SC on Classification of ‘relays’ used as part of railway signalling system

Westinghouse Saxby Farmer Ltd. Vs Commr. of Central Excise Calcutta (Supreme Court of India)

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 product is referable to goods of a specific description in Chapter sub­Heading 8536.90 and that, therefore, General Rule 3(a) will apply.

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. Ltd1 the 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 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 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.

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 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 that is sought to be repelled by the Authorities by relying upon Note 2(f) of Section XVII.

Though at first blush, Note 2(f) seems to apply to the case on hand, it may not, upon a deeper scrutiny.

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