The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Ahmedabad Bench held that greenhouses cleared in ready-to-assemble sets fall under tariff item 9406 00 11, but set aside a ₹2.67 lakh duty demand because the show cause notice was issued too late.

The bench of Dr. Ajaya Krishna Vishvesha (Judicial Member) and Satendra Vikram Singh (Technical Member) has set aside a central excise duty demand of ₹2,67,667 against the assessee, along with interest and an equal penalty. The Tribunal upheld the department’s classification of the company’s greenhouses, but ruled that the demand for clearances made between March and December 2014 was barred by limitation.

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The dispute turned on the Finance Act, 2016 amendment that increased the normal time limit for issuing a central excise show cause notice from one year to two years. The Tribunal held that the longer period could not revive demands for which the earlier one-year limit had already expired.

The appellant/assessee manufactured customised greenhouses. In its monthly excise returns, it classified the goods under tariff item 8419 89 60, which covers plant growth chambers and rooms with temperature, humidity or light control. It paid duty at a concessional rate under Notification No. 04/2014-CE.

After scrutinising the returns, the department took the view that the goods were greenhouses in ready-to-assemble sets classifiable under tariff item 9406 00 11. It issued a show cause notice on 26 July 2016 seeking differential duty of ₹2,67,667 for the March–December 2014 period, with interest and penalty.

The Assistant Commissioner confirmed the demand and imposed an equal penalty in May 2017. The Commissioner (Appeals) upheld that decision in February 2018, prompting the company to approach CESTAT.

The assessee said it cut, drilled, bent and welded galvanised iron pipes at its factory, but that this accounted for only part of greenhouse construction. According to the company, workers then fixed the pipes to a civil foundation at the customer’s site and installed covering material, irrigation equipment, climate-control systems and other components as required.

It argued that it did not clear a complete greenhouse, or even an unassembled greenhouse structure, from its factory. It also contended that a greenhouse became immovable property after installation.

On limitation, the company pointed to its duty-paying invoices and monthly returns, which disclosed the classification it had adopted. Its counsel also said the company had written to departmental authorities in 2013 seeking clarification on the classification and dutiability of greenhouses. The department, the company argued, could not invoke the extended period when it already knew the relevant facts.

CESTAT rejected the company’s proposed classification. It examined tariff heading 9406, which covers prefabricated buildings and specifically includes “green house—in ready to assemble sets” under item 9406 00 11.

The Bench found that assessee processed materials at its factory and cleared an identifiable greenhouse in ready-to-assemble condition. Final installation took place at the site because transporting the bulky structure fully assembled would have been difficult.

Applying the tariff interpretation rule that prefers a specific description over a general one, the Tribunal held that item 9406 00 11 prevailed over the company’s claimed item 8419 89 60. It also relied on an earlier CESTAT decision concerning ready-to-assemble greenhouses in Jain Irrigation Systems Ltd.

The department argued that the show cause notice was issued after the 2016 amendment had increased the normal notice period to two years. On that basis, it submitted that at least a substantial part of the demand remained recoverable.

The Tribunal disagreed. It held that the 2016 amendment did not operate retrospectively to restore demands that had already become time-barred under the previous one-year period. In reaching that conclusion, it referred to a CESTAT decision in Aveco Technologies Pvt Ltd addressing a similar increase in the customs notice period.

Because the notice to the assessee was issued on 26 July 2016 for clearances made from March to December 2014, the Tribunal held that the one-year period had expired before the amendment took effect. It therefore allowed the appeal on limitation and set aside the duty demand, interest and penalty, while maintaining the classification under tariff item 9406 00 11.

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