2001(03)LCX0015

IN THE CEGAT, SOUTH ZONAL BENCH, BANGALORE

S/Shri G.A. Brahma Deva, Member (J) and S.S. Sekhon, Member (T)

LAKESHORE HOSPITAL & RESEARCH CENTRE LTD.

Versus

COMMR. OF CUS., KOCHI

Final Order No. 671/2001, dated 21-3-2001 in Appeal No. C/12/2001

Cases Quoted

Carrier Aircon Ltd. v. Commissioner — 2000(09)LCX0015 Eq 2001 (128) ELT 0485 (Tribunal) — Relied on [Paras 3(b), (c)]

Collector v. Subros Ltd. — 1989(06)LCX0060 Eq 1989 (043) ELT 0543 (Tribunal) — Referred .............................. [Para 3]

Gemini Shreewas Engineers (P) Ltd. v. Commissioner — 1997(12)LCX0327 Eq 1999 (107) ELT 0268 (Tribunal) — Referred           [Para 3]

Paramount Centrispun Castings Ltd. v. Collector — 1995(03)LCX0084 Eq 1995 (077) ELT 0705 (Tribunal) — Referred [Para 3]

DEPARTMENTAL CLARIFICATION CITED

Board’s Circular No. 242/76/96-CX, dated 3-9-1996...................................................... [Para 3(b)]

Advocated By :   Shri A.K. Nambiar, Advocate, for the Appellant.

Smt. Radha Arun, SDR, for the Respondent.

[Order per : S.S. Sekhon, Member (T)]. - Respondents imported through Cochin Customs House, goods described as ‘York refrigeration chiller, Rotary Screw liquid chillers.’ They were claimed assessable under Heading 8418.61 of the Customs Tariff and the declarations were accepted. After payment of duty, the respondents requested for examination of the goods at their premises which was granted. The goods were examined, on examination it was reported that goods appear to be Central Air-conditioning Plant which appeared to be classifiable under 8415. The explanation of the importers, the respondents herein was called for and the Deputy Commissioner ordered the classification accordingly. The Commissioner (Appeals), after considering the Catalogue, installed equipment of similar kind, HSN notes, came to the conclusion that the classification under Heading 8415 as an incomplete machine having essential characters of air-conditioning machine was not legal and proper and held that the appropriate classification to be 8418.69 as ‘Liquid Cooling Units.’

2. Revenue has filed this appeal against the earlier Order of the Commissioner (Appeals) on the grounds -

(a)     The item under import was declared as Refrigeration equipment - 2 Nos. York Liquid Chiller. The goods were sought to be classified under Heading 8418.61 as Chiller Unit. On examination it was found that the goods were self-contained central air-conditioning plant without piping and duets. Accordingly it was found that goods are correctly classifiable under Heading 8415 as air-conditioning unit. Demand was issued and confirmed by Assistant Commissioner of Customs, Appraising Import, holding that goods are to be classified under Heading 8415 as air-conditioning unit. Party’s appeal was admitted by Commissioner of Customs and Central Excise (Appeals) who held that goods are correctly classifiable as under Heading 8418 as refrigeration chiller only.

(b)     The item under import, liquid chillers are used in central air-conditioning plants for chilling water which is circulated through cold water coils or air handling unit heated at various points viz rooms, halls, etc. When air is blown through the cold water coil the air gets cooled and reduces cooling agent in the enclosed space. The chiller is the identified part of the air-conditioning system, which means that tine chiller is part and parcel of the air-conditioning system. The importers and the technical representations have admitted to the facts that the machine imported by them produces water in the range of 3.3 C to 21.1 C and the temperature at the active cooling element will be 1.1 C to 15.5 C. This would mean that the temperature at the action-cooling element would be around 0.5 C to 1 C and the temperature of the chilled water when it leaves the chamber will be around 8 C. The refrigeration chiller under import cannot have any independent function as a chiller or as a refrigeration unit as the chilled water is only around 8C at any given time. The water so chilled are taken by ducts and air is blown through this water where by air gets cooled. It is this cooled air that is circulated in the enclosed space from this it may be seen that it is this chiller unit which is the main unit of the central air-conditioning system. What is to be done is the integration of the blower and the ducts/air handling units/cold water cools with the chiller unit. From this it follows that the system is nothing but the main equipment for central air-conditioning system and as such can be treated only as the integral part of that system.

(C)     The importers themselves have admitted to the fact that item under import is for the use as central air-conditioning system. Heading 8415 covers equipment for maintaining temperature and humidity in a closed space. These equipment’s may also contained elements for purification of air. The chilled water in this chiller is not capable of use in any manner prescribed under Heading 8418. The importers themselves have submitted before Commissioner of Customs and Central Excise (Appeals) that these chillers are not falling within the range as absorption or controlling humidity as water is used which is chilled for cooling the air blown into the water coils/ducts. This also proves that the item can only be regarded as air-conditioning unit without blower and ducts. It may a fact that the blower and ducts as separately procured or fabricated by the importer but it is not to be denied that these are used only as the central air-conditioning system.

