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2026 (4) TMI 762
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....2024 2018 - 2019 15.03.2024 3. 15653 of 2024 2022 - 2023 15.03.2024 4. 15655 of 2024 2019 - 2020 15.03.2024 5. 15657 of 2024 2023 - 2024 15.03.2024 6. 15658 of 2025 2021 - 2022 15.03.2024 7. 15659 of 2024 2020 - 2021 15.03.2024 FACTS OF THE CASE:- 3. The Petitioner is engaged in the business of manufacture and supply of various automotive parts including 'Gas Compressors' which are used as parts of Air Conditioners in Motor Vehicles which are classified under Chapter 87 of Section XVII of the Customs Tariff Act, 1975. The Petitioner adopted the following classification for the following goods manufactured by them for the purpose of payment of GST under Section 9 of the respective GST Enactments:- Sl. No. Product Petitioner Classification % Dispute in Classification 1. Parts and accessories of vehicles 8708 28% No dispute 2. AC machines used in motor vehicles 8415 20 90 28% No dispute 3. Gas compressors used in airconditioning equipment 8414 80 11 18% Department classifies under '8708' 4. The present dispute is confined to the correct rate of tax on ....
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....eneral Explanatory Notes of the First Schedule are relevant. 9. The Petitioner classified 'Gas Compressors' manufactured by them under Sub-Heading 8414 80 11 as "Gas compressors: Of a kind used in air-conditioning equipment" and paid tax at 28% under Serial No. 118 to Schedule IV to Notification No.1/2017-Central Tax (Rate) dated 28.06.2017 and later at 18% under Serial No.317B to Schedule III to Notification No.1/2017-Central Tax (Rate) dated 28.06.2017 in view of the amendment vide Notification No.41/2017 dated 15.11.2017 with effect from 15.11.2017. For the purpose of tax, the above Notification No.1/2017- Central Tax (Rate) dated 28.06.2017 is relevant. 10. The Respondent has on the other hand treated the 'Gas Compressors' manufactured by the Petitioner as "Parts and accessories of Motor vehicles" under Heading 8708 and has demanded tax at 28% under Serial No.170 to IV Schedule to Notification No. 1/2017 Central Tax (Rate) dated 28.06.2017. 11. The Respondent has thus concluded that the Petitioner has suppressed facts by adopting a wrong classification under Sub-Heading 8414 80 11 to pay lesser tax instead of tax at 28% under Sub-Heading 8708 as "Parts and accessories ....
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....r Heading 8608 under 'Railway or tramway track fixtures and fittings; mechanical (including electro mechanical) signalling, safety or traffic control equipment for railway, tramways, roads inland waterways, parking facilities, port installation or air-fields; parts of the foregoing'. The Hon'ble Supreme Court upheld the classification of "Relays" under Heading 8608 of the Central Excise Tariff Act, 1985 based on the following reasonings:- 1. 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." 2. The 'predominant use' or 'sole/principal use' test: 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. 3. The goods were previously classified ....
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....ctive GST Enactments cannot be sustained as it is only an error that occurred in the classification of goods. SUBMISSIONS MADE ON BEHALF OF THE PETITIONER:- 22. The challenge to the impugned Order passed by the Respondent by the Petitioner is primarily on the ground that the Petitioner, a manufacturer of "Gas Compressors" had adopted the classification of "Gas compressors: Of a kind used in air-conditioning equipment" under Heading 8414 of the Central Excise Tariff Act, 1985 since 1997 and later under Customs Tariff Act, 1975 as made applicable for determination of rate of tax under the provisions of the respective GST Enactments under Notification No.1/2017- Central Tax (Rate) dated 28.06.2017. 23. It is the contention of the Petitioner that all along the 'Gas Compressors' manufactured by the Petitioner, which were supplied to automobile companies like Hyundai Motor India Limited were classified under Sub-Heading 8414 80 11 of the Central Excise Tariff Act, 1985. It is submitted that Heading 8414 80 - other, is a residuary heading and applies to goods other than those specified in Heading 8414 10 (Vacuum Pumps), Heading 8418 40 (Air Compressors mounted on a wheeled chassi....
