ORDER
S.S. Sekhon, Members (T)
1. The appellants are a manufacturer of ‘Indoor and Outdoor Circuit Breakers’ up to 36KV. They also manufacture Control Panels for control and protecting electrical system and components thereof. The present appeal is as regards the duty demands determination and classification of the following items which were declared classified by them as shown against each items.
1. Circuit Breakers (Indoor and Outdoor) _____ 85.35
2. Circuit Breakers (Indoor and Outdoor) _____ 85.35
with control panels
Exemption under Notification No. 217/86 was availed on the control panels manufactured in house and captively consumed Sl. No. 3).
2. The classification lists were duly approved under Heading 8535.00 with eligibility of Notification No. 52/93 by the proper officer. The dispute in the appeal before us, originated on 1-3-94 with the issue of show cause notice No. 17/94, dated 1-3-1994 proposing a change the classification of Circuit Breakers under 85.37; duty was demanded on Circuit Breakers Indoor and Outdoor and Circuit Breaker with Control Panels under Heading 85.37 cleared during the period 1-3-1993 to 31-12-1993. This notice also alleged suppression of information to invoke the longer period of limitation under Section 11A(i) proviso. Two other show cause notices viz. dated 13-4-94 for the period 1-1-94 to 28-2-94 and dated 29-8-94 for the period 1-3-94 to 31-7-94 where clearance were made under Heading 8535,00 read with Notification No. 52/93 and 46/94 were issued on similar grounds. The Commissioner did not accept the plea of the appellants and confirmed the duty demand of Rs. 3,09, 62,619 as made out in these three show cause notices and imposed penalty of Rs. 75 Lacs, under Rule 173Q of the Central Excise Rules, after coming to the conclusion that provision of Rule 9(1) read with Rules 173B, 173E, 173G, 52A and 53 of Central Excise Rules were contravent.
3. We have heard both sides and considered the submissions and find:
(a) The learned Commissioner has found these goods to be, and reasons for conclusion of the classification to be under Heading 85.37, on the following grounds.
“With, regard to the classification of the goods, as seen from the records and in particular, the relevant literature, in the case of Indoor Circuit Breakers, the Control Panel Portion forms part of the entire housing in which the Circuit Breaker System is housed i.e., it forms an integral part of the Breaker System and is an assembly to breaker mechanism with devices such as relays, voltmeters, ammeters, switches etc. The Outdoor Circuit Breakers are also with associated control panels. Shri K.V. Ranganath (Chief Manager, Marketing) in his statement dated 27-10-93 has also clearly stated that they procure inter alia orders for outdoor circuit breakers with control panels and indoor circuit breaker with in-built control panels and whether these control devices are mounted on the circuit breaker or provided on separate control panels, they form part of the circuit breaker system without which the circuit breaker cannot be operated.
The assessee in their reply to show cause notice dated 5-1-98 have also clearly admitted that the integral control parts built in the Indoor Circuit Breakers and SF6 outdoor circuit breakers are relays, voltmeter, ammeter, demand indicators, test terminal blocks, auxiliary switches, push buttons, indicating lamps and fuses, Kilowatt meters, current transformers, potential transformers, lighting arresters and control panels and have admitted that these are all parts for the effective functioning of Circuit Breakers. Their claim that the word ‘Panel’ as described under Headings 85.37 has absolutely no application to the Indoor or Outdoor Circuit Breakers manufactured by them is not borne out by these submissions. The contention that Heading 85.37 does not attract the breakers that have in-built control parts but only those breakers/panels, which are equipped with the goods of Heading 85.35 or Heading 85.36 is also not acceptable for the reasons given below: Headings 85.35, 85.36 and 85.37 read as under:
85.35 8535.00 Electrical apparatus for switching or
protecting electrical circuits, or for
making connections to or in
electrical circuits (for e.g. switches
fuses, lighting arresters, voltage limiters,
surgeuppressors, plugs, junction boxes)
for a voltage exceeding 1000 Volts.
85.36 Electrical apparatus for switching or protecting
electrical circuits, or for making connections to or
in electrical circuits (for e.g. switches, surge
suppressors, plugs, sockets, lamp-holders, junction
boxes) for a voltage not exceeding 1000 Volts.
85.37 8537.00 Boards, panels (including numerical control
panels), consoles, desks, cabinets and other
bases, equipped with two or more apparatus
of Heading No. 85.35 or 85.36, for
electrical control or the distribution of
electricity including those incorporating
instruments of apparatus of Chapter 90,
other than switching apparatus of
Heading No. 85.17.
