thus, the collective wisdom of these judgements indicates the manner in which such classification issues are to be approached. Few of such judgements are illustrated in succeeding paragraphs: 3.1 Intel Design Systems (India) Pvt. Ltd vs Commissioner of Customs and C. Ex. [2008 (223) ELT 135 (SC)] A. Apart from the reliance on the Section Notes and the Chapter Notes, the Court in this judgement, also considered the HSN Explanatory notes, wherein the three conditions that need to be fulfilled for the goods to be classified under the chapters of Section XVII are mentioned, namely- a. They must not be excluded by the terms of Note 2 to section XVII; and b. They must be suitable for use solely or principally with the articles of chapter 86 to 88; and c. They must not be more specifically included elsewhere in the Nomenclature. B. While relying on these conditions, the Hon'ble Supreme Court held- "The items, therefore, manufactured by the appellants are identifiable or are in the nature of goods falling under Chapter Heading 85.36. Since these fall under the category of excluded goods under Chapter Notes, eve....
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....by judgement itself, has acknowledged the complexity of the issue and has pointed to the undesirability of generalising the decisions of one case to others. The Hon'ble Court, has referred to the observations made in its own judgement in the case of "A. Nagaraju Bros Vs. State of A.P, thus ".....there is no one single universal test in these matters. The several decided cases drive home this truth quite eloquently. ....There may be cases, particularly in the case of new products, where this test may not be appropriate. In such cases, other tests like the test of predominance, either by weight or value or on some other basis may have to be applied. It is indeed not possible, nor desirable, to lay down any hard and fast rules of universal application" 7. Further, the Hon'ble Supreme Court, in the case of Commissioner of Central Excise, Mumbai Versus M/s Fiat India (P) Ltd. [2012 (283) ELT 161 (SC)] has observed that,- "a case is only an authority for what it actually decides and not for what may seem to follow logically from it. . . . Each case depends on its own facts and a close similarity between one case and another is not enough because either....
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....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". The court's finding is reproduced below: "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 otherwise than in or as Railway signalling equipment, those parts which are suitable for use solely or principally with an article in Chapter 86 cannot be taken to a different Chapter as the same would negate the very object of group classification. This is made clear by Note 3. 37. It is conceded by the Revenue that the relays manufactured by the appellant are used solely as part of the railway signalling / traffic control equipment. Therefore, t....
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....ote 4, has to govern itself in limited territory" 19.1.9. Also, in the case of British Airways PLC (2002 (139) ELT & SC), the Hon'ble Supreme Court ruled as follows: "It is a cardinal principle of construction of a statute that effort should be made in construing the different provisions so that each provision will have its play and in the event of any conflict a harmonious construction should be given. The well-known principle of harmonious construction is that effect shall be given to all the provisions and for that any provision of the statute should be construed with reference to the other provisions so as to make it workable. A particular provision cannot be picked up and interpreted to defeat another provision made in that behalf under the statute" 19.1:10 Hence, the interpretation made in the Westinghouse Saxby case does not appear to be in consonance with the principles set out in the other judgments rendered by the Hon'ble Supreme Court cited supra. 19.1.11. It is well-settled law that the Chapter / Section Notes are legally binding and circumscribe the scope of the headings/sub-headings. In the case of Subash Photographics [1993 (66....
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.... Circular 05.01.2022 was dismissed by Hon'ble Supreme Court on 10.8.2022. Therefore, the findings of the Adjudicating Authority passed relying on the Circular dated 05.01.2022 have to be held unsustainable. Thus, the decision in Westing House has become final and it is a binding decision. It must be followed as per Article 141 of the Constitution. ii. The two judgments, which are relied upon on by the Commissioner, were rendered on 11.02.2008 and 01.05.2020 by Hon'ble Division Bench (Two judges). These two are much earlier than the decision of the Hon'ble Full Bench. Note 3 of Section XVII was not considered in these two decisions. iii. The principle, which was laid down in Westing House decision, was also earlier laid down by the Hon'ble Supreme Court [Division bench] in the case of GS Auto International Ltd. Vs. CCE [2003 (1) TMI 700]. iv. Classification of these products on the basis of "Sole/principal use test" was already upheld by the Hon'ble Tribunal in the case of Diesel Component Works Vs. Commissioner of Central Excise [2000 (120) ELT 648 (Trib)]. The ratio was also followed in the case of CCE Vs. Diesel Loco Modernisation Wo....
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....n under any other chapter of the Customs Tariff. The appellant has drawn attention to the decision of a Coordinate Bench of this Tribunal in the case of Hi-Tech Industries Ltd Vs Commissioner of Customs, Bangalore [2005 180 ELT 0356], wherein web camera was classified under chapter 84 instead of chapter 90 considering that it was not an ordinary camera and does not function independently. The decision of the Tribunal has been affirmed by the Hon'ble Supreme Court in Commissioner Vs Hi-Tech Computers [2015 321 ELT A274 SC]." 15. Further, in the case of Premier Polyfilm Limited Vs. Commissioner of CGST, Ghaziabad [2024 (7) TMI 6-CESTAT ALLAHABAD], the Tribunal Allahabad has decided the issue in favour of the Assessee that the goods will be classified under the specific tariff entry of the goods cleared or under Chapter 86 in view of the Hon'ble Supreme Court's decision in the case of Westighouse Saxby Farmer ltd. Vs. Commissioner of Central Excise, Calcutta [2021 (3) TMI 291-SC]. 16. In strict observance of judicial discipline and by appreciating above facts, we are inclined to hold that parts of railway diesel locomotive are more appropriately classifiable under CETH 86079100.....