WESTINGHOUSE SAXBY FARMER LTD.versusCOMMR. OF CENTRAL EXCISE CALCUTTA

622                       [2021]
               SUPREME COURT     3 S.C.R. 622
                              REPORTS                     [2021] 3 S.C.R.


A                 WESTINGHOUSE SAXBY FARMER LTD.
                                       v.
                COMMR. OF CENTRAL EXCISE CALCUTTA
                          (Civil Appeal No. 37 of 2009)
B                               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”
C     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
D     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
E     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
F     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
G
            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
H
                                      622
   WESTINGHOUSE SAXBY FARMER LTD. v. COMMR. OF                           623
            CENTRAL EXCISE CALCUTTA

this Schedule”. These Rules begin with a mandate that the                A
“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
                                                                         B
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                C
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
                                                                         D
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     E
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         F
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                G
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, especially after
they had found that ‘relays’ are not classifiable under Chapter          H
624            SUPREME COURT REPORTS                       [2021] 3 S.C.R.


A     Heading 8608, on account of Note 2(f) of Section XVII.
      [Paras 30, 31][633-E-H; 634-A]
            Central Excise vs. Simplex Mills Co. Ltd. (2005) 3 SCC
            51 : [2005] 2 SCR 441 – relied on.
            1.3 Section XVII, which precedes Chapter 86, the same
B     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) is
      relied upon by the Revenue, in view of the fact that Chapter
      Heading 8608 uses the words “parts of the foregoing” after the
C     words “Railway or tramway track fixtures and fittings” etc.
      Chapter Heading 8608 does not specifically mention “electrical
      relays”. The assessee’s contention is that “it is part of the railway
      signaling safety or traffic control equipment” and that, therefore,
      Relays manufactured by them would fall under Chapter Heading
      8608 due to the usage of the word “parts”. It is this contention
D     that is sought to be repelled by the Authorities by relying upon
      Note 2(f) of Section XVII. [Para 32, 33][634-B, E-F]
            1.4 What is recognized in Note 3 can be called the
      “suitability for use test” or ‘the user test’. While the exclusion
      under Note 2(f) may be of goods which are capable of being
E     marketed independently as electrical machinery or equipment,
      for use otherwise than in or as Railway signaling equipment, those
      parts which are suitable for use solely or principally with an article
      in Chapter 86 cannot be taken to a different Chapter as the same
      would negate the very object of group classification. This is made
F     clear by Note 3. [Para 36][635-B]
             1.5 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
G     test” indicated in Note 3, is not justified. 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. [Para 37, 38][635-C, G]
           1.6 The Commissioner (Appeals), pointed out that the goods
      were previously classified (before 1993) under Sub-heading
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   WESTINGHOUSE SAXBY FARMER LTD. v. COMMR. OF                            625
            CENTRAL EXCISE CALCUTTA

8536.90, but a revised classification list, classifying them under        A
sub-heading 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. [Para 39]
[635-G-H; 636-A-B]
                                                                          B
      2.1 This is not a case where the extended period of limitation
would apply, especially in the light of the admitted position that
the assessee who had his product classified under sub-heading
8536.90 till the year 1993, specifically filed a classification list on
27.08.1993, reclassifying them under sub-heading 8608 and the
same was also approved by the competent authority. Therefore,             C
there is no question of any fraud or collusion or any willful
misstatement or suppression of facts or contravention of any of
the provisions of this Act or of the rules made there under with
intent to evade payment of duty. It is not even the case of the
Department that the appellant was guilty of any of these things,          D
warranting the invocation of the extended period of limitation.
Therefore, the conclusion is inescapable that the Revenue had
only the normal period of limitation available to them to invoke
the power under Section 11-A. [Para 41][636-D-F]
       2.2 The Appellate Authority held without any discussion,           E
that the show cause notices were issued within the time limit
envisaged in Section 11-A and that “any discussion on the
jurisdiction of invocation of extended period is not at all required”.
Therefore, it is obvious that none of the Authorities chose to
invoke the extended period of limitation, but proceeded on the
footing that all show cause notices were issued within the normal         F
period of limitation. If only any of the Authorities had taken care
to look at the dates of the 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. [Para 43][637-A-C]              G
      2.3 The normal period of limitation for invoking Section
11-A 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. All show cause notices were of a
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626            SUPREME COURT REPORTS                      [2021] 3 S.C.R.


