2000(10)LCX0293
IN THE CEGAT, WEST ZONAL BENCH, MUMBAI
S/Shri Gowri Shankar, Member (T) and J.N. Srinivasa Murthy, Member (J)
COMMISSIONER OF C. EX., MUMBAI-III
Order No. 3752/2000-WZB/C-I, dated 16-10-2000 in Appeal No. E/839R/2000-Mum.
DEPARTMENTAL CLARIFICATION CITED
Circular No. 231/65/96-CX., dated 12-7-1996 .................................................................... [Para 3]
Advocated By : Shri Vipinkumar Jain, Chartered Accountant, for the Appellant.
Shri B.B. Sarkar, JDR, for the Respondents.
[Order per : Gowri Shankar, Member (T)]. - We are concerned in this appeal with the eligibility of parts of air-conditioners manufactured by the appellant, to the benefit of entry 11 of the Table to Notification 56/95. This entry exempts from duty beyond 30%, parts and accessories of refrigerating and air-conditioning appliances and machinery, other than parts and accessories of car air-conditioners, which fall under the tariff headings which it specifies.
2. In the order impugned in this appeal, the Commissioner (Appeals) has confirmed the finding of the Assistant Commissioner that the goods manufactured by the appellant in respect of which the exemption was claimed, constituted an entire unit of split air-conditioning machine and that this unit being an assembly of parts was not entitled to the exemption.
3. The split type of air-conditioner consists generally of two or more machines. Of these, what is referred to as the outdoor unit contains the air mechanism which is required to cool the incoming air. The air so cooled by this machine is supplied by means of ducts to the indoor unit which incorporates a device to circulate it and return the hot air back to the outdoor unit for expulsion. The Assistant Commissioner has relied upon a clarification issued by the Board in support of his view that indoor unit is not a part of a refrigerating machine. This clarification, contained in Circular No. 231/65/96 CX, dated 12-7-1996 concludes that parts of air-conditioning machines are different from a unit of a split air-conditioner and explains that a part has been defined in the Import and Export Policy as an element of sub-assembly or assembly not normally useful by itself and not amenable to further disassembly for maintenance purposes. Therefore, it said, a unit which would necessarily be an assembly of such parts is not itself a part entitled for the exemption.
4. The Commissioner's order cannot be maintained for two reasons. The first is that he has not considered the appellant's claim, despite being asked by the Tribunal to do so in its order of 9-9-1999 that what it had cleared did not constitute a complete unit of a split air-conditioning machine. Secondly, we are unable to subscribe to the view expressed in the Board's circular. The view with regard to the definition of the part expressed in the Board's circular appears to be correct in a strict engineering terminology. The definition in the Import/Export policy cited in that circular is in fact the reproduction of the definition of the term "part" in the McGraw Hill Dictionary of Science and Technology. This however, is not the common understanding of the term "part" or the understanding contained in the Explanatory Notes of the Harmonised System of Nomenclature upon which the tariff is based. A carburettor is an assembly of many parts, which is generally understood and dealt with as a part of an internal combustion engine. The Explanatory Notes to Chapter heading 85.09 which covers "parts suitable for use solely or principally with the engines of heading 84.07 or 84.08", explains that carburettors fall under that heading. In other words, in determining whether an item is a part of a machine or appliance, it is not necessary to see whether it is a part in the strict engineering sense i.e. whether that by itself forms a sub-assembly or not. In fact, if the strict definition is applied, it would result in the notification being largely rendered redundant of having the goods which the notification exempts are parts and accessories of air-conditioning machines falling under heading 84.15, 84.18, 84.19, 8476.91, 8481.10, 8481.91, 8536.10, 9032.11 and 9032.91. Heading 8476.91, includes parts of automatic goods vending machines, incorporating refrigerating devices; heading 8481.10 includes expansion valves and solenoid valves for refrigerating and air-conditioning appliances and machines; heading 8536.10 includes overload protection or thermal relays; heading 9032.11 covers thermostats and pressure switches. All those goods are assemblies of parts and, by applying the strict definition of parts would not be entitled to exemption. Thus, goods covered by four headings out of the nine mentioned above in the notification would not be entitled to notification, if the strict definition is applied. Apart from this, the fact that the heading mentioned cover besides solenoid valves and expansion valves under heading 8481.10 and thermostats, and parts of such goods covered by 8481.91 and heading 9032.91 shows that it does not set out to exempt only parts in the strict engineering sense but also assemblies of such parts. There was therefore no basis for denying the exemption by relying upon a definition of parts which is at variance with the generally understood scheme of the tariff or the Harmonised System of Nomenclature upon which the tariff is based.
5. The Commissioner (Appeals) also finds that the appellant had colluded with some other manufacturer to manufacture and supply complete split machines. There is however nothing in the show cause notice to say that the appellant manufactured a complete split machine. The Commissioner (Appeals) was necessarily required to be within the limits set out in the notice. It is another matter that the appellant may have embarked upon this manufacture with a view to ultimately assemble these machines elsewhere but this again is not established.
6. The appeal is thus allowed and the impugned order set aside.
Equivalent 2001 (127) ELT 0186 (Tri. - Mum.)