(d)     This is a case for import of elements separately i.e. entire central air-conditioning system has not been imported, but only the chilling unit. In the case Section Note 2 of Section XVI is to be applied which reads as :

“2. Subject to Note 1 to this section Note 1 to Chapter 84 and Note 1 to Chapter 85, parts of machines (not being parts of articles of Heading Nos. 84.84, 85.44, 85.45, 85.46 or 85.47) are to be classified accordingly to the following rules.

(a)     parts Parts which are included in any of the heading of Chapters 84 and 85 (other than Hhdgseadings 84.09, 84.31, 84.48, 84.66, 84.73, 84.4585, 85.03, 85.22, 85.29, 85.38 and 85.48) are in all cases to be classified in their respective headings;.

(b)     Others parts, if suitable for use solely or principally with a particular kind of machine, or with a number of machines of the same heading (including a machine of hdgHeadings 84.79 or 85.43) are to be classified with the machines of that kind or in Hhdgeadings (84.09, 84.31, 84.48, 84.66, 84.73, 85.03, 85.23, 85.24, 85.29 or 85.38 as appropriate. However, parts of the goods of hdgHeadings 85.17 and 85.25 to 85.28 are to be classified in Hhdgeadings. 85.17.

(c)     all All such parts are to be classified in Hhdgeadings 84.09, 84.31, 84.48, 84.66, 84.73, 85.03, 85.22, 85.29 or 85.38 as appropriate or falling that, in hdgHeading 84.85 or 85.48” copy of the relevant pages is annexed as Annexure “E”.

(e)     It may be seen that the classification of this item squarely is to be determined according to Rule 2(b) above. As it is an admitted fact that the item chillers are classified principally as part and parcel of the central air- conditioning system and further that these item do not have an independent and identified use/function. As may be seen from the admission of the importer before Commissioner of Customs & and Central Excise (Appeals) with reference to explanatory note to Heading 8418, these chillers are excluded from the purview of being classified as other refrigerating equipment.

(f)      HSN explanatory Explanatory note at page 1263 at (3) provides that a cold water cooler a refrigerator unit (either of which changes both the temperature and, by condensation, the humidity of air) or some other type of elements with a separate device for changing the humidity of the air are also covered by Heading 8415. In the instant case it has been established that the chilled water is taken to the water coils/ducts through which air is blown. The refrigerator cools the air and it is this air which is circulated in the enclosed space. There is no function as provided under Heading 8418 that takes place where as the pattern of working as specified under Heading 8415 is what happens. This would also go to establish that the item is correctly classifiable/ under Heading 8415 in preference Heading 8418.

(g)     It is fact that the Bombay Custom House the classification of the item is under Heading 8418. Where as both at Madras and Calcutta Custom Houses the classification of the item is under Heading 8415 as air- conditioner. Similarly, there are different views in the orders of Commissioner of Customs & and Central Excise (Appeals). The Commissioner of Customs & and Central Excise (Appeals), Mumbai by his order Order No. SDK(294) 195/ M VI/98, dated 30-9-1998 held that the chillers manufactured and cleared by M/s. Blue Star are more appropriately classifiable under CETH 8418 modifying the original authorities decision classifying under 8415. Commissioner of Customs & and Central Excise (Appeals), Chennai disagreeing with the above order held that the liquid chiller imported by M/s. Blue Star, Chennai has rightly been classified under CTH 8415.90 as part of the air- conditioning machine by the lower authority. Copies of the above order are annexed as Annexures “F” & “F-1”.

(h)     The chillers provide chilled water to all air- conditioning appliances using central station air handling at the terminal units. These chillers through one independent unit having magnetic compressors, liquid cooler, air cooled condenser and micro processor can be all of which are monitored on a formed steel base is used in the air- conditioning system as mentioned above. Only refrigeration unit design to maintain a fixed temperature below zero degree in a closed chamber (e.g. lorry, train or a container) alone are excluded from the provisions of Heading 8415 those excluded category alone would fall under Heading 8418.

(i)      Note 2(b) to Section XVI of Customs Tariff Act, it is seen that, parts which are suitable for use solely or principally with a particular machine or with a number of machines of the same heading are to be classified with the machines of that kind. Accordingly, to note Note 4 ibid., where a machine consists of individual components (whether separate or in the connected by piping, by transmission devisesdevices, by electric cables or by other devisesdevices) introduced or contribute together to a clearly defined function covered by one of the headings in Chapter 84 or Chapter 85, then the whole falls to be classified in the heading appropriate to that function. The importers have admitted to the fact that chiller unit is ultimately to be used as central air- conditioning and that the chiller provides chilled water to the air- conditioning system. Hence, the chiller becomes part of the air- conditioning system and appropriately classifiable under CTH 8415.90.

