2025-VIL-17-CESTAT-CHE-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise – Classification of Parts of Railway Locomotive, Section Note 2(e) vs Section Note 3, Sole/Principal Use Test - Appellant had classified certain electrical machinery parts and accessories manufactured and cleared to Indian Railways under Chapter 86 of the Central Excise Tariff Act, 1985 (CETA) as attracting 5% duty - Department alleged that such parts merit classification under respective Chapters 84 or 85, as per Section Note 2(f) of Section XVII of CETA - Whether the goods manufactured and cleared by the Appellant should be classified under Chapter 86 or under Chapters 84/85 of CETA - HELD - The parts of railway diesel locomotive are more appropriately classifiable under CETH 86079100 - the decision of the Hon'ble Supreme Court in Westinghouse Saxby Farmer Ltd. case gave precedence to the 'sole or principal use test' of Section Note 3 over Note 2(f) of Section XVII. The Appellant's goods were manufactured as per the designs submitted by Indian Railways and have to be specifically treated as part of Diesel Locomotive, thus more appropriately classifiable under Chapter 86 – The parts of railway diesel locomotive are more appropriately classifiable under CETH 86079100 - the issue regarding classification is decided in favour of the appellant - In the absence of any finding as to intent of suppression by the Appellant in the impugned order, the allegation of wilful misclassification and intention to evade duty by the appellant is not tenable as misclassification could not be equated with misdeclaration. Further, the issue of limitation is also decided in favour of the appellant and consequently, the penalties imposed are set aside – the appeal is allowed
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