Circuit Breaker as defined in the Chambers’ Science and Technology Dictionary is a device for opening electrical circuit under abnormal operating conditions e.g. excessive current, heat etc. A plain reading of the Headings would show that Headings 85.35 and 85.36 relate to individual and independent components such as switches, relays, fuses etc. which are meant for switching or protecting the electrical circuits or for making a connection to or in electrical. On the other hand, Heading 85.37 covers under its ambit, an assembly of apparatus covered by Headings 85.35 and 85.36. In the instant case, the breaker mechanism manufactured by the assessee is cleared as a complete unit i.e. as an assembly of apparatus like relays, voltmeters auxiliary switches, fuses, potential transformers etc. falling under Heading 85.35, which are integrally built in the circuit breaker. The assessee’s contention that Heading 85.37 covers only boards and panels (forming the base) equipped with two or more apparatus of Heading 85.35 or 85.36 and not circuits breakers with in-built switches etc. is a specious one. The Heading 85.37 refers to not only boards and panels but also to ‘other bases’ which are ‘equipped’ with two or more apparatus of Heading 85.35 or 85.36 for electric control or distribution of electricity. The terms ‘other bases’ and ‘equipped’ have vide connotation as evident from the HSN notes under 85.37 which clearly states that “these consist of an assembly by apparatus referred in preceding Heading (e.g. switches and fuses) on a board, panel, console etc. or mounted in a cabinet, desk etc.” Thus, Circuit Breakers with integrated control devices are assemblies falling under 85.37. Further, as per the explanatory notes to the HSN, the Heading 85.35 clearly excludes assemblies (other than simple switch assemblies) of the apparatus mentioned under Heading 85.35 and such dated 14-7-94 issued under Section 37B of the Central Excise Act, 1944 also supports this view. I, therefore, hold that the indoor and outdoor circuit breakers manufactured by M/s. S&S Power Switchgears Ltd., are rightly classifiable under Heading 85.37 of Central Excise Tariff Act, 1985. As a result of this reclassification, the products falling under sub-heading 8537.00 stands disqualified for the exemption under Notification No. 52/93 dated 28-3-93, claimed by the assessee in the classification lists filed by them.”
(b) With regard to suppression and invoking of the proviso clause, to Section 11A(1), the learned Commissioner found :
“With regard to the suppression of facts by the assessee, the allegation in the show cause notice is that the classification list filed by the assessee from time to time have described the goods as “HT Circuit Breakers” of various types, which does not give full description of the products manufactured. While they have sought classification of Circuits Breakers under Heading 85.35 and Control Panel separately under Heading 85.37, it is a fact that they failed to declare that the control mechanism is an integral part of the Circuit Breakers or that the entire assembly i.e. Circuit Breaker with integrated control devices or associated control devices are tested and cleared as a single unit. The classification list merely describes the goods as HT Circuit Breakers of various types as per Annexure-I which gives 5 categories.
1. Vaccume Circuit Breakers of various types.
2. SF 6 Circuit Breakers of various types.
3. Indoor and Outdoor Circuit Breakers of various types.
4. Pole mounted Auto Re-Closers of various types.
5. Sectionalisers of various types.
Whereas, the purchase orders and invoices show that what is manufactured and cleared to their customers is a whole system consisting of breakers and control devices. I am unable to accept the assessee’s claim that mere inclusion of all these in the purchase orders/invoices would not make it a single unit, in view of the fact that the Chief Manager (Marketing) Shri K.V. Ranganath, in his statement dated 27-10-93 has categorically confirm this position stating that “the control accessories whether mounted on the circuit breaker or provided on separate control panels are part of the circuit, breaker system…… This is the reason for clearing the apparatus as a whole system”. Further, in the statements recorded from Shri V. Srivathsan, Manager (Accounts) (dated 2-11-93), Shri K. Ramachandran, Financial Controller (dated 2-11-92) Shri A.C. Sivasubramaniam, Manager (Accounts) (dated 29-10-93), Shri Atul Shah, Senior General Manager and Shri K.V. Ranganath, Chief Manager (Marketing) (dated 27-10-93), the following are clearly admitted.
(a) that the full description was not given in the classification list i.e., they have not mentioned whether the breakers consist of control devices or not.
(b) there are differences between the description in the classification list in respect of H.T. Circuit Breakers and in the clearance documents/purchase orders.
(c) that the management was aware that some of the competitors were discharging duty on such breakers at 20% and by paying only 5%, they would have a competitive advantage.
In view of the above, there was evidently suppression of facts and the intent to evade higher duty liability and, therefore, the invocation of the extended period under the proviso to Section 11A(1) is justified.”
(c) The learned Commissioner, as evident from the findings, has relied upon the statements of the executives, especially of the Chief Manager (Marketing) to effect –
“…. Control accessories whether mounted on the Circuit Breakers or provided on separate control panel or part of the Circuit Breaker System….”
