TaxTMI 
TaxTMI 
2026 (3) TMI 1629
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....Acting on the information that the Noticee were manufacturing transmission shafts falling under Tariff heading 84831099, gears/gearing/gear boxes/gear housings/ Bevel Set/ Spur Gears/ Side Gears etc falling under Tariff Heading No. 84834000 and clearing them misclassifying the same under Tariff Heading No. 84329090/84339000, under the garb of parts of agricultural implements and clearing the same, without payment of duty as exempted goods, the unit was visited by the Preventive staff of Central Excise Division, Phagwara on 11.09.2015. During the visit, it was observed that the appellants were clearing the goods manufactured as parts of agricultural implements, without payment of duty, classifying in the periodical ER-1 Returns under Tariff heading 84329090/84339000; there was no difference between the parts being cleared by them on payment of duty and those being cleared without payment of duty. On completion of investigation, a show cause notice dated30.09.2015, was issued to the appellants seeking to recover central excise duty of Rs.13,86,31,711, for the period 01.09.2010 to 31.08.2015, along with interest and penalties. The proposals in the Notice were confirmed by the impugned....
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....ree from all duties/levies and for this reason, all the agriculture machinery/ parts thereof under Heading 8432 have been kept at NIL rate. 5. Learned counsel submits also that the issue has been settled by the Hon'ble Supreme Court in the case of G.S. Auto International Ltd v/s CCE, Chandigarh 2003 (152) ELT 3 (SC) and in the case of Cast Metal Industries (P) Ltd. Hon'ble Apex Court held in the case of Cast Metal Industries (P) Ltd 2015 (325) ELT 471 (SC) and G.S Auto Ind Ltd 2003 (152) ELT 3 (SC) that door handles and hinges for automobiles, goods having been manufactured as per designs of motor vehicle manufacturers, not remaining general purpose goods, being usable only for specific purpose, HSN explanatory note relied by Tribunal in classifying aforesaid goods under Heading 83.02 of Central Excise Tariff, not applicable. Learned Counsel further submits that tribunal in the case of Vikas Automatic Fasteners (P) Ltd 2005 (190) ELT 90 (Tri. - Mumbai) held that Agricultural implement kit/parts designed to specific use as parts in Agricultural Implements for attachment to tractors, even if treaded are classifiable under Heading 84.32 of Central Excise Tariff and not under Headin....
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....) * Cosmic Dye Chemical 1995 (75) E.L.T. 721 (S.C.) * Pushpam Pharmaceuticals Company 1995 (78) E.L.T. 401 (S.C.) * Chemphar Drugs & Liniments 1989 (40) E.L.T. 276 (S.C.) * H.M.M. Limited 1995 (76) E.L.T. 497 (S.C.) * Delphi Automotive Systems Pvt Ltd., Gurugram Final Order No. 61699-61700/2025 DATED 21.11.2025 8. Learned Counsel submits in addition that the appellant reversed an amount equal to 5%/6% (as applicable at the material period) in terms of the provisions of Rule 6(3) of the Cenvat Credit Rules on the aforesaid exempted goods as evident from ER1 Returns; thus, they reversed/ debited an amount of Rs. 6,79,35,479/- as certified by the jurisdictional Superintendent vide certificate dated 23.01,2017; the amount reversed merits to be adjusted against the total demand in case the goods are not treated to be treated as exempted goods as held by CESTAT, Chandigarh in the case of Dee Development Engineers Pvt Ltd vide Final Order Nos. 61184/2017 dated 16-05-2017. He further submits that the appellant has not collected any duty on the exempted goods from their customers; therefore, benefit of cum-tax value merits to be allowed in vie....
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....cation, common parlance test and trade understanding cannot be resorted to in classifying the product; classification has to be necessarily guided by HSN explanatory notes and common parlance test has to be discarded. He relies on * Raja Forgings & Gears Ltd. 2009 (233) ELT 404 (Tri. - Del) * Thyssenkrupp Industries India P. Ltd 2016 (343) ELT 533 (Tri. - Mumbai) * Sree Ganesh Gears Pvt. Ltd. 2002 (139) ELT 307 (Tri. - Bang.) * HMT Ltd. (Machine Tool Division) 2003 (151) ELT 666 (Tri. - Bang.) * Lakshmi Synthetic Machinery Mfrs. Ltd. 2001 (127) ELT 726 (Tri. - Chennai) * Larsen & Toubro Ltd 1998 (98) ELT 861 (Tribunal) 11. Learned Authorised Representative submits on the issue of limitation that from the perusal of the copies of ER-1 Returns, it is clear that the appellants did not declare anywhere that they are manufacturing of gears, Gearbox, Transmission shafts etc; they have only mentioned the description as " Machinery, Mechanical Appliances & Parts, Agricultural /Horticultural Appliances Agricultural / Horticultural or Forestry Machinery and parts or Combine Machinery" etc and declared that they are manufacturing the ex....
