Customs, Excise and Gold Tribunal - Delhi
Sanden Vikas (I) Ltd. vs Collector Of Central Excise on 31 May, 1995
Equivalent citations: 1995(78)ELT540(TRI-DEL)
ORDER Gowri Shankar, Member (T)
1. The issue for decision in this appeal is whether goods described as 'air conditioning kits' including compressor and blower are eligible for benefit of exemption provided in the Notification No. 166, dated 1-3-1986.
2. The appellant is a manufacturer of car air-conditioners. Notification 166 which was issued on 1-3-1986 gave exemption to parts and accessories of refrigerators and air-conditioning appliances and machinery as also to such complete machinery on 20-3-1990. The amendment inserted vide Sl. No. 8 to the Notification which exempted parts and accessories of car air-conditioner including car air-conditioning kit. Subsequently, the Notification was, further, amended on 25-7-1991 by inserting an Explanation to provide the term car conditioning kit would exclude kit or assembly which contains automatic gas compressor with or without magnetic clutch. Subsequent to the amendment to the Notification on 20-3-1990, the appellant filed eleven classification lists during the period from 20-3-1990 to 1-4-1991 claiming the benefit of the exemption under SI. No. 8 of the Notification for kits manufactured by it intended to be fitted to various makes and models of motor cars. Show cause notices were issued by the Department proposing denial of the benefit and proposing recovery of differential duty. After considering the reply shown and hearing the appellant the Assistant Collector, Central Excise, held that the air-conditioning kits were in fact complete air-conditioning systems chargeable to basic excise duty. The air-conditioning kits inclusive of compressor would be covered under Sl. No. 3A of the Notification during the period from 20-3-1990 to 24-7-1991 as 'complete air-conditioners'. She, however, ruled that if the kits did not have the blower, it would not be a complete air-conditioning machinery. Such kits would get the benefit of Sl. No. 8 of the Notification except for compressors which would be levied to duty according to Notification 135, dated 8-5-1987. In appeal, the Collector confirmed the reasoning and conclusions of the Assistant Collector, Central Excise. The appellant has now come before us.
3. Shri Lahoti first argues that the authorities below have not appropriately appreciated the scope and significance of the term 'air-conditioning kit'. Parts and accessories of air-conditioning machinery were, prior to amendment of Notification 166 of 1986 by Notification 75/90, classifiable in Sl. No. 5. By the amending Notification, a separate item was carved out for parts and accessories of car air-conditioner 'including car air-conditioning kit'. The Collector's Order had the effect of eliminating the difference between a complete air-conditioner and air-condition kit. For an air-conditioner to be complete, he argues, a prime mover has to be provided, for example, in the form of electric motor. The air-conditioning kits manufactured by the appellant lacked this prime mover as motor power was provided by the car engine itself. He said that they were in fact air-conditioner manufacturers abroad for use in cars which had their own prime mover. The goods manufactured by the appellant, therefore, cannot be equated with complete air-conditioners. He further said that in the absence of motor-driven fan, an air-conditioning kit could not be considered a complete air-conditioner. He relied upon the decision of this Tribunal - Collector of Central Excise v. Subros Engineering, 1989 (43) E.L.T. 453. The motor-driven fan 'is distinct and distinguishable item appurtenant to a condenser whereas a blower pertains only to evaporator'. Therefore, the kits which did not contain motor-driven fan would fall outside the scope of Heading 83.15. Duty on 11020 kits on which full duty has been demanded, 8893 did not have the motor-driven fan and, therefore, the kits would be liable to duty at concessional rate.
4. He further argued that once a tariff classification is approved, it cannot be changed. He relied upon the decision of this Tribunal in Eagle Flask v. Collector of Central Excise -1991 (53) E.L.T. 65. In any event, the Explanation to the Notification could not have retrospective effect, for which parliamentary sanction was necessary.
5. Shri Somesh Arora, JDR, supported the findings of the lower authorities that whatever manufactured and sold were not air-conditioning kits but complete air-conditioners except those which do not have a blower. He said that there was no distinction between blower and a motor-driven fan and blower was in fact a motor-driven fan. Since Explanation to the Notification was in the nature of clarification, it would have retrospective effect. He cited the decision in the case of Orient Paper Mills v. Collector of Central Excise -1983 (14) E.L.T. 1813 and 1988 (33) E.L.T. 344. He further argued that it was up to the assessee to establish that it was entitled for the benefit of the Notification. The Notification has to be interpreted strictly and if there is any ambiguity in the Notification, the benefit would go to the State. He cited the decision of the Hon'ble Supreme Court in Novopan India Ltd. v. Collector - 1994(4) RLT 323.
