TaxTMI 
TaxTMI 
2026 (9) TMI 1762
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.... Chairman-cum-Managing Director of the appellant-company [hereinafter referred to as "appellant no. 2"], and (iii) Ms. Rupanjali Dey, Chief Financial Officer of the appellant-company [hereinafter referred to as "appellant no. 3"], against the Order-in-Original No. KOL/CUS/A&A/Pr. COMMISSIONER/ADJN/11/2024 dated 13.03.2024 passed by the Principal Commissioner of Customs (Airport & A.C.C.), Custom House, 15/1, Strand Road, Kolkata - 700001, whereby the classification declared by the appellant-company (importer) for the imported Digital Axle Counter ("DAC") under Customs Tariff Item No. 86080030 was rejected ordering re- classification of the same under Customs Tariff Item No. 85301010,, differential Additional Customs Duty / Integrated Tax amounting to Rs.7,67,54,006/- under Section 3(7) of the Customs Tariff Act, 1975 read with Section 5 of the Integrated Goods and Services Tax Act, 2017 was confirmed by invoking Section 28(4) of the Customs Act, 1962, together with applicable interest under Section 28AA of the Act, the said goods valued at Rs.54,61,14,482/- were held liable to confiscation under Section 111(m) of the Customs Act, 1962 offering an option of redemption in....
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....e, but comprises four functionally interdependent constituents, namely: i. The Rail Contacts, installed at the designated detection points on the railway rails; ii. The Line Side Electronics Unit, commonly referred to as the EAK, situated in proximity to the Rail Contacts; iii. The Central Evaluator, or ACE, ordinarily located at the station, relay room or another centralised location; and iv. The relay/output stage, comprising the plug-in vital relays driven by the Central Evaluator, the pick-up/drop condition of which represents the clear/occupied status of the railway track section and whose contacts are utilised in railway interlocking and signal-clearance circuits. 3.1. For the purposes of the present appeals, the fourth component mentioned above viz. 'relay', is of particular significance to the appellant-company's case, since the relay constitutes the electromechanical output interface through which the digital determination of track occupation is translated into a physical electrical contact condition capable of operating the railway signalling and interlocking circuitry. The investigation, while elaborately dealing with the first thre....
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....cording to the appellant-company, it was advised that the classification earlier adopted under Chapter Heading 8530 was not the appropriate classification and that the goods were more specifically covered by Chapter Heading 8608. The appellant-company accordingly altered its declared classification for the subsequent imports. The first consignment covered by the revised classification under Customs Tariff Item 86080030 was imported on 02.08.2017. 5.1. The said change in classification was undertaken, after intimating the same vide letter dated 10.11.2017 to the Commissioner of CGST, South Kolkata, specifically placing the issue of change in classification before the authorities. Along with the aforesaid representation, it furnished a specimen purchase order and the product literature of M/s. Thales India Pvt. Ltd., the Indian subsidiary through which the DACs were being procured from the German manufacturer. The appellant-company did not receive any communication raising an objection to the proposed classification under Chapter Heading 8608 and, on the basis of the material placed before the authorities and in the absence of any contrary communication, proceeded to classify the ....
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....nder Chapter Heading 8608. The appellant-company sought thirty days' time for furnishing the requisite records. 8. On 05.03.2019, Ms. Rupanjali Dey, Chief Financial Officer (CFO) of the appellant-company, (the appellant no. 3 herein), appeared before DRI-Noida with an authority letter duly signed by the Director of the appellant-company on its behalf and submitted, inter alia, the technical literature relating to the DAC, the agreement entered into with M/s. Thales India Pvt. Ltd. and other documents connected with the imports and the product. A statement of appellant no. 3 was recorded under Section 108 of the Customs Act, 1962 on 05.03.2019. She stated, inter alia, that the appellant-company was a registered company engaged in railway signalling and safety items and that it predominantly supplied such materials to the Railways. She explained that the DAC is designed to detect railway axles in a defined section of railway track, the section being demarcated by a pair of detection points comprising Rail Contacts mounted on the rails/web. According to her statement, as the axles pass over the Rail Contact at the entry side of the section, an evaluator receives occupation informat....
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....ristics of a mechanical/electromechanical device rather than a purely electrical device. It was also stated that the appellant-company was not deriving any ultimate fiscal advantage from the classification adopted under Chapter Heading 8608, since GST was being charged to the ultimate customers at the corresponding rate. The letter further relied upon the general principle that, where competing tariff entries are under consideration, the more specific description should be preferred, and reference was made to the decision of the Hon'ble Supreme Court in Commissioner of Central Excise v. M/s. Minwool Rocks Fibre Ltd., 2012, in support of the proposition canvassed therein. 8.2. Ms. Rupanjali Dey / appellant no. 3 was again summoned and appeared before the investigating officers on 03.06.2019. She confirmed the spirit and contents of the letter dated 18.04.2019 and stated that, to the best of her knowledge and belief, she agreed with the facts set out therein. During questioning, however, she clarified that she was not herself a technical expert. In particular, when questioned about the nature of the wires referred to in the letter dated 18.04.2019, she stated that she would need t....
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....assage of a metallic railway wheel upon the receiver waveform is sensed by the EAK. He further explained that the Line Side Electronics Unit, or EAK, is installed in weather-proof metal cabinets in proximity to the Rail Contacts; one EAK is connected to a Rail Contact through the copper wire contained in the integral cable of the latter; that the electronic circuitry of the EAK sends an A.C. waveform to the transmitter coil and receives the corresponding waveform generated in the receiver coil; that the receiver level is continuously compared against a level preset for the rail profile, and, when train wheels pass over the Rail Contact, the resulting influence upon the receiver waveform is sensed and counted by the EAK electronics; that the counts are continuously transmitted through a pair of wires to the Central Evaluator, with the count being computed taking into account the direction of movement. With respect to the Central Evaluator, or ACE, Shri Biswas stated that it is ordinarily situated in a station, relay room or other centralised location and is connected to a plurality of EAKs installed at the Detection Points along the line. The serial cards of the ACE are connected to....
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....Chapter Heading 8608. In explaining the functional operation of the DAC, he stated, inter alia, that the output generated by the system is processed through an electromechanical contact in the form of a "yes/no" voltage, which communicates the result of the detection and thereby enables the corresponding railway signalling/interlocking circuitry to recognise the detected condition. He canvassed that the Digital Axle Counter, viewed as a complete system, is an electromechanical system which operates primarily on the effect of electricity. 10.1. Shri Santanu Basu appeared again before the investigating authority on 29.11.2019 and made further statements in relation to the technical character and mode of operation of the DAC. He reiterated, inter alia, that the DAC is an electromechanical system and operates on the principle and theory of electromechanical properties. He further explained that the system becomes operative only upon being energised by an electrical voltage, consequent upon which the requisite electromagnetic flux is developed and the electrical/electromagnetic phenomenon is utilised for detection and determination of the condition of the railway track section. The s....
