Holding

Re‑classification of the product can take effect only prospectively from the date of communication of the show‑cause notice proposing the re‑classification.

Summary

Mysore Electricals Industries Ltd manufactured single panel circuit breakers and initially classified them under tariff heading 85.35, claiming a 5% excise duty as per its approved classification list dated 01‑03‑1993. The Revenue later issued a show‑cause notice and, relying on a CBEC circular dated 14‑07‑1994, re‑classified the breakers under heading 85.37, attracting a 20% duty. The key issues were the correct tariff heading for the breakers and whether the circular could be applied retrospectively. The Supreme Court held that re‑classification can take effect only prospectively from the date the show‑cause notice proposing the change is communicated, i.e., from 27‑04‑1994, and therefore the differential duty could be demanded only from that date. Consequently, the appeal by the Commissioner of Central Excise was dismissed.

Issues considered

Whether single panel circuit breakers are classifiable under CSH 8535 or CSH 8537 of the Customs Excise Tariff Act, 1985.
Whether the Central Board of Excise & Customs circular issued under Section 37B has retrospective effect.
Whether a re‑classification order can be applied retrospectively to periods prior to the communication of the show‑cause notice.

Subjects

classificationexcise dutycustoms excise tariffretrospective effectprospective applicationsingle panel circuit breakerSection 37BSection 378circular

Judgment

>
COMMISSIONER OF CENTRAL EXCISE, BANGALORE A
v.
MIS. MYSORE ELECTRICALS INDUSTRIES LTD.

NOVEMBER 15, 2006

[DR. AR. LAKSHMANAN AND AL TAMAS KABIR, JJ.] B

Customs Excise Tariff Act, 1985; Section 37B; CSH 8535, 8536 &
8537/Central Board of Excise & Customs Circular No. 3218194-CX and
Notification No. 52193 dated 2812193:
c
Classification-Single Panel Circuit Breakers-Levy of Excise duty
under CSH 8535 or 8537-Circular re-classifying the product under CSH
8537-Effective date-Held: Re-classification of the product in question
could take effect prospectively from the date of communication of the Show-
· cause Notice proposing re-classification-Hence, differential amount of Excise D
duty could be levied from that date.

The questions which arose for consideration by this Court in the appeal
~ were as to whether Single Panel Circuit Breakers, an electrical appliance,
manufactured by the respondent-assessee could be classifiable under Tariff
Heading 8535.00 of the Customs Excise Tariff Act as claimed by the assessee E
or classifiable under Tariff Heading 8537.00 as classified by the Revenue for
the purpose of levying excise duty and as to whether the Circular issued by
. the Central Board of Excise & Customs classifying the product under the
Heading 8537.00 could be given retrospective effect.

Revenue contended that much prior to issuance of Circular dated G
14.07.1994 classifying the product in question under CSH 8537, a show cause
notice was issued by the Assistant Collector on 17.12.1993 on the basis of
~ his interpretation of the two entries CSH 8535 and CSH 8537; that the said
order is not based on the circular dated 14.07.1994 and, therefore, the circular
had no application to the facts of this case; that under Section 378 of the Act,
F
the Board is empowe11ed to issue instructions to Central Excise Officers for
the purpose of maintaining uniformity in the classification of eligible goods
which instructions, are required to be followed by such officers; and that
switches, fuses, relays, plugs, junction boxes etc. have been given the status
of separate/individual items. Without these items main equipments/machinery
19 H

""
20 SUPREME COURT REPORTS [2006] SUPP. 9 S.C.R.

A cannot function, therefore, though they may be parts of certain machinery,
yet they have to be classified under those headings where 'they are specifically
mentioned. Thus, the panels manufactured by the assessee contain more than
two apparatus falling under heading 85.35 and 85.37 of the Act.

The respondent-assessee submitted that when there is a concurrent
B finding of fact in his favour, the appeal filed by ~he Revenue has no merits;
that the issues involved in the present appeal is a question of fact which has
been decided in his favour both by the Commissioner (Appeals) and by the
Tribunal and thus there is a concurrent finding of fact in his favour; that the
circular being oppressive and has to be applied only prospectively and cannot
C be applied retrospectively; and that for the period in question, trade notices
had been issued classifying the circuit breakers under Heading No. 85.35 or
85.36 depending upon the voltage, such notices are binding upon the Revenue.
Thus, the circuit breaker is classifiable under Heading 85.35.

