Holding

The Circular dated 14‑July‑1994 is not applicable to the present case and cannot bind the assessing officer or appellate authority, so the Tribunal’s order is set aside.

Summary

Mis. Eswaran and Sons Engineers Ltd manufactured Minimum Oil Circuit Breakers and had been paying excise duty by classifying them under tariff sub‑heading 8535. The Department issued show‑cause notices in 1993‑94 seeking reclassification to sub‑heading 8537 and the Assistant Collector reclassified the goods on 19‑Dec‑1994. The assessee appealed, relying on a Circular dated 14‑July‑1994 issued under Section 37B of the Central Excise Tariff Act, which stated that such goods would fall under 8537 prospectively. The Tribunal held the Circular to be prospective and limited the demand to periods after its issuance. The Supreme Court held that, because the reclassification and the show‑cause notices were issued before the Circular, the proviso to Section 37B prevents the Circular from binding the assessing officer or the appellate authority, rendering it inapplicable. Consequently, the Tribunal’s order was set aside and the appeals were allowed.

Issues considered

Whether a circular issued under Section 37B/Section 378 of the Central Excise Tariff Act can be applied prospectively to a case where the assessment or reclassification was initiated before the circular.
Whether the proviso (a) and (b) to Section 37B/378 bars the circular from binding the assessing officer or the Commissioner of Central Excise (Appeals).
Whether the Department can restrict the demand for differential duty to the period after the circular’s issuance.

Legislation cited

Central Excise Act, 1944s. 35L

Subjects

classificationcentral excisecircularSection 37Btariff sub‑headingprospective effectdiscretionexcise dutyminimum oil circuit breaker

Judgment

A COMMISSIONER OF CENTRAL EXCISE
v.
MIS. ESWARAN AND SONS ENGINEERS LTD.

JANUARY 5, 2005

B
(S.N. VARIA VA, DR. AR. LAKSHMANAN AND S.H. KAPADIA, JJ.]

Central Excise Tariff Act, 19135; Section 37B and Proviso (a) and (b)I
Tariff sub-heading 8535 and 8537 and Circular dated 14.7.1994:
c Classification-Minimum Oil Circuit Breakers-levy of excise duty-
Assessee classifoing the product under tariff sub-heading 8535-/ssuance of
Circular by the Board clarifoing that the product falls under the sub-heading
8537 prospectively-Applicability of the Circular-Held: Though Circulars
being issued by the Board for maintaining uniformity in the classification of
C excisable goods, Circulars could not restrict the Authorities to exercise their
discretionary power in the specified manner-Since assessing authority had
taken a prima facie view by reclassifoing the product under sub-heading
8537 before issuance of the Circular, the Circular has no application to the
facts and circumstances of the case.
E Assessee-manufacturer of Minimum Oil Circuit Breakers, calculated
excise duty by showing classification of the product under tariff sub-
heading 8535 of the Central Excise Tariff Act. Assessing Authorities issued
show cause notices to the assessee proposing to revise the classification
from sub-heading 8535 to sub-heading 8537 of the Act, and came to the
F finding that the product was classifiable under the sub-heading 8537, and
accordingly ordered the assessee to pay differential amount of duty. On
appeal, the appellate authority took note of a Circular dated 14.7.94 issued
by the CBEC/Board clarifying that the product in question would fall
under the sub-heading 8537 and accordingly ordered re-classification of
the product prospectively and to that extent alone raised demand of
G differential amount of excise duty. The order was affirmed by the Tribunal
(CEGAT). Hence the present appeals.

Revenue contended that since show cause notices were issued by the
assessing authorities prior to issuance of the Circular, the Tribunal erred

H 108
C.C.E. v. ESWARAN & SONS ENGINEERS LTD. [KAPADIA, J.] 109

in restricting the demand raised by them. A
Allowine the appeals, the Court

HELD: Under Section 378 of the Central Excise Tariff Act, the
Board is empowered to issue instructions to Central Excise Officers, for
the purpose of maintaining uniformity in the classification of excisable B
goods, which are required to be followed by such officers. However, under
proviso (a) to Section 378 of the Act an exception is made that the
instructions, orders or directions cannot make any Central Excise Officer
to dispose of a particular case in a particular manner. Similarly, under
proviso (b) such instructions shall not bind the discretion of Commissioner C
of Central Excise (Appeals), discharging appellate functions. In view of
the proviso to Section 378 as also in the present case, the Assistant
Collector had taken a prima facie view for purposes of reclassification as
far back as 17.12.1993. Therefore, the Circular which was issued by the
Board on 14.7.1994 had no application to the facts of the present case.
Hence, the impugned judgment of the Tribunal is set aside. D
[113-D-E; 114-DJ

Bir/a Jute And Industries Ltd v. Assistant Collector of Central Excise,
(1992) 57 ELT 674, approved.

