Customs, Excise and Gold Tribunal - Delhi
M/S. Cold Breeze Engg. Pvt. Ltd. vs Cce, Vadodara on 29 May, 2001
Equivalent citations: 2001(76)ECC402
ORDER
V.K. Agrawal
1. The issue involved in this appeal, filed by M/s.Cold Breeze Engineering Pvt. Ltd., is whether they removed Air Conditioners from their factory premises in the guise of kits/components and suppressed the value for claiming the benefit or exemption under Notification No. 64/83-CE dated 1.3.1983.
2. Shri Himanshu Desai, learned Advocate, mentioned that the Appellants manufacture and supply air conditioners, water coolers and parts thereof; that they also provide service for installing, maintaining or renting air-conditioners, water coolers; that they surrendered their L-4 licence ad the activity of manufacturing water coolers was discontinued during 1983-84, that after having crossed the prescribed limit,they obtained L-4 licence again on 5.9.1986 for manufacture of air-conditioner and split unit, water cooler and cooler-cum-filter;that Central Excise Officers visited their premises on 26.8-1986 and subsequently visited the premises of various customers and issued show cause notice dated 15.2.89 for demanding the duty amounting to Rs.5,27,000/- for the period 1984-85 to 1986-87 on the ground that they had cleared fully assembled air conditioners quise of parts without payment of duty and certain air-conditioners said to have been procured on rental basis or purchased in second hand conditions were actually manufactured by them.
3.1 The learned Advocate submitted that every alleged consignment of air-conditioner did not have one or the other very vital compound and thus none of these supplies could even remotely be considered as air-conditioners; that the air-conditioners were never assembled at their factory premises; that the duty as per Tariff Item 29A of the erstwhile Central Excise Tariff is leviable only "ready assembled units" and as the air-conditioners in question were not in ready assembled units, no duty is leviable.The learned Advocate, further , submitted that the statements had been recorded after lapse of more than one years from thee date of visit of officers of their factory premises and as such no reliance can be placed on them; that Shri Mahendrabhai Sharma of M/s. Variety Engineers, in his statement dated 24.8.96, had clearly deposed that he had purchased kit for one ton air-conditioner and the same was assembled in his factory; that in his further statement dated 7.8.87, he had confirmed to have received only kit; that this clearly goes to show that the appellants were not indulging in clearing their conditioners in the guise of parts.
3.2 The learned Advocate also mentioned also mentioned that Shri Raman Ishwar Patel, Store Keeper of Bhailal Amin General Hospital, in his statements dated 4.6.87 had clearly deposed that parts of two air-conditione were purchased; that their-conditioner was installed in their hospital by the supplier's man; that in his record statement dated 5.6.87, he had shifted the stand and had apparently given the same in the way required by the Officers.
3.3. He also mentioned that Shri K.P.Mankodi, Director of the Appellant company, on his statement had cleared deposed that they had supplied only parts and never engaged any mechanic for assembling work.
3.4. He further submitted that generally one bill was issued by the Appellants in most of the cases; that whenever two bills were issued, certain vital parts were missing.The learned Advocate referred to a statement at Page 219 of the paper Book which shows that one or the other part was missing in the items supplies by them; that the Department has not proved that the Appellant had not supplied component parts but had, in fact, supplied the fully manufactured/assembled air-conditioner.
4. The learned Advocate also mentioned that the Tariff Item 29A clearly envisaged that the clearance of ready assembled units only were excisable; that as they had cleared only components or kits of air-conditioners and not ready assembled air-conditioners, no duty is payable by them. He relied upon the decision in the case of Mother India Refrigeration Industries P.Ltd. vs. Superintendent of Central Excise, 1980 ELT 600 (All), wherein it was held by the Allahabad High Court that "the Central idea underlying entry 29A is that the dutiable article must be an assembled unit which is ordinarily sold or offered for sale. If a person erects a unit with his own ingenuity, that is not liable for duty. It is further cleared that component parts erected at the site are equally outside the purview of entry 29A as they are not assembled units." Reliance was also placed on the decision in Frick India Ltd. vs. UOI, 1990 (48) ELT 627 (SC).He also relied upon the decision in CCE vs. Subros Ltd., 1989 (43) (T) wherein it was held that goods are not be classified as air-conditioning machine under Sub-heading 8415.00 of the Schedule to the Central Excise Tariff Act unless equipped with motor driven fan or blower.Finally the learned Advocate relied upon the decision in the case of Calicut Refrigeration Co. vs.CCE, 1982 (10) ELT 106 (Ker) wherein it was held by the Kerala High Court that the words 'Ordinarily sold or offered for sale as a ready assembled unit' mentioned din Item 29A would refer to those units which are very well known to the consumer and are available for sale in the market as assembled units.