Dismissing the appeal, the Court
D HELD: The assessee had filed a classification list effective from
01.03.1993, classifying the Single Panel Circuit Breakers under Heading
No. 85.35 and claiming concessional rate of duty at 5% under Notification
No. 52/93 dated 28.02.1993. The said classification list was approved by the
jurisdictional Assistant Commissioner. Thereafter, the assessee cleared the
E said goods in accordance with the approved classification list. When the
approved classification was proposed to be revised to reclassify the Single
Panel Circuit Breakers under Heading No. 85.37 of the Tariff Act, such re-
classification can take effect only prospectively from the date of
communication of the show ca<1se notice proposing re-classification.
Accordingly, the differential amount of duty can be demanded from that date.
F
[24-C-D-E-Fl

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4488 of2005.
From the Final Order No. 1943/2004 dated 6-12-2004 ofthe CESTAT, at
Bangalore in Appeal No. E/339/2001.
G
Mohan K Parasaran, A.S:G., T.S. Dhobia, Chinmoy Pradip Sharma and
B. Krishna Prasad for the Appellant.

A.R. Madhav Rao, Alok Yadav and M.P. Devanath for the Respondent.

The Judgment of the Court was delivered by
H
COMMNR. OF CENTR.'1. EXCISE. BANGALORE••. MYSORE ELECTRIC.US INDUSTRIES LTD. jLAKSHMANAN. J.j 2J
>
DR. AR. LAKSHMANAN, J. Delay condoned. A
This appeal is directed against the final order No. 1943 of 2004 dated
06.12.2004 passed by the Customs, Excise and Service Tax Appeliate. Tribunal,
Bangalore in Appeal No. E/399/200 I. The appellant before us is the
Commissioner of Central Excise, Bangalore.
B
We have heard Mr. T.S. Doabia, learned senior counsel for the appellant
and Mr. A.R. Madhav Rao, learned counsel for the respondent.

The issue involved in the present appeal is whether the Single Panel
f Circuit Breakers are classifiable under CSH 8535.00 (rate of duty 5%) as
claimed by the assessee or under CSH 8537.00 (rate of duty 20%) as per the C
revenue and whether the Board's Circular F.No. 32/8/94-CX (Section 37B
Order) dated 14.7.2004, which has clarified that the Single Panel Circuit Breakers
are classifiable under Chapter 85.37, has retrospective effect.

The assessee is engaged in the manufacture of electrical appliances D
falling under Chapter 85 of the CETA, 1985. The assessee had filed the
classification list classifying the products under chapter 8535.00 CETA 1985
and availing the benefit of notification No. 52/93 dated 28.02.1993 attracting
duty @ 5% ad valorem.
)
A show cause notice was served on the assessee to classify the goods E
in question under CSH 8537.00 attracting duty at the rate of 20%, as single
control panel manufactured by the assessee consists of a panel equipped
with more than two apparatus of Heading Nos.8535 and 8536 (like circuit
breaker/fuses/switches/plugs/socket/relays). The relevant tariff entries are
quoted herein below :-
F
<.
"Heading 85.35 :- electrical apparatus for switching of protecting
electrical circuits, or for making connection or in electrical circuits (for
example -switches, fuses, lightning arrest voltage limiters, surges
suppressors, plugs, junction boxes).

Heading 85.37 :- 'Boaras, panels, consoles, des-cabinets and other G
bases, equipped with two or more apparatus of heading No. 85.35 or
85.36, for electric control or the distribution electricity."

The Assistant Commissioner decided the classification of the products
in question, under CSH 8537.00 and confomed the duty demand of Rs.22,13, 129.
H
22 SUPREME COURT REPORTS [2006] SUPP. 9 S.C.R.

A Aggrieved by the aforesaid order, the assessee preferred an appeal to
"'
the Commissioner (Appeal) who by his order dt.28.11.1995, set aside the
impugned order dated 31.10.1994 and remanded the same for denovo, for the
reasons that the order was passed without hearing the assessee in respect
of the first show cause notice dated 31.12.1993.

B The case was again taken up and the Adjudicating Authority relying
mainly on the two entries in the tariff decided that the Single Panel Circuit
Breaker manufactured by the assessee has to be classified under CSH 8537.00
and confirmed the duty demand of Rs.22, 13, 129/-.