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....plies to "Parts and Accessories of Motor Vehicles" under Heading 8701 to 8785 in Chapter 87 to Section XVII of the Customs Tariff Act, 1975. 29. The learned counsel for the Petitioner further submitted that even otherwise, Heading 8708 cannot be applied to 'Gas Compressors' as the final product viz., 'Air Conditioners' used in Motor Vehicles manufactured out of 'Gas Compressors' is classifiable under Heading 8415 in Chapter 84 to Section XVI viz., "Air Conditioning Machines, comprising a motor driven fan and elements for changing the temperature and humidity, including those machines in which the humidity cannot be separately regulated". Specifically, it is submitted Sub-Heading 8415 20 applies to Air Conditioning Machines viz., "of a kind used for persons in motor vehicles". 30. On a specific query, as to what would be the correct classification of 'Gas Compressors', if Sub-Heading 8414 80 11 was absent in the Customs Tariff Act, 1975, the learned counsel for the Petitioner answered that if Sub-Heading 8414 80 11 - "Gas compressors: Of a kind used in air-conditioning equipment" absent, 'Gas Compressors' cannot be still considered as parts of air conditioning machines and the....
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....ed by the Respondent Department making it onerous on the Petitioner. 35. It is submitted by the learned counsel for the Petitioner that the conclusion in the impugned Orders for invocation of Section 74 of the respective GST Enactments is erroneous and that the submissions of the Petitioner has not been considered by the Respondent while passing the impugned Orders. 36. The learned counsel for the Petitioner further submits that the Petitioner has been importing the very same 'Gas Compressors' from South Korea from its Group concern viz., Hanon Systems and even as on date, the counter parts of the Respondent in the Custom Tariff Act, 1975 have accepted the classification under Heading 8414 811 and therefore, on this count also there can be no divulgence in the classification of 'Gas Compressors' under Heading 8414, which was adopted by the Petitioner since 1997. 37. The learned counsel for the Petitioner further submits that the reasoning given in Paragraph No.16 of the impugned Order by applying the determination test is only immaterial and inapplicable and ought to have been examined in the light of the decisions cited by the Petitioner. 38. The learned counsel for th....
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....1975, placing reliance on Paragraph Nos.35, 36, 37 and 38 which are reproduced below:- "35. Note 3 of Section XVII reads as follows:- "References in Chapter 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 recognised in Note 3 can be called the "suitably 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 which 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 relay manufactured by the appellant are used solely as part of the rail....
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....y of the Petitioner to the Show Cause Notices in DRC - 01 and that therefore no useful purpose will be served by remitting the case back to the Respondent to re-do the exercise. It is therefore submitted that these writ petitions are liable to be dismissed. DISCUSSION:- 47. I have considered the arguments advanced by the learned counsel for the Petitioner and the learned Special Government Pleader for the Respondent and have perused the materials on record. 48. In the context of change of classification, the Courts have given several decisions. They are still relevant and contemporary and form the basis for determination of the correct classification. A classification adopted by an assessee which has been accepted by the Department can be revised only under specified circumstances. There are well laid principles in this regard. 49. It has also been held that where, a classification adopted by an assessee has been accepted over the period of time, invocation of extended period of limitation by alleging suppression of facts or wilful misstatement cannot be countenanced. Therefore, before proceeding to answer further, I shall refer to some of the celebrated decisions rende....
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....ent with one another. Therefore the second Tribunal must be satisfied that the circumstances are such as to justify it in departing from the ordinary principles which apply to all Tribunals to try and give as far as possible a finality and a conclusiveness to the decision given earlier by that very Tribunal. The effect of revising this decision should not lead to injustice and the court must always be anxious to avoid injustice being done to the assessee." 51. The Delhi High Court in J.K.Synthetics Limited and another Vs. Union of India and others, 1981 (8) ELT 328 (Del), while dealing with a similar case relating to a change in classification under the Central Excise Act, 1944 referred to the above decision of the Bombay High Court in N.A.Shah and Co. Vs. Commissioner of Income Tax, 1956-(70) ITR 618 and observed as under:- "15. The question which we are now called upon to consider is as to the precise scope of this limitation. What will be its effect in a case where there are no changes in the circumstances, either factual or legal? Will it be open to the department, without any cogent reasons and merely at its own caprice, to refuse to follow the conclusion reached o....
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.... it is open to the Income Tax Authorities to change their view capriciously. An authority can depart from a finding arrived at in an earlier year only for cogent reasons. There should be either fresh facts or a change of law or at least a suggestion that while arriving at the conclusion of the earlier year certain material facts or provisions had not been considered and that if they had been considered a different view might have been taken. But for no reason at all there can be no departure from the view taken in an earlier year. This rule is based both on the principle that there should be finality to litigation even in income-tax matters as well on principles of natural justice." 53. The aforesaid decision of the Hon'ble Supreme Court in J.K.Synthetics Limited case, referred to supra has been explained with felicity by Senior Counsel Mr.Aravind P Datar in his 'Guide to Central Excise Law and Practice' Third Edition 1992-1993 while elaborating the circumstances under which change in classification can be justified:- 1. If facts are different; 2. If fresh facts are brought on record; 3. The process of manufacture has changed; 4. If the releva....
