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Godrej & Boyce Manufacturing Co. Ltd. Versus Union of India & Ors.

Classification of parts of manufactured motor - stators and rotors - classified under sub-heading 8501.00 or under sub-heading 8414.91 - for a period of 25 years stators and motors have been classified and charged to duty as electric motors when cleared together and as parts of electric motors when cleared separately. That long standing practice is sought to be changed and retrospectively although the clarificatory circular prohibits this exercise. - Held that: - Once there is a clear instru .....

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ARI & B.P. COLABAWALLA, JJ. Mr. Arshad Hidayatullah, senior counsel with Ms. Shailaja Kher Hidayatullah, Ms. Chandni Tanna an Mr. Makarand Joshi i/b India Law Alliance for the Petitioner. Mr. M. Dwivedi with Mr. Vipul Bajpayee for the Respondents. ORAL JUDGMENT : [Per S.C. Dharmadhikari, J.] 1 This writ petition challenges a show cause notice issued by the respondent-Revenue and thereafter an order made in furtherance thereof.

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manufacture of hermetic motors in 1964/1965. They were issued a licence for such manufacture. The licence was renewed from time to time. There are two main parts of this motor, namely, stators and rotors. The hermetic motors manufactured by the petitioners are, in turn, used as component of compressors. The compressors in their turn are used in refrigerators or in air conditioning systems. 4 For the period 1964-1965 to 28th February, 1986, the petitioners filed various classification .....

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ared individually under subheading 8503.00. The classification lists from 1st March, 1986, to 29th February, 1989, have been finally approved. On 11th January, 1989, the second respondent purported to issue a show cause notice to the petitioner-company seeking to classify stators and rotors under sub-heading 8414.91 and alleging that there has been a short levy of the duty amounting to ₹ 1,27,45,805.02 for the period 1st July, 1988 to 31st December, 1988. 5 On 1st March, 1989, t .....

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ent issued another show cause notice to the petitioner for the period 1st January, 1989 to 31st March, 1989, copy of which is at Annexure-D raising self-same grounds. By letter dated 14th May, 1989, the company replied to the show cause notice dated 21st April, 1989. On 3rd August, 1989, the Revenue issued an amendment to the show cause notice enhancing the amount allegedly short levied. That amendment was also replied to. 7 On 13th December, 1989, the Central Board of Exc .....

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to file fresh classification list by letter dated 20th February, 1990. In consequence of this, all further classification lists were filed invoking sub-heading 8414.91, but under protest. Then, a demand was raised and a personal hearing was granted. The petitioners appeared for the personal hearing and also filed written submissions. 9 However, not being satisfied with all this, the second respondent passed the impugned order dated 6th December, 1990, inter alia, classifying stators a .....

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ears stators and motors have been classified and charged to duty as electric motors when cleared together and as parts of electric motors when cleared separately. That long standing practice is sought to be changed and retrospectively although the clarificatory circular prohibits this exercise. 12 The only submission raised before us by Mr. Hidayatullah, learned senior counsel for the petitioners is that the impugned order is based on the 13th December, 1989, clarification. That is c .....

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circular and instructions of the Board were in force. Therefore, they could not have been ignored and to take a view contrary to the same. 13 Mr. Hidayatullah, in support of his submissions, places reliance upon the judgments of the Hon'ble Supreme Court in the cases of Collector of Central Excise, Bombay vs. Jayant Dalal Private Limited reported in 1996 (88) ELT 638, Paper Products Ltd. vs. Commissioner of Central Excise 1999 (112) ELT 765 and finally Commissioner of Customs, Ca .....

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if in the teeth of the language of the tariff entry the circulars cannot be sustained, then, they do not bind the Revenue. Therefore, the above judgments of the Hon'ble Supreme Court cannot assist the petitioner. 15 On hearing both counsel and perusing with their assistance the writ petition and all the annexures thereto, we are unable to agree with Mr. Dwivedi. The show cause notice has been issued on 11th January, 1989. The show cause notice relies upon the tariff entries but se .....

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air conditioning machinery and appliances. There was a doubt and which was sought to be cleared. The All India Air conditioning and Refrigeration Association, New Delhi furnished a list of parts and accessories in respect of which they had such doubts. Though the matter was examined by the Board and it opined that it was not possible in the absence of detailed technical information of each of the parts or accessories to provide comprehensive rulings on the classification of each of th .....

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iff. The clear clarification and emerging from a reading of Sr. Nos.11 and 47 is that stators and rotors and named specifically as description of the product is classifiable under sub-heading 8503.00. Then comes another departmental clarification and which is based on the above. That comes on 1st March, 1988, but does not alter the position. What we have found is that on the date of issuance of the show cause notice, this was the position regarding classification of stators and rotors.

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was decided to obtain the opinion of the DGTD as to whether stators and rotors used in compressors could also be treated as parts of electric motor. That opinion was obtained and the Board agreed with it. Therefore, stators and rotors of hermetically sealed compressors are parts of compressors for use solely or principally with the compressors and are appropriately classifiable under heading 84.14. The relevant part of the Board's Circular of December 1989 appearing at page 95 reads as under .....

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ctice followed in the light of earlier clarification of the Board may be changed only prospectively. 17 Once there is a clear instruction that the practice followed in the light of the earlier clarification of the Board may be changed only prospectively, we have no doubt in our minds that on the date on which the earlier circular was in force, the show cause notice could not have been issued nor the demand raised. 18 We are in agreement with Mr. Hidayatullah that the law l .....

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39;ble Supreme Court, after referring to all its earlier views, held as under : 2. … … … … … …. … … … The appellant also submits that with effect from the said date the appellant is classifying its products in terms of Circular No.6/89 dated 16-1-1989. However, it is contended that in view of the fact that prior to issuance of the said Circular dated 16-1-1989, Circular No.4/85 being in force, the appellant's products .....

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ing authorities, therefore, it was open to the tribunal to have independently considered the case and having done so correctly, the appellant's appeals before us are devoid of any merit. 17 Even the latter judgment in the case of Commissioner of Customs vs. Indian Oil Corporation Limited (supra) reiterated the principles in paragraph 12 and conclusively held that a show cause notice for demand contrary to existing Circulars of the Board is ab initio void. 18 In the lig .....

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