which would indicate an admission for the ‘Control Panels’ to be in nature of an accessory and not an integral part; thereafter from the records and literature he concluded that for the Circuit Breakers, the Control Panel Portion, forms a part of the entire housings, in which the “Circuit Breaker System” is based. These findings, when read with the admissions on record, to the effect the Control System being “accessories” and not essential parts, lead us to conclude, since by definition and being an accessory, the ‘panels’ appear to be, not an integral part of the Circuit Breakers. Therefore, the ‘entity’ under classification viz Panel and Circuit Breakers cannot to be constituted to be an assembly of two or more devices of relays, volt meters, ammeters, switches etc. We, therefore, cannot find or persuade ourselves, to agree to arrive at a finding, that material exists to conclude, that the entity under classification, should be considered to be “Boards, panels etc. equipped with two or more apparatus of Headings 85.35/85.36, 90 etc. de hors the accessory. This is an essential requirement for arriving at classification under Heading 85.37, The lower authority should get expert opinion, on record, if necessary, to determine, what the entity and its essential parts would encompass and constitute; thereafter they should proceed to determine the classification under the appropriate Headings. One cannot first relying on the Purchase Orders/Invoices descriptions of “whole system” and not agreeing with the appellants submission that in itself will not make a single unit and relying on the statements, which have been found by us to admit and indicate the ‘Controls’ to be in nature of “accessories” and not “integral parts”, has upheld the suppression. No material has been brought on record as to what positive acts of non-feasance or malfeasance were committed on the part of the appellants or their employees. How the product mentioned in the CL’s were not the same as mentioned in the invoices is not determined. We cannot therefore hold, the charge of non-declaration on part of the appellants to have been established. The Tribunal in the case of Commissioner of Central Excise v. Muzzaffarnagar Steel – 1989 (44) E.L.T. 552 at 555 has held-
“13. The Rule 173B providing for the filing of classification list clearly shows that what is required of the Assistant Collector is the approval “after such enquiry as he deems fit”. The approval of classification list is an important part of the process of assessment and, therefore, the Assistant Collector is required to be very careful and is expected to apply his mind before according approval. He is entitled to and indeed required to make such inquiries and summoned such information as may be called for in order to arrive at the correct decision. In other words the act of approval was not merely a passive act or concurrence but involves an active decision making and the Assistant Collector was required to fully satisfy himself about the particulars of goods being manufactured and the process of manufacture wherever necessary and relevant facts and then only determine the classification and pass appropriate orders; and once the Assistant Collector has approved the classification the department has to bear the consequences thereof.”
Since it is well settled law, that under Central Excise, supply of accessories and value thereof, are not exigible, along with the main machine, as such. As only “accessories” appear to be not declared, in the Classification Lists, then such non-declarations do not effect Excise Duty. Therefore, non-mention of ‘accessory’ cannot constitute non-declaration on the CL’s determine the appropriate Heading and thereafter find reasons to establish characteristics to exist in the ‘entity’, by considering the function of an apparent “accessory” to establish the pre-determined Headings to be an appropriate classification. Whether it is an accessory or an integral parts to be redetermined.
(d) We have considered the order under Section 37B of the Central Excise Act, 1944 issued vide C.B.E.C. Circular F. No. 32/8/94-CX., dated 14-7-1994. This order determining the classification of the impugned goods, if applicable, would be for & for the issues open, as on 14-7-1994 and not be applicable retrospectively in operation, as held in HM Bags Manufacturing Co., 1997 (94) E.L.T. 3 (S.C.). If the department wants to rely upon this order, they have to give an opportunity to the appellants to contest the same and can apply the same only to issues open on or after 14-7-1994.
(e) The appellants have submitted that the clearances were made after due approval of the Classification Lists. The adjudicator has determined, that there were suppression of facts, with intent to evade. We have considered the submission. The Classification Lists, as filed and approved, are required to declare, in Column as presented in the proforma, which reads as follows –
Full description of each item of the goods produced, manufactured or warehoused including specification (e.g. size number of counts, horse power sort No. etc.) as the case may be together with the description as would appear in the invoice.
There Circuit Breakers of difference Capacities/Models are mentioned. However, the Commissioner has found, that… “they failed to declare the control mechanism in an integral part of the Circuit Breaker or that the entire assembly i.e. Circuit Breaker with integrated control devices or associated control devices are tested and cleared as a single unit….” Thereafter to bring in charge of intent to evade. Following the decision of Muzzaffarnagar Steels (supra), when CL’s have been approved by the proper officer, we would hold, that the proviso of Section 11A(1) conditions, in the case of Notice dated 1-3-1994, to invoke the larger period prescribed, are not available or and met. Demands have to be restricted to six months periods only.
(f) We find on merits, the appellants have submitted before us as follows :
(i) Heading 85.35 covers switches, fuses, lighting arresters etc. which are in the nature of making or breaking connections in electrical circuits. Thus an ordinary switch used in the household for switching on or switching off the lights are specifically covered under Heading 85.35. The making or breaking of the electrical circuits is common whether the circuit is low voltage or high voltage.
The higher the voltage of electrical circuit, the construction the design, and various parameters of the switches will vastly vary. This is for the reason that while making or breaking electrical circuits there will be arcs and the generated electrical arcs have to be quenched or dissipated using appropriate medium.
The medium through which this quenching or dissipating electrical arc could take place can either be vacuum, oil or certain inert gas medium like SF6.
(ii) In the ordinary switch used in the house hold (230V), the arcs takes place in air but since the intensity of the arc is so low, there is no need for vacuum, oil of SF6 etc. Nonetheless the function of an ordinary household switch (230V) and a circuit breaker of 33KV (whether indoor or outdoor) is the same, namely, making or breaking the electrical unit.