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....ting wheel counts to the ACE; and the ACE compares the counts from the corresponding entry and exit Detection Points. When the in-count and out-count become equal, the corresponding section is treated as free, whereas any mismatch signifies occupation. The system is used for monitoring and controlling railway traffic at stations, junctions and level crossings and for determining the passage of trains over the same section of line. 12.1. The investigation principally treated the aforesaid operation as dependent upon the properties or effects of electricity, particularly the electromagnetic effect. It relied upon the relevant Chapter Notes and HSN Explanatory Notes and, inter alia, referred to Note 1(c) as excluding electrical signalling, safety or traffic-control equipment of Heading 8530 from the scope of articles elsewhere in the chapter. Reference was also made to the General Scope and Structure of Chapter 85 and to the proposition that machines and appliances which depend for their operation upon the properties or effects of electricity, including electromagnetic effects, fall within Chapter 85. In relation to Chapter 86, the investigation referred to the description of appar....
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....orresponding differential rate of IGST, and the subsequent proceedings treated the change in classification as deliberate and as resulting in short payment of duty. The investigation consequently concluded that the goods had been wrongly declared under Customs Tariff Item No. 86080030, that the more appropriate classification was Customs Tariff Item No. 85301010, and that the corresponding parts were appropriately covered by Customs Tariff Item No. 85309000. On the basis thereof, the differential duty / Integrated Tax was worked out at Rs.7,67,54,006/-. 15. The investigation culminated in Show Cause Notice No. DRI/NRU/CI-26/Int-0/Enq-125/2018 dated 31.12.2020, whereby it was alleged that the appellant-company had mis-declared the classification of the DACs with a view to fraudulently avail the lower rate of IGST applicable to Chapter Heading 8608. The notice proposed recovery of differential duty of Rs.7,67,54,006/- under the Customs Act, invoking the extended period contemplated under Section 28(4), together with applicable interest under Section 28AA. The notice further proposed confiscation of the imported goods under Section 111(m), imposition of redemption fine under Sectio....
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....nt through levers, cranks, rods, wires, chains, hydropneumatics devices or an electric motor in the manner referred to in the HSN Explanatory Notes. The impugned order accordingly rejected the appellant company's claim for classification under Chapter Heading 8608 and held the complete DAC classifiable under Chapter Heading 8530. 15.4. It was also observed by the ld. adjudicating authority, that Shri Santanu Basu and Ms. Rupanjali Dey, the appellant no. 2 and appellant no. 3 respectively, had tried to misguide the investigation, with a mala fide intent, to suppress the material facts, thus rendering themselves liable to penalty under the relevant provisions of the Customs Act, 1962, and instead, placed reliance on the statement of Shri Gautam Biswas dated 09.07.209 to hold that the imported goods pertained to Chapter 8530. 15.5. On the basis of the aforesaid observations, the Ld. Principal Commissioner held that the appellant-company had availed the benefit of the lower 5% Integrated Tax rate applicable to the goods classified under Chapter Heading 8608, whereas the goods, according to the ld. adjudicating authority, were liable to Integrated Tax at 18% under Chapter Heading ....
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....ltant status for use by the railway signalling and interlocking system. The nature and purpose of the equipment as railway signalling and traffic control equipment is, therefore, not in dispute. The material issue of dispute arising in the present case is whether, having regard to its complete operation, the DAC answers the description of "mechanical (including electro-mechanical)" signalling, safety or traffic control equipment contemplated by Heading 8608. (iii) The language of Heading 8530 itself assumes considerable significance in resolving the said issue. Heading 8530 does not unconditionally encompass every item of electrical railway signalling or traffic control equipment. By the express words "other than those of heading 8608", the legislature has excluded from Heading 8530 equipment which answers the description contained in Heading 8608. The proper enquiry must, therefore, first be whether the said goods fall within Heading 8608. Upon such classification being established, Heading 8530 stands excluded by its own terms. (iv) The same conclusion follows from the language and structure of Chapter 86. The title to Chapter 86 itself refers to "mechanical (in....
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....erpretation. Even assuming that both headings merit consideration, Rule 3(a) further provides that the heading which furnishes the most specific description shall be preferred to a heading providing a more general description. (viii) In the present case, Heading 8608 furnishes the more specific description once the actual composition and functioning of the Eldyne DAC is examined. Heading 8608 specifically identifies mechanical, including electro-mechanical, signalling, safety and traffic control equipment for railways, and Tariff Item 86080030 specifically covers "Other traffic control equipment for railways". Heading 8530, by contrast, is expressly qualified by the exclusion of equipment falling under Heading 8608. The relationship between the two headings is therefore not one of two independent and coextensive entries; Heading 8530 expressly gives way where the equipment answers the description in Heading 8608. (ix) The technical composition and functioning of the DAC is described in the Maintenance Handbook on Digital Axle Counter (Multi Section), Reference No. CAMTECH/2008/S/MSDAC/1.0, December 2008, issued by CAMTECH, Ministry of Railways. Part B thereof spec....
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....d was allegedly used by the appellant to divert the issue of classification is rendered totally erroneous and false. On a perusal of the discussion and findings in the impugned order, it is also apparent that no significance whatsoever has been accorded to the Handbook and Manuals published by Indian Railways and which were relied on substantially during the impugned adjudication by the appellants. (xii) The nature of the operation of such railway signalling relays is explained in the publication S 19 - Signalling Relays & Cables, issued in November 2009 by the Indian Railways Institute of Signal Engineering & Telecommunications, Secunderabad ("IRISET"). Chapter 1 of the said publication deals with signalling relays generally. The publication explains that relays may be divided into DC and AC relays depending upon the means by which electrical energy in the coil is converted into mechanical energy for movement of the contacts. It further describes the armature as the movable component associated with the relay contacts. (xiii) Chapter 3 of the aforesaid IRISET publication, dealing with shelf-type DC line and track relays, describes the mechanical sequence in great....
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....ot warrant such a construction that disregards the plain language used in the description of the relevant chapter tariff head. (xvii) In this context, the HSN Explanatory Notes to Heading 8608 are also relevant. In relation to mechanical, including electro-mechanical, signalling, safety or traffic control equipment, the Explanatory Notes describe apparatus in which the signal or other device may be operated from a control point through mechanical means, hydro-pneumatic devices or electric motors. The Explanatory Notes therefore themselves recognise that electrically actuated mechanisms may nevertheless retain their character as mechanical or electromechanical signalling equipment classifiable under Heading 8608. (xviii) The HSN Explanatory Notes to Heading 8530 correspondingly state that the heading covers electrical traffic-control equipment but excludes similar equipment which is operated mechanically, even though electrical features may be incorporated therein, such equipment falling under Heading 8608. The distinction drawn by the HSN is therefore not between apparatus which uses electricity and apparatus which does not; rather, the material distinction is bet....
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....ion of India v. Garware Nylons Ltd., 1996 (87) E.L.T. 12 (S.C.); * H.P.L. Chemicals Ltd. v. Commissioner of Central Excise, 2006 (197) E.L.T. 324 (S.C.); and * State of Madhya Pradesh v. Marico Industries Ltd., 2016 (338) E.L.T. 335 (S.C.). (iii) The principle emerging therefrom is that where the taxing authority seeks to bring goods within a particular tariff entry, the onus lies upon such authority to establish the facts necessary for application of that entry by appropriate material and evidence. (iv) In the present case, the Department was therefore required to establish affirmatively that the DAC imported by Eldyne constituted electrical signalling, safety or traffic control equipment of Heading 8530 and, equally importantly, that it did not fall within the express description of mechanical, including electro-mechanical, signalling, safety or traffic control equipment under Heading 8608. The said impugned order does not discharge that burden. Its conclusion proceeds principally upon the fact that the DAC utilises electricity and electromagnetic effects, without adequately addressing the complete functional operation of the apparatus, includi....
