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CASE NO.: Appeal (civil)  5403-5406 of 1999

PETITIONER: Commissioner of Central Excise

RESPONDENT: M/s Eswaran & Sons Engineers Ltd.

DATE OF JUDGMENT: 05/01/2005

BENCH: S.N. VARIAVA, Dr. AR. LAKSHMANAN & S.H. KAPADIA

JUDGMENT: J U D G M E N T

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.

        The 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.    The assessee paid duty by classifying the same under Tariff  sub heading 8535 of Central Excise Tariff Act, 1985.   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 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.  

       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 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.

       On the other hand, it was the case of the Department  that the components of Minimum Oil Circuit Breaker

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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 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 the conclusion that  Circuit Breakers were  classifiable under sub heading 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 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 dismissed.                   Being 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.                  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 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.                  Before 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

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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.  Heading  No. Sub- heading  No. Description 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.  20% 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.

       Now 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

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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.

       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 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  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  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 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  Birla Jute And Industries Ltd. v. Assistant Collector  of Central Excise, reported in [1992 (57) ELT 674].  Ruma Pal, J. (as she then was) has succinctly analysed  the provisions of Section 37B by laying down the  following principles:- "(1)    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  directive/instruction issued.

(2)     The instructions which may be binding  on the Central Excise Officers are not binding  on the Assessee who may question the

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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 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.          

       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.