(iii) In the case of the household switches (230V) the on-off mechanism can be operated by the hand but when we have to operate a circuit breaker for a 33KV we need to have certain mechanical contrivances to make or break the electrical circuit. Such mechanical contrivances, would include hand operated levers, springs or even motorized springs. These mechanical contrivances which are necessary to make or break the circuits in the circuit breakers of higher are considered part and parcel of the same and the whole equipments is nothing but a large scale size of the smallest switch used in houses.
(iv) A switch used in the house hold, say for operating an air-conditioner, water heater or slightly heavier electrical appliances, would have certain protective fuses to protect the equipment from electrical surges. These switches are known as Miniature Circuit Breakers (MCB) which are also classifiable under 85.35.
(v) The circuit breakers (both indoor and outdoor) are correctly classifiable under Heading 85.35. The relevant HSN notes also supports this submission. Infact Heading 85.35 is meant for circuit breakers of 1000V and above whereas 85.36 will cover circuit breakers less than 1000V. If the argument of the Revenues argument that the circuit breakers of high voltage like 11KV and 33KV are themselves classifiable under 85.37 is correct, then some of the items mentioned in Heading will be redundant and otiose.
(vi) ITC (HS) which is the nomenclature adopted by the Ministry of Commerce, Government of India has specifically classified both Vacuum circuit breakers and SF6 circuit breakers of different kilo volts under 85.35 and not under 85.37.
Annexure III
(vii) The Heading 85.37 cover boards, panels, consoles, and other bases equipped with two or more apparatus of Heading No. 85.35 for electric control or distribution of electricity. According to HSN, 85.37 covers the following:
“These consists of an assembly of apparatus of the kind referred to in the two preceding Headings (e.g. switches and fuses) on a board, panel, console, etc., or mounted in a cabinet, desk etc. They usually also incorporate meters, and sometimes also subsidiary apparatus such as transformers, valves, voltage regulators, rheostats or luminous circuit diagrams.
The goods of this Heading vary from small switchboards with only a few switches, fuses, etc. (e.g., for lighting installations) to complex control panels for machine-tools, rolling mills, power stations, radio stations, etc., including assemblies of several of the articles cited in the test of this heading. The Heading also covers :
(1) Numerical control panels with built-in automatic data processing machine, which are generally used to control machine-tools.
(2) Programmed Switchboards to control apparatus; these permit variations in the choice of operations to be followed. They are normally used in domestic electrical appliances, such as washing machines and dish washers.
(3) “Programmable controllers” which are digital apparatus using a programmable memory for the storage of instructions for implementing specific functions such as logic, sequencing, timing, counting and arithmetic, to control, through digital or analog input/output modules, various types of machines.
(viii) The control panels manufactured by the appellants will certainly satisfy the criteria under 85.37. The appellants are paying excise duty on the control panels under Heading 85.37 whenever they are cleared separately. The Control panel which is cleared along with the circuit breaker consists of relays, ammeters, volt meters, kilo watt meters, fuses, terminal blocks, etc. They are dedicated to relevant circuit breakers. In other words, the control panel is dedicated to the relevant circuit breaker. This control panel does the following functions namely;
(i) provides information about the system parameters like current voltage, amperage, flow of energy,
(ii) the relays in the control panel help in giving command to the circuit breaker to open or close the electrical circuit according to the set parameters in the control panel including breaking of the circuits during faults.
(iii) to control the circuit breakers by manual or automatic controls.
(ix) The question now is the classification of a combination of the control panels with the circuit breakers. It is alleged in the show cause notice that in respect of outdoor circuit breakers the control panel is not housed inside the circuit breaker but is kept separately in the location and the same are cleared separately not being attached to each other and that in respect of indoor circuit breakers, the appellants usually house the control panel in the circuit breaker itself.
The question regarding the classification of the combination is therefore to be decided by reading the relevant section notes and the interpretative notes.
Note 4 to Section XVI reads as under:
“Where a machine (including a combination of machines) consists of individual components (whether separate or interconnected by piping, by transmission devices, by electric cables or by other devices) intended to contribute together to a clearly defined function covered by one of the Headings in Chapter 84 or Chapter 85, then the whole falls to be classified in the Heading appropriate to that function”.
According to this Section Note when a circuit breaker and the control panel are cleared together but are to be interconnected by piping or by electrical cables and the combination is intended to contribute together to a clearly defined function covered under Section 84 or 85 then the whole falls to be classified in the Heading appropriate to the function. This is a legal fiction created in the Section Note to decide the classification of combination machines. The classification of combination machines was always posing a problem and to resolve this problem this Section Note was introduced. Let us take the case of ceiling fan and a regulator fixed on the wall. The ceiling fan manufacturer will clear the ceiling fan and the regulator in one package. The regulator will always be kept at a distance from the fan for easy operation and control. The regulator and fan will be connected through electrical cables. The fan itself is classifiable under Heading 84.14 while the regulator is classifiable under 85.35. But the combination of the fan with the regulator even though packed together is being classified under Heading 84.14 as electrical fan by applying Note 4 to Section XVI. Similarly the control panel per se is classifiable under 85.37 but a combination of the control panel with the circuit breaker will be classifiable under Heading 85.35 since the control panel acts as an accessory or an adjunct to the main purpose machine, namely circuit breaker. Undoubtedly the combination of the control panel and the circuit breaker is intended to contribute together to the only function of circuit breaking or making which is specifically covered under Heading 85.35. Like in the case of a regulator and the fan the control panel-cum-circuit breaker does the function of circuit breaking only and thus the combination is classifiable under Heading 85.35.
