of Central Excise Vs. M/S Eswaran & Sons Engineers Ltd  Insc 11 (5 January 2005)
Variava, Dr. Ar. Lakshmanan & S.H. Kapadia Kapadia, J.
appeals under section 35L of Central Excise Act, 1944, (hereinafter referred to
for the sake of brevity as "the said 1944 Act") are filed by the
Department seeking to challenge the order dated 26.4.1999 passed by the Customs
Excise and Gold (Control) Appellate Tribunal (for short 'the tribunal') in
appeal No. E/689-692 of 1995.
facts giving rise to these civil appeals, briefly stated, are as follows:
On 17th December, 1993 M/s. Eswaran & Sons Engineers
Limited (hereafter referred to as 'the assessee') was engaged in the
manufacture of Minimum Oil Circuit Breakers.
paid duty by classifying the same under Tariff sub heading 8535 of Central
Excise Tariff Act, 1985.
to the Department the item was classifiable under sub heading 8537.
Accordingly, four show cause notices were issued on; 17.12.1993 for the period
30.6.1993 to 31.8.1993; show cause notice dated 4.4.1994 for the period
13.9.1993 to 30.9.1993; show cause notice dated 31.5.1994 for the period
1.11.1993 to 28.2.1994 and show cause notice dated August 1994 for the period
March 1994 to August 1994. By the aforestated four shows cause notices, the
Department called upon the assessee to pay differential duty of Rs.9,69,638/-
covering a period from 30.6.1993 to 31.8.1994. By the said four show cause
notices, the Department proposed to revise the classification from sub heading
8535 to sub heading 8537.
reply dated 4.2.1994 the assessee submitted that they were manufacturers of
electrical goods falling under Chapter 85. They were manufacturing Switchgear
Products coming under sub heading 8535.00, 8536.90, 8537.00 and 8538.00. They
submitted that Minimum Oil Circuit Breaker was classified, right from
inception, under tariff sub heading 8535.00 as it is an apparatus used for
switching and protecting the electrical circuit in cases where the voltage
exceeded 1000V. The assessee contended that the demand for duty was not
maintainable because the said Minimum Oil Circuit Breaker was one single
apparatus having function of breaking the current under abnormal conditions
such as short circuit.
other hand, it was the case of the Department that the components of Minimum
Oil Circuit Breaker performed individual functions within the said Circuit
Breaker and, therefore, cannot be termed as a separate apparatus.
to the Department Minimum Oil Circuit Breaker (outdoor) was put on a control
panel for controlling the electricity current. Therefore, according to the
Department the item in question came within sub-heading 8537.
order dated 19.12.1994, the Assistant Collector of Central Excise came to the
conclusion that Minimum Oil Circuit Breakers were classifiable under sub
heading 8537.00 and not under sub heading 8535.00. Reliance was placed on the
Explanatory Note to Chapter 85 as well as HSN for coming to the conclusion that
Circuit Breakers were classifiable under sub heading 8537.00.
aggrieved by the order of the Assistant Collector, the assessee went in appeal
to the Collector of Central Excise (Appeals). Before the appellate authority
the assessee placed reliance on a Circular dated 14.7.1994 issued under Section
37B clarifying that the item in question would fall under tariff sub heading
8537.00 prospectively. It was urged by the assessee before the appellate
authority that in view of the said Circular dated 14.7.1994 the
reclassification ordered should be given prospective effect and to that extent
alone demand should be made from the assessee. On merits, the assessee
contended that there were two types of Minimum Oil Circuit Breakers, namely
indoor and outdoor, which consists of electrical components such as fuse,
terminals, socker outlet etc. The assessee, therefore, contended that the
product came under sub heading 8535.00. By Order dated 31.5.1995 the appeal was
aggrieved by the aforestated two orders, the assessee preferred appeal to the
Tribunal. By the impugned judgment, the tribunal held that Minimum Oil Circuit
Breaker was classifiable under sub heading 8537 and not under sub heading 8535.
However, by the impugned judgment, the tribunal held that in view of the
Circular dated 14.7.1994 issued by the Board under Section 37B the quantum of
duty leviable needed recalculation as the said Circular dated 14.7.1994
operated prospectively. The tribunal noted that the assessee had pre-deposited
Rs.4,00,000/- whereas the amount payable on the basis of the Circular dated
14.7.1994 fell within the amount of Rs.4,00,000/-. Accordingly, the tribunal
remitted the matter to the Assistant Commissioner concerned to recalculate the
duty payable by the assessee and refund the balance. Hence, these civil appeals
by the Department.