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....cts and circumstances of the case. 14. It is the argument of the appellants that the impugned goods are manufactured on the basis of purchase orders issued by their customers with specific Drawings/ Design as per their requirement for use in the Rotavators (Agriculture machinery); the impugned goods are fitted as parts in Agriculture machinery and only then the said Agriculture machine is complete only after fitment of the said items; these are parts of the agriculture machinery and not parts for general purpose.; they are solely and principally meant/ used as part of agriculture machinery; they are neither saleable in the market as such nor usable for any purpose other than for use as part of Rotavator; the specific and exclusive use of items in agriculture machinery is evident and confirmed by the Certificates issued by the customers. 15. Revenue is of the opinion that the classification of the goods in the schedule has to be governed by the principles laid down in the General Rules for the Interpretation (GRI) of the Central Excise Tariff; classification is to be determined according to the terms of the headings and any other relative Section or Chapter Notes; a plain read....
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....eading 8432 Tariff Item DESCRIPTION OF GOODS Unit Rate of duty 8482 AGRICULTURAL, HORTICULTURAL OR FORESTRY MACHINERY FOR SOIL PREPARATION OR CULTIVATION; LAWN OR SPORTS-GROUND ROLLERS ______ ____________ 843290 Parts 84329010 Parts of agricultural machinery falling within headings 8432 10, 8432 21, 8432 29, 8432 30 and 8432 40 u Nil 84329090 Other u Nil Tariff heading 8433 Tariff Item DESCRIPTION OF GOODS Unit Rate of duty 8433 HARVESTING OR MACHINERY, INCLUDING STRAW OR FODDER BALERS; GRASS OR HAY THRESHING MOWERS; MACHINES FOR CLEANING, SORTING OR GRADING EGGS, FRUIT OR OTHER AGRICULTURAL PRODUCE, OTHER THAN MACHINERY OF HEADING 8437 84339... Parts Kg. Nil 17. We find that General Rules for interpretation of Tariff provide that the titles of Sections, Chapters and sub-Chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any ....
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....neral parts which are suitable for use solely or principally with particular machines or apparatus (including those of heading 84.79 or heading 85.43), or with a group of machines or apparatus falling in the same heading, are classified in the same heading as those machines or apparatus subject, of course, to the exclusions mentioned in part(I) above. Separate headings are, however, provided for: A. Parts of engines of heading 84.07 or 84.08 (heading 84.09) B. Parts of the machinery of heading 84.25 to 84.30 (heading 84.31) C. Parts of textile machines of headings 84.44 to 84.47 (heading 84.48) D. Parts of the machine - tools of headings 84.56 to 84.65 (heading 84.66) E. Parts of the office machines of headings 84.69 to 84.72(heading 84.73) F. Parts of the machines of heading 85.01 or 85.02(heading 85.03) G. Parts of apparatus of headings 85.19 to 85.21 (heading 85.22) H. Parts of apparatus of headings 85.25 to 85.28 (heading 85.29) I. Parts of apparatus of heading 85.35,85.36 or 85.37 (heading 85.38) The above rules do not apply to parts which in themselves constitute an article covered by a ....
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...."4. As per Rule 1 on Interpretative Rules, classification of excisable goods is to be determined according to the terms of the Heading and in terms of Section/Chapter notes. Note 2(f) to Section XVII (which governs chapter 87) excludes the goods viz. electrical machinery and equipment (Chapter 85). The goods in question i.e. contractors, switches, control box etc. are the goods used for switching, protecting electrical circuits or for making connections to or in electric circuit. These parts/components are specifically covered under CSH 8536.90. The CBEC Circular relied upon by the assessee is not relevant. 5. As per the Explanatory Notes to HSN the parts falling under Chapter Heading 8710 would be covered under the said chapter, provided they fulfil 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 i....