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....rials 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 clause (a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as the criterion is applicable. (c) When goods cannot be classified by reference to clause (a) or clause (b), they shall be classified under the heading which occurs last in numerical order among those which equally merits consideration." Rule 3 of the General Rules of Interpretation strictly applies with reference to composition of "Materials" or "Substances". 58. The clauses (a), (b) and (c) in Rule 3 of the General Rules of Interpretation are mutually exclusive. The specific heading or entry must prevail over the general heading or entry. Clause (b) would apply only ....
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.... * "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 clause (a) Classified as if they consisted of the material component which gives them their essential character, insofar as the criterion is applicable Rule 3(c) when "Goods" consisting of more than one "Material" or "Substance", cannot be classified by reference to clause (a) or clause (b) They are to be classified under the heading which occurs last in numerical order among those Heading which equally merits classification 60. Rules 4, 5 and 6 of the General Rules of Interpretation are self explanatory. They read as under:- "4. Goods which cannot be classified in accordance with the above Rules shall be classified under the heading appropriate to the goods to which they are most akin. 5. In addition to the foregoing provisions, the following Rules shall apply in respect of the goods referred to therein : (a) Camera cases, musical instrument cases, gun cases, drawing instrument cases, necklace cases and similar containers, specially....
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....o.8 of the order. However, on 23.04.1996, Central Board of Excise and Customs issued a Circular, whereby it was clarified that "plug-in type relays" were to be classified under Heading 8536, by which time Notification No.11/95-Central Excise (NT) dated 01.05.1995, Rule 173B of the Central Excise Rules, 1944 was amended. Thus, the question of approval of the classification list was dispensed with. Instead, a declaration was required to be filed. 66. Text of Rule 173B of the Central Excise Rules, 1944 as it stood on the date of classification list filed on 27.08.1993 and on the date of Notification No.11/95-Central Excise (NT) dated 16.03.1995 with effect from 01.05.1995 issued by the Central Board of Excise and Customs is extracted below:- Rule 173B of the Central Excise Rules, 1944 as in force with effect from 25.01.1978 Rule 173B of the Central Excise Rules, 1944 as in force with effect from from 01.05.1995 Rule 173-B. Assessee to file list of goods for approval of the proper officer.- (1) Every assessee shall file with the proper officer for approval a list in such form as the Collector may direct, in quintuplicate showing- 1. the full description of (i) a....
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....provided in sub-rule (1) (5) when the dispute about the rate of duty has been finalised or for any other reasons affecting rate or rates of duty, a modification of the rate or rates of duty is necessitated, the proper officer shall make such modification and inform the assessee accordingly. (6) The Collector may exempt by a general order any class of assessee's, who manufacture wholly goods which for the time being, are exempt from paying duty, from filing the list under sub-rule (1): Provided that as and when duty exemption is withdrawn or modified or no longer applicable, the assessee shall comply with the provisions of sub-rule (4) as if he had filed a list earlier and the list had been approved with 'nil' rate of duty. Rule 173-B.-Assessee to file declaration of goods produced or manufactured in the factory.- (1) Every assesses, shall file with the Superintendent of Central Excise, having jurisdiction over the factory, a declaration (in quadruplicate) showing,- 1. the full description of- (i) all excisable goods produced or manufactured by him, (ii) all other goods produced or manufactured by him and intended to be removed from his fact....
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....r officer may after such further enquiry as he may consider necessary, reassess the correct amount of duty payable following the provisions of section 11A of the Act and the assessee shall pay the deficiency, if any. 67. This aspect was not considered by the Hon'ble Supreme Court in Westinghouse Saxby Farmer case referred to supra. 68. There 9 different Show Cause Notices had been as stated in Paragraph No.11 of the decision of the Hon'ble Supreme Court were issued to the said Company for the period starting from 01.02.1995 to 28.02.1999. Thus, a part of the demand proposed was under the old regime and thereafter under the new regime. By separate orders, the demands were confirmed. Thus, the said Company filed appeals before the Appellate Authority. 69. The said Company lost the case all the way up to the Appellate Tribunal as the classification proposed and confirmed by the Lower Authority was upheld not only by the First Appellate Authority but also by the Appellate Tribunal. 70. The Hon'ble Supreme Court examined the rival Tariff Entry for the goods in question namely "Relays". The Hon'ble Supreme Court held that the reasoning of the Lower Authority which was upheld ....