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....h refers to "electrical machinery or equipment (Chapter 85)", cannot be read in isolation so as automatically to exclude from Chapter 86 every railway component which employs electricity. Such an interpretation would render the sole or principal use test contained in Note 3 ineffective in respect of railway-specific signalling equipment and would also run contrary to the express inclusion of electro-mechanical signalling equipment within Heading 8608. Notes 2(f) and 3 must therefore be construed harmoniously, having regard to the nature, principal use and actual function of the goods concerned. IV. THE DECISION OF THE HON'BLE SUPREME COURT IN WESTINGHOUSE SAXBY FARMER LTD. SUPPORTS CLASSIFICATION UNDER HEADING 8608 (i) The aforesaid interpretation stands substantially supported by the decision of the Hon'ble Supreme Court in Westinghouse Saxby Farmer Ltd. v. Commissioner of Central Excise, Calcutta, 2021 (376) E.L.T. 14 (S.C.). The dispute therein concerned relays used solely as railway signalling and traffic control equipment, which the assessee claimed to be classifiable under Heading 8608, whereas the Department sought classification under Chapter 85. In paragr....
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....clude classification under Heading 8608. Read with the express words "mechanical (including electro-mechanical)" appearing in Heading 8608 and the technical operation of the Eldyne DAC, the principle laid down therein strongly supports the classification adopted by Eldyne under Tariff Item 86080030. The stated decision in Westinghouse Saxby Farmer Ltd (supra) has been subsequently applied by this Tribunal in Commissioner of Customs v. Bosch Limited, 2023 (12) TMI 386. V. STATEMENTS OF SHRI GAUTAM BISWAS IRRELEVANT, INCOMPLETE AND UNRELIABLE (i) The said impugned order places substantial reliance upon the statements of Shri Gautam Biswas recorded by the DRI on July 1, 2019 and July 9, 2019 for arriving at the conclusion that the DAC is classifiable under Heading 8530. In particular, reliance has been placed upon his statements to the effect that the DAC depends for its functioning upon electricity and electromagnetic effects and that, according to him, the characteristics of the subject goods did not correspond with Heading 8608. The said statements have thus been treated by the adjudicating authority not merely as evidence concerning the physical composition or fu....
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....traffic control equipment" under Heading 8608 is a matter of tariff interpretation. A witness or technical consultant cannot conclusively determine that legal question by stating his own understanding of the tariff. (v) The error assumes particular significance because the technical premise attributed to Shri Gautam Biswas - that the equipment depends upon electricity and electromagnetic effects - does not, even if accepted as a fact, resolve the classification dispute. Heading 8608 itself expressly embraces "electro-mechanical" signalling, safety and traffic control equipment. The adjudicating authority was therefore required to proceed further and determine whether the complete operation of the Eldyne DAC, including the operation of the vital relay and the consequent mechanical movement of its armature and contacts, brings the apparatus within the express electro-mechanical limb of Heading 8608. Merely repeating that the equipment uses electricity or electromagnetic effects does not answer that statutory question. (vi) The said impugned order ought, therefore, to have independently examined the Maintenance Handbook on Digital Axle Counter (Multi Section), Refere....
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....ice on the part of Shri Biswas. (x) The said reason is wholly beside the point. Cross-examination was sought because the statements were proposed to be used as substantive evidence upon disputed technical matters central to classification. The right to test such evidence does not depend upon first establishing personal hostility or bias on the part of the witness. Where the adjudicating authority proposes to rely upon the truth and technical correctness of the statements against the noticees, the statutory requirements of Section 138B and the principles of natural justice must be observed. (xi) The statements of Shri Gautam Biswas thus suffer from substantial deficiencies. First, his purported opinion upon the proper tariff classification cannot substitute the independent legal determination required to be made by the adjudicating authority under the CTA. Secondly, even in respect of the technical facts spoken to by him, the statements could not lawfully be treated as substantive evidence against the appellants without compliance with Section 138B and without affording the requested opportunity of cross-examination. The opinion of Gautam Biswas conveyed in summary....
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....-levy, short-levy, non-payment or short-payment of duty is shown to have arisen by reason of collusion, wilful misstatement or suppression of facts by the importer, exporter, agent or employee. Mere short-payment, assuming without admitting the same, is therefore insufficient; the Department must establish the existence of one of the statutorily prescribed culpable circumstances and a causal connection between such circumstance and the alleged short-payment. (ii) The records of the present case disclose no concealment of any material fact. Eldyne commenced classification of the said goods under CTH 86080030 from August 2, 2017. Thereafter, by its representation dated November 10, 2017 addressed to the Commissioner of GST South, Kolkata, Eldyne expressly disclosed its understanding that the appropriate classification of the DAC was under Heading 8608 and sought clarification in that regard. The said representation was accompanied, inter alia, by a specimen purchase order and product literature concerning the goods. The change in classification was thus expressly brought to the notice of the jurisdictional tax authorities and was not a classification adopted covertly or kept....
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....cise, Calcutta (supra), particularly paragraphs 41 to 46, is also apposite. The Hon'ble Supreme Court declined to sustain invocation of the extended period where the classification adopted by the assessee had been disclosed to and acted upon by the Department and there was no material establishing fraud, collusion, wilful misstatement or suppression of facts. The principle applies with equal force where, as in the present case, the classification under Heading 8608 was openly declared in the Bills of Entry and repeatedly accepted in assessment until the DRI subsequently took a different view. (vii) The said impugned order seeks to infer an intention to evade duty substantially from the fiscal consequence of the change in classification. Under Serial No. 242 of Schedule I to Notification No. 1/2017-Integrated Tax (Rate) dated June 28, 2017, goods falling under Heading 8608 attracted integrated tax at the rate of 5%. Goods falling under Heading 8530, on the other hand, initially attracted integrated tax at the rate of 28% under Serial No. 156 of Schedule IV to the said Notification and, with effect from November 15, 2017, at the rate of 18% under Serial No. 384B of Schedule ....
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....puted that, in computing the relevant period, effect has to be given to the orders of the Hon'ble Supreme Court in In Re: Cognizance for Extension of Limitation, Miscellaneous Application No. 21 of 2022 in Miscellaneous Application No. 665 of 2021 in Suo Motu Writ Petition (C) No. 3 of 2020, Order dated January 10, 2022, whereby the period from March 15, 2020 to February 28, 2022 was directed to stand excluded for purposes of limitation in judicial and quasi-judicial proceedings. The balance period accordingly became available from March 1, 2022. (iii) The said impugned order further records that the matter had been placed in the Call Book pursuant to Instruction No. 04/2021-Customs dated March 17, 2021, issued under File No. 450/72/2021-Cus-IV, in view of the decision of the Hon'ble Supreme Court in Canon India Pvt. Ltd. v. Commissioner of Customs, Civil Appeal No. 1827 of 2018, decided on March 9, 2021, and that the matter was subsequently taken out of the Call Book for adjudication under intimation dated July 25, 2022. Reliance is accordingly placed in the said impugned order upon Section 28(9A)(c) of the said Act. (iv) The said impugned order thereafter merely....