(x) The control panels are not always supplied along with the circuit breakers. The buyer has the option of procuring the control panel from other sources. Infact, assembling of the control panel is a low technology activity which the appellant will be reluctant to undertake unless the buyer orders the circuit breaker along with the control panel. The appellants are obliging the buyer in supplying the control panels along with the circuit breakers so that the buyers are rid of the problem of sourcing the control panels and coordinating the same. Excepting in a case of retrofitting of the control panel the appellants do not normally sell the control panel separately.
The price of the control panel is also much less as compared to the corresponding circuit breaker. For example a 11KV control panel is sold at a price of Rs. 45,000 vide invoice No. 51587, dated 3-6-93 while a corresponding circuit breaker model is sold at price of Rs. 1,82,600 vide invoice No. 51441, dated 31-3-93. Thus the value control panel will be less than 25% value of the circuit breaker.
(xi) Technical books will also clarify that the control panel is a necessary adjunct, the circuit breakers. Photo copies of the relevant extracts of technical books are collectively enclosed as the control panel which is housed in the same housing of the circuit breaker or sent separately along with the circuit breaker loses its identity as a control panel and is to be treated as a circuit breaker by virtue of Note 4 to Section XVI. Thus levying a separate excise duty on the control panel whenever the same is cleared along with the circuit breaker under 85.37 does not arise. Therefore the appellant were right in classifying it under Heading 85.35.
(xii) Viewed from another angle, the control panel with circuit breaker whether housed in the same housing or sent separately, will qualify for the exemption under Notification No. 217/86, dated 2-4-86 since the same is captively consumed in the manufacture of the circuit breaker (since the combination is treated as a circuit breaker by the legal fiction created under section Note 4 of Section XVI). It is not in dispute that appellant has paid excise duty on the circuit breaker control panel combination as circuit breaker. Infact, the exemption under Notification 217/86 was also claimed under the relevant classification list which was duly approved.
(xiii) The show cause notice repeatedly alleges that the appellants have cleared circuit breaker system which should be classified under 85-37 since the system consist of control panel. There appears to be a serious misconception in this allegation. Firstly the appellants have not sold a product as circuit breaker system. They have only sold circuit breakers with or without control panels. Secondly, the so-called circuit breaker system as alleged in the show cause notice has to properly classified. The proper classification of the alleged circuit breaker system has got to be under 85.35 since the combination contributes to the well defined function of circuit breaking under Heading 85.35. The control panel is merely an adjunct to the circuit breaker and does the auxiliary function and not the main function. The example of the regulator and the fan is more apt in this scenario
(xiv) The appellants are exporting the circuit breakers with or without control panel to number of countries like UK, Venezuel, Bangladesh, Myanmar, Vietnam, Argentina, Newzealand, etc. The customs offices of these countries have always assessed the circuit breakers with or without the combination of the control panel under 85.35. Even the Letters of Credit from these foreign buyers always quote the classification of the circuit breakers with or without control panels under Heading 85.35.
For the aforesaid reasons and the reasons stated in the reply to the show cause notice and the grounds taken in the appeal memorandum the order-in-original deserves to be set aside.”
Since we are setting aside the order by restricting the demands to a period of six months and remanding the matter back to the learned Commissioner to requantify the demands, we would consider leaving the issue on merits to be kept open, to both sides. Therefore we do not arrive at any findings on submissions made on merits and also on the logic of the Section 37B orders, as made before us. We keep the same, to be re-determined in the remand proceedings.
(g) Since we do not find any suppression and clearance have been affected after following the procedure established by law, we do not uphold the case and cause for a penalty in the facts of this case.
4. In view of the finding, we set aside the order, the penalty and direct that the issue of classification on merit be redetermined and demand if any be quantified, for the periods as arrived herein. Appeal disposed off in above terms.
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(S.S. Sekhon)
Member (Technical)
S.L. Peeran, Member (J)
5. With due respects to my learned brother, I am unable to agree with my ld. brother’s findings expressed in his order. Hence, I am writing a separate order as under : –
6. The stay application of the appellants was heard on 25-9-2001 and vide Stay Order No. 540/2001, dated 25-9-2001 the waiver of pre-deposit of Rs. 3,09,62,619/- and penalty of Rs. 75,000/- was allowed solely on the basis of prima facie view expressed in the Misc. Order No. 229/2001, dated 28-8-2001 by the Bench that prima facie, there is violation of principles of natural justice and the matter has to go back for de novo consideration. As the Revenue implication’s were high, the early hearing was granted in the matter. On 1-4-2002, the matter was heard.
