1992(08)LCX0021

BEFORE THE CEGAT, SPECIAL BENCH ‘B’, NEW DELHI

Shri P.C. Jain, Member (T) and Ms. Jyoti Balasundaram, Member (J)

ASIAN HOTELS

Versus

COLLECTOR OF CUSTOMS

Final Order No. C/99/92-B2, dated 5-8-1992 in Appeal No. C/348/92-B2

CASES CITED

SUNDARAM INDUSTRIES v. COLLECTOR - ORDER NO. 336/85-D (TRI.),
 DATED 6-12-1985   [PARAS 3, 6]

NAT STEEL EQUIPMENT P. LTD. v. COLLECTOR - 1988(01)LCX0006 Eq 1988 (034) ELT 0008 (S.C.)   [PARAS 4, 6]

ANNAPURNA CARBON COMPANY v. STATE OF ANDHRA PRADESH
 - 1976 (3) SCR 561   [PARA 6]

SUDERSAN CHEMICALS LTD. v. U.O.I. - 1979(01)LCX0010 Eq 1979 (004) ELT 0275 (BOM.)   [PARA 6]

COLLECTOR v. RAJA BARLEY BISCUIT CO. - 1987(09)LCX0010 Eq 1989 (042) ELT 0067 (TRIBUNAL) [PARA 6]

INDIAN HANDICRAFTS v. COLLECTOR - 1987(08)LCX0045 Eq 1989 (042) ELT 0126 (TRIBUNAL) [PARA 6]

Advocated By: Shri V. Lakshmikumaran, Advocate, for the Appellants.

Shri. M.N. Dhar, JDR, for the Respondents.

[Order per : Jyoti Balasundaram, Member (J)]. - The issue for determination in this appeal is the eligibility of mini-bars imported by the appellants to the benefit of Notification 59/87 against Sl. No. 13 thereof which covers “refrigerators, refrigerating equipment including freezing equipment (electrical and others) other than household type refrigerators.”

2. The brief facts of the case are as follows :

The appellants imported 115 pieces of Electrolux Mini Bar Refrigerators and sought clearance under Heading 8418.29 of the Customs Tariff Act with benefit of Notification 59/87. The goods were examined on 16-1-1992 under a specific query whether they were fitted with self-contained absorption unit and the examination revealed the presence of self-contained absorption unit. The Department was of the view that as these refrigerators were fitted with the above type of unit, which are only fitted in the domestic type refrigerators as per the HSN, the same were classifiable under Heading 8418.22 read with Notification 100/90-Cus. and 122/91-Cus. and 166/86-C.E.chargeable to duty @ 100% + 50% + CVD Rs. 500/- per piece + 10% special CVD. The adjudicating authority classified the goods under Heading 8418.22 read with the above notifications and denied the benefit of Notification 59/87 on the ground that the refrigerators are interchangeable between hotel industry and domestic section. The Collector (Appeals) held that the use of the refrigerators in hotel rooms is not different from their use in a house room where they may be used as mini-bars or for storing small quantity of eatables and, therefore, the imported refrigerators cannot be other than household type. He upheld the adjudication order for the following reasons :

(i) The appellants have themselves classified imported refrigerators under sub-heading “8418.22 - absorption type, electrical” (but this sub-heading is for refrigerator household type covering the sub-headings 8418.21 to 8418.50).

(ii) Sub-heading 8418.61 to 8418.99 are other than household type “other refrigerating or freezing equipment; heat pumps;” but the appellants have not contended that the imported refrigerators in this case fall under any of the aforesaid sub-headings (for other than household type); the catalogue also does not say that the imported refrigerators are for other than house hold type;

(iii) The appellants’ contention that since the refrigerator is absorption type, it is meant for hotel and is not household type has got no merits since absorption refrigerators are clearly covered for tariff classification as “refrigerator - household type” and such fridges can very well be used in household and are clearly household type;

(iv) The catalogue mentions that “defrosting must be carried out at least once a week. Appliances in use in hotel have to be defrosted daily” it clearly shows that the imported fridges can be put to household use as well as hotel use and there is no reason to hold the imported refrigerators as other than the household type;

(v) The provision of packs or lack of it does not make a refrigerator household type or other than household type since the racks can be placed in or taken out and have got nothing to do with the fridges being household type or other than that;

(vi) Capability of refrigerators for commercial use does not mean that the refrigerators are other than household type.

(vii) The refrigerator/mini bar of 40 ltrs. capacity cannot be held to be other than household type and can be easily used in household and is clearly household type; and

(viii) The appellants’ distinction between domestic refrigerators and hotel refrigerators is non-existent.

Hence this appeal.