5. Finally, the learned advocate submitted that in any case, if it is held that duty is payable by them, the price has to be treated to be cum-duty price and the assessable value has to be determined from such cum duty price as held in CCE vs. Pawan Tyres Ltd., 1997 (93) ELT 635;that the benefit of Notification No. 95/83-CE has not been extended to them by the Collector; that they would be eligible for set off of duty paid on various inputs such as copper pipes and tubes, steel sheets and plates, aluminium and products thereof, electric motors, fans, compresses, etc. under Notification No. 201/79.
6. Countering the arguments, Shri M.P. Singh, learned D.R., submitted that the customers were placing the order for A.C. Kit as per the advice of Appellants which is admitted by shri Mahendra Vijayendra Shrma, Director of M/s. Variety Engineers Pvt. Ltd. in his statement dated 7.8.87; that the Appellants were giving quotations for A.C. kit whereas their buyers wanted the quotation for air-conditioner which is evident from the statement of Shri K.P. Mankodi, Director of the Appellant Company; that the statement dated 7.8.87 of Shri A.S.Murthy, Executive Engineers, G.E.B. to the effect that he had purchased Air-conditioner from the Appellant had not been rebutted.The learned D.R., further, submitted that even after surrender of their excise licence for manufacture of Air-conditioner in 1984, the Appellants continued to manufacture air-conditions by adopting the modus operandi of supplying A.C. kits; that for installing the air-conditione the Appellants were deputing their person; that it is not believable that the assembly of the air-conditioner was done by other person and in installing the air-conditioner, the assembly has to take place and as such they had supplied the ready assembled units.Referring to the Bills issued by the Appellants at Page 160 onward of the Paper Book, the learned D.R. contended that the bills were issued by the Appellants for the entire value of their-conditioner.Regarding the appellants plea of giving Air-conditioners on rent, the learned D.R. submitted that the Appellants had not produced any documents for purchasing the air-conditioners; that the burden of proof is on them to prove that they had not manufactured those air-conditioners; that as they had not denied the Air-conditioners being given by them on rent, they should adduce the evidence to prove those air-conditioners were not manufactured by them; that this burden cast upon them has not been discharged by them.He also mentioned that M/s. Refcon Enterprise from whom the Appellants claim to have purchased air conditioners deal only in refrigeration gas and spare parts; that the authenticity of the receipts issued by M/s. International Electrical for receiving cash from the Appellants towards rental charges is doubtful as no proof about their existence has been adduced by them.
7. In reply, the learned Advocate mentioned that Shri R.J. Patel, in his cross examination, in answer to the question whether he received individual components or a compete assembled air-conditioner has mentioned that he had counted the number of individual articles and components; that as such findings of the Commissioner in Para 13 of the impugned Order that "Shri R.J. Patel said that he had not received components..." is factually wrong; that Shri Patel also stated in his cross examination that electrician and carpenter who attended to the work of installation was hired employee; that Shri S.L. Saggu, Superintendent also in his cross examination mentioned that purchase Order No. 733 of M/s. Mercury Laboratories Pvt. Ltd., mentioned major items, some other small parts also required were not mentioned; that M/s.Unicure Pharmaceutical, Bhailal Amin General Hospital have given certificate to the effect that they purchased only components for window type air-conditioner units; that M/s. Manish Enterprises in their letter dated 8.10.1986 addressed to the Superintendent (Preventive) has mentioned that they has purchased only components and the Air-conditioner was assembled by Harish J.Patil, a refrigeration mechanic.
8. We have considered the submissions of both the sides.Tariff Item 29A of the erstwhile Central Excise Tariff reads as under:
29A REFRIGERATING AND AIR-CONDITIONING APPLIANCES AND MACHINERY, ALL SORTS, AND PARTS THEREOF-
(1) Refrigerators and other refrigerating appliances, which are ordinarily sold or offered for sale as ready assembled units, such as ice makers, bottle coolers, display cabinets and water coolers.
(2) Air-conditioners and other air-conditioning appliances, which are ordinarily sold or offered for sale as ready assembled units, including package type of air-conditioners and evaporative type of coolers.
(3) Parts of refrigerating and air-conditioning appliances and machinery, all sorts.
