TMI Blog2021 (3) TMI 291X X X X Extracts X X X X X X X X Extracts X X X X ..... ification. This is made clear by Note 3 - It is conceded by the Revenue that the relays manufactured by the appellant are used solely as part of the railway signaling/ traffic control equipment. Therefore, the invocation of Note 2(f) in Section XVII, overlooking the sole or principal user test indicated in Note 3, is not justified. As pointed out by the Commissioner (Appeals), the goods were previously classified (before 1993) under Subheading 8536.90, but a revised classification list, classifying them under subheading 8608, submitted by the appellant, was approved by the competent Authority on 27.08.1993. After such specific approval of the classification list, it is not proper on the part of the Authorities to invoke Note 2(f) of Section XVII - decided in favour of the appellant and against the Revenue. Whether the show cause-cum-demand notices issued by the Department on various dates during the period 19951998 were not barred by time under Section 11A of the Central Excise Act, 1944, in the absence of any fraud, collusion, willful misstatement or suppression of facts, especially since the classification list submitted by the appellant have been approved on 27.08.199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnment of West Bengal. It is engaged in the manufacture of Relays which is used as part of the Railway signaling system. 4. A Relay is generally an electrically operated switch, used to control a circuit. They may also be used where several circuits must be controlled by one signal. 5. Though essentially relays are electrical equipment, they may also form part of Railway signaling equipment. 6. While the normal electrical relays fall under Tariff Item No. 8536.90, Railways and Railways signaling equipment fall under No. 8608. 7. It appears that from 01.03.1986 till February1993, the effective rate of excise duty charged under both subheadings was 15% and hence the appellant had no problem with the classification of their goods under subheading No.8536.90. But with effect from 28.02.1993, the effective rate of excise duty for the goods under subheading No.8536.90 became much higher than the effective rate of duty for the goods under subheading 8608. 8. On 27.08.1993, the appellant submitted a classification list for the approval of the Assistant Collector, Central Excise. This list provided details of the products manufactured by the appellant as Railway signali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 41,509.204. ₹ 2000 05.09.1998 01.03.1998 to 31.08.1998 ₹ 3,71,922.575. ₹ 5000 05.03.1999 01.09.1998 to 28.02.1999 ₹ 1,99,180 6. ₹ 5000 Total Duty Imposed/ Total Penalty Imposed ₹ 16,67,109/7. ₹ 36,000/- 12. Aggrieved by the Orders-in-original, the appellant filed statutory appeals. All the nine appeals were partly allowed by the Commissioner (Appeals) by an Order dated 29.08.2003. By this Order, the Appellate Authority confirmed the classification made by the Adjudicating Authority and the consequential differential duty demanded by the Adjudicating Authority. However, the penalty imposed by the Original Authority was set aside by the Commissioner (Appeals). 13. Challenging that portion of the order of the Commissioner (Appeals) upholding the proposed classification and demanding differential duty, the appellant filed an appeal before CESTAT. The CESTAT dismissed the appeal by a final order dated 26 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or traffic control equipment for railway, tramways, roads, inland waterways, parking facilities, port installation or airfields; parts of the foregoing . 20. There are five subheadings under Chapter Heading 8608 which are as follows: 8608 00 10 -Railway and tramway track fixtures and fittings .. 8608 00 20 -Mechanical equipment, not electrically powered for signaling to, or controlling, road rail or other vehicles, ships or aircraft 8608 00 30 -Other traffic control equipment for railways 8608 00 40 -Other traffic control equipment for roads or inland waterways including automatic traffic control equipment for use at ports and airports 8608 00 90 -Other 21. The Assistant Commissioner who passed the Orders-in-Original felt that the Relays manufactured by the appellant fell only under the category of Electrical machinery covered by Chapter 85 and that in view of Note 2(f) of Section XVII, the expressions parts and parts and accessories appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Rule 1 of these Rules makes it clear that the titles of Sections, Chapters and Sub-Chapters are provided for ease of reference only and that for legal purposes, classification shall be determined according to the terms of the Headings and any relative Section or Chapter Notes and provided such headings or Notes do not otherwise require, according to the provisions of the rules that follow . 27. Rule 2 deals with (i) incomplete or unfinished articles; and (ii) mixtures or combinations of material or substance. While Rule 2(a) deals with incomplete or unfinished Articles, Rule 2(b) deals with mixtures or combinations of a material or substance. 28. Rule 3 deals with cases where goods are classifiable under two or more subheadings. But Rule 3 begins with a reference to Rule 2(b). Therefore, it is necessary to extract Rule 2(b) and Rule 3 together. They read as follows: 2. (a) xxxx (b) Any reference in a heading to a material or substance shall be taken to include a reference to mixtures or combinations of that material or substance with other materials or substances. Any reference to goods of a given material or substance shall be taken to include a reference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ule 3 of the General Rules can be invoked only when a particular good is classifiable under two or more Headings, either by application of Rule 2(b) or for any other reason. Once the authorities have concluded that by virtue of Note 2(f) of Section XVII, relays manufactured by the appellant are not even classifiable under Chapter Heading 8608, we do not know how the Authorities could fall back upon Rule 3(a) of the General Rules. There is a fundamental fallacy in the reasoning of the Authorities, that Rule 3(a) of the General Rules will apply, especially after they had found that relays are not classifiable under Chapter Heading 8608, on account of Note 2(f) of Section XVII. 32. Coming to Section XVII, which precedes Chapter 86, the same contains a few notes, one of which is Note 2, which lists out certain articles to which the expressions parts and parts and accessories mentioned in Chapter 86 do not apply. Note 2 (f) reads as follows: 1. xxxx 2. xxx (a) xxxx (b) xxxx (c) xxxx (d) xxxx (e xxxx (f) electrical machinery or equipment (Chapter 85) 33. Note 2(f) is relied upon by the Revenue, in view of the fact that Chapter Heading 8608 u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h not the only one. There may be cases, particularly in the case of new products, where this test may not be appropriate. In such cases, other tests like the test of predominance, either by weight of value or on some other basis may have to be applied. It is indeed not possible, nor desirable, to lay down any hard and fast rules of universal application Therefore, the respondents ought not to have overlooked the predominant use or sole/principal use test acknowledged by the General Rules for the Interpretation of the Schedule. 39. As pointed out by the Commissioner (Appeals), the goods were previously classified (before 1993) under Subheading 8536.90, but a revised classification list, classifying them under subheading 8608, submitted by the appellant, was approved by the competent Authority on 27.08.1993. After such specific approval of the classification list, it is not proper on the part of the Authorities to invoke Note 2(f) of Section XVII. Hence question No.1 is answered in favour of the appellant and against the Revenue. Question No.2 40. The second question that arises for consideration is as to whether the show cause-cum-demand notices issued by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... show cause notices, the period covered by those notices and the normal period of limitation that prevailed at that time, they could have easily found that the show cause notices were at least partly time barred. 44. The normal period of limitation for invoking Section 11A was six months until 11.05.2000 and the same was modified as one year by Act 10 of 2000 with effect from 12.05.2000. This period of one year was modified as two years by Act 28 of 2016 with effect from 14.05.2016. Keeping this in mind let us now have a look at the dates of issue of show cause notices and the period covered by the show cause notices. They are as follows: S.No. Date of Show Cause Notice Period covered by the Show Cause Notice 1 30.08.1995 01.02.1995 to 31.07.1995 2 09.02.1996 01.08.1995 to 31.01.1996 3 05.02.1997 01.08.1996 to 31.01.1997 4 07.08.1997 01.02.1997 to 31.07.1997 5 06.08.1996 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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