A. Subba Rao, learned advocate for the Department, submitted that in the
present case the first show cause notice was issued on 17.12.1993, much prior
to the Board's Circular dated 14.7.1994. It was submitted that the said show
cause notice was not based on the Circular dated 14.7.1994, but, it was on the
basis of the interpretation placed on the aforestated two entries by the
it was urged that the tribunal had erred in restricting the demand raised by
the Department to the period on and after 14.7 1994.
notice none appeared for the assessee.
dealing with the above arguments, for the sake of convenience, we reproduce hereinbelow
the relevant heading, sub heading and description of the goods, along with the
rate of duty under Chapter 85 which dealt with electrical machinery and
equipment and parts thereof.
ELECTRICAL MACHINERY AND EQUIPMENT AND PARTS THEREOF.
of goods Rate of duty (1) (2) (3) (4) 85.35 8535.00 Electrical apparatus for
switching or protecting electrical circuits, or for making connections to or in
electrical circuits (for example, switches, fuses, lightining arresters,
voltage limiters, surge suppressors, plugs, junction boxes), for a voltage
exceeding 1,000 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 electric control or the distribution of electricity,
including those incorporating instruments or apparatus of Chapter 90, other
than switching apparatus of heading No.85.17 20% On merits, the tribunal in the
present case following its judgment in the case of Crompton Greaves Limited v.
C.C.E., Aurangabad, reported in [1996 (87) ELT 414], has held that Circuit
Breakers are panels equipped with circuit breakers classifiable under sub-
heading 8535 and are also equipped with one or more apparatus under sub heading
8535.00 or under sub- heading 8536.00 and consequently such panels were
classifiable under sub heading 8537.00 of Central Excise Tariff. Against the
said decision, the assessee has not filed any appeal to this Court.
coming to the question of interpretation of Section 37B of the Act, as stated
above, the tribunal has held that Circular dated 14.7.1994 issued by the Board
was prospective and consequently the Department was not entitled to demand duty
on the basis of reclassification for the period prior to that date. In this
connection, reliance was placed on the judgment of this Court in the case of
H.M. Bags Manufacturer v. Collector of Central Excise, reported in [1997 (94)
ELT 3]. In our view, the judgment of this Court in the case of H.M. Bags Manufacturer
(supra) has no application to the facts of the present case. As can be seen
from the facts enumerated hereinabove, much prior to 14.7.1994 a show cause
notice was issued by the Assistant Collector on 17.12.1993 on the basis of his
interpretation of the above two entries. The order passed by the Assistant
Collector dated 19.12.1994 is also on the basis of his interpretation of the
above two entries. The said order is not based on the Circular dated 14.7.1994.
Therefore, the Circular had no application to the facts of this case.
Section 37B of the Act, the Board is empowered to issue instructions to Central
Excise Officers, for the purpose of uniformity in the classification of
excisable goods, which instructions, are required to be followed by such
officers. However, under proviso (a) to Section 37B an exception is made.
said proviso states that the said Instructions, orders or directions cannot
make any Central Excise Officer to dispose of a particular case in a particular
under proviso (b) such Instructions, shall not bind the discretion of
Commissioner of Central Excise (Appeals), discharging appellate functions. In
view of the proviso to Section 37B, the said Circular dated 14.7.1994 issued by
the Board was not applicable to the facts of the present case. As stated above,
in the present case, the Assistant Collector had taken a prima facie view for
purposes of reclassification as far back as 17.12.1993.
the Circular dated 14.7.1994 had no application to the facts of the present
case. The judgment of the Supreme Court in the case of H.M. Bags Manufacturer
(supra) did not deal with the case where the department had issued show cause
notice purporting to reclassify the product prior to the issuance of Instructions
by the Board. Therefore, the said judgment has no application to the facts of
the present case.
extent and scope of Section 37B came up for consideration before the Calcutta
High Court in the case of Birla Jute And Industries Ltd. v. Assistant Collector
of Central Excise, reported in [1992 (57) ELT 674].
Pal, J. (as she then was) has succinctly analysed the provisions of Section 37B
by laying down the following principles:-
There is a distinction between a decision in a particular assessment by a
quasi- judicial authority and a decision on principle by the Board. While an
instruction issued under Section 37B cannot be binding upon a quasi-judicial
authority under the Act, the departmental officers conducting the lis before
such quasi-judicial authority cannot take a stand contrary to the
The instructions which may be binding on the Central Excise Officers are not
binding on the Assessee who may question the correctness of the same before a
quasi-judicial authority and before a Court. Both the quasi- judicial authority
and a fortiori, the Court, can question the correctness of the instructions.
assessee has on the other hand the right to claim and the court may compel
compliance with such instructions as are for the benefit of the assessee by the
Central Excise Officers." Applying the tests enunciated hereinabove, to
the facts and circumstances of this case, we hold that Circular dated 14.7.1994
had no application.
the reasons stated above, these civil appeals are allowed, the impugned
judgment of the tribunal dated 26.4.1999 in Appeal Nos.E/689-692 of 1995 is set
aside with no order as to costs.