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.... "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 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 classificat....
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....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 sub-heading 8536.90 till the year 1993, specifically filed a classification list on 27-8-1993, reclassifying them under sub-heading 8608 and the same was also approved by the competent authority. Therefore, there is no question of any fraud or collusion or any wilful misstatement or suppression of facts or contravention of any of the provisions of this Act or of the rules made thereunder 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 follows : "I find that the subject goods were previously classified under sub-heading No. 8536.90 and then the appellant aske....
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....e notices individually with reference to the period covered by them. 46. In any case all the show cause notices were issued only on and after 30-8-1995, raising a classification dispute, after having approved the classification list submitted on 27-8-1993. The dispute in the case on hand was one of classification alone, applicable to the product manufactured during the entire period after 27-8-1993. The dispute was not invoice-centric. Therefore, what was sought to be done by the Original Authority was actually to review the approval of the classification list submitted on 27-8-1993 by cleverly issuing separate notices covering certain specific periods. What is to be seen here is that the attempt to undo the effect of the approval of the classification done on 27-8-1993, was actually time- barred. Therefore, despite the fact that some of the individual notices were issued within the period of limitation either in respect of the part of the period or in respect of the whole of the period covered by them, the very invocation of Section 11A, in the facts and circumstances of the case, cannot be said to be within time. 47. Therefore, both questions of law are answered....
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...., for refrigerating and air conditioning appliances and machinery 8536 90 - Other 76. Thus, "Relays" used for railway signalling equipment could not have been classified under Heading 8536 of the Central Excise Tariff Act, 1985 as it stood then. Presently, "Relays" under Sub-Heading 8536 of the Customs Tariff Act, 1975 reads as under:- Sub-heading 8536 - Relays 8536 4100 -- For a voltage not exceeding 60 V 8536 4900 -- Other 77. Chapter 86 deals with 'Railway or Tramway Locomotives, Rolling-Stock and parts thereof; Railway or Tramway Tracks Fixtures and Fittings and Parts thereof; Mechanical (including Electromechanical) Traffic signalling Equipment of all kinds'. 78. Heading 8608 which was adopted by the said Company deals with 'Railway or Tramway Track fixtures and Fittings; Mechanical (including, Electro-mechanical) Signalling, Safety or Traffic Control Equipment for Railway, Tramways, Roads, Inland Waterways, Parking Facilities, Port Installation or Air-Fields; Parts of the Foregoing'. 79. Thus, it is clear that Heading 8536 and Heading 8608 of the Central Excise Tariff Act, 1985 as it stood then which fell for considerati....
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....he Foreign Trade Policy are extracted below for the sake of clarity:- Heading Customs Tariff Act, 1975 ITC (HS) 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; gas-tight biological safety cabinets, whether or not fitted with filters Air or vacuum pumps, air or other gas compressors and fans; ventilating or recycling hoods incorporating a fan, whether or not fitted with filters 8414 80 - Other: Other: - - - Gas compressors Gas compressors 8414 80 11 - - - - Of a kind used in air-conditioning equipment Of a kind used in air-conditioning equipment 8414 80 19 - - - - Other Other However, those minor variations do not in any manner affect the determination of the correct classification. 85. Thus, under the residuary Heading 8414 80, there are two broad categories of 'Gas compressors' namely:- Heading 8414 80 - Other: - - - Gas compressors Heading 8414 80 11 Heading 8414 80 19 - - - - Of a kind used in air-conditioning equipment - - - - Other 86. Thus, Sub-Heading 8414 80 of ....
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.... changing the temperature and humidity, including those machines in which the humidity cannot be separately regulated 8415 20 - Of a kind used for persons in motor vehicles: 8415 20 10 - - - For buses 8415 20 90 - - - Other 91. If Gas compressors of a kind used in air-conditioning of Motor Vehicle was to be classified under Heading 8414, a separate Sub Heading would have provided for the same under Residuary Heading 8414. 92. Residuary Sub-Heading 8414 80 19 within Residuary Sub- Heading 8414 80 cannot apply to 'Gas compressors' manufactured by the Petitioner which are meant to be fitted in Air conditioning units of Automobile Vehicles, though 'Air Conditioning Machines of a kind used for persons in Motor Vehicles' are themselves required to be classified under Sub-Heading 8415 20 of the Customs Tariff Act, 1975. 93. Therefore, only 'Gas compressors - Of a kind used in general air-conditioning equipment' alone will merit classification under Heading 8414 80, as Heading 8414 80 itself is a residuary Heading. Within the said residuary Heading only 'Gas compressors - Of a kind used in airconditioning equipment' will merit classification under the Sub-Heading....
