WESTINGHOUSE SAXBY FARMER LTD. versus COMMR. OF CENTRAL EXCISE CALCUTTA

Citation: [2021] 3 S.C.R. 622 · Decided: 08-03-2021 · Supreme Court of India · Bench: S.A. BOBDE · Disposal: Appeal(s) allowed

Cited by 1 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

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SUPREME COURT REPORTS
[2021] 3 S.C.R.
   [2021] 3 S.C.R. 622
622
WESTINGHOUSE SAXBY FARMER LTD.
v.
COMMR. OF CENTRAL EXCISE CALCUTTA
(Civil Appeal No. 37 of 2009)
MARCH 08, 2021
[S. A. BOBDE, CJI, A. S. BOPANNA AND
V. RAMASUBRAMANIAN, JJ.]
Central Excise Tariff Act, 1985: Chapter 86, Tariff Item No.
8608 and Chapter 85 Tariff Item No.8536.90 – “Relays”
manufactured by the assessee, used as Railway signaling equipment
– Taxability of – Classification of, under Tariff Item No. 8608 or
8536.90 – Held: Relays manufactured by the assessee are used
solely as part of the railway signaling/traffic control equipment –
On the basis of the ‘predominant use’ or ‘sole/principal use’ test
acknowledged by the General Rules for the Interpretation of the
Schedule, ‘relays’ are classifiable as parts of ‘railway signalling
equipment’, under Heading 8608 – Thus, the invocation of Note
2(f) in Section XVII, overlooking the “sole or principal user test”
indicated in Note 3, not justified –These goods were previously
classified (before 1993) under Sub--heading 8536.90, but a revised
classification list, classifying them under sub-heading 8608,
submitted by the assessee, was approved by the competent Authority
on 27.08.1993 – After such specific approval of the classification
list, it was not proper on the part of the Authorities to invoke Note
2(f) of Section XVII – Furthermore, the show cause-cum-demand
notices issued by the Department during 1995-1998 were partly
time barred u/s. 11-A – Despite the fact that some of the individual
notices were issued within the period of limitation, the very
invocation of s. 11-A, cannot be said to be within time – Central
Excise Act, 1944 – s. 11-A.
Allowing the appeal, the Court
HELD: 1.1 Section 2 of the Central Excise Tariff Act, 1985
provides that the rates at which duties of excise shall be levied
under the Central Excise Act, 1944 are specified in the First
Schedule and the Second Schedule. The First Schedule contains
a set of Rules known as “General Rules for the Interpretation of
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this Schedule”. These Rules begin with a mandate that the
“classification of goods in this Schedule shall be governed by the
principles laid thereunder.”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”. 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. Rule 3 deals with cases where goods are classifiable
under two or more sub-headings. But Rule 3 begins with a
reference to Rule 2(b). Therefore, it is necessary to extract Rule
2(b) and Rule 3 together.Rule 2(a) speaks about “Article”, Rule
2(b) speaks about “material or substance” as well as “goods of a
given material or substance” and Rule 3 speaks about “goods”.
[Para 25-29][631-G-H; 632-A-D; 633-D]
1.2 In the instant case, the claim of the assessee was that
the relays manufactured by them were part of the railway signaling
equipment. But all the Authorities were of the unanimous view
that this product is referable to goods of a specific description in
Chapter sub-Heading 8536.90 and that, therefore, General Rule
3(a) will apply. But in invoking General Rule 3(a), the Authorities
omitted to take note of 2 things. They are that the General Rules
of Interpretation would come into play, as mandated in Rule 1
itself, only when no clear picture emerges from the terms of the
Headings and the relevant section or chapter notes; and that in
any case, Rule 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, it is not known 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 would apply, especi

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