A     date prior to 12.05.2000 and hence the normal period of limitation
      was only six months and at least a couple of show cause notices
      were issued in respect of a period partly or fully beyond the period
      of limitation. Unfortunately neither the Appellate Authority nor
      CESTAT took care to analyze the show cause notices individually
      with reference to the period covered by them. [Paras 44, 45]
B
      [637-C-D; 638-A-B]
            2.4 In any case all the show cause notices were issued only
      on and after 30.08.1995, raising a classification dispute, after
      having approved the classification list submitted on 27.08.1993.
      The dispute in the case on hand was one of classification alone,
C     applicable to the product manufactured during the entire period
      after 27.08.1993. The dispute was not invoice-centric. Therefore,
      what was sought to be done by the Original Authority was actually
      to review the approval of the classification list submitted on
      27.08.1993 by cleverly issuing separate notices covering certain
D     specific periods. The attempt to undo the effect of the approval
      of the classification done on 27.08.1993, was actually time barred.
      Therefore, despite the fact that some of the individual notices
      were issued within the period of limitation either in respect of
      the part of the period or in respect of the whole of the period
      covered by them, the very invocation of Section 11-A, in the facts
E     and circumstances of the case, cannot be said to be within time.
      [Para 46][638-B-E]
            3. The Orders-in-Original, the Order of the Appellate
      Authority and the Order of the CESTAT are set aside.
      Consequently, the show cause-cum-demand notices are also set
F     aside. [Para 47][638-E]
            A. Nagaraju Bros Vs. State of A.P. 1994 Supp (3) SCC
            122 : [1994] 1 Suppl. SCR 784 – referred to.
                              Case Law Reference
      [2005] 2 SCR 441                relied on               Para 31
G     [1994] 1 Suppl. SCR 784         referred to             Para 38
            CIVIL APPELLATE JURISDICTION : Civil Appeal No. 37
      of 2009.
            From the Judgment and Order dated 26.03.2008 of the Customs,
      Excise and Service Tax Appellate Tribunal at Eastern Zonal Bench in
H     M.A. No.64 of 2008 in Excise Appeal No.EDM-566/2004.
   WESTINGHOUSE SAXBY FARMER LTD. v. COMMR. OF                                627
            CENTRAL EXCISE CALCUTTA

      Kunal Chatterji, Ms. Maitrayee Banerjee, Pravar Veer Misra,             A
Advs. for the Appellant.
      Ms. Nisha Bagchi, Ms. Aakansha Kaul, B. V. Balaram Das, B.
Krishna Prasad, Advs. for the Respondent.
      The Judgment of the Court was delivered by
                                                                              B
      V. RAMASUBRAMANIAN, J.
      1. Aggrieved by the dismissal of their appeal by the Customs
Excise and Service Tax Appellate Tribunal (for short “CESTAT”), the
assessee has come up with the present appeal under Section 35 L(b) of
the Central Excise Act, 1944.                                                 C
       2. We have heard Shri Kunal Chatterji, learned counsel for the
appellant/assessee and Ms. Nisha Bagchi, learned standing counsel for
the respondent.
      3. The appellant is a company wholly owned by the State
Government of West Bengal. It is engaged in the manufacture of “Relays”       D
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        E
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.
                                                                              F
       7. It appears that from 01.03.1986 till February-1993, the effective
rate of excise duty charged under both sub-headings was 15% and hence
the appellant had no problem with the classification of their goods under
sub-heading No.8536.90. But with effect from 28.02.1993, the effective
rate of excise duty for the goods under sub-heading No.8536.90 became
much higher than the effective rate of duty for the goods under sub-          G
heading 8608.
       8. On 27.08.1993, the appellant submitted a classification list for
the approval of the Assistant Collector, Central Excise. This list provided

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628             SUPREME COURT REPORTS                            [2021] 3 S.C.R.


