CBIC Instruction on classification of parts & accessories of automobiles comes as relief after much debated Westinghouse judgment
We apprised you regarding rising disputes on classification of parts and accessories of automobiles in light of the Supreme Court judgment in the case of Westinghouse Saxby Farmer Limited v. CCE, 2021-VIL-33-SC-CE (‘Westinghouse’) and its incongruity with earlier jurisprudence in this regard. Yesterday, the CBIC has issued Instruction dated January 5, 2022 (‘Instruction’) that has come up as a big relief on this issue.
The Instruction clarifies the following:
- Law laid down in Westinghouse ought not to be generalized. The Apex Court accorded primacy to ‘sole and principal use’ under Note 3 of Section XVII to exclusion of Note 2 which is contrary to earlier jurisprudence.
- Classification of goods should be done as per relevant Section, Chapter and HSN Explanatory Notes and earlier jurisprudence. Earlier Supreme Court judgments like CCE v. Uni Products India Limited, 2020 (372) ELT 465 (SC) emphasized utility of HSN Explanatory Notes in determining classification and the Court was not apprised of these judgments in Westinghouse.
- Westinghouse pertains to case under the Central Excise Tariff Act, 1944 (‘Central Excise Tariff’) in 1994, when the Central Excise Tariff was not aligned with the Customs Tariff Act, 1975.
- Westinghouse decided classification of a specific product i.e. ‘relays’ used in railway signaling equipment of Chapter 86 and not parts of goods falling under Chapter 87.
The Instruction also mentions that the department has filed a review petition against Westinghouse.
NITYA Comments: It is a trite law that judgment of the Supreme Court is law of land and can only be negated via Larger Bench judgment of the Supreme Court or via legislative change. In our view, irrespective of its correctness, law laid down by the Apex Court still holds authority. To that extent, the CBIC is not empowered to issue Instruction stating that law laid down by the Apex Court is not good law. Having said that, legal position laid down in the Instruction is legally correct and will put many disputes at rest for automobile industry.
On this issue, Mr. Deepak Suneja, Partner at NITYA Tax Associates has also shared his views in video available at https://youtu.be/fyS_DDxUUJk
Hope you find this an interesting read and watch! Please feel free to share your comments / feedback on the same.
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