7. Shri V. Lakshmikumaran, Advocate, argued that there was violation of principles of natural justice inasmuch as that the entire evidence produced by the appellants with regard to technical literature, trade understanding of the product in question has not been considered in the impugned order. It was also argued that various documents pertaining to earlier classification and re-classification sought by them has not been considered, besides there is no specific and clear finding on limitation of extended period. He submitted that there was no clear cut finding on all aspects and the matter is required to be remanded for de novo consideration in view of, prima facie view of the Bench expressed in the Misc. and Stay order noted above and matter requires to be remanded for de novo consideration.
8. Ld. SDR pointed out that the order has been passed in terms of Board’s circular and explanatory notes to HSN. He also pointed out that statements had been recorded from S/Shri V. Srivathsan, Manager (Accounts), K. Ramachandran, Financial Controller, A.C. Subramaniam, Manager (Accounts), Atul Shah, Senior General Manager, V. Subramaniam, Senior General Manager, K.V. Ranganath, Chief Manager (Marketing) who had clearly admitted the following: –
“(a) that the full description was not given in the classification list i.e., they have not mentioned whether the breakers consist of control devices or not.
(b) there are differences between the description in the classification list in respect of HT Circuit Breakers and in the clearance documents/purchase orders.
(c) that the management was aware that some of the competitors were discharging duty on such breakers at 20% and by paying only 5%, they would have a competitive advantage.”
9. Ld. SDR also pointed out that in view of specific and full description not having been given in the classification list and details not furnished, therefore there was clear suppression in the matter. He also referred to the allegations in the SCN which clearly brought out the points which clearly showed that there was suppression in the case.
10. On a careful consideration of the submissions made by both sides in the matter. I am satisfied that this is a case which requires to be remanded for de novo consideration on all points i.e. both on merits as well as on time-bar. It is not the proper for us to express our opinion even on time-bar as the documents have been produced before us for the first time at the time of hearing. Appellant’s Counsel also produced enormous evidence with regard to classification list filed from time to time as well as various technical specifications and extracts from various books. Counsel has also produced pamphlets of the item in question. All these materials was not before the original authority and the same has not been examined. Further more, the Bench did not hear in detail on technical aspects and on the issue of classification, even on time-bar but had restricted itself to hear on the violation of principles of natural justice and order being not a speaking order, therefore the matter has to go back to the original authority for de novo consideration. The original authority is entitled to take expert opinion, if he feels necessary with regard to impugned goods and also seek explanation from appellants with regard to opinion they may obtain before re-determining the issue. The matter requires to be examined on all issues to come to the conclusion as to whether there is suppression of facts or not and as to whether appellants are entitled to relief claimed by them with regard to reclassification of the product. The original authority shall hear the entire matter with open mind and give a detailed finding after granting opportunity of hearing to the appellants. Thus, the appeal is allowed for an open remand to the original authority.
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(S.L. Peeran)
Member (J)
POINTS OF DIFFERENCE
In view of difference of opinion arisen between the Members, the following points are required to be determined by the Third Member :-
“Whether appeal is required to be remanded for re-determination of classification in the light of Member (Technical) Shri S.S. Sekhon’s order and demand to be restricted only for 6 months as held by him.
OR
The matter has to be remanded entirely on all points for de novo consideration, in view of impugned order not a speaking order as held by Member (Judicial) Shri S.L. Peeran in his order.”
Sd/- Sd/-
(S.S. Sekhon) (S.L. Peeran)
Member (T) Member (J)
Jeet Ram Kait, Member (T)
11. This matter has been referred to me as Third Member for resolving the difference of opinion between learned Member (Judicial) Shri S.L. Peeran and learned Member (Technical) Shri S.S. Sekhon. The point of difference is as under:
Whether the appeal is required to be remanded for re-determination of the classification in the light of the Member (Technical) Shri S.S. Sekhon's order, and remand to be restricted only for six months as held by him.
OR
The matter has to be remanded entirely on all points for de novo consideration in view of the impugned order not a speaking order as held by Member (Judicial) Shri S.L. Peeran in his order.
12. The facts of the case in detail are recorded in the order recorded by learned Member (T) and I am not repeating the same here.
13. The matter was heard by me on 8-5-2002 and Shri J. Sankararaman, learned Advocate appeared for the appellants while Shri G.S. Menon, learned SDR represented the Revenue.