A     details of the products manufactured by the appellant as Railway signaling
      equipment, including relays and claimed that they should be classified
      under sub-heading 8608 and not under 8536 in the First Schedule to the
      Central Excise Tariff Act. Admittedly this classification list was approved
      by the competent authority.
B            9. On 23.04.1996 the Central Board of Excise and Customs issued
      a circular indicating that ‘plug-in type relays’ merited classification under
      the Chapter Heading 85.36. Thereafter, the Assistant Commissioner of
      Central Excise issued nine different show cause-cum-demand notices
      calling upon the appellant to show cause as to why the goods should not
      be classified under the Sub-Heading 8536.90 and why the differential
C     duty should not be collected together with the interest and penalty.
             10. The appellant gave reply to the show cause notices, contending
      that what was manufactured by them was supplied only to Railways as
      part of the signaling equipment and that, therefore, the show cause notices
      required to be dropped.
D
             11. However, the Assistant Commissioner passed 9 separate
      Orders-in-original on 20/21.12.2001 confirming the demand. The dates
      of the show cause notices, the period to which each one of them related
      to, the differential excise duty arrived at by the Adjudicating Authority
      and the penalty imposed by the Adjudicating Authority are provided in a
E     tabular column for easy appreciation as follows:-




F




G




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  WESTINGHOUSE SAXBY FARMER LTD. v. COMMR. OF                                   629
CENTRAL EXCISE CALCUTTA [V. RAMASUBRAMANIAN, J.]

       12. Aggrieved by the Orders-in-original, the appellant filed statutory   A
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
                                                                                B
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 26.03.2008. It is
against the said order that the appellant has come up with the present          C
appeal under Section 35L(b) of the Central Excise Act, 1944.
       14. The questions that arise for our consideration in this appeal
are:
       (i)    Whether the “Relays” manufactured by the appellant used           D
              only as Railway signaling equipment would fall under
              Chapter 86, Tariff Item 8608 as claimed by the appellant or
              under Chapter 85 Tariff Item No.8536.90 as claimed by
              the Department ?
       (ii)   Whether the show cause-cum-demand notices issued by               E
              the Department on various dates during the period 1995-
              1998 were not barred by time under Section 11-A 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 27.08.1993?                       F
       Question No.1
       15. For finding an answer to question No.1, it is necessary first to
see the description of the goods that fall under Chapter 85 and Chapter
86 with particular reference to the relevant Tariff Items thereunder.
                                                                                G
Chapter 85 covers goods, described as “Electrical machinery and
equipment and parts thereof; sound recorders and reproducers,
television image and sound recorders and reproducers, and parts
and accessories of such articles.”

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630            SUPREME COURT REPORTS                          [2021] 3 S.C.R.


A            16. Chapter Heading 8536 covers “Electrical apparatus for
      switching or protecting electrical circuits, or for making connections
      to or in electrical circuits (for example, switches, relays, fuses, surge
      suppressors, plugs sockets, lamp-holders and other connectors,
      junction boxes), for a voltage not exceeding 1,000 volts; connectors
      for optical fibres, optical fibre bundles or cables.”
B
            17. Sub-heading 8536.90 covers “other apparatus”. This includes
            (i) Motor starters for AC motors under sub-heading 8536.90.10;
            (ii) Motor starters for DC motors under sub-heading 8536.90.20;
            (iii) Junction boxes under sub-heading 8536.90.30; and
C
            (iv) others under sub-heading 8536.90.90.
             18. Chapter 86 covers “Railway or tramway locomotives, rolling-
      stock and parts thereof; railway or tramway track fixtures and
      fittings and parts thereof; mechanical (including electro-mechanical)
D     traffic signaling equipment of all kinds.”
             19. Chapter Heading 8608 covers “Railway or tramway track
      fixtures and fittings; mechanical (including electro-mechanical)
      signaling safety or traffic control equipment for railway, tramways,
      roads, inland waterways, parking facilities, port installation or air-
      fields; parts of the foregoing”.
E
            20. There are five sub-headings under Chapter Heading 8608
      which are as follows:



F




G




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  WESTINGHOUSE SAXBY FARMER LTD. v. COMMR. OF                                  631
CENTRAL EXCISE CALCUTTA [V. RAMASUBRAMANIAN, J.]

       21. The Assistant Commissioner who passed the Orders-in-                A
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” appearing in Chapter 86 do not apply to
electrical machinery or equipment, covered by Chapter 85. The Assistant
                                                                               B
Commissioner also relied upon Rule 3(a) of the “General Rules for
Interpretation of the First Schedule” to the Central Excise Tariff Act,
1985 to hold that the Heading which provides the most specific description
shall be preferred to the Heading providing a more general description.
Therefore, the Original Authority held that since “Relays” do not find a
mention in Chapter 86, but finds a specific mention in Chapter Heading         C
8536, the same has to be classified only under sub-Heading 8536.90.
       22. The Appellate Authority agreed with the assessee that the
Relays manufactured by them are used solely as part of the Railway
signaling equipment, but held that in view of Note 2(f) of Section XVII,
the Orders of the Original Authority did not call for any interference.        D
However, the Appellate Authority set aside that portion of the Orders of
the Original Authority by which penalty was imposed. This was on the
ground that the classification list submitted by the appellant on 27.08.1993
was approved by the competent Authority and that, therefore, the appellant
could not be taken to have violated the provisions of the law.
                                                                               E
      23. CESTAT, by the Order impugned in the present appeal, merely
concurred with the reasoning given by the Appellate Authority and
dismissed the appeal.
       24. As could be seen from the Orders of the Original Authority
and the first Appellate Authority, the answer to question No.1 revolves        F
around the description of goods found in Chapters 85 and 86, as well as
the Notes in Section XVII and the General Rules for Interpretation of
the First Schedule. We have already extracted the description of goods
in Chapters 85 and 86. Therefore, let us now take note of the relevant
Notes in Section XVII and the relevant Rule of the General Rules for
interpretation of the First Schedule.                                          G
       25. 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
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632             SUPREME COURT REPORTS                           [2021] 3 S.C.R.


A     Rules for the Interpretation of this Schedule”. These Rules begin
      with a mandate that the “classification of goods in this Schedule
      shall be governed by the principles laid thereunder.”
            26. Rule 1 of these Rules makes it clear that “the titles of Sections,
      Chapters and Sub-Chapters are provided for ease of reference only
B     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”.
C            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
D     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.
      They read as follows:
            “2. (a) xxxx
            (b) Any reference in a heading to a material or substance
E           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 to
            goods consisting wholly or partly of such material or
F           substance. The classification of goods consisting of more than
            one material or substance shall be according to the principles
            of Rule 3.
            3. When by application of rule 2(b) or for any other reason,
            goods are, prima facie, classifiable under two or more
            headings, classification shall be effected as follows:
G
            (a)    the heading which provides the most specific description
                   shall be preferred to headings providing a more general
                   description. However, when two or more headings each
                   refer to part only of the materials or substances
                   contained in mixed or composite goods or to part only
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  WESTINGHOUSE SAXBY FARMER LTD. v. COMMR. OF                                 633
CENTRAL EXCISE CALCUTTA [V. RAMASUBRAMANIAN, J.]