9. The Appellants have contended that they were not clearing ready assembled unit of Air-conditioners from their factory as they were only clearing A.C. kit, the question of their paying duty as Air-conditioning unit does not arise as the product was not ready assembled unit.In support of their contention they have relied upon the decision in the case of Mother India Refrigeration Industries P. Ltd., Calicut Refrigeration Co., Subros Ltd.and Frick India Ltd. After going into the findings of the Commissioner as recorded in the impugned Order and the submissions made by learned D.R. on behalf of the Revenue and submissions made by the learned Advocate for the Appellants, we are of the view that the Appellants are liable to payment of duty on the Air-conditione under Item 29A of the old Central Excise Tariff.It is apparent from the statement of Mahendra Sharma, Director of Variety Engineers Pvt. Ltd. that the order for A.C. kit was placed by them as per the advice of the Appellants; that they wanted Air-conditioner for their company.He, in his both statements dated 14.9.86 and 7.8.87 had clearly deposed that Air-conditioner was assembled in his factory by the mechanic of the Appellant.It is also significant to note that Shri Mahendra Sharma deposed that he had not purchased or brought any other parts or materials required for assembling the air-conditioner, thus disproving the contention of the Appellants that some part(s) were missing in their supply of kit.It is also evident, as submitted by the learned D.R. , that before installing the air-conditioner, it has to be made into a ready assembled unit which is chargeable to duty. We also note that Shri R.J. Patel,Store Keeper of M/s. Bhailal Amin General Hospital, even in his first statement dated 4.6.87 deposed that except Parta set, grill and name plates, all the parts were in assembled conditions and packed in carton box and no other parts were received. He had further deposed that the Appellants had sent one man for installing the air-conditioner who was assisted by two employees of the hospital.In his cross examination, Shri R.J. Patel only said that he counted the number of individual articles and components.There is no denial by him that except Patraset, grill and name plates, all the parts were in assembled condition. No question was put to Shri Patel about his deposition that the Appellants had sent his man for installation. That fact remains unrebutted. Further, no question has been put in cross examination as to who assembled the Air-conditioner from the components as if components were received, these have to be assembled before installation. It is not believable that a person who wants an air-conditioner, will take components and that too not all the component, get it assembled by some one else and then call the man of the Appellants to install the same and make the payment equivalent to the prevailing price of the air-conditioner. The process of assembly and installation has been detailed in Paragraph 12 of the show-cause notice which involves many processes including flushing of coil and condensers, leakage test with dry nitrogen, vaccuming the system for 3-4 hours, gas charging, etc. According to Shri Pantherki, Proprietor of M/s. Refrigeration Agencies, the labour charges for assembly and installation was about Rs.2800/-.
10. We further find that Shri Addala Suryanarayana Murthy, Executive Engineer of Gujarat Electricity Board, had also deposed in his statement dated 7.8.87 that he had purchased Air-conditioner from the Appellants for his own use; that he had placed order for the supply of air-conditioner and not for parts; that he was not aware of the method of billing. The other customers also in their statements recorded on 15/16/19th January, 1988 had deposed that they had placed orders for air-conditioners and the Appellants had supplied them the air-conditioners only. In view of these statements, their certificate that they had purchased only components is no avail. It was mentioned specially in the show cause notice that the customers whom the invoices were raised only for kits/components had not incurred any extra expense towards assembly of the air-conditioners as well as towards the work of leak testing, flushing and gas charging. We, therefore, uphold the findings in the impugned Order that the Appellants had suppressed the material facts from the Department regarding the production and clearance of Air-conditioners and they had adopted dubious modus operandi by raising two sets of invoice - one for the kit/components and other for labour/repairing charges.
11. Appellants have also submitted that the air-conditioners given by them on rent were new/old and used air conditioners which either they had purchased or which had come to their factory for repair and repair charges were not paid by them. The Director of the Appellant company, Shri K.P. Mankodi, in his statement dated 23.11.87, that is after more than one year of visit of the factory by the Central Excise Officers, did not mention any of these facts. If the Appellants had entered into a contract with M/s. International Electrical for hiring window air-conditioner, the Director should have mentioned the same few air-conditioners to different parties during 1984 onwards on rental basis and he would furnish the details within a week. No mention that they had taken these air-conditioners either from the market or our of the ones which had come to them for repairs. The Commissioner had also given his finding in the impugned Order that the Appellants had not indicated the names of the parties with their addresses who had left their air-conditioners with them for repairing as no one would leave the air-conditioner valued more than Rs.10,000/- for non-payment of repair charges. These pleas are nothing but after thought. We, therefore, hold that the Appellants are liable to pay duty and the penalty is also imposable on them. We, however, agree with the learned Advocate that the Appellants will be eligible for the benefit of Notification No. 95/83-CE and 201/79 provided they produce duty paying documents for the inputs/raw materials before the Adjudicating Authority within 2 months from the date of receipt of this Order. We also agree that the price has to be considered as cum duty price, as held by the Larger Bench in the case of Shri Chakra Tyres, 1999 (32) RLT 1 (LB), and the assessable value has to be redetermined. Taking into consideration all the facts and circumstances we are of the view that interest of justice will be met if the Appellants are directed to pay penalty of Rs.1 lakhs only.
The appeal is disposed of in the above terms.