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.... in a particular case. (ii) It is settled law that unless an assessment is completed there can be no question of any short levy or short payment or non-levy or nonpayment of duty payable under the Act. It is only when assessment is complete in a particular case and it is found subsequently, in the manner prescribed under the Act, that such assessment order is erroneous and that there has been either non-levy or non-payment of duty payable or short levy or short payment of such duty payable or erroneous refund of any duty involved in a particular case, that provisions of Section 28(1) or Section 28(4) are attracted. In terms of the Act the provisions under which such determination as to whether or not there has been, in a case of a particular assessment order passed, whereby duty payable by an assessee has either not been levied or not paid or has been short levied or short paid or erroneously refunded, are Section 128 read with Section 128A and Section 129D(2) of the Act. The assessment order has to be first got reversed or set aside through the process of appeal as provided for under Section 128 read with Section 128A and/or Section 129D(2) of the Act. It is only on setti....
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....rticular with the entry made under the said Act. The condition precedent is therefore a material discrepancy between the goods imported and the particulars declared in the relevant entry. (ii) No such discrepancy exists in the present case. The goods were disclosed as Digital Axle Counters and components thereof and there is no finding that Eldyne concealed the identity, quantity, value, country of origin or physical description of the imported goods. The controversy concerns the appropriate tariff heading applicable to goods whose identity and function were disclosed to the Department. (iii) A bona fide claim to a particular tariff classification does not become a false declaration merely because the Department subsequently proposes another heading. The principle laid down in Northern Plastics Ltd. v. Collector of Customs and Central Excise, 1998 (101) E.L.T. 549 (S.C.), that a claim to a particular tariff or exemption treatment in respect of correctly described goods does not by itself constitute misdeclaration, applies squarely to the present case. (iv) In any event, for the reasons already set out hereinabove, the classification under CTH 86080030 was....
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....n 114A cannot independently survive. Further, upon the principal demand itself being set aside on classification, there remains no amount of duty upon which an equal penalty under Section 114A could be founded. The penalty imposed upon Eldyne is therefore liable to be set aside. XII PENALTIES UPON SHRI SANTANU BASU UNDER SECTIONS 112(a) AND 114AA OF THE SAID ACT ARE UNSUSTAINABLE (i) The said impugned order imposes upon Shri Santanu Basu a penalty of Rs.10,00,000/- under Section 112(a) and a further penalty of Rs.15,00,000/- under Section 114AA of the said Act. The allegations against him substantially arise from his role as Chairman and Managing Director of Eldyne, his involvement in the classification adopted by the company and the explanations furnished by him during investigation regarding the functioning of the DAC. (ii) Section 112(a) requires the Department to establish that the person concerned, in relation to the goods, did or omitted to do an act which rendered the goods liable to confiscation under Section 111 or abetted the doing or omission of such an act. The provision therefore requires identification of a specific act or omission having th....
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.... was a non-technical officer dealing principally with financial matters and acted upon the understanding of the product and its classification conveyed to her by the technical personnel of the company. (ii) No specific act or omission has been identified against Ms. Dey which rendered the goods liable to confiscation under Section 111 or amounted to abetment of any such act. The broad allegation that she participated in or supported the company's classification under Heading 8608 cannot satisfy the statutory conditions of Section 112(a), particularly when such classification had been openly disclosed and repeatedly accepted in assessment. (iii) The allegation under Section 114AA appears principally to arise from statements or correspondence attributed to Ms. Dey during investigation concerning the working of the DAC and whether the system was operated from a control point. Even assuming any part of her technical understanding to have been inaccurate, Section 114AA is not attracted by mere error or misunderstanding. The Department must establish that the statement was made knowingly or intentionally despite knowledge of its falsity. (iv) No such evidence h....
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....e under Chapter Heading 8530 of the Customs Tariff, as correctly held in the impugned order, rather than under Chapter Heading 8608 as claimed by the appellant. (b) Chapter Heading 8530 specifically covers electrical signalling, safety, or traffic control equipment for railways, whereas Chapter Heading 8608 covers mechanical (including electro-mechanical) signalling, safety, or traffic control equipment. The DAC system in question relies on digital axle-counting mechanisms, electronic sensors, and advanced electronic circuitry to perform its core functions of detecting/counting railway axles and determining track occupancy. (c) In accordance with HSN Explanatory Note (B) to Chapter Heading 86.08, mechanical/electromechanical equipment under Heading 8608 refers to apparatus operated from a control point-generally at some distance-by means including electric motors, levers, cranks, rods, wires, chains, and hydro-pneumatic devices. (d) The DAC system is installed beside the railway track, where it performs its sensing, counting, and computing functions autonomously. It is not operated mechanically or electro-mechanically from a distant control point through ....
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.... anterior and more determinative question is as to the correct tariff characterization of the complete apparatus viewed in its entirety and by reference to the function which it is designed to perform, and, in that context, whether the DAC is merely an electrical signalling/safety apparatus of Chapter Heading 8530 or constitutes mechanical/electromechanical railway signalling, safety or traffic-control equipment falling under Chapter Heading 8608. 20.1. The controversy, therefore, circumscribes a somewhat narrower and technically more exacting inquiry than that which might emerge from a mere juxtaposition of the words "electrical" and "mechanical". It would, therefore, be required to ascertain the true functional identity of the said apparatus, the nature in which its several constituent stages cooperate, the manner in which physical information pertaining to the movement of a railway wheel is sensed, processed, evaluated and ultimately translated into a condition capable of actuating the railway signalling and interlocking system, and, concomitantly, whether the complete architecture of the DAC, when so appreciated, bears the character of an electromechanical railway safety/sig....
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....way track is occupied or clear. Unlike conventional track-circuit arrangements in which electrical continuity through the rails is utilised for determining occupancy, the DAC proceeds upon a digital "check-in/check-out" methodology. The passage of each railway axle at the entry and exit Detection Points is detected, electronically evaluated and compared, and the resultant condition of the track section is thereafter communicated to the signalling/interlocking infrastructure through the relay/output stage. 22. Viewed functionally, the system may be appreciated through four principal and sequential stages, namely: (I) the Rail Contacts constituting the outdoor detection points; (II) the Track-Side Electronic Unit or EAK; (III) the Central Evaluator or ACE; and (IV) the Vital Signalling Relay/Output Stage. The four stages collectively constitute the operational chain by which a physical railway event is transformed into a safety-signalling command. (I) Rail Contacts - Outdoor Detection Point * Technical Nomenclature: Model SK30H (comprising Transmitter and Receiver Heads). * Physical Location: Installed directly on t....
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....ls, which are connected to the Line Side Electronics Unit through an integrated insulated cable. The transmitter coil is excited by an alternating current signal originating from the EAK, whereupon an electromagnetic field is generated around the transmitter coil. The resulting electromagnetic flux links with the receiver coil and gives rise to a corresponding alternating-current waveform in the receiving circuit. The presence of a metallic railway wheel between the transmitter and receiver sets alters the amplitude and phase characteristics of the waveform. It is this alteration which furnishes the raw detection information upon which the subsequent axle-counting process proceeds. 22.1.3. Thus, while the Rail Contact does not contain an active electronic processing device of its own and remains in a passive state until electrically energised from the EAK, it is nevertheless an indispensable constituent of the complete DAC system. In its absence there is no physical detection input to the electronic processing chain, and consequently no basis upon which the succeeding stages can perform the function for which the system is designed. (II) Line Side Electronics Unit (EAK)....