               of the items in a set put up for retail sale, those headings   A
               are to be regarded as equally specific in relation to those
               goods, even if one of them gives a more complete or
               precise description of the goods.
         (b)   mixtures, composite goods consisting of different
               materials or made up of different components, and              B
               goods put up in sets for retail sale, which cannot be
               classified by reference to (a), shall be classified as if
               they consisted of the material or component which gives
               them their essential character, insofar as this criterion
               is applicable.
                                                                              C
         (c)   when goods cannot be classified by reference to (a) or
               (b), they shall be classified under the heading which
               occurs last in numerical order among those which
               equally merit consideration.”
      29. Interestingly Rule 2(a) speaks about “Article”, Rule 2(b)           D
speaks about “material or substance” as well as “goods of a given
material or substance” and Rule 3 speaks about “goods”.
      30. In the case on hand, 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       E
product is referable to goods of a specific description in Chapter sub-
Heading 8536.90 and that, therefore, General Rule 3(a) will apply.
       31. But in invoking General Rule 3(a), the Authorities have omitted
to take note of 2 things. They are : (i) that as laid down by this Court in
Commissioner of Central Excise Vs. Simplex Mills Co. Ltd 1 the                F
General Rules of Interpretation will 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 (ii) 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        G
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
1
    (2005) 3 SCC 51
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634               SUPREME COURT REPORTS                       [2021] 3 S.C.R.


A     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
B     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
C
            (a)     xxxx
            (b)     xxxx
            (c)     xxxx
            (d)     xxxx
D
            (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 uses the words “parts of the foregoing”
E     after the words “Railway or tramway track fixtures and fittings” etc.
      Chapter Heading 8608 does not specifically mention “electrical relays”.
      The assessee’s contention is that “it is part of the railway signaling
      safety or traffic control equipment” and that, therefore, Relays
      manufactured by them would fall under Chapter Heading 8608 due to
F     the usage of the word “parts”. It is this contention that is sought to be
      repelled by the Authorities by relying upon Note 2(f) of Section XVII.
            34. Though at first blush, Note 2(f) seems to apply to the case on
      hand, it may not, upon a deeper scrutiny.
            35. Note 3 of Section XVII reads as follows:
G
            “References in Chapters 86 to 88 to “parts” or “accessories”
            do not apply to parts or accessories which are not suitable
            for use solely or principally with the articles of those Chapters.
            A part or accessory which answers to a description in two or
            more of the headings of those Chapters is to be classified
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  WESTINGHOUSE SAXBY FARMER LTD. v. COMMR. OF                                 635
CENTRAL EXCISE CALCUTTA [V. RAMASUBRAMANIAN, J.]

         under that heading which corresponds to the principal use            A
         of that part or accessory.”
       36. What is recognized in Note 3 can be called the “suitability
for use test” or ‘the user test’. While the exclusion under Note 2(f)
may be of goods which are capable of being marketed independently as
electrical machinery or equipment, for use otherwise than in or as Railway    B
signaling equipment, those parts which are suitable for use solely
or principally with an article in Chapter 86 cannot be taken to a
different Chapter as the same would negate the very object of group
classification. This is made clear by Note 3.
        37. It is conceded by the Revenue that the relays manufactured        C
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.
       38. On the question as to what test would be appropriate in a          D
given case, this court pointed out in A. Nagaraju Bros Vs. State of
A.P.2, as follows:
         “…..there is no one single universal test in these matters. The
         several decided cases drive home this truth quite eloquently.
         It is for this reason probably that the common parlance test         E
         or commercial usage test, as it is called, is treated as the more
         appropriate test, though 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         F
         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.                         G
       39. As pointed out by the Commissioner (Appeals), the goods
were previously classified (before 1993) under Sub-heading 8536.90,
but a revised classification list, classifying them under sub-heading 8608,
2
    1994 Supp( 3) SCC 122                                                     H
636             SUPREME COURT REPORTS                            [2021] 3 S.C.R.