Aggrieved by the said order, the assessee preferred an appeal to the
c Commissioner (Appeals) who observed that to merit classification of the
"
panel under CSH 853 7.0.0, it should contain two or more appa.ratus of Heading
No. 8535.00 or 8536.00 and in the instant case, the single panel contains only
~
the circuit breaker falling under Chapter 85.35 and hence the subject panel is
not classifiable under Chapter 85.37 and accordingly the Single Panel Circuit
D merits classification under Chapter 85.35, and accordingly set aside the order
and allowed the appeal. The department preferred an appeal against the said
order in the Customs, Excise and Service Tax Appellate Tribunal, Bangalore
which relied on a ruling of the Tribunal in the case of Eswaran & Sons
Engineers Ltd. v. CCE, Madras, reported in ( 1991) 112 ELT 1011, which
upheld the classification under Heading 85.35 and has noted that the Board's
E Circular (Section 378 Order) issued on 14.07.1994, does nothave a retrospective
effect but only a prospective effect to classify the item under Chapter 85.37.
Since the period under dispute is 24.06.1993 to 22.11.1993 and 01.12.1993 to
27.02.1994 to 22. l L 1993 and 01.12.1993 to 27.02.1994, which is prior to the
issuance ofCBEC Circular No. 32/8/94-CX dated 14.07.1994 which does not
F have ~etrospective effect and has only prospective effect to classify the
goods in question under Chapter 85.37, the departmental appeal has been . .,
rejected. Aggrieved against the rejection of their appeal, the Commissioner of '
Central Excise, Bangalore filed the above appeal before this Court.
.,
Mr. T.S. Doabia, learned senior counsel for the appellant took us through
G the orders passed by the authorities below and also other relevant records.
He submitted much prior to 14.07 .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 and the order passed by the Assistant Collector dated
19 .12.1994 is also on the basis of his interpretation of the above two entries
and that the said order is not based on the circular dated 14.07.1994 and,
H
) COMMNR. OF CENTRAL EXCISE. BANGALORE••. MYSORE ELECTRICALS INDUSTRIES LTD. ILAKSHMANAN. J.J
23
therefore, the circular had no application to the facts of this case. He would A
further submit that under 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 eligible goods which instructions, are required to be
followed by such officers. However, under proviso A to Section 378, an
exception is made. The said proviso states that the said instructions, orders
or directions cannot make any Central Excise Officer to dispose off a particular B
case in a particular manner. Similarly, under proviso 8, such instructions shall
not in the discretion of the Commissioner of Central Excise (Appeals),
discharging appellate functions. In view of the proviso to Section 378, the
I said circular dated 14.07.1994 issued by the Board was not applicable to the
facts of the said case. Therefore, he would submit the circular dated 14.07.1994 c
had no application to the facts of the present case. It is further submitted that
switches, fuses, relays, plugs, junction boxes etc. have been given th>! status
of separate/individual items. Without these items also main equipments/
machinery cannot function. Therefore, though they may be parts of certain
machinery, they have to be classified under those headings where they are
specifically mentioned/classified. Thus, the panels manufactured by the D
assessee contain more than two apparatus falling under heading 85.35 vide
relays, circuit breakers, switches, position indicators etc. Therefore, the goods
manufactured by the assessee are correctly classifiable under heading 85 .3 7.

Concluding his argument, Mr. Doabia submitted that the matter requires
E
investigation and, therefore, be remitted to the authorities concerned for fresh
consideration.

Mr. A.R. Madhav Rao, learned counsel for the respondent submitted
that when there is a concurrent finding of fact in favour of the respondent,
the appeal filed by the Department has no merits. It is submitted that the F
issues involved in the present appeal is a question of fact which has been
decided in favour of the respondents both by the Commissioner (Appeals)
and by the Tribunal and thus there is a concurrent finding of fact in favour
of the respondent and department's appeal ought to be dismissed in view of
the same. Learned counsel has also invited our attention to the counter
affidavit filed on behalf of the respondent and the detailed reply made G
thereunder to the civil appeal filed by the Revenue. Learned counsel further
submitted the circular being oppressive and against the respondent has to
apply only prospectively and cannot be applied retrospectively. In other
words, a beneficial circular has to be applied retrospectively while an oppressive
circular has to be applied prospectively. Thus, when the circular is against the H

ill\·
(
.•
'
24 SUPREME COURT REPORTS [2006] SUPP. 9 S.C.R.

A respondents they have a right to claim the enforcement of the same
prospectively. It is further submitted that for the period in question, trade
notices had been issued classifying the circuit breakers under Heading No.
85.35 or 85.36 depending upon the voltage, which are binding upon the
Department. Thus, he submitted that the circuit breaker is classifiable under
B Heading 85.35. He would further submit that the Tribunal has allowed the
appeal filed by the respondents by following its own order in the case of
Eswaran and Sons (supra) and has not given any finding on the merits of
the matter.

We have perused the order impugned in this appeal, other connected ._
C records, and considered the rival submissions.

In the instant case, the assessee had filed a classification list effective
from 01.03.1993, classifying the Single Panel Circuit Breakers under Heading
No. 85.35 and claiming concessional rate of duty at 5% under Notification No.
52/93 dated 28.02.1993. The said classification list was approved by the
D jurisdictional Assistant Commissioner, on 10.06.1993. Thereafter, the assessee
cleared the said goods in accordance with the approved classification list.
When this approved classification was proposed to be revised to reclassify
the Single Panel Circuit Breakers under Heading No. 85.37 of the tariff, such
re-classification can take effect only prospectively from the date of
communication of the show cause notice proposing re-classification. In the
E instant case, the show cause notice was communicated to the assessee only
on 31.12.1993. Therefore, as rightly urged by the learned counsel for the
respondent, the reclassification can take effect only from 27 .04.1994 and
accordingly the differential duty can be demanded only from that date.

F In view of the above, we see no reason to interfere with the order
passed by the Commissioner (Appeals) and as confirmed by the Tribunal. The
appeal is accordingly dismissed.

However, there shall be no order as to costs.

S.K.S. Appeal dismissed.