H.M Bags Manufacturer v. Collector of Central Excise, (1997) 94 ELT E
3, held inapplicable.

CIVIL APPELLATE JURJSD!CTION : Civil Appeal Nos. 5403-5406
of 1999.

From the Judgment and Order dated 26.9.1999 of the Central Excise p
...
'
Customs and Gold (Control) Appellate Tribunal, South Zonal Bench at Madras
in A.No. E./689-692/95 in F.O. No. 864-867 of 1999.

A. Subba Rao and B. Krishn Prasad for the Appellant.

The Judgment of the Court was delivered by G
KAPADIA, J. These 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. H
110 SUPREME COURT REPORTS [2005] I S.C.R.

A The facts giving rise to these civil appeals, briefly stated, are as follows:

On 17th December, 1993 Mis. Eswaran and Sons Engineers Limited
(hereafter referred to as 'the assessee') was engaged in the manufacture of
Minimum Oil Circuit Breakers. The assessee paid duty by classifying the
same under Tariff sub heading 8535 of Central Excise Tariff Act, 1985.
B According 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
C 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.

D By 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
E in cases where the voltage exceeded 1OOOV. 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.

F On the 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.
According 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
G 8537.

By 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
H
C.C.E. v.ESWARAN & SONS ENGINEERS LTD. [KAPADIA . .I.] 111
the conclusion that Circuit Breakers were classifiable under sub heading A
8537.00.

Being 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 B
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 C
indoor and outdoor, which consists of electrical components such as fuse,
tenninals, 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
dismissed.

Being aggrieved by the aforestated two orders, the assessee preferred D
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 378 the quantum of duty leviable needed recalculation as the said
Circular dated 14.7.1994 operated prospectively. The tribunal noted that the E
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 refl.. nd the
balance. Hence, these civil appeals by the Department. F
Shri 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 G
by the Assistant Collector. Therefore, 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.
Despite notice none appeared for the assessee.
H
Before dealing with the above arguments, for the sake of convenience,
112 SUPREME COURT REPORTS [2005] I S.C.R.

A 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.

CHAPTER-85 ELECTRICAL MACHINERY AND EQUIPMENT
AND PARTS THEREOF.
B
Heading Sub- Description of goods Rate of
No. heading duty
No.
(1) (2) (3) (4)

c 85.35 8535.00 Electrical apparatus for switching or 20%
protecting electrical circuits, or for making
connections to or in electrical circuits (for
exam pie, switches, fuses, lightining
arresters, voltage limiters, surge suppressors,
plugs, junction boxes), for a voltage
D exceeding 1,000 volts.

85.37 8537.00 Boards, panels (including numerical control 20%
panels), consoles, desks, cabinets and other
bases, equipped with two or more apparatus
E 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.
F
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
G 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.

Now coming to the question of interpretation of Section 37B of the
H 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
C.C.E. v. ESWARAN & SONS ENGINEERS LTD. [KAPADIA, J.] 113

not entitled to demand duty on the basis of reclassification for the period A
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, B
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. c
Under Section 3 7B 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. The said proviso states that the said Instructions, orders D
or directions cannot make any Central Excise Officer to dispose of a particular
case in a particular manner. Similarly, 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 E
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. Therefore, 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 F
prior to the issuance of Instructions by the Board. Therefore, the said judgment
has no application to the facts of the present case.

The extent and scope of Section 37B came up for consideration before
the Calcutta High Court in the case of Bir/a Jute and Industries ltd. v.
Assistant Collector of Central Excise, reported in (1992) 57 EL T 674. Ruma G
Pal, J. (as she then was) has succinctly analysed the provisions of Section
37B by laying down the following principles:-"

"(l) There is a distinction between a decision in a particular
assessment by a quasi-judicial authority and a decision on principle H
114 SUPREME COURT REPORTS [2005] I S.C.R.

A 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 /is before such quasi-judicial
authority cannot take a stand contrary to the directive/instruction issued.

(2) The instructions which may be binding on the Central Excise
B 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.

(3) An assessee has on the other hand the right to claim and the court
C 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.
D
For 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.

S.K.S. Appeals allowed.