3. Shri V. Lakshmi Kumaran, learned Counsel appearing for the appellants contends that the goods in question are internationally bought and sold as mini-bars and draws our attention to the bill of entry and invoice which describe the goods as “Electrolux mini-bars”. He also invites attention to the catalogue of Electrolux mini-bar RA 138 LD (the model of the disputed item is RA 138A which is said to be almost identical to the RA 138 LD model) wherein it is stated that the model is one of a total range of 9 mini-bar models by Electrolux the world’s leading manufacturer of absorption refrigerators, offering hotel management a way to increasing profitability. He submits that the imported items are different and distinct from house hold type refrigerators which generally work on compressor system and are likely to be noisy while the imported refrigerators work on absorption system which is noiseless and, therefore, suitable for use in hotel rooms to avoid disturbance to the guests. He also submits that mini-bars are fitted with automatic defrost timer which automatically shuts off the mini-bar for two hours daily while the household refrigerators cannot be defrosted for two hours daily as food/contents would get spoiled. As there are no racks provided in the imported refrigerators it is not possible to store any food-stuff therein and this is also a distinction between the refrigerators imported and household refrigerators which would contain egg rack, butter rack, vegetable tray, etc. He further submits that the size of the refrigerator is also relevant for distinguishing between household type of refrigerator and mini-bar refrigerator as the minimum size of a domestic refrigerator is 65 ltrs. While the mini-bar refrigerator is of 40 ltrs. capacity and cannot be used effectively for anything except to hold beverage bottles. The learned Counsel also refers to the affidavits filed by M/s. Kelvinator of India Ltd. (the largest manufacturers of refrigerators in India) certifying that the refrigerators of a size lower than 65 ltrs. are not manufactured either by them or by anybody else in India and that refrigerators of 40 ltrs. capacity without compressors are for commercial use only in hotels/offices, etc. The letter of 14-11-1991of the manufacturer to the effect that the subject goods are commercial refrigerators for hotel use only is also brought to our notice. The subject goods work on absorption principle which is based on heat exchange and will not work properly if the temperature is above 22⁰C approximately and is actually meant for cool/airconditioned rooms found in hotels whereas domestic room temperature in India is usually above 28⁰C. He further submits that for a refrigerator to fall under the category of household type it should have been manufactured primarily with the object of being used in a house i.e. for domestic purposes and not for commercial purposes. The capability of the goods for use in household would not in any manner detract from the fact that they are refrigerators other than household type entitled to the benefit of exemption under the notification. In support of his proposition that the normal method of use of material would be relevant to decide whether an exemption should be granted or not, he relies upon the order of the Tribunal in the case of M/s. Sundaram Industries v. Collector of Central Excise, Madurai - Order No. 336/85-D dated 6-12-1985. The learned Counsel also refers to Notification 6/86 dated 2-1-1986 which exempts specified equipments like kitchen equipments imported for initial setting up of a hotel or expansion of a hotel from the basic customs duty in excess of 15 per cent ad valorem and the entire additional duty subject to the production of a certificate from specified authority in the Department of Tourism and evidence of use for specific purpose to the Assistant Collector within a period of 2 years from the date of import. In particular he draws our attention to Sl. No. 28 which covers “Roll-in-Refrigerator (Absorption type) or Mini-Bars.”

4. In reply, Shri Dhar, learned JDR submits that the subject goods are household type of refrigerators and the HSN Vol. 3 page 1170 describes absorption type refrigerators as household type refrigerators. As the appellants themselves had classified the goods as falling under 8418.22 which covers household type refrigerators, they cannot now claim that the goods are other than household type and entitled to the benefit of the above notification. He cites the decision of the Hon’ble Supreme Court in the case of Nat Steel Equipment P. Ltd. v. Collector of Central Excise, reported in 1988 (034) ELT 8, in support of his stand that the size and price of the imported items and the space required for them were not the relevant criteria for determining whether they are domestic or other than domestic type of refrigerators. He supports the impugned order in all respects.

5. We have heard both sides, carefully considered their submissions and perused the records. The catalogue of Electrolux mini-bar RA 138 LD (identical in all aspects to the imported model except for the difference that the imported model has no racks in the inner door) describes the goods as follows :

“Electrolux RA 138LD. The 40 litre mini-bar, which can be positioned as a free-standing unit or built in. With a dark brown metal housing, the door can be given its own decor. The cooling unit at the rear is fully integrated in to the housing.

The RA 138 LD is one of a total range of 9 mini-bar models by Electrolux, the world’s leading manufacturer of absorption refrigerators, offering hotel management a way to increasing profitability.

*Average consumption in 24 hours at 25⁰C mean annual ambient temperature.

* * Other voltages on request. All details are subject to alteration without notice."

The catalogue describes the items as hotel mini-bar type refrigerators. The manufacturer has also confirmed by letter dated 14-11-1991 that Electrolux Model RA 138 is a hotel refrigerator (mini-bar) for commercial use only. The certificate is as follows :

“This is to certify that our Electrolux model RA 138 is a hotel refrigerator (mini-bar) for commercial use only.

It does not have a compressor and works on the fully noiseless absorption system specially designed for hotel use.

It has no egg racks nor bread or butter racks and/or compartments

Our range of Electrolux domestic refrigerators is totally separate from above hotel mini-bar RA 138. This model RA 138 is a commercial refrigerator for hotel use only."