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....ts" and "parts and accessories" in Section XVII of the Customs Tariff Act, 1975 do not apply to "parts" and "parts and accessories" are identifiable as for the goods of Section XVII of the Customs Tariff Act, 1975. Thus, the expressions "parts" and "parts and accessories" do not apply to:- 1. Machines and Apparatus of Headings 8401 to 8479, or parts thereof, provided they constitute as an integral parts of engines and motors, other than the radiators for the articles of this Section. 2. Articles of heading 8481 or 8482 provided they constitute integral parts of engines and motors or; 3. Articles of heading 8483. 101. The expressions "parts" and "parts and accessories" whether or not they are identifiable as for the goods of Section XVII of the Customs Tariff Act, 1975 will include radiators. 102. At the same time, as per Section Note 3 to Section XVII, reference in Chapter 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 clas....
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....XVII of the Custom Tariff Act, 1975 as "parts" and "parts and accessories" unless they constitute integral parts of engines and motors. Only exceptions to "parts" and "parts and accessories" other than radiators for the article of Section XVII. 107. "Parts" and "parts and accessories" which are "parts and accessories of radiators" used for the articles of Section XVII will merit classification under any of the Headings in Chapter 86-89 to Section XVII of the Customs Tariff Act, 1975. 108. Therefore, it is evident that on a conjoint reading of Section Note 2, Section Note 2(e) and Section Note 3 to Section XVII, 'Gas Compressors' manufactured by the Petitioner cannot merit classification under Chapter 84 to Section XVI of the Customs Tariff Act, 1975. Rather they merit classification under Chapter 87 to Section XVII of the Customs Tariff Act, 1975. 109. Therefore, 'Gas Compressors' manufactured by the Petitioner for the sole purpose to be used in air conditioners in Motor Vehicles would not fall under the description of Heading 8414 80 - "Other: Gas compressors" and Sub-Heading 8414 8011 - "Gas compressors : Of a kind used in air-conditioning equipment". 110. Further, as....
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.... Sub-Heading for such 'Gas Compressors' would have been mentioned under the Heading 8415. Thus, there is no scope for classifying 'Gas Compressors' manufactured by the Petitioner which was ostensibly cleared for being used as parts of Air Conditioners in Motor Vehicles under Heading 8414 of the Customs Tariff Act, 1975. 118. On the other hand, Heading 8708 to Chapter 87 which falls under Section XVII which is a rival classification which has been imposed on the Petitioner by the impugned Orders specifically deals with 'Parts and Accessories of Motor Vehicles' from Heading 8701 to 8705. 'Gas Compressors' manufactured by the Petitioner merits classification under Heading 8708 as has been held in the impugned Orders. CONCLUSION:- 119. However, it is noticed that the classification adopted by the Petitioner for the subject good 'Gas Compressors' has been in use both before the GST era and thereafter. The Petitioner has taken a bona fide stand that the 'Gas Compressors' manufactured by the Petitioner merits classification under Heading 8414 both under the pre-GST era and post-GST era. This was also accepted by the Respondent. There is no indication that the Petitioner had been ....
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....re clearly qualified by the word 'wilful' preceding the words "misstatement or suppression of facts" which means with intent to evade duty. The next set of words "contravention of any of the provisions of this Act or rules" are again qualified by the immediately following words "with intent to evade payment of duty". It is, therefore, not correct to say that there can be a suppression or misstatement of fact, which is not wilful and yet constitutes a permissible ground for the purpose of the proviso to Section 11-A. Misstatement or suppression of fact must be wilful." 123. The Hon'ble Supreme Court in Collector of Central Excise, Baroda Vs. L.M.P Precision Engg Co Ltd., (2004) 9 SCC 703, held as under:- "18....Where the assessee had proceeded on a misinterpretation of a legal provision, this Court appears to have held that the bona fides could not be called into question. Those decisions are distinguishable since in this case there was no question of the assessee failing to comply with the requirement of the rule by reason of any alleged misinterpretation of the rule. Had the assessee given a full description of the excisable goods but claimed classification under a wro....