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Westinghouse Saxby Farmer Ltd. v. Commr. of Central Excise, Calcutta

Civil Appeal · 2021 INSC 158Decided 8 Mar 2021
Civil Appeal No. 37 of 2009
Chief Justice S.A. Bobde · Justice A.S. Bopanna · Justice V. Ramasubramanian

Background

The appellant, a West Bengal government-owned company, manufactures "Relays" used in railway signalling equipment. In 1993, when the excise duty rate for the tariff heading covering relays (8536.90) became much higher than for railway signalling equipment (8608), the appellant got its classification list approved placing its products under the lower-duty heading 8608. Years later, after a 1996 CBEC circular said "plug-in type relays" should fall under 8536, the excise department issued nine separate show-cause notices demanding differential duty for various periods, and the demand was confirmed by the authorities and upheld by the CESTAT (tribunal).

Decision Breakdown

The Supreme Court held that because the appellant's classification under heading 8608 had been formally approved by the competent authority in 1993 and never set aside or reviewed through the proper process, the department could not later use piecemeal show-cause notices covering specific periods to effectively re-open and overturn that approved classification. Since the dispute was not about any single invoice but about undoing the entire 1993 classification approval, the attempt was barred by limitation even though some individual notices were technically issued within the normal time limit. The Court set aside the CESTAT's order, the appellate authority's order, and the original orders, and quashed the show-cause-cum-demand notices, allowing the appeal with no order as to costs.

Lesson Learnt

Once a tax classification is formally approved by the authorities, the department cannot bypass the limitation period for reopening it by disguising a wholesale review as a series of separate, narrower show-cause notices; the real substance of what is being demanded, not its formal packaging, determines whether it is time-barred.

Official source (sci.gov.in)View Judgment (PDF)

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