14. The learned Counsel pleaded that the appellants are engaged in the manufacture of circuit breakers falling under Heading 85.35 of the CETA 1985 and they were licensed by the department under L-4 licence and started manufacturing this particular product from 1986. After introduction of Tariff Act, 1985 they filed classification list 99/86 effective from 1-3-86 and it was approved on 9-7-86 by the Assistant Collector, Division No. VII. They have also been filing classification list for the subsequent period as and when there were changes in the budget or otherwise and all the classification lists were accordingly approved by the Assistant Collector. The item in dispute HT circuit breakers up to 33 KV were declared to fall under Heading 8535.00 attracting 15% duty and they have been filing classification list classifying the product under Heading 8535.00 and the same was approved by the department. However, the department issued show cause notice No. 17/94 dated 1-3-94 (File No. V/8/15/20/93-CX-Adj.) demanding duty for the period from 1-3-93 to 31-12-93 for Rs 1,51,95,375/- seeking classification of the product under tariff Heading 8537.00 as circuit breaker panels. The department also issued another show cause notice bearing No. 221/94, dated 13-4-94 for the period from 1-1-94 to 28-2-94 involving an amount of Rs 8,91,680/- alleging that the appellants have not disclosed the full description of the product “HT Circuit Breaker of various types”. A third show cause notice was issued on 29-8-94 by the Supdt. of Central Excise, Range VII vide OC No. 608/94, dated 29-8-94 for the period from 1-3-94 to 31-7-94 involving a demand of Rs 1,48,75,639.77 under Rule 9(2) of the Central Excise Rules, 1944 read with Section 11A(1) of the Central Excise Act, 1944.
15. In the mean while the Central Board of Excise & Customs, vide F.No. 151/6/94-CX.4, dated 14-7-94 issued an order under Section 37B vide order No. 32/8/94-CX., dated 14-7-94. The learned Counsel invited my attention to para 3(d) at page 7 of the order recorded by Shri S.S. Sekhon, learned Member (T) who relied upon the judgment rendered in the case of HM Bags Manufacturing Co. reported in 1997 (94) E.L.T. 3 (S.C.). He therefore, argued that the Board’s order issued under Section 37B of the Central Excise Act, 1944 re-classifying the goods, is effective from 14-7-94 or from a subsequent date of its publication. He further argued that demand of duty cannot be raised for the period prior to the publication of the said order of the Board. He also relied upon the judgment in the case of RC Polysacks Pvt. Ltd. reported in 2000 (117) E.L.T. 790 (T) in which it has been held that order issued under Section 37B read with Section HA of the Act ibid is not effective from the date of its issue but only from the date of issue of trade notice by the concerned Commissionerate. While delivering the above judgment the Tribunal had followed the Hon’ble Apex Court judgment in the case of HM Bags Manufacturing Co. (supra). The learned Counsel also invited my attention to para 3(e) on page 7 of the order recorded by learned Member (T) and argued that there was no question of any suppression of facts and therefore the learned Member (T) Shri S.S. Sekhon has rightly arrived at the conclusion that the provisions as contained in proviso to Section 11A(1) of the C.E. Act, 1944 in the case of show cause notice issued on 1-3-94 to invoke the longer period of limitation prescribed are not applicable. Therefore, the demand has to be restricted to six months period only. He, therefore, argued that decision of the Tribunal in the case of CCE v. Muzzaffarnagar Steel reported in 1989 (44) E.L.T. 552, as contained in para 13 at page 555 thereof, which is extracted at page 8 of the order recorded by learned Member (T), is squarely applicable to the facts of the present case. In that case learned Member (J) was also in the Bench. He, therefore, argued that the extended period of time for demanding differential duty is not applicable in the absence of suppression of fact or misstatement of fact with intent to evade payment of duty. The learned Counsel also invited my attention to the judgment rendered by CEGAT, West Regional Bench, in the case of Bombay Drums Manufacturing Co. v. CCE, Mumbai-I reported in 2000 (124) E.L.T. 908 (T). While delivering the above judgment, the Bench referred to the judgment in the case of Muzzaffarnagar Steel (supra). He also invited my attention to the judgment of the Tribunal presided over by justice K. Sreedharan, Ex-President, in the case of Fricks India Ltd. v. CCE, Delhi, 2000 (119) E.L.T. 676 in which it has been held that if goods are cleared pursuant to approval of the classification or price list it is not open to the department to justify demand of differential duty by invoking the longer period of limitation. He also invited my attention to para 3(g) of the order recorded by learned Member (T) at page 15 that since there is no suppression of any fact and since clearances have been effected by following the procedure established by law the order of penalty was set aside in the order recorded by learned Member (T). He further invited my attention to para 6 of the order recorded by learned Member (J) Shri S.L. Peeran in which the learned Member (J) has remanded the case for de novo consideration and decision on merits as well as on time bar aspect. Both the learned Members have referred the matter to the original authority for determining the classification of the product, but the appellants do not agree to the order of the learned Member (J) Shri S.L. Peeran for remand of the matter in regard to time bar aspect since learned Member (T) has analysed the whole case very thoroughly on time bar and has relied upon various judgments rendered by the Tribunal. The learned Member (T) has also analysed and discussed the aspect of time bar and on the applicability of prospective nature of the Board’s order which has been issued under Section 37B of the C.E, Act, 1944. Learned Member (T) has set aside the order of imposition of penalty on merits as the appellants have not suppressed any material from the department and the order of the learned Member (T) being legal and proper, the same should be concurred with.