Kelvinator of India Ltd. has also certified on 21-1-1992 that 40 litre refrigerators without compressor are used for commercial purposes only. The differences between the imported refrigerators and the household refrigerators as brought out from the submissions of the learned Counsel also indicate that the goods are other than household type of refrigerators. The capability of use of the imported items as household refrigerators will not alter their basic character and nature as refrigerators other than household type. It is true that the HSN mentions that the domestic refrigerators are commonly fitted with absorption unit. However the question here is not whether the imported items can be used in household but whether they are “household type”. It may also be possible to store food in the racks of the imported refrigerators. But that by itself would not make them domestic refrigerators. The absence of regular features of domestic refrigerators viz. egg rack, butter rack and vegetable tray; the method of defrosting; the size and the mean annual ambient temperature distinguish the imported refrigerators from domestic refrigerators. The lower appellate authority has erred in holding that the refrigerators admittedly imported for use in Five Star Hotels cannot be other than those of household type. The goods appear appropriately classifiable under Heading 8418.69 which covers other “refrigerators or freezing equipment, other than compression type unit whose condensers are heat exchangers" as the classification is determined by the ordinary or commonly known purpose or use of an item. The Collector was not correct in pinning the appellants down to the classification claimed by them under Heading 8418.22 as classification is a primary and basic issue to be decided by the authorities.

6. In the case of Sundaram Industries (supra), the Tribunal had occasion to deal with eligibility of Splicing Compound manufactured by the appellants to the benefit of exemption under Notification No. 71/68 dated 1-4-1968. In para 5 of the order the Tribunal relied upon the decision of the Hon’ble Supreme Court in the case of Annapurna Carbon Company v. State of Andhra Pradesh - 1976 (3) SCR 561 wherein the Court held that “the use of arc carbons under consideration was duly proved to be that of production of powerful light used in projectors in cinemas and that the fact that they can also be used for searchlights, signalling, stage lighting, etc. may be required, could not detract from the classification to which the carbon arcs belong". The Court held that classification was determined by their ordinary or commonly known purposes or use. Similarly the Bombay High Court had in the case of Sudersan Chemicals Ltd. v. Union of India - 1979 (004) ELT 275 held that in connection with TI 14B, the words “used” would mean the dominant user or common user. In the case of Collector of Customs v. Raja Barley Biscuit Co. reported in 1987(09)LCX0010 Eq 1989 (042) ELT 0067 (Tribunal), the Tribunal held, while interpreting TI 33C of the Central Excise Tariff, that the domestic electrical appliances were defined in the Tariff to mean such electrical appliances as were normally used in the household though similar appliances may also be used in hotels, restaurants, hostels etc. and that the voltage and the capacity of the imported Macaroni Paste Mixing Machine clearly establish that it was a commercial machine and not of the type used in the household for making biscuits. In the case of Indian Handicrafts v. Collector of Customs, reported in 1987(08)LCX0045 Eq 1989 (042) ELT 0126 (Tribunal), the Tribunal held that though Tariff Item 33C of the Central Excise Tariff covers domestic electrical appliances irrespective of the fact whether such appliances are used in household or hotels, shops, etc. but the condition is that the appliances should be of the domestic type (emphasis applied). The Tribunal held that countervailing duty should be reassessed with reference to TI 68 as there was no dispute that the goods therein was of the industrial type. In the present appeal we have already held that the imported items are other than household type refrigerators. Therefore, in our view the goods would be eligible for the benefit of Notification 59/87 against Sl. No. 13 thereof. The reliance placed by the learned DR on the judgment of the Supreme Court in the case of Nat Steel Equipment (supra) does not advance the case of the Department. The Supreme Court was seized of the issue of classification of items such as storage tank, cooking range, baking oven, bread toaster, chappatty plate, etc. claimed under TI 68 by the assessees and held by the Department to be classifiable under TI 33C. The Supreme Court in paragraph 5 as follows :

“It is manifest that these equipments were electrical appliances. There was no dispute on that. It is also clear that these are normally used in household and similar appliances are used in hotels etc. The expression “similar” is a significant expression. It does not mean identical but it means corresponding to or resembling to in many respects; somewhat like; or having a general likeness. The statute does not contemplate that goods classed under the words of ‘similar description’ shall be in all respects the same. If it did these words would be unnecessary. These were intended to embrace the goods but not identical with those goods. If the items were similar appliances which are normally used in the household, these will be taxable under Tariff Item No. 33C."

In para 7 of the order, the Supreme Court held that “we agree that it is not necessary to be a domestic electrical appliance that it must be actually used in the home or the house. It must be of a kind which is generally used for household purposes” (emphasis applied).

7. In the above appeal the items cannot be said to be generally used for household purposes for the reasons contained in paragraph 5 above.

8. In the light of the above discussion we hold that the imported goods are classifiable under Heading 8418.69 and eligible to the benefit of concessional assessment in terms of Notification 59/87 against Sl. No. 13 thereof. In the result the impugned order is set aside and the appeal allowed with consequential relief, if any, due to the appellants.

Equivalent 1992 (62) ELT 630 (Tribunal)