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....ysis of the changes occurring in the waveform, including the phase relationship between the sensor signals, it calculates the axle count and determines the direction of movement, thereby distinguishing between entry-side and exit-side movement. 22.2.3. The significance of this stage lies in the fact that it does not merely relay an undifferentiated electrical signal. It transforms the raw physical detection information into structured and addressable digital information. The wheel counts are transmitted continuously through the communication pair of wires to the Central Evaluator, accompanied, where applicable, by the relevant internal health and error diagnostics. Nevertheless, the EAK, by itself, does not pronounce whether the entire intervening track section is "Free" or "Occupied". Its function remains confined to the reliable detection, local processing, counting and transmission of the events occurring at the relevant Detection Point. 22.2.4. The mode of operation of the EAK also reinforces the functional interdependence of the system. The electromagnetic phenomenon generated at the Rail Contact furnishes the input; the EAK senses and processes the resulting disturbance....
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....lti-Section Digital Axle Counter ("MSDAC") configurations, such processing is undertaken through safety-oriented microcomputer architectures designed to satisfy stringent railway safety requirements, including safety-integrity configurations such as SIL-4 arrangements. 22.3.2. The operative logic is both precise and consequential. Where the total "In-Count" equals the total "Out-Count", the system determines that the intervening section is clear; where the two counts do not reconcile, the section is treated as occupied. The ACE thus constitutes the central computational stage at which the separately detected railway events are translated into the final safety determination regarding the status of the track section. 22.3.4. The significance of the ACE, however, must not be viewed in isolation. The Central Evaluator merely arriving at the electronic conclusion "Free" or "Occupied" does not, by itself, bring about the corresponding physical operation of the railway signalling infrastructure. The electronic safety determination must still be presented to the signalling/interlocking apparatus in a form capable of actuating the relevant circuitry. It is at this precise juncture tha....
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....e corresponding signalling condition and the continuity of the block-proving or related safety circuits. The "pick-up" and "drop" conditions of the relay consequently constitute a physical representation of the electronically determined "clear" or "occupied" condition of the track section. 22.4.3. The relay/output stage thus performs a function qualitatively different from mere electronic computation. An electronic processor may conclude that a section is clear, but the railway signalling installation requires that conclusion to be embodied in a physical switching condition capable of participating in the interlocking logic. The vital relay provides precisely that bridge between electronic computation and electromechanical actuation. The movement of its armature and the consequent operation of the metallic contacts constitute the physical intervention through which the abstract digital determination is translated into an actionable signalling state. 22.4.4. The architecture assumes still greater significance when the system is considered as a whole. If the Rail Contacts are the sensory ingress of the system, the EAK is the local processing and transmission limb, and the ACE i....
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....s converted into an actual electromechanical switching condition in the railway signalling and interlocking network. No one of these stages, taken in isolation, performs the complete function of the Digital Axle Counter system; it is their coordinated interaction which constitutes the apparatus in its commercially and functionally intelligible form. 23.3. It is, therefore, this complete functional architecture which must inform the subsequent examination of the competing Chapter Headings. To characterise the goods solely by reference to the electronic principle employed at the sensing or processing stages, while severing from consideration the electromechanical output through which the safety determination is ultimately translated into railway signalling action, would amount to viewing the apparatus through an unduly truncated prism and would not, in our considered view, capture its true functional identity. 24. Having delineated the functional architecture of the Digital Axle Counter, we may now turn to the competing tariff entries under which the rival classifications have been canvassed. The appellant-company has classified the complete DAC under Customs Tariff Item 860800....
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....ying the presence of electricity in the article; their interrelationship necessarily requires the nature and character of the equipment to be examined with some degree of functional exactitude. 25. On the other hand, Chapter 86 bears the following description: "Railway or tramway locomotives, rolling-stock and parts thereof; railway or tramway track fixtures and fittings and parts thereof; mechanical (including electro-mechanical) traffic signalling equipment of all kinds" 25.1. Within the said Chapter, Chapter Heading 8608 is described as follows: "RAILWAY OR TRAMWAY TRACK FIXTURES AND FITTINGS; MECHANICAL (INCLUDING ELECTOMECHANICAL) SIGNALLING, SAFETY OR TRAFFIC CONTROL EQUIPMENT FOR RAILWAY, TRAMWAYS, ROADS, INLAND WATERWAYS, PARKING FACILITIES, PORT INSTALLATION OR AIR- FIELDS; PARTS OF THE FOREGOING" 25.2. The relevant tariff structure under Heading 8608 is reproduced below: Tariff Item Description of goods Unit Rate of duty Standard Preferential areas 8608 Railway or tramway track fixtures and fittings; mechanical (including electomechanical) signalling, safety or traffic control equipment for railway, tr....
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.... (b) frames, under frames, bogies and bissel-bogies; (c) axle boxes, brake gear; (d) buffers for rolling-stock; hooks and other coupling gear and corridor connections; (e) coachwork. 3. Subject to the provisions of Note 1 above, heading 8608 applies, inter alia, to: (a) assembled track, turntables, platform buffers, loading 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." 27. Before proceeding further, the relevant provisions of Section XVII may also be noticed: - "SECTION XVII VEHICLES, AIRCRAFT, VESSELS AND ASSOCIATED TRANSPORT EQUIPMENT Notes: 1. This Section does not cover articles of heading 9503 or 9508 or bobsleighs, toboggans and the like of heading 9506. 2. The expressions "parts" and "parts and accessories" do not apply to the following articles, whether or not they are ide....
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....Heading 8530 is specifically directed towards electrical signalling, safety or traffic-control equipment, subject to the express exclusion of goods falling under Heading 8608. This distinction becomes particularly relevant where the apparatus, although incorporating electrical and electronic elements, is alleged to possess an electro-mechanical character falling within the express language of Chapter Note 3(b) to Chapter 86. (b) Chapter Note 1(c) to Chapter 86 29. The scheme is further reinforced by Chapter Note 1(c) to Chapter 86, which provides that Chapter 86 does not cover "electrical signalling, safety or traffic control equipment of heading 8530". The provision thus operates as a corresponding exclusion from Chapter 86 in respect of goods which are properly covered by Heading 8530. Read with the exclusion in Heading 8530 itself, the two provisions demonstrate that the competing headings are not to be applied in isolation. The decisive question is whether the goods fall within the description of electrical signalling equipment of Heading 8530, or whether, having regard to their construction and functional character, they are covered by Heading 8608, including the express....
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....sion "parts" merely by virtue of its association with a Chapter 86 article. 32. These provisions are therefore required to be considered along with the actual functional integration of the constituent components of the Digital Axle Counter (DAC), rather than by examining any one component in isolation. ▪ Maintenance Handbook, CAMTECH/2008/S/ MSDAC/1.0, December 2008 33. For the present purpose, it would be relevant to go through the Maintenance Handbook CAMTECH/2008/S/MSDAC/1.0, December 2008 issued by the Ministry of Railways, Government of India which provides contemporaneous technical material concerning the architecture and functioning of the Digital Axle Counter: "PART-A DIGITAL AXLE COUNTER (MULTI SECTION) 1. Introduction Axle counter is a device for monitoring a specified section of track for the presence of vehicle. Conventional Axle counters were designed with transistorized circuits and ICs. Now Axle Counters are designed using Micro-Controllers and Software program, and these are called as "Digital Axle Counters". The communication used in the system is by means of packets for exchange of information between units. This ....