16. Shri G.S. Menon, learned SDR submitted that the point of dispute is about classification of the product in question and both the Members have agreed for remand of the matter for determining the classification of the product in question. He invited my attention to para 3(c) page 6 of the order recorded by learned Member (T) wherein he has held that the matter be referred to expert and then determine the classification of the product. He also invited my attention to para 3(d) of the order recorded by Member (T) wherein he has discussed about the Section 37B order issued by the Central Board. He also took me to para 3 (e) and (g) of the order of learned Member (T). He also took me to para 6 of the order recorded by Member (J) at page 18 and he submitted that since the case is to be remanded for determining the classification issue by taking expert opinion, as well as by relying upon the order issued by the Central Board under Section 37B, he wanted me to agree with the open remand as held by Member (J) Shri S.L. Peeran.
17. I have considered the submissions made by both the sides and gone through the orders recorded by learned Member (T) and Member (J). I find that learned Member (T) Shri S.S. Sekhon has thoroughly analysed the whole issue and has recorded a very detailed order supported by various judgments as cited by him under para 3. I have also perused the various classification lists and it is observed that in the classification list the assessee has clearly described the goods as HT circuit breakers. Further the matter was taken to the Central Board by the Indian Electrical and Electronic Manufacturers Association who had represented that there is no uniformity in the classification of circuit breakers above 1000 volts for the purpose of levy of Central Excise duty under Schedule to Tariff Act, 1985 (henceforth referred to as Tariff). The association had furnished a list of such HV and MV circuit breakers manufactured in India and it was pointed out by the Association that the Central Excise Officers in different Commissionerate have been classifying such circuit breakers under Headings 8535 and 8537 of the Tariff. In order to ensure uniformity in classification of this product, the Board examined the classification of circuit breakers and issued an order in exercise of the power conferred under Section 37B of the C.E. Act, 1944 for the purpose of ensuring uniformity in classification of the product and levy of duty, vide order No. 32/8/94-CX issued from file F.No. 151/6/94-CX.4, dated 14-7-94. The list enclosed with the Board’s order as noted above, covers circuit breakers manufactured by the appellants also. Since there was confusion in the minds of the trade as well as the Revenue whether the product in question viz. circuit breakers would fall under Tariff Heading 8535 or under 8537 of the Tariff and since there was no uniformity in the classification of circuit breakers as admitted by the Board while issuing the Section 37B order, the order issued by the Board will be applicable prospectively i.e. from the date of its publication. In view of the order recorded by learned Member (T) in para 3(d) at page 7 and in view of the judgment in the case of HM Bags Manufacturing Co. reported in 1997 (94) E.L.T. 3 (S.C.) the order issued by the Board under Section 37B will be applicable from the date of its publication. Therefore, no demand of duty can be raised for a period prior to the date of publication of such order. Learned Member (T) has also relied upon the judgment of the Tribunal in the case of RN Polyasacks reported in 2000 (117) E.L.T. 790 in which it has been held that the Section 37B order issued by the Central Board will be applicable from the date of issue of the trade notice by the concerned Commissionerate and not from the date of issue of the order by the Board. While rendering the above judgment the Tribunal had followed the judgment of the Hon’ble Apex Court in the case of HM Bags Manufacturing Co. (supra).
18. I am also in agreement with the finding recorded by learned Member (T) in para 3(e) at page 7 that as there was no suppression of facts the proviso to Section 11A(1) cannot be invoked for demand of duty. I also agree with the view taken by learned Member (T) Shri S.S. Sekhon that the demands have to be restricted to six months only following the ratio of the decision of the Tribunal in the case of Muzzaffarnagar Steel reported in 1989 (44) E.L.T. 552, page, 555 as contained in page 8 of the order recorded by learned Member (T) as this judgment is squarely applicable to the facts of the present case. Therefore, the extended period cannot be invoked for demand of duty in the absence of deliberate suppression or misstatement of facts with intent to evade payment of duty. The Tribunal judgment in the case of Muzzaffarnagar Steel was also followed by the West Regional Bench of the Tribunal in the case of Bombay Drums Manufacturing Co. v. CCE reported in 2000 (124) E.L.T. 908. Further in the case of Fricks India Ltd. v. CCE reported in 2000 (119) E.L.T. 676, the Bench presided over by Justice K. Sreedharan, Ex-President has held that if the goods are cleared pursuant to approval of the classification list it is not open to the department to justify demand of duty invoking the longer period of limitation in terms of Section 11A.
19. In view of the above discussion, I agree with the view taken by learned Member (T) Shri S.S. Sekhon that the appeal is required to be remanded for re-determination of the classification issue and the demand of duly has to be restricted to six months period only.
20. The file may now be placed before the original Bench for passing final order.
Sd/-
(Jeet Ram Kait)
Member (T)
MAJORITY ORDER
In terms of majority order, the appeal is allowed by remand for re-determination of classification issue and the demand of duty has to be restricted only to six months period only as held by both learned Members (Technical) in their respective orders.
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(S.S. Sekhon) (S.L. Peeran)
Member (T) Member (J)