Supreme Court Upholds Pantographs Classified Under Railway Parts, Not General Electrical Equipment [Read Judgement]

The Supreme Court of India upheld the decision of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai Bench, confirming that pantographs used in railway locomotives are to be classified as railway parts under Chapter Heading 8607 and not as general electrical equipment under Chapter Heading 8535.

Faiveley Transport Rail Technologies India Pvt. Ltd., the respondent, is a manufacturer of railway components including brake systems, pantographs, doors, and couplers. The company had classified several of these goods, including pantographs, under Chapter 86 of the Central Excise Tariff, which relates to railway or tramway locomotives and their parts, and paid excise duty accordingly at a concessional rate.

The Department of GST and Central Excise, Salem, issued a show cause notice alleging that the goods had been misclassified. They argued that pantographs should have been classified under Chapter 85, specifically Heading 8535, which covers general high-voltage electrical equipment, and sought to recover the differential duty of over Rs. 8.5 crore.

A corrigendum was later issued changing the classification of pantographs to Heading 8535 and increasing the duty demand. The adjudicating authority upheld the demand, leading the company to file an appeal before the Tribunal.

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The appellant’s counsel argued that pantographs are custom-designed solely for use in railway locomotives and cannot be used elsewhere. They argued that as per the principal use test and judicial precedents such as Westinghouse Saxby Farmer Ltd., the goods rightfully fall under Chapter 86.

The revenue’s counsel argued that the classification must follow the interpretative rules of the tariff schedule and not solely the intended use of the goods. The department also claimed suppression of facts and sought to justify invoking the extended limitation period for demanding duty along with interest and penalty.

The two-member bench of the CESTAT, Chennai, comprising Justice P. Dinesha (Judicial Member) and M. Ajit Kumar (Technical Member) found that the department failed to provide sufficient reasoning for reclassifying pantographs under Heading 8535.

The tribunal observed that pantographs were purpose-built for railway use and that classification should be based on their principal and exclusive use, so they should be classified as railway parts under CTH 8607, not under general electrical equipment.

The department appealed the CESTAT ruling to the Supreme Court. After hearing both parties, the Supreme Court bench comprising Justice Abhay S. Oka and Justice Ujjal Bhuyan condoned the delay in filing but found no reason to interfere with the Tribunal’s well-reasoned order. The appeal was dismissed.

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