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....le counter respectively. The contacts of vital relay can be used in interlocking circuits e.g. Signal clearance circuit. ... PART-B Az LM ELDYNE MULTI SECTION DIGITAL AXLE COUNTER . . . 3.8.3. Connection of relays 33.1. The above material touches upon the essential aspects of the Mult-Section Digital Axle Counter and inter alia, the role of the Vital Relay Unit within the overall architecture of the Digital Axle Counter. Paragraphs 1 to 3 of the Maintenance Handbook introduce the Digital Axle Counter and explain its functioning. The "MSDAC Interconnection Block Diagram" depicted as Fig. 1 under paragraph 3.1, General Description, is particularly instructive in this regard. The diagram does not portray the relay circuitry as an external or unrelated apparatus; rather, it depicts the track inputs through the field units/rail contacts, their processing through the Central Evaluator, and the corresponding output through the Relay Control/Status stage. 33.2. The significance of the relay becomes still more apparent from paragraph 4 of the above Maintenance Handbook, which identifies the main ....
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....hich the DAC is deployed remains incomplete. The relay unit thus constitutes an essential component of the complete DAC system, notwithstanding that its physical form and electromechanical mode of operation may be distinguishable from the electronic processing units. This aspect assumes particular relevance when the expression "electromechanical" occurring in Chapter Note 3(b) to Chapter 86 is considered in conjunction with the actual construction and functional operation of the complete apparatus. ▪ Railway Tender and Scope of Work 34. The appellants have also placed on record the relevant Railway Tender documents, including the portion defining the Scope of Work for installation of the Digital Axle Counter system, which is also required to be looked into for the limited purpose of appreciating the manner in which the equipment is conceived and installed in an actual railway signalling environment. A sample copy of one of such Tender documents viz. Tender Notice No. S&T/Con/KGP/3rd Line/HIJ-NYA/15-16/06 dated 15.02.2016 issued by the South Eastern Railway is being reproduced below:- 34.1. The "Description of materials" therein, inter alia, specifically contemplates ....
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.... interlocking is functionally defined as preventing a clear signal for one route when clearance has already been given to a conflicting route. In the imported system, this ultimate safety enforcement is performed exclusively by the integrated electromechanical relays. Therefore, the system's essential character is not generic electronic calculation (Heading 8530), but a dedicated, trackside electro-mechanical safety apparatus tailored solely for railway use (Heading 8608). The fail-safe operation of the relay mechanism, including its pick-up and drop conditions, ensures that the requisite signalling condition is maintained or, upon loss of the appropriate energisation, reverts to the safe condition. Thus, the interlocking function further demonstrates that the ultimate purpose of the DAC is not confined to electronic detection or calculation of axle counts, but extends to the safe and controlled operation of railway signalling through an electromechanical output mechanism. ▪ IRISET Technical Manual/Guide S19 36. The technical character of the Relay Unit is further elucidated by the Technical Manual/Guide S19 on "Signalling Relays and Cables" issued by the Indian Rai....
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....nto a pre- wired plug boards. (b) According to their connection and usage, they are classified as: (i) Track relays: Relay, which is directly connected to the track, to detect the presence of vehicle. (ii) Line Relays: Other than track relay all are line relays. Relays connected to the selection circuit. (c) According to their vitality or importance in ensuring train working safety, they are classified as: (i) Vital Relays: All relays used for traffic control such as signal, point, controls, track detection etc. (ii) Non-vital Relays: Relays, which operate control aids and accessories like warnings, buzzers, Indications etc. (d) According to their special provisions to ensure reliability of their contacts, they are classified as: (i) Proved type: are those whose normalization after each operation shall be proved in circuit controlled by their contacts. Contacts in which both the springs have metal surfaces on their tips. They may get fused due to high sparking current across them during operation. These may prevent relay normalization and causes unsafe condition in traffic control. To avoid this, proving of rel....
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....and closes front contacts. When the circuit is opened the magnetic flux collapses and the armature drops away by gravity from the pole faces, the front contacts break and back contacts close. The front and back contacts of the relay can be utilised to make or break other circuits. Two stop pins of non-magnetic material are fixed either on the armature or pole faces so that the armature cannot come in contact with the pole faces. It is essential to maintain a small air-gap between the armature and pole faces so that low value of residual magnetism may not retain the armature in picked up position and causes the relay to fail to drop away with a break in its control circuit. . . . CHAPTER 4: PLUG IN TYPE DC NEUTRAL LINE RELAYS (NON-PROVED TYPE) 4.1 Two styles made in this type to BR specifications are introduced on Indian railways, P-series/Q-series relays. They are called because their name code starts with these letters. However, P-series relays are going out of use gradually. Q series relays are now universally used with the British signalling practice. Even as no separate IRS specifications are issued for these relays, they confirm to ....
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.... The relay is provided with a handle attached to molding base of the relay. A transparent cover covers all the components. The rated life of relay shall be taken as 1000000 cycles under specified conditions of operation where one cycle consists of an operation followed by a release. .... 1) Relay base 2) Electro-magnet 3) Armature 4) Pusher spring 5) Fixed front contacts 6) movable arm contact 7) Fixed back contact 8) Operating arm 9) Adjustment card 10) Residual pin 11) Transparent cover 12) handle 13) Heel piece 4.4 Details of Parts: 1. Base: It is a one piece moulding of non-hygroscope thermosetting material. Contact springs extend behind on it and below them are coil connection springs. Coding pins are fitted below these springs on the base in nominated positions. 2. Electro-magnet: It is mounted on the base below the contact stacks. It consists of a bar magnet core and an L-shaped heel piece that extends above to the front. A coil is wound on a bobbin over the core. 3. Armature: It is mounted on a phosphor....
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....aces causes the armature to be attracted to the pole faces, whereby it picks up and closes the front contacts. Upon opening of the circuit, the magnetic flux collapses and the armature drops away from the pole faces under the action of gravity. Thus, the operation is not merely an electrical switching phenomenon; electrical energy is converted into a physical movement of the armature, which in turn produces the requisite mechanical movement of the contacts. 36.3. The same electromechanical construction is reflected in Chapter 4 of the Manual dealing with Plugin Type DC Neutral Line Relays, and particularly in paragraph 4.3 and Fig. 4.1 relating to the construction of the DC Neutral Line Relay, Style QN1. The components specifically identified therein include the armature and the pusher spring, thereby demonstrating the physical and mechanical elements through which the electrical excitation of the relay is translated into movement and contact operation. 36.4. The aforesaid material is of considerable significance when viewed alongside the actual functioning of the DAC. The Central Evaluator generates the requisite output corresponding to the clear or occupied condition of the....