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....any, in case the contention of the appellants on classification is not accepted. We find that this bench held the same in the case of Dee Development Engineers Pvt Ltd vide Final Order Nos. 61184/2017 dated 16-05-2017. We also find that the appellants are eligible for the cum-duty benefit and the amount recovered by their customers is to be treated as inclusive of excise duty. 21. Now, we turn our attention to the issue of limitation. We find that the impugned Show Cause Notice dated 30.09.2015, covering the period 01.09.2010 to 31.08.2015. The appellants submit that the Show Cause Notice is barred by limitation for the following reasons. * the issue involved is of interpretation of the entries in Tariff and was subject to many decisions by Tribunal and Courts. * Elements like mis-declaration/misstatement, suppression of facts, collusion, with intent to evade payment of duty, are totally absent and no substantiating evidence was put forth in support of the mere allegation; Hon'ble Apex Court has held in many cases that the extended period of limitation is invokable only if existence of both situations i.e. Suppression, Fraud, Collusion etc and intention to evad....
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....ted the Department to reopen proceedings if the levy was short within six months of the relevant date and permitted the Authority to exercise this power within five years from the relevant date under the circumstances mentioned in the proviso, one of which was suppression of facts. It is in this context that the Supreme Court observed in the case of M/s Pushpam Pharmaceuticals Company 1995 (78) ELT 401 (SC) that since "suppression of facts‟ has been used in the company of strong words such as fraud, collusion, or willful default, suppression of facts must be deliberate and with an intent to escape payment of duty; mere suppression is not enough to invoke extended period. The ratio was followed by the Hon'ble Apex Court themselves in Anand Nishikawa Company Ltd. 2005 (188) E.L.T. 149 (SC) and in M/s Uniworth Textile Limited2013 (288) E.L.T. 161 (SC). Hon'ble Apex Court held in M/s Pushpam Pharmaceuticals Company (supra) that: "4. Section 11A empowers the Department to re-open proceedings if the levy has been short-levied or not levied within six months from the relevant date. But the proviso carves out an exception and permits the authority to exercise this power with....
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....relating to suppression of facts is not sufficient and it has to be specifically alleged and substantiated that facts were suppressed with intent to evade payment of excise duty. 26. Further, the appellants submit that they have been submitting the ER-1 returns regularly and for that reason extended period cannot be invoked. The Revenue argues that the appellants have indicated headings and made a general declaration in the returns that they manufactured exempted goods and that they have indicated both headings 84834000 and 84329090 describing Mechanical Appliances and Parts. We find that this is a lame excuse. The officers who scrutinised the returns should have made enquiries from the appellants as to what were the goods they manufactured and cleared without payment of duty. Instead, Revenue simply alleges that the appellants wilfully and consciously supressed the fact that they actually cleared transmission shafts, gears and gearing, gear housings, bevel gears, Spur gears, side gears classifiable under Tariff Heading Chapter Heading 8483 of CETA, 1985. We find that the appellants have declared in the return for January 2012 that they manufactured Agriculture/Horticulture appl....
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....egal position that the primary responsibility for ensuring that correct amount of service tax is paid rests on the officer even in a regime of self-assessment was clarified by the Central Board of Excise and Customs7 in its Manual for Scrutiny of 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. 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 supplied) 22. Therefore, to say that had the audit not been conducted, the incorrect availment of CENVAT credit would n....
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....ntained under Section 44AB of the Income Tax Act. In other words, the Rule permits the officer to examine financial records for scrutinizing the return to determine the correctness of the assessments made. In pursuance of this, the Board has also issued guidelines vide letter F.No.137/27/2007 CX.4, dated 08.02.2007, which makes it mandatory to scrutinize returns on a regular basis. Details of the Board's guidelines on returns' scrutiny are discussed in Chapter 2 of this manual. 1.2.2B The guidelines clearly envisaged that returns' scrutiny would become the core function of the Service Tax Group/Range, supervised by the Assistant Commissioner of the Service Tax Unit. 24. Thus, the CBEC took a conscious decision that detailed scrutiny of the Returns should be done only in some cases selected based on some criteria. In those Returns, where detailed scrutiny is not done by the officers some tax may escape assessment which may not be discovered within the normal period of limitation. As a matter of policy, the CBEC, took such risk and the loss of Revenue is a result of the policy. 25. To sum up: a) The appellant assessee was required to file the ST 3 ....