6. The Notification nowhere defines what a 'kit' is. As it read from 20-3-1990, the Notification covered parts and accessories of car air-conditioner 'including car air-conditioning kit'. The entry in the Notification for complete air-conditioners continued to stand. That this entry covered car air-conditioners is clear from the fact that it uses the expression in Sl. No. 3 'air-conditioners including room air-conditioners'. One therefore, concludes that air-conditioning kit is not synonymous with complete machines. It is not synonymous with parts and accessories also, since the wording in SI. No. 8 is 'parts and accessories including kit'. By the Explanation subsequently added, the word 'kit' has been used synonymously with an assembly of parts. Since, when the kits are supplied, they consist of individual parts which are later to be fitted into a car, one might almost conclude that the expression 'kits' was superfluous since every part in the kit would be covered by the expression 'parts and accessories'. However, such an interpretation is not permissible, since redundancy cannot be attributed to legislation. Therefore, kits would have to be treated as something other than a simple part or collection of parts, but less than air-conditioning machines. The definition in 'Random House Dictionary, 1966 Edition, of 'Kit' as meaning." a set or collection of tools, supplies, instructional matter, etc., for a specific purpose" would suffice.
7. This brings us to consider as to what parts would constitute a complete car air-conditioner? Heading 8415.00 of the Tariff provides that air-conditioning machines must comprise a motor-driven fan and elements for changing temperature and humidity. It includes those machines in which the humidity cannot be separately regulated. This is in fact based upon the Explanatory Notes to the H.S.N. which say that Heading 8415 applies only to machines - (1) equipped with motor-driven fan or blower, (2) designed to change both the temperature (a heating or cooling element or both) and the humidity ( a humidifying or drying element or both) of air; and (3) for which the elements mentioned in (1) and (2) are presented together. These authorities and others were in fact relied upon by Shri Lahoti to say that to have essential character of air-conditioner, the machine must be capable of changing the temperature and humidity and must necessarily comprise compressor, con-densor, as also the motor-driven fan or blower. One cannot quarrel with this proposition. However, we are not able to agree when Shri Lahoti says that car air-conditioning kit is not an air-conditioner because it lacks the motor for driving the compressor. Neither the H.S.N. nor the Tariff provide that prime mover to drive the compressor must be present before the assembly of parts can be considered to be an air-conditioner. In the car air-conditioner, the compressor is driven by the rotatory movement of the crankshaft which is transferred to the compressor by means of a pulley. The absence of the prime mover, therefore, cannot lead to the conclusion that no air-conditioner exists. Heading 8415 covers air-conditioners of all types including room air-conditioners. Therefore, those air-conditioners in which the motive power is external to the air-conditioner would continue to be covered by this description. If the intention was to exclude car air-conditioners from Heading 8415, the heading elsewhere would have included prime mover along with the other components specified. The absence of this is significant.
8. Much stress was laid by Shri Lahoti on the fact that the majority of the kits supplied did not have motor-driven fan. It was claimed that while the blowers which are a part of the air distribution system through the cooling coils to provide cool in the car cabin, the motor-driven fan or the fan motor assembly is required to provide air to the condenser dissipate the heat collected from the cabin to the outside atmosphere, and that in the absence of this fan, the system will not function and will in fact fail. The expression 'motor-driven fan' occurring in the Heading has obviously been taken from the Explanatory Notes, which we have reproduced above in para 7. Therefore, the expression used is 'motor-driven fan or blower'. In other words, the two expressions relate to the same item (the fan or blower) which propels the conditioned air into the weather cooled or heated. The proposition advanced by Shri Lahoti that fan motor or a motor-driven fan is required to cool the compressor is not supported by any technical literature. The appellant itself agrees that fan motor assembly and blower assembly are different. From the lists of parts furnished by the appellants, there is a blower assembly with cooling coil for the Maruti Van, PAL Padmini and PAL NE 118 and for Tata cars. We, thus, do not see any case for extending the benefit already accorded by lower authorities in this regard.
9. We are also not able to agree that the kit would not comprise a complete air-conditioner till it is assembled. That once the essential elements of air-conditioner are present even the parts would, by virtue of Interpretative Rule 3 assume the character of the complete machine.
10. It is thus clear that the kits supplied by the appellant which included the fan and compressor would have to be considered complete air-conditioners. The position is clear enough subsequent to amendment of the Notification in July, 1991. The appellant's claim that Explanation which was inserted in 1991 would apply with retrospective effect and that, therefore, till this date, the goods must be treated as kits. Here again, we are not able to agree. The essential elements of air-conditioner, elements for changing the temperature (in this case cooling the air) consisted compressor which compresses the refrigerant gas so that it is liquefied , the cooling coil where, by taking up the temperature from the warm air, the refrigerant reverts to its gaseous state and at the same time cools the incoming air and other elements completing the refrigeration cycle. As we have seen these are essential components of air-conditioning system and the presence of these elements would make complete air-conditioning system. Therefore, even in the absence of Explanation, such goods would have to be considered complete air-conditioning system. The Explanation, therefore, seems to have been inserted ex abundanti cautela. It does not enlarge or restrict the scope of the Notification. It is only at the most a guide to its extent. Application of the Notification in the absence of the Explanation would not result in different conclusion. The point made by the Departmental Representative in this regard, therefore, has to be accepted.
We therefore, hold that the Order of the Collector (Appeals) is correct, confirm it and dismiss the appeal.