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....l conversion and identifies Vital Relays as railway traffic-control relays; while the tender documentation treats the relay installation as part of the prescribed DAC set-up. The three sets of documents, emanating from or relating to the railway signalling domain, thus converge upon the same conclusion: the Relay Unit is not an extraneous apparatus subsequently associated with the DAC, but an integral and functionally indispensable component of the complete system. 36.9. The relevance of Section XVII Note 3 also becomes apparent in this setting. Where the component under consideration is principally and specifically employed with an article of Chapter 86, its principal use assumes significance for classification. The Vital Relay in the present case is not a generic relay capable of indiscriminate use across unrelated equipment; the technical material placed on record identifies it as a specialised railway signalling relay and, in the DAC configuration, it performs the vital output function for track detection and interlocking. Its principal use and functional integration with the DAC therefore reinforce the classification of the complete apparatus within the statutory framework ....
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....er, are recognisable as a particular finished article. 38.2. In the present case, the DAC unit and the associated electromechanical Vital Relay Unit cannot be regarded as unrelated articles merely because their respective functions are performed at different stages of the system. The technical material discussed hereinabove demonstrates that the Rail Contacts, Track-Side Electronic Unit, Central Evaluator and Vital Relay Unit constitute successive and functionally interdependent stages of one railway safety and signalling system. The Relay Unit, in particular, performs the vital output function whereby the clear or occupied status determined by the Central Evaluator is translated into the requisite physical contact condition for the interlocking circuitry. 38.3. The relay is thus not a mere accessory appended to an otherwise complete DAC. Its armature and contact mechanism provide the electromechanical output through which the processed result assumes its actual signalling consequence. In the absence of that output stage, the Central Evaluator may determine the status of the track section, but the complete system cannot communicate that determination in the prescribed vital f....
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....ining function is the safe detection and determination of track occupancy and the communication of that determination, through a fail-safe electromechanical output, to the railway signalling system. 38.8. Thus, even if the apparatus contains components which, when separately viewed, may possess characteristics ordinarily associated with Chapter 85, the classification of the complete system must have regard to the constituent which imparts its essential functional character. In the present case, the technical evidence demonstrates that the electromechanical Vital Relay Unit is integral to the completion of that function. Section Note 3 to Section XVII - Principal use and functional association 38.9. The aforesaid Rules must further be read harmoniously with Section Note 3 to Section XVII, which provides that references in Chapters 86 to 88 to parts or parts and accessories are to be taken as applying to parts or accessories suitable for use solely or principally with the articles of those Chapters. The significance of this provision becomes particularly apparent in the present case, where the Revenue seeks to treat the Vital Relay as something separate from the DAC system. ....
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....al literature and other documents placed on record by the appellants, together with the General Rules for Interpretation and the relevant Chapter and Section Notes, we are unable to subscribe to the proposition that the presence of digital circuitry, processors or electromagnetic sensing, by itself, renders the complete Digital Axle Counter an item of purely electrical equipment falling under Heading 8530. The expression "mechanical (including electromechanical) signalling, safety or traffic control equipment" occurring in Chapter Note 3(b) to Chapter 86 cannot be construed as though the expression "electro-mechanical" were confined to the traditional signalling arrangements employing only mechanical levers, rods, cranks or chains. Such an interpretation would render the express reference to "electromechanical" substantially otiose in the context of modern railway signalling systems. The essential characteristic of an electro-mechanical apparatus is that an electrical or electromagnetic input produces a corresponding physical mechanical movement, which performs or completes the operative function of the apparatus. The Vital Relay employed in the DAC answers this description in a di....
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....tion, is a specialised railway signalling relay, employed for track detection and the transmission of the requisite vital output to railway interlocking circuits. Its use is not merely incidental to a railway installation; it is specifically designed and principally employed for the very purpose for which the DAC is constructed. The technical literature and the Railway Tender documents demonstrate that the relay installation forms part of the prescribed DAC configuration. Its physical separation from the other DAC units, whether for purposes of manufacture, packing, transportation or installation, cannot sever that functional and principal-use nexus. 39.4. The application of Rule 2(a) also warrants consideration in this context. Where the constituent articles are imported in a disassembled or incomplete form but are identifiable as components of a predetermined and dedicated apparatus and, taken together, possess the essential character of the complete article, their classification cannot appropriately be determined by treating each constituent as an independent article unrelated to the others. Similarly, under Rule 3(b), where different components collectively constitute a comp....
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....ifiable and, depending upon the manner of importation, separately packaged or installed. The Vital Relay is not an external electrical switch added after completion of the DAC; it is the mechanism through which the system's electronic determination is converted into the physical, fail-safe signalling condition required by the railway interlocking system. The movement of the relay armature and the consequent change in contact condition constitute the electromechanical actuation which completes the DAC's safety function. 40. We are, therefore, of the considered view that the essential character, functional architecture and principal use of the complete DAC are consistent with the description of electro-mechanical signalling, safety or traffic control equipment covered by Heading 8608. The presence of electronic and digital components does not take the apparatus outside that heading. On the contrary, the technical evidence establishes that the electronic and electromechanical stages operate as integrated parts of one dedicated railway safety system. 41. Accordingly, on a conjoint reading of the competing tariff entries, the relevant Chapter and Section Notes, the technic....
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....ty or traffic control equipment" and that, therefore, Relays manufactured by them would fall under Chapter Heading 8608 due to the usage of the word "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 sole....
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....fication under Chapter 85. 42.2. Read with the express reference to "mechanical (including electro-mechanical)" signalling equipment in Chapter Note 3(b) to Chapter 86 and the technical character of the Eldyne DAC, the aforesaid decision substantially supports the classification adopted by the appellants under Customs Tariff Item 86080030. The said decision has also been subsequently applied by this Tribunal in the case of Commissioner of Customs v. Bosch Limited [2023 (12) TMI 386]. Examination of the Principal Objections Raised in the Impugned Order 43. Having considered the technical literature and the functional architecture of the DAC, it is now necessary to examine the principal reasons which weighed with the adjudicating authority in rejecting the classification under Heading 8608. We first propose to deal with the Revenue's reliance upon the exclusion contained in Section XVII Note 2(f) and, in particular, upon the expression contained in the HSN Explanatory Note to Heading 8608. (a) The exclusion contained in Section XVII Note 2(f): 43.1. The reliance placed upon Section XVII Note 2(f), in our view, cannot be examined divorced from the scheme of the tari....
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....ach, what is required to be seen is the functional principle underlying the said Explanatory Note: an electrical or electromagnetic input produces a physical mechanical action which establishes or interrupts the requisite signalling condition. The Vital Relay employed in the DAC satisfies this essential characteristic. The energisation of its coil produces electromagnetic flux, the flux causes physical movement of the armature, and the movement changes the condition of the contacts which constitute the vital clear/occupied output. 43.6. Further, the reference in the HSN Note to "levers, cranks, rods, wires, chains, etc." cannot merely be treated as a closed catalogue of permissible mechanisms. The use of the expression "etc.", followed by separate reference to hydro-pneumatic devices and electric motors, itself indicates that the Note is describing the means by which the signalling or control operation may be effected, rather than freezing the heading to a particular historical technology. The statutory expression in Chapter Note 3(b), in any event, is broader and expressly recognises electro-mechanical signalling equipment. 43.7. Similarly, the mere fact that the command is ....