(j)      HSN Explanatory notes at page 1263 pertaining to the Heading 8415 reads as “they are used for air- conditioning offices, houses, public halls, ships, motor vehicles, etc., and also in certain industrial installations requiring special atmosphere conditions (e.g. in the textile, paper, tobacco, or for industries)”. From this also it is clear that Heading 8415 is vide wide enough to cover the chiller unit in question within its purview.

(k)     The temperature of water when it leaves the chamber is around 8 C and not below. This is because if water goes below the temperature of 4 C it starts to develop flakes on top layers and at 0 C it freezes and will not move without the water moving freely in the ducts/water coils the system will not operate/function. Therefore, from this angle also the only purpose of these chillers are for air- conditioning and refrigeration for freezing unit.

3. We have heard learned SDR, Smt. Radha Arun, for the Revenue, who relied upon the submissions made in the ground of appeal and in the case of Subros, 1989 (043) ELT (453 ) and took us through the definition of the word ‘machinery’ to submit, that a part of the plant, would also be considered as an air-conditioning machinery, the present part under import was used for the purposes of the Central central Air air-cConditioning plant of the hospital of the Respondentsrespondents. The learned Advocate for the respondents submitted that explanatory notes to Chapter 8415 covering air- Cconditioning machines, states that the heading is restrictive, it applies only to machines equipped with motor driven fan or blower and which are designed for change of temperature and humidity. Both these elements should be present together. In the present case, the unit does not comprise any motor driven fan or has any facility for changing the humidity which cannot be controlled/regulated by it. The Heading 8415 been proposed by Revenue, clearly proposes that the same incorporate do not incorporate a refrigerating unit. Therefore, it is clear that the refrigeration unit (which is the item under import) are different from or a different unit and cannot therefore be a component of an Air air-Cconditioning Machinerymachinery. On the other hand the notes of HSN under 8418 cover machines or articles thereof, for production of low temperatures around 0° or less than that by evaporation of liquefied gases or liquids of certain types even brine or marine water. From the catalogue produced, he submitted, it could be clearly seen, that the goods under import produce a range of 3.3° to 21.1° degree while the temperature at the evaporator (the active cooling element) will be be - 1.1° to 15.5° degrees and if brine was used, the temperature would down to - 6.7 degrees with corresponding evaporator temperature at - 9.5 degrees. Therefore, this item would be classifiable under Heading 8418.61, as held by Commissioner (Appeals), since the import has not been made along with other items. It should be classified under 8418.61. He relied on 1995(03)LCX0084 Eq 1995 (077) ELT 0705 (Tri.) = 1995 (059) ECR (260) and submitted that the case of Subros, 1989 (043) ELT (543) had held that unless an air-handling unit is incorporated, the item could not be classified as an air- conditioning unit. He also relied on 1999 (107) ELT (268 ) to submit that on the analogy of this decision the goods under import before us require to be classified under 8418. After considering the material we find :

(a)     there is no doubt about the item under import being ‘liquid chillers’ and that very low temperature could be achieved. Therefore, the items to our mind are functionally designed to produce chilled water (liquid) by using a refrigeration circuit in its construction and such chilled liquid, in turn was applied in an Industrial industrial process, which could be a Central central Air air-cConditioning Systemsystem/Plant plant of a huge size or would be an end end-use as recorded by the learned DDyeputy. Commissioner, as follows :

“.... The end end-uses known to the appellants for the said machine are for processing cooling, brine machine cooling, process cooling for injection Moulding Machine, CNC Machine cooling, Brine chilling, Chilling of chemical plant and cooling of rubber and allied products.”

We also find, that the Commissioner (Appeals) has also come to a finding that :

“The liquid Chiller chiller here is a machine on a common basis with water cooled condenser, compressor and a heat exchanger containing an evaporator and a tubing carrying the liquid to be cooled and the combined function of the machine is to cool the liquid water passing through the tube to the desired temperature which in turn can be used for other application including air-conditioning with the help of another independent machine viz. AHU. There is no dispute that the liquid chiller is used by the importer in this case for chilling the water toc 8°C for the purpose of using various AHU installed in many locations of the multi-story hospital. The brochure/manual and manufacturers clarifications make it clear that these apparatus can be used for very low temperature brine applications also.”

(b)     We find that after considering all the case law on the subject, the Tribunal in the case of Carrier Aircon Ltd., v. CCE , Delhi-III - 2001 (128) ELT (485) have upheld the classification of similar ‘liquid chillers’ under 8418, after considering the HSN notes, Board’s instruction Nos. 242/76/96/CX, dated 3-9-1996 and have ruled cut out the classification under 8415 of the Central Excise Tariff.

(c)      We find that the Central Excise Tariff and the Customs Tariff, is parapari -materia as far as Headings 8415 and 8418 are concerned. Therefore, relying en on this decision of the Tribunal in Carrier Aircon, 2001 (128) ELT (485), we have no reasons to uphold the revenues Revenue’s appeal to classify the subject- goods under import under 8415.

4. In view of our findings, the order of Commissioner (Appeals) is confirmed and the Revenue’s appeal is dismissed.

Equivalent 2001 (135) ELT 1363 (Tri. - Bang.)