A     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.
B            Question No.2
            40. The second question that arises for consideration is as to
      whether the show cause-cum-demand notices issued by the Department
      on various dates during the period 1995-1998 were not barred by time
      under Section 11-A of the Central Excise Act, 1944, in the absence of
C     any fraud, collusion, willful misstatement or suppression of facts,
      especially since the classification list submitted by the appellant have
      been approved on 27.08.1993.
             41. At the outset we should point out that this is not a case where
      the extended period of limitation would apply, especially in the light of
D     the admitted position that the assessee who had his product classified
      under sub-heading 8536.90 till the year 1993, specifically filed a
      classification list on 27.08.1993, reclassifying them under sub-heading
      8608 and the same was also approved by the competent authority.
      Therefore, there is no question of any fraud or collusion or any willful
      misstatement or suppression of facts or contravention of any of the
E     provisions of this Act or of the rules made there under with intent to
      evade payment of duty. It is not even the case of the Department that
      the appellant was guilty of any of these things, warranting the invocation
      of the extended period of limitation. Therefore, the conclusion is
      inescapable that the Revenue had only the normal period of limitation
F     available to them to invoke the power under Section 11-A.
            42. As a matter of fact the first Appellate Authority held in the
      penultimate paragraph of its Order as follows:
             “I find that the subject goods were previously classified under
             sub-heading No.8536.90 and then the appellant asked for
G            reclassification of the goods under sub-heading No.8608.00.
             The new classification was approved by the proper authority
             and the appellant paid duty according to the approved
             classification. Hence there is no violation of any provisions
             of law on the part of the appellant and therefore penalty is
             not imposable under rule 173Q.
H
  WESTINGHOUSE SAXBY FARMER LTD. v. COMMR. OF                                637
CENTRAL EXCISE CALCUTTA [V. RAMASUBRAMANIAN, J.]

       43. The Appellate Authority also held without any discussion, that    A
the show cause notices were issued within the time limit envisaged in
Section 11-A and that “any discussion on the jurisdiction of
invocation of extended period is not at all required”. Therefore, it is
obvious that none of the Authorities chose to invoke the extended period
of limitation, but proceeded on the footing that all show cause notices
                                                                             B
were issued within the normal period of limitation. If only any of the
Authorities had taken care to look at the dates of the 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 11-A was     C
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         D
are as follows:




                                                                             E




                                                                             F




                                                                             G




                                                                             H
638                SUPREME COURT REPORTS                         [2021] 3 S.C.R.


A            45. It could be seen from the above table (i) that all show cause
      notices were of a date prior to 12.05.2000 and hence the normal period
      of limitation was only six months; and (ii) that at least a couple of show
      cause notices were issued in respect of a period partly or fully beyond
      the period of limitation. Unfortunately neither the Appellate Authority
      nor CESTAT took care to analyze the show cause notices individually
B
      with reference to the period covered by them.
             46. In any case all the show cause notices were issued only on
      and after 30.08.1995, raising a classification dispute, after having approved
      the classification list submitted on 27.08.1993. The dispute in the case
      on hand was one of classification alone, applicable to the product
C     manufactured during the entire period after 27.08.1993. The dispute was
      not invoice-centric. Therefore, what was sought to be done by the Original
      Authority was actually to review the approval of the classification list
      submitted on 27.08.1993 by cleverly issuing separate notices covering
      certain specific periods. What is to be seen here is that the attempt to
D     undo the effect of the approval of the classification done on 27.08.1993,
      was actually time barred. Therefore, despite the fact that some of the
      individual notices were issued within the period of limitation either in
      respect of the part of the period or in respect of the whole of the period
      covered by them, the very invocation of Section 11-A, in the facts and
      circumstances of the case, cannot be said to be within time.
E
             47. Therefore, both questions of law are answered in favour of
      the appellant and the appeal is allowed. The Orders-in-Original, the Order
      of the Appellate Authority and the Order of the CESTAT are set aside.
      Consequently, the show cause-cum-demand notices are also set aside.
      There will be no order as to costs.
F
      Nidhi Jain                                                     Appeal allowed.




G




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