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....part of the system. The contention that the DAC is incapable of classification under Heading 8608 because its control is generated electronically also overlooks the distinction between the generation of the command and the execution of the signalling function. The former may be electronic; the latter, in the present system, is electromechanical. It is the character of the complete apparatus and its specialised signalling function which have to be appreciated. Accordingly, the Revenue's reliance upon the HSN Explanatory Note to Heading 8608, to exclude the DAC from Heading 8608, cannot be accepted. 43.9. In this regard, it is also imperative to note that the traditional mechanical levers and cranks employed in railway signalling have, with technological advancement, evolved into electrically actuated electromechanical relays controlled by digital evaluators. The expression used in the HSN cannot, therefore, be construed as confined to obsolete mechanical arrangements, particularly when the ultimate output continues to involve physical electromechanical movement for controlling the railway signalling system. (c) Statement of Shri Gautam Biswas: 43.10. From a perusal of t....
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....lways, the IRISET Manual and the Railway Tender documents already discussed. These documents specifically identify the Vital Relay as part of the DAC architecture and establish its role in producing the vital output. His opinion, therefore, cannot displace the contemporaneous and specialised technical literature placed on record. 43.14. Fourthly, the statements of Shri Biswas, insofar as they are sought to be used as evidence against the appellants, were also required to be considered in the light of Section 138B of the Customs Act, 1962. The statutory provision governs the circumstances in which statements recorded during investigation may be treated as relevant in adjudication. Judicial decisions have held that, where such a statement is relied upon against a noticee and its maker is available, the prescribed procedure for examination and cross-examination cannot be bypassed. In the present case, the appellants had specifically sought cross-examination of Shri Biswas to test the technical assertions attributed to him, which request, as per the submissions made before us, came to be rejected merely on the ground that the appellants had not established personal bias or malice on....
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....ble. 44. Therefore, taking an overall view of the rival contentions, the technical literature, the architecture and functioning of the Digital Axle Counter system, the relevant tariff entries and Chapter Notes, as also the principles governing classification, we are of the considered view that the electronic components of the DAC cannot be isolated from its ultimate electromechanical mode of operation. The imported apparatus is designed exclusively for configurations and applications of the Indian Railways and possesses no discernible alternate industrial utility. The Rail Contacts, EAK, ACE and the Vital Plug-in Relays constitute, notwithstanding their physical and consignment-wise separability, an integrated and functionally indivisible safety architecture, in which the passage of the wheel at the rail web initiates the sensing process, the resultant signals are processed and evaluated, and the ultimate safety condition is executed through the physical movement of the armature of the Vital Relay. The relay, therefore, cannot be regarded as an adventitious or independently functioning electrical switch; it is the electromechanical extension through which the electronic determin....
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....rocessed information is converted into the operative safety output. Its principal and exclusive railway application further militates against treating the Vital Relay as a generic electrical article divorced from the specialised apparatus of which it forms an integral part. 45. In this conspectus, we hold that Chapter Heading 8608 constitutes the more specific and appropriate tariff entry for the goods in question. Once the goods are found to be covered by Heading 8608, the parenthetical exclusion contained in Heading 8530-"other than those of heading 8608"- operates proprio vigore, and the goods cannot, by reason merely of the presence of electrical and electronic components, be diverted to Heading 8530. The classification adopted by the appellant under Customs Tariff Item 86080030 is, therefore, found to be in consonance with the structure of the tariff, the relevant Chapter and Section Notes, the technical literature governing the apparatus, and the functional character of the goods. Conversely, the reclassification adopted in the impugned order under Customs Tariff Item 85301010, with the alleged parts thereof being classified under Customs Tariff Item 85309000, is devoid of....
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....tances wholly at variance with such an allegation. It is a fact on record that the appellant company commenced declaring the goods under Customs Tariff Item No. 86080030 from 02.08.2017 and, by its representation dated 10.11.2017, expressly disclosed its understanding of the classification to the jurisdictional tax authorities, enclosing product literature and other supporting material. Thereafter, the Bills of Entry continued to be assessed and the goods cleared under the said declared classification without any objection from the Department. The classification was thus neither concealed nor adopted clandestinely. The ratio of Westinghouse Saxby Farmer Ltd. v. Commissioner of Central Excise, Calcutta [2021 (376) E.L.T. 14 (S.C.)], particularly the reasoning in paragraphs 41 onwards, is apposite: where the assessee had openly adopted a classification and there was no material establishing fraud, collusion, wilful misstatement or suppression, the extended period was held unavailable. The relevant portion of the said judgement is extracted below: - "41. At the outset we should point out that this is not a case where the extended period of limitation would apply, especially i....
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.... invocation of Section 11A, in the facts and circumstances of the case, cannot be said to be within time." [Emphasis supplied] 47.2. The same principle is reinforced by Northern Plastics Ltd. v. Collector of Customs & Central Excise [1998 (101) E.L.T. 549 (S.C.)], wherein the Hon'ble Supreme Court recognised that, where the description and particulars of the imported goods are correctly disclosed, a claim to a particular classification or exemption, even if subsequently found untenable, is essentially a matter of the importer's belief and does not, without more, amount to misdeclaration. Thus, the mere fact that the classification claimed by the appellants carried a lower rate of tax cannot, in isolation, furnish the requisite foundation for alleging wilful misstatement or suppression with intent to evade duty. 47.3. In this context, we also take note of the suo motu Order dated 10.01.2022 of the Hon'ble Supreme Court in In Re: Cognizance for Extension of Limitation, whereby the period from 15.03.2020 to 28.02.2022 was directed to stand excluded in computing limitation prescribed under general or special laws in respect of judicial and quasi-judicial proceedings, with the ....
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....tion 114A of the said Act cannot be sustained. The said provision predicates the non-levy, short-levy, non-payment or short-payment of duty upon collusion or any wilful misstatement or suppression of facts. As already found, the classification under Customs Tariff Item No. 86080030 was openly declared in the Bills of Entry, the revised classification was expressly brought to the notice of the jurisdictional authorities by the representation dated 10.11.2017, and the goods were thereafter repeatedly assessed and cleared on the declared basis. No collusion, wilful misstatement or suppression has consequently been established. Moreover, once the principal demand itself fails on merits, no duty liability remains upon which the equal penalty contemplated under Section 114A could be founded. The penalty imposed upon the appellant-company, accordingly, stands set aside. (ii) Penalties upon Shri Santanu Basu under Sections 112(a) and 114AA 49.2. Section 112(a) requires an act or omission in relation to the goods which renders them liable to confiscation under Section 111, or the abetment thereof. No such act or omission has been established against the appellant; and, the very findin....
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....nd safety apparatus, including its indispensable electromechanical Vital Relay, whereas its reclassification under Customs Tariff Item No. 85301010 and, that of the alleged parts thereof, under Customs Tariff Item No. 85309000, is found to be devoid of merit. The consequential demand of Duty / Integrated Tax, therefore, has no sustainable foundation. Equally, as already observed hereinbefore, the consequential findings of confiscability and penal liability, being predicated upon the same infirm foundation, cannot survive. 51. As regards the ground taken by the appellant, that the adjudicating authority has not completed the adjudication proceedings within the period prescribed under Section 28(9) of the Customs Act, 1962, we note that the Ld. Counsel for the appellant has undertaken, both during the course of hearing and by way of subsequent written communication, that the said issue is not being pressed before this Tribunal. The present decision is, therefore, confined to and proceeds upon the other grounds and submissions advanced on behalf of the appellant, which have been considered and adjudicated upon hereinabove. 52. Consequently, the impugned Order-in-Original No. KOL....